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)
DECISION
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. ". . . 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,
This case was originally commenced by defendants-appellants in the until such (time that) the premises is (sic) completely vacated; plus attorney’s
municipal court of Manila in Civil Case No. 43073, for ejectment. Having lost fees of P100.00 and the costs of the suit." 5
therein, defendants-appellants appealed to the court a quo (Civil Case No.
30993) which also rendered a decision against them, the dispositive portion of Defendants-appellants, in their answers in both the municipal court and court
which follows:jgc:chanrobles.com.ph 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
"WHEREFORE, the court hereby renders judgment in favor of the plaintiffs or documentary. Instead, they relied on their memoranda in support of their
and against the defendants, ordering the latter to pay jointly and severally the motion to dismiss, predicated mainly on the grounds that: (a) the municipal
former a monthly rent of P200.00 on the house, subject-matter of this action, court did not have jurisdiction to try and decide the case because (1) the issue
from March 27, 1956, to January 14, 1967, with interest at the legal rate from involved is ownership, and (2) there was no allegation of prior possession; and
April 18, 1956, the filing of the complaint, until fully paid, plus attorney’s fees (b) failure to prove prior demand pursuant to Section 2, Rule 72, of the Rules
in the sum of P300.00 and to pay the costs."cralaw virtua1aw library of Courts. 6

It appears on the records that on 1 September 1955 defendants-appellants During the pendency of the appeal to the Court of First Instance, defendants-
executed a chattel mortgage 1 in favor of plaintiffs-appellees over their house appellants failed to deposit the rent for November, 1956 within the first 10 days
of strong materials located at No. 550 Int. 3, Quezon Boulevard, Quiapo, of December, 1956 as ordered in the decision of the municipal court. As a
Manila, over Lot No. 6-B and 7-B, Block No. 2554, which were being rented result, the court granted plaintiffs-appellees’ motion for execution, and it was
from Madrigal & Company, Inc. The mortgage was registered in the Registry actually issued on 24 January 1957. However, the judgment regarding the
of Deeds of Manila on 2 September 1955. The herein mortgage was executed surrender of possession to plaintiffs-appellees could not be executed because
to guarantee a loan of P4,800.00 received from plaintiffs-appellees, payable the subject house had been already demolished on 14 January 1957 pursuant
within one year at 12% per annum. The mode of payment was P150.00 to the order of the court in a separate civil case (No. 25816) for ejectment
monthly, starting September, 1955, up to July 1956, and the lump sum of against the present defendants for non-payment of rentals on the land on
P3,150 was payable on or before August, 1956. It was also agreed that default which the house was constructed.
in the payment of any of the amortizations would cause the remaining unpaid
balance to become immediately due and payable and — The motion of plaintiffs for dismissal of the appeal, execution of the
supersedeas bond and withdrawal of deposited rentals was denied for the
"the Chattel Mortgage will be enforceable in accordance with the provisions of reason that the liability therefor was disclaimed and was still being litigated,
Special Act No. 3135, and for this purpose, the Sheriff of the City of Manila or and under Section 8, Rule 72, rentals deposited had to be held until final
any of his deputies is hereby empowered and authorized to sell all the disposition of the appeal. 7
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. . ." On 7 October 1957, the appellate court of First Instance rendered its decision,
2 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
When defendants-appellants defaulted in paying, the mortgage was appeal to this Court. Plaintiffs-appellees failed to file a brief and this appeal
extrajudicially foreclosed, and on 27 March 1956, the house was sold at public was submitted for decision without it.
auction pursuant to the said contract. As highest bidder, plaintiffs-appellees
were issued the corresponding certificate of sale. 3 Thereafter, on 18 April Defendants-appellants submitted numerous assignments of error which can
1956, plaintiffs-appellees commenced Civil Case No. 43073 in the municipal be condensed into two questions, namely:chanrob1es virtual 1aw library
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 (a) Whether the municipal court from which the case originated had jurisdiction
of P200.00 monthly from 27 March 1956 up to the time the possession is to adjudicate the same;
surrendered. 4 On 21 September 1956, the municipal court rendered its
decision — (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 nature is considered personal property." In the later case of Navarro v. Pineda,
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
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 hereby reinstated, with costs against the private Respondent.
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 SO ORDERED.
house is built and We should not lay down distinctions not contemplated by
law. Makasiar (Chairman), Aquino, Concepcion, Jr., Guerrero and Escolin, JJ.,
concur.
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 Abad Santos, J., concurs in the result.
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. NIMFA USERO, petitioner,
vs.
Private respondent contends that estoppel cannot apply against it because it COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA
had never represented nor agreed that the machinery in suit be considered as POLINAR, respondents.
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 x--------------------------------x
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 G.R. No. 155055 January 26, 2005
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 LUTGARDA R. SAMELA, petitioner,
that the charge is true, such fact alone does not render a contract void ab initio, vs.
but can only be a ground for rendering said contract voidable, or annullable COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA
pursuant to Article 1390 of the new Civil Code, by a proper action in court. POLINAR, respondents.
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 DECISION
hand, as pointed out by petitioner and again not refuted by respondent, the
latter has indubitably benefited from said contract. Equity dictates that one CORONA, J.:
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
Before this Court are two consolidated petitions for review on certiorari under
benefited therefrom.cralawnad
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
From what has been said above, the error of the appellate court in ruling that
Appeals in CA-GR SP No. 64718. The second petition, docketed as G.R. No.
the questioned machinery is real, not personal property, becomes very
155055, filed by Lutgarda R. Samela, assails the January 11, 2002 decision 2 of
apparent. Moreover, the case of Machinery and Engineering Supplies, Inc. v.
the Court of Appeals in CA-GR SP NO. 64181.
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 The undisputed facts follow.
subject of a Chattel Mortgage. Undoubtedly, the Tumalad case bears more
nearly perfect parity with the instant case to be the more controlling Petitioners Lutgarda R. Samela and Nimfa Usero are the owners respectively
jurisprudential authority. of lots 1 and 2, Block 5, Golden Acres Subdivision, Barrio Almanza, Las Piñas
City.
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
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
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.

