G.R. No.
92013 July 25, 1990 The subject property in this case is one of the four (4) properties in Japan acquired by the
SALVADOR H. LAUREL, petitioner,
vs.
RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as
Secretary of Foreign Affairs, and CATALINO MACARAIG, as Executive
Secretary, respondents.
G.R. No. 92047 July 25, 1990
DIONISIO S. OJEDA, petitioner,
vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST
CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as
members of the PRINCIPAL AND BIDDING COMMITTEES ON THE
UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT PROPERTIES
IN JAPAN, respondents.
Arturo M. Tolentino for petitioner in 92013.
GUTIERREZ, JR., J.:
These are two petitions for prohibition seeking to enjoin respondents, their representatives and
agents from proceeding with the bidding for the sale of the 3,179 square meters of land at 306
Roppongi, 5-Chome Minato-ku Tokyo, Japan scheduled on February 21, 1990. We granted the
prayer for a temporary restraining order effective February 20, 1990. One of the petitioners (in
G.R. No. 92047) likewise prayes for a writ of mandamus to compel the respondents to fully
disclose to the public the basis of their decision to push through with the sale of the Roppongi
property inspire of strong public opposition and to explain the proceedings which effectively
prevent the participation of Filipino citizens and entities in the bidding process.
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court on
March 13, 1990. After G.R. No. 92047, Ojeda v. Secretary Macaraig, et al.  was filed, the
respondents were required to file a comment by the Court's resolution dated February 22, 1990.
The two petitions were consolidated on March 27, 1990 when the memoranda of the parties in
the Laurel case were deliberated upon.
The Court could not act on these cases immediately because the respondents filed a motion for
an extension of thirty (30) days to file comment in G.R. No. 92047, followed by a second
motion for an extension of another thirty (30) days which we granted on May 8, 1990, a third
motion for extension of time granted on May 24, 1990 and a fourth motion for extension of
time which we granted on June 5, 1990 but calling the attention of the respondents to the length
of time the petitions have been pending. After the comment was filed, the petitioner in G.R.
No. 92047 asked for thirty (30) days to file a reply. We noted his motion and resolved to decide
the two (2) cases.
I
Philippine government under the Reparations Agreement entered into with Japan on May 9,
1956, the other lots being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area
of approximately 2,489.96 square meters, and is at present the site of the Philippine Embassy
Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72
square meters and categorized as a commercial lot now being used as a warehouse and parking
lot for the consulate staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a
residential lot which is now vacant.
The properties and the capital goods and services procured from the Japanese government for
national development projects are part of the indemnification to the Filipino people for their
losses in life and property and their suffering during World War II.
The Reparations Agreement provides that reparations valued at $550 million would be payable
in twenty (20) years in accordance with annual schedules of procurements to be fixed by the
Philippine and Japanese governments (Article 2, Reparations Agreement). Rep. Act No. 1789,
the Reparations Law, prescribes the national policy on procurement and utilization of
reparations and development loans. The procurements are divided into those for use by
the government sector and those for private parties  in projects as the then National Economic
Council shall determine. Those intended for the private sector shall be made available by sale
to Filipino citizens or to one hundred (100%) percent Filipino-owned entities in national
development projects.
The Roppongi property was acquired from the Japanese government under the Second Year
Schedule and listed under the heading "Government Sector", through Reparations Contract No.
300 dated June 27, 1958. The Roppongi property consists of the land and building "for the
Chancery of the Philippine Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As
intended, it became the site of the Philippine Embassy until the latter was transferred to
Nampeidai on July 22, 1976 when the Roppongi building needed major repairs. Due to the
failure of our government to provide necessary funds, the Roppongi property has remained
undeveloped since that time.
A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to
Japan, Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese
firm - Kajima Corporation — which shall construct two (2) buildings in Roppongi and one (1)
building in Nampeidai and renovate the present Philippine Chancery in Nampeidai. The
consideration of the construction would be the lease to the foreign corporation of one (1) of the
buildings to be constructed in Roppongi and the two (2) buildings in Nampeidai. The other
building in Roppongi shall then be used as the Philippine Embassy Chancery. At the end of the
lease period, all the three leased buildings shall be occupied and used by the Philippine
government. No change of ownership or title shall occur. (See Annex "B" to Reply to
Comment) The Philippine government retains the title all throughout the lease period and
thereafter. However, the government has not acted favorably on this proposal which is pending
approval and ratification between the parties. Instead, on August 11, 1986, President Aquino
created a committee to study the disposition/utilization of Philippine government properties in
Tokyo and Kobe, Japan through Administrative Order No. 3, followed by Administrative
Orders Numbered 3-A, B, C and D.
On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino citizens
or entities to avail of separations' capital goods and services in the event of sale, lease or
disposition. The four properties in Japan including the Roppongi were specifically mentioned
in the first "Whereas" clause.
Amidst opposition by various sectors, the Executive branch of the government has been
pushing, with great vigor, its decision to sell the reparations properties starting with the
Roppongi lot. The property has twice been set for bidding at a minimum floor price of $225
million. The first bidding was a failure since only one bidder qualified. The second one, after
postponements, has not yet materialized. The last scheduled bidding on February 21, 1990 was
restrained by his Court. Later, the rules on bidding were changed such that the $225 million
floor price became merely a suggested floor price.
The Court finds that each of the herein petitions raises distinct issues. The petitioner in G.R.
No. 92013 objects to the alienation of the Roppongi property to anyone while the petitioner in
G.R. No. 92047 adds as a principal objection the alleged unjustified bias of the Philippine
government in favor of selling the property to non-Filipino citizens and entities. These petitions
have been consolidated and are resolved at the same time for the objective is the same - to stop
the sale of the Roppongi property.
The petitioner in G.R. No. 92013 raises the following issues:
(1) Can the Roppongi property and others of its kind be alienated by the Philippine
Government?; and
(2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to
sell the Roppongi property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of the
government to alienate the Roppongi property assails the constitutionality of Executive Order
No. 296 in making the property available for sale to non-Filipino citizens and entities. He also
questions the bidding procedures of the Committee on the Utilization or Disposition of
Philippine Government Properties in Japan for being discriminatory against Filipino citizens
and Filipino-owned entities by denying them the right to be informed about the bidding
requirements.
II
In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related lots
were acquired as part of the reparations from the Japanese government for diplomatic and
consular use by the Philippine government. Vice-President Laurel states that the Roppongi
property is classified as one of public dominion, and not of private ownership under Article
420 of the Civil Code (See infra).
The petitioner submits that the Roppongi property comes under "property intended for public
service" in paragraph 2 of the above provision. He states that being one of public dominion, no
ownership by any one can attach to it, not even by the State. The Roppongi and related
properties were acquired for "sites for chancery, diplomatic, and consular quarters, buildings
and other improvements" (Second Year Reparations Schedule). The petitioner states that they
continue to be intended for a necessary service. They are held by the State in anticipation of an
opportune use. (Citing 3 Manresa 65-66). Hence, it cannot be appropriated, is outside the
commerce of man, or to put it in more simple terms, it cannot be alienated nor be the subject
matter of contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]). Noting the
non-use of the Roppongi property at the moment, the petitioner avers that the same remains
property of public dominion so long as the government has not used it for other purposes nor
adopted any measure constituting a removal of its original purpose or use.
The respondents, for their part, refute the petitioner's contention by saying that the subject
property is not governed by our Civil Code but by the laws of Japan where the property is
located. They rely upon the rule of lex situs which is used in determining the applicable law
regarding the acquisition, transfer and devolution of the title to a property. They also invoke
Opinion No. 21, Series of 1988, dated January 27, 1988 of the Secretary of Justice which used
the lex situs in explaining the inapplicability of Philippine law regarding a property situated in
Japan.
The respondents add that even assuming for the sake of argument that the Civil Code is
applicable, the Roppongi property has ceased to become property of public dominion. It has
become patrimonial property because it has not been used for public service or for diplomatic
purposes for over thirteen (13) years now (Citing Article 422, Civil Code) and because
the intention by the Executive Department and the Congress to convert it to private use has
been manifested by overt acts, such as, among others: (1) the transfer of the Philippine
Embassy to Nampeidai (2) the issuance of administrative orders for the possibility of alienating
the four government properties in Japan; (3) the issuance of Executive Order No. 296; (4) the
enactment by the Congress of Rep. Act No. 6657 [the Comprehensive Agrarian Reform Law]
on June 10, 1988 which contains a provision stating that funds may be taken from the sale of
Philippine properties in foreign countries; (5) the holding of the public bidding of the Roppongi
property but which failed; (6) the deferment by the Senate in Resolution No. 55 of the bidding
to a future date; thus an acknowledgment by the Senate of the government's intention to
remove the Roppongi property from the public service purpose; and (7) the resolution of this
Court dismissing the petition in Ojeda v. Bidding Committee, et al., G.R. No. 87478 which
sought to enjoin the second bidding of the Roppongi property scheduled on March 30, 1989.
III
In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the constitutionality
of Executive Order No. 296. He had earlier filed a petition in G.R. No. 87478 which the Court
dismissed on August 1, 1989. He now avers that the executive order contravenes the
constitutional mandate to conserve and develop the national patrimony stated in the Preamble
of the 1987 Constitution. It also allegedly violates:
(1) The reservation of the ownership and acquisition of alienable lands of the public domain to
Filipino citizens. (Sections 2 and 3, Article XII, Constitution; Sections 22 and 23 of
Commonwealth Act 141).i•t•c-aüsl
(2) The preference for Filipino citizens in the grant of rights, privileges and concessions
covering the national economy and patrimony (Section 10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair competition and trade practices;
(4) The guarantee of the right of the people to information on all matters of public concern
(Section 7, Article III, Constitution);
(5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned by
Filipino citizens of capital goods received by the Philippines under the Reparations Act
(Sections 2 and 12 of Rep. Act No. 1789); and
(6) The declaration of the state policy of full public disclosure of all transactions involving
public interest (Section 28, Article III, Constitution).
Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional
executive order is a misapplication of public funds He states that since the details of the
bidding for the Roppongi property were never publicly disclosed  until February 15, 1990 (or a
few days before the scheduled bidding), the bidding guidelines are available only in Tokyo,
and the accomplishment of requirements and the selection of qualified bidders should be done
in Tokyo, interested Filipino citizens or entities owned by them did not have the chance to
comply with Purchase Offer Requirements on the Roppongi. Worse, the Roppongi shall be
sold for a minimum price of $225 million from which price capital gains tax under Japanese
law of about 50 to 70% of the floor price would still be deducted.
IV
The petitioners and respondents in both cases do not dispute the fact that the Roppongi site and
the three related properties were through reparations agreements, that these were assigned to
the government sector and that the Roppongi property itself was specifically designated under
the Reparations Agreement to house the Philippine Embassy.
The nature of the Roppongi lot as property for public service is expressly spelled out. It is
dictated by the terms of the Reparations Agreement and the corresponding contract of
procurement which bind both the Philippine government and the Japanese government.
There can be no doubt that it is of public dominion unless it is convincingly shown that the
property has become patrimonial. This, the respondents have failed to do.
As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be
alienated. Its ownership is a special collective ownership for general use and enjoyment, an
application to the satisfaction of collective needs, and resides in the social group. The purpose
is not to serve the State as a juridical person, but the citizens; it is intended for the common and
public welfare and cannot be the object of appropration. (Taken from 3 Manresa, 66-69; cited
in Tolentino, Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol. II, p. 26).
The applicable provisions of the Civil Code are:
ART. 419. Property is either of public dominion or of private ownership.
ART. 420. The following things are property of public dominion
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks shores roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth.
ART. 421. All other property of the State, which is not of the character stated in the preceding
article, is patrimonial property.
The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil
Code as property belonging to the State and intended for some public service.
Has the intention of the government regarding the use of the property been changed because
the lot has been Idle for some years? Has it become patrimonial?
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]).
The respondents enumerate various pronouncements by concerned public officials insinuating
a change of intention. We emphasize, however, that an abandonment of the intention to use the
Roppongi property for public service and to make it patrimonial property under Article 422 of
the Civil Code must be definite Abandonment cannot be inferred from the non-use alone
specially if the non-use was attributable not to the government's own deliberate and indubitable
will but to a lack of financial support to repair and improve the property (See Heirs of Felino
Santiago v. Lazaro, 166 SCRA 368 [1988]). Abandonment must be a certain and positive act
based on correct legal premises.
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the
Roppongi property's original purpose. Even the failure by the government to repair the building
in Roppongi is not abandonment since as earlier stated, there simply was a shortage of
government funds. The recent Administrative Orders authorizing a study of the status and
conditions of government properties in Japan were merely directives for investigation but did
not in any way signify a clear intention to dispose of the properties.
Executive Order No. 296, though its title declares an "authority to sell", does not have a
provision in its text expressly authorizing the sale of the four properties procured from Japan
for the government sector. The executive order does not declare that the properties lost their
public character. It merely intends to make the properties available to foreigners and not to
Filipinos alone in case of a sale, lease or other disposition. It merely eliminates the restriction
under Rep. Act No. 1789 that reparations goods may be sold only to Filipino citizens and one
hundred (100%) percent Filipino-owned entities. The text of Executive Order No. 296
provides:
Section 1. The provisions of Republic Act No. 1789, as amended, and of other laws to the
contrary notwithstanding, the above-mentioned properties can be made available for sale, lease
or any other manner of disposition to non-Filipino citizens or to entities owned by non-Filipino
citizens.
Executive Order No. 296 is based on the wrong premise or assumption that the Roppongi and
the three other properties were earlier converted into alienable real properties. As earlier stated,
Rep. Act No. 1789 differentiates the procurements for the government sector and the private
sector (Sections 2 and 12, Rep. Act No. 1789). Only the private sector properties can be sold to
end-users who must be Filipinos or entities owned by Filipinos. It is this nationality provision
which was amended by Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the sources of
funds for its implementation, the proceeds of the disposition of the properties of the
Government in foreign countries, did not withdraw the Roppongi property from being
classified as one of public dominion when it mentions Philippine properties abroad. Section 63
(c) refers to properties which are alienable and not to those reserved for public use or service.
Rep Act No. 6657, therefore, does not authorize the Executive Department to sell the Roppongi
property. It merely enumerates possible sources of future funding to augment (as and when
needed) the Agrarian Reform Fund created under Executive Order No. 299. Obviously any
property outside of the commerce of man cannot be tapped as a source of funds.
The respondents try to get around the public dominion character of the Roppongi property by
insisting that Japanese law and not our Civil Code should apply.
It is exceedingly strange why our top government officials, of all people, should be the ones to
insist that in the sale of extremely valuable government property, Japanese law and not
Philippine law should prevail. The Japanese law - its coverage and effects, when enacted, and
exceptions to its provision — is not presented to the Court It is simply asserted that the lex loci
rei sitae or Japanese law should apply without stating what that law provides. It is a ed on faith
that Japanese law would allow the sale.
We see no reason why a conflict of law rule should apply when no conflict of law situation
exists. A conflict of law situation arises only when: (1) There is a dispute over the title or
ownership of an immovable, such that the capacity to take and transfer immovables, the
formalities of conveyance, the essential validity and effect of the transfer, or the interpretation
and effect of a conveyance, are to be determined (See Salonga, Private International Law,
1981 ed., pp. 377-383); and (2) A foreign law on land ownership and its conveyance is asserted
to conflict with a domestic law on the same matters. Hence, the need to determine which law
should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or title. There is no question that the
property belongs to the Philippines. The issue is the authority of the respondent officials to
validly dispose of property belonging to the State. And the validity of the procedures adopted
to effect its sale. This is governed by Philippine Law. The rule of lex situs does not apply.
The assertion that the opinion of the Secretary of Justice sheds light on the relevance of the lex
situs  rule is misplaced. The opinion does not tackle the alienability of the real properties
procured through reparations nor the existence in what body of the authority to sell them. In
discussing who are capable of acquiring the lots, the Secretary merely explains that it is the
foreign law which should determine who can acquire the properties so that the constitutional
limitation on acquisition of lands of the public domain to Filipino citizens and entities wholly
owned by Filipinos is inapplicable. We see no point in belaboring whether or not this opinion
is correct. Why should we discuss who can acquire the Roppongi lot when there is no showing
that it can be sold?
The subsequent approval on October 4, 1988 by President Aquino of the recommendation by
the investigating committee to sell the Roppongi property was premature or, at the very least,
conditioned on a valid change in the public character of the Roppongi property. Moreover, the
approval does not have the force and effect of law since the President already lost her
legislative powers. The Congress had already convened for more than a year.
Assuming for the sake of argument, however, that the Roppongi property is no longer of public
dominion, there is another obstacle to its sale by the respondents.
There is no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917 provides
Section 79 (f ) Conveyances and contracts to which the Government is a party. —  In cases in
which the Government of the Republic of the Philippines is a party to any deed or other
instrument conveying the title to real estate or to any other property the value of which is in
excess of one hundred thousand pesos, the respective Department Secretary shall prepare the
necessary papers which, together with the proper recommendations,  shall be submitted to the
Congress of the Philippines for approval by the same. Such deed, instrument, or contract shall
be executed and signed by the President of the Philippines on behalf of the Government of the
Philippines unless the Government of the Philippines unless the authority therefor be expressly
vested by law in another officer. (Emphasis supplied)
The requirement has been retained in Section 48, Book I of the Administrative Code of 1987
(Executive Order No. 292).
SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be executed in
behalf of the government by the following:
(1) For property belonging to and titled in the name of the Republic of the Philippines, by the
President, unless the authority therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the name of any
political subdivision or of any corporate agency or instrumentality, by the executive head of the
agency or instrumentality. (Emphasis supplied)
It is not for the President to convey valuable 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.
Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the sale of the
Roppongi property does not withdraw the property from public domain much less authorize its
sale. It is a mere resolution; it is not a formal declaration abandoning the public character of the
Roppongi property. In fact, the Senate Committee on Foreign Relations is conducting hearings
on Senate Resolution No. 734 which raises serious policy considerations and calls for a fact-
finding investigation of the circumstances behind the decision to sell the Philippine
government properties in Japan.
The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass upon the
constitutionality of Executive Order No. 296. Contrary to respondents' assertion, we did not
uphold the authority of the President to sell the Roppongi property. The Court stated that the
constitutionality of the executive order was not the real issue and that resolving the
constitutional question was "neither necessary nor finally determinative of the case." The Court
noted that "[W]hat petitioner ultimately questions is the use of the proceeds of the disposition
of the Roppongi property." In emphasizing that "the decision of the Executive to dispose of the
Roppongi property to finance the CARP ... cannot be questioned" in view of Section 63 (c) of
Rep. Act No. 6657, the Court did not acknowledge the fact that the property became alienable
nor did it indicate that the President was authorized to dispose of the Roppongi property. The
resolution should be read to mean that in case the Roppongi property is re-classified to be
patrimonial and alienable by authority of law, the proceeds of a sale may be used for national
economic development projects including the CARP.
Moreover, the sale in 1989 did not materialize. The petitions before us question the proposed
1990 sale of the Roppongi property. We are resolving the issues raised in these petitions, not
the issues raised in 1989.
Having declared a need for a law or formal declaration to withdraw the Roppongi property
from public domain to make it alienable and a need for legislative authority to allow the sale of
the property, we see no compelling reason to tackle the constitutional issues raised by
petitioner Ojeda.
The Court does not ordinarily pass upon constitutional questions unless these questions are
properly raised in appropriate cases and their resolution is necessary for the determination of
the case (People v. Vera, 65 Phil. 56 [1937]). The Court will not pass upon a constitutional
question although properly presented by the record if the case can be disposed of on some other
ground such as the application of a statute or general law (Siler v. Louisville and Nashville R.
Co., 213 U.S. 175, [1909], Railroad Commission v. Pullman Co., 312 U.S. 496 [1941]).
The petitioner in G.R. No. 92013 states why the Roppongi property should not be sold:
The Roppongi property is not just like any piece of property. It was given to the Filipino people
in reparation for the lives and blood of Filipinos who died and suffered during the Japanese
military occupation, for the suffering of widows and orphans who lost their loved ones and
kindred, for the homes and other properties lost by countless Filipinos during the war. The
Tokyo properties are a monument to the bravery and sacrifice of the Filipino people in the face
of an invader; like the monuments of Rizal, Quezon, and other Filipino heroes, we do not
expect economic or financial benefits from them. But who would think of selling these
monuments? Filipino honor and national dignity dictate that we keep our properties in Japan as
memorials to the countless Filipinos who died and suffered. Even if we should become paupers
we should not think of selling them. For it would be as if we sold the lives and blood and tears
of our countrymen. (Rollo- G.R. No. 92013, p.147)
The petitioner in G.R. No. 92047 also states:
Roppongi is no ordinary property. It is one ceded by the Japanese government in atonement for
its past belligerence for the valiant sacrifice of life and limb and for deaths, physical dislocation
and economic devastation the whole Filipino people endured in World War II.
It is for what it stands for, and for what it could never bring back to life, that its significance
today remains undimmed, inspire of the lapse of 45 years since the war ended, inspire of the
passage of 32 years since the property passed on to the Philippine government.
Roppongi is a reminder that cannot — should not — be dissipated ... (Rollo-92047, p. 9)
It is indeed true that the Roppongi property is valuable not so much because of the inflated
prices fetched by real property in Tokyo but more so because of its symbolic value to all
Filipinos — veterans and civilians alike. Whether or not the Roppongi and related properties
will eventually be sold is a policy determination where both the President and Congress must
concur. Considering the properties' importance and value, the laws on conversion and
disposition of property of public dominion must be faithfully followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of
prohibition is issued enjoining the respondents from proceeding with the sale of the Roppongi
property in Tokyo, Japan. The February 20, 1990 Temporary Restraining Order is made
PERMANENT.
G.R. No. L-24661 February 28, 1974
BENJAMIN RABUCO, VENANCIO G. GUIRNALDA, LEODEGARIO ALOBA,
ELEUTERIO IBAÑES, ROGELIO ARAGONES, ASENCIO ABANCO, BENEDICTO
BAUTISTA, MAXIMO AQUINO, PAULINA DALUMIAS, NENITA RAMOS,
GUILLERMO VARIAS, EMELDA ARELLANO, PEDRO BILBAO, ERNESTO
BONBALES, ROSITA OCA BAUTISTA, TERESITA ESTEBAN, JOSE BENJAMIN,
LORENZO BELDEVER, LEODEGARIO TUMLOS, PATRICIO MALATE, ANSELMO
CORTEJOS, ANACLETA ADUCA, SALOME BARCELONA, ENRICO CELSO, IRENE
CAMBA, MARIA COLLADO, RUFINO CANTIL, ANANIAS CANILLO, MAXIMO DE
CASTRO, CEFERINO SALAZAR, PATRIA ANAYA, FELISA VELASCO, IGNACIO
SARASPI, FLAVIO DINAGUIT, REMEDIOS BAROMETRO, PEDRO GEBANIA, RUBEN
GEGABALEN, EMETRIO EDAÑO, LUCIANO ARAGONES, ADRIANO ESTRELLADO,
BONIFACIO EVARISTO, ISIDORO EDORIA, TIMOTEA ECARUAN, BIENVENIDO
COLLADO, CENON DAJUYA, RAFAELA FERNANDEZ, ALFONSO FAUSTINO,
AVELINO GARCIA, RICARDO GUIRNALDA, FRANCISCO HENERAL, CARMEN
KIONESALA, FELICIANO LUMACTOD, DOLORES VILLACAMPA, NARCISO LIM,
EUFEMIO LEGASPI, MATILDE MABAQUIAO, EULOGIO VIÑA, MACARIO ANTONIO,
JEREMIAS DE LA CRUZ, MARTIN MANGABAN, SIMEON MANGABA T., CARIDAD
MER MILLA, FELIX MAHINAY, NAPOLEON MARZAN, ISAIAS MANALASTAS,
JOSEFA CORVERA, JOSE APRUEDO, ARSENIO REYES, EUGENIA A. ONO,
CORNELIO OPOLENCIA, SEDECIAS PASCUA, ABUNDIO PAGUNTALAN,
ESPERANZA DE QUIROS, CRESENCIO SALEM, MOISES FERNANDEZ, FORTUNATO
GONZALES, SOCORRO R. VALEN, RODOLFO COLLADO, VENERIO CELSO,
GREGORIO DE LA CRUZ, CELSO ALCERA, NICOLAS ARAGONES, JOSEFINA
MANANSALA, ADELAIDA CALASIN , JOSE AGUSTIN, TOMAS JOSEPH, MANUEL
DADOR, SERGIO LIPATON, ERNESTO SUMAYDING, MARCELINO DIOSO, MIGUEL
ALCERA, CRISANTA ENAMER, JUAN VIADO HILARION CHIOCO, EUROPIA
CABAHUG, VICTORIA DUERO, CONSORCIO ENOC, MAMERTO GAMONIDO,
BONIFACIO SABADO, MARIA INTROLIZO, HENRY ENOLBA, REYNALDO LIM,
FORTUNATO LIPON, ERNESTO MALLOS, FLORENTINA PATRICIO, MAMERTO
PALAPALA, RAMON DE PERALTA, JOSE PARRAS, APOLINARIO YAP, JUAN
ROQUE, FELIX ROQUE, GLICERIA SALAZAR, MIGUELA SABIO, AGAPITO SAYAS,
PAULINO SARROZA, PACIFICO JUANICO, LIBERADO TULAWAN, LIGAYA LAUS,
ERNESTO VERZOSA, LEOPOLDO BERNALES, JAIME VISTA, ISAIAS AMURAO,
BENITA M. BARENG, and BRIGIDA SANCHEZ, petitioners,
vs.
HON. ANTONIO J. VILLEGAS substituted by HON. RAMON BAGATSING as CITY
MAYOR OF MANILA, HON. LADISLAO J. TOLENTINO, City Engineer of Manila, their
agents, employees, assistants and all persons acting under them; HON. BENJAMIN GOZON,
Administrator, Land Reform Authority substituted by HON CONRADO ESTRELLA as
Secretary of the Department of Agrarian Reforms and his agents, employees, assistants and all
persons acting under his orders, respondent.1
G.R. No. L-24915 February 28, 1974
BENJAMIN RABUCO, et al., (the same co-petitioners in L-24661), petitioners,
vs.
HON. ANTONIO J. VILLEGAS substituted by HON. RAMON BAGATSING as CITY
MAYOR OF MANILA, et al., (the same co-respondents in L-24661), respondents.
G.R. No. L-24916 February 28, 1974
BENJAMIN RABUCO, et al. (the same co-petitioners in L-24661), petitioners-appellants,
vs.
HON. ANTONIO J. VILLEGAS substituted by HON. RAMON BAGATSING as CITY
MAYOR OF MANILA, et al., (the same co-respondents in L-24661), respondents-appellees.
Manuel D. Melotindos and Ricardo M. Guirnalda for petitioners.
Second Assistant City Fiscal Manuel T. Reyes for respondents.
TEEHANKEE, J.:p
The Court herein upholds the constitutionality of Republic Act 3120 on the strength of the
established doctrine that the subdivision of communal land of the State (although titled in the
name of the municipal corporation) and conveyance of the resulting subdivision lots by sale on
installment basis to bona fide occupants by Congressional authorization and disposition does
not constitute infringements of the due process clause or the eminent domain provisions of the
Constitution but operates simply as a manifestation of the legislature's right of control and
power to deal with State property.
The origin and background of the cases at bar which deal with the decisive issue of
constitutionality of Republic Act 3120 enacted on June 17, 1961, as raised by respondent
mayor of Manila in resisting petitioners' pleas that respondent mayor not only lacks the
authority to demolish their houses or eject them as tenants and bona fide occupants of a parcel
of land in San Andres, Malate2 but is also expressly prohibited from doing so by section 2 of
the Act, may be summarized from the Court of Appeals'3 certification of resolution of May 31,
1965 as follows:
Case L-24916 involves petitioners' appeal to the Court of Appeals4 from the decision of the
Manila court of first instance dismissing their petition for injunction and mandamus to enjoin
the demolition of their houses and the ejectment from the public lots in question and to direct
respondent administrator of the Land Authority (now Secretary of Agrarian Reform) to
implement the provisions of Republic Act 3120 for the subdivision and sale on installment
basis of the subdivided lots to them as the tenants and bona fide occupants thereof, and instead
ordering their ejectment.
Case L-24915 involves petitioners' independent petition for injunction filed directly with the
Court of Appeals January 29, 19655 to forestall the demolition overnight of their houses
pursuant to the order of demolition set for January 30, 1965 at 8 a.m. issued by respondents
city officials pending the elevation of their appeal. The appellate court gave due course thereto
and issued the writ of preliminary injunction as prayed for.
The two cases were ordered "consolidated into one" since they were "unavoidably interlaced."
The appellate court, finding that the constitutionality of Republic Act 3120 was "the dominant
and inextricable issue in the appeal" over which it had no jurisdiction and that the trial court
incorrectly "sidetracked" the issue, thereafter certified the said cases to this Court, as follows:
The validity of Republic Act 3120 which was seasonably posed in issue in the court below was
sidetracked by the trial court, thus:
The constitutionality of Republic Act No. 3120 need not be passed upon as the principal
question in issue is whether the houses of the petitioners are public nuisances, which the court
resolved in the affirmative. As a matter of fact even if the petitioners were already the owners
of the land on which their respected houses are erected, the respondent city officials could
cause the removal thereof as they were constructed in violation of city ordinances and
constitute public nuisance.
It is significant to note, however, that what is sought by the respondent City Mayor and City
Engineer of Manila is not only the demolition of the petitioners' houses in the premises in
controversy, but their ejectment as well. Moreover, Republic Act 3120 does intend not only the
dismissal of the ejectment proceedings against the petitioners from the land in controversy
upon their motion, but as well that any demolition order issued against them shall also have to
be dismissed. The law says:
Upon approval of this Act no ejectment proceedings against any tenants or bona fide occupant
shall be instituted and any proceedings against any such tenant or bona fide occupant shall be
dismissed upon motion of the defendant. Provided, That any demolition order directed against
any tenant or bona fide occupant thereof, shall be dismissed. (Sec. 2, R. A. 3120).
Indeed, the petitioners-appellants, who contended in the court below that it was not necessary
to decide on the validity or constitutionality of the law, now asseverate that 'Republic Act No.
3120 expressly prohibits ejectment and demolition of petitioners' home.' The petitioners'
argument in their appeal to this Court runs as follows:
1. Petitioners-appellants are entitled to the remedies of injunction and mandamus, being vested
with lawful possession over Lot 21-B, Block 610, granted by law, Republic Act No. 3120.
2. Civil Case No. 56092 has not been barred by any prior judgment, as wrongly claimed by
respondents-appellees.
3. Ejectment and demolition against petitioners-appellants are unlawful and clearly prohibited
by Republic Act No. 3120.
The defense of the respondents Mayor and City Engineer of Manila to arguments 2 and 3 is the
invalidity of the said Republic Act 3120 for being in violation of the Constitutional prohibition
against the deprivation of property without due process of law and without just compensation.
So that even if argument 2 interposed by the petitioners-appellants should be rejected, still they
may claim a right, by virtue of the aforesaid provisions of Republic Act 3120, to continue
possession and occupation of the premises and the lifting of the order of demolition issued
against them. The constitutionality of the said Republic Act 3120, therefore, becomes the
dominant and inextricable issue of the appeal.
Case L-24661 for the continuation and maintenance of the writ of preliminary injunction
previously issued by the Court of Appeals for preservation of the status quo was filed by
petitioners directly with this Court on June 21, 1965, pending transmittal of the records of
Cases L-24915 and L-24916 to this Court as certified by the Court of Appeals which declared
itself without jurisdiction over the principal and decisive issue of constitutionality of Republic
Act 3120.
The Court gave due course thereto and on August 17, 1965 issued upon a P1,000 — bond the
writ of preliminary injunction as prayed for enjoining respondents "from demolishing and/or
continuing to demolish the houses of herein petitioners situated in Lot No. 21-B, Block No.
610 of the Cadastral Survey of the City of Manila, or from performing any act constituting an
interference in or disturbance of their present possession."
The records of two cases certified by the appellate court, L-24915 and L-24916, were
eventually forwarded to this Court which per its resolution of August 24, 1965 ordered that
they be docketed and be considered together with case L-24661.
In the early morning of April 19, 1970, a large fire of undetermined origin gutted the Malate
area including the lot on which petitioners had built their homes and dwellings. Respondents
city officials then took over the lot and kept petitioners from reconstructing or repairing their
burned dwellings. At petitioners' instance, the Court issued on June 17, 1970 a temporary
restraining order enjoining respondents city officials "from performing any act constituting an
interference in or disturbance of herein petitioners' possession of Lot No. 21-B, Block No. 610,
of the Cadastral Survey of the City of Manila" as safeguarded them under the Court's subsisting
preliminary injunction of August 17, 1965.
The "dominant and inextricable issue" at bar, as correctly perceived by the appellate court is
the constitutionality of Republic Act 3120 whereby Congress converted the lot in question
together with another lot in San Andres, Malate "which are reserved as communal property"
into "disposable or alienable lands of the State to be placed under the administration and
disposal of the Land Tenure Administration" for subdivision into small lots not exceeding 120
square meters per lot for sale on installment basis to the tenants or bona fide occupants
thereof6 and expressly prohibited ejectment and demolition of petitioners' homes under section
2 of the Act as quoted in the appellate court's certification resolution, supra.
The incidental issue seized upon by the trial court as a main issue for "sidetracking" the
decisive issue of constitutionality, to wit, that petitioners' houses as they stood at the time of its
judgment in 1965 "were constructed in violation of city ordinances and constituted public
nuisances" whose removal could be ordered "even if petitioners were already the owners of the
land on which their respective houses are erected" has become moot with the burning down of
the petitioners' houses in the fire of April 19, 1970.
If the Act is invalid and unconstitutional for constituting deprivation of property without due
process of law and without just compensation as contended by respondents city officials, then
the trial court's refusal to enjoin ejectment and demolition of petitioners' houses may be upheld.
Otherwise, petitioners' right under the Act to continue possession and occupation of the
premises and to the lifting and dismissal of the order of demolition issued against them must be
enforced and the trial court's judgment must be set aside.
Respondents city officials' contention that the Act must be stricken down as unconstitutional
for depriving the city of Manila of the lots in question and providing for their sale in
subdivided small lots to bona fide occupants or tenants without payment of just compensation
is untenable and without basis, since the lots in question are manifestly owned by the city in
its public and governmental capacity and are therefore public property over which Congress
had absolute control as distinguished from patrimonial property owned by it in
its private or  proprietary capacity of which it could not be deprived without due process and
without just compensation.7
Here, Republic Act 3120 expressly declared that the properties were "reserved as communal
property" and ordered their conversion into "disposable and alienable lands of the State" for
sale in small lots to the bona fide occupants thereof. It is established doctrine that the act of
classifying State property calls for the exercise of wide discretionary legislative power which
will not be interfered with by the courts.
The case of Salas vs. Jarencio8 wherein the Court upheld the constitutionality of Republic Act
4118 whereby Congress in identical terms as in Republic Act 3120 likewise converted another
city lot (Lot 1-B-2-B of Block 557 of the cadastral survey of Manila also in Malate) which was
reserved as communal property into disposable land of the State for resale in small lots by the
Land Tenure, Administration to the bona fide occupants is controlling in the case at bar.
