1

January 18, 1921

G.R. No. 16513
THE UNITED STATES, plaintiff-appellee,
vs.
MANUEL TAMBUNTING, defendant-appellant.

This appeal was instituted for the purpose of reversing a judgment
of the Court of First Instance of the city of Manila, finding the
accused, Manuel Tambunting, guilty of stealing a quantity of gas
belonging to the Manila Gas Corporation, and sentencing him to
undergo imprisonment for two months and one day, of arresto
mayor, with the accessories prescribed by law; to indemnify the
said corporation in the sum of P2, with subsidiary imprisonment
in case of insolvency; and to pay the costs.
The evidence submitted in behalf of the prosecution shows that in
January of the year 1918, the accused and his wife became
occupants of the upper floor of the house situated at No. 443,
Calle Evangelista, in the city of Manila. In this house the Manila
Gas Corporation had previously installed apparatus for the
delivery of gas on both the upper and lower floors, consisting of
the necessary piping and a gas meter, which last mentioned
apparatus was installed below. When the occupants at whose
request this installation had been made vacated the premises, the
gas company disconnected the gas pipe and removed the meter,
thus cutting off the supply of gas from said premises.
Upon June 2, 1919, one of the inspectors of the gas company
visited the house in question and found that gas was being used,
without the knowledge and consent of the gas company, for
cooking in the quarters occupied by the defendant and his wife: to
effect which a short piece of iron pipe had been inserted in the
gap where the gas meter had formerly been placed, and piece of
rubber tubing had been used to connect the gas pipe of rubber
tubing had been used to connect the gas pipe in kitchen with the
gas stove, or plate, used for cooking.
At the time this discovery was made, the accused, Manuel
Tambunting, was not at home, but he presently arrived and
admitted to the agent to the gas company that he had made the
connection with the rubber tubing between the gas pipe and the
stove, though he denied making the connection below. He also
admitted that he knew he was using gas without the knowledge of
the company and that he had been so using it for probably two or
three months.
The clandestine use of gas by the accused in the manner stated is
thus established in our opinion beyond a doubt; and inasmuch as
the animo lucrandi is obvious, it only remains to consider, first,
whether gas can be the subject to larceny and, secondly, whether
the quantity of gas appropriated in the two months, during which
the accused admitted having used the same, has been established
with sufficient certainty to enable the court to fix an appropriate
penalty.
Some legal minds, perhaps more academic than practical, have
entertained doubt upon the question whether gas can be the
subject of larceny; but no judicial decision has been called to our
attention wherein any respectable court has refused to treat it as
such. In U.S. vs. Genato (15 Phil., 170, 175), this court, speaking
through Mr. Justice Torres, said ". . . the right of the ownership of
electric current is secured by article 517 and 518 of the Penal
Code; the application of these articles in cases of subtraction of
gas, a fluid used for lighting, and in some respects resembling
electricity, is confirmed by the rule laid down in the decisions of
the supreme court of Spain of January 20, 1887, and April 1,
1897, construing and enforcing the provisions of articles 530 and
531 of the Penal Code of that country, articles identical with
articles 517 and 518 of the code in force in these Islands." These
expressions were used in a case which involved the subtraction
and appropriation of electrical energy and the court held, in
accordance with the analogy of the case involving the theft of gas,
that electrical energy could also be the subject of theft. The same
conclusion was reached in U.S. vs. Carlos (21 Phil., 553), which