Form of Payment Paid/Payable On Amount Thus, we now come to the resolution of the second Motions for
Reconsideration 7 filed by public respondent Public Estates Authority ("PEA")
Manager’s Checks 28 April 1995 P400,000,000.00 and private respondent Amari Coastal Bay Development Corporation
("Amari"). As correctly pointed out by petitioner Francisco I. Chavez in his
Manager’s Checks Upon signing of letter 262,500,000.00 Consolidated Comment, 8 the second Motions for Reconsideration raise no
new issues.
10 Post Dated Checks (PDCs) 60 days from date of letter 127,000,000.00
However, the Supplement to "Separate Opinion, Concurring and Dissenting"
24 PDCs 31 Aug.’95 to 31 Jan.’98 150,000,000.00 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
48 PDCs Monthly, over a 12-month 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
pd. from date of letter 357,363,050.00 effect, the Supplement to the Dissenting Opinion claims that these two
Resolutions serve as authority that a single private corporation like Amari may
Cash bonus When sale of land begins not exceeding acquire hundreds of hectares of submerged lands, as well as reclaimed
submerged lands, within Manila Bay under the Amended Joint Venture
157,844,100.00 Agreement ("Amended JVA").

Developed land from Project Upon completion of each Costing We find the cited Ponce Cases inapplicable to the instant case.

phase 300,000,000.00 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
TOTAL P1,754,707,150.00
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
Mr. Luis Benitez of SGV, the external auditors of AMARI, testified that said
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife,
Letter-Agreement was approved by the AMARI Board. 6 (Emphasis supplied)
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
The private entity that purchased the reclaimed lands for P1.894 billion
alienated. . . . (Emphasis supplied)
expressly admitted before the Senate Committees that it spent P1.754 billion
in commissions to pay various individuals for "professional efforts and services
Submerged lands, like the waters (sea or bay) above them, are part of the
in successfully negotiating and securing" the contract. By any legal or moral
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 alienable lands of the public domain, and the 1987 Constitution reiterated this
Constitutions, to hold alienable or even inalienable lands of the public domain. prohibition. Obviously, the Ponce Cases cannot serve as authority for a private
There is no dispute that a public corporation is not covered by the constitutional corporation to acquire alienable public lands, much less submerged lands,
ban on acquisition of alienable public lands. Both the 9 July 2002 Decision and since under the present Constitution a private corporation like Amari is barred
the 6 May 2003 Resolution of this Court in the instant case expressly recognize from acquiring alienable lands of the public domain.
this.
Clearly, the facts in the Ponce Cases are different from the facts in the instant
Cebu City is an end user government agency, just like the Bases Conversion case. Moreover, the governing constitutional and statutory provisions have
and Development Authority or the Department of Foreign Affairs. 21 Thus, changed since the Ponce Cases were disposed of in 1965 and 1966 through
Congress may by law transfer public lands to the City of Cebu to be used for minute Resolutions of a divided (6 to 5) Court.
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. This Resolution does not prejudice any innocent third party purchaser of the
However, lands so acquired by the City of Cebu for a patrimonial purpose may reclaimed lands covered by the Amended JVA. Neither the PEA nor Amari has
be sold to private parties, including private corporations. 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
However, in the instant case the PEA is not an end user agency with respect Decision:chanrob1es virtual 1aw library
to the reclaimed lands under the Amended JVA. As we explained in the 6 May
2003 Resolution: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
PEA is the central implementing agency tasked to undertake reclamation as well as proprietary functions. No patent or certificate of title has been issued
projects nationwide. PEA took the place of the Department of Environment and to any private party. No one is asking the Director of Lands to cancel PEA’s
Natural Resources ("DENR" for brevity) as the government agency charged patent or certificates of title. In fact, the thrust of the instant petition is that
with leasing or selling all reclaimed lands of the public domain. In the hands of PEA’s certificates of title should remain with PEA, and the land covered by
PEA, which took over the leasing and selling functions of DENR, reclaimed these certificates, being alienable lands of the public domain, should not be
foreshore (or submerged lands) lands are public lands in the same manner sold to a private corporation.
that these same lands would have been public lands in the hands of DENR.
(Emphasis supplied) 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
Our 9 July 2002 Decision explained the rationale for treating the PEA in the Resolution, we DENIED with FINALITY respondents’ Motions for
same manner as the DENR with respect to reclaimed foreshore or submerged Reconsideration. Litigations must end some time. It is now time to write finis
lands in this wise:chanrob1es virtual 1aw library to this "Grandmother of All Scams."cralaw virtua1aw library