The Court therein reaffirmed the established general rule that "regardless of the source or
classification of land in the possession of a municipality, excepting those acquired with its own
funds in its private or corporate capacity, such property is held in trust for the State for the
benefit of its inhabitants, whether it be for governmental or proprietary purposes. It holds such
lands subject to the paramount power of the legislature to dispose of the same, for after all it
owes its creation to it as an agent for the performance of a part of its  public work, the
municipality being but a subdivision or instrumentality thereof for purposes of local
administration. Accordingly, the legal situation is the same as if the State itself holds the
property and puts it to a different use"9 and stressed that "the property, as has been previously
shown, was not acquired by the City of Manila with its own funds in its private or proprietary
capacity. That it has in its name a registered title is not questioned, but this title should be
deemed to be held in trust for the State as the land covered thereby was part of the territory of
the City of Manila granted by the sovereign upon its creation." 10
There as here, the Court holds that the Acts in question (Republic Acts 4118 in Salas and
Republic Act 3120 in the case at bar) were intended to implement the social justice policy of
the Constitution and the government program of land for the landless and that they
were not "intended to expropriate the property involved but merely to confirm its character
as communal land of the State and to make it available for disposition by the National
Government: ... The subdivision of the land and conveyane of the resulting subdivision lots to
the occupants by Congressional authorization does not operate as an exercise of the power of
eminent domain without just compensation in violation of Section 1, subsection (2), Article III
of the Constitution, 11 but simply as a manifestation of its right and power to deal with state
property." 12
Since the challenge of respondents city officials against the constitutionality of Republic Act
3120 must fail as the City was not deprived thereby of anything it owns by acquisition with its
private or corporate funds either under the due process clause or under the eminent domain
provisions of the Constitution, the provisions of said Act must be enforced and petitioners are
entitled to the injunction as prayed for implementing the Act's prohibition against their
ejectment and demolition of their houses.
WHEREFORE, the appealed decision of the lower court (in Case No. L-24916) is hereby set
aside, and the preliminary injunction heretofore issued on August 17, 1965 is hereby made
permanent. The respondent Secretary of Agrarian Reform as successor agency of the Land
Tenure Administration may now proceed with the due implementation of Republic Act 3120 in
accordance with its terms and provisions. No costs.
G.R. No. 97764 August 10, 1992
LEVY D. MACASIANO, Brigadier General/PNP Superintendent, Metropolitan Traffic
Command, petitioner,
vs.
HONORABLE ROBERTO C. DIOKNO, Presiding Judge, Branch 62, Regional Trial Court of
Makati, Metro Manila, MUNICIPALITY OF PARAÑAQUE, METRO MANILA,
PALANYAG KILUSANG BAYAN FOR SERVICE, respondents.
Ceferino, Padua Law Office for Palanyag Kilusang Bayan for service.
Manuel de Guia for Municipality of Parañaque.
MEDIALDEA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of
the decision of the Regional Trial Court of Makati, Branch 62, which granted the writ of
preliminary injunction applied for by respondents Municipality of Parañaque and Palanyag
Kilusang Bayan for Service (Palanyag for brevity) against petitioner herein.
The antecedent facts are as follows:
On June 13, 1990, the respondent municipality passed Ordinance No. 86, Series of 1990 which
authorized the closure of J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena
Streets located at Baclaran, Parañaque, Metro Manila and the establishment of a flea market
thereon. The said ordinance was approved by the municipal council pursuant to MMC
Ordinance No. 2, Series of 1979, authorizing and regulating the use of certain city and/or
municipal streets, roads and open spaces within Metropolitan Manila as sites for flea market
and/or vending areas, under certain terms and conditions.
On July 20, 1990, the Metropolitan Manila Authority approved Ordinance No. 86, s. 1990 of
the municipal council of respondent municipality subject to the following conditions:
1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the
residents do not oppose the establishment of the flea market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area shall be marked
distinctly, and that the 2 meters on both sides of the road shall be used by pedestrians;
3. That the time during which the vending area is to be used shall be clearly designated;
4. That the use of the vending areas shall be temporary and shall be closed once the reclaimed
areas are developed and donated by the Public Estate Authority.
On June 20, 1990, the municipal council of Parañaque issued a resolution authorizing
Parañaque Mayor Walfrido N. Ferrer to enter into contract with any service cooperative for the
establishment, operation, maintenance and management of flea markets and/or vending areas.
On August 8, 1990, respondent municipality and respondent Palanyag, a service cooperative,
entered into an agreement whereby the latter shall operate, maintain and manage the flea
market in the aforementioned streets with the obligation to remit dues to the treasury of the
municipal government of Parañaque. Consequently, market stalls were put up by respondent
Palanyag on the said streets.
On September 13, 1990, petitioner Brig. Gen. Macasiano, PNP Superintendent of the
Metropolitan Traffic Command, ordered the destruction and confiscation of stalls along G.G.
Cruz and J. Gabriel St. in Baclaran. These stalls were later returned to respondent Palanyag.
On October 16, 1990, petitioner Brig. General Macasiano wrote a letter to respondent Palanyag
giving the latter ten (10) days to discontinue the flea market; otherwise, the market stalls shall
be dismantled.
Hence, on October 23, 1990, respondents municipality and Palanyag filed with the trial court a
joint petition for prohibition and mandamus with damages and prayer for preliminary
injunction, to which the petitioner filed his memorandum/opposition to the issuance of the writ
of preliminary injunction.
On October 24, 1990, the trial court issued a temporary restraining order to enjoin petitioner
from enforcing his letter-order of October 16, 1990 pending the hearing on the motion for writ
of preliminary injunction.
On December 17, 1990, the trial court issued an order upholding the validity of Ordinance No.
86 s. 1990 of the Municipality' of Parañaque and enjoining petitioner Brig. Gen. Macasiano
from enforcing his letter-order against respondent Palanyag.
Hence, this petition was filed by the petitioner thru the Office of the Solicitor General alleging
grave abuse of discretion tantamount to lack or excess of jurisdiction on the part of the trial
judge in issuing the assailed order.
The sole issue to be resolved in this case is whether or not an ordinance or resolution issued by
the municipal council of Parañaque authorizing the lease and use of public streets or
thoroughfares as sites for flea markets is valid.
The Solicitor General, in behalf of petitioner, contends that municipal roads are used for public
service and are therefore public properties; that as such, they cannot be subject to private
appropriation or private contract by any person, even by the respondent Municipality of
Parañaque. Petitioner submits that a property already dedicated to public use cannot be used for
another public purpose and that absent a clear showing that the Municipality of Parañaque has
been granted by the legislature specific authority to convert a property already in public use to
another public use, respondent municipality is, therefore, bereft of any authority to close
municipal roads for the establishment of a flea market. Petitioner also submits that assuming
that the respondent municipality is authorized to close streets, it failed to comply with the
conditions set forth by the Metropolitan Manila Authority for the approval of the ordinance
providing for the establishment of flea markets on public streets. Lastly, petitioner contends
that by allowing the municipal streets to be used by market vendors the municipal council of
respondent municipality violated its duty under the Local Government Code to promote the
general welfare of the residents of the municipality.
In upholding the legality of the disputed ordinance, the trial court ruled:
. . . that Chanter II Section 10 of the Local Government Code is a statutory grant of power
given to local government units, the Municipality of Parañaque as such, is empowered under
that law to close its roads, streets or alley subject to limitations stated therein (i.e., that it is in
accordance with existing laws and the provisions of this code).
xxx xxx xxx
The actuation of the respondent Brig. Gen. Levi Macasiano, though apparently within its power
is in fact an encroachment of power legally vested to the municipality, precisely because when
the municipality enacted the ordinance in question — the authority of the respondent as Police
Superintendent ceases to be operative on the ground that the streets covered by the ordinance
ceases to be a public thoroughfare. (pp. 33-34, Rollo)
We find the petition meritorious. In resolving the question of whether the disputed municipal
ordinance authorizing the flea market on the public streets is valid, it is necessary to examine
the laws in force during the time the said ordinance was enacted, namely, Batas Pambansa Blg.
337, otherwise known as Local Government Code, in connection with established principles
embodied in the Civil Code an property and settled jurisprudence on the matter.
The property of provinces, cities and municipalities is divided into property for public use and
patrimonial property (Art. 423, Civil Code). As to what consists of property for public use,
Article 424 of Civil Code states:
Art. 424. Property for public use, in the provinces, cities and municipalities, consists of the
provincial roads, city streets, the squares, fountains, public waters, promenades, and public
works for public service paid for by said provinces, cities or municipalities.
All other property possessed by any of them is patrimonial and shall be governed by this Code,
without prejudice to the provisions of special laws.
Based on the foregoing, J. Gabriel G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena
streets are local roads used for public service and are therefore considered public properties of
respondent municipality. Properties of the local government which are devoted to public
service are deemed public and are under the absolute control of Congress (Province of
Zamboanga del Norte v. City of Zamboanga, L-24440, March 28, 1968, 22 SCRA 1334).
Hence, local governments have no authority whatsoever to control or regulate the use of public
properties unless specific authority is vested upon them by Congress. One such example of this
authority given by Congress to the local governments is the power to close roads as provided in
Section 10, Chapter II of the Local Government Code, which states:
Sec. 10. Closure of roads. — A local government unit may likewise, through its head acting
pursuant to a resolution of its sangguniang and in accordance with existing law and the
provisions of this Code, close any barangay, municipal, city or provincial road, street, alley,
park or square. No such way or place or any part of thereof shall be close without indemnifying
any person prejudiced thereby. A property thus withdrawn from public use may be used or
conveyed for any purpose for which other real property belonging to the local unit concerned
might be lawfully used or conveyed. (Emphasis ours).
However, the aforestated legal provision which gives authority to local government units to
close roads and other similar public places should be read and interpreted in accordance with
basic principles already established by law. These basic principles have the effect of limiting
such authority of the province, city or municipality to close a public street or thoroughfare.
Article 424 of the Civil Code lays down the basic principle that properties of public dominion
devoted to public use and made available to the public in general are outside the commerce of
man and cannot be disposed of or leased by the local government unit to private persons. Aside
from the requirement of due process which should be complied with before closing a road,
street or park, the closure should be for the sole purpose of withdrawing the road or other
public property from public use when circumstances show that such property is no longer
intended or necessary for public use or public service. When it is already withdrawn from
public use, the property then becomes patrimonial property of the local government unit
concerned (Article 422, Civil Code; Cebu Oxygen, etc. et al. v. Bercilles, et al., G.R. No. L-
40474, August 29, 1975, 66 SCRA 481). It is only then that the respondent municipality can
"use or convey them for any purpose for which other real property belonging to the local unit
concerned might be lawfully used or conveyed" in accordance with the last sentence of Section
10, Chapter II of Blg. 337, known as Local Government Code. In one case, the City Council of
Cebu, through a resolution, declared the terminal road of M. Borces Street, Mabolo, Cebu City
as an abandoned road, the same not being included in the City Development Plan. Thereafter,
the City Council passes another resolution authorizing the sale of the said abandoned road
through public bidding. We held therein that the City of Cebu is empowered to close a city
street and to vacate or withdraw the same from public use. Such withdrawn portion becomes
patrimonial property which can be the object of an ordinary contract (Cebu Oxygen and
Acetylene Co., Inc. v. Bercilles, et al., G.R. No.
L-40474, August 29, 1975, 66 SCRA 481). However, those roads and streets which are
available to the public in general and ordinarily used for vehicular traffic are still considered
public property devoted to public use. In such case, the local government has no power to use it
for another purpose or to dispose of or lease it to private persons. This limitation on the
authority of the local government over public properties has been discussed and settled by this
Court en banc in "Francisco V. Dacanay, petitioner v. Mayor Macaria Asistio, Jr., et al.,
respondents, G.R. No. 93654, May 6, 1992." This Court ruled:
There is no doubt that the disputed areas from which the private respondents' market stalls are
sought to be evicted are public streets, as found by the trial court in Civil Case No. C-12921. A
public street is property for public use hence outside the commerce of man (Arts. 420, 424,
Civil Code). Being outside the commerce of man, it may not be the subject of lease or others
contract (Villanueva, et al. v. Castañeda and Macalino, 15 SCRA 142 citing the Municipality
of Cavite v. Rojas, 30 SCRA 602; Espiritu v. Municipal Council of Pozorrubio, 102 Phil. 869;
And Muyot v. De la Fuente, 48 O.G. 4860).
As the stallholders pay fees to the City Government for the right to occupy portions of the
public street, the City Government, contrary to law, has been leasing portions of the streets to
them. Such leases or licenses are null and void for being contrary to law. The right of the
public to use the city streets may not be bargained away through contract. The interests of a
few should not prevail over the good of the greater number in the community whose health,
peace, safety, good order and general welfare, the respondent city officials are under legal
obligation to protect.
The Executive Order issued by acting Mayor Robles authorizing the use of Heroes del '96
Street as a vending area for stallholders who were granted licenses by the city government
contravenes the general law that reserves city streets and roads for public use. Mayor Robles'
Executive Order may not infringe upon the vested right of the public to use city streets for the
purpose they were intended to serve: i.e., as arteries of travel for vehicles and pedestrians.
Even assuming, in gratia argumenti, that respondent municipality has the authority to pass the
disputed ordinance, the same cannot be validly implemented because it cannot be considered
approved by the Metropolitan Manila Authority due to non-compliance by respondent
municipality of the conditions imposed by the former for the approval of the ordinance, to wit:
1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the
residents do(es) not oppose the establishment of the flea market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area shall be marked
distinctly, and that the 2 meters on both sides of the road shall be used by pedestrians;
3. That the time during which the vending area is to be used shall be clearly designated;
4. That the use of the vending areas shall be temporary and shall be closed once the reclaimed
areas are developed and donated by the Public Estate Authority. (p. 38, Rollo)
Respondent municipality has not shown any iota of proof that it has complied with the
foregoing conditions precedent to the approval of the ordinance. The allegations of respondent
municipality that the closed streets were not used for vehicular traffic and that the majority of
the residents do not oppose the establishment of a flea market on said streets are unsupported
by any evidence that will show that this first condition has been met. Likewise, the designation
by respondents of a time schedule during which the flea market shall operate is absent.
Further, it is of public notice that the streets along Baclaran area are congested with people,
houses and traffic brought about by the proliferation of vendors occupying the streets. To
license and allow the establishment of a flea market along J. Gabriel, G.G. Cruz, Bayanihan,
Lt. Garcia Extension and Opena streets in Baclaran would not help in solving the problem of
congestion. We take note of the other observations of the Solicitor General when he said:
. . . There have been many instances of emergencies and fires where ambulances and fire
engines, instead of using the roads for a more direct access to the fire area, have to maneuver
and look for other streets which are not occupied by stalls and vendors thereby losing valuable
time which could, otherwise, have been spent in saving properties and lives.
Along G.G. Cruz Street is a hospital, the St. Rita Hospital. However, its ambulances and the
people rushing their patients to the hospital cannot pass through G.G. Cruz because of the stalls
and the vendors. One can only imagine the tragedy of losing a life just because of a few
seconds delay brought about by the inaccessibility of the streets leading to the hospital.
The children, too, suffer. In view of the occupancy of the roads by stalls and vendors, normal
transportation flow is disrupted and school children have to get off at a distance still far from
their schools and walk, rain or shine.
Indeed one can only imagine the garbage and litter left by vendors on the streets at the end of
the day. Needless to say, these cause further pollution, sickness and deterioration of health of
the residents therein. (pp. 21-22, Rollo)
Respondents do not refute the truth of the foregoing findings and observations of petitioners.
Instead, respondents want this Court to focus its attention solely on the argument that the use of
public spaces for the establishment of a flea market is well within the powers granted by law to
a local government which should not be interfered with by the courts.
Verily, the powers of a local government unit are not absolute. They are subject to limitations
laid down by toe Constitution and the laws such as our Civil Code. Moreover, the exercise of
such powers should be subservient to paramount considerations of health and well-being of the
members of the community. Every local government unit has the sworn obligation to enact
measures that will enhance the public health, safety and convenience, maintain peace and
order, and promote the general prosperity of the inhabitants of the local units. Based on this
objective, the local government should refrain from acting towards that which might prejudice
or adversely affect the general welfare.
As what we have said in the Dacanay case, the general public have a legal right to demand the
demolition of the illegally constructed stalls in public roads and streets and the officials of
respondent municipality have the corresponding duty arising from public office to clear the city
streets and restore them to their specific public purpose.
The instant case as well as the Dacanay case, involves an ordinance which is void and illegal
for lack of basis and authority in laws applicable during its time. However, at this point, We
find it worthy to note that Batas Pambansa Blg. 337, known as Local Government Lode, has
already been repealed by Republic Act No. 7160 known as Local Government Code of 1991
which took effect on January 1, 1992. Section 5(d) of the new Code provides that rights and
obligations existing on the date of effectivity of the new Code and arising out of contracts or
any other source of prestation involving a local government unit shall be governed by the
original terms and conditions of the said contracts or the law in force at the time such rights
were vested.
ACCORDINGLY, the petition is GRANTED and the decision of the respondent Regional Trial
Court dated December 17, 1990 which granted the writ of preliminary injunction enjoining
petitioner as PNP Superintendent, Metropolitan Traffic Command from enforcing the
demolition of market stalls along J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and
Opena streets is hereby RESERVED and SET ASIDE.
G.R. No. 100709 November 14, 1997
REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR OF LANDS, petitioner,
vs.
COURT OF APPEALS, JOSEFINA L. MORATO, SPOUSES NENITA CO and ANTONIO
QUILATAN AND THE REGISTER OF DEEDS OF QUEZON PROVINCE, respondents.
PANGANIBAN, J.:
Will the lease and/or mortgage of a portion of a realty acquired through free patent constitute
sufficient ground for the nullification of such land grant? Should such property revert to the
State once it is invaded by the sea and thus becomes foreshore land?
The Case
These are the two questions raised in the petition before us assailing the Court of
Appeals' 1 Decision in CA-G.R. CV No. 02667 promulgated on June 13, 1991 which answered
the said questions in the negative. 2 Respondent Court's dismissed 3 petitioner's appeal and
affirmed in toto the decision of the Regional Trial Court4 of Calauag, Quezon, dated December
28, 1983 in Civil Case No. C-608. In turn, the Regional Trial Court's decision dismissed
petitioner's complaint for cancellation of the Torrens Certificate of Title of Respondent Morato
and for reversion of the parcel of land subject thereof of the public domain.
The Facts
The petition of the solicitor general, representing the Republic of the Philippines, recites the
following facts: 5
Sometime in December, 1972, respondent Morato filed a Free Patent Application No. III-3-
8186-B on a parcel of land with an area of 1,265 square meters situated at Pinagtalleran,
Calauag, Quezon. On January 16, 1974, the patent was approved and the Register of Deeds of
Quezon at Lucena City issued on February 4, 1974 Original Certificate of Title No. P-17789.
Both the free paten and the title specifically mandate that the land shall not
be alienated nor encumbered within five years from the date of the issuance of the patent
(Sections 118 and 124 of CA No. 141, as amended).
Subsequently, the District Land Officer in Lucena City, acting upon reports that respondent
Morato had encumbered the land in violation of the condition of the patent, conducted an
investigation. Thereafter, it was established that the subject land is a portion of the Calauag
Bay, five (5) to six (6) feet deep under water during high tide and two (2) feet deep at low tide,
and not suitable to vegetation. Moreover, on October 24, 1974, a portion of the land was
mortgaged by respondent Morato to respondents Nenita Co and Antonio Quilatan for
P10,000.00 (pp. 2, 25, Folder of Exhibits). The spouses Quilatan constructed a house on the
land. Another portion of the land was leased to Perfecto Advincula on February 2, 1976 at
P100.00 a month, where a warehouse was constructed.
On November 5, 1978, petitioner filed an amended complaint against respondents Morato,
spouses Nenita Co and Antonio Quilatan, and the Register of Deeds of Quezon for the
cancellation of title and reversion of a parcel of land to the public domain, subject of a free
patent in favor of respondent Morato, on the grounds that the land is a foreshore land and was
mortgaged and leased within the five-year prohibitory period (p. 46, Records).
After trial, the lower court, on December 28, 1983, rendered a decision dismissing petitioner's
complaint. In finding for private respondents, the lower court ruled that there was no violation
of the 5-year period ban against alienating or encumbering the land, because the land was
merely leased and not alienated. It also found that the mortgage to Nenita Co and Antonio
Quilatan covered only the improvement and not the land itself.
On appeal, the Court of Appeals affirmed the decision of the trial court. Thereafter, the
Republic of the Philippines filed the present petition. 6
The Issues
Petitioner alleges that the following errors were committed by Respondent Court: 7
I Original Certificate of Title No. P-17789 to Respondent Josefina L. Morato were subject to the
Respondent court erred in holding that the patent granted and certificate of title issued to
Respondent Morato cannot be cancelled and annulled since the certificate of title becomes
indefeasible after one year from the issuance of the title.
II
Respondent Court erred in holding that the questioned land is part of a disposable public land
and not a foreshore land.
The Court's Ruling
The petition is meritorious.
First Issue: Indefeasibility of a Free Patent Title
In resolving the first issue against petitioner, Respondent Court held: 8
. . . As ruled in Heirs of Gregorio Tengco vs. Heirs of Jose Alivalas, 168 SCRA 198. ". . . The
rule is well-settled that an original certificate of title issued on the strength of a homestead
patent partakes of the nature of a certificate of title issued in a judicial proceeding, as long as
the land disposed of is really part of the disposable land of the public domain, and becomes
indefeasible and incontrovertible upon the expiration of one year from the date of promulgation
of the order of the Director of Lands for the issuance of the patent. (Republic v. Heirs of Carle,
105 Phil. 1227 (1959); Ingaran v. Ramelo, 107 Phil. 498 (1960); Lopez v. Padilla, (G.R. No. L-
27559, May 18, 1972, 45 SCRA 44). A homestead patent, one registered under the Land
Registration Act, becomes as indefeasible as a Torrens Title. (Pamintuan v. San Agustin, 43
Phil. 558 (1982); El Hogar Filipino v. Olviga, 60 Phil. 17 (1934); Duran v. Oliva, 113 Phil. 144
(1961); Pajomayo v. Manipon, G.R. No. L-33676, June 30, 1971, 39 SCRA 676). (p. 203).
Again, in Lopez vs. Court of Appeals, 169 SCRA 271, citing Iglesia ni Cristo v. Hon. Judge,
CFI of Nueva Ecija, Branch I, (123 SCRA 516 (1983) and Pajomayo, et al. v. Manipon, et al.
(39 SCRA 676 (1971) held that once a homestead patent granted in accordance with the Public
Land Act is registered pursuant to Section 122 of Act 496, the certificate of title issued in
virtue of said patent has the force and effect of a Torrens Title issued under the Land
Registration Act.
Indefeasibility of the title, however, may not bar the State, thru the Solicitor General, from
filing an action for reversion, as ruled in Heirs of Gregorio Tengco v. Heirs of Jose Aliwalas,
(supra), as follows:
But, as correctly pointed out by the respondent Court of Appeals, Dr. Aliwalas' title to the
property having become incontrovertible, such may no longer be collaterally attacked. If
indeed there had been any fraud or misrepresentation in obtaining the title, an action for
reversion instituted by the Solicitor General would be the proper remedy (Sec. 101, C.A. No.
141; Director of Lands v. Jugado, G.R. No. L-14702, May 21, 1961, 2 SCRA 32; Lopez v.
Padilla, supra). (p. 204).
Petitioner contends that the grant of Free Patent (IV-3) 275 and the subsequent issuance of
conditions provided for in Commonwealth Act (CA) No. 141. It alleges that on October 24,
1974, or nine (9) months and eight (8) days after the grant of the patent, mortgaged a portion of
the land" to Respondent Nenita Co, who thereafter constructed a house thereon. Likewise, on
February 2, 1976 and "within the five-year prohibitory period," Respondent Morato "leased a
portion of the land to Perfecto Advincula at a monthly rent of P100.00 who, shortly thereafter,
constructed a house of concrete materials on the subject land."9 Further, petitioner argues that
the defense of indefeasibility of title is "inaccurate." The original certificate of title issued to
Respondent Morato "contains the seeds of its own cancellation": such certificate specifically
states on its face that "it is subject to the provisions of Sections 118, 119, 121, 122, 124 of CA
No. 141, as amended." 10
Respondent Morato counters by stating that although a "portion of the land was previously
leased," it resulted "from the fact that Perfecto Advincula built a warehouse in the subject land
without [her] prior consent." The mortgage executed over the improvement "cannot be
considered a violation of the said grant since it can never affect the ownership." 11 She states
further:
. . . . the appeal of the petitioner was dismissed not because of the principle of indefeasibility of
title but mainly due to failure of the latter to support and prove the alleged violations of
respondent Morato. The records of this case will readily show that although petitioner was able
to establish that Morato committed some acts during the prohibitory period of 5 years, a
perusal thereof will also show that what petitioner was able to prove never constituted a
violation of the grant. 12
Respondent-Spouses Quilatan, on the other hand, state that the mortgage contract they entered
into with Respondent Morato "can never be considered as [an] 'alienation' inasmuch as the
ownership over the property remains with the owner." 13 Besides, it is the director of lands and
not the Republic of the Philippines who is the real party in interest in this case, contrary to the
provision of the Public Land Act which states that actions for reversion should be instituted by
the solicitor general in the name of Republic of the Philippines. 14
We find for petitioner.
Quoted below are relevant sections of Commonwealth Act No. 141, otherwise known as the
Public Land Act:
Sec. 118. Except in favor of the Government or any of its branches, units or institutions, or
legally constituted banking corporations, lands acquired under free patent or homestead
provisions shall not be subject to encumbrance or alienation from the date of the approval of
the application and for a term of five years from and after the date of issuance of the patent or
grant nor shall they become liable to the satisfaction of any debt contracted prior to the
expiration of said period; but the improvements or crops on the land may be mortgaged or
pledged to qualified persons, associations, or corporations.
No alienation, transfer, or conveyance of any homestead after five years and before twenty-five
years after issuance of title shall be valid without the approval of the Secretary of Agriculture
and Natural Resources, which approval shall not be denied except on constitutional and legal
grounds. (As amended by Com. Act No. 456, approved June 8, 1939.)
xxx xxx xxx
Sec. 121. Except with the consent of the grantee and the approval of the Secretary of
Agriculture and Natural Resources, and solely for educational, religious, or charitable purposes
or for a right of way, no corporation, association, or partnership may acquire or have any right,
title, interest, or property right whatsoever to any land granted under the free patent,
homestead, or individual sale provisions of this Act or to any permanent improvement on such
land. (As amended by Com. Act No. 615, approved May 5, 1941)
Sec. 122. No land originally acquired in any manner under the provisions of this Act, nor any
permanent improvement on such land, shall be encumbered, alienation or transferred, except to
persons, corporations, association, or partnerships who may acquire lands of the public domain
under this Act or to corporations organized in the Philippines authorized therefore by their
charters.
Except in cases of hereditary successions, no land or any portion thereof originally acquired
under the free patent, homestead, or individual sale provisions of this Act, or any permanent
improvement on such land, shall be transferred or assigned to any individual, nor shall such
land or any permanent improvement thereon be leased to such individual, when the area of said
land, added to that of this own, shall exceed one hundred and forty-four hectares. Any transfer,
assignment, or lease made in violation hereto shall be null and void. (As amended by Com Act
No. 615, Id.).
xxx xxx xxx
Sec. 124. Any acquisition, conveyance, alienation, transfer, or other contract made or executed
in violation of any of the provisions of sections one hundred and eighteen, one hundred and
twenty, one hundred and twenty-one, one hundred and twenty-two, and one hundred and
twenty-three of this Act  shall be unlawful and null and void from its execution and shall
produce the effect of annulling and cancelling the grant, title, patent, or permit originally
issued, recognized or confirmed, actually or presumatively, and cause the reversion of the
property and its improvements to the State. (Emphasis supplied)
The foregoing legal provisions clearly proscribe the encumbrance of a parcel of land acquired
under a free patent or homestead within five years from the grant of such patent. Furthermore,
such encumbrance results in the cancellation of the grant and the reversion of the land to the
public domain. Encumbrance has been defined as "[a]nything that impairs the use or transfer of
property; anything which constitutes a burden on the title; a burden or charge upon property; a
claim or lien upon property." It may be a "legal claim on an estate for the discharge of which
the estate is liable; and embarrassment of the estate or property so that it cannot be disposed of
without being subject to it; an estate, interest, or right in lands, diminishing their value to the
general owner; a liability resting upon an estate." 15 Do the contracts of lease and mortgage
executed within five (5) years from the issuance of the patent constitute an "encumbrance" and
violate the terms and conditions of such patent? Respondent Court answered in the negative: 16
From the evidence adduced by both parties, it has been proved that the area of the portion of
the land, subject matter of the lease contract (Exh. "B") executed by and between Perfecto
Advincula and Josefina L. Morato is only 10 x 12 square meters, where the total area of the
land granted to Morato is 1,265 square meters. It is clear from this that the portion of the land
leased by Advincula does not significantly affect Morato's ownership and possession. Above
all, the circumstances under which the lease was executed do not reflect a voluntary and blatant
intent to violate the conditions provided for in the patent issued in her favor. On the contrary,
Morato was compelled to enter into that contract of lease
out of sympathy and the goodness of her heart to accommodate a fellow man. . . .
It is indisputable, however, that Respondent Morato cannot fully use or enjoy the land during
the duration of the lease contract. This restriction on the enjoyment of her property sufficiently
meets the definition of an encumbrance under Section 118 of the Public Land Act, because
such contract "impairs the use of the property" by the grantee. In a contract of lease which is
consensual, bilateral, onerous and commutative, the owner temporarily grants the use of his or
her property to another who undertakes to pay rent therefor. 17 During the term of the lease, the
grantee of the patent cannot enjoy the beneficial use of the land leased. As already observed,
the Public Land Act does not permit a grantee of a free patent from encumbering any portion of
such land. Such encumbrance is a ground for the nullification of the award.
Morato's resort to equity, i.e. that the lease was executed allegedly out of the goodness of her
heart without any intention of violating the law, cannot help her. Equity, which has been aptly
described as "justice outside legality," is applied only in the absence of, and never against,
statutory law or judicial rules of procedure. Positive rules prevail over all abstract arguments
based on equity contra legem. 18
Respondents failed to justify their position that the mortgage should not be considered an
encumbrance. Indeed, we do not find any support for such contention. The questioned
mortgage falls squarely within the term "encumbrance" proscribed by Section 118 of the Public
Land Act. 19 Verily, a mortgage constitutes a legal limitation on the estate, and the foreclosure
of such mortgage would necessarily result in the auction of the property. 20
Even if only part of the property has been sold or alienated within the prohibited period of five
years from the issuance of the patent, such alienation is a sufficient cause for the reversion of
the whole estate to the State. As a condition for the grant of a free patent to an applicant, the
law requires that the land should not be encumbered, sold or alienated within five years from
the issuance of
the patent. The sale or the alienation of part of the homestead violates that condition. 21
The prohibition against the encumbrance — lease and mortgage included — of a homestead
which, by analogy applies to a free patent, is mandated by the rationale for the grant, viz.: 22
It is well-known that the homestead laws were designed to distribute disposable agricultural
lots of the State to land-destitute citizens for their home and cultivation. Pursuant to such
benevolent intention the State prohibits the sale or incumbrance of the homestead (Section 116)
within five years after the grant of the patent. After that five-year period the law impliedly
permits alienation of the homestead; but in line with the primordial purpose to favor the
homesteader and his family the statute provides that such alienation or conveyance (Section
117) shall be subject to the right of repurchase by the homesteader, his widow or heirs within
five years. This section 117 is undoubtedly a complement of section 116. It aims to preserve
and keep in the family of the homesteader that portion of public land which the State had
gratuitously given to him. It would, therefore, be in keeping with this fundamental idea to hold,
as we hold, that the right to repurchase exists not only when the original homesteader makes
the conveyance, but also when it is made by his widow or heirs. This construction is clearly
deducible from the terms of the statute.
By express provision of Section 118 of Commonwealth Act 141 and in conformity with the
policy of the law, any transfer or alienation of a free patent or homestead within five years
from the issuance of the patent is proscribed. Such transfer nullifies said alienation and
constitutes a cause for the reversion of the property to the State.
The prohibition against any alienation or encumbrance of the land grant is a proviso attached to
the approval of every application. 23 Prior to the fulfillment of the requirements of law,
Respondent Morato had only an inchoate right to the property; such property remained part of
the public domain and, therefore, not susceptible to alienation or encumbrance. Conversely,
when a "homesteader has complied with all the terms and conditions which entitled him to a
patent for [a] particular tract of public land, he acquires a vested interest therein and has to be
regarded an equitable owner thereof." 24 However, for Respondent Morato's title of ownership
over the patented land to be perfected, she should have complied with the requirements of the
law, one of which was to keep the property for herself and her family within the prescribed
period of five (5) years. Prior to the fulfillment of all requirements of the law, Respondent
Morato's title over the property was incomplete. Accordingly, if the requirements are not
complied with, the State as the grantor could petition for the annulment of the patent and the
cancellation of the title.
Respondent Morato cannot use the doctrine of the indefeasibility of her Torrens title to bar the
state from questioning its transfer or encumbrance. The certificate of title issued to her clearly
stipulated that its award was "subject to the conditions provided for in Sections 118, 119, 121,
122 and 124 of Commonwealth Act (CA) No. 141." Because she violated Section 118, the
reversion of the property to the public domain necessarily follows, pursuant to Section 124.
Second Issue: Foreshore Land
Revert to the Public Domain
There is yet another reason for granting this petition.
Although Respondent Court found that the subject land was foreshore land, it nevertheless
sustained the award thereof to Respondent Morato: 25
First of all, the issue here is whether the land in question, is really part of the foreshore lands.
The Supreme Court defines foreshore land in the case of Republic vs. Alagad, 169 SCRA 455,
464, as follows:
Otherwise, where the rise in water level is due to, the "extraordinary" action of nature, rainful,
for instance, the portions inundated thereby are not considered part of the bed or basin of the
body of water in question. It cannot therefore be said to be foreshore land but land outside of
the public dominion, and land capable of registration as private property.
A foreshore land, on the other hand has been defined as follows:
. . . that part of (the land) which is between high
and low water and left dry by the flux and reflux of the tides . . . . (Republic vs. C.A., Nos. L-
43105, L-43190, August 31, 1984, 131 SCRA 532; Government vs. Colegio de San Jose, 53
Phil 423)
The strip of land that lies between the high and low water marks and that is alternatively wet
and dry according to the flow of the tide. (Rep. vs. CA, supra, 539).
The factual findings of the lower court regarding the nature of the parcel of land in question
reads:
Evidence disclose that the marginal area of the land radically changed sometime in 1937 up to
1955 due to a strong earthquake followed by frequent storms eventually eroding the land. From
1955 to 1968, however, gradual reclamation was undertaken by the lumber company owned by
the Moratos. Having thus restored the land thru mostly human hands employed by the lumber
company, the area continued to be utilized by the owner of the sawmill up to the time of his
death in 1965. On or about March 17, 1973, there again was a strong earthquake unfortunately
causing destruction to hundreds of residential houses fronting the Calauag Bay including the
Santiago Building, a cinema house constructed of concrete materials. The catastrophe totally
caused the sinking of a concrete bridge at Sumulong river also in the municipality of Calauag,
Quezon.
On November 13, 1977 a typhoon code named "Unding" wrought havoc as it lashed the main
land of Calauag, Quezon causing again great erosion this time than that which the area suffered
in 1937. The Court noted with the significance of the newspaper clipping entitled "Baryo ng
Mangingisda Kinain ng Dagat" (Exh. "11").
x x x           x x x          x x x
Evidently this was the condition of the land when on or about December 5, 1972 defendant
Josefina L. Morato filed with the Bureau of Lands her free patent application. The defendant
Josefina Morato having taken possession of the land after the demise of Don Tomas Morato,
she introduced improvement and continued developing the area, planted it to coconut tree.
Having applied for a free patent, defendant had the land area surveyed and an approved plan
(Exh. "9") based on the cadastral survey as early as 1927 (Exh. "10") was secured. The area
was declared for taxation purposes in the name of defendant Josefina Morato denominated as
Tax Declaration No. 4115 (Exh. "8") and the corresponding realty taxes religiously paid as
shown by Exh. "8-A"). (pp. 12-14, DECISION).
