GAVINO A. TUMALAD and GENEROSA R. TUMALAD, Plaintiffs-Appellees, v.

ALBERTA VICENCIO and EMILIANO

SIMEON, Defendants-Appellants.

Castelo & Suck for Plaintiffs-Appellees.

Jose Q. Calingo, for Defendants-Appellants.

SYLLABUS

1. REMEDIAL LAW; SPECIAL CIVIL ACTION; UNLAWFUL DETAINER; CLAIM OF OWNERSHIP IS A MATTER OF
DEFENSE THEREIN. — In detainer cases the claim of ownership "is a matter of defense and raises an issue of fact
which should be determined from the evidence at the trial."cralaw virtua1aw library

2. CIVIL LAW; CONTRACTS; FRAUD OR DECEIT RENDERS CONTRACT VOIDABLE, NOT VOID AB INITIO. — Fraud
or deceit does not render a contract void ab initio, and can only be a ground for rendering the contract voidable or
annullable pursuant to Article 1390 of the New Civil Code, by a proper action in court.

3. ID.; ID.; PARTIES THERETO MAY TREAT AS PERSONAL PROPERTY THAT WHICH IS REAL PROPERTY. — In
the case of Manarang and Manarang v. Ofilada (99 Phil. 109), this Court stated that "it is undeniable that the parties to a
contract may by agreement treat as personal property that which by nature would be real property," citing Standard Oil
Company of New York v. Jaramillo (44 Phil. 632).

4. ID.; ID.; ID.; CASE AT BAR. — In the contract now before Us, the house on rented land is not only expressly
designated as Chattel Mortgage; it specifically provides that "the mortgagor. . . voluntarily CEDES, SELLS and
TRANSFERS by way of Chattel Mortgage the property together with its leasehold rights over the lot on which it is
constructed and participation . . ." Although there is no specific statement referring to the subject house as personal
property, yet by ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only
have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be
allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot to which
defendants-appellants merely had a temporary right as lessee, and although this can not in itself alone determine the
status of the property, it does so when combined with other factors to sustain the interpretation that the parties,
particularly the mortgagors, intended to treat the house as personality.

5. ID.; ID.; PARTIES ESTOPPED TO ASSAIL VALIDITY THEREOF. — It is the defendants-appellants themselves, as
debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case. The doctrine of estoppel therefore
applies to the herein defendants-appellants, having treated the subject house as personality.

6. ID.; ID.; MORTGAGE; FORECLOSURE; MORTGAGOR MAY BE ALLOWED POSSESSION DURING THE ONE-
YEAR PERIOD OF REDEMPTION. — Section 6 of the Act referred to (Act No. 3135) provides that the debtor-mortgagor
(defendants-appellants herein) may, at any time within one year from and after the date of the auction sale, redeem the
property sold at the extra judicial foreclosure sale. Section 7 of the same Act allows the purchaser of the property to obtain
from the court the possession during the period of redemption: but the same provision expressly requires the filing of a
petition with the proper Court of First Instance and the furnishing of a bond. It is only upon filing of the proper motion and
the approval of the corresponding bond that the order for a writ of possession issues as a matter of course. No discretion
is left to the court. In the absence of such a compliance, as in the instant case, the purchaser can not claim possession
during the period of redemption as a matter of right.

7. ID.; ID.; ID.; ID.; PURCHASER RECEIVING RENTALS DURING REDEMPTION PERIOD IS ACCOUNTABLE TO
MORTGAGOR; RATIONALE. — "In other words, before the expiration of the 1-year period within which the judgment-
debtor or mortgagor may redeem the property, the purchaser thereof is not entitled, as a matter of right, to possession of
the same. Thus, while it is true that the Rules of Court allow the purchaser to receive the rentals if the purchased property
is occupied by tenants, he is, nevertheless, accountable to the judgment-debtor or mortgagor as the case may be, for the
amount so received and the same will be duly credited against the redemption price when the said debtor or mortgagor
effects the redemption. Differently stated, the rentals receivable from tenants, although they may be collected by the
purchaser during the redemption period, do not belong to the latter but still pertain to the debtor or mortgagor. The
rationale for the Rule, it seems, is to secure for the benefit of the debtor or mortgagor, the payment of the redemption
amount and the consequent return to him of his properties sold at public auction." (Italics supplied)
REYES, J.B.L., J.:

Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R) for the reason that only questions of law are
involved.

This case was originally commenced by defendants-appellants in the municipal court of Manila in Civil Case No. 43073,
for ejectment. Having lost therein, defendants-appellants appealed to the court a quo (Civil Case No. 30993) which also
rendered a decision against them, the dispositive portion of which follows:jgc:chanrobles.com.ph

"WHEREFORE, the court hereby renders judgment in favor of the plaintiffs and against the defendants, ordering the latter
to pay jointly and severally the former a monthly rent of P200.00 on the house, subject-matter of this action, from March
27, 1956, to January 14, 1967, with interest at the legal rate from April 18, 1956, the filing of the complaint, until fully paid,
plus attorney’s fees in the sum of P300.00 and to pay the costs."cralaw virtua1aw library

It appears on the records that on 1 September 1955 defendants-appellants executed a chattel mortgage 1 in favor of
plaintiffs-appellees over their house of strong materials located at No. 550 Int. 3, Quezon Boulevard, Quiapo, Manila, over
Lot No. 6-B and 7-B, Block No. 2554, which were being rented from Madrigal & Company, Inc. The mortgage was
registered in the Registry of Deeds of Manila on 2 September 1955. The herein mortgage was executed to guarantee a
loan of P4,800.00 received from plaintiffs-appellees, payable within one year at 12% per annum. The mode of payment
was P150.00 monthly, starting September, 1955, up to July 1956, and the lump sum of P3,150 was payable on or before
August, 1956. It was also agreed that default in the payment of any of the amortizations would cause the remaining
unpaid balance to become immediately due and payable and —

"the Chattel Mortgage will be enforceable in accordance with the provisions of Special Act No. 3135, and for this purpose,
the Sheriff of the City of Manila or any of his deputies is hereby empowered and authorized to sell all the Mortgagor’s
property after the necessary publication in order to settle the financial debts of P4,500.00, plus 12% yearly interest, and
attorney’s fees. . ." 2

When defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27 March 1956, the
house was sold at public auction pursuant to the said contract. As highest bidder, plaintiffs-appellees were issued the
corresponding certificate of sale. 3 Thereafter, on 18 April 1956, plaintiffs-appellees commenced Civil Case No. 43073 in
the municipal court of Manila, praying, among other things, that the house be vacated and its possession surrendered to
them, and for defendants-appellants to pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is
surrendered. 4 On 21 September 1956, the municipal court rendered its decision —

". . . ordering the defendants to vacate the premises described in the complaint; ordering further to pay monthly the
amount of P200.00 from March 27, 1956, until such (time that) the premises is (sic) completely vacated; plus attorney’s
fees of P100.00 and the costs of the suit." 5

Defendants-appellants, in their answers in both the municipal court and court a quo impugned the legality of the chattel
mortgage, claiming that they are still the owners of the house; but they waived the right to introduce evidence, oral or
documentary. Instead, they relied on their memoranda in support of their motion to dismiss, predicated mainly on the
grounds that: (a) the municipal court did not have jurisdiction to try and decide the case because (1) the issue involved is
ownership, and (2) there was no allegation of prior possession; and (b) failure to prove prior demand pursuant to Section
2, Rule 72, of the Rules of Courts. 6

During the pendency of the appeal to the Court of First Instance, defendants-appellants failed to deposit the rent for
November, 1956 within the first 10 days of December, 1956 as ordered in the decision of the municipal court. As a result,
the court granted plaintiffs-appellees’ motion for execution, and it was actually issued on 24 January 1957. However, the
judgment regarding the surrender of possession to plaintiffs-appellees could not be executed because the subject house
had been already demolished on 14 January 1957 pursuant to the order of the court in a separate civil case (No. 25816)
for ejectment against the present defendants for non-payment of rentals on the land on which the house was constructed.

The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas bond and withdrawal of deposited
rentals was denied for the reason that the liability therefor was disclaimed and was still being litigated, and under Section
8, Rule 72, rentals deposited had to be held until final disposition of the appeal. 7

On 7 October 1957, the appellate court of First Instance rendered its decision, the dispositive portion of which is quoted
earlier. The said decision was appealed by defendants to the Court of Appeals which, in turn, certified the appeal to this
Court. Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision without it.
Defendants-appellants submitted numerous assignments of error which can be condensed into two questions,
namely:chanrob1es virtual 1aw library

(a) Whether the municipal court from which the case originated had jurisdiction to adjudicate the same;

(b) Whether the defendants are, under the law, legally bound to pay rentals to the plaintiffs during the period of one (1)
year provided by law for the redemption of the extrajudicially foreclosed house.

We will consider these questions seriatim.

(a) Defendants-appellants mortgagors question the jurisdiction of the municipal court from which the case originated, and
consequently, the appellate jurisdiction of the Court of First Instance a quo, on the theory that the chattel mortgage is void
ab initio; whence it would follow that the extrajudicial foreclosure, and necessarily the consequent auction sale, are also
void. Thus, the ownership of the house still remained with defendants-appellants who are entitled to possession and not
plaintiffs-appellees. Therefore, it is argued by defendants-appellants, the issue of ownership will have to be adjudicated
first in order to determine possession. It is contended further that ownership being in issue, it is the Court of First Instance
which has jurisdiction and not the municipal court.

Defendants-appellants predicate their theory of nullity of the chattel mortgage on two grounds, which are: (a) that their
signatures on the chattel mortgage were obtained through fraud, deceit, or trickery; and (b) that the subject matter of the
mortgage is a house of strong materials, and, being an immovable, it can only be the subject of a real estate mortgage
and not a chattel mortgage.

On the charge of fraud, deceit or trickery, the Court of First Instance found defendants-appellants’ contentions as not
supported by evidence and accordingly dismissed the charge, 8 confirming the earlier finding of the municipal court that
"the defense of ownership as well as the allegations of fraud and deceit . . . are mere allegations." 9

It has been held in Supia and Batiaco v. Quintero and Ayala 10 that "the answer is a mere statement of the facts which
the party filing it expects to prove, but it is not evidence; 11 and further, that when the question to be determined is one of
title, the Court is given the authority to proceed with the hearing of the cause until this fact is clearly established. In the
case of Sy v. Dalman, 12 wherein the defendant was also a successful bidder in an auction sale, it was likewise held by
this Court that in detainer cases the claim of ownership "is a matter of defense and raises an issue of fact which should be
determined from the evidence at the trial." What determines jurisdiction are the allegations or averments in the complaint
and the relief asked for. 13

Moreover, even granting that the charge is true, fraud or deceit does not render a contract void ab initio, and can only be a
ground for rendering the contract voidable or annullable pursuant to Article 1390 of the New Civil Code, by a proper action
in court. 14 There is nothing on record to show that the mortgage has been annulled. Neither is it disclosed that steps
were taken to nullify the same. Hence, defendants-appellants’ claim of ownership on the basis of a voidable contract
which has not been voided fails.

It is claimed in the alternative by defendants-appellants that even if there was no fraud, deceit or trickery, the chattel
mortgage was still null and void ab initio because only personal properties can be subject of a chattel mortgage. The rule
about the status of buildings as immovable property is stated in Lopez v. Orosa, Jr. and Plaza Theatre, Inc., 15 cited in
Associated Insurance Surety Co., Inc. v. Iya, Et. Al. 16 to the effect that —

". . . it is obvious that the inclusion of the building, separate and distinct from the land, in the enumeration of what may
constitute real properties (art. 415, New Civil Code) could only mean one thing — that a building is by itself an immovable
property irrespective of whether or not said structure and the land on which it is adhered to belong to the same
owner."cralaw virtua1aw library

Certain deviations, however, have been allowed for various reasons. In the case of Manarang and Manarang v. Ofilada,
17 is Court stated that "it is undeniable that the parties to a contract may by agreement treat as personal property that
which by ,nature would be real property", citing Standard Oil Company of New York v. Jaramillo. 18 In the latter case, the
mortgagor conveyed and transferred to the mortgagee by way of mortgage "the following described personal property." 19
The "personal property" consisted of leasehold rights and a building. Again, in the case of Luna v. Encarnacion, 20 the
subject of the contract designated as Chattel Mortgage was a house of mixed materials, and this Court held therein that it
was a valid Chattel mortgage because it was so expressly designated and specifically that the property given as security
"is a house of mixed materials, which by its very nature is considered personal property." In the later case of Navarro v.
Pineda, 21 this Court stated that —

"The view that parties to a deed of chattel mortgage may agree to consider a house as personal property for the purposes
of said contract, ‘is good only insofar as the contracting parties are concerned. It is based, partly, upon the principle of
estoppel’ (Evangelista v. Alto Surety, No. L-11139, 23 April 1958). In a case, a mortgaged house built on a rented land
was held to be a personal property, not only because the deed of mortgage considered it as such, but also because it did
not form part of the land (Evangelista v. Abad, [CA]; 36 O.G. 2913), for it is now settled that an object placed on land by
one who had only a temporary right to the same, such as the lessee or usufructuary, does not become immobilized by
attachment (Valdez v. Central Altagracia, 222 U.S. 58, cited in Davao Sawmill Co., Inc. v. Castillo, Et Al., 61 Phil. 709).
Hence, if a house belonging to a person stands on a rented land belonging to another person, it may be mortgaged as a
personal property as so stipulated in the document of mortgage. (Evangelista v. Abad, supra.) It should be noted, however
that the principle is predicated on statements by the owner declaring his house to be a chattel, a conduct that may
conceivably estop him from subsequently claiming otherwise." (Ladera v. C.N. Hodges, [CA] 48 O.G. 5374). 22

In the contract now before Us, the house on rented land is not only expressly designated as Chattel Mortgage; it
specifically provides that "the mortgagor . . . voluntarily CEDES, SELLS and TRANSFERS by way of Chattel Mortgage 23
the property together with its leasehold rights over the lot on which it is constructed and participation . . ." 24 Although
there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a
property by way of chattel mortgage defendants-appellants could only have meant to convey the house as chattel, or at
least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by
claiming otherwise. Moreover, the subject house stood on a rented lot to which defendants-appellants merely had a
temporary right as lessee, and although this can not in itself alone determine the status of the property, it does so when
combined with other factors to sustain the interpretation that the parties, particularly the mortgagors, intended to treat the
house as personality. Finally, unlike in the Iya cases, Lopez v. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung Yee v. F.
L. Strong Machinery and Williamson, 26 wherein third persons assailed the validity of the chattel mortgage, 27 it is the
defendants-appellants themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage in this
case. The doctrine of estoppel therefore applies to the herein defendants-appellants, having treated the subject house as
personalty.