To allow vast areas of reclaimed lands of the public domain to be transferred WHEREFORE, the second Motions for Reconsideration filed by Public Estates
to PEA as private lands will sanction a gross violation of the constitutional ban Authority and Amari Coastal Bay Development Corporation are DENIED for
on private corporations from acquiring any kind of alienable land of the public being prohibited pleadings. In any event, these Motions for Reconsideration
domain. PEA will simply turn around, as PEA has now done under the have no merit. No further pleadings shall be allowed from any of the parties.
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 SO ORDERED.
transaction. This scheme will effectively nullify the constitutional ban in Section
3, Article XII of the 1987 Constitution which was intended to diffuse equitably Davide, Jr ., C.J., Panganiban, Austria-Martinez, Carpio Morales and Callejo,
the ownership of alienable lands of the public domain among Filipinos, now Sr., concur.
numbering over 80 million strong. (Emphasis supplied)
Bellosillo, J., I vote to grant reconsideration.
Finally, the Ponce Cases were decided under the 1935 Constitution which
allowed private corporations to acquire alienable lands of the public domain. Puno, J., I maintain my previous qualified opinion.
However, the 1973 Constitution prohibited private corporations from acquiring
Quisumbing, J., I vote to allow reconsideration. 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
Ynares-Santiago, J., I maintain my previous dissent. of the structures or improvements. 6

Sandoval-Gutierrez and Corona, JJ., we maintain our dissent. The above exceptional instances are issues that, in my view, could well be
litigated by the proper parties in separate proceedings.
Azcuna, J., took no part.
QUISUMBING, J.:
Separate Opinions

Considering the crucial significance of the action to be taken by the Court on

VITUG, J.: the PEA motion, I vote to allow a final reconsideration of the controversy.

Two points, in my view, require painstaking elucidation and

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 us. That the submerged lands, under the sea or below baywater, should
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 Tan, 129 SCRA 85, for an equitable approach to what appears now a
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
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
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.
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 Constitution must be upheld, not defeated nor diminished.
distinguishable, if not outright distinct, from disposal of surplus/junk property.
The reclamation projects like those contemplated in the PEA-AMARI joint Infrastructure building is a function of the government and ideally should be
venture call for a greater public appreciation of equitable investment regimes financed exclusively by public funds. However, present circumstances show
by policy-makers and private entrepreneurs alike as they impact hugely on the that this cannot be done. Thus, private corporations are encouraged to invest
economic development concerns of the nation. Thus, we are of the view that in income generating national construction ventures.
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. Investments on the scale of reclamation projects entail huge amounts of
No. 1085 concerning reclaimed lands along Manila Bay. money. It is a reality that only private corporations can raise such amounts. In
the process, they assist this country in its economic development.
Lastly, we are informed that the possible criminal responsibility, if any, of Consequently, our government should not take arbitrary action against these
certain officers of PEA are allegedly now before the Sandiganbayan. Be that corporate developers. Obviously, the courts play a key role in all disputes
as it may, the merit of the question before us regarding the validity of the PEA- arising in this area of national development.
AMARI joint venture is not necessarily foreclosed by cases before the
Sandiganbayan which of necessity require the highest quantum of proof, This is the background behind my second hard look at the issues and my
beyond reasonable doubt. Here we are not so constrained. For our principal resulting determination to dissent.
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 The basic issue before us is whether a private corporation, such as respondent
reconsideration. AMARI, can acquire reclaimed lands.