Being supported by substantial evidence and for failure of the appellant to show cause which
would warrant disturbance, the aforecited findings of the lower court, must be respected.
Petitioner correctly contends, however, that Private Respondent Morato cannot own foreshore
land:
Through the encroachment or erosion by the ebb and flow of the tide, a portion of the subject
land was invaded by the waves and sea advances. During high tide, at least half of the land
(632.5 square meters) is 6 feet deep under water and three (3) feet deep during low tide. The
Calauag Bay shore has extended up to a portion of the questioned land.
While at the time of the grant of free patent to respondent Morato, the land was not reached by
the water, however, due to gradual sinking of the land caused by natural calamities, the sea
advances had permanently invaded a portion of subject land. As disclosed at the trial, through
the testimony of the court-appointed commissioner, Engr. Abraham B. Pili, the land was under
water during high tide in the month of August 1978. The water margin covers half of the
property, but during low tide, the water is about a kilometer (TSN, July 19, 1979, p. 12). Also,
in 1974, after the grant of the patent, the land was covered with vegetation, but it disappeared
in 1978 when the land was reached by the tides (Exh. "E-1", "E-14"). In fact, in its decision
dated December 28, 1983, the lower court observed that the erosion of the land was caused by
natural calamities that struck the place in 1977 (Cf. Decision, pp. 17-18). 26
Respondent-Spouses Quilatan argue, however, that it is "unfair and unjust if Josefina Morato
will be deprived of the whole property just because a portion thereof was immersed in water
for reasons not her own doing." 27
As a general rule, findings of facts of the Court of Appeals are binding and conclusive upon
this Court, unless such factual findings are palpably unsupported by the evidence on record or
unless the judgment itself is based on a misapprehension of facts. 28 The application for a free
patent was made in 1972. From the undisputed factual findings of the Court of Appeals,
however, the land has since become foreshore. Accordingly, it can no longer be subject of a
free patent under the Public Land Act. Government of the Philippine Islands
vs. Cabañgis  29 explained the rationale for this proscription:
Article 339, subsection 1, of the Civil Code, reads:
Art. 339. Property of public ownership is —
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, riverbanks, shores, roadsteads, and that of a similar character.
xxx xxx xxx
Article 1, case 3, of the law of Waters of August 3, 1866, provides as follows:
Art. 1. The following are part of the national domain open to public use.
xxx xxx xxx
3. The Shores. By the shore is understood that space covered and uncovered by the movement
of the tide. Its interior or terrestrial limit is the line reached by the highest equinoctal tides.
Where the tides are not appreciable, the shore begins on the land side at the line reached by the
sea during ordinary storms or tempests.
In the case of Aragon vs. Insular Government (19 Phil. 223), with reference to article 339 of
the Civil Code just quoted, this Court said:
We should not be understood, by this decision, to hold that in a case of gradual encroachment
or erosion by the ebb and flow of the tide, private property may not become "property of public
ownership." as defined in article 339 of the code, where it appear that the owner has to all
intents and purposes abandoned it and permitted it to be totally destroyed, so as to become a
part of the "playa" (shore of the sea), "rada" (roadstead), or the like. . . .
In the Enciclopedia Juridica Española, volume XII, page 558, we read the following:
With relative frequency the opposite phenomenon occurs; that is, the sea advances and private
properties are permanently invaded by the waves, and in this case they become part of the
shore or breach. The then pass to the public domain, but the owner thus dispossessed does not
retain any right to the natural products resulting from their new nature; it is a de facto case of
eminent domain, and not subject to indemnity.
In comparison, Article 420 of the Civil Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth.
When the sea moved towards the estate and the tide invaded it, the invaded property became
foreshore land and passed to the realm of the public domain. In fact, the Court in Government
vs. Cabangis 30 annulled the registration of land subject of cadastral proceedings when the
parcel subsequently became foreshore land. 31 In another case, the Court voided the registration
decree of a trial court and held that said court had no jurisdiction to award foreshore land to
any private person or entity. 32 The subject land in this case, being foreshore land, should
therefore be returned to the public domain.
WHEREFORE, the petition is GRANTED. This Court hereby REVERSES and SETS ASIDE
the assailed Decision of Respondent Court and ORDERS the CANCELLATION of Free Patent
No. (IV-3) 275 issued to Respondent Morato and the subsequent Original Certificate of Title
No. P-17789. The subject land therefore REVERTS to the State. No costs.
G.R. No. L-24440             March 28, 1968
THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee,
vs.
CITY OF ZAMBOANGA, SECRETARY OF FINANCE and COMMISSIONER OF
INTERNAL REVENUE, defendants-appellants.
Fortugaleza, Lood, Sarmiento, M. T. Yap & Associates for plaintiff-appellee.
Office of the Solicitor General for defendants-appellants.
BENGZON, J.P., J.:
          Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be
the provincial capital of the then Zamboanga Province. On October 12, 1936, Commonwealth
Act 39 was approved converting the Municipality of Zamboanga into Zamboanga City. Sec. 50
of the Act also provided that —
          Buildings and properties which the province shall abandon upon the transfer of the
capital to another place will be acquired and paid for by the City of Zamboanga at a price to be
fixed by the Auditor General.
          The properties and buildings referred to consisted of 50 lots and some buildings
constructed thereon, located in the City of Zamboanga and covered individually by Torrens
certificates of title in the name of Zamboanga Province. As far as can be gleaned from the
records, 1 said properties were being utilized as follows —
No. of Lots Use
1 ................................................ Capitol Site
3 ................................................ School Site
3 ................................................ Hospital Site
3 ................................................ Leprosarium
1 ................................................ Curuan School
1 ................................................ Trade School
2 ................................................ Burleigh School
2 ................................................ High School Playground
9 ................................................ Burleighs
1 ................................................ Hydro-Electric Site (Magay)
1 ................................................ San Roque
23 ................................................ vacant
          It appears that in 1945, the capital of Zamboanga Province was transferred to
Dipolog. 2 Subsequently, or on June 16, 1948, Republic Act 286 was approved creating the
municipality of Molave and making it the capital of Zamboanga Province.
          On May 26, 1949, the Appraisal Committee formed by the Auditor General, pursuant to
Commonwealth Act 39, fixed the value of the properties and buildings in question left by
Zamboanga Province in Zamboanga City at P1,294,244.00. 3
          On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga
into two (2): Zamboanga del Norte and Zamboanga del Sur. As to how the assets and
obligations of the old province were to be divided between the two new ones, Sec. 6 of that law
provided:
          Upon the approval of this Act, the funds, assets and other properties and the obligations
of the province of Zamboanga shall be divided equitably between the Province of Zamboanga
del Norte and the Province of Zamboanga del Sur by the President of the Philippines, upon the
recommendation of the Auditor General.
          Pursuant thereto, the Auditor General, on January 11, 1955, apportioned the assets and
obligations of the defunct Province of Zamboanga as follows: 54.39% for Zamboanga del
Norte and 45.61% for Zamboanga del Sur. Zamboanga del Norte therefore became entitled to
54.39% of P1,294,244.00, the total value of the lots and buildings in question, or P704,220.05
payable by Zamboanga City.
          On March 17, 1959, the Executive Secretary, by order of the President, issued a
ruling 4 holding that Zamboanga del Norte had a vested right as owner (should be co-
owner  pro-indiviso) of the properties mentioned in Sec. 50 of Commonwealth Act 39, and is
entitled to the price thereof, payable by Zamboanga City. This ruling revoked the previous
Cabinet Resolution of July 13, 1951 conveying all the said 50 lots and buildings thereon to
Zamboanga City for P1.00, effective as of 1945, when the provincial capital of the then
Zamboanga Province was transferred to Dipolog.
          The Secretary of Finance then authorized the Commissioner of Internal Revenue to
deduct an amount equal to 25% of the regular internal revenue allotment for the City of
Zamboanga for the quarter ending March 31, 1960, then for the quarter ending June 30, 1960,
and again for the first quarter of the fiscal year 1960-1961. The deductions, all aggregating
P57,373.46, was credited to the province of Zamboanga del Norte, in partial payment of the
P764,220.05 due it.
          However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of
Commonwealth Act 39 by providing that —
          All buildings, properties and assets belonging to the former province of Zamboanga and
located within the City of Zamboanga are hereby transferred, free of charge, in favor of the
said City of Zamboanga. (Stressed for emphasis).
          Consequently, the Secretary of Finance, on July 12, 1961, ordered the Commissioner of
Internal Revenue to stop from effecting further payments to Zamboanga del Norte and to return
to Zamboanga City the sum of P57,373.46 taken from it out of the internal revenue allotment
of Zamboanga del Norte. Zamboanga City admits that since the enactment of Republic Act
3039, P43,030.11 of the P57,373.46 has already been returned to it.
          This constrained plaintiff-appellee Zamboanga del Norte to file on March 5, 1962, a
complaint entitled "Declaratory Relief with Preliminary Mandatory Injunction" in the Court of
First Instance of Zamboanga del Norte against defendants-appellants Zamboanga City, the
Secretary of Finance and the Commissioner of Internal Revenue. It was prayed that: (a)
Republic Act 3039 be declared unconstitutional for depriving plaintiff province of property
without due process and just compensation; (b) Plaintiff's rights and obligations under said law
be declared; (c) The Secretary of Finance and the Internal Revenue Commissioner be enjoined
from reimbursing the sum of P57,373.46 to defendant City; and (d) The latter be ordered to
continue paying the balance of P704,220.05 in quarterly installments of 25% of its internal
revenue allotments.
          On June 4, 1962, the lower court ordered the issuance of preliminary injunction as
prayed for. After defendants filed their respective answers, trial was held. On August 12, 1963,
judgment was rendered, the dispositive portion of which reads:
          WHEREFORE, judgment is hereby rendered declaring Republic Act No. 3039
unconstitutional insofar as it deprives plaintiff Zamboanga del Norte of its private properties,
consisting of 50 parcels of land and the improvements thereon under certificates of title
(Exhibits "A" to "A-49") in the name of the defunct province of Zamboanga; ordering
defendant City of Zamboanga to pay to the plaintiff the sum of P704,220.05 payment thereof to
be deducted from its regular quarterly internal revenue allotment equivalent to 25% thereof
every quarter until said amount shall have been fully paid; ordering defendant Secretary of
Finance to direct defendant Commissioner of Internal Revenue to deduct 25% from the regular
quarterly internal revenue allotment for defendant City of Zamboanga and to remit the same to
plaintiff Zamboanga del Norte until said sum of P704,220.05 shall have been fully paid;
ordering plaintiff Zamboanga del Norte to execute through its proper officials the
corresponding public instrument deeding to defendant City of Zamboanga the 50 parcels of
land and the improvements thereon under the certificates of title (Exhibits "A" to "A-49") upon
payment by the latter of the aforesaid sum of P704,220.05 in full; dismissing the counterclaim
of defendant City of Zamboanga; and declaring permanent the preliminary mandatory
injunction issued on June 8, 1962, pursuant to the order of the Court dated June 4, 1962. No
costs are assessed against the defendants.
          It is SO ORDERED.
          Subsequently, but prior to the perfection of defendants' appeal, plaintiff province filed a
motion to reconsider praying that Zamboanga City be ordered instead to pay the
P704,220.05 in lump sum with 6% interest per annum. Over defendants' opposition, the lower
court granted plaintiff province's motion.
          The defendants then brought the case before Us on appeal.
          Brushing aside the procedural point concerning the property of declaratory relief filed in
the lower court on the assertion that the law had already been violated and that plaintiff sought
to give it coercive effect, since assuming the same to be true, the Rules anyway authorize the
conversion of the proceedings to an ordinary action, 5 We proceed to the more important and
principal question of the validity of Republic Act 3039.
          The validity of the law ultimately depends on the nature of the 50 lots and buildings
thereon in question. For, the matter involved here is the extent of legislative control over the
properties of a municipal corporation, of which a province is one. The principle itself is simple:
If the property is owned by the municipality (meaning municipal corporation) in its public and
governmental capacity, the property is public and Congress has absolute control over it. But if
the property is owned in its private or proprietary capacity, then it is patrimonial and Congress
has no absolute control. The municipality cannot be deprived of it without due process and
payment of just compensation. 6
          The capacity in which the property is held is, however, dependent on the use to which it
is intended and devoted. Now, which of two norms, i.e., that of the Civil Code or that obtaining
under the law of Municipal Corporations, must be used in classifying the properties in
question?
          The Civil Code classification is embodied in its Arts. 423 and 424 which
provide:1äwphï1.ñët
          ART. 423. The property of provinces, cities, and municipalities is divided into property
for public use and patrimonial property.
          ART. 424. Property for public use, in the provinces, cities, and municipalities, consists
of the provincial roads, city streets, municipal streets, the squares, fountains, public waters,
promenades, and public works for public service paid for by said provinces, cities, or
municipalities.
All other property possessed by any of them is patrimonial and shall be governed by this Code,
without prejudice to the provisions of special laws. (Stressed for emphasis).
          Applying the above cited norm, all the properties in question, except the two (2) lots
used as High School playgrounds, could be considered as patrimonial properties of the former
Zamboanga province. Even the capital site, the hospital and leprosarium sites, and the school
sites will be considered patrimonial for they are not for public use. They would fall under the
phrase "public works for public service" for it has been held that under the ejusdem
generis rule, such public works must be for free and indiscriminate use by anyone, just like the
preceding enumerated properties in the first paragraph of Art 424. 7 The playgrounds, however,
would fit into this category.
          This was the norm applied by the lower court. And it cannot be said that its actuation
was without jurisprudential precedent for in Municipality of Catbalogan v. Director of
Lands, 8 and in Municipality of Tacloban v. Director of Lands, 9 it was held that the capitol site 3748 ...................................... 434-A-1 ...................................... School Site
and the school sites in municipalities constitute their patrimonial properties. This result is
understandable because, unlike in the classification regarding State properties, properties for 5406 ...................................... 171 ...................................... School Site
public service in the municipalities are not classified as public. Assuming then the Civil Code
classification to be the chosen norm, the lower court must be affirmed except with regard to the High School
two (2) lots used as playgrounds. 5564 ...................................... 168 ......................................
Play-ground

          On the other hand, applying the norm obtaining under the principles constituting the law 157 &
of Municipal Corporations, all those of the 50 properties in question which are devoted to 5567 ...................................... ...................................... Trade School
158
public service are deemed public; the rest remain patrimonial. Under this norm, to be
considered public, it is enough that the property be held and, devoted for governmental High School
purposes like local administration, public education, public health, etc. 10 5583 ...................................... 167 ......................................
Play-ground

          Supporting jurisprudence are found in the following cases: (1) HINUNANGAN V. 6181 ...................................... (O.C.T.) ...................................... Curuan School
DIRECTOR OF LANDS, 11 where it was stated that "... where the municipality has occupied
lands distinctly for public purposes, such as for the municipal court house, the public school, 11942 ...................................... 926 ...................................... Leprosarium
the public market, or other necessary municipal building, we will, in the absence of proof to the
contrary, presume a grant from the States in favor of the municipality; but, as indicated by the 11943 ...................................... 927 ...................................... Leprosarium
wording, that rule may be invoked only as to property which is used distinctly for public
purposes...." (2) VIUDA DE TANTOCO V. MUNICIPAL COUNCIL OF ILOILO 12 held that 11944 ...................................... 925 ...................................... Leprosarium
municipal properties necessary for governmental purposes are public in nature. Thus, the auto
trucks used by the municipality for street sprinkling, the police patrol automobile, police Burleigh
5557 ...................................... 170 ......................................
stations and concrete structures with the corresponding lots used as markets were declared School
exempt from execution and attachment since they were not patrimonial properties. (3)
MUNICIPALITY OF BATANGAS VS. CANTOS 13 held squarely that a municipal lot which Burleigh
5562 ...................................... 180 ......................................
had always been devoted to school purposes is one dedicated to public use and is not School
patrimonial property of a municipality.
5565 ...................................... 172-B ...................................... Burleigh
          Following this classification, Republic Act 3039 is valid insofar as it affects the lots used
as capitol site, school sites and its grounds, hospital and leprosarium sites and the high school 5570 ...................................... 171-A ...................................... Burleigh
playground sites — a total of 24 lots — since these were held by the former Zamboanga
5571 ...................................... 172-C ...................................... Burleigh
province in its governmental capacity and therefore are subject to the absolute control of
Congress. Said lots considered as public property are the following:
5572 ...................................... 174 ...................................... Burleigh
TCT
Lot Number Use 5573 ...................................... 178 ...................................... Burleigh
Number
5585 ...................................... 171-B ...................................... Burleigh
2200 ...................................... 4-B ...................................... Capitol Site
5586 ...................................... 173 ...................................... Burleigh
2816 ...................................... 149 ...................................... School Site
5587 ...................................... 172-A ...................................... Burleigh
3281 ...................................... 1224 ...................................... Hospital Site
          We noticed that the eight Burleigh lots above described are adjoining each other and in
3282 ...................................... 1226 ...................................... Hospital Site turn are between the two lots wherein the Burleigh schools are built, as per records appearing
herein and in the Bureau of Lands. Hence, there is sufficient basis for holding that said eight
3283 ...................................... 1225 ...................................... Hospital Site
lots constitute the appurtenant grounds of the Burleigh schools, and partake of the nature of the 5576 ...................................... 181-B ...................................... "
same.
5578 ...................................... 182 ...................................... "
          Regarding the several buildings existing on the lots above-mentioned, the records do not
disclose whether they were constructed at the expense of the former Province of Zamboanga. 5579 ...................................... 197 ...................................... "
Considering however the fact that said buildings must have been erected even before 1936
when Commonwealth Act 39 was enacted and the further fact that provinces then had no 5580 ...................................... 195 ...................................... "
power to authorize construction of buildings such as those in the case at bar at their own
expense, 14 it can be assumed that said buildings were erected by the National Government, 5581 ...................................... 159-B ...................................... "
using national funds. Hence, Congress could very well dispose of said buildings in the same
manner that it did with the lots in question. 5582 ...................................... 194 ...................................... "

          But even assuming that provincial funds were used, still the buildings constitute mere 5584 ...................................... 190 ...................................... "
accessories to the lands, which are public in nature, and so, they follow the nature of said
lands, i.e., public. Moreover, said buildings, though located in the city, will not be for the 5588 ...................................... 184 ...................................... "
exclusive use and benefit of city residents for they could be availed of also by the provincial
5589 ...................................... 187 ...................................... "
residents. The province then — and its successors-in-interest — are not really deprived of the
benefits thereof.
5590 ...................................... 189 ...................................... "
          But Republic Act 3039 cannot be applied to deprive Zamboanga del Norte of its share in
5591 ...................................... 192 ...................................... "
the value of the rest of the 26 remaining lots which are patrimonial properties since they are not
being utilized for distinctly, governmental purposes. Said lots are:
5592 ...................................... 193 ...................................... "
TCT Number Lot Number Use
5593 ...................................... 185 ...................................... "
5577 ...................................... 177 ...................................... Mydro, Magay
7379 ...................................... 4147 ...................................... "
13198 ...................................... 127-0 ...................................... San Roque           Moreover, the fact that these 26 lots are  registered strengthens the proposition that they
15 are truly private in nature. On the other hand, that the 24 lots used for governmental purposes
5569 ...................................... 169 ...................................... Burleigh 
are also registered is of no significance since registration cannot convert public property to
private. 16
5558 ...................................... 175 ...................................... Vacant
          We are more inclined to uphold this latter view. The controversy here is more along the
5559 ...................................... 188 ...................................... "
domains of the Law of Municipal Corporations — State vs. Province — than along that of
5560 ...................................... 183 ...................................... " Civil Law. Moreover, this Court is not inclined to hold that municipal property held and
devoted to public service is in the same category as ordinary private property. The
5561 ...................................... 186 ...................................... " consequences are dire. As ordinary private properties, they can be levied upon and attached.
They can even be acquired thru adverse possession — all these to the detriment of the local
5563 ...................................... 191 ...................................... " community. Lastly, the classification of properties other than those for public use in the
municipalities as patrimonial under Art. 424 of the Civil Code — is "... without prejudice to the
5566 ...................................... 176 ...................................... " provisions of special laws." For purpose of this article, the principles, obtaining under the Law
of Municipal Corporations can be considered as "special laws". Hence, the classification of
5568 ...................................... 179 ...................................... " municipal property devoted for distinctly governmental purposes as public should prevail over
the Civil Code classification in this particular case.
5574 ...................................... 196 ...................................... "
          Defendants' claim that plaintiff and its predecessor-in-interest are "guilty of laches is
5575 ...................................... 181-A ...................................... " without merit. Under Commonwealth Act 39, Sec. 50, the cause of action in favor of the
defunct Zamboanga Province arose only in 1949 after the Auditor General fixed the value of
the properties in question. While in 1951, the Cabinet resolved transfer said properties
practically for free to Zamboanga City, a reconsideration thereof was seasonably sought. In
1952, the old province was dissolved. As successor-in-interest to more than half of the
properties involved, Zamboanga del Norte was able to get a reconsideration of the Cabinet
Resolution in 1959. In fact, partial payments were effected subsequently and it was only after
the passage of Republic Act 3039 in 1961 that the present controversy arose. Plaintiff brought
suit in 1962. All the foregoing, negative laches.
          It results then that Zamboanga del Norte is still entitled to collect from the City of
Zamboanga the former's 54.39% share in the 26 properties which are patrimonial in nature,
said share to computed on the basis of the valuation of said 26 properties as contained in
Resolution No. 7, dated March 26, 1949, of the Appraisal Committee formed by the Auditor
General.
          Plaintiff's share, however, cannot be paid in lump sum, except as to the P43,030.11
already returned to defendant City. The return of said amount to defendant was without legal
basis. Republic Act 3039 took effect only on June 17, 1961 after a partial payment of
P57,373.46 had already been made. Since the law did not provide for retroactivity, it could not
have validly affected a completed act. Hence, the amount of P43,030.11 should be immediately
returned by defendant City to plaintiff province. The remaining balance, if any, in the amount
of plaintiff's 54.39% share in the 26 lots should then be paid by defendant City in the same
manner originally adopted by the Secretary of Finance and the Commissioner of Internal
Revenue, and not in lump sum. Plaintiff's prayer, particularly pars. 5 and 6, read together with
pars. 10 and 11 of the first cause of action recited in the complaint 17 clearly shows that the
relief sought was merely the continuance of the quarterly payments from the internal revenue
allotments of defendant City. Art. 1169 of the Civil Code on reciprocal obligations invoked by
plaintiff to justify lump sum payment is inapplicable since there has been so far in legal
contemplation no complete delivery of the lots in question. The titles to the registered lots are
not yet in the name of defendant Zamboanga City.
          WHEREFORE, the decision appealed from is hereby set aside and another judgment is
hereby entered as follows:.
          (1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del
Norte in lump sum the amount of P43,030.11 which the former took back from the latter out of
the sum of P57,373.46 previously paid to the latter; and
          (2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever
balance remains of plaintiff's 54.39% share in the 26 patrimonial properties, after deducting
therefrom the sum of P57,373.46, on the basis of Resolution No. 7 dated March 26, 1949 of the
Appraisal Committee formed by the Auditor General, by way of quarterly payments from the
allotments of defendant City, in the manner originally adopted by the Secretary of Finance and
the Commissioner of Internal Revenue. No costs. So ordered.
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 negotiations before 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 title 48 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,55 Justice 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)
64
In Ayog v. Cusi,  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 properties in 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.104 Alienable
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 hectares110 of the Freedom Islands, such transfer is void for being contrary to Section 3,
Article XII of the 1987 Constitution which prohibits private corporations from acquiring any
kind of alienable land of the public domain.
4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156
hectares111 of still submerged areas of Manila Bay, such transfer is void for being contrary to
Section 2, Article XII of the 1987 Constitution which prohibits the alienation of natural
resources other than agricultural lands of the public domain. PEA may reclaim these
submerged areas. Thereafter, the government can classify the reclaimed lands as alienable or
disposable, and further declare them no longer needed for public service. Still, the transfer of
such reclaimed alienable lands of the public domain to AMARI will be void in view of Section
3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any
kind of alienable land of the public domain.
Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987
Constitution. Under Article 1409112 of the Civil Code, contracts whose "object or purpose is
contrary to law," or whose "object is outside the commerce of men," are "inexistent and void
from the beginning." The Court must perform its duty to defend and uphold the Constitution,
and therefore declares the Amended JVA null and void ab initio.
Seventh issue: whether the Court is the proper forum to raise the issue of whether the Amended
JVA is grossly disadvantageous to the government.
Considering that the Amended JVA is null and void ab initio, there is no necessity to rule on
this last issue. Besides, the Court is not a trier of facts, and this last issue involves a
determination of factual matters.
WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari Coastal
Bay Development Corporation are PERMANENTLY ENJOINED from implementing the
Amended Joint Venture Agreement which is hereby declared NULL and VOID ab initio.
G.R. No. 136438             November 11, 2004
TEOFILO C. VILLARICO, petitioner,
vs.
VIVENCIO SARMIENTO, SPOUSES BESSIE SARMIENTO-DEL MUNDO & BETH DEL
MUNDO, ANDOK’S LITSON CORPORATION and MARITES’
CARINDERIA, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals dated
December 7, 1998 in CA-G.R. CV No. 54883, affirming in toto the Decision2 of the Regional
Trial Court (RTC) of Parañaque City, Branch 259, dated November 14, 1996, in Civil Case No.
95-044.
The facts of this case, as gleaned from the findings of the Court of Appeals, are:
Teofilo C. Villarico, petitioner, is the owner of a lot in La Huerta, Parañaque City, Metro
Manila with an area of sixty-six (66) square meters and covered by Transfer Certificate of Title
(T.C.T.) No. 95453 issued by the Registry of Deeds, same city.
Petitioner’s lot is separated from the Ninoy Aquino Avenue (highway) by a strip of land
belonging to the government. As this highway was elevated by four (4) meters and therefore
higher than the adjoining areas, the Department of Public Works and Highways (DPWH)
constructed stairways at several portions of this strip of public land to enable the people to have
access to the highway.
Sometime in 1991, Vivencio Sarmiento, his daughter Bessie Sarmiento and her husband Beth
Del Mundo, respondents herein, had a building constructed on a portion of said government
land. In November that same year, a part thereof was occupied by Andok’s Litson Corporation
and Marites’ Carinderia, also impleaded as respondents.
In 1993, by means of a Deed of Exchange of Real Property, petitioner acquired a 74.30 square
meter portion of the same area owned by the government. The property was registered in his
name as T.C.T. No. 74430 in the Registry of Deeds of Parañaque City.
In 1995, petitioner filed with the RTC, Branch 259, Parañaque City, a complaint for accion
publiciana against respondents, docketed as Civil Case No. 95-044. He alleged inter alia that
respondents’ structures on the government land closed his "right of way" to the Ninoy Aquino
Avenue; and encroached on a portion of his lot covered by T.C.T. No. 74430.
Respondents, in their answer, specifically denied petitioner’s allegations, claiming that they
have been issued licenses and permits by Parañaque City to construct their buildings on the
area; and that petitioner has no right over the subject property as it belongs to the government.
After trial, the RTC rendered its Decision, the dispositive portion of which reads:
"WHEREFORE, premises considered, judgment is hereby rendered:
1. Declaring the defendants to have a better right of possession over the subject land except the
portion thereof covered by Transfer Certificate of Title No. 74430 of the Register of Deeds of
Parañaque;
2. Ordering the defendants to vacate the portion of the subject premises described in Transfer
Certificate of Title No. 74430 and gives its possession to plaintiff; and
3. Dismissing the claim for damages of the plaintiff against the defendants, and likewise
dismissing the claim for attorney’s fees of the latter against the former.
Without pronouncement as to costs.
SO ORDERED."3
The trial court found that petitioner has never been in possession of any portion of the public
land in question. On the contrary, the defendants are the ones who have been in actual
possession of the area. According to the trial court, petitioner was not deprived of his "right of
way" as he could use the Kapitan Tinoy Street as passageway to the highway.
On appeal by petitioner, the Court of Appeals issued its Decision affirming the trial court’s
Decision in toto, thus:
"WHEREFORE, the judgment hereby appealed from is hereby AFFIRMED in toto, with costs
against the plaintiff-appellant.
SO ORDERED."4
In this petition, petitioner ascribes to the Court of Appeals the following assignments of error:
"I
THE FINDINGS OF FACT OF THE HON. COURT OF APPEALS CONTAINED A
CONCLUSION WITHOUT CITATION OF SPECIFIC EVIDENCE ON WHICH THE SAME
WAS BASED.
II
THE HON. COURT OF APPEALS ERRED IN CONSIDERING THAT THE ONLY ISSUE
IN THIS CASE IS WHETHER OR NOT THE PLAINTIFF-APPELLANT HAS ACQUIRED
A RIGHT OF WAY OVER THE LAND OF THE GOVERNMENT WHICH IS BETWEEN
HIS PROPERTY AND THE NINOY AQUINO AVENUE.
III
THE HON. COURT OF APPEALS ERRED IN CONCLUDING THAT ACCION
PUBLICIANA IS NOT THE PROPER REMEDY IN THE CASE AT BAR.
IV
THE HON. COURT OF APPEALS ERRED IN CONCLUDING THAT THE EXISTENCE
OF THE PLAINTIFF-APPELLANT’S RIGHT OF WAY DOES NOT CARRY POSSESSION
OVER THE SAME.
V However, the trial court and the Court of Appeals found that defendants’ buildings were
THE HON. COURT OF APPEALS ERRED IN NOT RESOLVING THE ISSUE OF WHO
HAS THE BETTER RIGHT OF POSSESSION OVER THE SUBJECT LAND BETWEEN
THE PLAINTIFF-APPELLANT AND THE DEFENDANT-APPELLEES."5
In their comment, respondents maintain that the Court of Appeals did not err in ruling that
petitioner’s action for accion publiciana is not the proper remedy in asserting his "right of way"
on a lot owned by the government.
Here, petitioner claims that respondents, by constructing their buildings on the lot in question,
have deprived him of his "right of way" and his right of possession over a considerable portion
of the same lot, which portion is covered by his T.C.T. No. 74430 he acquired by means of
exchange of real property.
It is not disputed that the lot on which petitioner’s alleged "right of way" exists belongs to the
state or property of public dominion. Property of public dominion is defined by Article 420 of
the Civil Code as follows:
"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 other 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."
Public use is "use that is not confined to privileged individuals, but is open to the indefinite
public."6 Records show that the lot on which the stairways were built is for the use of the
people as passageway to the highway. Consequently, it is a property of public dominion.
Property of public dominion is outside the commerce of man and hence it: (1) cannot be
alienated or leased or otherwise be the subject matter of contracts; (2) cannot be acquired by
prescription against the State; (3) is not subject to attachment and execution; and (4) cannot be
burdened by any voluntary easement.7
Considering that the lot on which the stairways were constructed is a property of public
dominion, it can not be burdened by a voluntary easement of right of way in favor of herein
petitioner. In fact, its use by the public is by mere tolerance of the government through the
DPWH. Petitioner cannot appropriate it for himself. Verily, he can not claim any right of
possession over it. This is clear from Article 530 of the Civil Code which provides:
"ART. 530. Only things and rights which are susceptible of being appropriated may be the
object of possession."
Accordingly, both the trial court and the Court of Appeals erred in ruling that respondents have
better right of possession over the subject lot.
constructed on the portion of the same lot now covered by T.C.T. No. 74430 in petitioner’s
name. Being its owner, he is entitled to its possession.
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated
December 7, 1998 in CA-G.R. CV No. 54883 is AFFIRMED with MODIFICATION in the
sense that neither petitioner nor respondents have a right of possession over the disputed lot
where the stairways were built as it is a property of public dominion. Costs against petitioner.
G.R. No. 179987               September 3, 2013
HEIRS OF MARIO MALABANAN, (Represented by Sally A. Malabanan), Petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, Respondent.
RESOLUTION
BERSAMIN, J.:
For our consideration and resolution are the motions for reconsideration of the parties who both
assail the decision promulgated on April 29, 2009, whereby we upheld the ruling of the Court
of Appeals (CA) denying the application of the petitioners for the registration of a parcel of
land situated in Barangay Tibig, Silang, Cavite on the ground that they had not established by
sufficient evidence their right to the registration in accordance with either Section 14(1) or
Section 14(2) of Presidential Decree No. 1529 (Property Registration Decree).
Antecedents
The property subject of the application for registration is a parcel of land situated in Barangay
Tibig, Silang Cavite, more particularly identified as Lot 9864-A, Cad-452-D, with an area of
71,324-square meters. On February 20, 1998, applicant Mario Malabanan, who had purchased
the property from Eduardo Velazco, filed an application for land registration covering the
property in the Regional Trial Court (RTC) in Tagaytay City, Cavite, claiming that the property
formed part of the alienable and disposable land of the public domain, and that he and his
predecessors-in-interest had been in open, continuous, uninterrupted, public and adverse
possession and occupation of the land for more than 30 years, thereby entitling him to the
judicial confirmation of his title.1
To prove that the property was an alienable and disposable land of the public domain,
Malabanan presented during trial a certification dated June 11, 2001 issued by the Community
Environment and Natural Resources Office (CENRO) of the Department of Environment and
Natural Resources (DENR), which reads:
This is to certify that the parcel of land designated as Lot No. 9864 Cad 452-D, Silang Cadastre
as surveyed for Mr. Virgilio Velasco located at Barangay Tibig, Silang, Cavite containing an
area of 249,734 sq. meters as shown and described on the Plan Ap-04-00952 is verified to be
within the Alienable or Disposable land per Land Classification Map No. 3013 established
under Project No. 20-A and approved as such under FAO 4-1656 on March 15, 1982.2
After trial, on December 3, 2002, the RTC rendered judgment granting Malabanan’s
application for land registration, disposing thusly:
WHEREFORE, this Court hereby approves this application for registration and thus places
under the operation of Act 141, Act 496 and/or P.D. 1529, otherwise known as Property
Registration Law, the lands described in Plan Csd-04-0173123-D, Lot 9864-A and containing
an area of Seventy One Thousand Three Hundred Twenty Four (71,324) Square Meters, as
supported by its technical description now forming part of the record of this case, in addition to
other proofs adduced in the name of MARIO MALABANAN, who is of legal age, Filipino,
widower, and with residence at Munting Ilog, Silang, Cavite.
Once this Decision becomes final and executory, the corresponding decree of registration shall
forthwith issue.
SO ORDERED.3
The Office of the Solicitor General (OSG) appealed the judgment to the CA, arguing that
Malabanan had failed to prove that the property belonged to the alienable and disposable land
of the public domain, and that the RTC erred in finding that he had been in possession of the
property in the manner and for the length of time required by law for confirmation of imperfect
title.
On February 23, 2007, the CA promulgated its decision reversing the RTC and dismissing the
application for registration of Malabanan. Citing the ruling in Republic v. Herbieto
(Herbieto),4 the CA declared that under Section 14(1) of the Property Registration Decree, any
period of possession prior to the classification of the land as alienable and disposable was
inconsequential and should be excluded from the computation of the period of possession.
Noting that the CENRO-DENR certification stated that the property had been declared
alienable and disposable only on March 15, 1982, Velazco’s possession prior to March 15,
1982 could not be tacked for purposes of computing Malabanan’s period of possession.
Due to Malabanan’s intervening demise during the appeal in the CA, his heirs elevated the
CA’s decision of February 23, 2007 to this Court through a petition for review on certiorari.