was also a case of prosecution for stealing electricity.
The precise point whether the taking of gas may constitute
larceny has never before, so far as the present writer is aware,
been the subject of adjudication in this court, but the decisions of
Spanish, English, and American courts all answer the question in
the affirmative. (See U.S. vs. Carlos, 21 Phil., 553, 560.)
In this connection it will suffice to quote the following from the
topic "Larceny," at page 34, Vol. 17, of Ruling Case Law:
There is nothing in the nature of gas used for illuminating
purposes which renders it incapable of being feloniously taken
and carried away. It is a valuable article of merchandise, bought
and sold like other personal property, susceptible of being severed
from a mass or larger quantity and of being transported from
place to place. Likewise water which is confined in pipes and
electricity which is conveyed by wires are subjects of larceny."
As to the amount and value of the gas appropriated by the
accused in the period during which he admits having used it, the
proof is not entirely satisfactory. Nevertheless we think the trial
court was justified in fixing the value of the gas at P2 per month,
which is the minimum charge for gas made by the gas company,
however small the amount consumed. That is to say, no person
desiring to use gas at all for domestic purposes can purchase the
commodity at a lower rate per month than P2. There was
evidence before the court showing that the general average of the
monthly bills paid by consumers throughout the city for the use of
gas in a kitchen equipped like that used by the accused is from
P18 to 20, while the average minimum is about P8 per month. We
think that the facts above stated are competent evidence; and the
conclusion is inevitable that the accused is at least liable to the
extent of the minimum charge of P2 per month. The market value
of the property at the time and place of the theft is of court the
proper value to be proven (17 R.C.L., p. 66); and when it is found
that the least amount that a consumer can take costs P2 per
months, this affords proof that the amount which the accused took
was certainly worth that much. Absolute certainty as to the full
amount taken is of course impossible, because no meter wad
used; but absolute certainty upon this point is not necessary, when
it is certain that the minimum that could have been taken was
worth a determinable amount.
It appears that before the present prosecution was instituted, the
accused had been unsuccessfully prosecuted for an infraction of
section 504 of the Revised Ordinances of the city of Manila,
under a complaint charging that the accused, not being a
registered installer of gas equipment had placed a gas installation
in the house at No. 443, Calle Evangelista. Upon this it is argued
for the accused that, having been acquitted of that charge, he is
not now subject to prosecution for the offense of theft, having
been acquitted of the former charge. The contention is evidently
not well-founded, since the two offenses are of totally distinct
nature. Furthermore, a prosecution for violation of a city
ordinance is not ordinarily a bar to a subsequent prosecution for
the same offense under the general law of the land. (U.S. vs.
Garcia Gavieres, 10 Phil., 694.)
The conclusion is that the accused is properly subject to
punishment, under No. 5 of article 518 of the Penal Code, for the
gas taken in the course of two months a the rate of P2 per month.
There being no aggravating or attenuating circumstance to be
estimated, it results that the proper penalty is two months and one
day of arresto mayor, as fixed by the trial court. The judgment
will therefore be affirmed, with costs against the appellant, it
being understood that the amount of the indemnity which the
accused shall pay to the gas company is P4, instead of P2, with
subsidiary imprisonment for one day in case of insolvency. So
ordered.
Mapa, C.J., Araullo, Malcolm and Villamor, JJ., concur.