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 public use or public service, shall form part of the patrimonial property of the
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 1654 enacted by the Philippine Commission in 1907, Act No. 2874 (the Public
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
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
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.
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.
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

"Taking into account the requirements of conservation, ecology, and

development, and subject to the requirements of agrarian reform, the "Special land patent/patents shall be issued by the Secretary of Natural
Congress shall determine, by law, the size of lands of the public domain which Resources in favor of the Public Estates Authority without prejudice to the
may be acquired, developed, held, or leased and the conditions subsequent transfer to the contractor or his assignees of such portion or
therefor."cralaw virtua1aw library 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
I dissent from the foregoing conclusions which are based on general laws Commission shall issue the corresponding certificates of title." (Emphasis
mainly of ancient vintage. Reclaimed lands, especially those under the Manila- ours)
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 Pursuant to the above provisions, PEA is mandated inter alia to reclaim land,
than half a century after the enactment of the Public Lands Acts of 1919 and including foreshore and submerged areas, or to acquire reclaimed land.
1936. 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
PD 1084 and PD 1085 provide:chanrob1es virtual 1aw library authorized to transfer to the contractor or its assignees portion or portions of
the land reclaimed or to be reclaimed.
PD 1084 —
It is a fundamental rule that if two or more laws govern the same subject, every
"Section 4. Purposes. — The Authority is hereby created for the following effort to reconcile and harmonize them must be taken. Interpretare et
purposes:chanrob1es virtual 1aw library concordare legibus est optimus interpretandi. Statutes must be so construed
and harmonized with other statutes as to form a uniform system of
a. To reclaim land, including foreshore and submerged areas, by dredging, jurisprudence. 11 However, if several laws cannot be harmonized, the earlier
filling or other means, or to acquire reclaimed land; 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
b. To develop, improve, acquire, administer, deal in, subdivide, dispose, lease 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 vein, the New Civil Code classifies properties of the State as either property of
execution of the contract. As in negotiations leading to a treaty or international the public dominion 1 or patrimonial property. 2
agreement, whether sovereign or commercial in nature, a certain amount of
secrecy is not only permissible but compelling. 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
At any rate, recent developments appear to have mooted this issue, and corporations from acquiring alienable lands of the public domain. On the other
anything in the Decision which apparently approves publicity during on-going hand, if it is patrimonial property, the constitutional proscription does not apply.
negotiations without pinpointing the stage where the right to information
appears is obiter. The motions for reconsideration all treat the JVA as a done First, the fundamentals. The Constitution ordains that natural resources are
thing, something already concrete, if not finalized. 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
Indeed, it is hypothetical to identify exactly when the right to information begins forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna."
and what matters may be disclosed during negotiations for the reclamation of 4
land from the sea.
Obviously, the common characteristics of natural resources are that they are
Unfortunately for private respondent, its name, "AMARI," happens to retain still in their original, raw state. Natural resources are material objects of
lingering unpleasant connotations. The phrase "grandmother of all scams," economic value and utility to man produced by nature. 5 In other words, they
arising from the Senate investigation of the original contract, has not been refer to property and materials in their original and native state, not to those
completely erased from the public mind. However, any suspicion of anything which have been produced through the intervention of man.
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 Natural resources are capable of conversion or, in the words of the
stressing that the Decision and this Dissenting Opinion center exclusively on Constitution, 6" [e]xploration, development and utilization." But the conversion
questions of constitutionality and legality earlier discussed. 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
To recapitulate, it is my opinion that there is nothing in the Constitution or or production-sharing agreements is authorized by the Government through a
applicable statutes which impedes the exercise by PEA of its right to sell or law, the qualified party to the agreement may own the converted product or
otherwise dispose of its reclaimed land to private corporations, especially part of it, when so provided in the agreement. The rationale is that the
where, as here, the purpose is to compensate respondent AMARI, the converted product is not the same as the original natural resource. Thus, the
corporate developer, for its expenses incurred in reclaiming the subject areas. timber concessionaire may own the logs cut from the timber concession; the
Pursuant to PD 1084 and PD 1085, PEA can transfer to the contractor, such miner may dispose of the gold produced from the gold ores taken from the
as AMARI, such portion or portions of the land reclaimed or to be reclaimed. mine; the developer may market the energy harnessed from a geothermal
field.
WHEREFORE, I vote to GRANT the motions for reconsideration and to
DISMISS the petition for lack of merit. Significantly, the reclamation contract is not an outright sale. Reclamation is
essentially a construction and infrastructure contract. 8 This is also clear from
TINGA, J.: the BOT Laws. 9 Specifically, the contract subject of this case is a joint venture
agreement.