The petitioners assert that the ruling in Republic v. Court of Appeals and Corazon
Naguit5 (Naguit) remains the controlling doctrine especially if the property involved is
agricultural land. In this regard, Naguit ruled that any possession of agricultural land prior to its
declaration as alienable and disposable could be counted in the reckoning of the period of
possession to perfect title under the Public Land Act (Commonwealth Act No. 141) and the
Property Registration Decree. They point out that the ruling in Herbieto, to the effect that the
declaration of the land subject of the application for registration as alienable and disposable
should also date back to June 12, 1945 or earlier, was a mere obiter dictum considering that the
land registration proceedings therein were in fact found and declared void ab initio for lack of
publication of the notice of initial hearing.
The petitioners also rely on the ruling in Republic v. T.A.N. Properties, Inc.6 to support their
argument that the property had been ipso jure converted into private property by reason of the
open, continuous, exclusive and notorious possession by their predecessors-in-interest of an
alienable land of the public domain for more than 30 years. According to them, what was
essential was that the property had been "converted" into private property through prescription
at the time of the application without regard to whether the property sought to be registered
was previously classified as agricultural land of the public domain.
As earlier stated, we denied the petition for review on certiorari because Malabanan failed to
establish by sufficient evidence possession and occupation of the property on his part and on
the part of his predecessors-in interest since June 12, 1945, or earlier.
Petitioners’ Motion for Reconsideration
In their motion for reconsideration, the petitioners submit that the mere classification of the
land as alienable or disposable should be deemed sufficient to convert it into patrimonial
property of the State. Relying on the rulings in Spouses De Ocampo v. Arlos,7 Menguito v.
Republic8 and Republic v. T.A.N. Properties, Inc.,9 they argue that the reclassification of the
land as alienable or disposable opened it to acquisitive prescription under the Civil Code; that
Malabanan had purchased the property from Eduardo Velazco believing in good faith that
Velazco and his predecessors-in-interest had been the real owners of the land with the right to
validly transmit title and ownership thereof; that consequently, the ten-year period prescribed
by Article 1134 of the Civil Code, in relation to Section 14(2) of the Property Registration
Decree, applied in their favor; and that when Malabanan filed the application for registration
on February 20, 1998, he had already been in possession of the land for almost 16 years
reckoned from 1982, the time when the land was declared alienable and disposable by the
State.
The Republic’s Motion for Partial Reconsideration
The Republic seeks the partial reconsideration in order to obtain a clarification with reference
to the application of the rulings in Naguit and Herbieto.
Chiefly citing the dissents, the Republic contends that the decision has enlarged, by
implication, the interpretation of Section 14(1) of the Property Registration Decree through
judicial legislation. It reiterates its view that an applicant is entitled to registration only when
the land subject of the application had been declared alienable and disposable since June 12,
1945 or earlier.
Ruling
We deny the motions for reconsideration.
In reviewing the assailed decision, we consider to be imperative to discuss the different
classifications of land in relation to the existing applicable land registration laws of the
Philippines.
Classifications of land according to ownership
Land, which is an immovable property,10 may be classified as either of public dominion or of
private ownership.11 Land is considered of public dominion if it either: (a) is intended for
public use; or (b) belongs to the State, without being for public use, and is intended for some
public service or for the development of the national wealth.12 Land belonging to the State that
is not of such character, or although of such character but no longer intended for public use or
for public service forms part of the patrimonial property of the State.13 Land that is other than
part of the patrimonial property of the State, provinces, cities and municipalities is of private
ownership if it belongs to a private individual.
Pursuant to the Regalian Doctrine (Jura Regalia), a legal concept first introduced into the
country from the West by Spain through the Laws of the Indies and the Royal Cedulas,14 all
lands of the public domain belong to the State.15 This means that the State is the source of any
asserted right to ownership of land, and is charged with the conservation of such patrimony.16
All lands not appearing to be clearly under private ownership are presumed to belong to the
State. Also, public lands remain part of the inalienable land of the public domain unless the
State is shown to have reclassified or alienated them to private persons. 17
Classifications of public lands
according to alienability
Whether or not land of the public domain is alienable and disposable primarily rests on the
classification of public lands made under the Constitution. Under the 1935 Constitution, 18 lands
of the public domain were classified into three, namely, agricultural, timber and
mineral.19 Section 10, Article XIV of the 1973 Constitution classified lands of the public
domain into seven, specifically, agricultural, industrial or commercial, residential, resettlement,
mineral, timber or forest, and grazing land, with the reservation that the law might provide
other classifications. The 1987 Constitution adopted the classification under the 1935
Constitution into agricultural, forest or timber, and mineral, but added national
parks.20 Agricultural lands may be further classified by law according to the uses to which they
may be devoted.21 The identification of lands according to their legal classification is done
exclusively by and through a positive act of the Executive Department.22
Based on the foregoing, the Constitution places a limit on the type of public land that may be
alienated. Under Section 2, Article XII of the 1987 Constitution, only agricultural lands of the
public domain may be alienated; all other natural resources may not be.
Alienable and disposable lands of the State fall into two categories, to wit: (a) patrimonial
lands of the State, or those classified as lands of private ownership under Article 425 of the
Civil Code,23 without limitation; and (b) lands of the public domain, or the public lands as
provided by the Constitution, but with the limitation that the lands must only be agricultural.
Consequently, lands classified as forest or timber, mineral, or national parks are not susceptible
of alienation or disposition unless they are reclassified as agricultural.24 A positive act of the
Government is necessary to enable such reclassification, 25 and the exclusive prerogative to
classify public lands under existing laws is vested in the Executive Department, not in the
courts.26 If, however, public land will be classified as neither agricultural, forest or timber,
mineral or national park, or when public land is no longer intended for public service or for the
development of the national wealth, thereby effectively removing the land from the ambit of
public dominion, a declaration of such conversion must be made in the form of a law duly
enacted by Congress or by a Presidential proclamation in cases where the President is duly
authorized by law to that effect.27 Thus, until the Executive Department exercises its
prerogative to classify or reclassify lands, or until Congress or the President declares that the
State no longer intends the land to be used for public service or for the development of national
wealth, the Regalian Doctrine is applicable.
Disposition of alienable public lands
Section 11 of the Public Land Act (CA No. 141) provides the manner by which alienable and
disposable lands of the public domain, i.e., agricultural lands, can be disposed of, to wit:
Section 11. Public lands suitable for agricultural purposes can be disposed of only as follows,
and not otherwise:
(1) For homestead settlement;
(2) By sale;
(3) By lease; and
(4) By confirmation of imperfect or incomplete titles;
(a) By judicial legalization; or
(b) By administrative legalization (free patent).
The core of the controversy herein lies in the proper interpretation of Section 11(4), in relation
to Section 48(b) of the Public Land Act, which expressly requires possession by a Filipino
citizen of the land since June 12, 1945, or earlier, viz:
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 of the province where the land
is located for confirmation of their claims and the issuance of a certificate of title thereafter,
under the Land Registration Act, to wit:
xxxx
(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 fide claim of acquisition of ownership, since June 12,
1945, or earlier, immediately preceding the filing of the applications 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. (Bold emphasis supplied)
Note that Section 48(b) of the Public Land Act used the words "lands of the public domain" or that the character of the property subject of the application as alienable and disposable
"alienable and disposable lands of the public domain" to clearly signify that lands otherwise agricultural land of the public domain determines its eligibility for land registration, not the
classified, i.e., mineral, forest or timber, or national parks, and lands of patrimonial or private ownership or title over it.
ownership, are outside the coverage of the Public Land Act. What the law does not include, it
excludes. The use of the descriptive phrase "alienable and disposable" further limits the Alienable public land held by a possessor, either personally or through his predecessors-in-
coverage of Section 48(b) to only the agricultural lands of the public domain as set forth in interest, openly, continuously and exclusively during the prescribed statutory period is
Article XII, Section 2 of the 1987 Constitution. Bearing in mind such limitations under the converted to private property by the mere lapse or completion of the period.29 In fact, by virtue
Public Land Act, the applicant must satisfy the following requirements in order for his of this doctrine, corporations may now acquire lands of the public domain for as long as the
application to come under Section 14(1) of the Property Registration Decree,28 to wit: lands were already converted to private ownership, by operation of law, as a result of satisfying
the requisite period of possession prescribed by the Public Land Act.30 It is for this reason that
1. The applicant, by himself or through his predecessor-in-interest, has been in possession and the property subject of the application of Malabanan need not be classified as alienable and
occupation of the property subject of the application; disposable agricultural land of the public domain for the entire duration of the requisite period
of possession.
2. The possession and occupation must be open, continuous, exclusive, and notorious;
To be clear, then, the requirement that the land should have been classified as alienable and
3. The possession and occupation must be under a bona fide claim of acquisition of ownership; disposable agricultural land at the time of the application for registration is necessary only to
dispute the presumption that the land is inalienable.
4. The possession and occupation must have taken place since June 12, 1945, or earlier; and
The declaration that land is alienable and disposable also serves to determine the point at which
5. The property subject of the application must be an agricultural land of the public domain. prescription may run against the State. The imperfect or incomplete title being confirmed under
Section 48(b) of the Public Land Act is title that is acquired by reason of the applicant’s
Taking into consideration that the Executive Department is vested with the authority to classify
possession and occupation of the alienable and disposable agricultural land of the public
lands of the public domain, Section 48(b) of the Public Land Act, in relation to Section 14(1)
domain. Where all the necessary requirements for a grant by the Government are complied
of the Property Registration Decree, presupposes that the land subject of the application for
with through actual physical, open, continuous, exclusive and public possession of an alienable
registration must have been already classified as agricultural land of the public domain in order
and disposable land of the public domain, the possessor is deemed to have acquired by
for the provision to apply. Thus, absent proof that the land is already classified as agricultural
operation of law not only a right to a grant, but a grant by the Government, because it is not
land of the public domain, the Regalian Doctrine applies, and overcomes the presumption that
necessary that a certificate of title be issued in order that such a grant be sanctioned by the
the land is alienable and disposable as laid down in Section 48(b) of the Public Land Act.
courts.31
However, emphasis is placed on the requirement that the classification required by Section
48(b) of the Public Land Act is classification or reclassification of a public land as agricultural. If one follows the dissent, the clear objective of the Public Land Act to adjudicate and quiet
titles to unregistered lands in favor of qualified Filipino citizens by reason of their occupation
The dissent stresses that the classification or reclassification of the land as alienable and
and cultivation thereof for the number of years prescribed by law32 will be defeated. Indeed, we
disposable agricultural land should likewise have been made on June 12, 1945 or earlier,
should always bear in mind that such objective still prevails, as a fairly recent legislative
because any possession of the land prior to such classification or reclassification produced no
development bears out, when Congress enacted legislation (Republic Act No. 10023)33 in order
legal effects. It observes that the fixed date of June 12, 1945 could not be minimized or glossed
to liberalize stringent requirements and procedures in the adjudication of alienable public land
over by mere judicial interpretation or by judicial social policy concerns, and insisted that the
to qualified applicants, particularly residential lands, subject to area limitations. 34
full legislative intent be respected.
On the other hand, if a public land is classified as no longer intended for public use or for the
We find, however, that the choice of June 12, 1945 as the reckoning point of the requisite
development of national wealth by declaration of Congress or the President, thereby converting
possession and occupation was the sole prerogative of Congress, the determination of which
such land into patrimonial or private land of the State, the applicable provision concerning
should best be left to the wisdom of the lawmakers. Except that said date qualified the period
disposition and registration is no longer Section 48(b) of the Public Land Act but the Civil
of possession and occupation, no other legislative intent appears to be associated with the
Code, in conjunction with Section 14(2) of the Property Registration Decree.35 As such,
fixing of the date of June 12, 1945. Accordingly, the Court should interpret only the plain and
prescription can now run against the State.
literal meaning of the law as written by the legislators.
To sum up, we now observe the following rules relative to the disposition of public land or
Moreover, an examination of Section 48(b) of the Public Land Act indicates that Congress
lands of the public domain, namely:
prescribed no requirement that the land subject of the registration should have been classified
as agricultural since June 12, 1945, or earlier. As such, the applicant’s imperfect or incomplete
title is derived only from possession and occupation since June 12, 1945, or earlier. This means
(1) As a general rule and pursuant to the Regalian Doctrine, all lands of the public domain
belong to the State and are inalienable. Lands that are not clearly under private ownership are
also presumed to belong to the State and, therefore, may not be alienated or disposed;
(2) The following are excepted from the general rule, to wit:
(a) Agricultural lands of the public domain are rendered alienable and disposable through any
of the exclusive modes enumerated under Section 11 of the Public Land Act. If the mode is
judicial confirmation of imperfect title under Section 48(b) of the Public Land Act, the
agricultural land subject of the application needs only to be classified as alienable and
disposable as of the time of the application, provided the applicant’s possession and occupation
of the land dated back to June 12, 1945, or earlier. Thereby, a conclusive presumption that the
applicant has performed all the conditions essential to a government grant arises,36 and the
applicant becomes the owner of the land by virtue of an imperfect or incomplete title. By legal
fiction, the land has already ceased to be part of the public domain and has become private
property.37
(b) Lands of the public domain subsequently classified or declared as no longer intended for
public use or for the development of national wealth are removed from the sphere of public
dominion and are considered converted into patrimonial lands or lands of private ownership
that may be alienated or disposed through any of the modes of acquiring ownership under the
Civil Code. If the mode of acquisition is prescription, whether ordinary or extraordinary, proof
that the land has been already converted to private ownership prior to the requisite acquisitive
prescriptive period is a condition sine qua non in observance of the law (Article 1113, Civil
Code) that property of the State not patrimonial in character shall not be the object of
prescription.
To reiterate, then, the petitioners failed to present sufficient evidence to establish that they and
their predecessors-in-interest had been in possession of the land since June 12, 1945. Without
satisfying the requisite character and period of possession - possession and occupation that is
open, continuous, exclusive, and notorious since June 12, 1945, or earlier - the land cannot be
considered ipso jure converted to private property even upon the subsequent declaration of it as
alienable and disposable. Prescription never began to run against the State, such that the land
has remained ineligible for registration under Section 14(1) of the Property Registration
Decree. Likewise, the land continues to be ineligible for land registration under Section 14(2)
of the Property Registration Decree unless Congress enacts a law or the President issues a
proclamation declaring the land as no longer intended for public service or for the development
of the national wealth.1âwphi1
WHEREFORE, the Court DENIES the petitioners' Motion for Reconsideration and the
respondent's Partial Motion for Reconsideration for their lack of merit.
G.R. No. 160453               November 12, 2012
REPUBLIC OF THE PHILIPPINES, Petitioner,
vs.
ARCADIO IVAN A. SANTOS III, and ARCADIO C. SANTOS, JR., Respondents.
DECISION
BERSAMIN, J.:
By law, accretion - the gradual and imperceptible deposit made through the effects of the
current of the water- belongs to the owner of the land adjacent to the banks of rivers where it
forms. The drying up of the river is not accretion. Hence, the dried-up river bed belongs to the
State as property of public dominion, not to the riparian owner, unless a law vests the
ownership in some other person.
Antecedents
Alleging continuous and adverse possession of more than ten years, respondent Arcadio Ivan
A. Santos III (Arcadio Ivan) applied on March 7, 1997 for the registration of Lot 4998-B (the
property) in the Regional Trial Court (RTC) in Parafiaque City. The property, which had an
area of 1,045 square meters, more or less, was located in Barangay San Dionisio, Parañaque
City, and was bounded in the Northeast by Lot 4079 belonging to respondent Arcadio C.
Santos, Jr. (Arcadio, Jr.), in the Southeast by the Parañaque River, in the Southwest by an
abandoned road, and in the Northwest by Lot 4998-A also owned by Arcadio Ivan.1
On May 21, 1998, Arcadio Ivan amended his application for land registration to include
Arcadio, Jr. as his co-applicant because of the latter’s co-ownership of the property. He alleged
that the property had been formed through accretion and had been in their joint open,
notorious, public, continuous and adverse possession for more than 30 years.2
The City of Parañaque (the City) opposed the application for land registration, stating that it
needed the property for its flood control program; that the property was within the legal
easement of 20 meters from the river bank; and that assuming that the property was not
covered by the legal easement, title to the property could not be registered in favor of the
applicants for the reason that the property was an orchard that had dried up and had not
resulted from accretion.3
Ruling of the RTC
On May 10, 2000,4 the RTC granted the application for land registration, disposing:
WHEREFORE, the Court hereby declares the applicants, ARCADIO IVAN A. SANTOS, III
and ARCADIO C. SANTOS, JR., both Filipinos and of legal age, as the TRUE and
ABSOLUTE OWNERS of the land being applied for which is situated in the Barangay of San
Dionisio, City of Parañaque with an area of one thousand forty five (1045) square meters more
or less and covered by Subdivision Plan Csd-00-000343, being a portion of Lot 4998, Cad.
299, Case 4, Parañaque Cadastre, LRC Rec. No. and orders the registration of Lot 4998-B in
their names with the following technical description, to wit:
xxxx
Once this Decision became (sic) final and executory, let the corresponding Order for the
Issuance of the Decree be issued.
SO ORDERED.
The Republic, through the Office of the Solicitor General (OSG), appealed.
Ruling of the CA
In its appeal, the Republic ascribed the following errors to the RTC, 5 to wit:
I DISPOSABLE IS FATAL TO THEIR APPLICATION FOR LAND REGISTRATION.
THE TRIAL COURT ERRED IN RULING THAT THE PROPERTY SOUGHT TO BE
REGISTERED IS AN ACCRETION TO THE ADJOINING PROPERTY OWNED BY
APPELLEES DESPITE THE ADMISSION OF APPELLEE ARCADIO C. SANTOS JR.
THAT THE SAID PROPERTY WAS NOT FORMED AS A RESULT OF THE GRADUAL
FILLING UP OF SOIL THROUGH THE CURRENT OF THE RIVER.
II
THE TRIAL COURT ERRED IN GRANTING THE APPLICATION FOR LAND
REGISTRATION DESPITE APPELLEE’S FAILURE TO FORMALLY OFFER IN
EVIDENCE AN OFFICIAL CERTIFICATION THAT THE SUBJECT PARCEL OF LAND
IS ALIENABLE AND DISPOSABLE.
III
THE TRIAL COURT ERRED IN RULING THAT APPELLEES HAD SUFFICIENTLY
ESTABLISHED THEIR CONTINUOUS, OPEN, PUBLIC AND ADVERSE OCCUPATION
OF THE SUBJECT PROPERTY FOR A PERIOD OF MORE THAN THIRTY (30) YEARS.
On May 27, 2003, the CA affirmed the RTC.6
The Republic filed a motion for reconsideration, but the CA denied the motion on October 20,
2003.7
Issues
Hence, this appeal, in which the Republic urges that:8
I and further considering that Lot 4 which adjoins the same property is owned by applicant,
RESPONDENTS’ CLAIM THAT THE SUBJECT PROPERTY IS AN ACCRETION TO
THEIR ADJOINING LAND THAT WOULD ENTITLE THEM TO REGISTER IT UNDER
ARTICLE 457 OF THE NEW CIVIL CODE IS CONTRADICTED BY THEIR OWN
EVIDENCE.
II
ASSUMING THAT THE LAND SOUGHT TO BE REGISTERED WAS "PREVIOUSLY A
PART OF THE PARAÑAQUE RIVER WHICH BECAME AN ORCHARD AFTER IT
DRIED UP," THE REGISTRATION OF SAID PROPERTY IN FAVOR OF RESPONDENTS
CANNOT BE ALTERNATIVELY JUSTIFIED UNDER ARTICLE 461 OF THE CIVIL
CODE.
III
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT RULING
THAT THE FAILURE OF RESPONDENTS TO FORMALLY OFFER IN EVIDENCE AN
OFFICIAL CERTIFICATION THAT THE SUBJECT PROPERTY IS ALIENABLE AND
IV
THE FINDING OF THE COURT OF APPEALS THAT RESPONDENTS HAVE
CONTINUOUSLY, OPENLY, PUBLICLY AND ADVERSELY OCCUPIED THE SUBJECT
PROPERTY FOR MORE THAN THIRTY (30) YEARS IS NOT SUPPORTED BY WELL-
NIGH INCONTROVERTIBLE EVIDENCE.
To be resolved are whether or not Article 457 of the Civil Code was applicable herein; and
whether or not respondents could claim the property by virtue of acquisitive prescription
pursuant to Section 14(1) of Presidential Decree No. 1529 (Property Registration Decree).
Ruling
The appeal is meritorious.
I.
The CA grossly erred in applying Article 457 of the Civil Code to respondents’ benefit
Article 457 of the Civil Code provides that "(t)o the owners of lands adjoining the banks of
rivers belong the accretion which they gradually receive from the effects of the currents of the
waters."
In ruling for respondents, the RTC pronounced as follows:
On the basis of the evidence presented by the applicants, the Court finds that Arcadio Ivan A.
Santos III and Arcadio C. Santos, Jr., are the owners of the land subject of this application
which was previously a part of the Parañaque River which became an orchard after it dried up
Arcadio C. Santos, Jr., after it was obtained by him through inheritance from his mother,
Concepcion Cruz, now deceased. Conformably with Art. 457 of the New Civil Code, it is
provided that:
"Article 457. To the owners of the lands adjoining the bank of rivers belong the accretion
which they gradually receive from the effects of the current of the waters."9
The CA upheld the RTC’s pronouncement, holding:
It could not be denied that "to the owners of the lands adjoining the banks of rivers belong the
accretion which they gradually receive from the effects of the current of the waters" (Article
457 New Civil Code) as in this case, Arcadio Ivan Santos III and Arcadio Santos, Jr., are the
owners of the land which was previously part of the Parañaque River which became an orchard
after it dried up and considering that Lot 4 which adjoins the same property is owned by the
applicant which was obtained by the latter from his mother (Decision, p. 3; p. 38 Rollo). 10
The Republic submits, however, that the application by both lower courts of Article 457 of the
Civil Code was erroneous in the face of the fact that respondents’ evidence did not establish
accretion, but instead the drying up of the Parañaque River.
The Republic’s submission is correct.
Respondents as the applicants for land registration carried the burden of proof to establish the
merits of their application by a preponderance of evidence, by which is meant such evidence
that is of greater weight, or more convincing than that offered in opposition to it.11 They would
be held entitled to claim the property as their own and apply for its registration under the
Torrens system only if they established that, indeed, the property was an accretion to their land.
Accretion is the process whereby the soil is deposited along the banks of rivers.12 The deposit
of soil, to be considered accretion, must be: (a) gradual and imperceptible; (b) made through
the effects of the current of the water; and (c) taking place on land adjacent to the banks of
rivers.13
Accordingly, respondents should establish the concurrence of the elements of accretion to
warrant the grant of their application for land registration.
However, respondents did not discharge their burden of proof. They did not show that the
gradual and imperceptible deposition of soil through the effects of the current of the river had
formed Lot 4998-B. Instead, their evidence revealed that the property was the dried-up river
bed of the Parañaque River, leading both the RTC and the CA to themselves hold that Lot
4998-B was "the land which was previously part of the Parañaque River xxx (and) became an
orchard after it dried up."
Still, respondents argue that considering that Lot 4998-B did not yet exist when the original
title of Lot 4 was issued in their mother’s name in 1920, and that Lot 4998-B came about only
thereafter as the land formed between Lot 4 and the Parañaque River, the unavoidable
conclusion should then be that soil and sediments had meanwhile been deposited near Lot 4 by
the current of the Parañaque River, resulting in the formation of Lot 4998-B.
The argument is legally and factually groundless. For one, respondents thereby ignore that the
effects of the current of the river are not the only cause of the formation of land along a river
bank. There are several other causes, including the drying up of the river bed. The drying up of
the river bed was, in fact, the uniform conclusion of both lower courts herein. In other words,
respondents did not establish at all that the increment of land had formed from the gradual and
imperceptible deposit of soil by the effects of the current. Also, it seems to be highly
improbable that the large volume of soil that ultimately comprised the dry land with an area of
1,045 square meters had been deposited in a gradual and imperceptible manner by the current
of the river in the span of about 20 to 30 years – the span of time intervening between 1920,
when Lot 4 was registered in the name of their deceased parent (at which time Lot 4998-B was
not yet in existence) and the early 1950s (which respondents’ witness Rufino Allanigue alleged
to be the time when he knew them to have occupied Lot 4988-B). The only plausible
explanation for the substantial increment was that Lot 4988-B was the dried-up bed of the
Parañaque River. Confirming this explanation was Arcadio, Jr.’s own testimony to the effect
that the property was previously a part of the Parañaque River that had dried up and become an
orchard.
We observe in this connection that even Arcadio, Jr.’s own Transfer Certificate of Title No.
44687 confirmed the uniform conclusion of the RTC and the CA that Lot 4998-B had been
formed by the drying up of the Parañaque River. Transfer Certificate of Title No. 44687 recited
that Lot 4 of the consolidated subdivision plan Pcs-13-002563, the lot therein described, was
bounded "on the SW along line 5-1 by Dried River Bed."14
That boundary line of "SW along line 5-1" corresponded with the location of Lot 4998-B,
which was described as "bounded by Lot 4079 Cad. 299, (Lot 1, Psu-10676), in the name of
respondent Arcadio Santos, Jr. (Now Lot 4, Psd-13-002563) in the Northeast."15
The RTC and the CA grossly erred in treating the dried-up river bed as an accretion that
became respondents’ property pursuant to Article 457 of the Civil Code. That land was
definitely not an accretion. The process of drying up of a river to form dry land involved the
recession of the water level from the river banks, and the dried-up land did not equate to
accretion, which was the gradual and imperceptible deposition of soil on the river banks
through the effects of the current. In accretion, the water level did not recede and was more or
less maintained. Hence, respondents as the riparian owners had no legal right to claim
ownership of Lot 4998-B. Considering that the clear and categorical language of Article 457 of
the Civil Code has confined the provision only to accretion, we should apply the provision as
its clear and categorical language tells us to. Axiomatic it is, indeed, that where the language of
the law is clear and categorical, there is no room for interpretation; there is only room for
application.16 The first and fundamental duty of courts is then to apply the law.17
The State exclusively owned Lot 4998-B and may not be divested of its right of ownership.
Article 502 of the Civil Code expressly declares that rivers and their natural beds are public
dominion of the State.18 It follows that the river beds that dry up, like Lot 4998-B, continue to
belong to the
State as its property of public dominion, unless there is an express law that provides that the
dried-up river beds should belong to some other person.19
II
Acquisitive prescription was
not applicable in favor of respondents
The RTC favored respondents’ application for land registration covering Lot 4998-B also
because they had taken possession of the property continuously, openly, publicly and adversely
for more than 30 years based on their predecessor-in-interest being the adjoining owner of the
parcel of land along the river bank. It rendered the following ratiocination, viz:20
In this regard, the Court found that from the time the applicants became the owners thereof,
they took possession of the same property continuously, openly, publicly and adversely for
more than thirty (30) years because their predecessors-in-interest are the adjoining owners of
the subject parcel of land along the river bank. Furthermore, the fact that applicants paid its
realty taxes, had it surveyed per subdivision plan Csd-00-000343 (Exh. "L") which was duly
approved by the Land Management Services and the fact that Engr. Chito B. Cainglet, OIC–
Chief, Surveys Division Land Registration Authority, made a Report that the subject property
is not a portion of the Parañaque River and that it does not fall nor overlap with Lot 5000, thus,
the Court opts to grant the application.
Finally, in the light of the evidence adduced by the applicants in this case and in view of the
foregoing reports of the Department of Agrarian Reforms, Land Registration Authority and the
Department of Environment and Natural Resources, the Court finds and so holds that the
applicants have satisfied all the requirements of law which are essential to a government grant
and is, therefore, entitled to the issuance of a certificate of title in their favor. So also, oppositor
failed to prove that the applicants are not entitled thereto, not having presented any witness.
In fine, the application is GRANTED.
As already mentioned, the CA affirmed the RTC.
Both lower courts erred.
The relevant legal provision is Section 14(1) of Presidential Decree No. 1529 (Property
Registration Decree), which pertinently states:
Section 14. Who may apply. — The following persons may file in the proper [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 a bona fide claim of ownership since June 12, 1945, or
earlier.
xxxx
Under Section 14(1), then, applicants for confirmation of imperfect title must prove the
following, namely: (a) that the land forms part of the disposable and alienable agricultural
lands of the public domain; and (b) that they have been in open, continuous, exclusive, and
notorious possession and occupation of the land under a bona fide claim of ownership either
since time immemorial or since June 12, 1945.21
The Republic assails the findings by the lower courts that respondents "took possession of the
same property continuously, openly, publicly and adversely for more than thirty (30) years."22
Although it is well settled that the findings of fact of the trial court, especially when affirmed
by the CA, are accorded the highest degree of respect, and generally will not be disturbed on
appeal, with such findings being binding and conclusive on the Court,23 the Court has
consistently recognized exceptions to this rule, including the following, to wit: (a) when the
findings are grounded entirely on speculation, surmises, or conjectures; (b) when the inference
made is manifestly mistaken, absurd, or impossible; (c) when there is grave abuse of discretion;
(d) when the judgment is based on a misapprehension of facts; (e) when the findings of fact are
conflicting; (f) when in making its findings the CA went beyond the issues of the case, or its
findings are contrary to the admissions of both the appellant and the appellee; (g) when the
findings are contrary to those of the trial court; (h) when the findings are conclusions without
citation of specific evidence on which they are based; (i) when the facts set forth in the petition
as well as in the petitioner’s main and reply briefs are not disputed by respondent; and (j) when
the findings of fact are premised on the supposed absence of evidence and contradicted by the
evidence on record.24
Here, the findings of the RTC were obviously grounded on speculation, surmises, or
conjectures; and that the inference made by the RTC and the CA was manifestly mistaken,
absurd, or impossible. Hence, the Court should now review the findings.
In finding that respondents had been in continuous, open, public and adverse possession of the
land for more than 30 years, the RTC declared:
In this regard, the Court found that from the time the applicant became the owners thereof, they
took possession of the same property continuously, openly, publicly and adversely for more
than thirty years because their predecessor in interest are the adjoining owners of the subject
parcel of land along the river banks. Furthermore, the fact that the applicant paid its realty
taxes, had it surveyed per subdivision plan Csd-00-000343 (Exh. "L") which was duly
approved by the Land Management Services and the fact that Engr. Chito B. Cainglet, OIC –
Chief, Surveys Division Land Registration Authority, made a Report that the subject property
is not a portion of the Parañaque River and that it does not fall nor overlap with Lot 5000, thus,
the Court opts to grant the application.
The RTC apparently reckoned respondents’ period of supposed possession to be "more than
thirty years" from the fact that "their predecessors in interest are the adjoining owners of the
subject parcel of land." Yet, its decision nowhere indicated what acts respondents had
performed showing their possession of the property "continuously, openly, publicly and
adversely" in that length of time. The decision mentioned only that they had paid realty taxes
and had caused the survey of the property to be made. That, to us, was not enough to justify the
foregoing findings, because, firstly, the payment of realty taxes did not conclusively prove the
payor’s ownership of the land the taxes were paid for,25 the tax declarations and payments
being mere indicia of a claim of ownership;26 and, secondly, the causing of surveys of the
property involved was not itself an of continuous, open, public and adverse possession.
The principle that the riparian owner whose land receives the gradual deposits of soil does not
need to make an express act of possession, and that no acts of possession are necessary in that
instance because it is the law itself that pronounces the alluvium to belong to the riparian
owner from the time that the deposit created by the current of the water becomes manifest 27 has
no applicability herein. This is simply because Lot 4998-B was not formed through accretion.
Hence, the ownership of the land adjacent to the river bank by respondents’ predecessor-in-
interest did not translate to possession of Lot 4998-B that would ripen to acquisitive
prescription in relation to Lot 4998-B.
On the other hand, the claim of thirty years of continuous, open, public and adverse possession
of Lot 4998-B was not even validated or preponderantly established. The admission of
respondents themselves that they declared the property for taxation purposes only in 1997 and
paid realty taxes only from 199928 signified that their alleged possession would at most be for
only nine years as of the filing of their application for land registration on March 7, 1997.
Yet, even conceding, for the sake of argument, that respondents possessed Lot 4998-B for
more than thirty years in the character they claimed, they did not thereby acquire the land by
prescription or by other means without any competent proof that the land was already declared
as alienable and disposable by the Government. Absent that declaration, the land still belonged
to the State as part of its public dominion.
Article 419 of the Civil Code distinguishes property as being either of public dominion or of
private ownership. Article 420 of the Civil Code lists the properties considered as part of public
dominion, namely: (a) 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; and (b) 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. As earlier
mentioned, Article 502 of the Civil Code declares that rivers and their natural beds are of
public dominion.
Whether the dried-up river bed may be susceptible to acquisitive prescription or not was a
question that the Court resolved in favor of the State in Celestial v. Cachopero,29 a case
involving the registration of land found to be part of a dried-up portion of the natural bed of a
creek. There the Court held:
As for petitioner’s claim of ownership over the subject land, admittedly a dried-up bed of the
Salunayan Creek, based on (1) her alleged long term adverse possession and that of her
predecessor-in-interest, Marcelina Basadre, even prior to October 22, 1966, when she
purchased the adjoining property from the latter, and (2) the right of accession under Art. 370
of the Spanish Civil Code of 1889 and/or Article 461 of the Civil Code, the same must fail.
Since property of public dominion is outside the commerce of man and not susceptible to
private appropriation and acquisitive prescription, the adverse possession which may be the
basis of a grant of title in the confirmation of an imperfect title refers only to alienable or
disposable portions of the public domain. It is only after the Government has declared the land
to be alienable and disposable agricultural land that the year of entry, cultivation and exclusive
and adverse possession can be counted for purposes of an imperfect title.
A creek, like the Salunayan Creek, is a recess or arm extending from a river and participating
in the ebb and flow of the sea. As such, under Articles 420(1) and 502(1) of the Civil Code, the
Salunayan Creek, including its natural bed, is property of the public domain which is not
susceptible to private appropriation and acquisitive prescription. And, absent any declaration
by the government, that a portion of the creek has dried-up does not, by itself, alter its
inalienable character.
xxxx
Had the disputed portion of the Salunayan Creek dried up after the present Civil Code took
effect, the subject land would clearly not belong to petitioner or her predecessor-in-interest
since under the aforementioned provision of Article 461, "river beds which are abandoned
through the natural change in the course of the waters ipso facto belong to the owners of the
land occupied by the new course," and the owners of the adjoining lots have the right to
acquire them only after paying their value.
And both Article 370 of the Old Code and Article 461 of the present Civil Code are applicable
only when "river beds are abandoned through the natural change in the course of the waters." It
is uncontroverted, however, that, as found by both the Bureau of Lands and the DENR
Regional Executive Director, the subject land became dry as a result of the construction an
irrigation canal by the National Irrigation Administration. Thus, in Ronquillo v. Court of
Appeals, this Court held:
The law is clear and unambiguous. It leaves no room for interpretation. Article 370 applies
only if there is a natural change in the course of the waters. The rules on alluvion do not apply
to man-made or artificial accretions nor to accretions to lands that adjoin canals or esteros or
artificial drainage systems. Considering our earlier finding that the dried-up portion of Estero
Calubcub was actually caused by the active intervention of man, it follows that Article 370
does not apply to the case at bar and, hence, the Del Rosarios cannot be entitled thereto
supposedly as riparian owners.