(b) Turning now to the question of possession and rentals of the premises in question. The Court of First Instance noted in
its decision that nearly a year after the foreclosure sale the mortgaged house had been demolished on 14 and 15 January
1957 by virtue of a decision obtained by the lessor of the land on which the house stood. For this reason, the said court
limited itself to sentencing the erstwhile mortgagors to pay plaintiffs a monthly rent of P200.00 from 27 March 1956 (when
the chattel mortgage was foreclosed and the house sold) until 14 January 1957 (when it was torn down by the Sheriff),
plus P300.00 attorney’s fees.

Appellants mortgagors question this award, claiming that they were entitled to remain in possession without any obligation
to pay rent during the one year redemption period after the foreclosure sale, i.e., until 27 March 1957. On this issue, We
must rule for the appellants.

Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act No. 1508. 28 Section 14 of this Act allows
the mortgagee to have the property mortgaged sold at public auction through a public officer in almost the same manner
as that allowed by Act No. 3135, as amended by Act No. 4118, provided that the requirements of the law relative to notice
and registration are complied with. 29 In the instant case, the parties specifically stipulated that "the chattel mortgage will
be enforceable in accordance with the provisions of Special Act No. 3135 . . ." 30 (Emphasis supplied).

Section 6 of the Act referred to 31 provides that the debtor-mortgagor (defendants-appellants herein) may, at any time
within one year from and after the date of the auction sale, redeem the property sold at the extra judicial foreclosure sale.
Section 7 of the same Act 32 allows the purchaser of the property to obtain from the court the possession during the
period of redemption: but the same provision expressly requires the filing of a petition with the proper Court of First
Instance and the furnishing of a bond. It is only upon filing of the proper motion and the approval of the corresponding
bond that the order for a writ of possession issues as a matter of course. No discretion is left to the court. 33 In the
absence of such a compliance, as in the instant case, the purchaser can not claim possession during the period of
redemption as a matter of right. In such a case, the governing provision is Section 34, Rule 39, of the Revised Rules of
Court 34 which also applies to properties purchased in extrajudicial foreclosure proceedings. 35 Construing the said
section, this Court stated in the aforestated case of Reyes v. Hamada,

"In other words, before the expiration of the 1-year period within which the judgment-debtor or mortgagor may redeem the
property, the purchaser thereof is not entitled, as a matter of right, to possession of the same. Thus, while it is true that the
Rules of Court allow the purchaser to receive the rentals if the purchased property is occupied by tenants, he is,
nevertheless, accountable to the judgment-debtor or mortgagor as the case may be, for the amount so received and the
same will be duly credited against the redemption price when the said debtor or mortgagor effects the redemption.
Differently stated, the rentals receivable from tenants, although they may be collected by the purchaser during the
redemption period, do not belong to the latter but still pertain to the debtor of mortgagor. The rationale for the Rule, it
seems, is to secure for the benefit of the debtor or mortgagor, the payment of the redemption amount and the consequent
return to him of his properties sold at public auction." (Emphasis supplied)

The Hamada case reiterates the previous ruling in Chan v. Espe. 36

Since the defendants-appellants were occupying the house at the time of the auction sale, they are entitled to remain in
possession during the period of redemption or within one year from and after 27 March 1956, the date of the auction sale,
and to collect the rents or profits during the said period.

It will be noted further that in the case at bar the period of redemption had not yet expired when action was instituted in
the court of origin, and that plaintiffs-appellees did not choose to take possession under Section 7, Act No. 3135, as
amended, which is the law selected by the parties to govern the extrajudicial foreclosure of the chattel mortgage. Neither
was there an allegation to that effect. Since plaintiffs-appellees’ right to possess was not yet born at the filing of the
complaint, there could be no violation or breach thereof. Wherefore, the original complaint stated no cause of action and
was prematurely filed. For this reason, the same should be ordered dismissed, even if there was no assignment of error to
that effect. The Supreme Court is clothed with ample authority to review palpable errors not assigned as such if it finds
that their consideration is necessary in arriving at a just decision of the case. 37

It follows that the court below erred in requiring the mortgagors to pay rents for the year following the foreclosure sale, as
well as attorney’s fees.

FOR THE FOREGOING REASONS, the decision appealed from is reversed and another one entered, dismissing the
complaint. With costs against Plaintiffs-Appellees.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ.,
concur.

MANILA ELECTRIC COMPANY, petitioner,

vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF BATANGAS and
PROVINCIAL ASSESSOR OF BATANGAS, respondents.

AQUINO, J.:

This case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by Manila Electric Company on
a lot in San Pascual, Batangas which it leased in 1968 from Caltex (Phil.), Inc. The tanks are within the Caltex refinery
compound. They have a total capacity of 566,000 barrels. They are used for storing fuel oil for Meralco's power plants.

According to Meralco, the storage tanks are made of steel plates welded and assembled on the spot. Their bottoms rest
on a foundation consisting of compacted earth as the outermost layer, a sand pad as the intermediate layer and a two-
inch thick bituminous asphalt stratum as the top layer. The bottom of each tank is in contact with the asphalt layer,

The steel sides of the tank are directly supported underneath by a circular wall made of concrete, eighteen inches thick, to
prevent the tank from sliding. Hence, according to Meralco, the tank is not attached to its foundation. It is not anchored or
welded to the concrete circular wall. Its bottom plate is not attached to any part of the foundation by bolts, screws or
similar devices. The tank merely sits on its foundation. Each empty tank can be floated by flooding its dike-inclosed
location with water four feet deep. (pp. 29-30, Rollo.)

On the other hand, according to the hearing commissioners of the Central Board of Assessment Appeals, the area where
the two tanks are located is enclosed with earthen dikes with electric steel poles on top thereof and is divided into two
parts as the site of each tank. The foundation of the tanks is elevated from the remaining area. On both sides of the
earthen dikes are two separate concrete steps leading to the foundation of each tank.
Tank No. 2 is supported by a concrete foundation with an asphalt lining about an inch thick. Pipelines were installed on
the sides of each tank and are connected to the pipelines of the Manila Enterprises Industrial Corporation whose buildings
and pumping station are near Tank No. 2.

The Board concludes that while the tanks rest or sit on their foundation, the foundation itself and the walls, dikes and
steps, which are integral parts of the tanks, are affixed to the land while the pipelines are attached to the tanks. (pp. 60-
61, Rollo.) In 1970, the municipal treasurer of Bauan, Batangas, on the basis of an assessment made by the provincial
assessor, required Meralco to pay realty taxes on the two tanks. For the five-year period from 1970 to 1974, the tax and
penalties amounted to P431,703.96 (p. 27, Rollo). The Board required Meralco to pay the tax and penalties as a condition
for entertaining its appeal from the adverse decision of the Batangas board of assessment appeals.

The Central Board of Assessment Appeals (composed of Acting Secretary of Finance Pedro M. Almanzor as chairman
and Secretary of Justice Vicente Abad Santos and Secretary of Local Government and Community Development Jose
Roño as members) in its decision dated November 5, 1976 ruled that the tanks together with the foundation, walls, dikes,
steps, pipelines and other appurtenances constitute taxable improvements.

Meralco received a copy of that decision on February 28, 1977. On the fifteenth day, it filed a motion for reconsideration
which the Board denied in its resolution of November 25, 1977, a copy of which was received by Meralco on February 28,
1978.

On March 15, 1978, Meralco filed this special civil action of certiorari to annul the Board's decision and resolution. It
contends that the Board acted without jurisdiction and committed a grave error of law in holding that its storage tanks are
taxable real property.

Meralco contends that the said oil storage tanks do not fall within any of the kinds of real property enumerated in article
415 of the Civil Code and, therefore, they cannot be categorized as realty by nature, by incorporation, by destination nor
by analogy. Stress is laid on the fact that the tanks are not attached to the land and that they were placed on leased land,
not on the land owned by Meralco.

This is one of those highly controversial, borderline or penumbral cases on the classification of property where strong
divergent opinions are inevitable. The issue raised by Meralco has to be resolved in the light of the provisions of the
Assessment Law, Commonwealth Act No. 470, and the Real Property Tax Code, Presidential Decree No. 464 which took
effect on June 1, 1974.

Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings, machinery,
and other improvements" not specifically exempted in section 3 thereof. This provision is reproduced with some
modification in the Real Property Tax Code which provides:

Sec. 38. Incidence of Real Property Tax. — They shall be levied, assessed and collected in all provinces,
cities and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery
and other improvements affixed or attached to real property not hereinafter specifically exempted.

The Code contains the following definition in its section 3:

k) Improvements — is a valuable addition made to property or an amelioration in its condition, amounting

to more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its
value, beauty or utility or to adapt it for new or further purposes.

We hold that while the two storage tanks are not embedded in the land, they may, nevertheless, be considered as
improvements on the land, enhancing its utility and rendering it useful to the oil industry. It is undeniable that the two tanks
have been installed with some degree of permanence as receptacles for the considerable quantities of oil needed by
Meralco for its operations.

Oil storage tanks were held to be taxable realty in Standard Oil Co. of New Jersey vs. Atlantic City, 15 Atl. 2nd 271.

For purposes of taxation, the term "real property" may include things which should generally be regarded as personal
property(84 C.J.S. 171, Note 8). It is a familiar phenomenon to see things classed as real property for purposes of
taxation which on general principle might be considered personal property (Standard Oil Co. of New York vs. Jaramillo, 44
Phil. 630, 633).
The case of Board of Assessment Appeals vs. Manila Electric Company, 119 Phil. 328, wherein Meralco's steel towers
were held not to be subject to realty tax, is not in point because in that case the steel towers were regarded as poles and
under its franchise Meralco's poles are exempt from taxation. Moreover, the steel towers were not attached to any land or
building. They were removable from their metal frames.

Nor is there any parallelism between this case and Mindanao Bus Co. vs. City Assessor, 116 Phil. 501, where the tools
and equipment in the repair, carpentry and blacksmith shops of a transportation company were held not subject to realty
tax because they were personal property.

WHEREFORE, the petition is dismissed. The Board's questioned decision and resolution are affirmed. No costs.

SO ORDERED.

MAKATI LEASING and FINANCE CORPORATION, Petitioner, v. WEAREVER TEXTILE MILLS, INC., and
HONORABLE COURT OF APPEALS, Respondents.

Loreto C. Baduan for Petitioner.

Ramon D. Bagatsing & Assoc. (collaborating counsel) for Petitioner.

Jose V. Mancella for Respondent.

SYLLABUS

1. REMEDIAL LAW; PETITION FOR REVIEW; NOT RENDERED MOOT AND ACADEMIC; WHERE RIGHT TO
QUESTION DECISION, TIMELY RESERVED. — The contention of private respondent is without merit. When petitioner
returned the subject motor drive, it made itself unequivocably clear that said action was without prejudice to a motion for
reconsideration of the Court of Appeals’ decision, as shown by the receipt duly signed by respondent’s representative.
Considering that petitioner has reserved its right to question the propriety of the Court of Appeals’ decision, the contention
of private respondent that this petition has been mooted by such return may not be sustained.

2. CIVIL LAW; PROPERTY; MACHINERY THOUGH IMMOBILIZED BY DESTINATION IF TREATED BY THE PARTIES
AS A PERSONALTY FOR PURPOSES OF A CHATTEL MORTGAGE LEGAL, WHERE NO THIRD PARTY IS
PREJUDICED. — The next and the more crucial question to be resolved in this petition is whether the machinery in suit is
real or personal property from the point of view of the parties. Examining the records of the instance case, the Supreme
Court found no logical justification to exclude and rule out, as the appellate court did, the present case from the
application of the pronouncement in the TUMALAD v. VICENCIO CASE (41 SCRA 143) where a similar, if not identical
issue was raised. If a house of strong materials, like what was involved in the Tumalad case may be considered as
personal property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree
and no innocent third party will be prejudiced thereby, there is absolutely no reason why a machinery, which is movable in
its nature and becomes immobilized only by destination or purpose, may not be likewise treated as such. This is really
because one who has so agreed is estopped from denying the existence of the chattel mortgage.

3. ID.; ID.; ID.; COURT SHOULD NOT MAKE DISTINCTIONS, WHERE THE LAW DOES NOT. — In rejecting petitioner’s
assertion on the applicability of the Tumalad doctrine, the Court of Appeals lays stress on the fact that the house involved
therein was built on a land that did not belong to the owner of such house. But the law makes no distinction with respect to
the ownership of the land on which the house is built and the Supreme Court should not lay down distinctions not
contemplated by law.