2

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-41506 March 25, 1935
PHILIPPINE REFINING CO., INC., plaintiff-appellant,
vs.
FRANCISCO JARQUE, JOSE COROMINAS, and
ABOITIZ & CO., defendants.
JOSE COROMINAS, in his capacity as assignee of the estate
of the insolvent Francisco Jarque,appellee.
Thos. G. Ingalls, Vicente Pelaez and DeWitt, Perkins and Brady
for appellant.
D.G. McVean and Vicente L. Faelnar for appellee.
MALCOLM, J .:
First of all the reason why the case has been decided by the
court in banc needs explanation. A motion was presented by
counsel for the appellant in which it was asked that the case be
heard and determined by the court sitting in banc because the
admiralty jurisdiction of the court was involved, and this motion
was granted in regular course. On further investigation it appears
that this was error. The mere mortgage of a ship is a contract
entered into by the parties to it without reference to navigation or
perils of the sea, and does not, therefore, confer admiralty
jurisdiction. (Bogart vs. Steamboat John Jay [1854], 17 How.,
399.)
Coming now to the merits, it appears that on varying dates the
Philippine Refining Co., Inc., and Francisco Jarque executed
three mortgages on the motor vessels Pandan and Zaragoza.
These documents were recorded in the record of transfers and
incumbrances of vessels for the port of Cebu and each was therein
denominated a "chattel mortgage". Neither of the first two
mortgages had appended an affidavit of good faith. The third
mortgage contained such an affidavit, but this mortgage was not
registered in the customs house until May 17, 1932, or within the
period of thirty days prior to the commencement of insolvency
proceedings against Francisco Jarque; also, while the last
mentioned mortgage was subscribed by Francisco Jarque and M.
N. Brink, there was nothing to disclose in what capacity the said
M. N. Brink signed. A fourth mortgage was executed by
Francisco Jarque and Ramon Aboitiz on the
motorship Zaragoza and was entered in the chattel mortgage
registry of the register of deeds on May 12, 1932, or again within
the thirty-day period before the institution of insolvency
proceedings. These proceedings were begun on June 2, 1932,
when a petition was filed with the Court of First Instance of Cebu
in which it was prayed that Francisco Jarque be declared an
insolvent debtor, which soon thereafter was granted, with the
result that an assignment of all the properties of the insolvent was
executed in favor of Jose Corominas.
On these facts, Judge Jose M. Hontiveros declined to order the
foreclosure of the mortgages, but on the contrary sustained the
special defenses of fatal defectiveness of the mortgages. In so
doing we believe that the trial judge acted advisedly.
Vessels are considered personal property under the civil law.
(Code of Commerce, article 585.) Similarly under the common
law, vessels are personal property although occasionally referred
to as a peculiar kind of personal property. (Reynolds vs. Nielson
[1903], 96 Am. Rep., 1000; Atlantic Maritime Co vs. City of
Gloucester [1917], 117 N. E., 924.) Since the term "personal
property" includes vessels, they are subject to mortgage agreeably
to the provisions of the Chattel Mortgage Law. (Act No. 1508,
section 2.) Indeed, it has heretofore been accepted without
discussion that a mortgage on a vessel is in nature a chattel
mortgage. (McMicking vs. Banco Espaol-Filipino [1909], 13
Phil., 429; Arroyo vs. Yu de Sane [1930], 54 Phil., 511.) The only
difference between a chattel mortgage of a vessel and a chattel
mortgage of other personalty is that it is not now necessary for a
chattel mortgage of a vessel to be noted n the registry of the
register of deeds, but it is essential that a record of documents
affecting the title to a vessel be entered in the record of the
Collector of Customs at the port of entry. (Rubiso and Gelito vs.
Rivera [1917], 37 Phil., 72; Arroyo vs. Yu de Sane, supra.)
Otherwise a mortgage on a vessel is generally like other chattel
mortgages as to its requisites and validity. (58 C.J., 92.)
The Chattell Mortgage Law in its section 5, in describing what
shall be deemed sufficient to constitute a good chattel mortgage,
includes the requirement of an affidavit of good faith appended to
the mortgage and recorded therewith. The absence of the affidavit
vitiates a mortgage as against creditors and subsequent
encumbrancers. (Giberson vs. A. N. Jureidini Bros. [1922], 44
Phil., 216; Benedicto de Tarrosa vs. F. M. Yap Tico & Co. and
Provincial Sheriff of Occidental Negros [1923], 46 Phil., 753.) As
a consequence a chattel mortgage of a vessel wherein the affidavit
of good faith required by the Chattel Mortgage Law is lacking, is
unenforceable against third persons.
In effect appellant asks us to find that the documents appearing in
the record do not constitute chattel mortgages or at least to gloss
over the failure to include the affidavit of good faith made a
requisite for a good chattel mortgage by the Chattel Mortgage
Law. Counsel would further have us disregard article 585 of the
Code of Commerce, but no reason is shown for holding this
article not in force. Counsel would further have us revise
doctrines heretofore announced in a series of cases, which it is not
desirable to do since those principles were confirmed after due
liberation and constitute a part of the commercial law of the
Philippines. And finally counsel would have us make rulings on
points entirely foreign to the issues of the case. As neither the
facts nor the law remains in doubt, the seven assigned errors will
be overruled.
Judgment affirmed, the costs of this instance to be paid by the
appellant.
Avancea, C.J., Street, Villa-Real, Abad Santos, Hull, Vickers,
Imperial, Butte, and Goddard, JJ., concur.








3


[G.R. No. 137705. August 22, 2000]
SERGS PRODUCTS, INC., and SERGIO T.
GOQUIOLAY, petitioners, vs. PCI
LEASING AND FINANCE,
INC., respondent.

After agreeing to a contract stipulating that a real
or immovable property be considered as personal or
movable, a party is estopped from subsequently
claiming otherwise. Hence, such property is a proper
subject of a writ of replevin obtained by the other
contracting party.
The Case
Before us is a Petition for Review on Certiorari
assailing the January 6, 1999 Decision
[1]
of the Court
of Appeals (CA)
[2]
in CA-GR SP No. 47332 and its
February 26, 1999 Resolution
[3]
denying
reconsideration. The decretal portion of the CA
Decision reads as follows:
WHEREFORE, premises considered, the assailed Order dated
February 18, 1998 and Resolution dated March 31, 1998 in Civil
Case No. Q-98-33500 are hereby AFFIRMED. The writ of
preliminary injunction issued on June 15, 1998 is
hereby LIFTED.
[4]