The dried-up portion of Estero Calubcub should thus be considered as forming part of the land
of the public domain which cannot be subject to acquisition by private ownership. xxx
(Emphasis supplied)
Furthermore, both provisions pertain to situations where there has been a change in the course
of a river, not where the river simply dries up. In the instant Petition, it is not even alleged that
the Salunayan Creek changed its course. In such a situation, commentators are of the opinion
that the dry river bed remains property of public dominion. (Bold emphases supplied)
Indeed, under the Regalian doctrine, all lands not otherwise appearing to be clearly within
private ownership are presumed to belong to the State.30 No public land can be acquired by
private persons without any grant, express or implied, from the Government. It is
indispensable, therefore, that there is a showing of a title from the State.31 Occupation of public
land in the concept of owner, no matter how long, cannot ripen into ownership and be
registered as a title.32
Subject to the exceptions defined in Article 461 of the Civil Code (which declares river beds
that are abandoned through the natural change in the course of the waters as ipso facto
belonging to the owners of the land occupied by the new course, and which gives to the owners
of the adjoining lots the right to acquire only the abandoned river beds not ipso facto belonging
to the owners of the land affected by the natural change of course of the waters only after
paying their value), all river beds remain property of public dominion and cannot be acquired
by acquisitive prescription unless previously declared by the Government to be alienable and
disposable. Considering that Lot 4998-B was not shown to be already declared to be alienable
and disposable, respondents could not be deemed to have acquired the property through
prescription.
Nonetheless, respondents insist that the property was already classified as alienable and
disposable by the Government. They cite as proof of the classification as alienable and
disposable the following notation found on the survey plan, to wit:33
NOTE
ALL CORNERS NOT OTHERWISE DESCRIBED ARE OLD BL CYL. CONC. MONS 15 X
60CM
All corners marked PS are cyl. conc. mons 15 x 60 cm
Surveyed in accordance with Survey Authority NO. 007604-48 of the Regional Executive
Director issued by the CENR-OFFICER dated Dec. 2, 1996.
This survey is inside L.C. Map No. 2623, Proj. No. 25 classified as alienable/disposable by the
Bureau of Forest Dev’t. on Jan. 3, 1968.
Lot 4998-A = Lot 5883} Cad 299
Lot 4998-B = Lot 5884} Paranaque Cadastre.
Was the notation on the survey plan to the effect that Lot 4998-B was "inside" the map
"classified as alienable/disposable by the Bureau of Forest Development on 03 Jan. 1968"
sufficient proof of the property’s nature as alienable and disposable public land?
To prove that the land subject of an application for registration is alienable, an applicant must
conclusively establish the existence of a positive act of the Government, such as a presidential
proclamation, executive order, administrative action, investigation reports of the Bureau of
Lands investigator, or a legislative act or statute. Until then, the rules on confirmation of
imperfect title do not apply.
As to the proofs that are admissible to establish the alienability and disposability of public land,
we said in Secretary of the Department of Environment and Natural Resources v. Yap34 that:
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. To overcome this
presumption, incontrovertible evidence must be established that the land subject of the
application (or claim) is alienable or disposable.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. 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.
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." (Emphasis supplied)
In Menguito v. Republic,35 which we reiterated in Republic v. Sarmiento,36 we specifically
resolved the issue of whether the notation on the survey plan was sufficient evidence to
establish the alienability and disposability of public land, to wit:
To prove that the land in question formed part of the alienable and disposable lands of the
public domain, petitioners relied on the printed words which read: "This survey plan is inside
Alienable and Disposable Land Area, Project No. 27-B as per L.C. Map No. 2623, certified by
the Bureau of Forestry on January 3, 1968," appearing on Exhibit "E" (Survey Plan No. Swo-
13-000227).
This proof is not sufficient. Section 2, Article XII of the 1987 Constitution, provides: "All
lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces
of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. x x x."
For the original registration of title, the applicant (petitioners in this case) must overcome the
presumption that the land sought to be registered forms part of the public domain. Unless
public land is shown to have been reclassified or alienated to a private person by the State, it
remains part of the inalienable public domain. Indeed, "occupation thereof in the concept of
owner, no matter how long, cannot ripen into ownership and be registered as a title." To
overcome such presumption, incontrovertible evidence must be shown by the applicant. Absent
such evidence, the land sought to be registered remains inalienable.
In the present case, petitioners cite a surveyor-geodetic engineer’s notation in Exhibit "E"
indicating that the survey was inside alienable and disposable land. Such notation does not
constitute a positive government act validly changing the classification of the land in question.
Verily, a mere surveyor has no authority to reclassify lands of the public domain. By relying
solely on the said surveyor’s assertion, petitioners have not sufficiently proven that the land in
question has been declared alienable. (Emphasis supplied)
In Republic v. T.A.N. Properties, Inc.,37 we dealt with the sufficiency of the certification by the
Provincial Environmental Officer (PENRO) or Community Environmental Officer (CENRO)
to the effect that a piece of public land was alienable and disposable in the following manner,
viz:
x x x it is not enough for the PENRO or CENRO to certify that a land is alienable and
disposable. The applicant for land registration must prove that the DENR Secretary had
approved the land classification and released the land of the public domain as alienable and
disposable, and that the land subject of the application for registration falls within the approved
area per verification through survey by the PENRO or CENRO. In addition, the applicant for
land registration must present a copy of the original classification approved by the DENR
Secretary and certified as a true copy by the legal custodian of the official records. These facts
must be established to prove that the land is alienable and disposable. Respondent failed to do
so because the certifications presented by respondent do not, by themselves, prove that the land
is alienable and disposable.
Only Torres, respondent’s Operations Manager, identified the certifications submitted by
respondent.1âwphi1 The government officials who issued the certifications were not presented
before the trial court to testify on their contents. The trial court should not have accepted the
contents of the certifications as proof of the facts stated therein. Even if the certifications are
presumed duly issued and admissible in evidence, they have no probative value in establishing
that the land is alienable and disposable.
xxxx
The CENRO and Regional Technical Director, FMS-DENR, certifications do not prove that
Lot 10705-B falls within the alienable and disposable land as proclaimed by the DENR
Secretary. Such government certifications do not, by their mere issuance, prove the facts stated
therein. Such government certifications may fall under the class of documents contemplated in
the second sentence of Section 23 of Rule 132. As such, the certifications are prima facie
evidence of their due execution and date of issuance but they do not constitute prima facie
evidence of the facts stated therein. (Emphasis supplied)
These rulings of the Court indicate that the notation on the survey plan of Lot 4998-B, Cad-00-
000343 to the effect that the "survey is inside a map classified as alienable/disposable by the
Bureau of Forest Dev’t" did not prove that Lot 4998-B was already classified as alienable and
disposable. Accordingly, respondents could not validly assert acquisitive prescription of Lot
4988-B.
WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the Court of Appeals
promulgated on May 27, 2003; DISMISSES the application for registration of Arcadio C.
Santos, Jr. and Arcadio Ivan S. Santos III respecting Lot 4998-B with a total area of 1,045
square meters, more or less, situated in Barangay San Dionisio, Parañaque City, Metro Manila;
and DECLARES Lot 4998-B as exclusively belonging to the State for being part of the dried--
up bed of the Parat1aque River.
G.R. No. 177168, August 03, 2015
NAVY OFFICERS' VILLAGE ASSOCIATION, INC. (NOVAI), Petitioner, v. REPUBLIC
OF THE PHILIPPINES, Respondent.
DECISION
BRION, J.:
We resolve the present petition for review on certiorari1 assailing the December 28, 2006
decision2 and March 28, 2007 resolution3 of the Court of Appeals (CA) in CA-G.R. CV No.
85179.
The CA reversed and set aside the August 20, 2004 decision4 of the Regional Trial Court
(RTC) Branch 67, Pasig City, that dismissed the complaint filed by the Republic of the
Philippines (respondent or the Republic) for the cancellation of Transfer Certificate of Title
(TCT) No. T-15387 issued in the name of Navy Officers' Village Association, Inc. or NOVAI
(petitioner).
The Factual Antecedents
TCT No. T-15387,5 issued in NOVAI's name, covers a 475,009 square-meter parcel of land
(the property)6 situated inside the former Fort Andres Bonifacio Military Reservation (FBMR)
in Taguig, Metro Manila.
The property previously formed part of a larger 15,812,684 square-meter parcel of land
situated at the former Fort William McKinley, Rizal, which was covered by TCT No. 61524
issued in the name of the Republic of the Philippines.
On July 12, 1957, then President Carlos P. Garcia issued Proclamation No. 4237 "reserving for
military purposes certain parcels of the public domain situated in the municipalities of Pasig,
Taguig, Parañaque, province of Rizal, and Pasay City," which included the 15,812,684 square-
meter parcel of land covered by TCT No. 61524.
On September 29, 1965, then Pres. Diosdado Macapagal issued Proclamation No. 4618 which
excluded from Fort McKinley "a certain portion of land embraced therein, situated in the
municipalities of Taguig and Parañaque, Province of Rizal, and Pasay City," with an area of
2,455,310 square meters, and declared the excluded area as "AFP Officers' Village" to be
disposed of under the provisions of Republic Act Nos. 2749 and 730.10cralawrednad
Barely a month after, or on October 25, 1965, Pres. Macapagal issued Proclamation No.
47811 "reserving for the veterans rehabilitation, medicare and training center site purposes" an
area of 537,520 square meters of the land previously declared as AFP Officers' Village under
Proclamation No. 461, and placed the reserved area under the administration of the Veterans
Federation of the Philippines (VFP).
The property is within the 537,520 square-meter parcel of land reserved in VFP's favor.
On November 15, 1991, the property was the subject of a Deed of Sale12between the Republic
of the Philippines, through former Land Management Bureau (LMB) Director Abelardo G.
Palad, Jr., (Dir. Palad) and petitioner NOVAI. The deed of sale was subsequently registered
and from which TCT No. T-15387 was issued in NOVAI's name.
The Republic's Complaint for Cancellation of Title
In its complaint13 filed with the RTC on December 23, 1993, the Republic sought to cancel
NOVAFs title based on the following grounds: (a) the land covered by NOVAFs title is part of
a military reservation; (b) the deed of sale conveying the property to NOVAI, which became
the basis for the issuance of TCT No. 15387, is fictitious; (c) the LMB has no records of any
application made by NOVAI for the purchase of the property, and of the NOVAFs alleged
payment of P14,250,270.00 for the property; and (d) the presidential proclamation, i.e.,
Proclamation No. 2487, claimed to have been issued by then President Corazon C. Aquino in
1991 that authorized the transfer and titling of the property to NOVAI, is fictitious.
NOVAI's Answer to the Complaint
In its answer (which was later amended) to the Republic's complaint, NOVAI counter-argued
that the property was no longer part of the public dominion, as the land had long been
segregated from the military reservation pursuant to Proclamation No. 461.
NOVAI claimed that, contrary to the Republic's contention that there were no records of the
sale, it had actually filed a letter-application for a sales patent over the property with the LMB
which prepared, verified and approved the property's plan and technical description; and that
the LMB delivered to it a copy of the deed of sale, signed and executed by Dir. Palad, after it
had paid a portion of the P14,250,270.00 purchase price, corresponding taxes, and other
charges, with the balance to be paid in installments.
Also, NOVAI contended that, since any alleged irregularities that may have attended the sale
pertained only to formalities, the proper remedy for the Republic was to file an action for
reformation of instrument, not for cancellation of title. In any event, it added that the
Republic's cause of action had prescribed because its title to the property had already become
indefeasible.
The RTC's decision
The RTC narrowed down the issues to: (a) the character of the property in question, i.e.,
whether the property in question was part of the FBMR, and hence, inalienable; and (b) the
validity of the deed of sale conveying the property to NOVAI, i.e., whether the title over the
property was acquired by NOVAI through fraud. The RTC resolved both issues in NOVAI's
favor.
In its decision, the RTC ruled that: (a) the property is alienable and disposable in character, as
the land falls within the area segregated from the FBMR pursuant to Proclamation No. 461; (b)
the subject deed of sale should be presumed valid on its face, as it was executed with all the
formalities of a notarial certification; (c) notwithstanding the claims of forgery, the signature of
Dir. Palad on the deed of sale appeared genuine and authentic; and (d) NOVAI's title to the
property had attained indefeasibility since the Republic's action for cancellation of title was
filed close to two (2) years from the issuance of the title.
The CA's decision
The CA reversed and set aside the RTC's decision. It ruled that the property is inalienable land
of the public domain; thus, it cannot be disposed of or be the subject of a sale. It pointed out
that, since NOVAI failed to discharge its burden of proving the existence of Proclamation No.
2487 - the positive governmental act that would have removed the property from the public
domain — the property remained reserved for veterans rehabilitation purposes under
Proclamation No. 478, the latest executive issuance affecting the property.
Since the property is inalienable, the CA held that the incontestability and indefeasibility
generally accorded to a Torrens title cannot apply because the property, as in this case, is
unregistrable land; that a title issued by reason or on account of any sale, alienation, or transfer
of an inalienable property is void and a patent nullity; and that, consequently, the Republic's
action for the cancellation of NOVAI's title cannot be barred by prescription.
Also, the CA held that there can be no presumption of regularity in the execution of the subject
deed of sale given the questionable circumstances that surrounded the alleged sale of the
property to NOVAI,14e.g., NOVAI's failure to go through the regular process in the Department
of Environment and Natural Resources (DENR) or the LMB Offices in the filing of an
application for sales patent and in the conduct of survey and investigation; the execution of the
deed of sale without payment of the full purchase price as required by policy; and the
appearances of forgery and falsification of Dir. Palad's signature on the deed of sale and on the
receipts issued to NOVAI for its installment payments on the property, among others.
Lastly, the CA held that the Court's observations and ruling in Republic of the Philippines v.
Southside Homeowners Association, Inc (Southside)15 is applicable to the present case. In
Southside, the Republic similarly sought the cancellation of title - TCT No. 15084 - issued in
favor of Southside Homeowners Association, Inc. (SHAI) over a 39.99 hectare area of land
situated in what was known as the Joint U.S. Military Assistance Group (JUSMAG) housing
area in Fort Bonifacio. The Court cancelled the certificate of title issued to SHAI, as the latter
failed to prove that the JUSMAG area had been withdrawn from the military reservation and
had been declared open for disposition. The Court therein ruled that, since the JUSMAG area
was still part of the FBMR, its alleged sale to SHAI is necessarily void and of no effect.
NOVAI sought reconsideration of the CA's decision, which the CA denied in its March 28,
2007 resolution;16 hence, this petition.
The Petition
NOVAI alleges that the CA erred in declaring that: (a) the property is inalienable land of the
public domain, (b) the deed of sale and Proclamation No. 2487 were void and nonexistent,
respectively, (c) the Republic's action for cancellation of title was not barred by prescription,
and (d) the ruling in Southside was applicable to the present case.
In support of its petition, NOVAI raises the following arguments:ChanRoblesvirtualLawlibrary
(a)The property is no longer part of the public domain because, by virtue of Proclamation No.
461, s. of 1965, the property was excluded from the FBMR and made available for
disposition to qualified persons, subject to the provisions of R.A. Nos. 274 and 720 in
relation to the Public Land Act;
(b The deed of sale was, in all respects, valid and enforceable, as it was shown to have been
) officially executed by an authorized public officer under the provisions of the Public Land
Act, and celebrated with all the formalities of a notarial certification;
(c)Proclamation No. 2487 is to be presumed valid until proven otherwise; that the Republic
 carried the burden of proving that Proclamation No. 2487 was a forgery, and that it failed to
discharge this burden;
(d The CA should not have considered as evidence the testimony of Senator Franklin Drilon on
) the nonexistence of Proclamation No. 2487 because such testimony was given by Senator
Drilon in another case17 and was not formally offered in evidence by the Republic during the
trial of the present case before the RTC;
(e)The action for cancellation of title filed by the Republic is already barred by prescription
because it was filed only on December 23, 1993, or close to two (2) years from the issuance
of NOVAI's title on January 9, 1992; and
(f) The case of Southside is not a cognate or companion case to the present case because the
two cases involve completely dissimilar factual and doctrinal bases; thus, the Court's
observations and ruling in Southside should not be applied to the present case.
The Republic's Comment to the Petition
Procedurally, the Republic assails the propriety of the issues raised by NOVAI, such as
"whether Proclamation No. 2487 and the signature of LMB Director Palad on the assailed deed
of sale are forged or fictitious," and "whether the Republic had presented adequate evidence to
establish the spuriousness of the subject proclamation," which are factual in nature and not
allowed in a Rule 45 petition.
On the petition's substance, the Republic counters that:ChanRoblesvirtualLawlibrary
(a)The property is inalienable public land incapable of private appropriation because, while the
property formed part of the area segregated from the FBMR under Proclamation No. 461, it
was subsequently reserved for a specific public use or purpose under Proclamation No. 478;
(b Proclamation No. 2487, which purportedly revoked Proclamation No. 478, does not legally
) exist and thus cannot be presumed valid and constitutional unless proven otherwise; the
presumption of validity and constitutionality of a law applies only where there is no dispute
as to the authenticity and due execution of the law in issue;
(c)The deed of sale executed by NOVAI and by Dir. Palad was undeniably forged, as Dir.
Palad categorically denied having signed the deed of sale, and a handwriting expert from the
National Bureau of Investigation (NBI) confirmed that Dir. Palad's signature was indeed a
forgery;18
(d NOVAI, a private corporation, is disqualified from purchasing the property because R.A.
) Nos. 274 and 730, and the Public Land Act only allow the sale of alienable and disposable
public lands to natural persons, not juridical persons; and
(e)The Court's decision in Southside applies to the present case because of the strong factual
and evidentiary relationship between the two cases.
BCDA's Comment-in-Intervention
On December 28, 2007, and while the case was pending before this Court, the Bases
Conversion Development Authority (BCDA) filed a motion for leave to file comment-in-
intervention and to admit the attached comment-in-intervention.19cralawrednad
In a resolution dated February 18, 2008,20 the Court allowed the BCDA's intervention.
As the Republic has done, the BCDA contends that NOVAI is disqualified from acquiring the
property given the constitutional and statutory provisions that prohibit the acquisition of lands
of the public domain by a corporation or association; that any sale of land in violation of the
Constitution or of the provisions of R.A. Nos. 274 and 730, and the Public Land Act are null
and void; and that any title which may have been issued by mistake or error on the part of a
public official can be cancelled at any time by the State.
The BCDA further contends that NOVAI miserably failed to comply with the legal
requirements for the release of the property from the military reservation. More specifically,
(1) the Director of Lands did not cause the property's subdivision, including the determination
of the number of prospective applicants and the area of each subdivision lot which should not
exceed one thousand (1,000) square meters for residential purposes; (2) the purchase price for
the property was not fixed by the Director of Lands as approved by the DENR Secretary; (3)
NOVAI did not pay the purchase price or a portion of it to the LMB; and (4) the Deed of Sale
was not signed by the President of the Republic of the Philippines or by the Executive
Secretary, but was signed only by the LMB Director.
Also, the BCDA observed that NOVAI was incorporated only on December 11, 1991, while
the deed of sale was purportedly executed on November 15, 1991, which shows that NOVAI
did not yet legally exist at the time of the property's purported sale.
OUR RULING
We resolve to DENY NOVAI's petition for review on certiorari as we find no reversible
error committed by the CA in issuing its December 28, 2006 decision and March 28, 2007
resolution.
I. Procedural Objections
A. In the filing of the present petition before this Court
Under Section 1, Rule 45 of the Rules of Court, a party desiring to appeal from a judgment or
final order of the CA shall raise only questions of law which must be distinctly set forth.
A question of law exists when the doubt or controversy concerns the correct application of law
or jurisprudence on a certain state of facts.21 The issue does not call for an examination of the
probative value of the evidence presented, the truth or falsehood of the facts being
admitted.22 In contrast, a question of fact exists when a doubt or difference arises as to the truth
or falsehood of facts or when the query invites the calibration of the whole evidence
considering mainly the credibility of the witnesses; the existence and relevancy of specific
surrounding circumstances, as well as their relation to each other and to the whole; and the
probability of the situation.23cralawrednad
The rule that only questions of law may be the subject of a Rule 45 Petition before this Court,
however, has exceptions.24 Among these exceptions is when there is conflict between the
factual findings of the RTC and that of the CA.
In this case, the CA totally reversed the RTC on the nature and character of the land, in
question, and on the,validity of the deed of sale between the parties. Due to the conflicting
findings of the RTC and the CA on these issues, we are allowed to reexamine the facts and the
parties' evidence in order to finally resolve the present controversy.
B. On BCD A's Intervention
In its reply25cralawred to the BCDA's comment-in-intervention, NOVAI primarily objects to
the BCDA's intervention because it was made too late.
Intervention is a proceeding in a suit or action by which a third person is permitted by the court
to make himself a party, either joining the plaintiff or defendant, or demanding something
adverse to both of them.26 Its purpose is to enable such third party to protect or preserve a right
or interest which may be affected by the proceeding,27 such interest being actual, material,
direct and immediate, not simply contingent and expectant.28cralawrednad
As a general rule, intervention cannot be made at the appeal stage. Section 2, Rule 19 of the
Rules of Court, governing interventions, provides that "the motion to intervene may be filed at
any time before rendition of judgment by the trial court." This rule notwithstanding,
intervention may be allowed after judgment where it is necessary to protect some interest
which cannot otherwise be protected, and may be allowed for the purpose of preserving the
intervenor's right to appeal.29 "The rule on intervention, like all other rules of procedure, is
intended to make the powers of the Court fully and completely available for justice x x x and
aimed to facilitate a comprehensive adjudication of rival claims overriding technicalities on the
timeliness of the filing thereof."30cralawrednad
Thus, in exceptional cases, the Court may allow intervention although the trial court has
already rendered judgment. In fact, the Court had allowed intervention in one case even when
the petition for review was already submitted for decision before it. 31cralawrednad
In the present case, the BCDA is indisputably the agency specifically created under R.A. No.
722732 to own, hold and/or administer military reservations including, among others, those
located inside the FBMR. If we are to affirm the CA's decision, the BCDA stands to benefit as
a favorable ruling will enable it to pursue its mandate under R.A. No. 7227. On the other hand,
if we reverse the CA's decision, it stands to suffer as the contrary ruling will greatly affect the
BCDA's performance of its legal mandate as it will lose the property without the opportunity to
defend its right in court.
Indeed, the BCDA has such substantial and material interest both in the outcome of the case
and in the disputed property that a final adjudication cannot be made in its absence without
affecting such interest. Clearly, the BCDA's intervention is necessary; hence, we allow the
BCDA's intervention although made beyond the period prescribed under Section 2, Rule 19 of
the Rules of Court.
II. Substantive Issues
A. The property is non-disposable land of the public domain reserved for public or quasi-
public use or purpose
We agree with the CA that the property remains a part of the public domain that could not have
been validly disposed of in NOVAI's favor. NOVAI failed to discharge its burden of proving
that the property was withdrawn from the intended public or quasi-public use or purpose.
While the parties disagree on the character and nature of the property at the time of the
questioned sale, they agree, however, that the property formed part of the FBMR - a military
reservation belonging to the public domain. We note that the FBMR has been the subject of
several presidential proclamations and statues issued subsequent to Proclamation No. 423,
which either removed or reserved for specific public or quasi-public use or purpose certain of
its portions.
On the one hand, NOVAI argues that Proclamation No. 461 had already transferred the
property from the State's "public domain" to its "private domain." On the other hand, the
respondents argue that Proclamation No. 478, in relation with RA 7227 and EO No. 40, had
reverted the property to the inalienable property of the "public domain."
The classification and disposition of lands of the public domain are governed by
Commonwealth Act (C.A.) No. 141 or the Public Land Act, the country's primary law on the
matter.
Under Section 6 of C.A. No. 141, the President of the Republic of the Philippines, upon the
recommendation of the Secretary of Agriculture and Natural Resources, may, from time to
time, classify lands of the public domain into alienable or disposable, timber and mineral lands,
and transfer these lands from one class to another for purposes of their administration and
disposition.
Under Section 7 of C.A. No. 141, the President may, from time to time, upon recommendation
of the Secretary of Agriculture and Natural Resources and for purposes of the administration
and disposition of alienable and disposable public lands, declare what lands are open to
disposition or concession under the Acts' provisions.33cralawrednad
Section 8 of C.A. No. 141 sets out the public lands open to disposition or concession and the
requirement that they have been officially delimited and classified, and when practicable,
surveyed. Section 8 excludes (by implication) from disposition or concession, public lands
which have been reserved for public or quasi-public uses; appropriated by the Government; or
in any manner have become private property, or those on which a private right authorized and
recognized by the Act or any other valid law may be claimed. Further, Section 8 authorizes the
President to suspend the concession or disposition of lands previously declared open to
disposition, until again declared open to disposition by his proclamation or by act of Congress.
Lands of the public domain classified as alienable and disposable are further classified, under
Section 9 of C.A. No. 141, according to their use or purpose into: (1) agricultural; (2)
residential, commercial, industrial, or for similar productive purposes; (3) educational,
charitable, or other similar purposes; and (4) reservations for townsites and for public and
quasi-public uses. Section 9 also authorizes the President to make the classifications and, at any
time, transfer lands from one class to another.
Section 83 of C.A. No. 141 defines public domain lands classified as reservations for public
and quasi-public uses as "any tract or tracts of land of the public domain" which the President,
by proclamation and upon recommendation of the Secretary of Agriculture and Natural
Resources, may designate "as reservations for the use of the Republic of the Philippines or any
of its branches, or of the inhabitants thereof or "for quasi-public uses or purposes when the
public interest requires it."34 Under Section 88 of the same Act, these "reserved tract or tracts of
lands shall be non-alienable and shall not be subject to occupation, entry, sale, lease or other
disposition until again declared alienable under the provisions of [CA No. 141] or by
proclamation of the President."35cralawrednad
As these provisions operate, the President may classify lands of the public domain as alienable
and disposable, mineral or timber land, and transfer such lands from one class to another at any
time.
Within the class of alienable and disposable lands of the public domain, the President may
further classify public domain lands, according to the use or purpose to which they are
destined, as agricultural: residential, commercial, industrial, etc.; educational, charitable, etc.;
and reservations for townsites and for public and quasi-public uses; and, he may transfer such
lands from one class to the other at any time.
Thus, the President may, for example, transfer a certain parcel of land from its classification as
agricultural (under Section 9 [a]), to residential, commercial, industrial, or for similar purposes
(under Section 9 [b]) and declare it available for disposition under any of the modes of
disposition of alienable and disposable public lands available under C.A. No. 141, as amended.
The modes of disposition of alienable and disposable lands available under C.A. No. 141
include: (1) by homestead settlement (Chapter IV), by sale (Chapter V), by lease (Chapter VI)
and by confirmation of imperfect or incomplete titles (Chapters VII and VIII) for agricultural
lands under Title II of C.A. No. 141 as amended; (2) by sale or by lease for residential,
commercial, or industrial lands under Title III of C.A. No. 141, as amended; (3) by donation,
sale, lease, exchange or any other form for educational and charitable lands under Title IV of
C.A. No. 141, as amended; and (4) by sale by public auction for townsite reservations under
Chapter XI, Title V of C.A. No. 141, as amended.
Once these parcels of lands are actually acquired by private persons, either by sale, grant, or
other modes of disposition, they are removed from the mass of land of the public domain and
become, by operation of law, their private property.
With particular regard, however, to parcels of land classified as reservations for public and
quasi-public uses (under Section 9 [d]), when the President transfers them to the class of
.alienable and disposable public domain lands destined for residential, commercial, industrial,
or for similar purposes (under Section 9 [b]), or some other class under Section 9, these
reserved public domain lands become available for disposition under any of the available
modes of disposition under C.A. No. 141, as provided above. Once these re-classified lands (to
residential purposes from reservation for public and quasi-public uses) are actually acquired by
private persons, they become private property.
In the meantime, however, and until the parcels of land are actually granted to, acquired, or
purchased by private persons, they remain lands of the public domain which the President,
under Section 9 of C.A. No. 141, may classify again as reservations for public and quasi-public
uses. The President may also, under Section 8 of C.A. No. 141, suspend their concession or
disposition.
If these parcels of land are re-classified as reservations before they are actually acquired by
private persons, or if the President suspends their concession or disposition, they shall not be
subject to occupation, entry, sale, lease, or other disposition until again declared open for
disposition by proclamation of the President pursuant to Section 88 in relation with Section 8
of C.A. No. 141.
Thus, in a limited sense, parcels of land classified as reservations for public or quasi-public
uses under Section 9 (d) of C.A. No. 141 are still non-alienable and non-disposable, even
though they are, by the general classification under Section 6, alienable and disposable lands of
the public domain. By specific declaration under Section 88, in relation with Section 8, these
lands classified as reservations are non-alienable and non-disposable.
In short, parcels of land classified as reservations for public or quasi-public uses: (1) are non-
alienable and non-disposable in view of Section 88 (in relation with Section 8) of CA No. 141
specifically declaring them as non-alienable and not subject to disposition; and (2) they remain
public domain lands until they are actually disposed of in favor of private persons.
Complementing and reinforcing this interpretation - that lands designated as reservations for
public and quasi-public uses are non-alienable and non-disposable and retain their character as
land of the public domain is the Civil Code with its provisions on Property that deal with lands
in general. We find these provisions significant to our discussion and interpretation as lands are
property, whether they are public lands or private lands.36cralawrednad
In this regard, Article 419 of the Civil Code classifies property as either of public dominion or
of private ownership. Article 42037 defines property of the public dominion as those which are
intended for public use or, while not intended for public use, belong to the State and are
intended for some public service. Article 421, on the other hand, defines patrimonial property
as all other property of the State which is not of the character stated in Article 420. While
Article 422 states that public dominion property which is no longer intended for public use or
service shall form part of the State's patrimonial property.
Thus, from the perspective of the general Civil Code provisions on Property, lands which are
intended for public use or public service such as reservations for public or quasi-public uses are
property of the public dominion and remain to be so as long as they remain reserved.
As property of the public dominion, public lands reserved for public or quasi-public uses are
outside the commerce of man.38 They cannot be subject to sale, disposition or encumbrance;
any sale, disposition or encumbrance of such property of the public dominion is void for being
contrary to law and public policy.39cralawrednad
To be subject to sale, occupation or other disposition, lands of the public domain designated as
reservations must first be withdrawn, by act of Congress or by proclamation of the President,
from the public or quasi-public use for which it has been reserved or otherwise positively
declared to have been converted to patrimonial property, pursuant to Sections 8 and 88 of C.A.
No. 141 and Article 422 of the Civil Code.40 Without such express declaration or positive
governmental act, the reserved public domain lands remain to be public dominion property of
the State.41cralawrednad
To summarize our discussion:ChanRoblesvirtualLawlibrary
(1) Lands of the public domain classified as reservations for public or quasi-public uses are
non-alienable and shall not be subject to disposition, although they are, by the general
classification under Section 6 of C.A. No. 141, alienable and disposable lands of the public
domain, until declared open for disposition by proclamation of the President; and
(2) Lands of the public domain classified as reservations are property of the public dominion;
they remain to be property of the public dominion until withdrawn from the public or quasi-
public use for which they have been reserved, by act of Congress or by proclamation of the
President, or otherwise positively declared to have been converted to patrimonial property.
Based on these principles, we now examine the various issuances affecting the property in
order to determine the property's character and nature, i.e., whether the property remains public
domain property of the State or has become its private property.
For easier reference, we reiterate the various presidential proclamations and statutes affecting
the property:cralawlawlibrary
(1 Proclamation No. 423, series of 1957 - established the FBMR, a military reservation; the
) property falls within the FBMR;
(2 Proclamation No. 461, series of (September) 1965 - segregated, from the FBMR, a portion
) of Parcel 3, plan Psd-2031, which includes the property, for disposition in favor of the
AFPOVAI;
(3 Proclamation No. 478, series of (October) 1965 — reserved the property in favor of the
) Veterans Rehabilitation and Medical Training Center (VRMTC); and
(4 RA No. 7227 (1992), as implemented by EO No. 40, series of 1992 - subject to certain
) specified exemptions, transferred the military camps within Metro Manila, among others, to
the BCDA.
1. Proclamation No. 461 was not the legal basis for the property's sale in favor of NOVAI
We agree with the respondents that while Proclamation No. 461, issued in September 1965,
removed from the FBMR a certain parcel of land that includes the property, Proclamation No.
478, issued in October 1965, in turn segregated the property from the area made available for
disposition under Proclamation No. 461, and reserved it for the use of the VRMTC.
We find it clear that Proclamation No. 478 was issued after, not before, Proclamation No. 461.
Hence, while Proclamation No. 461 withdrew a certain area or parcel of land from the FBMR
and made the covered area available for disposition in favor of the AFPOVAI, Proclamation
No. 478 subsequently withdrew the property from the total disposable portion and reserved it
for the use of the VRMTC. With the issuance of Proclamation No. 478, the property was
transferred back to that class of public domain land reserved for public or quasi-public use or
purpose which, consistent with Article 420 of the Civil Code, is property of the public
dominion, not patrimonial property of the State.
Even under the parties' deed of sale, Proclamation No. 2487, not Proclamation No. 461, was
used as the authority for the transfer and sale of the property to NOVAI. The subject deed of
sale pertinently reads:cralawlawlibrary
"This DEED OF SALE, made and executed in Manila, Philippines, by the Director of Lands,
Pursuant to Batas Pambansa Blg. 878 and in representation of the Republic of the Philippines,
hereinafter referred to as the Vendor, in favor of THE NAVY OFFICERS VILLAGE
ASSOCIATION (NOVA) and residing in Fort Bonifacio, Metro Manila, referred to as the
Vendee, WITNESSETH:ChanRoblesvirtualLawlibrary
xxxx
WHEREAS, pursuant to Presidential proclamation No. 478 as amended by proclamation No.
2487 in relation to the provision of Act No. 3038 and similar Acts supplemented thereto, the
Vendee applied for the purchase of a portion of the above-described Property which portion is
identical to Lot 3, Swo-000183 and more particularly described on page two hereof;
xxxx
WHEREAS, the Vendee has complied with all other conditions required by Act No. 3038 in
relation to Commonwealth Act No. 141, as amended, and the rules and regulation promulgated
thereunder.
x x x x. (Emphasis supplied)
Clearly, the legal basis of the property's sale could not have been Proclamation No. 461.
2. Proclamation No. 2487 which purportedly revoked Proclamation No. 478 does not legally
exist; hence, it did not withdraw the property from the reservation or from the public dominion
Neither can Proclamation No. 2487 serve as legal basis for the property's sale in NOVAI's
favor. Proclamation No. 2487 purportedly revoked Proclamation No. 478 and declared the
property open for disposition in favor of NOVAI.
The Republic and the BCD A (now respondents) argue that Proclamation No. 2487 does not
legally exist; it could not have served to release the property from the mass of the non-alienable
property of the State.
Hence, even if NOVAI relies on Proclamation No. 2487 - on which it did not as it relied on
Proclamation No. 4.61 - the sale and NOVAI's title are still void. NOVAI, on the other hand,
claims in defense that Proclamation No. 2487 is presumed valid and constitutional, and the
burden of proving otherwise rests on the respondents.
In insisting on the presumptive validity of law, NOVAI obviously failed to grasp and
appreciate the thrust of the respondents' arguments, including the impact of the evidence which
they presented to support the question they raised regarding the authenticity of Proclamation
No. 2487.
Rather than the validity or constitutionality of Proclamation No. 2487, what the respondents
assailed was its legal existence, not whether it was constitutional or not. Put differently, they
claimed that Proclamation No. 2487 was never issued by former Pres. Aquino; hence, the
presumptive validity and constitutionality of laws cannot apply.
Accordingly, after the respondents presented their evidence, it was NOVAI's turn to present its
own evidence sufficient to rebut that of the respondents. On this point, we find the Republic's
evidence sufficiently convincing to show that Proclamation No. 2487 does not legally exist.
These pieces of evidence include:ChanRoblesvirtualLawlibrary
First, the October 26, 1993 letter of the Solicitor General to the Office of the President
inquiring about the existence of Proclamation No. 2487.42cralawrednad
Second, the November 12, 1993 letter-reply of the Office of the President informing the
Solicitor General that Proclamation No. 2487 "is not among the alleged documents on file with
[its] Office."43cralawrednad
Third, the testimony of the Assistant Director of the Records Office in Malacañang confirming
that indeed, after verifying their records or of the different implementing agencies, "[t]here is
no existing document(s) in [their] possession regarding that alleged Proclamation No.