4. ID.; ID.; ID.; CHARACTERIZATION OF PROPERTY, INDICATIVE OF THE INTENTION OF THE PARTIES. — It must
be pointed out that the characterization of the subject machinery as chattel by the private respondent is indicative of
intention and impresses upon the property the character determined by the parties. As stated in Standard Oil Co. of New
York v. Jaramillo, 44 Phil. 630, it is undeniable that the parties to a contract may by agreement treat as personal property
that which by nature would be real property, as long as no interest of third parties would be prejudiced thereby.
5. CIVIL LAW; ESTOPPEL; REPRESENTING OR AGREEING ON THE CONSTITUTION OF A PROPERTY AS
CHATTEL; A CASE THEREOF. — Private respondent contends that estoppel cannot apply against it because it had
never represented nor agreed that the machinery in suit he considered as personal property but was merely required and
dictated on by herein petitioner to sign a printed form of chattel mortgage which was in a blank format the time of signing.
This contention lacks persuasiveness. As aptly pointed out by petitioner and not denied by the respondent, the status of
the subject machine as movable or immovable was never placed in issue before the lower court and the Court of Appeals
except ins supplemental memorandum in support of the petition filed in the appellate court.

6. ID.; CONTRACT; TREATING A MACHINERY AS A CHATTEL; AGREEMENT DEEMED VALID UNLESS ANNULLED
OR VOIDED IN A PROPER ACTION. — Moreover, even granting that the charge is true, such fact alone does not render
a contract void ab initio, but can only be a ground for rendering said contract voidable or annullable pursuant to Article
1390 of the new Civil Code, by a proper action in court. There is nothing on record to show that the mortgage has been
annulled. Neither is it disclosed that steps were taken to nullify the same.

7. ID.; ID.; UNDUE BENEFIT OVER A CONTRACT AT THE EXPENSE OF ANOTHER NOT COUNTENANCED BY
EQUITY. — On the other hand, as pointed out by petitioner and again not refuted by respondent, the latter has indubitably
benefited from said contract. Equity dictates that one should not benefit at the expense of another. Private respondent
could not now therefore, he allowed to impugn the efficacy of the chattel mortgage after it has benefited therefrom.

DECISION

DE CASTRO, J.:

Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate Appellate Court) promulgation
August 27, 1981 in CA-G.R. No. SP-12731, setting aside certain Orders later specified herein, of Judge Ricardo J.
Francisco, as Presiding Judge of the Court of First Instance of Rizal, Branch VI, issued in Civil Case No. 36040, as well as
the resolution dated September 22, 1981 of the said appellate court, denying petitioner’s motion for reconsideration.

It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and Finance
Corporation, the private respondent Wearever Textile Mills, Inc., discounted and assigned several receivables with the
former under a Receivable Purchase Agreement. To secure the collection of the receivables assigned, private respondent
executed a Chattel Mortgage over certain raw materials inventory as well as a machinery described as an Artos Aero
Dryer Stentering Range.

Upon private respondent’s default, petitioner filed a petition for extrajudicial foreclosure of the properties mortgage to it.
However, the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into private respondent’s premises
and was not able to effect the seizure of the aforedescribed machinery. Petitioner thereafter filed a complaint for judicial
foreclosure with the Court of First Instance of Rizal, Branch VI, docketed as Civil Case No. 36040, the case before the
lower court.cralawnad

Acting on petitioner’s application for replevin, the lower court issued a writ of seizure, the enforcement of which was
however subsequently restrained upon private respondent’s filing of a motion for reconsideration. After several incidents,
the lower court finally issued on February 11, 1981, an order lifting the restraining order for the enforcement of the writ of
seizure and an order to break open the premises of private respondent to enforce said writ. The lower court reaffirmed its
stand upon private respondent’s filing of a further motion for reconsideration.

On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of private respondent and removed the
main drive motor of the subject machinery.

The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private respondent, set aside
the Orders of the lower court and ordered the return of the drive motor seized by the sheriff pursuant to said Orders, after
ruling that the machinery in suit cannot be the subject of replevin, much less of a chattel mortgage, because it is a real
property pursuant to Article 415 of the new Civil Code, the same being attached to the ground by means of bolts and the
only way to remove it from respondent’s plant would be to drill out or destroy the concrete floor, the reason why all that the
sheriff could do to enforce the writ was to take the main drive motor of said machinery. The appellate court rejected
petitioner’s argument that private respondent is estopped from claiming that the machine is real property by constituting a
chattel mortgage thereon.

A motion for reconsideration of this decision of the Court of Appeals having been denied, petitioner has brought the case
to this Court for review by writ of certiorari. It is contended by private respondent, however, that the instant petition was
rendered moot and academic by petitioner’s act of returning the subject motor drive of respondent’s machinery after the
Court of Appeals’ decision was promulgated.

The contention of private respondent is without merit. When petitioner returned the subject motor drive, it made itself’
unequivocably clear that said action was without prejudice to a motion for reconsideration of the Court of Appeals
decision, as shown by the receipt duly signed by respondent’s representative. 1 Considering that petitioner has reserved
its right to question the propriety of the Court of Appeals’ decision, the contention of private respondent that this petition
has been mooted by such return may not be sustained.

The next and the more crucial question to be resolved in this petition is whether the machinery in suit is real or personal
property from the point of view of the parties, with petitioner arguing that it is a personalty, while the respondent claiming
the contrary, and was sustained by the appellate court, which accordingly held that the chattel mortgage constituted
thereon is null and void, as contended by said Respondent.chanrobles law library : red

A similar, if not identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this Court, speaking through
Justice J.B.L. Reyes, ruled:jgc:chanrobles.com.ph

"Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or
transferring a property by way of chattel mortgage defendants-appellants could only have meant to convey the house as
chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent
stand by claiming otherwise. Moreover, the subject house stood on a rented lot to which defendants-appellants merely
had a temporary right as lessee, and although this can not in itself alone determine the status of the property, it does so
when combined with other factors to sustain the interpretation that the parties, particularly the mortgagors, intended to
treat the house as Personalty. Finally, unlike in the Iya cases, Lopez v. Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee v.
F.L. Strong Machinery & Williamson, wherein third persons assailed the validity of the chattel mortgage, it is the
defendants-appellants themselves, as debtors mortgagors, who are attacking the validity of the chattel mortgage in this
case. The doctrine of estoppel therefore applies to the herein defendants appellants, having treated the subject house as
personalty."cralaw virtua1aw library

Examining the records of the instant case, We find no logical justification to exclude the rule out, as the appellate court
did, the present case from the application of the abovequoted pronouncement. If a house of strong materials, like what
was involved in the above Tumalad case, may be considered as personal property for purposes of executing a chattel
mortgage thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby,
there is absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by
destination or purpose, may not be likewise treated as such. This is really because one who has so agreed is estopped
from denying the existence of the chattel mortgage.

In rejecting petitioner’s assertion on the applicability of the Tumalad doctrine, the Court of Appeals lays stress on the fact
that the house involved therein was built on a land that did not belong to the owner of such house. But the law makes no
distinction with respect to the ownership of the land on which the house is built and We should not lay down distinctions
not contemplated by law.

It must be pointed out that the characterization of the subject machinery as chattel by the private respondent is indicative
of intention and impresses upon the property the character determined by the parties. As stated in Standard Oil Co. of
New York v. Jaramillo, 44 Phil. 630, it is undeniable that the parties to a contract may by agreement treat as personal
property that which by nature would be real property, as long as no interest of third parties would be prejudiced thereby.

Private respondent contends that estoppel cannot apply against it because it had never represented nor agreed that the
machinery in suit be considered as personal property but was merely required and dictated on by herein petitioner to sign
a printed form of chattel mortgage which was in a blank form at the time of signing. This contention lacks persuasiveness.
As aptly pointed out by petitioner and not denied by the respondent, the status of the subject machinery as movable or
immovable was never placed in issue before the lower court and the Court of Appeals except in a supplemental
memorandum in support of the petition filed in the appellate court. Moreover, even granting that the charge is true, such
fact alone does not render a contract void ab initio, but can only be a ground for rendering said contract voidable, or
annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court. There is nothing on record to show
that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same. On the other hand,
as pointed out by petitioner and again not refuted by respondent, the latter has indubitably benefited from said contract.
Equity dictates that one should not benefit at the expense of another. Private respondent could not now therefore, be
allowed to impugn the efficacy of the chattel mortgage after it has benefited therefrom.cralawnad

From what has been said above, the error of the appellate court in ruling that the questioned machinery is real, not
personal property, becomes very apparent. Moreover, the case of Machinery and Engineering Supplies, Inc. v. CA, 96
Phil. 70, heavily relied upon by said court is not applicable to the case at bar, the nature of the machinery and equipment
involved therein as real properties never having been disputed nor in issue, and they were not the subject of a Chattel
Mortgage. Undoubtedly, the Tumalad case bears more nearly perfect parity with the instant case to be the more
controlling jurisprudential authority.

WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby reversed and set aside, and the
Orders of the lower court are hereby reinstated, with costs against the private Respondent.

SO ORDERED.

Makasiar (Chairman), Aquino, Concepcion, Jr., Guerrero and Escolin, JJ., concur.

Abad Santos, J., concurs in the result.

NIMFA USERO, petitioner,

vs.
COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents.

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

G.R. No. 155055 January 26, 2005

LUTGARDA R. SAMELA, petitioner,

vs.
COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents.

DECISION

CORONA, J.:

Before this Court are two consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. The first
petition, docketed as G.R. No. 152115, filed by Nimfa Usero, assails the September 19, 2001 decision1 of the Court of
Appeals in CA-GR SP No. 64718. The second petition, docketed as G.R. No. 155055, filed by Lutgarda R. Samela,
assails the January 11, 2002 decision 2 of the Court of Appeals in CA-GR SP NO. 64181.

The undisputed facts follow.

Petitioners Lutgarda R. Samela and Nimfa Usero are the owners respectively of lots 1 and 2, Block 5, Golden Acres
Subdivision, Barrio Almanza, Las Piñas City.

Private respondent spouses Polinar are the registered owners of a parcel of land at no. 18 Anahaw St., Pilar Village, Las
Piñas City, behind the lots of petitioners Samela and Usero.

Situated between the lots of the parties is a low-level strip of land, with a stagnant body of water filled with floating water
lilies; abutting and perpendicular to the lot of petitioner Samela, the lot of the Polinars and the low-level strip of land is the
perimeter wall of Pilar Village Subdivision.

Apparently, every time a storm or heavy rains occur, the water in said strip of land rises and the strong current passing
through it causes considerable damage to the house of respondent Polinars. Frustrated by their predicament, private
respondent spouses, on July 30, 1998, erected a concrete wall on the bank of the low-level strip of land about three
meters from their house and rip-rapped the soil on that portion of the strip of land.

Claiming ownership of the subject strip of land, petitioners Samela and Usero demanded that the spouses Apolinar stop
their construction but the spouses paid no heed, believing the strip to be part of a creek. Nevertheless, for the sake of
peace, the Polinars offered to pay for the land being claimed by petitioners Samela and Usero. However, the parties failed
to settle their differences.

On November 9, 1998, petitioners filed separate complaints for forcible entry against the Polinars at the Metropolitan Trial
Court of Las Piñas City. The case filed by petitioner Samela was docketed as Civil Case No. 5242, while that of petitioner
Usero was docketed as Civil Case No. 5243.

In Civil Case No. 5242, petitioner Samela adduced in evidence a copy of her Transfer Certificate of Title, plan of
consolidation, subdivision survey, the tax declaration in her name, and affidavits of petitioner Usero and a certain Justino
Gamela whose property was located beside the perimeter wall of Pilar Village.

The spouses Polinar, on the other hand, presented in evidence their own TCT; a barangay certification as to the existence
of the creek; a certification from the district engineer that the western portion of Pilar Village is bound by a tributary of
Talon Creek throughout its entire length; boundary and index map of Pilar Village showing that the village is surrounded
by a creek and that the Polinar property is situated at the edge of said creek; and pictures of the subject strip of land filled
with water lilies.

On March 22, 1999, the trial court rendered a decision in favor of petitioner Samela:

WHEREFORE, the Court hereby renders judgment ordering the defendants to vacate and remove at their expense the
improvements made on the subject lot; ordering the defendants to pay the plaintiff ₱1,000.00 a month as reasonable
compensation for the use of the portion encroached from the filing of the complaint until the same is finally vacated; and to
pay plaintiff ₱10,000.00 as reasonable attorney’s fees plus costs of suit. 31ªvvphi1.nét

In a parallel development, the Metropolitan Trial Court, in Civil Case No. 5243, issued an order on February 29, 2000,
directing petitioner Usero and the Polinar spouses to commission a professional geodetic engineer to conduct a relocation
survey and to submit the report to the trial court.

On April 24, 2000, Mariano Flotilde, a licensed geodetic engineer, conducted a relocation survey of Usero’s property
covered by TCT No. T- 29545. The result of the said relocation survey, as stated in his affidavit, was as follows:

1. That I executed a relocation survey of Lot 2, Block 5, (LRC) PCS-4463 covered by TCT No. T-29545 registered
in the name of Nimfa O. Usero;

2. That according to my survey, I found out that there is no existing creek on the boundary of the said lot;

3. That based on the relocation plan surveyed by the undersigned, attached herewith, appearing is the
encroachment on the above-mentioned lot by Spouses Herminigildo and Cecilia Polinar with an area of FORTY
THREE (43) SQUARE METERS;

4. That this affidavit was made in compliance with Court Order dated February 23, 2000 of Metropolitan Trial
Court, Las Piñas City, Branch LXXIX.4

On August 25, 2000, the Metropolitan Trial Court decided in favor of petitioner Usero:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them:

a) To vacate and remove at their expense the improvement made on the subject lot;

b) To pay the plaintiff ₱1,000.00 a month as reasonable compensation for the portion encroached from the time of
the filing of the complaint until the same is finally vacated;

c) To pay plaintiff ₱10,000.00 as reasonable attorney’s fees plus costs of suit.