With all due respect, I dissent from the majority. Reclaimed land does not fall under the category of natural resources which
under the Constitution are inalienable. This is so because its development from
Central to the adjudication of this case is the determination of the status of the seabed entails human intervention. It is unlike land per se, which having
reclaimed lands. Lands of the State are either lands of the public domain or become such on account of the forces of nature, is considered a natural
lands of the private domain. Thus, Section 2, Article XII of the 1987 resource.
Constitution, incorporating the Regalian Doctrine, provides that" [a]ll lands of
the public domain . . . are owned by the State." Unwritten but implicit in this That being the case, it is statutory law which determines the status of
provision is that the State may own lands of the private domain. In the same 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 1. See "The Grandmother of All Scams" by Sheila S. Coronel and Ellen
will make it valid and legal, the latter interpretation should be adopted. 18 Thus, Tordesillas, 18-20 March 1998, Philippine Center for Investigative Journalism.
the New Civil Code states:chanrob1es virtual 1aw library This report won the 1st Prize in the 1998 JVO Investigative Journalism Awards.

Art. 1373. If some stipulation of any contract should admit of several meanings, 2. 6 May 2003 Resolution, p. 13.
it shall be understood as bearing that import which is most adequate to render
it effectual. 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
The Constitution 19 specifically mentions joint venture agreements as among Report No. 560 dated 16 September 1997. Moreover, the existence of this
the contracts that the State may enter into with the private sector for the report is a matter of judicial notice pursuant to Section 1, Rule 129 of the Rules
development of natural resources. Consequently, there is nothing aberrant for of Court which provides, "A court shall take judicial notice, without the
the respondents in this case to secure reconveyance in the form of reclaimed introduction of evidence, of . . . the official acts of the legislature."cralaw
land. virtua1aw library

Finally, I submit that this case should be resolved in terms of the long range 4. 9 July 2002 Decision, p. 4.
development of the country. However rich our country may be in natural
resources, these riches are not inexhaustible, land being among the most 5. Senate Committee Report No. 560, p. 48.
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 6. A more detailed discussion on this matter in Senate Report No. 560 reads
hectares. Such a limited land area could hardly sustain a population, which, as follows:chanrob1es virtual 1aw library
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 The Commissions
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 A Letter-Agreement dated 09 June 1995 signed by Messrs. Premchai
extension of our coastlines consisting of 36,289 kilometers may be one of Karnasuta and Emmanuel Sy for and in behalf of AMARI, on the one hand,
them. 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
It is with this end in mind that the Government pursues policies established or payments AMARI paid or agreed to pay the aforesaid stockholders by way of
recognized by the Constitution, one of which is land reclamation. No less than fees for "professional efforts and services in successfully negotiating and
the Constitution, under the general welfare clause, 20 empowers and obliges securing for AMARI the Joint Venture Agreement", as follows:chanrob1es
the State to execute such a policy. The State, though, need not go at it alone. virtual 1aw library
Indeed, the Constitution itself acknowledges that the State cannot perform this
task by itself. Thus, the fundamental law, under the Article on National Form of Payment Paid/Payable On Amount
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 Manager’s Checks 28 April 1995 P400,000,000.00
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 Manager’s Checks Upon signing of letter 262,500,000.00
to this stark reality and, ultimately, to defeat State policy:chanrob1es virtual
1aw library 10 Post Dated Checks (PDCs) 60 days from date of letter 127,000,000.00

Accordingly, I vote to GRANT respondents’ second motions for 24 PDCs 31 Aug.’95 to 31 Jan.’98 150,000,000.00
reconsideration.chanrob1es virtua1 1aw 1ibrary
48 PDCs Monthly, over a 12-month
Endnotes:
pd. from date of letter 357,363,050.00
3) Forty (40) blank checks amounting to P357 million.
Cash bonus When sale of land begins not exceeding
In this regard, the pertinent portion of the 9 June 1995 letter-agreement
157,844,100.00 provides as follows:jgc:chanrobles.com.ph

Developed land from Project Upon completion of each Costing "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
phase 300,000,000.00 Million Five Hundred Thousand Pesos (Pesos 262,500,000) and (b) pay and
deliver to you the following checks:jgc:chanrobles.com.ph
TOTAL P1,754,707,150.00
"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);
Mr. Luis Benitez of SGV, the external auditors of AMARI, testified that said
Letter-Agreement was approved by the AMARI Board. "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
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 DUE DATE OF CHECK AMOUNT
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 August 31, 1995 6,250,000
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 March 31, 1996 6,250,000
were issued by Citibank-Makati in favor of a Mr. George Triviño, a Dominican
Republic national, broken down as follows:chanrob1es virtual 1aw library April 30, 1996 6,250,000