2487;"44 and
Fourth and last, the October 11, 1993 Memorandum of then Department of Justice Secretary
Frahklin M. Drilon (DOJ Secretary Drilon) to the NBI to investigate, among others, the
circumstances surrounding the issuance of Proclamation No. 2487.45 Notably, this October 11,
1993 Memorandum of DOJ Secretary Drilon stated that: "Proclamation No. 2487 is null and
void x x x. [It] does not exist in the official records of the Office of the President x x x [and]
could riot have been issued by the former President since the last Proclamation issued during
her term was proclamation No. 932 dated 19 June 1992."46cralawrednad
In this regard, we quote with approval the CA's observations in its December 28, 2006
decision:cralawlawlibrary
Cast against this backdrop, it stands to reason enough that the defendant-appellee NOVAI was
inevitably duty bound to prove and establish the very existence, as well as the genuineness or
authenticity, of this Presidential Proclamation No. 2487. For certain inexplicable reasons,
however, the defendant-appellee did not do so, but opted to build up and erect its case upon
Presidential Proclamation No. 461.
To be sure, the existence of Presidential Proclamation No. 2487 could be easily proved, and
established, by its publication in the Official Gazette. But the defendant-appellee could not, as
it did not, submit or present any copy or issue of the Official Gazette mentioning or referring to
this Presidential Proclamation No. 2487, this even in the face of the Government's determined
and unrelenting claim that it does not exist at all.47 (Emphasis supplied)
A final point, we did not fail to notice the all too obvious and significant difference between
the proclamation number of Proclamation No. 2487 and the numbers of the proclamations
actually issued by then President Corazon C. Aquino on or about that time.
We take judicial notice that on September 25, 1991 - the very day when Proclamation No. 2487
was supposedly issued - former Pres. Aquino issued Proclamation No. 80048 and Proclamation
No. 801.49 Previously, on September 20, 1991, Pres. Aquino issued Proclamation No.
799;50 and thereafter, on September 27, 1991, she issued Proclamation No. 802.51cralawrednad
Other proclamations issued around or close to September 25, 1991, included the
following:cralawlawlibrary
1. Proclamation No. 750 issued on July 1, 1991;52cralawrednad
2. Proclamation No. 760 issued on July 18, 1991;53cralawrednad
3. Proclamation No. 770 issued on August 12, 1991;54cralawrednad
4. Proclamation No. 780 issued on August 26, 1991;55cralawrednad
5. Proclamation No. 790 issued on September 3, 1991;56cralawrednad
6. Proclamation No. 792 issued on September 5, 1991;57cralawrednad
7. Proclamation No. 797 issued on September 11, 1991;58cralawrednad
8. Proclamation No. 798 issued on September 12, 1991;59cralawrednad
9. Proclamation No. 804 issued on September 30, 1991;60cralawrednad
10. Proclamation No. 805 issued on September 30, 1991;61cralawrednad
11. Proclamation No. 806 issued on October 2, 1991;62cralawrednad
12. Proclamation No. 810 issued on October 7, 1991;63cralawrednad
13. Proclamation No. 820 issued on October 25, 1991;64cralawrednad
14. Proclamation No. 834 issued on November 13, 1991;65 and
15. Proclamation No. 840 issued on November 26, 1991.66
This list shows that the proclamations issued by former Pres. Aquino followed a series or
sequential pattern with each succeeding issuance bearing a proclamation number one count
higher than the proclamation number of the preceding Presidential Proclamation. It also shows
that on or about the time Proclamation No. 2487 was purportedly issued, the proclamation
numbers of the proclamations issued by President Aquino did not go beyond the hundreds
series.
It is highly implausible that Proclamation No. 2487 was issued on September 25, 1991, or on
any day close to September 25, 1991, when the proclamations issued for the same period were
sequentially numbered and bore three-digit proclamation numbers.
As Proclamation No. 2487 does not legally exist and therefore could not have validly revoked
Proclamation No. 478, we find, as the CA also correctly did, that Proclamation No. 478 stands
as the most recent manifestation of the State's intention to reserve the property anew for some
public or quasi-public use or purpose. Thus, consistent with Sections 88, in relation with
Section 8, of C.A. No. 141 and Article 420 of the Civil Code, as discussed above, the property
which was classified again as reservation for public or quasi-public use or purpose is non-
alienable and not subject to disposition; it also remains property of the public dominion; hence,
non-alienable and non-disposable land of the public domain.
As a consequence, when R.A. No. 7227 took effect in 1992, the property subject of this case,
which does not fall among the areas specifically designated as exempt from the law's
operation67 was, by legal fiat, transferred to the BCDA's authority.
B. As the property remains a reserved public domain land, its sale and the title issued pursuant
to the sale are void
As the property remains a reserved public domain land, it is outside the commerce of man.
Property which are intended for public or quasi- public use or for some public purpose are
public dominion property of the State68 and are outside the commerce of man. NOVAI,
therefore, could not have validly purchased the property in 1991.
We reiterate and emphasize that property which has been reserved for public or quasi-public
use or purpose are non-alienable and shall not be subject to sale or other disposition until again
declared alienable by law or by proclamation of the President. 69 Any sale or disposition of
property of the public dominion is void for being contrary to law and public
policy.70cralawrednad
Since the sale of the property, in this case, is void, the title issued to NOVAI is similarly
void ab initio. It is a well-settled doctrine that registration under the Torrens System does not,
by itself, vest title as it is not a mode of acquiring ownership;71 that registration under the
Torrens System merely confirms the registrant's already existing title.72cralawrednad
Accordingly, the indefeasibility of a Torrens title does not apply in this case and does not
attach to NOVAI's title. The principle of indefeasibility does not apply when the sale of the
property and the title based thereon are null and void. Hence, the Republic's action to declare
the nullity of NOVAI's void title has not prescribed.
NOVAI insists that the deed of sale carries the presumption of regularity in the performance of
official duties as it bears all the earmarks of a valid deed of sale and is duly notarized.
While we agree that duly notarized deeds of sale carry the legal presumption of regularity in
the performance of official duties,73 the presumption of regularity in the performance of official
duties, like all other disputable legal presumptions, applies only in the absence of clear and
convincing evidence establishing the contrary.74cralawrednad
When, as in this case, the evidence on record shows not only that the property was reserved for
public use or purpose, and thus, non-disposable - a fact that on its own defeats all the evidence
which the petitioner may have had to support the validity of the sale - but also shows that the
sale and the circumstances leading to it are void in form and in substance, the disputable
presumption of regularity in the performance of official duties certainly cannot apply.
C. Even assuming that Proclamation No. 2487 legally exists, the sale of the property to NOVAI
is illegal.
1. Dir. Palad did not have the authority to sell and convey the property.
The subject deed of sale points to Proclamation No. 2487, purportedly amending Proclamation
No. 478, in relation with Act No. 3038,75 as legal basis for authorizing the sale.
Section 176 of Act No. 3038 authorizes the sale or lease only: (i) of land of the private domain,
not land of the public domain; and (ii) by the Secretary of Agriculture and Natural Resources,
not by the LMB Director. Section 277 of the said Act, in fact, specifically exempts from its
coverage "land necessary for the public service." As the sale was executed by the LMB
Director covering the property that was reserved for the use of the VRMTC, it, therefore,
clearly violated the provisions of Act No. 3038.

2. The area subject of the sale far exceeded the area that the Director of Lands is authorized to
convey.
Batas Pambansa (B.P.) Blg. 87878 which, per the Deed of Sale, purportedly authorized the
Director of Lands, representing the Republic, to sell the property in favor of NOVAI, limits the
authority of the Director of Lands to sign patents or certificates covering lands to ten (10)
hectares.
In this case, the subject deed of sale covers a total area of 475,009 square meters or 47.5009
hectares. Obviously, the area covered by the deed of sale and which NOVAI purportedly
purchased, far exceeds the area that the Director of Lands is authorized to convey under B.P.
Blg. 878.
3. The evidence on record and the highly suspect circumstances surrounding the sale fully
supports the conclusion that the property's sale to NOVAI is fictitious, thus, void.
We note the following irregularities that attended the sale of the property to NOVAI:
a. The absence, on file with the LMB, of any request for approval of any survey plan
or of an approved survey plan in NOVAI's name covering the property.79 The
approved survey plan relating to Lot 3, SWO-13-000183 subject of NOVAI's TCT
No. 15387 pertains to the AFPOVAI under Proclamation No. 461;80cralawrednad
b. The technical description, which the DENR prepared for the property as covered by
TCT No. T-15387, was issued upon NOVAI's request only for purposes of
reference, not for registration of title, and was based on the approved survey plan of
the AFPOVAI;81cralawrednad
c. There is no record of any public land application filed by NOVAI with the LMB or
with the DENR Office for the purchase of the property or of any parcel of land in
Metro Manila;82cralawrednad
d. LMB Dir. Palad categorically denied signing and executing the deed of
sale;83cralawrednad
e. The findings of the NBI handwriting; expert, detailed in the Questioned Documents
Report No. 815-1093 dated October 29, 1993,84 revealed that the, signature of LMB
Director Palad as it appeared on the Deed of Sale and his standard/sample signature
as they appeared on the submitted comparison documents "were not written by one
and the same person,"85 and concluded that "[t]he questioned signature of
'ABELARDG G. PALAD, JR.' xxx is a TRACED FORGERY by carbon
process;"86 and
f. Lastly, the LMB Cashier's Office did not receive the amount of P14,250,270.00
allegedly paid by NOVAI as consideration for the property. The receipts87 - O.R.
No. 8282851 dated November 28, 1991, for P160,000.00 and O.R. No. 317024
dated December 23, 1992, for P200,000.00 - which NOVAI presented as evidence
of its alleged payment bore official receipt numbers which were not among the
series of official receipts issued by the National Printing Office to the LMB, and in
fact, were not among the series used by the LMB on the pertinent dates.88
In sum, we find - based on the facts, the law, and jurisprudence - that the property, at the time
of the sale, was a reserved public domain land. Its sale, therefore, and the corresponding title
issued in favor of petitioner NOVAI, is void.
WHEREFORE, we hereby DENY the present petition for review on certiorari. No reversible
error attended the decision dated December 28, 2006, and the resolution dated March 28, 2007,
of the Court of Appeals in CA-G.R. CV No. 85179.
G.R. No. 184203               November 26, 2014
CITY OF LAPU-LAPU, Petitioner,
vs.
PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.
x-----------------------x
G.R. No. 187583
PROVINCE OF BATAAN, represented by GOVERNOR ENRIQUE T. GARCIA, JR., and
EMERLINDA S. TALENTO, in her capacity as Provincial Treasurer of Bataan, Petitioners,
vs.
PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.
DECISION
LEONEN, J.:
The Philippine Economic Zone Authority is exempt from payment of real property taxes.
These are consolidated1 petitions for review on certiorari the City of Lapu-Lapu and the
Province of Bataan separately filed against the Philippine Economic Zone Authority (PEZA).
In G.R. No. 184203, the City of Lapu-Lapu (the City) assails the Court of Appeals’
decision2 dated January 11, 2008 and resolution3 dated August 6, 2008, dismissing the City’s
appeal for being the wrong mode of appeal. The City appealed the Regional Trial Court,Branch
111, Pasay City’s decision finding the PEZA exempt from payment of real property taxes.
In G.R. No. 187583, the Province of Bataan (the Province) assails the Court of Appeals’
decision4 dated August 27, 2008 and resolution5 dated April 16, 2009, granting the PEZA’s
petition for certiorari. The Court of Appeals ruled that the Regional Trial Court, Branch 115,
Pasay City gravely abused its discretion in finding the PEZA liable for real property taxes to
the Province of Bataan.
Facts common to the consolidated petitions
In the exercise of his legislative powers,6 President Ferdinand E. Marcos issued Presidential
Decree No. 66 in 1972, declaring as government policy the establishment of export processing
zones in strategic locations in the Philippines. Presidential Decree No. 66 aimed "to encourage
and promote foreign commerce as a means of making the Philippines a center of international
trade, of strengthening our export trade and foreign exchange position, of hastening
industrialization,of reducing domestic unemployment, and of accelerating the development of
the country."7
To carry out this policy, the Export Processing Zone Authority (EPZA) was created to operate,
administer, and manage the export processing zones established in the Port of Mariveles,
Bataan8 and such other export processing zones that may be created by virtue of the decree.9
The decree declared the EPZA non-profit in character10 with all its revenues devoted to its
development, improvement, and maintenance.11 To maintain this non-profit character, the
EPZA was declared exempt from all taxes that may be due to the Republic of the Philippines,
its provinces, cities, municipalities, and other government agencies and
instrumentalities.12 Specifically, Section 21 of Presidential Decree No. 66 declared the EPZA
exempt from payment of real property taxes:
Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority shall
be non-profit and shall devote and use all its returns from its capital investment, as well as
excess revenues from its operations, for the development, improvement and maintenance and
other related expenditures of the Authority to pay its indebtedness and obligations and in
furtherance and effective implementation of the policy enunciated in Section 1 of this Decree.
In consonance therewith, the Authority is hereby declared exempt:
....
(b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and licenses
to be paid to the National Government, its provinces, cities, municipalities and other
government agenciesand instrumentalities[.]
In 1979, President Marcos issued Proclamation No. 1811, establishing the Mactan Export
Processing Zone. Certain parcels of land of the public domain located in the City of Lapu-
Lapuin Mactan, Cebu were reserved to serve as site of the Mactan Export Processing Zone.
In 1995, the PEZA was created by virtue of Republic Act No. 7916 or "the Special Economic
Zone Act of 1995"13 to operate, administer, manage, and develop economic zones in the
country.14 The PEZA was granted the power to register, regulate, and supervise the enterprises
located in the economic zones.15 By virtue of the law, the export processing zone in Mariveles,
Bataan became the Bataan Economic Zone16 and the Mactan Export Processing Zone the
Mactan Economic Zone.17
As for the EPZA, the law required it to "evolve into the PEZA in accordance with the
guidelines and regulations set forth in an executive order issued for [the] purpose."18
On October 30, 1995, President Fidel V. Ramos issued Executive Order No. 282, directing the
PEZA to assume and exercise all of the EPZA’s powers, functions, and responsibilities "as
provided in Presidential Decree No. 66, as amended, insofar as they are not inconsistent with
the powers, functions, and responsibilities of the PEZA, as mandated under [the Special
Economic Zone Act of 1995]."19 All of EPZA’s properties, equipment, and assets, among
others, were ordered transferred to the PEZA.20
Facts of G.R. No. 184203
In the letter21 dated March 25, 1998, the City of Lapu-Lapu, through the Office of the
Treasurer, demanded from the PEZA 32,912,350.08 in real property taxes for the period from
1992 to 1998 on the PEZA’s properties located in the Mactan Economic Zone.
The City reiterated its demand in the letter22 dated May 21, 1998. It cited Sections 193 and 234
of the Local Government Code of 1991 that withdrew the real property tax exemptions
previously granted to or presently enjoyed by all persons. The City pointed out that no
provision in the Special Economic Zone Act of 1995 specifically exempted the PEZA from
payment of real property taxes, unlike Section 21 of Presidential Decree No. 66 that explicitly
provided for EPZA’s exemption. Since no legal provision explicitly exempted the PEZA from
payment of real property taxes, the City argued that it can tax the PEZA.
The City made subsequent demands23 on the PEZA. In its last reminder24 dated May 13, 2002,
the City assessed the PEZA 86,843,503.48 as real property taxes for the period from 1992 to
2002.
On September 11, 2002, the PEZAfiled a petition for declaratory Relief25 with the Regional
Trial Court of Pasay City, praying that the trial court declare it exempt from payment ofreal
property taxes. The case was raffled to Branch 111.
The City answered26 the petition, maintaining that the PEZA is liable for real property taxes. To
support its argument, the City cited a legal opinion dated September 6, 1999 issued by the
Department of Justice,27 which stated that the PEZA is not exempt from payment of real
property taxes. The Department of Justice based its opinion on Sections 193 and 234 of the
Local Government Code that withdrew the tax exemptions, including real property tax
exemptions, previously granted to all persons.
A reply28 was filed by the PEZA to which the City filed a rejoinder.29
Pursuant to Rule 63, Section 3 of Rules of Court,30 the Office of the Solicitor General filed a
comment31 on the PEZA’s petition for declaratory relief. It agreed that the PEZA is exempt
from payment of real property taxes, citing Sections 24 and 51 of the Special Economic Zone
Act of 1995.
The trial court agreed with the Solicitor General. Section 24 of the Special Economic Zone Act
of 1995 provides:
SEC. 24. Exemption from National and Local Taxes. – Except for real property taxes on land
owned by developers, no taxes, local and national, shall be imposed on business establishments
operating within the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned
by all business enterprises within the ECOZONE shall be paid and remitted as follows:
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the business establishments to the
treasurer’s office of the municipality or city where the enterprise is located.
Section 51 of the law, on the other hand, provides:
SEC. 51. Ipso-Facto Clause. – All privileges, benefits, advantages or exemptions granted to
special economic zones under Republic Act No. 7227, shall ipso-facto be accorded to special
economic zones already created or to be created under this Act. The free port status shall not be
vested upon new special economic zones.
Based on Section 51, the trial court held that all privileges, benefits, advantages, or exemptions
granted tospecial economic zones created under the Bases Conversion and Development Act of
1992 apply to special economic zones created under the Special Economic ZoneAct of 1995.
Since these benefits include exemption from payment of national or local taxes, these benefits
apply to special economic zones owned by the PEZA.
According to the trial court, the PEZA remained tax-exempt regardless of Section 24 of the
Special Economic Zone Act of 1995. It ruled that Section 24, which taxes real property owned
by developers of economic zones, only applies to private developers of economic zones, not to
public developers like the PEZA. The PEZA, therefore, is not liable for real property taxes on
the land it owns.
Characterizing the PEZA as an agency of the National Government, the trial court ruled that
the City had no authority to tax the PEZA under Sections 133(o) and 234(a) of the Local
Government Code of 1991.
In the resolution32 dated June 14, 2006, the trial court granted the PEZA’s petition for
declaratory relief and declared it exempt from payment of real property taxes.
The City filed a motion for reconsideration,33 which the trial court denied in its
resolution34 dated September 26, 2006.
The City then appealed35 to the Court of Appeals.
The Court of Appeals noted the following issues the City raised in its appellant’s brief: (1)
whether the trial court had jurisdiction over the PEZA’s petition for declaratory relief; (2)
whether the PEZA is a government agency performing governmental functions; and (3)
whether the PEZA is exempt from payment of real property taxes.
The issues presented by the City, according to the Court of Appeals, are pure questions of law
which should have been raised in a petition for review on certiorari directly filed before this
court. Since the City availed itself of the wrong mode of appeal, the Court of Appeals
dismissed the City’s appeal in the decision36 dated January 11, 2008.
The City filed a motion for extension of time to file a motion for reconsideration,37 which the
Court of Appeals denied in the resolution38 dated April 11, 2008.
Despite the denial of its motion for extension, the City filed a motion for reconsideration.39 In
the resolution40 dated August 6, 2008, the Court of Appeals denied that motion.
In its petition for review on certiorari with this court,41 the City argues that the Court of
Appeals "hid under the skirts of technical rules"42 in resolving its appeal. The City maintains
that its appeal involved mixed questions of fact and law. According to the City, whether the
PEZA performed governmental functions "cannot completely be addressed by law but [by] the
factual and actual activities [the PEZA is] carrying out."43
Even assuming that the petition involves pure questions of law, the City contends that the
subject matter of the case "is of extreme importance with [far-reaching] consequence that [its
magnitude] would surely shape and determine the course ofour nation’s future."44 The Court of
Appeals, the City argues, should have resolved the case on the merits.
The City insists that the trial court had no jurisdiction to hear the PEZA’s petition for
declaratory relief. According to the City, the case involves real property located in the City of
Lapu-Lapu. The petition for declaratory relief should have been filed before the Regional Trial
Court of the City of Lapu-Lapu.45
Moreover, the Province of Bataan, the City of Baguio, and the Province of Cavite allegedly
demanded real property taxes from the PEZA. The City argues that the PEZA should have
likewise impleaded these local government units as respondents in its petition for declaratory
relief. For its failure to do so, the PEZA violated Rule 63, Section 2 of the Rules of Court, and
the trial court should have dismissed the petition.46
This court ordered the PEZA to comment on the City’s petition for review on certiorari.47
At the outset of its comment, the PEZA argues that the Court of Appeals’ decision dated
January 11, 2008 had become final and executory. After the Court of Appeals had denied the
City’s appeal, the City filed a motion for extension of time to file a motion for reconsideration.
Arguing that the time to file a motion for reconsideration is not extendible, the PEZA filed its
motion for reconsideration out of time. The Cityhas no more right to appeal to this court. 48
The PEZA maintains that the City availed itself of the wrong mode of appeal before the Court
of Appeals. Since the City raised pure questions of law in its appeal, the PEZA argues that the
proper remedy is a petition for review on certiorari with this court, not an ordinary appeal
before the appellate court. The Court of Appeals, therefore, correctly dismissed outright the
City’s appeal under Rule 50, Section 2 of the Rules of Court.49
On the merits, the PEZA argues that it is an agency and instrumentality of the National
Government. It is therefore exempt from payment of real property taxes under Sections 133(o)
and 234(a) of the Local Government Code.50 It adds that the tax privileges under Sections 24
and 51 of the Special Economic Zone Act of 1995 applied to it.51
Considering that the site of the Mactan Economic Zoneis a reserved land under Proclamation
No. 1811, the PEZA claims that the properties sought to be taxed are lands of public dominion
exempt from real property taxes.52
As to the jurisdiction issue, the PEZA counters that the Regional Trial Court of Pasay had
jurisdiction to hear its petition for declaratory relief under Rule 63, Section 1 of the Rules of
Court.[53]] It also argued that it need not implead the Province of Bataan, the City of Baguio,
and the Province of Cavite as respondents considering that their demands came after the PEZA
had already filed the petition in court.54
Facts of G.R. No. 187583
After the City of Lapu-Lapu had demanded payment of real property taxes from the PEZA, the
Province of Bataan followed suit. In its letter55 dated May 29, 2003, the Province, through the
Office of the Provincial Treasurer, informed the PEZA that it would be sending a real property
tax billing to the PEZA. Arguing that the PEZA is a developer of economic zones, the Province
claimed that the PEZA is liable for real property taxes under Section 24 of the Special
Economic Zone Act of 1995.
In its reply letter56 dated June 18, 2003, the PEZA requested the Province to suspend the
service of the real property tax billing. It cited its petition for declaratory relief against the City
of Lapu-Lapu pending before the Regional Trial Court, Branch 111, Pasay City as basis.
The Province argued that serving a real property tax billing on the PEZA "would not in any
way affect [its] petition for declaratory relief before [the Regional Trial Court] of Pasay
City."57 Thus, in its letter58 dated June 27, 2003, the Province notified the PEZAof its real
property tax liabilities for June 1, 1995 to December 31, 2002 totalling ₱110,549,032.55.
After having been served a tax billing, the PEZA again requested the Province to suspend
collecting its alleged real property tax liabilities until the Regional Trial Court of Pasay
Cityresolves its petition for declaratory relief.59
The Province ignored the PEZA’s request. On January 20, 2004, the Province served on the
PEZA a statement of unpaid real property tax for the period from June 1995 to December
2004.60
The PEZA again requested the Province to suspend collecting its alleged real property
taxes.61 The Province denied the request in its letter62 dated January 29, 2004, then servedon the
PEZA a warrant of levy63 covering the PEZA’s real properties located in Mariveles, Bataan.
The PEZA’s subsequent requests64 for suspension of collection were all denied by the
Province.65 The Province then served on the PEZA a notice of delinquency in the payment of
real property taxes66 and a notice of sale of real property for unpaid real property tax.67 The
Province finally sent the PEZA a notice of public auction of the latter’s properties in Mariveles,
Bataan.68
On June 14, 2004, the PEZA filed a petition for injunction69 with prayer for issuance of a
temporary restraining order and/or writ of preliminary injunction before the Regional Trial
Court of Pasay City, arguing that it is exempt from payment ofreal property taxes. It added that
the notice of sale issued by the Province was void because it was not published in a newspaper
ofgeneral circulation asrequired by Section 260 of the Local Government Code.70
The case was raffled to Branch 115.
In its order71 dated June 18, 2004, the trial court issued a temporary restraining order against
the Province. After the PEZA had filed a ₱100,000.00 bond,72 the trial court issued a writ of
preliminary injunction,73 enjoining the Province from selling the PEZA’s real properties at
public auction.
On March 3, 2006, the PEZA and Province both manifested that each would file a
memorandum after which the case would be deemed submitted for decision. The parties then
filed their respective memoranda.74
In the order75 dated January 31, 2007, the trial court denied the PEZA’s petition for injunction.
The trial court ruled that the PEZA is not exempt from payment of real property taxes.
According to the trial court, Sections 193 and 234 of the Local Government Code had
withdrawn the real property tax exemptions previously granted to all persons, whether natural
or juridical.76 As to the tax exemptions under Section 51 of the Special Economic Zone Act of
1995, the trial court ruled that the provision only applies to businesses operating within the
economic zones, not to the PEZA.77
The PEZA filed before the Court of Appeals a petition for certiorari78 with prayer for issuance
of a temporary restraining order.
The Court of Appeals issued a temporary restraining order, enjoining the Province and its
Provincial Treasurer from selling PEZA's properties at public auction scheduled on October 17,
2007.79 It also ordered the Province to comment on the PEZA’s petition.
In its comment,80 the Province alleged that it received a copy of the temporary restraining order
only on October 18, 2007 when it had already sold the PEZA’s properties at public auction.
Arguing that the act sought to be enjoined was already fait accompli, the Province prayed for
the dismissal of the petition for certiorari.
The PEZA then filed a supplemental petition for certiorari, prohibition, and
mandamus81 against the Province, arguing that the Provincial Treasurer of Bataan acted with
grave abuse of discretion in issuing the notice of delinquency and notice of sale. It maintained
that it is exempt from payment of real property taxes because it is a government
instrumentality. It added that its lands are property of public dominion which cannot be sold at
public auction.
The PEZA also filed a motion82 for issuance of an order affirming the temporary restraining
order and a writ of preliminary injunction to enjoin the Province from consolidating title over
the PEZA’s properties.
In its resolution83 dated January 16, 2008,the Court of Appeals admitted the supplemental
petition for certiorari, prohibition, and mandamus. It required the Province to comment on the
supplemental petition and to file a memorandum on the PEZA’s prayer for issuance of
temporary restraining order.
The Province commented84 on the PEZA’s supplemental petition, to which the PEZA replied.85
The Province then filed a motion86 for leave to admit attached rejoinder with motion to dismiss.
In the rejoinder with motion to dismiss,87 the Province argued for the first time that the Court of
Appeals had no jurisdiction over the subject matter of the action.
According to the Province, the PEZA erred in filing a petition for certiorari. Arguing that the
PEZA sought to reverse a Regional Trial Court decision in a local tax case, the Province
claimed that the court with appellate jurisdiction over the action is the Court of Tax Appeals.
The PEZA then prayed that the Court of Appeals dismiss the petition for certiorari for lack of
jurisdiction over the subject matter of the action.
The Court of Appeals held that the issue before it was whether the trial court judge gravely
abused his discretion in dismissing the PEZA’s petition for prohibition. This issue, according
to the Court of Appeals, is properly addressed in a petition for certiorari over which it has
jurisdiction to resolve. It, therefore, maintained jurisdiction to resolve the PEZA’s petition for
certiorari.88
Although it admitted that appeal, not certiorari, was the PEZA’s proper remedy to reverse the
trial court’s decision,89 the Court of Appeals proceeded to decide the petition for certiorari in
"the broader interest of justice."90
The Court of Appeals ruled that the trial court judge gravely abused his discretion in
dismissing the PEZA’s petition for prohibition. It held that Section 21 of Presidential Decree
No. 66 and Section 51 of the Special Economic Zone Act of 1995 granted the PEZA exemption
from payment of real property taxes.91 Based on the criteria set in Manila International Airport
Authority v. Court of Appeals,92 the Court of Appeals found that the PEZA is an
instrumentality of the national government. No taxes, therefore, could be levied on it by local
government units.93
In the decision94 dated August 27, 2008, the Court of Appeals granted the PEZA’s petition for
certiorari. It set aside the trial court’s decision and nullified all the Province’s proceedings with
respect to the collection of real property taxes from the PEZA.
The Province filed a motion for reconsideration,95 which the Court of Appeals denied in the
resolution96 dated April 16, 2009 for lack of merit.
In its petition for review on certiorari with this court,97 the Province of Bataan insists that the
Court of Appeals had no jurisdiction to take cognizance of the PEZA’s petition for certiorari.
The Province maintains that the Court of Tax Appeals had jurisdiction to hear the PEZA’s
petition since it involved a local tax case decided by a Regional Trial Court.98
The Province reiterates that the PEZA is not exempt from payment of real property taxes. The
Province points out that the EPZA, the PEZA’s predecessor, had to be categorically exempted
from payment of real property taxes. The EPZA, therefore, was not inherently exempt from
payment of real property taxes and so is the PEZA. Since Congress omitted from the Special
Economic Zone Act of 1995 a provision specifically exempting the PEZA from payment of
real property taxes, the Province argues that the PEZA is a taxable entity. It cited the rule in
statutory construction that provisions omitted in revised statutes are deemed repealed.99
With respect to Sections 24 and 51 of the Special Economic Zone Act of 1995 granting tax
exemptions and benefits, the Province argues that these provisions only apply to business
establishments operating within special economic zones, 100 not to the PEZA.
This court ordered the PEZA tocomment on the Province’s petition for review on
certiorari.101 In its comment,102 the PEZA argues that the Court of Appeals had jurisdiction to
hear its petition for certiorari since the issue was whether the trial court committed grave abuse
of discretion in denying its petition for injunction. The PEZA maintains thatit is exempt from
payment of real property taxes under Section 21 of Presidential Decree No. 66 and Section 51
of the Special Economic Zone Act of 1995.
The Province filed its reply,103 reiterating its arguments in its petition for review on certiorari.
On the PEZA’s motion,104 this court consolidated the petitions filed by the City of Lapu-Lapu
and the Province of Bataan.105
The issues for our resolution are the following:
I. Whether the Court of Appeals erred in dismissing the City of Lapu-Lapu’s appeal for raising
pure questions of law;
II. Whether the Regional Trial Court, Branch 111, Pasay City had jurisdiction to hear, try, and
decide the City of Lapu-Lapu’s petition for declaratory relief;
III. Whether the petition for injunction filed before the Regional Trial Court, Branch 115,
Pasay City, is a local tax case appealable to the Court of Tax Appeals; and
IV. Whether the PEZA is exempt from payment of real property taxes.
We deny the consolidated petitions.
I.
The Court of Appeals did not err in
dismissing the City of Lapu-Lapu’s
appeal for raising pure questions of law
Under the Rules of Court, there are three modes of appeal from Regional Trial Court decisions.
The first mode is through an ordinary appeal before the Court of Appeals where the decision
assailed was rendered in the exercise of the Regional Trial Court’s original jurisdiction.
Ordinary appeals are governed by Rule 41, Sections 3 to 13 of the Rules of Court. In ordinary
appeals, questions of fact or mixed questions of fact and law may be raised.106
The second mode is through a petition for review before the Court of Appeals where the
decision assailed was rendered by the Regional Trial Court in the exercise of its appellate
jurisdiction. Rule 42 of the Rules of Court governs petitions for review before the Court of
Appeals. In petitions for review under Rule 42, questions of fact, of law, or mixed questions of
fact and law may be raised.107
The third mode is through an appealby certiorari before this court under Rule 45 where only
questions of law shall be raised.108
A question of fact exists when there is doubt as to the truth or falsity of the alleged facts.109 On
the other hand, there is a question of law if the appeal raises doubt as to the applicable law on a
certain set of facts.110
Under Rule 50, Section 2, an improper appeal before the Court of Appeals is dismissed
outright and shall not be referred to the proper court:
SEC. 2. Dismissal of improper appeal to the Court of Appeals. – An appeal under Rule 41
taken from the Regional Trial Court to the Court of Appeals raising only questions of law shall
be dismissed, issues purely of law not being reviewable by said court. Similarly, an appeal by
notice of appeal instead of by petition for review from the appellate judgment of a Regional
Trial Court shall be dismissed.
An appeal erroneously taken to the Court of Appeals shall not be transferred to the appropriate
court but shall be dismissed outright.
Rule 50, Section 2 repealed Rule 50, Section 3 of the 1964 Rules of Court, which provided that
improper appeals to the Court of Appeals shall not be dismissed but shall be certified to the
proper court for resolution:
Sec. 3. Where appealed case erroneously, brought. — Where the appealed case has been
erroneously brought to the Court of Appeals, it shall not dismiss the appeal, but shall certify the
case to the proper court, with a specific and clear statement of the grounds therefor.
With respect to appeals by certiorari directly filed before this court but which raise questions of
fact, paragraph 4(b) of Circular No. 2-90 dated March 9, 1990 states that this court "retains the
option, in the exercise of its sound discretion and considering the attendant circumstances,
either itself to take cognizance of and decide such issues or to refer them to the Court of
Appeals for determination." In Indoyon, Jr. v. Court of Appeals,111 we said that this court
"cannot tolerate ignorance of the law on appeals."112 It is not this court’s task to determine for
litigants their proper remedies under the Rules.113
We agree that the City availed itself of the wrong mode of appeal before the Court of Appeals.
The City raised pure questions of law in its appeal. The issue of whether the Regional Trial
Court of Pasay had jurisdiction over the PEZA’s petition for declaratory relief is a question of
law, jurisdiction being a matter of law.114 The issue of whether the PEZA is a government
instrumentality exempt from payment of real property taxes is likewise a question of law since
this question is resolved by examining the provisions of the PEZA’s charter as well as other
laws relating to the PEZA.115
The Court of Appeals, therefore, did not err in dismissing the City’s appeal pursuant to Rule
50, Section 2 of the Rules of Court.
Nevertheless, considering the important questions involved in this case, we take cognizance of
the City’s petition for review on certiorari in the interest of justice.
In Municipality of Pateros v. The Honorable Court of Appeals,116 the Municipality of Pateros
filed an appeal under Rule 42 before the Court of Appeals, which the Court of Appeals denied
outright for raising pure questions of law. This court agreed that the Municipality of Pateros
"committed a procedural infraction"117 and should have directly filed a petition for review on
certiorari before this court. Nevertheless, "in the interest of justice and in order to write finisto
[the] controversy,"118 this court "opt[ed] to relax the rules"119 and proceeded to decide the case.
This court said:
While it is true that rules of procedure are intended to promote rather than frustrate the ends of
justice, and while the swift unclogging of the dockets of the courts is a laudable objective, it
nevertheless must not be met at the expense of substantial justice.
The Court has allowed some meritorious cases to proceed despite inherent procedural defects
and lapses. Thisis in keeping with the principle that rules of procedure are mere tools designed
to facilitate the attainment of justice, and that strict and rigid application ofrules which should
result in technicalities that tend to frustrate rather than promote substantial justice must always
be avoided. It is a far better and more prudent cause of action for the court to excuse a technical
lapse and afford the parties a review of the case to attain the ends of justice, rather than dispose
of the case on technicality and cause grave injustice to the parties, giving a false impression of
speedy disposal of cases while actually resulting in more delay, if not a miscarriage of
justice.120
Similar to Municipality of Pateros, we opt to relax the rules in this case. The PEZA operates or
otherwise administers special economic zones all over the country. Resolving the substantive
issue of whether the PEZA is taxable for real property taxes will clarify the taxing powers of
all local government units where special economic zones are operated. This case, therefore,
should be decided on the merits.