SO ORDERED.5

The Polinar spouses appealed the decisions of the two Municipal Trial Courts to the Regional Trial Court of Las Piñas,
Branch 253 which heard the appeals separately.
On December 20, 2000, the Regional Trial Court, deciding Civil Case No. 5242, reversed the decision of the trial court
and ordered the dismissal of the complaint. It confirmed the existence of the creek between the northwestern portion of
the lot of petitioner Samela and the southwestern portion of the lot of the spouses Polinar:

Finding the existence of a creek between the respective properties of the parties, plaintiff-appellee cannot therefore lay
claim of lawful ownership of that portion because the same forms part of public dominion.1a\^/phi1.net Consequently, she
cannot legally stop the defendants-appellants from rip-rapping the bank of the creek to protect the latter’s property from
soil erosion thereby avoiding danger to their lives and damage to property.

Absent a lawful claim by the plaintiff-appellee over the subject portion of that lot, defendants-appellants are not duty
bound to pay the former compensation for the use of the same. As a result, they may maintain the said improvements
introduced thereon subject to existing laws, rules and regulations and/or ordinances appurtenant thereto.

WHEREFORE, premises considered, the Decision rendered by Branch 79 of the Metropolitan Trial Court, Las Piñas is
REVERSED. Accordingly, the instant complaint is DISMISSED.

SO ORDERED.6

On March 16, 2001, the Regional Trial Court, in Civil Case No. 5243, also reversed the finding of the Municipal Trial
Court:

From the foregoing, defendants-appellants may maintain the improvements introduced on the subject portion of the lot
subject to existing laws, rules and regulations and/or ordinances pertaining thereto. Consequently, no compensation may
be awarded in favor of the plaintiff-appellee.

WHEREFORE, premises considered, the above-mentioned Decision rendered by Branch 79 of the Las Piñas City
Metropolitan Trial Court is REVERSED. Accordingly, the instant complaint is DISMISSED.

From the adverse decisions of the Regional Trial Court, petitioners filed their respective petitions for review on certiorari to
the Court of Appeals. Petitioner Samela’s case was docketed as CA-G.R. SP 64181 while that of petitioner Usero was
docketed as CA-G.R. SP 64718.1awphi1.nét

Both petitions failed in the CA. Thus the instant consolidated petitions.

The pivotal issue in the case at bar is whether or not the disputed strip of land, allegedly encroached upon by the spouses
Polinar, is the private property of petitioners or part of the creek and therefore part of the public domain. Clearly this an
issue which calls for a review of facts already determined by the Court of Appeals.

The jurisdiction of the Court in petitions for review on certiorari under Rule 45 of the Rules of Court is limited to reviewing
only errors of law, not of fact, unless the factual findings complained of are devoid of support by the evidence on record or
the assailed judgment is based on a misapprehension of facts. 7 This is obviously not the case here.

A careful scrutiny of the records reveals that the assailed decisions are founded on sufficient evidence. That the subject
strip of land is a creek is evidenced by: (1) a barangay certification that a creek exists in the disputed strip of land; (2) a
certification from the Second Manila Engineering District, NCR-DPWH, that the western portion of Pilar Village where the
subject strip of land is located is bounded by a tributary of Talon Creek and (3) photographs showing the abundance of
water lilies in the subject strip of land. The Court of Appeals was correct: the fact that water lilies thrive in that strip of land
can only mean that there is a permanent stream of water or creek there.

In contrast, petitioners failed to present proof sufficient to support their claim. Petitioners presented the TCTs of their
respective lots to prove that there is no creek between their properties and that of the Polinars. However, an examination
of said TCTs reveals that the descriptions thereon are incomplete. In petitioner Samela’s TCT No. T-30088, there is no
boundary description relative to the northwest portion of the property pertaining to the site of the creek. Likewise in TCT
No. T-22329-A of the spouses Polinar, the southeast portion which pertains to the site of the creek has no described
boundary. Moreover the tax declaration presented by petitioner is devoid of any entry on the "west boundary" vis-a-vis the
location of the creek. All the pieces of evidence taken together, we can only conclude that the adjoining portion of these
boundaries is in fact a creek and belongs to no one but the state.

Property is either of public dominion or of private ownership. 8 Concomitantly, 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;

The phrase "others of similar character" includes a creek which is a recess or an arm of a river. It is property belonging to
the public domain which is not susceptible to private ownership. 9 Being public water, a creek cannot be registered under
the Torrens System in the name of any individual 10 .

Accordingly, the Polinar spouses may utilize the rip-rapped portion of the creek to prevent the erosion of their property.

WHEREFORE, the consolidated petitions are hereby denied. The assailed decisions of the Court of Appeals in CA-G.R.
SP 64181 and CA-G.R. SP 64718 are affirmed in toto.

SO ORDERED.

Panganiban, (Chairman), Sandoval-Gutierrez, Carpio-Morales, and Garcia, JJ., concur.

FRANCISCO I. CHAVEZ, Petitioner, v. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, Respondents.

RESOLUTION

CARPIO, J.:

This Court is asked to legitimize a government contract that conveyed to a private entity 157.84 hectares of reclaimed
public lands along Roxas Boulevard in Metro Manila at the negotiated price of P1,200 per square meter. However,
published reports place the market price of land near that area at that time at a high of P90,000 per square meter. 1 The
difference in price is a staggering P140.16 billion, equivalent to the budget of the entire Judiciary for seventeen years and
more than three times the Marcos Swiss deposits that this Court forfeited in favor of the government.chanrob1es virtua1
1aw 1ibrary

Many worry to death that the private investors will lose their investments, at most not more than one-half billion pesos in
legitimate expenses, 2 if this Court voids the contract. No one seems to worry about the more than tens of billion pesos
that the hapless Filipino people will lose if the contract is allowed to stand. There are those who question these figures,
but the questions arise only because the private entity somehow managed to inveigle the government to sell the
reclaimed lands without public bidding in patent violation of the Government Auditing Code.

Fortunately for the Filipino people, two Senate Committees, the Senate Blue Ribbon Committee and the Committee on
Accountability of Public Officers, conducted extensive public hearings to determine the actual market value of the public
lands sold to the private entity. The Senate Committees established the clear, indisputable and unalterable fact that the
sale of the public lands is grossly and unconscionably undervalued based on official documents submitted by the proper
government agencies during the Senate investigation. We quote the joint report of these two Senate Committees, Senate
Committee Report No. 560, as approved by the Senate in plenary session on 27 September 1997: 3

The Consideration for the Property

PEA, under the JVA, obligated itself to convey title and possession over the Property, consisting of approximately One
Million Five Hundred Seventy Eight Thousand Four Hundred Forty One (1,578,441) Square Meters for a total
consideration of One Billion Eight Hundred Ninety Four Million One Hundred Twenty Nine Thousand Two Hundred
(P1,894,129,200.00) Pesos, or a price of One Thousand Two Hundred (P1,200.00) Pesos per square meter.

According to the zonal valuation of the Bureau of Internal Revenue, the value of the Property is Seven Thousand Eight
Hundred Pesos (P7,800.00) per square meter. The Municipal Assessor of Parañaque, Metro Manila, where the Property
is located, pegs the market value of the Property at Six Thousand Pesos (P6,000.00) per square meter. Based on these
alone, the price at which PEA agreed to convey the property is a pittance. And PEA cannot claim ignorance of these
valuations, at least not those of the Municipal Assessors’ office, since it has been trying to convince the Office of the
Municipal Assessor of Parañaque to reduce the valuation of various reclaimed properties thereat in order for PEA to save
on accrued real property taxes.

PEA’s justification for the purchase price are various appraisal reports, particularly the following:chanrob1es virtual 1aw
library

(1) An appraisal by Vic T. Salinas Realty and Consultancy Services concluding that the Property is worth P500.00 per
square meter for the smallest island and P750.00 per square meter for the two other islands, or a total of P1,170,000.00
as of 22 February 1995;

(2) An appraisal by Valencia Appraisal Corporation concluding that the Property is worth P850 per square meter for Island
I, P800 per square meter for Island II and P600 per square meter for the smallest island, or a total of P1,289,732,000, also
as of 22 February 1995; and

(3) An Appraisal by Asian Appraisal Company, Inc. (AACI), stating that the Property is worth approximately P1,000 per
square meter for Island I, P950 per square meter for Island II and P600 per square meter for Island III, or a total of
P1,518,805,000 as of 27 February 1995.

The credibility of the foregoing appraisals, however, are [sic] greatly impaired by a subsequent appraisal report of AACI
stating that the property is worth P4,500.00 per square meter as of 26 March 1996. Such discrepancies in the appraised
value as appearing in two different reports by the same appraisal company submitted within a span of one year render all
such appraisal reports unworthy of even the slightest consideration. Furthermore, the appraisal report submitted by the
Commission on Audit estimates the value of the Property to be approximately P33,673,000,000.00, or P21,333.07 per
square meter.

There were also other offers made for the property from other parties which indicate that the Property has been
undervalued by PEA. For instance, on 06 March 1995, Mr. Young D. See, President of Saeil Heavy Industries Co., Ltd.,
(South Korea), offered to buy the property at P1,400.00 and expressed its willingness to issue a stand-by letter of credit
worth $10 million. PEA did not consider this offer and instead finalized the JVA with AMARI. Other offers were made on
various dates by Aspac Management and Development Group Inc. (for P1,600 per square meter), Universal Dragon
Corporation (for P1,600 per square meter), Cleene Far East Manila Incorporated and Hyosan Prime Construction Co. Ltd.
which had prepared an Irrevocable Clean Letter of Credit for P100,000,000.

In addition, AMARI agreed to pay huge commissions and bonuses to various persons, amounting to P1,596,863,050.00
(P1,754,707,150.00 if the bonus is included), as will be discussed fully below, which indicate that AMARI itself believed
the market value to be much higher than the agreed purchase price. If such commissions are added to the purchase
price, AMARI’s acquisition cost for the Property will add-up to P3,490,992,250.00 (excluding the bonus). If AMARI was
willing to pay such amount for the Property, why was PEA willing to sell for only P1,894,129,200.00, making the
Government stand to lose approximately P1,596,863,050.00?

x x x

Even if we simply assume that the market value of the Property is half of the market value fixed by the Municipal
Assessors Office of Parañaque for lands along Roxas Boulevard, or P3,000.00 per square meter, the Government now
stands to lose approximately P2,841,193,800.00. But an even better assumption would be that the value of the Property is
P4,500.00 per square meter, as per the AACI appraisal report dated 26 March 1996, since this is the valuation used to
justify the issuance of P4 billion worth of shares of stock of Centennial City Inc. (CCI) in exchange for 4,800,000 AMARI
shares with a total par value of only P480,000,000.00. With such valuation, the Government’s loss will amount to
P5,208,855,300.00.

Clearly, the purchase price agreed to by PEA is way below the actual value of the Property, thereby subjecting the
Government to grave injury and enabling AMARI to enjoy tremendous benefit and advantage. (Emphasis supplied)

The Senate Committee Report No. 560 attached the following official documents from the Bureau of Internal Revenue, the
Municipal Assessor of Parañaque, Metro Manila, and the Commission on Audit:chanrob1es virtual 1aw library

1. Annex "M," Certified True Copy of BIR Zonal Valuations as certified by Antonio F. Montemayor, Revenue District
Officer. This official document fixed the market value of the 157.84 hectares at P7,800 per square meter.
2. Annex "N," Certification of Soledad S. Medina-Cue, Municipal Assessor, Parañaque, dated 10 December 1996. This
official document fixed the market value at P6,000 per square meter.

3. Exhibit "I-Engr. Santiago," the Appraisal Report of the Commission on Audit. This official document fixed the market
value at P21,333.07 per square meter.

Whether based on the official appraisal of the BIR, the Municipal Assessor or the Commission on Audit, the P1,200 per
square meter purchase price, or a total of P1.894 billion for the 157.84 hectares of government lands, is grossly and
unconscionably undervalued. The authoritative appraisal, of course, is that of the Commission on Audit which valued the
157.84 hectares at P21,333.07 per square meter or a total of P33.673 billion. Thus, based on the official appraisal of the
Commission on Audit, the independent constitutional body that safeguards government assets, the actual loss to the
Filipino people is a shocking P31.779 billion.

This gargantuan monetary anomaly, aptly earning the epithet "Grandmother of All Scams," 4 is not the major defect of this
government contract. The major flaw is not even the P1.754 billion in commissions the Senate Committees discovered the
private entity paid to various persons to secure the contract, 5 described in Senate Report No. 560 as follows:chanrob1es
virtual 1aw library

A Letter-Agreement dated 09 June 1995 signed by Messrs. Premchai Karnasuta and Emmanuel Sy for and in behalf of
AMARI, on the one hand, and stockholders of AMARI namely, Mr. Chin San Cordova (a.k.a. Benito Co) and Mr. Chua
Hun Siong (a.k.a. Frank Chua), on the other, sets forth various payments AMARI paid or agreed to pay the aforesaid
stockholders by way of fees for "professional efforts and services in successfully negotiating and securing for AMARI the
Joint Venture Agreement", as follows:chanrob1es virtual 1aw library

Form of Payment Paid/Payable On Amount

Manager’s Checks 28 April 1995 P400,000,000.00

Manager’s Checks Upon signing of letter 262,500,000.00

10 Post Dated Checks (PDCs) 60 days from date of letter 127,000,000.00

24 PDCs 31 Aug.’95 to 31 Jan.’98 150,000,000.00

48 PDCs Monthly, over a 12-month

pd. from date of letter 357,363,050.00

Cash bonus When sale of land begins not exceeding

157,844,100.00

Developed land from Project Upon completion of each Costing

phase 300,000,000.00

TOTAL P1,754,707,150.00

==============

Mr. Luis Benitez of SGV, the external auditors of AMARI, testified that said Letter-Agreement was approved by the AMARI
Board. 6 (Emphasis supplied)

The private entity that purchased the reclaimed lands for P1.894 billion expressly admitted before the Senate Committees
that it spent P1.754 billion in commissions to pay various individuals for "professional efforts and services in successfully
negotiating and securing" the contract. By any legal or moral yardstick, the P1.754 billion in commissions obviously
constitutes bribe money. Nonetheless, there are those who insist that the billions in investments of the private entity
deserve protection by this Court. Should this Court establish a new doctrine by elevating grease money to the status of
legitimate investments deserving of protection by the law? Should this Court reward the patently illegal and grossly
unethical business practice of the private entity in securing the contract? Should we allow those with hands dripping with
dirty money equitable relief from this Court?
Despite these revolting anomalies unearthed by the Senate Committees, the fatal flaw of this contract is that it glaringly
violates provisions of the Constitution expressly prohibiting the alienation of lands of the public domain.