1) Twenty-nine (29) manager’s checks at P10 million each; May 31, 1996 6,250,000

2) One (1) manager’s check at P7 million; and, June 30, 1996 6,250,000

3) One (1) manager’s check at P3 million. July 31, 1996 6,250,000

All these checks were indorsed by Mr. Triviño. Mr. Sy could not satisfactorily August 31, 1996 6,250,000
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 September 30, 1996 6,250,000
regarding the said Mr. Triviño.
October 31, 1996 6,250,000
Mr. Emmanuel Sy admitted signing several blank checks as special request
from Messrs. Co and Chua and issuing said checks as follows:chanrob1es November 30, 1996 6,250,000
virtual 1aw library
December 31, 1996 6,250,000
1) Ten (10) Manager’s checks dated 60 days from the June 9 letter amounting
to P127 million; January 31, 1997 6,250,000

2) Twenty-four (24) blank checks amounting to P150 million dated from 31 February 28, 1997 6,250,000
August 1995 up to 31 January 1998; and,
March 31, 1997 6,250,000 (bearer instruments). Each person was thus named payee to the following
amounts:chanrob1es virtual 1aw library
April 30, 1997 6,250,000
1. Emmanuel Sy:chanrob1es virtual 1aw library
May 31, 1997 6,250,000
Citibank Check No. 000019 dated 10/31/96 P6,250,000
June 30, 1997 6,250,000
2. Manuel Sy:chanrob1es virtual 1aw library
July 31, 1997 6,250,000
Citibank Check No. 000007 dated 8/8/95 12,700,000
August 31, 1997 6,250,000
3. Sy Pio Lato:chanrob1es virtual 1aw library
September 30, 1997 6,250,000
Citibank Check No. 000008 dated 8/8/95 12,700,000
October 31, 1997 6,250,000
000009 dated 8/8/95 12,700,000
November 30, 1997 6,250,000
000010 dated 8/8/95 12,700,000
December 31, 1997 6,250,000
4. International Merchandising and Development Corporation:chanrob1es
January 31, 1998 6,250,000 virtual 1aw library

Total P150,000,000 Citibank Check No. 000013 dated 4/30/96 6,250,000

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

"3.3 Forty Eight (48) checks in the total amount of Three Hundred Fifty Seven 000015 dated 6/30/96 6,250,000
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 000016 dated 7/31/96 6,250,000

"Each monthly payment to consist of Four (4) checks, three (3) checks of which 000045 dated 9/30/96 7,250,000
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. 5. Golden Star Industrial Corporation:chanrob1es virtual 1aw library
These monthly payment of four (4) checks each shall be dated the last date of
the thirteen, fourteen, fifteen, sixteen, seventeen, eighteen, nineteen, twenty, Citibank Check No. 000018 dated 9/30/96 6,250,000
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 6. Chin San Cordova:chanrob1es virtual 1aw library
P8,363,050."cralaw virtua1aw library
Citibank Check No. 000041 dated 8/31/96 7,250,000
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 000043 dated 9/30/96 7,250,000
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 7. EY:chanrob1es virtual 1aw library
payees: Emmanuel Sy, Manuel Sy, Sy Pio Lato, International Merchandising
and Development Corporation, Golden Star Industrial Corporation, Chin San Citibank Check No. 000047 dated 10/31/96 7,250,000
Cordova, EY, and Wee Te Lato. Other payments were made payable to Cash
000049 dated 10/31/96 7,250,000 and Mr. Frank Chua. Ms. Montano, however, insisted that she actually
received only P10 million.
8. Wee Te Lato:chanrob1es virtual 1aw library
Ms. Montano furthermore admitted that, through Mr. Ben Cuevo, she met
Citibank Check No. 000048 dated 10/31/96 7,250,000 Messrs. Chin San Cordova and Chua Hun Siong in 1994 for this transaction.