II.
The Regional Trial Court of Pasay had no
jurisdiction to hear, try, and decide the
PEZA’s petition for declaratory relief
against the City of Lapu-Lapu
Rule 63 of the Rules of Court governs actions for declaratory relief. Section 1 of Rule 63
provides:
SECTION 1. Who may file petition. – Any person interested under a deed, will, contract or
other written instrument, or whose rights are affected by a statute, executive order or
regulation, ordinance, or any other governmental regulation may, before breach or violation,
thereof, bring an action in the appropriate Regional Trial Court to determine any question of
construction or validity arising, and for a declaration of his rights or duties, thereunder.
An action for reformation of an instrument, to quiet title to real property or remove clouds
therefrom, or to consolidate ownership under Article 1607 of the Civil Code, may be brought
under this Rule.
The court with jurisdiction over petitions for declaratory relief is the Regional Trial Court, the
subject matter of litigation in an action for declaratory relief being incapable of pecuniary
estimation.121 Section 19 of the Judiciary Reorganization Act of 1980 provides:
SEC. 19. Jurisdiction in Civil Cases. – Regional Trial Courts shall exercise exclusive original
jurisdiction:
(1) In all civil actions in which the subject of litigation is incapable of pecuniary estimation[.]
Consistent with the law, the Rules state that a petition for declaratory relief is filed "in the
appropriate Regional Trial Court."122
A special civil action for declaratory relief is filed for a judicial determination of any question
of construction or validity arising from, and for a declaration of rights and duties, under any of
the following subject matters: a deed, will, contract or other written instrument, statute,
executive order or regulation, ordinance, orany other governmental regulation.123 However, a
declaratory judgment may issue only if there has been "no breach of the documents in
question."124 If the contract or statute subject matter of the action has already been breached,
the appropriate ordinary civil action must be filed.125 If adequate relief is available through
another form of action or proceeding, the other action must be preferred over an action for
declaratory relief.126
In Ollada v. Central Bank of the Philippines,127 the Central Bank issued CB-IED Form No. 5
requiring certified public accountants to submit an accreditation under oath before they were
allowed to certify financial statements submitted to the bank. Among those financial statements
the Central Bank disallowed were those certified by accountant Felipe B. Ollada.128 Claiming
that the requirement "restrained the legitimate pursuit of one’s trade,"129
Ollada filed a petition for declaratory relief against the Central Bank.
This court ordered the dismissal of Ollada’s petition "without prejudice to [his] seeking relief
in another appropriate action."130 According to this court, Ollada’s right had already been
violated when the Central Bank refused to accept the financial statements he prepared. Since
there was already a breach, a petition for declaratory relief was not proper. Ollada must pursue
the "appropriate ordinary civil action or proceeding."131 This court explained:
Petitioner commenced this action as, and clearly intended it to be one for Declaratory Relief
under the provisions of Rule 66 of the Rules of Court. On the question of when a special civil
action of this nature would prosper, we have already held that the complaint for declaratory
relief will not prosper if filed after a contract, statute or right has been breached or violated. In
the present case such is precisely the situation arising from the facts alleged in the petition for
declaratory relief. As vigorously claimed by petitioner himself, respondent had already invaded
or violated his right and caused him injury — all these giving him a complete cause of action
enforceable in an appropriate ordinary civil action or proceeding. The dismissal of the action
was, therefore, proper in the lightof our ruling in De Borja vs. Villadolid, 47 O.G. (5) p. 2315,
and Samson vs. Andal, G.R. No. L-3439, July 31, 1951, where we held that an action for
declaratory relief should be filed before there has been a breach of a contract, statutes or right,
and that it is sufficient tobar such action, that there had been a breach — which would
constitute actionable violation. The rule is that an action for Declaratory Relief is proper only if
adequate relief is not available through the means of other existing forms of action or
proceeding (1 C.J.S. 1027-1028).132
It is also required that the parties to the action for declaratory relief be those whose rights or
interests are affected by the contract or statute in question. 133 "There must be an actual
justiciable controversy or the ‘ripening seeds’ of one"134 between the parties. The issue between
the parties "must be ripe for judicial determination."135 An action for declaratory relief based on
theoreticalor hypothetical questions cannot be filed for our courts are not advisory courts. 136
In Republic v. Roque,137 this court dismissed respondents’ petition for declaratory relief for
lack of justiciable controversy. According to this court, "[the respondents’] fear of prospective
prosecution [under the Human Security Act] was solely based on remarks of certain
government officials which were addressed to the general public."138
In Velarde v. Social Justice Society,139 this court refused to resolve the issue of "whether or not
[a religious leader’s endorsement] of a candidate for elective office or in urging or requiring
the members of his flock to vote for a specific candidate is violative [of the separation
clause]."140 According to the court, there was no justiciable controversy and ordered the
dismissal of the Social Justice Society’s petition for declaratory relief. This court explained:
Indeed, SJS merely speculated or anticipated without factual moorings that, as religious
leaders, the petitioner and his co-respondents below had endorsed or threatened to endorse a
candidate or candidates for elective offices; and that such actual or threatened endorsement
"will enable [them] to elect men to public office who [would] in turn be forever beholden to
their leaders, enabling them to control the government"[;] and "pos[ing] a clear and present
danger ofserious erosion of the people’s faith in the electoral process[;] and reinforc[ing] their
belief that religious leaders determine the ultimate result of elections," which would then be
violative of the separation clause.
Such premise is highly speculative and merely theoretical, to say the least. Clearly, it does not
suffice to constitute a justiciable controversy. The Petition does not even allege any indication
or manifest intent on the part of any of the respondents below to champion an electoral
candidate, or to urge their so-called flock to vote for, or not to vote for, a particular candidate.
It is a time-honored rule that sheer speculation does not give rise to an actionable right.
Obviously, there is no factual allegation that SJS’ rights are being subjected to any threatened,
imminent and inevitable violation that should be prevented by the declaratory relief sought.
The judicial power and duty of the courts to settle actual controversies involving rights that are
legally demandable and enforceable cannot be exercised when there is no actual or threatened
violation of a legal right.
All that the 5-page SJS Petition prayed for was "that the question raised in paragraph 9 hereof
be resolved." In other words, it merely sought an opinion of the trial court on whether the
speculated acts of religious leaders endorsing elective candidates for political offices violated
the constitutional principle on the separation of church and state. SJS did not ask for a
declaration of its rights and duties; neither did it pray for the stoppage of any threatened
violation of its declared rights. Courts, however, are proscribed from rendering an advisory
opinion.141 In sum, a petition for declaratory relief must satisfy six requisites:
[F]irst, the subject matter of the controversy must be a deed, will, contract or other written
instrument, statute, executive order or regulation, or ordinance; second, the terms of said
documents and the validity thereof are doubtful and require judicial construction; third, there
must have been no breach of the documents in question; fourth, there must be an actual
justiciable controversy or the "ripening seeds" of one between persons whose interests are
adverse; fifth, the issue must be ripe for judicial determination; and sixth, adequate relief is not
available through other means or other forms of action or proceeding.142 (Emphases omitted)
We rule that the PEZA erred in availing itself of a petition for declaratory relief against the
City. The City had already issued demand letters and real property tax assessment against the
PEZA, in violation of the PEZA’s alleged tax-exempt status under its charter. The Special
Economic Zone Act of 1995, the subject matter of PEZA’s petition for declaratory relief, had
already been breached. The trial court, therefore, had no jurisdiction over the petition for
declaratory relief. There are several aspects of jurisdiction. 143 Jurisdiction over the subject
matter is "the power to hear and determine cases of the general class to which the proceedings
in question belong."144 It is conferred by law, which may either be the Constitution or a
statute.145 Jurisdiction over the subject matter means "the nature of the cause of action and the
relief sought."146 Thus, the cause of action and character of the relief sought as alleged in the
complaint are examinedto determine whether a court had jurisdiction over the subject
matter.147 Any decision rendered by a court without jurisdiction over the subjectmatter of the
action is void.148
Another aspect of jurisdiction is jurisdiction over the person. It is "the power of [a] court to
render a personal judgment or to subject the parties in a particular action to the judgment and
other rulings rendered in the action."149 A court automatically acquires jurisdiction over the
person of the plaintiff upon the filing of the initiatory pleading.150 With respect to the
defendant, voluntary appearance in court or a valid service of summons vests the court with
jurisdiction over the defendant’s person.151 Jurisdiction over the person of the defendant is
indispensable in actions in personamor those actions based on a party’s personal
liability.152 The proceedings in an action in personamare void if the court had no jurisdiction
over the person of the defendant.153
Jurisdiction over the resor the thing under litigation is acquired either "by the seizure of the
property under legal process, whereby it is brought into actual custody of the law; or asa result
of the institution of legal proceedings, in which the power of the court is recognized and made
effective."154 Jurisdiction over the res is necessary in actions in remor those actions "directed
against the thing or property or status of a person and seek judgments with respect thereto as
against the whole world."155 The proceedings in an action in rem are void if the court had no
jurisdiction over the thing under litigation.156
In the present case, the Regional Trial Court had no jurisdiction over the subject matter of the
action, specifically, over the remedy sought. As this court explained in Malana v. Tappa:157
. . . an action for declaratory relief presupposes that there has been no actual breach of the
instruments involved or of rights arising thereunder. Since the purpose of an action for
declaratory relief is to secure an authoritative statement of the rights and obligations of the
parties under a statute, deed, or contract for their guidance in the enforcement thereof, or
compliance therewith, and not to settle issues arising from an alleged breach thereof, it may be
entertained only before the breach or violation of the statute, deed, or contract to which it
refers. A petition for declaratory relief gives a practical remedy for ending controversies that
have not reached the state where another relief is immediately available; and supplies the need
for a form of action that will set controversies at rest before they lead to a repudiation of
obligations, an invasion of rights, and a commission of wrongs.
Where the law or contract has already been contravened prior to the filing of an action for
declaratory relief, the courts can no longer assume jurisdiction over the action. In other words,
a court has no more jurisdiction over an action for declaratory relief if its subject has already
been infringed or transgressed before the institution of the action. 158 (Emphasis supplied)
The trial court should have dismissed the PEZA’s petition for declaratory relief for lack of
jurisdiction.
Once an assessment has already been issued by the assessor, the proper remedy of a taxpayer
depends on whether the assessment was erroneous or illegal.
An erroneous assessment "presupposes that the taxpayer is subject to the tax but is disputing
the correctness of the amount assessed."159 With an erroneous assessment, the taxpayer claims
that the local assessor erred in determining any of the items for computing the real property
tax, i.e., the value of the real property or the portion thereof subject to tax and the proper
assessment levels. In case of an erroneous assessment, the taxpayer must exhaust the
administrative remedies provided under the Local Government Code before resorting to
judicial action.
The taxpayer must first pay the realproperty tax under protest. Section 252 of the Local
Government Code provides:
SECTION 252. Payment Under Protest. -(a) No protest shall be entertained unless the taxpayer
first paysthe tax. There shall be annotated on the tax receipts the words "paid under protest".
The protest in writing must be filed within thirty (30) days from payment of the tax to the
provincial, city treasurer or municipal treasurer, in the case of a municipality within
Metropolitan Manila Area, who shall decide the protest within sixty (60) days from receipt.
(b) The tax or a portion thereof paidunder protest, shall be held in trust by the treasurer
concerned.
(c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion
of the tax protested shall be refunded to the protestant, or applied as tax credit against his
existing or future tax liability.
(d) In the event that the protest is denied or upon the lapse of the sixty day period prescribed in
subparagraph (a), the taxpayer may avail of the remedies as provided for in Chapter 3, Title II,
Book II of this Code.
Should the taxpayer find the action on the protest unsatisfactory, the taxpayer may appeal with
the Local Board of Assessment Appeals within 60 days from receipt of the decision on the
protest:
SECTION 226. Local Board of Assessment Appeals. - Any owner or person having legal
interest in the property who is not satisfied with the action of the provincial, city or municipal
assessor in the assessment of his property may, within sixty (60) days from the date of receipt
of the written notice of assessment, appeal to the Board of Assessment Appeals of the
provincial or city by filing a petition under oath in the form prescribed for the purpose, together
with copies of the tax declarations and such affidavits or documents submitted in support of the
appeal.
Payment under protest and appeal to the Local Board of Assessment Appeals are "successive
administrative remedies to a taxpayer who questions the correctness of an assessment." 160 The
Local Board Assessment Appeals shall not entertain an appeal "without the action of the local
assessor"161 on the protest.
If the taxpayer is still unsatisfied after appealing with the Local Board of Assessment Appeals,
the taxpayer may appeal with the Central Board of Assessment Appeals within 30 days from
receipt of the Local Board’s decision:
SECTION 229. Action by the Local Board of Assessment Appeals. - (a) The Board shall
decide the appeal within one hundred twenty (120) days from the date of receipt of such
appeal. The Board, after hearing, shall render its decision based on substantial evidence or such
relevant evidence on record as a reasonable mind might accept as adequate to support the
conclusion. (b) In the exercise ofits appellate jurisdiction, the Board shall have the power to
summon witnesses, administer oaths, conduct ocular inspection, take depositions, and issue
subpoena and subpoena duces tecum. The proceedings of the Board shall be conducted solely
for the purpose of ascertaining the facts without necessarily adhering to technical rules
applicable in judicial proceedings.
(c) The secretary of the Board shall furnish the owner of the property or the person having
legal interest therein and the provincial or city assessor with a copy of the decision of the
Board. In case the provincial or city assessor concurs in the revision or the assessment, it shall
be his duty to notify the owner of the property or the person having legal interest therein of
such factusing the form prescribed for the purpose. The owner of the property or the person
having legal interest therein or the assessor who is not satisfied with the decision of the Board,
may, within thirty (30) days after receipt of the decision of said Board, appeal to the Central
Board of Assessment Appeals, as herein provided. The decision of the Central Board shall be
final and executory. (Emphasis supplied)
162
On the other hand, an assessment is illegal if it was made without authority under the law.  In
case of an illegal assessment, the taxpayer may directly resort to judicial action without paying
under protest the assessed tax and filing an appeal with the Local and Central Board of
Assessment Appeals.
In Ty v. Trampe,163 the Municipal Assessor of Pasig sent Alejandro B. Ty a notice of
assessment with respect to Ty’s real properties in Pasig. Without resorting to the administrative
remedies under the Local Government Code, Ty filed before the Regional Trial Court a
petition, praying that the trial court nullify the notice of assessment. In assessing the real
property taxes due, the Municipal Assessor used a schedule of market values solely prepared
by him. This, Ty argued, was void for being contrary to the Local Government Code requiring
that the schedule of market values be jointly prepared by the provincial, city, and municipal
assessors of the municipalities within the Metropolitan Manila Area.
This court ruled that the assessmentwas illegal for having been issued without authority of the
Municipal Assessor. Reconciling provisions of the Real Property Tax Code and the Local
Government Code, this court held that the schedule of market valuesmust be jointly prepared
by the provincial, city, and municipal assessors of the municipalities within the Metropolitan
Manila Area.
As to the issue of exhaustion of administrative remedies, this court held that Ty did not err in
directly resorting to judicial action. According to this court, payment under protest is required
only "where there is a question as to the reasonableness of the amount assessed." 164 As to
appeals before the Local and Central Board of Assessment Appeals, they are "fruitful only
where questions of fact are involved."165
Ty raised the issue of the legality of the notice of assessment, an issue that did not go into the
reasonableness of the amount assessed. Neither did the issue involve a question of fact. Ty
raised a question of law and, therefore, need not resort to the administrative remedies provided
under the Local Government Code.
In the present case, the PEZA did not avail itself of any of the remedies against a notice of
assessment. A petition for declaratory relief is not the proper remedy once a notice of
assessment was already issued.
Instead of a petition for declaratory relief, the PEZA should have directly resorted to a judicial
action. The PEZA should have filed a complaint for injunction, the "appropriate ordinary civil
action"166 to enjoin the City from enforcing its demand and collecting the assessed taxes from
the PEZA. After all, a declaratory judgment as to the PEZA’s tax-exempt status is useless
unless the City isenjoined from enforcing its demand.
Injunction "is a judicial writ, process or proceeding whereby a party is ordered to do or refrain
from doing a certain act."167 "It may be the main action or merely a provisional remedy for and
as incident in the main action."168 The essential requisites of a writ of injunction are: "(1) there
must be a right in esseor the existence of a right to be protected; and (2) the act against which
the injunction is directed to constitute a violation of such right."169
We note, however, that the City confused the concepts of jurisdiction and venue in contending
that the Regional Trial Court of Pasay had no jurisdiction because the real properties involved
in this case are located in the City of Lapu-Lapu.
On the one hand, jurisdiction is "the power to hear and determine cases of the general class to
which the proceedings in question belong."170 Jurisdiction is a matter of substantive
law.171 Thus, an action may be filed only with the court or tribunal where the Constitution or a
statute says it can be brought.172 Objections to jurisdiction cannot be waived and may be
brought at any stage of the proceedings, even on appeal.173 When a case is filed with a court
which has no jurisdiction over the action, the court shall motu propriodismiss the case.174
On the other hand, venue is "the place of trial or geographical location in which an action or
proceeding should be brought." 175 In civil cases, venue is a matter of procedural law.176 A
party’s objections to venue must be brought at the earliest opportunity either in a motion to
dismiss or in the answer; otherwise the objection shall be deemed waived.177 When the venue
of a civil action is improperly laid, the court cannot motu propriodismiss the case.178
The venue of an action depends on whether the action is a real or personal action. Should the
action affect title to or possession of real property, or interest therein, it is a real action. The
action should be filed in the proper court which has jurisdiction over the area wherein the real
property involved, or a portion thereof, is situated.179 If the action is a personal action, the
action shall be filed with the proper court where the plaintiff or any of the principal plaintiffs
resides, or where the defendant or any of the principal defendants resides, or in the case of a
non-resident defendant where he may be found, at the election of the plaintiff. 180
The City was objecting to the venue of the action, not to the jurisdiction of the Regional Trial
Court of Pasay. In essence, the City was contending that the PEZA’s petition is a real action as
it affects title to or possession of real property, and, therefore, the PEZA should have filed the
petition with the Regional Trial Court of Lapu-Lapu City where the real properties are located.
However, whatever objections the City has against the venue of the PEZA’s action for
declaratory relief are already deemed waived. Objections to venue must be raised at the earliest
possible opportunity.181 The City did not file a motion to dismiss the petition on the ground that
the venue was improperly laid. Neither did the City raise this objection in its answer.
In any event, the law sought to be judicially interpreted in this case had already been breached.
The Regional Trial Court of Pasay, therefore, had no jurisdiction over the PEZA’s petition for
declaratory relief against the City.
III.
The Court of Appeals had no jurisdiction
over the PEZA’s petition for certiorari
against the Province of Bataan
Appeal is the remedy "to obtain a reversal or modification of a judgment on the merits." 182 A
judgment on the merits is one which "determines the rights and liabilities of the parties based
on the disclosed facts, irrespective of the formal, technical or dilatory objections."183 It is not
even necessary that the case proceeded to trial. 184 So long as the "judgment is general"185 and
"the parties had a full legal opportunity to be heard on their respective claims and
contentions,"186 the judgment is on the merits.
On the other hand, certiorari is a special civil action filed to annul or modify a proceeding of a
tribunal, board, or officer exercising judicial or quasi-judicial functions.187 Certiorari, which in
Latin means "to be more fully informed,"188 was originally a remedy in the common law. This
court discussed the history of the remedy of certiorari in Spouses Delos Santos v. Metropolitan
Bank and Trust Company:189
In the common law, from which the remedy of certiorari evolved, the writ of certiorari was
issued out of Chancery, or the King’s Bench, commanding agents or officers of the inferior
courts to return the record of a cause pending before them, so as to give the party more sure
and speedy justice, for the writ would enable the superior court to determine froman inspection
of the record whether the inferior court’s judgment was rendered without authority. The errors
were of such a nature that, if allowed to stand, they would result in a substantial injury to the
petitioner to whom no other remedy was available. If the inferior court acted without authority,
the record was then revised and corrected in matters of law. The writ of certiorari was limited
to cases in which the inferior court was said to be exceeding its jurisdiction or was not
proceeding according to essential requirements of law and would lie only to review judicial or
quasi-judicial acts.190
In our jurisdiction, the term "certiorari" is used in two ways. An appeal before this court raising
pure questions of law is commenced by filing a petition for reviewon certiorari under Rule 45
of the Rules of Court. An appeal by certiorari, which continues the proceedings commenced
before the lower courts,191 is filed to reverse or modify judgments or final orders.192 Under the
Rules, an appeal by certiorarimust be filed within 15 days from notice of the judgment or final
order, or of the denial of the appellant’s motion for new trial or reconsideration.193
A petition for certiorari under Rule 65, on the other hand, is an independent and original action
filed to set aside proceedings conducted without or in excess of jurisdiction or with grave abuse
of discretion amounting to lack or excess of jurisdiction.194 Under the Rules, a petition for
certiorari may only be filed if there is no appeal or any plain, speedy, or adequate remedy in the
ordinary course of law.195 The petition must be filed within 60 days from notice of the
judgment, order, or resolution.196
Because of the longer period to file a petition for certiorari, some litigants attempt to file
petitions for certiorari as substitutes for lost appeals by certiorari. However, Rule 65 is clear
that a petition for certiorari will not prosper if appeal is available. Appealis the proper remedy
even if the error, or one of the errors, raised is grave abuse of discretion on the part of the court
rendering judgment.197 If appeal is available, a petition for certiorari cannot be filed.
In this case, the trial court’s decision dated January 31, 2007 is a judgment on the merits. Based
on the facts disclosed by the parties, the trial court declared the PEZA liable to the Province of
Bataan for real property taxes. The PEZA’s proper remedy against the trial court’s decision,
therefore, is appeal.
Since the PEZA filed a petition for certiorari against the trial court’s decision, it availed itself
of the wrong remedy. As the Province of Bataan contended, the trial court’s decision dated
January 31, 2007 "is only an error of judgment appealable to the higher level court and may not
be corrected by filing a petition for certiorari."198 That the trial court judge allegedly committed
grave abuse of discretion does not make the petition for certiorari the correct remedy. The
PEZA should haveraised this ground in an appeal filed within 15 days from notice of the
assailed resolution.
This court, "in the liberal spirit pervading the Rules of Court and in the interest of substantial
justice,"199 has treated petitions for certiorari as an appeal: "(1) if the petition for certiorari was
filed within the reglementary period within which to file a petition for review on certiorari; (2)
when errors of judgment are averred; and (3) when there is sufficient reason to justify the
relaxation of the rules."200 Considering that "the nature of an action is determined by the
allegationsof the complaint or the petition and the character of the relief sought,"201 a petition
which "actually avers errors of judgment rather than errors than that of jurisdiction" 202 may be
considered a petition for review.
However, suspending the application of the Rules has its disadvantages. Relaxing procedural
rules may reduce the "effective enforcement of substantive rights,"203 leading to "arbitrariness,
caprice, despotism, or whimsicality in the settlement of disputes."204 Therefore, for this court to
suspend the application of the Rules, the accomplishment of substantial justice must outweigh
the importance of predictability of court procedures.
The PEZA’s petition for certiorari may be treated as an appeal. First, the petition for certiorari
was filed withinthe 15-day reglementary period for filing an appeal. The PEZA filed its
petition for certiorari before the Court of Appeals on October 15, 2007,205 which was 12 days
from October 3, 2007206 when the PEZA had notice of the trial court’s order denying the
motion for reconsideration.
Second, the petition for certiorari raised errors of judgment. The PEZA argued that the trial
court erred in ruling that it is not exempt from payment of real property taxes given Section 21
of Presidential Decree No. 66 and Sections 11 and 51 of the Special Economic Zone Act of
1995.207
Third, there is sufficient reason to relax the rules given the importance of the substantive issue
presented in this case.
However, the PEZA’s petition for certiorari was filed before the wrong court. The PEZA
should have filed its petition before the Court of Tax Appeals.
The Court of Tax Appeals has the exclusive appellate jurisdiction over local tax cases decided
by Regional Trial Courts. Section 7, paragraph (a)(3) of Republic Act No. 1125, as amended
by Republic Act No. 9282, provides:
Sec. 7. Jurisdiction. – The [Court of Tax Appeals] shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
....
3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally
decided or resolved by them in the exercise of their original or appellate jurisdiction[.]
The local tax cases referred to in Section 7, paragraph (a)(3) of Republic Act No. 1125, as
amended, include cases involving real property taxes. Real property taxation is governed by
Book II of the Local Government Code on "Local Taxation and Fiscal Matters." Real property
taxes are collected by the Local Treasurer,208 not by the Bureau of Internal Revenue in charge
of collecting national internal revenue taxes, fees, and charges.209
Section 7, paragraph (a)(5) of Republic Act No. 1125, as amended by Republic Act No. 9282,
separately provides for the exclusive appellate jurisdiction of the Court of Tax Appeals over
decisions of the Central Board of Assessment Appeals involving the assessment or collection
of real property taxes:
Sec. 7. Jurisdiction. – The [Court of Tax Appeals] shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
....
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property originally
decided by the provincial or city board of assessment appeals[.]
This separate provision, nevertheless, does not bar the Court of Tax Appeals from taking
cognizance of trial court decisions involving the collection of real property tax cases. Sections
256210 and 266211 of the Local Government Code expressly allow localgovernment units to file
"in any court of competent jurisdiction" civil actions to collect basic real property taxes. Should
the trial court rule against them, local government units cannot be barred from appealing before
the Court of Tax Appeals – the "highly specialized body specifically created for the purpose of
reviewing tax cases."212
We have also ruled that the Court of Tax Appeals, not the Court of Appeals, has the exclusive
original jurisdiction over petitions for certiorari assailing interlocutory orders issued by
Regional Trial Courts in a local tax case. We explained in The City of Manila v. Hon. Grecia-
Cuerdo213 that while the Court of Tax Appeals has no express grant of power to issue writs of
certiorari under Republic Act No. 1125,214 as amended, the tax court’s judicial power as
defined in the Constitution215 includes the power to determine "whether or not there has been
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the
[Regional Trial Court] in issuing an interlocutory order of jurisdiction in cases falling within
the exclusive appellate jurisdiction of the tax court."216 We further elaborated:
Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must
have the authority to issue, among others, a writ of certiorari. In transferring exclusive
jurisdiction over appealed tax cases to the CTA, it can reasonably be assumed that the law
intended to transfer also such power as is deemed necessary, if not indispensable, in aid of such
appellate jurisdiction. There is no perceivable reason why the transfer should only be
considered as partial, not total.
....
If this Court were to sustain petitioners' contention that jurisdiction over their certiorari petition
lies with the CA, this Court would be confirming the exercise by two judicial bodies, the CA
and the CTA, of jurisdiction over basically the same subject matter – precisely the split-
jurisdiction situation which is anathema to the orderly administration of justice.The Court
cannot accept that such was the legislative motive, especially considering that the law
expressly confers on the CTA, the tribunal with the specialized competence over tax and tariff
matters, the role of judicial review over local tax cases without mention of any other court that
may exercise such power. Thus, the Court agrees with the ruling of the CA that since appellate
jurisdiction over private respondents' complaint for tax refund is vested in the CTA, it follows
that a petition for certiorari seeking nullification of an interlocutory order issued in the said
case should, likewise, be filed with the same court. To rule otherwise would lead to an absurd
situation where one court decides an appeal in the main case while another court rules on an
incident in the very same case.
Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence
to split jurisdiction to conclude that the intention of the law is to divide the authority over a
local tax case filed with the RTC by giving to the CA or this Court jurisdiction to issue a writ
of certiorari against interlocutory orders of the RTC but giving to the CTA the jurisdiction over
the appeal from the decision of the trial court in the same case. It is more in consonance with
logic and legal soundness to conclude that the grant of appellate jurisdiction to the CTA over
tax cases filed in and decided by the RTC carries withit the power to issue a writ of certiorari
when necessary in aid of such appellate jurisdiction. The supervisory power or jurisdiction of
the CTA to issue a writ of certiorari in aid of its appellate jurisdiction should co-exist with, and
be a complement to, its appellate jurisdiction to review, by appeal, the final orders and
decisionsof the RTC, in order to have complete supervision over the acts of the
latter.217 (Citations omitted)
In this case, the petition for injunction filed before the Regional Trial Court of Pasay was a
local tax case originally decided by the trial court in its original jurisdiction. Since the PEZA
assailed a judgment, not an interlocutory order, of the Regional Trial Court, the PEZA’s proper
remedy was an appeal to the Court of Tax Appeals.
Considering that the appellate jurisdiction of the Court of Tax Appeals is to the exclusion of all
other courts, the Court of Appeals had no jurisdiction to take cognizance of the PEZA’s
petition. The Court of Appeals acted without jurisdiction in rendering the decision in CA-G.R.
SP No. 100984. Its decision in CA-G.R. SP No. 100984 is void.218
The filing of appeal in the wrong court does not toll the period to appeal. Consequently, the
decision of the Regional Trial Court, Branch 115, Pasay City, became final and executory after
the lapse of the 15th day from the PEZA’s receipt of the trial court’s decision. 219 The denial of
the petition for injunction became final and executory.
IV.
The remedy of a taxpayer depends on the
stage in which the local government unit
is enforcing its authority to impose real
property taxes
The proper remedy of a taxpayer depends on the stage in which the local government unit is
enforcing its authority to collect real property taxes. For the guidance of the members of the
bench and the bar, we reiterate the taxpayer’s remedies against the erroneous or illegal
assessment of real property taxes.
Exhaustion of administrative remedies under the Local Government Code is necessary in cases
of erroneous assessments where the correctness of the amount assessed is assailed. The
taxpayer must first pay the tax then file a protest with the Local Treasurer within 30 days from
date of payment of tax.220 If protest is denied or upon the lapse of the 60-day period to decide
the protest, the taxpayer may appeal to the Local Board of Assessment Appeals within 60 days
from the denial of the protest or the lapse of the 60-day period to decide the protest. 221 The
Local Board of Assessment Appeals has 120 days to decide the appeal.222
If the taxpayer is unsatisfied withthe Local Board’s decision, the taxpayer may appeal before
the Central Board of Assessment Appeals within 30 days from receipt of the Local Board’s
decision.223
The decision of the Central Board of Assessment Appeals is appealable before the Court of
Tax Appeals En Banc.224 The appeal before the Court of Tax Appeals shall be filed following
the procedure under Rule 43 of the Rules of Court.225
The Court of Tax Appeals’ decision may then be appealed before this court through a petition
for review on certiorari under Rule 45 of the Rules of Court raising pure questions of law.226
In case of an illegal assessment where the assessment was issued without authority, exhaustion
of administrative remedies is not necessary and the taxpayer may directly resort to judicial
action.227 The taxpayer shall file a complaint for injunction before the Regional Trial Court228 to
enjoin the local government unit from collecting real property taxes.
The party unsatisfied with the decision of the Regional Trial Court shall file an appeal, not a
petition for certiorari, before the Court of Tax Appeals, the complaint being a local tax case
decided by the Regional Trial Court.229 The appeal shall be filed within fifteen (15) days from
notice of the trial court’s decision.
The Court of Tax Appeals’ decision may then be appealed before this court through a petition
for review on certiorari under Rule 45 of the Rules of Court raising pure questions of law.230
In case the local government unit has issued a notice of delinquency, the taxpayer may file a
complaint for injunction to enjoin the impending sale of the real property at public auction. In
case the local government unit has already sold the property at public auction, the taxpayer
must first deposit with the court the amount for which the real property was sold, together with
interest of 2% per month from the date ofsale to the time of the institution of action. The
taxpayer may then file a complaint to assail the validity of the public auction. 231 The decisions
of the Regional Trial Court in these cases shall be appealable before the Court of Tax
Appeals,232 and the latter’s decisions appealable before this court through a petition for review
on certiorari under Rule 45 of the Rules of Court.233
V.
The PEZA is exempt from payment of
real property taxes
The jurisdictional errors in this case render these consolidated petitions moot. We do not
review void decisions rendered without jurisdiction.
However, the PEZA alleged that several local government units, including the City of Baguio
and the Province of Cavite, have issued their respective real property tax assessments against
the PEZA. Other local government units will likely follow suit, and either the PEZA or the
local government units taxing the PEZA may file their respective actions against each other.
In the interest of judicial economy234 and avoidance of conflicting decisions involving the same
issues,235 we resolve the substantive issue of whether the PEZA is exempt from payment of real
property taxes.
Real property taxes are annual taxes levied on real property such as lands, buildings,
machinery, and other improvements not otherwise specifically exempted under the Local
Government Code.236 Real property taxes are ad valorem, with the amount charged based on a
fixed proportion of the value of the property.237 Under the law, provinces, cities, and
municipalities within the Metropolitan Manila Area have the power to levy real property taxes
within their respective territories.238
The general rule is that real properties are subject to real property taxes. This is true especially
since the Local Government Code has withdrawn exemptions from real property taxes of all
persons, whether natural or juridical:
SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment
of real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques,
nonprofit or religious cemeteries and all lands, buildings, and improvements actually, directly,
and exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by local
water districts and government-owned or – controlled corporations engaged in the supply and
distribution of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided under R.A. No. 6938;
and
(e) Machinery and equipment usedfor pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property taxes previously
granted to, or presently enjoyed by, all persons, whether natural or juridical, including
government-owned or -controlled corporations are hereby withdrawn upon the effectivity of
this Code. (Emphasis supplied)
The person liable for real property taxes is the "taxable person who had actual or beneficial use
and possession [of the real property for the taxable period,] whether or not [the person owned
the property for the period he or she is being taxed]."239
The exceptions to the rule are provided in the Local Government Code. Under Section 133(o),
local government units have no power to levy taxes of any kind on the national government, its
agencies and instrumentalities and local government units:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless
otherwise provided herein, the exercise of taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
....
(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities and local government units.
Specifically on real property taxes, Section 234 enumerates the persons and real property
exempt from real property taxes:
SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment
of real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques,
nonprofitor religious cemeteries and all lands, buildings, and improvements actually, directly,
and exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by local
water districts and government-owned or – controlled corporations engaged in the supply and
distribution of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided under R.A. No. 6938;
and
(e) Machinery and equipment used for pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property tax previously
granted to, or presently enjoyed by, all persons, whether natural or juridical, including all
government-owned or -controlled corporations are hereby withdrawn upon the effectivity of
this Code. (Emphasis supplied)
For persons granted tax exemptions or incentives before the effectivity of the Local
Government Code, Section 193 withdrew these tax exemption privileges. These persons
consist of both natural and juridical persons, including government-owned or controlled
corporations:
SEC. 193. Withdrawal of Tax Exemption Privileges. – Unless otherwise provided in this code,
tax exemptions or incentives granted to or presently enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations, except local water districts,
cooperatives duly registered under R.A. 6938, non stock and non profit hospitals and
educational institutions, are hereby withdrawn upon effectivity of this Code.
As discussed, Section 234 withdrew all tax privileges with respect to real property taxes.
Nevertheless, local government units may grant tax exemptions under such terms and
conditions asthey may deem necessary:
SEC. 192. Authority to Grant Tax Exemption Privileges. – Local government units may,
through ordinances duly approved, grant tax exemptions, incentives or reliefs under such terms
and conditions as they may deem necessary.
In Mactan Cebu International Airport Authority v. Hon. Marcos,240 this court classified the
exemptions from real property taxes into ownership, character, and usage exemptions.