In its February 18, 1998 Order,
[5]
the Regional
Trial Court (RTC) of Quezon City (Branch
218)
[6]
issued a Writ of Seizure.
[7]
The March 18, 1998
Resolution
[8]
denied petitioners Motion for Special
Protective Order, praying that the deputy sheriff be
enjoined from seizing immobilized or other real
properties in (petitioners) factory in Cainta, Rizal and
to return to their original place whatever immobilized
machineries or equipments he may have removed.
[9]

The Facts
The undisputed facts are summarized by the
Court of Appeals as follows:
[10]

On February 13, 1998, respondent PCI Leasing and Finance, Inc.
(PCI Leasing for short) filed with the RTC-QC a complaint for
[a] sum of money (Annex E), with an application for a writ of
replevin docketed as Civil Case No. Q-98-33500.
On March 6, 1998, upon an ex-parte application of PCI Leasing,
respondent judge issued a writ of replevin (Annex B) directing
its sheriff to seize and deliver the machineries and equipment to
PCI Leasing after 5 days and upon the payment of the necessary
expenses.
On March 24, 1998, in implementation of said writ, the sheriff
proceeded to petitioners factory, seized one machinery with [the]
word that he [would] return for the other machineries.
On March 25, 1998, petitioners filed a motion for special
protective order (Annex C), invoking the power of the court to
control the conduct of its officers and amend and control its
processes, praying for a directive for the sheriff to defer
enforcement of the writ of replevin.
This motion was opposed by PCI Leasing (Annex F), on the
ground that the properties [were] still personal and therefore still
subject to seizure and a writ of replevin.
In their Reply, petitioners asserted that the properties sought to
be seized [were] immovable as defined in Article 415 of the Civil
Code, the parties agreement to the contrary
notwithstanding. They argued that to give effect to the agreement
would be prejudicial to innocent third parties. They further stated
that PCI Leasing [was] estopped from treating these machineries
as personal because the contracts in which the alleged agreement
[were] embodied [were] totally sham and farcical.
On April 6, 1998, the sheriff again sought to enforce the writ of
seizure and take possession of the remaining properties. He was
able to take two more, but was prevented by the workers from
taking the rest.
On April 7, 1998, they went to [the CA] via an original action
for certiorari.
Ruling of the Court of Appeals
Citing the Agreement of the parties, the
appellate court held that the subject machines were
personal property, and that they had only been leased,
not owned, by petitioners. It also ruled that the
words of the contract are clear and leave no doubt
upon the true intention of the contracting
parties. Observing that Petitioner Goquiolay was an
experienced businessman who was not unfamiliar
with the ways of the trade, it ruled that he should
have realized the import of the document he
signed. The CA further held:
Furthermore, to accord merit to this petition would be to
preempt the trial court in ruling upon the case below, since the
merits of the whole matter are laid down before us via a petition
whose sole purpose is to inquire upon the existence of a grave
abuse of discretion on the part of the [RTC] in issuing the assailed
Order and Resolution. The issues raised herein are proper
subjects of a full-blown trial, necessitating presentation of
evidence by both parties. The contract is being enforced by one,
and [its] validity is attacked by the other a matter x x x which
respondent court is in the best position to determine.
Hence, this Petition.
[11]

The Issues
In their Memorandum, petitioners submit the
following issues for our consideration:
A. Whether or not the machineries purchased and imported by
SERGS became real property by virtue of immobilization.
B. Whether or not the contract between the parties is a loan or a
lease.
[12]

In the main, the Court will resolve whether the
said machines are personal, not immovable, property
which may be a proper subject of a writ of
replevin. As a preliminary matter, the Court will also
address briefly the procedural points raised by
respondent.
The Courts Ruling
4

The Petition is not meritorious.
Preliminary Matter:Procedural Questions
Respondent contends that the Petition failed to
indicate expressly whether it was being filed under
Rule 45 or Rule 65 of the Rules of Court. It further
alleges that the Petition erroneously impleaded Judge
Hilario Laqui as respondent.
There is no question that the present recourse is
under Rule 45. This conclusion finds support in the
very title of the Petition, which is Petition for Review
on Certiorari.
[13]