Thus, we now come to the resolution of the second Motions for Reconsideration 7 filed by public respondent Public
Estates Authority ("PEA") and private respondent Amari Coastal Bay Development Corporation ("Amari"). As correctly
pointed out by petitioner Francisco I. Chavez in his Consolidated Comment, 8 the second Motions for Reconsideration
raise no new issues.

However, the Supplement to "Separate Opinion, Concurring and Dissenting" of Justice Josue N. Bellosillo brings to the
Court’s attention the Resolutions of this Court on 3 February 1965 and 24 June 1966 in L-21870 entitled "Manuel O.
Ponce, Et. Al. v. Hon. Amador Gomez, Et. Al." and No. L-22669 entitled "Manuel O. Ponce, Et. Al. v. The City of Cebu, Et.
Al." ("Ponce Cases"). In effect, the Supplement to the Dissenting Opinion claims that these two Resolutions serve as
authority that a single private corporation like Amari may acquire hundreds of hectares of submerged lands, as well as
reclaimed submerged lands, within Manila Bay under the Amended Joint Venture Agreement ("Amended JVA").

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

First, as Justice Bellosillo himself states in his supplement to his dissent, the Ponce Cases admit that "submerged lands
still belong to the National Government." 9 The correct formulation, however, is that submerged lands are owned by the
State and are inalienable. Section 2, Article XII of the 1987 Constitution provides:chanrob1es virtual 1aw library

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. . . . (Emphasis supplied)

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

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

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

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

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

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

Second, in the Ponce Cases the Cebu City ordinance granted Essel, Inc. an "irrevocable option" to purchase from Cebu
City not more than 70% of the reclaimed lands. The ownership of the reclaimed lands remained with Cebu City until Essel,
Inc. exercised its option to purchase. With the subsequent enactment of the Government Auditing Code (Presidential
Decree No. 1445) on 11 June 1978, any sale of government land must be made only through public bidding. Thus, such
an "irrevocable option" to purchase government land would now be void being contrary to the requirement of public
bidding expressly required in Section 79 17 of PD No. 1445. This requirement of public bidding is reiterated in Section 379
18 of the 1991 Local Government Code. 19 Obviously, the ingenious reclamation scheme adopted in the Cebu City
ordinance can no longer be followed in view of the requirement of public bidding in the sale of government lands. In the
instant case, the Amended JVA is a negotiated contract which clearly contravenes Section 79 of PD No. 1445.

Third, Republic Act No. 1899 authorized municipalities and chartered cities to reclaim foreshore lands. The two
Resolutions in the Ponce Cases upheld the Cebu City ordinance only with respect to foreshore areas, and nullified the
same with respect to submerged areas. Thus, the 27 June 1965 Resolution made the injunction of the trial court against
the City of Cebu "permanent insofar . . . as the area outside or beyond the foreshore land proper is concerned."cralaw
virtua1aw library

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

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

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

However, in the instant case the PEA is not an end user agency with respect to the reclaimed lands under the Amended
JVA. As we explained in the 6 May 2003 Resolution:chanrob1es virtual 1aw library

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

Our 9 July 2002 Decision explained the rationale for treating the PEA in the same manner as the DENR with respect to
reclaimed foreshore or submerged lands in this wise:chanrob1es virtual 1aw library

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

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

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

This Resolution does not prejudice any innocent third party purchaser of the reclaimed lands covered by the Amended
JVA. Neither the PEA nor Amari has sold any portion of the reclaimed lands to third parties. Title to the reclaimed lands
remains with the PEA. As we stated in our 9 July 2002 Decision:chanrob1es virtual 1aw library

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

As we held in our 9 July 2002 Decision, the Amended JVA "violates glaringly Sections 2 and 3, Article XII of the 1987
Constitution." In our 6 May 2003 Resolution, we DENIED with FINALITY respondents’ Motions for Reconsideration.
Litigations must end some time. It is now time to write finis to this "Grandmother of All Scams."cralaw virtua1aw library

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

SO ORDERED.

Davide, Jr ., C.J., Panganiban, Austria-Martinez, Carpio Morales and Callejo, Sr., concur.

Bellosillo, J., I vote to grant reconsideration.

Puno, J., I maintain my previous qualified opinion.

Quisumbing, J., I vote to allow reconsideration.

Ynares-Santiago, J., I maintain my previous dissent.

Sandoval-Gutierrez and Corona, JJ., we maintain our dissent.

Azcuna, J., took no part.

Separate Opinions

VITUG, J.:

I still maintain that the conclusion reached by the Court in its main decision is correct, and while the reclaimed land from
the submerged areas of Manila Bay could perhaps be aptly classed as being "agricultural lands," respondent AMARI
Coastal Bay Development Corporation, being a private corporation, is nevertheless disqualified under Article XII, Section
3, 1 of the 1987 Constitution from directly acquiring, except by way of lease, land of the public domain.

Relative to the pronouncements in Case No. L-21870, entitled "Manuel O. Ponce, Et. Al. v. Hon. Amador Gomez, Et Al.,"
and Case No. L-22669, entitled "Manuel O. Ponce, Et. Al. v. City of Cebu, Et Al.," where this Court held to be valid the
assailed reclamation contracts, granting to a corporate entity the option to buy a portion of reclaimed lands, suffice it to
say that the foregoing cases were decided on 03 February 1965 and 24 June 1966, respectively, when the 1935
Constitution was still in effect. Unlike the 1987 Charter, the 1935 Constitution did not contain any proscription against
corporations holding alienable lands of the public domain. 2

Just the same, I should like to make a statement on what could be a grave concern on the part of individuals, who, not
being personally disqualified to hold alienable lands of the public domain, may have been able to acquire in good faith,
reclaimed portions of the subject property from respondent AMARI Coastal Bay Development Corporation. I believe that
such contracts must be duly respected and upheld in line with analogous and applicable jurisprudence, as well as
equitable considerations, in cases involving the conveyance to disqualified aliens of real property that, subsequently, are
acquired by nationals qualified to own such property. 3

In instances, where the successor-in-interest is itself a corporate entity, the constitutional proscription would stand, but if
the corporation has introduced structures or permanent improvements thereon, such structures or improvements, when so
viewed as having been made in good faith, 4 could well be governed by the Civil Code effectively entitling the builder to
pay to the State a reasonable rent for the use of the land 5 or to be reimbursed the value of the structures or
improvements. 6

The above exceptional instances are issues that, in my view, could well be litigated by the proper parties in separate
proceedings.

QUISUMBING, J.:

Considering the crucial significance of the action to be taken by the Court on the PEA motion, I vote to allow a final
reconsideration of the controversy.

Two points, in my view, require painstaking elucidation and clarification:chanrob1es virtua1 1aw 1ibrary

(1) How should the parcels of land now above water * — regardless of actual size in hectares — but conveyed already to
private entities by PEA and/or its partner in the joint venture, Amari Coastal Bay Development Corporation, be treated as
a consequence of the Court’s decision?

(2) May the Court at this time outlaw the long standing practice of the executive department to pay the private individual or
corporate reclaimer/developer by means of using a proportionate share in the reclaimed land itself? If so, shouldn’t the
Court’s action be prospective in nature, with adequate regard to rights and expectations of the private parties?

I find the cited cases in Justice Bellosillo’s separate opinion, L-21870 Ponce v. Hon. A. Gomez (Res. of Feb. 3, 1965) and
L-22669 (Res. of June 24, 1966) acceptable and instructive for the resolution of the instant controversy before us. That
the submerged lands, under the sea or below baywater, should belong to the National Government need not be
debatable. Nor would the proposition that their ownership should pass to the municipal corporation when the city had
successfully conducted the reclamation project, through private initiative and financial assistance, be a conceptual barrier
to uphold probable rights of the initiator and the financier that made the projects not only feasible but indeed successful.
This much at this time I would concede: state ownership of submerged land. But after reclamation, I could not concede
total nullity of private efforts and resources spent pursuant to prior law and executive policy. Nor would I neglect to
appreciate Justice Vitug’s reference to De Castro v. Tan, 129 SCRA 85, for an equitable approach to what appears now a
constitutional conundrum.

Subject to further reflection, it does not appear to me pertinent to apply Sec. 79 on disposal or sale of unserviceable
property, contained in P.D. No. 1445, the General Auditing Code, or Sec. 379 of the Local Government Code. The
requirement of bidding in regard to corporate projects of PEA is obviously distinguishable, if not outright distinct, from
disposal of surplus/junk property. The reclamation projects like those contemplated in the PEA-AMARI joint venture call
for a greater public appreciation of equitable investment regimes by policy-makers and private entrepreneurs alike as they
impact hugely on the economic development concerns of the nation. Thus, we are of the view that of more pertinence in
this regard are the BOT (Build, Operate, and Transfer) Law, R.A. 6957 as amended and the Charter of PEA (P.D. No.
1084) and P.D. No. 1085 concerning reclaimed lands along Manila Bay.

Lastly, we are informed that the possible criminal responsibility, if any, of certain officers of PEA are allegedly now before
the Sandiganbayan. Be that as it may, the merit of the question before us regarding the validity of the PEA-AMARI joint
venture is not necessarily foreclosed by cases before the Sandiganbayan which of necessity require the highest quantum
of proof, beyond reasonable doubt. Here we are not so constrained. For our principal concern now is a thorough review of
legal issues that might have previously eluded close scrutiny. Hence the need to grant leave for a second reconsideration.

SANDOVAL-GUTIERREZ, J.:

It is after deep introspection that I am constrained to dissent from the denial by the majority of the motions for
reconsideration filed by respondents PEA and AMARI.
Chief Justice Charles Evans Hughes of the United States Supreme Court stated that a dissent is of value because it is "an
appeal to the brooding spirit of the law, to the intelligence of a future day, when a later decision may possibly correct the
error into which the dissenting judge believes the court to have been betrayed." 1

While I joined in the initial grant of the petition, I realized, however, that the tenor of our interpretation of the Constitutional
prohibition on the acquisition of reclaimed lands by private corporations is so absolute and circumscribed as to defeat the
basic objectives of its provisions on "The National Economy and Patrimony." 2

The Constitution is a flexible and dynamic document. It must be interpreted to meet its objectives under the complex
necessities of the changing times. Provisions intended to promote social and economic goals are capable of varying
interpretations. My view happens to differ from that of the majority. I am confident, however, that the demands of the
nation’s economy and the needs of the majority of our people will bring the majority Decision and this Dissenting Opinion
to a common understanding. Always, the goals of the Constitution must be upheld, not defeated nor diminished.

Infrastructure building is a function of the government and ideally should be financed exclusively by public funds.
However, present circumstances show that this cannot be done. Thus, private corporations are encouraged to invest in
income generating national construction ventures.

Investments on the scale of reclamation projects entail huge amounts of money. It is a reality that only private
corporations can raise such amounts. In the process, they assist this country in its economic development. Consequently,
our government should not take arbitrary action against these corporate developers. Obviously, the courts play a key role
in all disputes arising in this area of national development.

This is the background behind my second hard look at the issues and my resulting determination to dissent.

The basic issue before us is whether a private corporation, such as respondent AMARI, can acquire reclaimed lands.

The Decision being challenged invokes the Regalian doctrine that the State owns all lands and waters of the public
domain. The doctrine is the foundation of the principle of land ownership that all lands that have not been acquired by
purchase or grant from the Government belong to the public domain. 3 Property of public dominion is 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. 4 Those which belong to the State, not devoted to public use, and are intended
for some public service or for the development of the national wealth, are also classified as property of public dominion. 5
All other property of the State which is not of public dominion is patrimonial. 6 Also, property of public dominion, when no
longer intended for public use or public service, shall form part of the patrimonial property of the State. 7

In our Decision sought to be reconsidered, 8 we held that the following laws, among others, are applicable to the
particular reclamation project involved in this case: the Spanish Law of Waters of 1866, the Civil Code of 1889, Act No.
1654 enacted by the Philippine Commission in 1907, Act No. 2874 (the Public Land Act of 1919), and Commonwealth Act
No. 141 of the Philippine National Assembly, also known as the Public Land Act of 1936. Certain dictums are
emphasized. Reclaimed lands of the government may be leased but not sold to private corporations and private
individuals. The government retains title to lands it reclaims. Only lands which have been officially delimited or classified
as alienable shall be declared open to disposition or concession.

Applying these laws and the Constitution, we then concluded that the submerged areas of Manila Bay are inalienable
natural resources of the public domain, outside the commerce of man. They have to be classified by law as alienable or
disposable agricultural lands of the public domain and have to be declared open to disposition. However, there can be no
classification and declaration of their alienable or disposable nature until after PEA has reclaimed these submerged areas.
Even after the submerged areas have been reclaimed from the sea and classified as alienable or disposable, private
corporations such as respondent AMARI, are disqualified from acquiring the reclaimed land in view of Section 3, Article
XII of the Constitution, quoted as follows:jgc:chanrobles.com.ph

"Lands of the Public domain are classified into agricultural, forest or timbre, mineral lands, and national parks. Agricultural
lands of the public domain may be further classified by law according to the uses to 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."cralaw virtua1aw library
I dissent from the foregoing conclusions which are based on general laws mainly of ancient vintage. Reclaimed lands,
especially those under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP), are governed by PD 1084 9
and PD 1085 10 enacted in 1976 and 1977, respectively, or more than half a century after the enactment of the Public
Lands Acts of 1919 and 1936.