Ownership exemptions are exemptions based on the ownership of the real property. The
exemptions of real property owned by the Republic of the Philippines, provinces, cities,
municipalities, barangays, and registered cooperatives fall under this classification.241 Character
exemptions are exemptions based on the character of the real property. Thus, no real property
taxes may be levied on charitable institutions, houses and temples of prayer like churches,
parsonages, or convents appurtenant thereto, mosques, and non profitor religious cemeteries.242
Usage exemptions are exemptions based on the use of the real property. Thus, no real property
taxes may be levied on real property such as: (1) lands and buildings actually, directly, and
exclusively used for religious, charitable or educational purpose; (2) machineries and
equipment actually, directly and exclusively used by local water districts or by government-
owned or controlled corporations engaged in the supply and distribution of water and/or
generation and transmission of electric power; and (3) machinery and equipment used for
pollution control and environmental protection.243
Persons may likewise be exempt from payment of real properties if their charters, which were
enacted or reenacted after the effectivity of the Local Government Code, exempt them payment
of real property taxes.244
V.
(A) The PEZA is an instrumentality of the national government
An instrumentality is "any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special funds, and enjoying operational
autonomy, usually through a charter."245
Examples of instrumentalities of the national government are the Manila International Airport
Authority,246 the Philippine Fisheries Development Authority,247 the Government Service
Insurance System,248 and the Philippine Reclamation Authority.249 These entities are not
integrated within the department framework but are nevertheless vested with special functions
to carry out a declared policy of the national government.
Similarly, the PEZA is an instrumentality of the national government. It is not integrated within
the department framework but is an agency attached to the Department of Trade and
Industry.250 Book IV, Chapter 7, Section 38(3)(a) of the Administrative Code of 1987 defines
"attachment": SEC. 38. Definition of Administrative Relationship.– Unless otherwise expressly
stated in the Code or in other laws defining the special relationships of particular agencies,
administrative relationships shall be categorized and defined as follows:
....
(3) Attachment.– (a) This refers to the lateral relationship between the department or its
equivalent and the attached agency or corporation for purposes of policy and program
coordination. The coordination may be accomplished by having the department represented in
the governing board of the attached agency or corporation, either as chairman or as a member,
with or without voting rights, if this is permitted by the charter; having the attached corporation
or agency comply with a system of periodic reporting which shall reflect the progress of the
programs and projects; and having the department or its equivalent provide general policies
through its representative in the board, which shall serve as the framework for the internal
policies of the attached corporation or agency[.]
Attachment, which enjoys "a larger measure of independence"251 compared with other
administrative relationships such as supervision and control, is further explained in Beja, Sr. v.
Court of Appeals:252
An attached agency has a larger measure of independence from the Department to which it is
attached than one which is under departmental supervision and control or administrative
supervision. This is borne out by the "lateral relationship" between the Department and the
attached agency. The attachment is merely for "policy and program coordination." With respect
to administrative matters, the independence of an attached agency from Departmental control
and supervision is further reinforced by the fact that even an agency under a Department’s
administrative supervision is free from Departmental interference with respect to appointments
and other personnel actions "in accordance with the decentralization of personnel functions"
under the Administrative Code of 1987. Moreover, the Administrative Code explicitly provides
that Chapter 8 of Book IV on supervision and control shall not apply to chartered institutions
attached to a Department.253
With the PEZA as an attached agency to the Department of Trade and Industry, the 13-person
PEZA Board is chaired by the Department Secretary.254 Among the powers and functions of the
PEZA is its ability to coordinate with the Department of Trade and Industry for policy and
program formulation and implementation.255 In strategizing and prioritizing the development of
special economic zones, the PEZA coordinates with the Department of Trade and Industry.256
The PEZA also administers its own funds and operates autonomously, with the PEZA Board
formulating and approving the PEZA’s annual budget.257 Appointments and other personnel
actions in the PEZA are also free from departmental interference, with the PEZA Board having
the exclusive and final authority to promote, transfer, assign and reassign officers of the
PEZA.258
As an instrumentality of the national government, the PEZA is vested with special functions or
jurisdiction by law. Congress created the PEZA to operate, administer, manage and develop
special economic zones in the Philippines.259 Special economic zones are areas with highly
developed or which have the potential to be developed into agro-industrial, industrial
tourist/recreational, commercial, banking, investment and financial centers.260 By operating,
administering, managing, and developing special economic zones which attract investments
and promote use of domestic labor, the PEZA carries out the following policy of the
Government: SECTION 2. Declaration of Policy. — It is the declared policy of the government
to translate into practical realities the following State policies and mandates in the 1987
Constitution, namely:
(a) "The State recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investments." (Sec. 20, Art. II)
(b) "The State shall promote the preferential use of Filipino labor, domestic materials and
locally produced goods, and adopt measures that help make them competitive." (Sec. 12, Art.
XII) In pursuance of these policies, the government shall actively encourage, promote, induce
and accelerate a sound and balanced industrial, economic and social development of the
country in order to provide jobs to the people especially those in the rural areas, increase their
productivity and their individual and family income, and thereby improve the level and quality
of their living condition through the establishment, among others, of special economic zones in
suitable and strategic locations in the country and through measures that shall effectively
attract legitimate and productive foreign investments.261
Being an instrumentality of the national government, the PEZA cannot be taxed by local
government units.
Although a body corporate vested with some corporate powers,262 the PEZA is not a
government-owned or controlled corporation taxable for real property taxes.
Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines the
term "government-owned or controlled corporation":
SEC. 2. General Terms Defined. – Unless the specific words of the text, or the context as a
whole, or a particular statute, shall require a different meaning:
....
(13) Government-owned or controlled corporation refers to any agency organized as a stock or
non-stock corporation, vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through its instrumentalities
either wholly, or, where applicable as in the case of stock corporations, to the extent of at least
fifty-one (51) per cent of its capital stock: Provided, That government owned or controlled
corporations may be further categorized by the Department of the Budget, the Civil Service
Commission, and the Commission on Audit for purposes of the exercise and discharge of their
respective powers, functions and responsibilities with respect to such corporations.
Government entities are created by law, specifically, by the Constitution or by statute. In the
case of government-owned or controlled corporations, they are incorporated by virtue of
special charters263 to participate in the market for special reasons which may be related to
dysfunctions or inefficiencies of the market structure. This is to adjust reality as against the
concept of full competition where all market players are price takers. Thus, under the
Constitution, government-owned or controlled corporations are created in the interest of the
common good and should satisfy the test of economic viability.264 Article XII, Section 16 of the
Constitution provides:
Section 16. The Congress shall not, except by general law, provide for the formation,
organization, or regulation of private corporations. Government-owned or controlled
corporations may be created or established by special charters in the interest of the common
good and subject to the test of economic viability.
Economic viability is "the capacity to function efficiently in business."265 To be economically
viable, the entity "should not go into activities which the private sector can do better."266
To be considered a government-owned or controlled corporation, the entity must have been
organized as a stock or non-stock corporation.267
Government instrumentalities, on the other hand, are also created by law but partake of
sovereign functions. When a government entity performs sovereign functions, it need not meet
the test of economic viability. In Manila International Airport Authority v. Court of
Appeals,268 this court explained:
In contrast, government instrumentalities vested with corporate powers and performing
governmental orpublic functions need not meet the test of economic viability. These
instrumentalities perform essential public services for the common good, services that every
modern State must provide its citizens. These instrumentalities need not be economically
viable since the government may even subsidize their entire operations. These instrumentalities
are not the "government-owned or controlled corporations" referred to in Section 16, Article
XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government
instrumentalities vested with corporate powers but performing essential governmental or public
functions. Congress has plenary authority to create government instrumentalities vested with
corporate powers provided these instrumentalities perform essential government functions or
public services. However, when the legislature creates through special charters corporations
that perform economic or commercial activities, such entities — known as "government-owned
or controlled corporations" — must meetthe test of economic viability because they compete in
the market place.
....
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the
Constitutional Commission the purpose of this test, as follows:
MR. OPLE: Madam President, the reason for this concern is really that when the government
creates a corporation, there is a sense in which this corporation becomes exempt from the test
of economic performance. We know what happened in the past. If a government corporation
loses, then it makes its claim upon the taxpayers' money through new equity infusions from the
government and what is always invoked is the common good. That is the reason why this year,
out of a budget of ₱115 billion for the entire government, about ₱28 billion of this will go into
equity infusions to support a few government financial institutions. And this is all taxpayers'
money which could have been relocated to agrarian reform, to social services like health and
education, to augment the salaries of grossly underpaid public employees. And yet this is all
going down the drain.
Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common
good," this becomes a restraint on future enthusiasts for state capitalism to excuse themselves
from the responsibility of meeting the market test so that they become viable. And so, Madam
President, I reiterate, for the committee's consideration and I am glad that I am joined in this
proposal by Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR
THE ECONOMIC TEST," together with the common good.
....
Clearly, the test of economic viability does not apply to government entities vested with
corporate powers and performing essential public services. The State is obligated to render
essential public services regardless of the economic viability of providing such service. The
noneconomic viability of rendering such essential public service does not excuse the State from
withholding such essential services from the public.269 (Emphases and citations omitted)
The law created the PEZA’s charter. Under the Special Economic Zone Act of 1995, the PEZA
was established primarily to perform the governmental function of operating,administering,
managing, and developing special economic zones to attract investments and provide
opportunities for preferential use of Filipino labor.
Under its charter, the PEZA was created a body corporate endowed with some corporate
powers. However, it was not organized as a stock270 or non-stock271 corporation. Nothing in the
PEZA’s charter provides that the PEZA’s capital is divided into shares.272 The PEZA also has
no members who shall share in the PEZA’s profits.
The PEZA does not compete with other economic zone authorities in the country. The
government may even subsidize the PEZA’s operations. Under Section 47 of the Special
Economic Zone Act of 1995, "any sum necessary to augment [the PEZA’s] capital outlay shall
be included in the General Appropriations Act to be treated as an equity of the national
government."273
The PEZA, therefore, need not be economically viable. It is not a government-owned or
controlled corporation liable for real property taxes.
V. (B)
The PEZA assumed the non-profit character, including the tax exempt status, of the EPZA
The PEZA’s predecessor, the EPZA, was declared non-profit in character with all its revenues
devoted for its development, improvement, and maintenance. Consistent with this non-profit
character, the EPZA was explicitly declared exempt from real property taxes under its charter.
Section 21 of Presidential Decree No. 66 provides:
Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority shall
be non-profit and shall devote and use all its returns from its capital investment, as well as
excess revenues from its operations, for the development, improvement and maintenance and
other related expenditures of the Authority to pay its indebtedness and obligations and in
furtherance and effective implementation of the policy enunciated in Section 1 of this Decree.
In consonance therewith, the Authority is hereby declared exempt:
....
(b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and licenses
to be paid to the National Government, its provinces, cities, municipalities and other
government agencies and instrumentalities[.]
The Special Economic Zone Act of 1995, on the other hand, does not specifically exempt the
PEZA from payment of real property taxes.
Nevertheless, we rule that the PEZA is exempt from real property taxes by virtue of its charter.
A provision in the Special Economic Zone Act of 1995 explicitly exempting the PEZA is
unnecessary. The PEZA assumed the real property exemption of the EPZA under Presidential
Decree No. 66.
Section 11 of the Special Economic Zone Act of 1995 mandated the EPZA "to evolve into the
PEZA in accordance with the guidelines and regulations set forth in an executive order issued
for this purpose." President Ramos then issued Executive Order No. 282 in 1995, ordering the
PEZA to assume the EPZA’s powers, functions, and responsibilities under Presidential Decree
No. 66 not inconsistent with the Special Economic Zone Act of 1995:
SECTION 1. Assumption of EPZA’s Powers and Functions by PEZA. All the powers,
functions and responsibilities of EPZA as provided under its Charter, Presidential Decree No.
66, as amended, insofar as they are not inconsistent with the powers,functions and
responsibilities of the PEZA, as mandated under Republic Act No. 7916, shall hereafter be
assumed and exercised by the PEZA. Henceforth, the EPZA shall be referred to as the PEZA.
The following sections of the Special Economic Zone Act of 1995 provide for the PEZA’s
powers,functions, and responsibilities:
SEC. 5. Establishment of ECOZONES. – To ensure the viability and geographical dispersal of
ECOZONES through a system of prioritization, the following areas are initially identified as
ECOZONES, subject to the criteria specified in Section 6:
....
The metes and bounds of each ECOZONE are to be delineated and more particularly described
in a proclamation to be issued by the President of the Philippines, upon the recommendation of
the Philippine Economic Zone Authority (PEZA), which shall be established under this Act, in
coordination with the municipal and / or city council, National Land Use Coordinating
Committee and / or the Regional Land Use Committee.
SEC. 6. Criteria for the Establishment of Other ECOZONES. – In addition to the ECOZONES
identified in Section 5 of this Act, other areas may be established as ECOZONES in a
proclamation to be issued by the President of the Philippines subject to the evaluation and
recommendation of the PEZA, based on a detailed feasibility and engineering study which
must conform to the following criteria:
(a) The proposed area must be identified as a regional growth center in the Medium-Term
Philippine Development Plan or by the Regional Development Council;
(b) The existence of required infrastructure in the proposed ECOZONE, such as roads,
railways, telephones, ports, airports, etc., and the suitability and capacity of the proposed site to
absorb such improvements;
(c) The availability of water source and electric power supply for use of the ECOZONE;
(d) The extent of vacant lands available for industrial and commercial development and future
expansion of the ECOZONE as well as of lands adjacent to the ECOZONE available for
development of residential areas for the ECOZONE workers;
(e) The availability of skilled, semi-skilled and non-skilled trainable labor force in and around
the ECOZONE;
(f) The area must have a significant incremental advantage over the existing economic zones
and its potential profitability can be established;
(g) The area must be strategically located; and
(h) The area must be situated where controls can easily be established to curtail smuggling
activities.
Other areas which do not meet the foregoing criteria may be established as ECOZONES:
Provided, That the said area shall be developed only through local government and/or private
sector initiative under any of the schemes allowed in Republic Act No. 6957 (the build-
operate-transfer law), and without any financial exposure on the part of the national
government: Provided, further, That the area can be easily secured to curtail smuggling
activities: Provided, finally, That after five (5) years the area must have attained a substantial
degree of development, the indicators of which shall be formulated by the PEZA.
SEC. 7. ECOZONE to be a Decentralized Agro-Industrial, Industrial, Commercial / Trading,
Tourist, Investment and Financial Community. - Within the framework of the Constitution, the
interest of national sovereignty and territorial integrity of the Republic, ECOZONE shall be
developed, as much as possible, into a decentralized, self-reliant and self-sustaining industrial,
commercial/trading, agro-industrial, tourist, banking, financial and investment center with
minimum government intervention. Each ECOZONE shall be provided with transportation,
telecommunications, and other facilities needed to generate linkage with industries and
employment opportunitiesfor its own inhabitants and those of nearby towns and cities.
The ECOZONE shall administer itself on economic, financial, industrial, tourism development
and such other matters within the exclusive competence of the national government.
The ECOZONE may establish mutually beneficial economic relations with other entities
within the country, or, subject to the administrative guidance of the Department of Foreign
Affairs and/or the Department of Trade and Industry, with foreign entities or enterprises.
Foreign citizens and companies owned by non-Filipinos in whatever proportion may set up
enterprises in the ECOZONE, either by themselves or in joint venture with Filipinos in any
sector of industry, international trade and commerce within the ECOZONE. Their assets,
profits and other legitimate interests shall be protected: Provided, That the ECOZONE through
the PEZA may require a minimum investment for any ECOZONE enterprises in freely
convertible currencies: Provided, further, That the new investment shall fall under the
priorities, thrusts and limits provided for in the Act.
SEC. 8. ECOZONE to be Operated and Managed as Separate Customs Territory. – The
ECOZONE shall be managed and operated by the PEZA as separate customs territory.
The PEZA is hereby vested with the authority to issue certificate of origin for products
manufactured or processed in each ECOZONE in accordance with the prevailing rules or
origin, and the pertinent regulations of the Department of Trade and Industry and/or the
Department of Finance.
SEC. 9. Defense and Security. – The defense of the ECOZONE and the security of its
perimeter fence shall be the responsibility of the national government in coordination with the
PEZA. Military forces sent by the national government for the purpose of defense shall not
interfere in the internal affairs of any of the ECOZONE and expenditure for these military
forces shall be borne by the national government. The PEZA may provide and establish the
ECOZONES’ internal security and firefighting forces.
SEC. 10. Immigration. – Any investor within the ECOZONE whose initial investment shall not
be less than One Hundred Fifty Thousand Dollars ($150,000.00), his/her spouse and dependent
children under twenty-one (21) years of age shall be granted permanent resident status within
the ECOZONE. They shall have freedom of ingress and egress to and from the ECOZONE
without any need of special authorization from the Bureau of Immigration.
The PEZA shall issue working visas renewable every two (2) years to foreign executives and
other aliens, processing highly-technical skills which no Filipino within the ECOZONE
possesses, as certified by the Department of Labor and Employment. The names of aliens
granted permanent resident status and working visas by the PEZA shall be reported to the
Bureau of Immigration within thirty (30) days after issuance thereof.
SEC. 13. General Powers and Functions of the Authority. – The PEZA shall have the following
powers and functions:
(a) To operate, administer, manage and develop the ECOZONE according to the principles and
provisions set forth in this Act;
(b) To register, regulate and supervise the enterprises in the ECOZONE in an efficient and
decentralized manner;
(c) To coordinate with local government units and exercise general supervision over the
development, plans, activities and operations of the ECOZONES, industrial estates, export
processing zones, free trade zones, and the like;
(d) In coordination with local government units concerned and appropriate agencies, to
construct,acquire, own, lease, operate and maintain on its own or through contract, franchise,
license, bulk purchase from the private sector and build-operate-transfer scheme or joint
venture, adequate facilities and infrastructure, such as light and power systems, water supply
and distribution systems, telecommunication and transportation, buildings, structures,
warehouses, roads, bridges, ports and other facilities for the operation and development of the
ECOZONE;
(e) To create, operate and/or contractto operate such agencies and functional units or offices of
the authority as it may deem necessary;
(f) To adopt, alter and use a corporate seal; make contracts, lease, own or otherwise dispose of
personal or real property; sue and be sued; and otherwise carry out its duties and functions as
provided for in this Act;
(g) To coordinate the formulation and preparation of the development plans of the different
entities mentioned above;
(h) To coordinate with the National Economic Development Authority (NEDA), the
Department of Trade and Industry (DTI), the Department of Science and Technology (DOST),
and the local government units and appropriate government agencies for policy and program
formulation and implementation; and
(i) To monitor and evaluate the development and requirements of entities in subsection (a) and
recommend to the local government units or other appropriate authorities the location,
incentives, basic services, utilities and infrastructure required or to be made available for said
entities.
SEC. 17. Investigation and Inquiries. – Upon a written formal complaint made under oath,
which on its face provides reasonable basis to believe that some anomaly or irregularity might
have been committed, the PEZA or the administrator of the ECOZONE concerned, shall have
the power to inquire into the conduct of firms or employees of the ECOZONE and to conduct
investigations, and for that purpose may subpoena witnesses, administer oaths, and compel the
production of books, papers, and other evidences: Provided, That to arrive at the truth, the
investigator(s) may grant immunity from prosecution to any person whose testimony or whose
possessions of documents or other evidence is necessary or convenient to determine the truth in
any investigation conducted by him or under the authority of the PEZA or the administrator of
the ECOZONE concerned.
SEC. 21. Development Strategy of the ECOZONE. - The strategy and priority of development
of each ECOZONE established pursuant to this Act shall be formulated by the PEZA, in
coordination with the Department of Trade and Industry and the National Economic and
Development Authority; Provided, That such development strategy is consistent with the
priorities of the national government as outlined in the medium-term Philippine development
plan. It shall be the policy of the government and the PEZA to encourage and provide
Incentives and facilitate private sector participation in the construction and operation of public
utilities and infrastructure in the ECOZONE, using any of the schemes allowed in Republic
Act No. 6957 (the build-operate-transfer law).
SEC. 22. Survey of Resources. The PEZA shall, in coordination with appropriate authorities
and neighboring cities and municipalities, immediately conduct a survey of the physical,
natural assets and potentialities of the ECOZONE areas under its jurisdiction.
SEC. 26. Domestic Sales. – Goods manufactured by an ECOZONE enterprise shall be made
available for immediate retail sales in the domestic market, subject to payment of
corresponding taxes on the raw materials and other regulations that may be adopted by the
Board of the PEZA. However, in order to protect the domestic industry, there shall be a
negative list of Industries that willbe drawn up by the PEZA. Enterprises engaged in the
industries included in the negative list shall not be allowed to sell their products locally. Said
negative list shall be regularly updated by the PEZA.
The PEZA, in coordination with the Department of Trade and Industry and the Bureau of
Customs, shall jointly issue the necessary implementing rules and guidelines for the effective
Implementation of this section.
SEC. 29. Eminent Domain. – The areas comprising an ECOZONE may be expanded or
reduced when necessary. For this purpose, the government shall have the power to acquire,
either by purchase, negotiation or condemnation proceedings, any private lands within or
adjacent to the ECOZONE for:
a. Consolidation of lands for zone development purposes;
b. Acquisition of right of way to the ECOZONE; and
c. The protection of watershed areas and natural assets valuable to the prosperity of the
ECOZONE.
If in the establishment of a publicly-owned ECOZONE, any person or group of persons who
has been occupying a parcel of land within the Zone has to be evicted, the PEZA shall provide
the person or group of persons concerned with proper disturbance compensation: Provided,
however, That in the case of displaced agrarian reform beneficiaries, they shall be entitled to
the benefits under the Comprehensive Agrarian Reform Law, including but not limited to
Section 36 of Republic Act No. 3844, in addition to a homelot in the relocation site and
preferential employment in the project being undertaken.
SEC. 32. Shipping and Shipping Register. – Private shipping and related business including
private container terminals may operate freely in the ECOZONE, subject only to such
minimum reasonable regulations of local application which the PEZA may prescribe.
The PEZA shall, in coordination with the Department of Transportation and Communications,
maintain a shipping register for each ECOZONE as a business register of convenience for
ocean-going vessels and issue related certification.
Ships of all sizes, descriptions and nationalities shall enjoy access to the ports of the
ECOZONE, subject only to such reasonable requirement as may be prescribed by the PEZA In
coordination with the appropriate agencies of the national government.
SEC. 33. Protection of Environment. - The PEZA, in coordination with the appropriate
agencies, shall take concrete and appropriate steps and enact the proper measure for the
protection of the local environment.
SEC. 34. Termination of Business. - Investors In the ECOZONE who desire to terminate
business or operations shall comply with such requirements and procedures which the PEZA
shall set, particularly those relating to the clearing of debts. The assets of the closed enterprise
can be transferred and the funds con be remitted out of the ECOZONE subject to the rules,
guidelines and procedures prescribed jointly by the Bangko Sentral ng Pilipinas, the
Department of Finance and the PEZA.
SEC. 35. Registration of Business Enterprises. - Business enterprises within a designated
ECOZONE shall register with the PEZA to avail of all incentives and benefits provided for in
this Act.
SEC. 36. One Stop Shop Center. - The PEZA shall establish a one stop shop center for the
purpose of facilitating the registration of new enterprises in the ECOZONE. Thus, all
appropriate government agencies that are Involved In registering, licensing or issuing permits
to investors shall assign their representatives to the ECOZONE to attend to Investor’s
requirements.
SEC. 39. Master Employment Contracts. - The PEZA, in coordination with the Department of
Tabor and Employment, shall prescribe a master employment contract for all ECOZONE
enterprise staff members and workers, the terms of which provide salaries and benefits not less
than those provided under this Act, the Philippine Labor Code, as amended, and other relevant
issuances of the national government.
SEC. 41. Migrant Worker. - The PEZA, in coordination with the Department of Labor and
Employment, shall promulgate appropriate measures and programs leading to the expansion of
the services of the ECOZONE to help the local governments of nearby areas meet the needs of
the migrant workers.
SEC. 42. Incentive Scheme. - An additional deduction equivalent to one- half (1/2) of the value
of training expenses incurred in developing skilled or unskilled labor or for managerial or other
management development programs incurred by enterprises in the ECOZONE can be deducted
from the national government's share of three percent (3%) as provided In Section 24.
The PEZA, the Department of Labor and Employment, and the Department of Finance shall
jointly make a review of the incentive scheme provided In this section every two (2) years or
when circumstances so warrant.
SEC. 43. Relationship with the Regional Development Council. - The PEZA shall determine
the development goals for the ECOZONE within the framework of national development
plans, policies and goals, and the administrator shall, upon approval by the PEZA Board,
submit the ECOZONE plans, programs and projects to the regional development council for
inclusion in and as inputs to the overall regional development plan.
SEC. 44. Relationship with the Local Government Units. - Except as herein provided, the local
government units comprising the ECOZONE shall retain their basic autonomy and identity.
The cities shall be governed by their respective charters and the municipalities shall operate
and function In accordance with Republic Act No. 7160, otherwise known as the Local
Government Code of 1991.
SEC. 45. Relationship of PEZA to Privately-Owned Industrial Estates. – Privately-owned
industrial estates shall retain their autonomy and independence and shall be monitored by the
PEZA for the implementation of incentives.
SEC. 46. Transfer of Resources. - The relevant functions of the Board of Investments over
industrial estates and agri-export processing estates shall be transferred to the PEZA. The
resources of government owned Industrial estates and similar bodies except the Bases
Conversion Development Authority and those areas identified under Republic Act No. 7227,
are hereby transferred to the PEZA as the holding agency. They are hereby detached from their
mother agencies and attached to the PEZA for policy, program and operational supervision.
The Boards of the affected government-owned industrial estates shall be phased out and only
the management level and an appropriate number of personnel shall be retained.
Government personnel whose services are not retained by the PEZA or any government office
within the ECOZONE shall be entitled to separation pay and such retirement and other benefits
theyare entitled to under the laws then in force at the time of their separation: Provided, That in
no case shall the separation pay be less than one and one-fourth (1 1/4) month of every year of
service.
The non-profit character of the EPZA under Presidential Decree No. 66 is not inconsistent with
any of the powers, functions, and responsibilities of the PEZA. The EPZA’s non-profit
character, including the EPZA’s exemption from real property taxes, must be deemed assumed
by the PEZA.
In addition, the Local Government Code exempting instrumentalities of the national
government from real property taxes was already in force274 when the PEZA’s charter was
enacted in 1995. It would have been redundant to provide for the PEZA’s exemption in its
charter considering that the PEZA is already exempt by virtue of Section 133(o) of the Local
Government Code.
As for the EPZA, Commonwealth Act No. 470 or the Assessment Law was in force when the
EPZA’s charter was enacted. Unlike the Local Government Code, Commonwealth Act No. 470
does not contain a provision specifically exempting instrumentalities of the national
government from payment of real property taxes.275 It was necessary to put an exempting
provision in the EPZA’s charter.
Contrary to the PEZA’s claim, however, Section 24 of the Special Economic Zone Act of 1995
is not a basis for the PEZA’s exemption. Section 24 of the Special Economic Zone Act of 1995
provides:
Sec. 24. Exemption from National and Local Taxes. — Except for real property taxes on land
owned by developers, no taxes, local and national, shall be imposed on business establishments
operating within the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned
by all business enterprises within the ECOZONEshall be paid and remitted as follows:
(a) Three percent (3%) to the National Government;
(b) Two percent (2%) which shall be directly remitted by the business establishments to the
treasurer's office of the municipality or city where the enterprise is located. (Emphasis
supplied)
Tax exemptions provided under Section 24 apply only to business establishments operating
within economic zones. Considering that the PEZA is not a business establishment but an
instrumentality performing governmental functions, Section 24 is inapplicable to the PEZA.
Also, contrary to the PEZA’s claim, developers ofeconomic zones, whether public or private
developers, are liable for real property taxes on lands they own. Section 24 does not distinguish
between a public and private developer. Thus, courts cannot distinguish. 276 Unless the public
developer is exempt under the Local Government Code or under its charter enacted after the
Local Government Code’s effectivity, the public developer must pay real property taxes on
their land.
At any rate, the PEZA cannot be taxed for real property taxes even if it acts as a developer or
operator of special economic zones. The PEZA is an instrumentality of the national
government exempt from payment of real property taxes under Section 133(o) of the Local
Government Code. As this court said in Manila International Airport Authority, "there must be
express language in the law empowering local governments to tax national government
instrumentalities. Any doubt whether such power exists is resolved against local
governments."277
V. (C)
Real properties under the PEZA’s title are owned by the Republic of the Philippines
Under Section 234(a) of the LocalGovernment Code, real properties owned by the Republic of
the Philippines are exempt from real property taxes:
SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment
of real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person[.]
Properties owned by the state are either property of public dominion or patrimonial property.
Article 420 of the Civil Code of the Philippines enumerates property of public dominion:
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 belonging for public use, and are intended for
some public service or for the development of the national wealth.
Properties of public dominion are outside the commerce of man. These properties are exempt
from "levy, encumbrance or disposition through public or private sale."278 As this court
explained in Manila International Airport Authority:
Properties of public dominion, being for public use, are not subject to levy, encumbrance or
disposition through public or private sale. Any encumbrance, levy on execution or auction sale
of any property of public dominion is void for being contrary to public policy. Essential public
services will stop if properties of public dominion are subject to encumbrances, foreclosures
and auction sale[.]279
On the other hand, all other properties of the state that are not intended for public use or are not
intended for some public service or for the development of the national wealth are patrimonial
properties. Article 421 of the Civil Code of the Philippines provides:
Art. 421. All other property of the State, which is not of the character stated in the preceding
article, is patrimonial property.
Patrimonial properties are also properties of the state, but the state may dispose of its
patrimonial property similar to private persons disposing of their property. Patrimonial
properties are within the commerce of man and are susceptible to prescription, unless otherwise
provided.280
In this case, the properties sought to be taxed are located in publicly owned economic zones.
These economic zones are property of public dominion. The City seeks to tax properties
located within the Mactan Economic Zone,281 the site of which was reserved by President
Marcos under Proclamation No. 1811, Series of 1979. Reserved lands are lands of the public
domain set aside for settlement or public use, and for specific public purposes by virtue of a
presidential proclamation.282 Reserved lands are inalienable and outside the commerce of
man,283 and remain property of the Republic until withdrawn from publicuse either by law or
presidential proclamation.284 Since no law or presidential proclamation has been issued
withdrawing the site of the Mactan Economic Zone from public use, the property remains
reserved land.
As for the Bataan Economic Zone, the law consistently characterized the property as a port.
Under Republic Act No. 5490, Congress declared Mariveles, Bataan "a principal port of
entry"285 to serve as site of a foreign trade zone where foreign and domestic merchandise may
be brought in without being subject to customs and internal revenue laws and regulations of the
Philippines.286
Section 4 of Republic Act No. 5490 provided that the foreign trade zone in Mariveles, Bataan
"shall at all times remain to be owned by the Government":
SEC. 4. Powers and Duties.– The Foreign Trade Zone Authority shall have the following
powers and duties:
a. To fix and delimit the site of the Zone which at all times remain to be owned by the
Government, and which shall have a contiguous and adequate area with well defined and
policed boundaries, with adequate enclosures to segregate the Zone from the customs territory
for protection of revenues, together with suitable provisions for ingress and egress of persons,
conveyance, vessels and merchandise sufficient for the purpose of this Act[.] (Emphasis
supplied)
The port in Mariveles, Bataan then became the Bataan Economic Zone under the Special
Economic Zone Act of 1995.287 Republic Act No. 9728 then converted the Bataan Economic
Zone into the Freeport Area of Bataan.288
A port of entry, where imported goods are unloaded then introduced in the market for public
consumption, is considered property for public use. Thus, Article 420 of the Civil Code
classifies a port as property of public dominion. The Freeport Area of Bataan, where the
government allows tax and duty-free importation of goods,289 is considered property of public
dominion. The Freeport Area of Bataan is owned by the state and cannot be taxed under
Section 234(a) of the Local Government Code.
Properties of public dominion, even if titled in the name of an instrumentality as in this case,
remain owned by the Republic of the Philippines. If property registered in the name of an
instrumentality is conveyed to another person,the property is considered conveyed on behalf of
the Republic of the Philippines. Book I, Chapter 12, Section 48 of the Administrative Code of
1987 provides:
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:
....
(2) For property belonging to the Republic of the Philippines, but titled in the name of any
political subdivision orof any corporate agency or instrumentality, by the executive head of the
agency or instrumentality. (Emphasis supplied)
In Manila International Airport Authority, this court explained:
[The exemption under Section 234(a) of the Local Government Code] should be read in
relation with Section 133(o) of the same Code, which prohibits local governments from
imposing "[t]axes, fess or charges of any kind on the National Government, its agencies and
instrumentalitiesx x x." The real properties owned by the Republic are titled either in the name
of the Republic itself or in the name of agencies or instrumentalities of the National
Government.The Administrative Code allows real property owned by the Republic to be titled
in the name of agencies or instrumentalities of the national government. Such real properties
remained owned by the Republic of the Philippines and continue to be exempt from real estate
tax.
The Republic may grant the beneficialuse of its real property to an agency or instrumentality of
the national government. This happens when title of the real property is transferred to an
agency or instrumentality even as the Republic remains the owner of the real property. Such
arrangement does not result in the loss of the tax exemption/ Section 234(a) of the Local
Government Code states that real property owned by the Republic loses its tax exemption only
if the "beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person." . . .290 (Emphasis in the original; italics supplied)
Even the PEZA’s lands and buildings whose beneficial use have been granted to other persons
may not be taxed with real property taxes. The PEZA may only lease its lands and buildings to
PEZA-registered economic zone enterprises and entities. 291 These PEZA-registered enterprises
and entities, which operate within economic zones, are not subject to real property taxes. Under
Section 24 of the Special Economic Zone Act of 1995, no taxes, whether local or national,
shall be imposed on all business establishments operating within the economic zones: SEC. 24.
Exemption from National and Local Taxes. – Except for real property on land owned by
developers, no taxes, local and national, shall be imposed on business establishments operating
within the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all
business enterprises within the ECOZONE shall be paid and remitted as follows:
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the business establishments to the
treasurer’s office of the municipality or city where the enterprise is located.292 (Emphasis
supplied)
In lieu of revenues from real property taxes, the City of Lapu-Lapu collects two-fifths of 5%
final tax on gross income paid by all business establishments operating withinthe Mactan
Economic Zone:
SEC. 24. Exemption from National and Local Taxes. – Except for real property on land owned
by developers, no taxes, local and national, shall be imposed on business establishments
operating within the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned
by all business enterprises within the ECOZONE shall be paid and remitted as follows:
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the business establishments to the
treasurer’s office of the municipality or city where the enterprise is located.293 (Emphasis
supplied)
For its part, the Province of Bataan collects a fifth of the 5% final tax on gross income paid by
all business establishments operating within the Freeport Area of Bataan:
Section 6. Imposition of a Tax Rate of Five Percent (5%) on Gross Income Earned. - No taxes,
local and national, shall be imposed on business establishments operating withinthe FAB. In
lieu thereof, said business establishments shall pay a five percent (5%) final tax on their gross
income earned in the following percentages:
(a) One per centum (1%) to the National Government;
(b) One per centum (1%) to the Province of Bataan;

(c) One per centum (1%) to the treasurer's office of the Municipality of Mariveles; and

(d) Two per centum (2%) to the Authority of the Freeport of Area of Bataan.294 (Emphasis
supplied)

Petitioners, therefore, are not deprived of revenues from the operations of economic zones
within their respective territorial jurisdictions.

The national government ensured that loeal government units comprising economic zones shall
retain their basic autonomy and identity.295

All told, the PEZA is an instrumentality of the national government.1âwphi1 Furthermore, the

lands owned by the PEZA are real properties owned by the Republic of the Philippines. The
City of Lapu-Lapu and the Province of Bataan cannot collect real property taxes from the
PEZA.

WHEREFORE, the consolidated petitions are DENIED.