9. Bearer Instruments: CASH:chanrob1es virtual 1aw library 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
Citibank Check No. 000001 dated 8/8/95 12,700,000 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
000002 dated 8/8/95 12,700,000 million, Mr. Cuevo actually received five (5) PDCs worth P31 million, but he
was only able to encash 2 checks at P12.5 million.
000003 dated 8/8/95 12,700,000
Still in Executive Session, Mr. Ben Cuevo also admitted receiving a check
000004 dated 8/8/95 12,700,000 worth P6.25 million payable to his company, International Merchandising and
Development Corporation. This was deposited in his Current Account No.
000005 dated 8/8/95 12,700,000 604010562-A, and the amount was transferred by credit memo to Mr. Montano
IV’s account at Pilipinas Bank.
000006 dated 8/8/95 12,700,000
Mr. Montano IV admitted that he has an account with Pilipinas Bank, but
000012 dated 3/31/96 6,250,000 invoked his constitutional right against self-incrimination when asked if he
received the amount of P6.25 million transferred to his account. The Pilipinas
000017 dated 8/31/96 6,250,000 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
000039 dated 8/31/96 7,250,000 Drilon. Once or twice, a certain Ms. Polly Tragico accompanied Mr. Montano
IV to withdraw funds from Pilipinas Bank-Pavilion.
000040 dated 8/31/96 7,250,000
7. Both filed on 26 May 2003. On 6 June 2003 Amari filed a Supplement to its
000042 dated 8/31/96 8,000,000 second Motion for Reconsideration.

000044 dated 9/30/96 7,250,000 8. Filed on 19 August 2003.

000046 dated 9/30/96 7,250,000 9. Decision dated 17 January 1964 of Judge Amador E. Gomez. Also quoted
in Justice Josue N. Bellosillo’s Supplement to Separate Opinion, Concurring
000050 dated 10/31/96 8,000,000 and Dissenting.

10. Payee ‘s Name Not Legible:chanrob1es virtual 1aw library 10. Sections 2 and 3, Article XII of the 1987 Constitution.

Citibank Check No. 000011 dated 8/31/96 6,250,000 11. Article 112, Civil Code of the Philippines.

On the other hand, Ms. Aurora Montano, a cousin of Mr. Justiniano Montano 12. Section 3.2 (a), Amended JVA.
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 13. Section 3.3 (a), Amended JVA.
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 14. Section 2.2, Amended JVA.
Mr. Benito Co and in the presence of, aside from Mr. Benito Co, Mr. Ben Cuevo
15. Section 5.2 (c), Amended JVA. auction.

16. Ibid. 20. 359 Phil. 530 (1998).

17. SECTION 79. Destruction or sale of unserviceable property. — When 21. Laurel v. Garcia, G.R. No. 92013, 25 July 1990, 187 SCRA 797.
government property has become unserviceable for any cause, or is no longer
needed, it shall, upon application of the officer accountable therefor, be VITUG, J.:chanrob1es virtual 1aw library
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 1. SEC. 3. Lands of the public domain are classified into agricultural, forest or
unsalable, it may be destroyed in their presence. If found to be valuable, it may timber, mineral lands, and national parks. Agricultural lands of the public
be sold at public auction to the highest bidder under the supervision of the domain may be further classified by law according to the uses to which they
proper committee on awards or similar body in the presence of the auditor may be devoted. Alienable lands of the public domain shall be limited to
concerned or other duly authorized representative of the Commission, after agricultural lands. Private corporations or associations may not hold such
advertising by printed notice in the Official Gazette, or for not less than three alienable lands of the public domain except by lease, for a period not
consecutive days in any newspaper of general circulation, or where the value exceeding twenty-five years, renewable for not more than twenty-five years,
of the property does not warrant the expense of publication, by notices posted and not to exceed one thousand hectares in area. Citizens of the Philippines
for a like period in at least three public places in the locality where the property may lease not more than five hundred hectares, or acquire not more than
is to be sold. In the event that the public auction fails, the property may be sold twelve hectares thereof by purchase, homestead or grant.
at a private sale at such price as may be fixed by the same committee or body
concerned and approved by the Commission. Taking into account the requirements of conservation, ecology, and
development, and subject to the requirements of agrarian reform, the
18. SECTION 379. Property Disposal. — When property of any local Congress shall determine, by law, the size of lands of the public domain which
government unit has become unserviceable for any cause or is no longer may be acquired, developed, held, or leased and the conditions therefor.
needed, it shall upon application of the officer accountable therefor, be
inspected and appraised by the provincial, city or municipal auditor, as the 2. Pertinent provisions in the 1935 Constitution provided —
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 Article XIII Conservation and Utilization of Natural Resources
presence of the inspecting officer.
Section 1. All agricultural, timber, and mineral lands of the public domain,
If found valuable, the same shall be sold at public auction to the highest bidder waters, minerals, coal, petroleum, and other mineral oils, all forces of potential
under the supervision of the committee on awards and in the presence of the energy and other natural resources of the Philippines belong to the State and
provincial, city or municipal auditor or his duly authorized representative. their disposition, exploitation, development, or utilization shall be limited to
Notice of the public auction shall be posted in at least three (3) publicly citizens of the Philippines or to corporations or associations at least sixty per
accessible and conspicuous places, and if the acquisition cost exceeds One centum of the capital of which is owned by such citizens, subject to any existing
hundred thousand pesos (P100,000.00) in the case of provinces and cities, right, grant, lease, or concession at the time of the inauguration of the
and Fifty thousand pesos (P50,000.00) in the case of municipalities, notice of Government established under this Constitution. Natural resources, with the
auction shall be published at least two (2) times within a reasonable period in exception of public agricultural land, shall not be alienated, and no license,
a newspaper of general circulation in the locality. concession, or lease for the exploitation, development, or utilization of any of
the natural resources shall be granted for a period exceeding twenty-five
19. Under Section 380 of the 1991 Local Government Code, local years, renewable for another twenty-five years, except as to water rights for
governments can sell real property through negotiated sale only with the irrigation, water supply, fisheries, or industrial uses other than the development
approval of the Commission on Audit. Under paragraph 2 (a) of COA Circular of water power, in which cases beneficial use may be the measure and the
No. 89-296, on "Sale Thru Negotiation," a negotiated sale may be resorted to limit of the grant.
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 Section 3. The Congress may determine by law the size of private agricultural
Code that a negotiated sale is possible only after there is a failure of public 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 * It would appear from the ponencia (page 9 of the Resolution) that some
shall be transferred or assigned except to individuals, corporations or 167.85 hectares out of 750 hectares have already been reclaimed.
associations qualified to acquire or hold lands of the public domain in the
Philippines. SANDOVAL-GUTIERREZ, J.:c