PD 1084 and PD 1085 provide:chanrob1es virtual 1aw library

PD 1084 —

"Section 4. Purposes. — The Authority is hereby created for the following purposes:chanrob1es virtual 1aw library

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

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

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

PD 1085 —

"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 P.D. No. 1084; Provided, however, that the rights and interest of the Construction and
Development Corporation of the Philippines pursuant to the aforesaid contract shall be recognized and respected.

x x x

"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 certificates of title." (Emphasis ours)

Pursuant to the above provisions, PEA is mandated inter alia to reclaim land, including foreshore and submerged areas,
or to acquire reclaimed land. Likewise, PEA has the power to sell any and all kinds of lands and other forms of real
property owned and managed by the government. Significantly, PEA is authorized to transfer to the contractor or its
assignees portion or portions of the land reclaimed or to be reclaimed.

It is a fundamental rule that if two or more laws govern the same subject, every effort to reconcile and harmonize them
must be taken. Interpretare et concordare legibus est optimus interpretandi. Statutes must be so construed and
harmonized with other statutes as to form a uniform system of jurisprudence. 11 However, if several laws cannot be
harmonized, the earlier statute must yield to the later enactment. The later law is the latest expression of the legislative
will. 12 Therefore, it is PD 1084 and PD 1085 which apply to the issues in this case.

Moreover, the laws cited in our Decision are general laws which apply equally to all the individuals or entities embraced by
their provisions. 13 The provisions refer to public lands in general.

Upon the other hand, PD 1084 and PD 1085 are special laws which relate to particular economic activities, specific kinds
of land and a particular group of persons. 14 Their coverage is specific and limited. More specifically, these special laws
apply to land reclaimed from Manila Bay by private corporations.

If harmonization and giving effect to the provisions of both sets of laws is not possible, the special law should be made to
prevail over the general law, as it evinces the legislative intent more clearly. The special law is a specific enactment of the
legislature which constitutes an exception to the general statute. 15

Our Decision cites the constitutional provision banning private corporations from acquiring any kind of alienable land of
the public domain. 16
Under the Constitution, lands of the public domain are classified into agricultural, forest or timber, mineral lands, and
natural parks. 17 Land reclaimed from the sea cannot fall under any of the last three categories because it is neither forest
or timber, mineral, nor park land. It is, therefore, agricultural land. 18 Agricultural land of the public domain may be
alienated. 19 However, the Constitution states that private corporations may not hold such alienable land except by lease.
It follows that AMARI, being a private corporation, cannot hold any reclaimed area. But let it be made clear that PD 1084
transfers the public agricultural land formed by reclamation to the "ownership and administration" of PEA, a government
owned corporation. The transfer is not to AMARI, a private corporation, hence, the constitutional prohibition does not
apply. Corollarily, under PD 1085, PEA is empowered to subsequently transfer to the contractor portion or portions of the
land reclaimed or to be reclaimed.

Does the Constitution restrain PEA from effecting such transfer to a private corporation? Under Article 421 of the Civil
Code, all property of the State which is not of public dominion is patrimonial. PEA does not exercise sovereign functions of
government. It handles business activities for the government. Thus, the property in its hands, not being of public
dominion, is held in a patrimonial capacity. PEA, therefore, may sell this property to private corporations without violating
the Constitution. It is relevant to state that there is no constitutional obstacle to the sale of real estate held by government
owned corporations, like the National Development Corporation, the Philippine National Railways, the National Power
Corporation, etc. to private corporations. Similarly, why should PEA, being a government owned corporation, be prohibited
to sell its reclaimed lands to private corporations?

I take exception to the view of the majority that after the enactment of the 1935 Constitution, Section 58 of Act 2874
continues to be applicable up to the present and that the long established state policy is to retain for the government title
and ownership of government reclaimed land. This simply is an inaccurate statement of current government policy. When
a government decides to reclaim the land, such as the area comprising and surrounding the Cultural Center Complex and
other parts of Manila Bay, it reserves title only to the roads, bridges, and spaces allotted for government buildings. The
rest is designed, as early as the drawing board stage, for sale and use as commercial, industrial, entertainment or
services-oriented ventures. The idea of selling lots and earning money for the government is the motive why the
reclamation was planned and implemented in the first place.

May I point out that there are other planned or on-going reclamation projects in the Philippines. The majority opinion does
not only strike down the Joint Venture Agreement (JVA) between AMARI and PEA but will also adversely affect or nullify
all other reclamation agreements in the country. I doubt if government financial institutions, like the Development Bank of
the Philippines, the Government Service Insurance System, the Social Security System or other agencies, would risk a
major portion of their funds in a problem-filled and highly speculative venture, like reclamation of land still submerged
under the sea. Likewise, there certainly are no private individuals, like business tycoons and similar entrepreneurs, who
would undertake a major reclamation project without using the corporate device to raise and disburse funds and to
recover the amounts expended with a certain margin of profits. And why should corporations part with their money if there
is no assurance of payment, such as a share in the land reclaimed or to be reclaimed? It would be most unfair and a
violation of procedural and substantive rights 20 to encourage investors, both Filipino and foreign, to form corporations,
build infrastructures, spend money and efforts only to be told that the invitation to invest is unconstitutional or illegal with
absolutely no indication of how they could be compensated for their work.

It has to be stressed that the petition does not actually assail the validity of the JVA between PEA and AMARI. The
petition mainly seeks to compel PEA to disclose all facts on the then on-going negotiations with respondent AMARI with
respect to the reclamation of portions of Manila Bay. Petitioner relies on the Constitutional provision that the right of the
people to information on matters of public concern shall be recognized and that access to papers pertaining to official
transactions shall be afforded the citizen. 21 I believe that PEA does not have to reveal what was going on from the very
start and during the negotiations with a private party. As long as the parties have the legal capacity to enter into a valid
contract over an appropriate subject matter, they do not have to make public, especially to competitors, the initial
bargaining, the give-and-take arguments, the mutual concessions, the moving from one position to another, and other
preliminary steps leading to the drafting and execution of the contract. As in negotiations leading to a treaty or
international agreement, whether sovereign or commercial in nature, a certain amount of secrecy is not only permissible
but compelling.

At any rate, recent developments appear to have mooted this issue, and anything in the Decision which apparently
approves publicity during on-going negotiations without pinpointing the stage where the right to information appears is
obiter. The motions for reconsideration all treat the JVA as a done thing, something already concrete, if not finalized.

Indeed, it is hypothetical to identify exactly when the right to information begins and what matters may be disclosed during
negotiations for the reclamation of land from the sea.

Unfortunately for private respondent, its name, "AMARI," happens to retain lingering unpleasant connotations. The phrase
"grandmother of all scams," arising from the Senate investigation of the original contract, has not been completely erased
from the public mind. However, any suspicion of anything corrupt or improper during the initial negotiations which led to
the award of the reclamation to AMARI are completely irrelevant to this petition. It bears stressing that the Decision and
this Dissenting Opinion center exclusively on questions of constitutionality and legality earlier discussed.

To recapitulate, it is my opinion that there is nothing in the Constitution or applicable statutes which impedes the exercise
by PEA of its right to sell or otherwise dispose of its reclaimed land to private corporations, especially where, as here, the
purpose is to compensate respondent AMARI, the corporate developer, for its expenses incurred in reclaiming the subject
areas. Pursuant to PD 1084 and PD 1085, PEA can transfer to the contractor, such as AMARI, such portion or portions of
the land reclaimed or to be reclaimed.

WHEREFORE, I vote to GRANT the motions for reconsideration and to DISMISS the petition for lack of merit.

TINGA, J.:

With all due respect, I dissent from the majority.

Central to the adjudication of this case is the determination of the status of reclaimed lands. Lands of the State are either
lands of the public domain or lands of the private domain. Thus, Section 2, Article XII of the 1987 Constitution,
incorporating the Regalian Doctrine, provides that" [a]ll lands of the public domain . . . are owned by the State." Unwritten
but implicit in this provision is that the State may own lands of the private domain. In the same vein, the New Civil Code
classifies properties of the State as either property of the public dominion 1 or patrimonial property. 2

If reclaimed land is part of the public domain, it is covered by the proscription in Section 3, Article XII of the 1987
Constitution, 3 which prohibits private corporations from acquiring alienable lands of the public domain. On the other
hand, if it is patrimonial property, the constitutional proscription does not apply.

First, the fundamentals. The Constitution ordains that natural resources are not alienable. Then it gives examples of
natural resources:" [a]ll 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." 4

Obviously, the common characteristics of natural resources are that they are still in their original, raw state. Natural
resources are material objects of economic value and utility to man produced by nature. 5 In other words, they refer to
property and materials in their original and native state, not to those which have been produced through the intervention of
man.

Natural resources are capable of conversion or, in the words of the Constitution, 6" [e]xploration, development and
utilization." But the conversion is, again pursuant to the Constitution, 7 "under the full control and supervision of the State."
When the conversion activity such as co-production, joint venture or production-sharing agreements is authorized by the
Government through a law, the qualified party to the agreement may own the converted product or part of it, when so
provided in the agreement. The rationale is that the converted product is not the same as the original natural resource.
Thus, the timber concessionaire may own the logs cut from the timber concession; the miner may dispose of the gold
produced from the gold ores taken from the mine; the developer may market the energy harnessed from a geothermal
field.

Significantly, the reclamation contract is not an outright sale. Reclamation is essentially a construction and infrastructure
contract. 8 This is also clear from the BOT Laws. 9 Specifically, the contract subject of this case is a joint venture
agreement.

Reclaimed land does not fall under the category of natural resources which under the Constitution are inalienable. This is
so because its development from the seabed entails human intervention. It is unlike land per se, which having become
such on account of the forces of nature, is considered a natural resource.

That being the case, it is statutory law which determines the status of reclaimed land. In other words, the matter of
categorization of reclaimed land is a legislative function.

From the advent of the Spanish Law of Waters of 1886 onwards, it is at least implicit if not express in the laws authorizing
reclamation that the resulting reclaimed lands are private property of the Government.

Under the Spanish Law of Waters of 1866, reclaimed land may be categorized even as private individual property. Article
5 thereof provides:chanrob1es virtual 1aw library
Art. 5. — Lands reclaimed from the sea in consequence of works constructed by the State, or by the provinces, pueblos,
or private persons, with proper permission shall become the property of the party constructing such works, unless
otherwise provided by the terms of the grant of authority.

Following the trail blazed by the Spanish Law of Waters, quite a number of local government units undertook, after
liberation, reclamation work under the aegis of special laws. 10

Other local government units availed of a general reclamation statute, specifically, Republic Act No. 1899, entitled "An Act
to Authorize the Reclamation of Foreshore Lands by Chartered Cities and Municipalities," which was enacted in 1957. It
provides inter alia:chanrob1es virtual 1aw library

SEC. 2. Any and all lands reclaimed, as herein provided, shall be the property of the respective municipalities or chartered
cities: Provided, however, That the new foreshore along the reclaimed areas shall continue to be the property of the
National Government.

Of more recent vintage is Republic Act No. 7160, otherwise known as the Local Government Code of 1991. It empowers
local government units to undertake reclamation projects by themselves or through contractors. Section 302 thereof
provides that" (t)he contractor shall be entitled to a reasonable return of its investment in accordance with its bid proposal
as accepted by the local government unit concerned . . . In case of land reclamation or construction of industrial estates,
the repayment plan may consist of the grant of the portion or percentage of the reclaimed lands or the industrial estate
concerned."cralaw virtua1aw library

The lands reclaimed under the auspices of the aforementioned special laws, Republic Acts No. 1899 and 7601 included,
are patrimonial property of the local government units concerned or private property of the developer, as the case may be.
Nevertheless, the reclamation law or the local government may reserve certain portions of the reclaimed area for public
use such as for plazas, schools or hospitals, in which case, the reclaimed land is characterized as land of the public
domain. 11

Hence, portions of the reclaimed land may be classified as property of public ownership while other portions may be
categorized as patrimonial or private property, depending on the text of the reclamation statute. 12

Clearly, the characterization of reclaimed land as patrimonial or public property emanates from the laws themselves and
becomes complete following the accomplishment of the reclamation project.chanrob1es virtua1 1aw 1ibrary

The challenged Joint Venture Agreement was undertaken under the aegis of Presidential Decree No. 1084, 13
Presidential Decree No. 1085 14 and the so-called Build Operate and Transfer (BOT) laws, Republic Act No. 6957, as
amended by Republic Act No. 7718. The latter BOT law 15 enumerates the infrastructure or development projects which
may be implemented by the private sector, among which are land reclamation projects. According to the same law, 16 the
proponent in land reclamation projects may be repaid by way of "grant of a portion or percentage of the reclaimed land."
The payment in the form of reclaimed land in the case of land reclamation projects completes the essence of privatization
which is the underlying economic philosophy of the BOT laws. In the beginning, the private sector is tapped to undertake
grant infrastructure and development project and in the end it is paid in the form of land which naturally is thenceforth
classified as private property.

In sum, whenever land reclamation authorized by law is undertaken by a private individual or entity, the reclaimed lands
which the developer secures by way of payment is classified as private property. There is no need for another special law
declaring the lands alienable as the reclamation law itself provides the legal basis that renders them alienable, unless of
course there is a contrary provision in the law. The laws ordaining that reclaimed lands become lands of the public domain
are the exception rather than the rule.

The Public Land Acts (Act No. 2874 and Commonwealth Act No. 141) typify the few laws which provide that reclaimed
lands are not alienable. But the categorization applies only to lands reclaimed by the National Government. It does not
cover lands reclaimed by private individuals or entities, including local government units, authorized by law. In other
words, Commonwealth Act No. 141, being a general law, is not applicable to lands reclaimed pursuant to special laws,
such as the reclaimed land subject of this case.