While Judge Laqui should not have been
impleaded as a respondent,
[14]
substantial justice
requires that such lapse by itself should not warrant
the dismissal of the present Petition. In this light, the
Court deems it proper to remove, motu proprio, the
name of Judge Laqui from the caption of the present
case.
Main Issue: Nature of the Subject Machinery
Petitioners contend that the subject machines
used in their factory were not proper subjects of the
Writ issued by the RTC, because they were in fact real
property. Serious policy considerations, they argue,
militate against a contrary characterization.
Rule 60 of the Rules of Court provides that writs
of replevin are issued for the recovery of personal
property only.
[15]
Section 3 thereof reads:
SEC. 3. Order. -- Upon the filing of such affidavit and approval
of the bond, the court shall issue an order and the corresponding
writ of replevin describing the personal property alleged to be
wrongfully detained and requiring the sheriff forthwith to take
such property into his custody.
On the other hand, Article 415 of the Civil Code
enumerates immovable or real property as follows:
ART. 415. The following are immovable property:
x x x....................................x x x....................................x x x
(5) Machinery, receptacles, instruments or implements intended
by the owner of the tenement for an industry or works which may
be carried on in a building or on a piece of land, and which tend
directly to meet the needs of the said industry or works;
x x x....................................x x x....................................x x x
In the present case, the machines that were the
subjects of the Writ of Seizure were placed by
petitioners in the factory built on their own
land. Indisputably, they were essential and principal
elements of their chocolate-making industry. Hence,
although each of them was movable or personal
property on its own, all of them have become
immobilized by destination because they are essential
and principal elements in the industry.
[16]
In that
sense, petitioners are correct in arguing that the said
machines are real, not personal, property pursuant to
Article 415 (5) of the Civil Code.
[17]

Be that as it may, we disagree with the
submission of the petitioners that the said machines
are not proper subjects of the Writ of Seizure.
The Court has held that contracting parties may
validly stipulate that a real property be considered as
personal.
[18]
After agreeing to such stipulation, they
are consequently estopped from claiming
otherwise. Under the principle of estoppel, a party to
a contract is ordinarily precluded from denying the
truth of any material fact found therein.
Hence, in Tumalad v. Vicencio,
[19]
the Court
upheld the intention of the parties to treat a house as a
personal property because it had been made the
subject of a chattel mortgage. The Court ruled:
x x x. 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.
Applying Tumalad, the Court in Makati Leasing
and Finance Corp. v. Wearever Textile Mills
[20]
also
held that the machinery used in a factory and essential
to the industry, as in the present case, was a proper
subject of a writ of replevin because it was treated as
personal property in a contract. Pertinent portions of
the Courts ruling are reproduced hereunder:
x x x. 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 the present case, the Lease Agreement clearly
provides that the machines in question are to be
considered as personal property. Specifically, Section
12.1 of the Agreement reads as follows:
[21]

12.1 The PROPERTY is, and shall at all times be and remain,
personal property notwithstanding that the PROPERTY or any
part thereof may now be, or hereafter become, in any manner
affixed or attached to or embedded in, or permanently resting
upon, real property or any building thereon, or attached in any
manner to what is permanent.
Clearly then, petitioners are estopped from
denying the characterization of the subject machines
as personal property. Under the circumstances, they
are proper subjects of the Writ of Seizure.
It should be stressed, however, that our holding -
- that the machines should be deemed personal
property pursuant to the Lease Agreement is good
only insofar as the contracting parties are
concerned.
[22]
Hence, while the parties are bound by
the Agreement, third persons acting in good faith are
not affected by its stipulation characterizing the
subject machinery as personal.
[23]
In any event, there is
no showing that any specific third party would be
adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that
the Agreement is a loan and not a lease.
[24]
Submitting
documents supposedly showing that they own the
subject machines, petitioners also argue in their
5

Petition that the Agreement suffers from intrinsic
ambiguity which places in serious doubt the intention
of the parties and the validity of the lease agreement
itself.
[25]
In their Reply to respondents Comment,
they further allege that the Agreement is invalid.
[26]