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.:
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 public highway. The pipes are embedded in the soil and are firmly and solidly

parties. welded together so as to preclude breakage or damage thereto and prevent

7. The SC, however, reversed the decision appealed from on the ground leakage or seepage of the oil. The valves are welded to the pipes so as to

that the purchaser of the house is not yet entitled, as a matter of right, to make the pipeline system one single piece of property from end to end.

its possession as there is a 1-year period within which the mortgagor

may redeem the property. In order to repair, replace, remove or transfer segments of the pipeline, the

8. The period of redemption had not yet expired when action was instituted pipes have to be cold-cut by means of a rotary hard-metal pipe-cutter after

in the court of origin. The original complaint stated no cause of action digging or excavating them out of the ground where they are buried. In points

and was prematurely filed. 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

MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner, assessor of Laguna treated the pipeline as real property and issued tax

declarations, containing the assessed values of portions of the pipeline.

vs.

Meralco appealed the assessments to the defendants, but the latter ruled

CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF that pipeline is subject to realty tax. The defendants argued that the pipeline

ASSESSMENT APPEALS OF LAGUNA and PROVINCIAL ASSESSOR OF is subject to realty tax because they are contemplated in Assessment Law

LAGUNA, respondents. 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

Facts: the Civil Code, defining real and personal property have no applications to

this case because these pipes are constructions adhered to soil and things

Pursuant to a pipeline concession issued under the Petroleum Act of 1949, attached to the land in a fixed manner, and that Meralco Securities is not

Republic Act No. 387, Meralco Securities installed from Batangas to Manila a exempt from realty tax under petroleum law.

pipeline system consisting of cylindrical steel pipes joined together and

buried not less than one meter below the surface along the shoulder of the
REPORT THIS AD

Article 415[l] and [3] provides that real property may consist of constructions

Meralco insists that its pipeline is not subject to realty tax because it is not of all kinds adhered to the soil and everything attached to an immovable in a

real property within the meaning of Art. 415. fixed manner, in such a way that it cannot be separated therefrom without

breaking the material or deterioration of the object.

Issue:

Whether the aforementioned pipelines are subject to realty tax. 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

Held: therefrom without dismantling the steel pipes which were welded to form the

Yes, the pipelines are subject to realty tax. pipeline.

Section 2 of the Assessment Law provides that the realty tax is due “on real WHEREFORE, the questioned decision and resolution are affirmed. The

property, including land, buildings, machinery, and other improvements.” This petition is dismissed. No costs.

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, Makati Leasing and Finance Corp. vs Wearever Textile Mills Inc.,

machinery, and other improvements affixed or attached to real property xxx.” G.R. No. 58469

May 16, 1983

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 Facts:

Assessment Law and section 40 of the Real Property Tax Code. Wearever Textile Mills, Inc. executed a chattel mortgage contract in favor of

Makati Leasing and Finance Corporation covering certain raw materials and

Pipeline means a line of pipe connected to pumps, valves and control machinery. Upon default, Makati Leasing filed a petition for judicial

devices for conveying liquids, gases or finely divided solids. It is a line of pipe foreclosure of the properties mortgaged. Acting on Makati Leasing’s

running upon or in the earth, carrying with it the right to the use of the soil in application for replevin, the lower court issued a writ of seizure. Pursuant

which it is placed. 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.