I have no quarrel with the majority’s ruling that "submerged areas [of the Manila Bay] are, under the Constitution, ‘waters .
. . owned by the State,’ forming part of the public domain and consequently inalienable." 17 I take exception, however, to
the holding that the subject JVA is invalid since it covers such submerged areas. I do not think that the parties
contemplated the transfer of the submerged lands per se but, rather, the conveyance of the reclaimed lands which shall
stand on the submerged lands. If there is any doubt as to the object of the prestation in this case, that interpretation which
would render the contract valid is to be favored. Where the instrument is susceptible of two interpretations, one which will
make it invalid and illegal, and another which will make it valid and legal, the latter interpretation should be adopted. 18
Thus, the New Civil Code states:chanrob1es virtual 1aw library

Art. 1373. If some stipulation of any contract should admit of several meanings, it shall be understood as bearing that
import which is most adequate to render it effectual.

The Constitution 19 specifically mentions joint venture agreements as among the contracts that the State may enter into
with the private sector for the development of natural resources. Consequently, there is nothing aberrant for the
respondents in this case to secure reconveyance in the form of reclaimed land.

Finally, I submit that this case should be resolved in terms of the long range development of the country. However rich our
country may be in natural resources, these riches are not inexhaustible, land being among the most finite. The total area
of Philippine agricultural lands is estimated to be 10.4 million hectares; the total area of mountainous lands, about 9.4
million hectares. Such a limited land area could hardly sustain a population, which, as of October 2000, stood at 76.5
million Filipinos (projected to be 81.1 million by the end of 2003) and growing at a rate of 2.36% per annum. Moreover, the
Philippine economy is expanding at a rate of 3.5% (2000-2001) to 4.5% (2001-2002). There is no single solution to
address these developments but the extension of our coastlines consisting of 36,289 kilometers may be one of them.

It is with this end in mind that the Government pursues policies established or recognized by the Constitution, one of
which is land reclamation. No less than the Constitution, under the general welfare clause, 20 empowers and obliges the
State to execute such a policy. The State, though, need not go at it alone. Indeed, the Constitution itself acknowledges
that the State cannot perform this task by itself. Thus, the fundamental law, under the Article on National Economy and
Patrimony, 21 vests the State with the concomitant authority to draw on the resources of the private sector, whose role is
aptly described elsewhere as "indispensable," 22 to aid it in such an awesome endeavor. To deny the motions for
reconsideration in this case would be to turn a blind eye to this stark reality and, ultimately, to defeat State
policy:chanrob1es virtual 1aw library

Accordingly, I vote to GRANT respondents’ second motions for reconsideration.chanrob1es virtua1 1aw 1ibrary

Endnotes:

1. See "The Grandmother of All Scams" by Sheila S. Coronel and Ellen Tordesillas, 18-20 March 1998, Philippine Center
for Investigative Journalism. This report won the 1st Prize in the 1998 JVO Investigative Journalism Awards.

2. 6 May 2003 Resolution, p. 13.

3. PEA’s Memorandum dated 4 August 1999 quoted extensively, in its Statement of Facts and the Case, the Statement of
Facts in Senate Committee Report No. 560 dated 16 September 1997. Moreover, the existence of this report is a matter
of judicial notice pursuant to Section 1, Rule 129 of the Rules of Court which provides, "A court shall take judicial notice,
without the introduction of evidence, of . . . the official acts of the legislature."cralaw virtua1aw library

4. 9 July 2002 Decision, p. 4.

5. Senate Committee Report No. 560, p. 48.

6. A more detailed discussion on this matter in Senate Report No. 560 reads as follows:chanrob1es virtual 1aw library

The Commissions

A Letter-Agreement dated 09 June 1995 signed by Messrs. Premchai Karnasuta and Emmanuel Sy for and in behalf of
AMARI, on the one hand, and stockholders of AMARI namely, Mr. Chin San Cordova (a.k.a. Benito Co) and Mr. Chua
Hun Siong (a.k.a. Frank Chua), on the other, sets forth various payments AMARI paid or agreed to pay the aforesaid
stockholders by way of fees for "professional efforts and services in successfully negotiating and securing for AMARI the
Joint Venture Agreement", as follows:chanrob1es virtual 1aw library

Form of Payment Paid/Payable On Amount

Manager’s Checks 28 April 1995 P400,000,000.00

Manager’s Checks Upon signing of letter 262,500,000.00

10 Post Dated Checks (PDCs) 60 days from date of letter 127,000,000.00

24 PDCs 31 Aug.’95 to 31 Jan.’98 150,000,000.00

48 PDCs Monthly, over a 12-month

pd. from date of letter 357,363,050.00

Cash bonus When sale of land begins not exceeding

157,844,100.00

Developed land from Project Upon completion of each Costing

phase 300,000,000.00

TOTAL P1,754,707,150.00

==============

Mr. Luis Benitez of SGV, the external auditors of AMARI, testified that said Letter-Agreement was approved by the AMARI
Board.

On the first payment of P400 million, records show that P300 million was paid in manager’s checks of Citibank-Makati,
while the balance of P100 million was deposited to the account of the two Chinese in a Hongkong bank. On the basis of a
Memorandum Order dated April 28, 1995 issued by Messrs. Karnasuta and Emmanuel Sy, and upon the instruction of
Messrs. Chin San Cordova and Chua Hun Siong, 31 manager’s checks in the total amount of P300 million were issued by
Citibank-Makati in favor of a Mr. George Triviño, a Dominican Republic national, broken down as follows:chanrob1es
virtual 1aw library

1) Twenty-nine (29) manager’s checks at P10 million each;

2) One (1) manager’s check at P7 million; and,

3) One (1) manager’s check at P3 million.

All these checks were indorsed by Mr. Triviño. Mr. Sy could not satisfactorily answer why Mr. Triviño was made payee of
the Manager’s Checks when he had nothing to do with the transactions. Neither could he provide information regarding
the said Mr. Triviño.

Mr. Emmanuel Sy admitted signing several blank checks as special request from Messrs. Co and Chua and issuing said
checks as follows:chanrob1es virtual 1aw library

1) Ten (10) Manager’s checks dated 60 days from the June 9 letter amounting to P127 million;

2) Twenty-four (24) blank checks amounting to P150 million dated from 31 August 1995 up to 31 January 1998; and,

3) Forty (40) blank checks amounting to P357 million.

In this regard, the pertinent portion of the 9 June 1995 letter-agreement provides as follows:jgc:chanrobles.com.ph

"3. Upon signing of this letter-agreement AMARI shall (a) pay to you (in cash in the form of Bank Manager’s Checks) the
sum of Two Hundred Sixty Two Million Five Hundred Thousand Pesos (Pesos 262,500,000) and (b) pay and deliver to
you the following checks:jgc:chanrobles.com.ph

"3.1 Ten (10) checks dated sixty (60) days from date of this letter agreement in the total amount of One Hundred Twenty
Seven Million Pesos (Pesos 127,000,000);

"3.2 Twenty-Four (24) checks in the total amount of One Hundred Fifty Million Pesos (Pesos 150,000,000) as
follows:chanrob1es virtual 1aw library
DUE DATE OF CHECK AMOUNT

August 31, 1995 6,250,000

March 31, 1996 6,250,000

April 30, 1996 6,250,000

May 31, 1996 6,250,000

June 30, 1996 6,250,000

July 31, 1996 6,250,000

August 31, 1996 6,250,000

September 30, 1996 6,250,000

October 31, 1996 6,250,000

November 30, 1996 6,250,000

December 31, 1996 6,250,000

January 31, 1997 6,250,000

February 28, 1997 6,250,000

March 31, 1997 6,250,000

April 30, 1997 6,250,000

May 31, 1997 6,250,000

June 30, 1997 6,250,000

July 31, 1997 6,250,000

August 31, 1997 6,250,000

September 30, 1997 6,250,000

October 31, 1997 6,250,000

November 30, 1997 6,250,000

December 31, 1997 6,250,000

January 31, 1998 6,250,000

Total P150,000,000

=========

"3.3 Forty Eight (48) checks in the total amount of Three Hundred Fifty Seven Million Three Hundred Sixty Three
Thousand Fifty Pesos (Pesos 357,363,050) payable over a period of twelve (12) months as follows:jgc:chanrobles.com.ph

"Each monthly payment to consist of Four (4) checks, three (3) checks of which shall each bear the amount of P7,250,000
and one (1) check of which shall bear the amount of P8,000,000 for a total monthly amount of P29,750,000. These
monthly payment of four (4) checks each shall be dated the last date of the thirteen, fourteen, fifteen, sixteen, seventeen,
eighteen, nineteen, twenty, twenty-one, twenty-two, twenty-three, and twenty-four months from the date of this letter
agreement. The last issued check hereunder shall bear the sum of P8,363,050."cralaw virtua1aw library

The Provisional Receipt shows that Mr. Chin San Cordova and Mr. Chua Hun Siong received the amount of
P896,863,050.00 as of 09 June 1995. Based on the submitted photocopies of the returned checks issued by AMARI vis-a-
vis item 3(b) of the quoted Letter-Agreement, the following persons were made payees: Emmanuel Sy, Manuel Sy, Sy Pio
Lato, International Merchandising and Development Corporation, Golden Star Industrial Corporation, Chin San Cordova,
EY, and Wee Te Lato. Other payments were made payable to Cash (bearer instruments). Each person was thus named
payee to the following amounts:chanrob1es virtual 1aw library

1. Emmanuel Sy:chanrob1es virtual 1aw library

Citibank Check No. 000019 dated 10/31/96 P6,250,000

2. Manuel Sy:chanrob1es virtual 1aw library

Citibank Check No. 000007 dated 8/8/95 12,700,000

3. Sy Pio Lato:chanrob1es virtual 1aw library

Citibank Check No. 000008 dated 8/8/95 12,700,000

000009 dated 8/8/95 12,700,000

000010 dated 8/8/95 12,700,000

4. International Merchandising and Development Corporation:chanrob1es virtual 1aw library

Citibank Check No. 000013 dated 4/30/96 6,250,000

000014 dated 5/31/96 6,250,000

000015 dated 6/30/96 6,250,000

000016 dated 7/31/96 6,250,000

000045 dated 9/30/96 7,250,000

5. Golden Star Industrial Corporation:chanrob1es virtual 1aw library

Citibank Check No. 000018 dated 9/30/96 6,250,000

6. Chin San Cordova:chanrob1es virtual 1aw library

Citibank Check No. 000041 dated 8/31/96 7,250,000

000043 dated 9/30/96 7,250,000

7. EY:chanrob1es virtual 1aw library

Citibank Check No. 000047 dated 10/31/96 7,250,000

000049 dated 10/31/96 7,250,000

8. Wee Te Lato:chanrob1es virtual 1aw library

Citibank Check No. 000048 dated 10/31/96 7,250,000

9. Bearer Instruments: CASH:chanrob1es virtual 1aw library

Citibank Check No. 000001 dated 8/8/95 12,700,000

000002 dated 8/8/95 12,700,000

000003 dated 8/8/95 12,700,000

000004 dated 8/8/95 12,700,000

000005 dated 8/8/95 12,700,000

000006 dated 8/8/95 12,700,000

000012 dated 3/31/96 6,250,000

000017 dated 8/31/96 6,250,000

000039 dated 8/31/96 7,250,000

000040 dated 8/31/96 7,250,000

000042 dated 8/31/96 8,000,000

000044 dated 9/30/96 7,250,000

000046 dated 9/30/96 7,250,000

000050 dated 10/31/96 8,000,000

10. Payee ‘s Name Not Legible:chanrob1es virtual 1aw library

Citibank Check No. 000011 dated 8/31/96 6,250,000

On the other hand, Ms. Aurora Montano, a cousin of Mr. Justiniano Montano IV, was asked by a Mr. Ben Cuevo if she
knew anybody from PEA, and she answered: "Yes, I know Mr. Justiniano Montano IV." For this answer, and for
introducing the AMARI representative to Mr. Montano, she received P10 million in cash and P20 million in postdated
manager’s checks in the office of Mr. Benito Co and in the presence of, aside from Mr. Benito Co, Mr. Ben Cuevo and Mr.
Frank Chua. Ms. Montano, however, insisted that she actually received only P10 million.

Ms. Montano furthermore admitted that, through Mr. Ben Cuevo, she met Messrs. Chin San Cordova and Chua Hun
Siong in 1994 for this transaction.

In Executive Session, Mr. Ben Cuevo admitted to having encashed two checks at Pilipinas Bank, worth P12.5 million.
According to him, the two checks form part of the P150 million worth of post-dated checks (PDCs), with a face value of
P6.25 million per check, described in the Letter-Agreement. Of this P150 million, Mr. Cuevo actually received five (5)
PDCs worth P31 million, but he was only able to encash 2 checks at P12.5 million.

Still in Executive Session, Mr. Ben Cuevo also admitted receiving a check worth P6.25 million payable to his company,
International Merchandising and Development Corporation. This was deposited in his Current Account No. 604010562-A,
and the amount was transferred by credit memo to Mr. Montano IV’s account at Pilipinas Bank.

Mr. Montano IV admitted that he has an account with Pilipinas Bank, but invoked his constitutional right against self-
incrimination when asked if he received the amount of P6.25 million transferred to his account. The Pilipinas Bank Credit
Advice dated May 6, 1996, marked as Exhibit 1-Montano IV, indicating the transfer of the amount of P6.25 million was
presented by Senator Drilon. Once or twice, a certain Ms. Polly Tragico accompanied Mr. Montano IV to withdraw funds
from Pilipinas Bank-Pavilion.

7. Both filed on 26 May 2003. On 6 June 2003 Amari filed a Supplement to its second Motion for Reconsideration.

8. Filed on 19 August 2003.

9. Decision dated 17 January 1964 of Judge Amador E. Gomez. Also quoted in Justice Josue N. Bellosillo’s Supplement
to Separate Opinion, Concurring and Dissenting.

10. Sections 2 and 3, Article XII of the 1987 Constitution.

11. Article 112, Civil Code of the Philippines.

12. Section 3.2 (a), Amended JVA.

13. Section 3.3 (a), Amended JVA.

14. Section 2.2, Amended JVA.

15. Section 5.2 (c), Amended JVA.

16. Ibid.

17. SECTION 79. Destruction or sale of unserviceable property. — 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 unsalable, 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 awards or similar body in the presence of
the auditor concerned or other duly 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.

18. SECTION 379. Property Disposal. — When property of any local government unit has become unserviceable for any
cause or is no longer needed, it shall upon application of the officer accountable therefor, be inspected and appraised by
the provincial, city or municipal auditor, as the case may be, or his duly authorized representative or that of the
Commission on Audit and, if found valueless or unusable, shall be destroyed in the presence of the inspecting officer.

If found valuable, the same shall be sold at public auction to the highest bidder under the supervision of the committee on
awards and in the presence of the provincial, city or municipal auditor or his duly authorized representative. Notice of the
public auction shall be posted in at least three (3) publicly accessible and conspicuous places, and if the acquisition cost
exceeds One hundred thousand pesos (P100,000.00) in the case of provinces and cities, and Fifty thousand pesos
(P50,000.00) in the case of municipalities, notice of auction shall be published at least two (2) times within a reasonable
period in a newspaper of general circulation in the locality.

19. Under Section 380 of the 1991 Local Government Code, local governments can sell real property through negotiated
sale only with the approval of the Commission on Audit. Under paragraph 2 (a) of COA Circular No. 89-296, on "Sale Thru
Negotiation," a negotiated sale may be resorted to only if" [T]here was a failure of public auction." The Commission on
Audit enforces the express requirement in Section 79 of the Government Auditing Code that a negotiated sale is possible
only after there is a failure of public auction.

20. 359 Phil. 530 (1998).

21. Laurel v. Garcia, G.R. No. 92013, 25 July 1990, 187 SCRA 797.

VITUG, J.:chanrob1es virtual 1aw library

1. SEC. 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 to 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.

2. Pertinent provisions in the 1935 Constitution provided —

Article XIII Conservation and Utilization of Natural Resources

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 the
limit of the grant.

Section 3. The Congress may determine by law the size of private agricultural land which individuals, corporations, or
associations may acquire and hold, subject to rights existing prior to the enactment of such law.

Section 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to
individuals, corporations or associations qualified to acquire or hold lands of the public domain in the Philippines.

3. In De Castro v. Tan (129 SCRA 85), the petitioner, the vendor in a contract of sale, sought to recover the subject parcel
of land, which she had sold to an alien vendee. The foreigner had, in the meantime, ceded the property to a naturalized
Filipino citizen. In denying the petitioner the right to recover the land, the Court observed that while the vendee was an
alien at the time of the sale, the land had since become the property of a naturalized Filipino citizen, who was
constitutionally qualified to own land. The Court was convinced that no public policy would be served if a contrary rule
were to be adopted. So also, in Republic v. IAC (175 SCRA 398), the Court sustained the conveyance of a land to a
foreigner who later became a Filipino citizen.

4. "Good faith" is deemed to be attendant where the builder believes to have a rightful claim of title to the property.

5. Article 448, New Civil Code provides —

The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate
as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige
the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or
planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case,
he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or tress after proper
indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms
thereof.

6. Article 546 provides:chanrob1es virtual 1aw library

Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until
he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who
has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase
in value which the thing may have acquired by reason thereof.

QUISUMBING, J.:

* It would appear from the ponencia (page 9 of the Resolution) that some 167.85 hectares out of 750 hectares have
already been reclaimed.

SANDOVAL-GUTIERREZ, J.:c
TUMALAD VS. VICENCIO (G.R. NO. L-30173, SEPTEMBER 30, 1971)

FACTS:

1. Some time in 1955, Alberta Vicencio and Emiliano Simeon loaned 4,800 pesos from Gavino and Generosa Tumalad.

As guarantee, they executed a chattel mortgage over their house in Quiapo which, at that time, was being rented

from Madrigal and Company, Inc.

2. The mortgage was registered in the Registry of Deeds of Manila. It was also agreed that default in the payment of

any of the amortizations will make the unpaid balance immediately due and demandable.

3. The defendants-appellants thus defaulted in paying and the mortgage was extrajudicially foreclosed. The house was

auctioned and bought by the Tumalad’s as the highest bidder.

4. They then commenced an ejectment case in the MTC which ruled in favor of Tumalad. The defendants-appellants

then appealed to the RTC questioning the legality of the chattel mortgage.

5. While pending, the MTC issued a writ of execution but cannot be carried because the house has already been

demolished 10 days before pursuant to an order in another ejectment case against the defendants.

6. The RTC ruled then in favor of Tumalad and ordered the defendants to pay the rent. This was appealed to the CA

which, in turn, certified the case to the SC as only questions of law are involved.

7. Defendants-appellants contend that the chattel mortgage was void because the subject matter is a house of strong

materials and being an immovable, it can only be the subject of a real estate mortgage and not a chattel mortgage.

ISSUE: Can defendants claim that the house is an immovable property?

RULING: No.

1. The parties to a contract may, by agreement, treat as personal property that which by nature would be a real property

if it was so expressly and specifically designated. This is based on the principle of estoppel.

2. A mortgaged house on a rented land was held to be a personal property not only because the deed of mortgage

considered it as such but also because it did not form part of the land.

3. It is now settled that an object placed on land by one who had only a temporary right to the same does not become

immobilized by attachment.

4. In the contract, the house was expressly designated as chattel mortgage which provides that: “the mortgagor

voluntarily cedes, sells and transfers by way of chattel mortgage…”

5. Although there is no specific statement referring to the house as personal property, the defendants-appellants could

only have meant to convey the house as chattek or intended to treat the same as such sk that they should not now

be allowed to make an inconsistent stand by claiming otherwise.

6. Moreover, the subject house stood on a rented lot to which defendants-appellants merely had a temporary right as

lessee, and although this cannot in itself alone determine the status of the property, it does so when combined with

other factors to sustain the interpretation of the parties.

7. The SC, however, reversed the decision appealed from on the ground that the purchaser of the house is not yet

entitled, as a matter of right, to its possession as there is a 1-year period within which the mortgagor may redeem the

property.

8. The period of redemption had not yet expired when action was instituted in the court of origin. The original complaint

stated no cause of action and was prematurely filed.

MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner,

vs.

CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF LAGUNA and

PROVINCIAL ASSESSOR OF LAGUNA, respondents.

Facts:

Pursuant to a pipeline concession issued under the Petroleum Act of 1949, Republic Act No. 387, Meralco Securities

installed from Batangas to Manila a pipeline system consisting of cylindrical steel pipes joined together and buried not less

than one meter below the surface along the shoulder of the public highway. The pipes are embedded in the soil and are

firmly and solidly welded together so as to preclude breakage or damage thereto and prevent leakage or seepage of the

oil. The valves are welded to the pipes so as to make the pipeline system one single piece of property from end to end.

In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be cold-cut by means of a rotary

hard-metal pipe-cutter after digging or excavating them out of the ground where they are buried. In points where the

pipeline traversed rivers or creeks, the pipes were laid beneath the bed thereof. Hence, the pipes are permanently

attached to the land.

Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial assessor of Laguna treated the pipeline as

real property and issued tax declarations, containing the assessed values of portions of the pipeline.

Meralco appealed the assessments to the defendants, but the latter ruled that pipeline is subject to realty tax. The

defendants argued that the pipeline is subject to realty tax because they are contemplated in Assessment Law and Real

Property Tax Code; that they do not fall within the category of property exempt from realty tax under those laws; that
Articles 415 & 416 of the Civil Code, defining real and personal property have no applications to this case because these

pipes are constructions adhered to soil and things attached to the land in a fixed manner, and that Meralco Securities is

not exempt from realty tax under petroleum law.

REPORT THIS AD

Meralco insists that its pipeline is not subject to realty tax because it is not real property within the meaning of Art. 415.

Issue:

Whether the aforementioned pipelines are subject to realty tax.

Held:

Yes, the pipelines are subject to realty tax.

Section 2 of the Assessment Law provides that the realty tax is due “on real property, including land, buildings, machinery,

and other improvements.” This provision is reproduced with some modification in Section 38, Real Property Tax Code,

which provides that “there shall be levied, assessed, and collected xxx annual ad valorem tax on real property such as

land, buildings, machinery, and other improvements affixed or attached to real property xxx.”

It is incontestable that the pipeline of Meralco Securities does not fall within any of the classes of exempt real property

enumerated in section 3 of the Assessment Law and section 40 of the Real Property Tax Code.

Pipeline means a line of pipe connected to pumps, valves and control devices for conveying liquids, gases or finely

divided solids. It is a line of pipe running upon or in the earth, carrying with it the right to the use of the soil in which it is

placed.

Article 415[l] and [3] provides that real property may consist of constructions of all kinds adhered to the soil and everything

attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the

material or deterioration of the object.

The pipeline system in question is indubitably a construction adhering to the soil. It is attached to the land in such a way

that it cannot be separated therefrom without dismantling the steel pipes which were welded to form the pipeline.

WHEREFORE, the questioned decision and resolution are affirmed. The petition is dismissed. No costs.
Makati Leasing and Finance Corp. vs Wearever Textile Mills Inc.,

G.R. No. 58469

May 16, 1983

Facts:

Wearever Textile Mills, Inc. executed a chattel mortgage contract in favor of Makati Leasing and Finance Corporation

covering certain raw materials and machinery. Upon default, Makati Leasing filed a petition for judicial foreclosure of the

properties mortgaged. Acting on Makati Leasing’s application for replevin, the lower court issued a writ of seizure.

Pursuant thereto, the sheriff enforcing the seizure order and removed the main motor of the subject machinery. In a

petition for certiorari and prohibition, the Court of Appeals ordered the return of the machinery on the ground that the

same cannot be the subject of replevin because it is a real property pursuant to Article 415 of the new Civil Code, the

same being attached to the ground by means of bolts and the only way to remove it from Wearever textile’s plant would

be to drill out or destroy the concrete floor. When the motion for reconsideration of Makati Leasing was denied by the

Court of Appeals, Makati Leasing elevated the matter to the Supreme Court.

Issue:

Whether or not the machinery in suit is real or personal property from the point of view of the parties.

Held:

The said machinery is a personal property. Like what was involved in the Tumalad case, if a house of strong materials,

may be considered as personal property for purposes of executing a chattel mortgage thereon, as long as the parties to

the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a

machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise

treated as such. This is really because one who has so agreed is estopped from the denying the existence of the chattel

mortgage. The decision of the Court of Appeals was set aside and the order of the lower court was reinstated.

Usero v CA Digest

G.R. No. 152115, 26 January 2005

Property Law

Facts: This is a consolidated petition assailing the decision of the Court of Appeals (CA). Petitioners and the private
respondent are registered owners of neighboring parcels of land wherein between the lots is a low-level strip of land
with stagnant body of water. Whenever there is a storm or heavy rain, the water therein would flood thereby causing
damage to houses of the Polinars prompting them to build a concrete wall on the bank of the strip of land about
3meters from their house and riprapped the soil in that portion.

The Useros claimed ownership of the strip, demanded the halt of the construction but the Polinars never heeded
believing that the strip is part of a creek. However, the Polinars offered to pay for the land. As the parties still failed
to settle, both filed separate complaints for forcible entry. The Municipal Trial Court ruled in favor of the petitioner,
while the regional trial court reversed and ordered the dismissal of the complaint and confirmed the existence of the
creek between the lots.

Issue: Whether or not the disputed strip of land is part of the creek hence part of public domain

Held: YES. Art. 420 of the Philippine New Civil Code (NCC) provides for properties which are part of public domain.
A creek is included in the phrase "and others of similar character". A creek, which refers to a recess or arm of a river
is a property belonging to the public domain, therefore not susceptible of private ownership. Being a public water, it
cannot be registered under the Torrens system under the name of any individual.

Chavez v. Pea and Amari

Fact:
In 1973, the Comissioner on Public Highways entered into a contract to reclaim areas of Manila Bay with the
Construction and Development Corportion of the Philippines (CDCP).

PEA (Public Estates Authority) was created by President Marcos under P.D. 1084, tasked with developing and
leasing reclaimed lands. These lands were transferred to the care of PEA under P.D. 1085 as part of the Manila
Cavite Road and Reclamation Project (MCRRP). CDCP and PEA entered into an agreement that all future projects
under the MCRRP would be funded and owned by PEA.

By 1988, President Aquino issued Special Patent No. 3517 transferring lands to PEA. It was followed by the transfer
of three Titles (7309, 7311 and 7312) by the Register of Deeds of Paranaque to PEA covering the three reclaimed
islands known as the FREEDOM ISLANDS.

Subsquently, PEA entered into a joint venture agreement (JVA) with AMARI, a Thai-Philippine corporation to
develop the Freedom Islands. Along with another 250 hectares, PEA and AMARI entered the JVA which would later
transfer said lands to AMARI. This caused a stir especially when Sen. Maceda assailed the agreement, claiming that
such lands were part of public domain (famously known as the “mother of all scams”).

Peitioner Frank J. Chavez filed case as a taxpayer praying for mandamus, a writ of preliminary injunction and a TRO
against the sale of reclaimed lands by PEA to AMARI and from implementing the JVA. Following these events,
under President Estrada’s admin, PEA and AMARI entered into an Amended JVA and Mr. Chaves claim that the
contract is null and void.

Issue:
w/n: the transfer to AMARI lands reclaimed or to be reclaimed as part of the stipulations in the (Amended) JVA
between AMARI and PEA violate Sec. 3 Art. XII of the 1987 Constitution
w/n: the court is the proper forum for raising the issue of whether the amended joint venture agreement is grossly
disadvantageous to the government.

Held:
On the issue of Amended JVA as violating the constitution:
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 1987Constitution
which prohibits private corporations from acquiring any kind of alienable land of the public domain.