These arguments are unconvincing. The validity
and the nature of the contract are the lis mota of the
civil action pending before the RTC. A resolution of
these questions, therefore, is effectively a resolution of
the merits of the case. Hence, they should be threshed
out in the trial, not in the proceedings involving the
issuance of the Writ of Seizure.
Indeed, in La Tondea Distillers v. CA,
[27]
the
Court explained that the policy under Rule 60 was that
questions involving title to the subject property
questions which petitioners are now raising -- should
be determined in the trial. In that case, the Court
noted that the remedy of defendants under Rule 60
was either to post a counter-bond or to question the
sufficiency of the plaintiffs bond. They were not
allowed, however, to invoke the title to the subject
property. The Court ruled:
In other words, the law does not allow the defendant to file a
motion to dissolve or discharge the writ of seizure (or delivery)
on ground of insufficiency of the complaint or of the grounds
relied upon therefor, as in proceedings on preliminary attachment
or injunction, and thereby put at issue the matter of the title or
right of possession over the specific chattel being replevied, the
policy apparently being that said matter should be ventilated and
determined only at the trial on the merits.
[28]

Besides, these questions require a determination
of facts and a presentation of evidence, both of which
have no place in a petition for certiorari in the CA
under Rule 65 or in a petition for review in this Court
under Rule 45.
[29]

Reliance on the Lease Agreement
It should be pointed out that the Court in this
case may rely on the Lease Agreement, for nothing on
record shows that it has been nullified or annulled. In
fact, petitioners assailed it first only in the RTC
proceedings, which had ironically been instituted by
respondent. Accordingly, it must be presumed valid
and binding as the law between the parties.
Makati Leasing and Finance Corporation
[30]
is
also instructive on this point. In that case, the Deed of
Chattel Mortgage, which characterized the subject
machinery as personal property, was also assailed
because respondent had allegedly been required to
sign a printed form of chattel mortgage which was in a
blank form at the time of signing. The Court rejected
the argument and relied on the Deed, ruling as
follows:
x x x. 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. x x x
Alleged I njustice Committed on the Part of Petitioners
Petitioners contend that if the Court allows
these machineries to be seized, then its workers would
be out of work and thrown into the streets.
[31]
They
also allege that the seizure would nullify all efforts to
rehabilitate the corporation.
Petitioners arguments do not preclude the
implementation of the Writ. As earlier discussed, law
and jurisprudence support its propriety. Verily, the
above-mentioned consequences, if they come true,
should not be blamed on this Court, but on the
petitioners for failing to avail themselves of the
remedy under Section 5 of Rule 60, which allows the
filing of a counter-bond. The provision states:
SEC. 5. Return of property. -- If the adverse party objects to
the sufficiency of the applicants bond, or of the surety or sureties
thereon, he cannot immediately require the return of the property,
but if he does not so object, he may, at any time before the
delivery of the property to the applicant, require the return
thereof, by filing with the court where the action is pending a
bond executed to the applicant, in double the value of the
property as stated in the applicants affidavit for the delivery
thereof to the applicant, if such delivery be adjudged, and for the
payment of such sum to him as may be recovered against the
adverse party, and by serving a copy bond on the applicant.
WHEREFORE, the Petition is DENIED and the
assailed Decision of the Court of
Appeals AFFIRMED. Costs against petitioners.
SO ORDERED.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-
Reyes, JJ., concur.

6

G.R. No. L-50008 August 31, 1987
PRUDENTIAL BANK, petitioner,
vs.
HONORABLE DOMINGO D. PANIS, Presiding Judge of
Branch III, Court of First Instance of Zambales and
Olongapo City; FERNANDO MAGCALE & TEODULA
BALUYUT-MAGCALE, respondents.

This is a petition for review on certiorari of the November 13,
1978 Decision * of the then Court of First Instance of Zambales
and Olongapo City in Civil Case No. 2443-0 entitled "Spouses
Fernando A. Magcale and Teodula Baluyut-Magcale vs. Hon.
Ramon Y. Pardo and Prudential Bank" declaring that the deeds of
real estate mortgage executed by respondent spouses in favor of
petitioner bank are null and void.
The undisputed facts of this case by stipulation of the parties are
as follows:
... on November 19, 1971, plaintiffs-spouses Fernando A.
Magcale and Teodula Baluyut Magcale secured a loan in the
sum of P70,000.00 from the defendant Prudential Bank. To
secure payment of this loan, plaintiffs executed in favor of
defendant on the aforesaid date a deed of Real Estate Mortgage
over the following described properties:
l. A 2-STOREY, SEMI-CONCRETE, residential building with
warehouse spaces containing a total floor area of 263 sq.
meters, more or less, generally constructed of mixed hard wood
and concrete materials, under a roofing of cor. g. i. sheets;
declared and assessed in the name of FERNANDO
MAGCALE under Tax Declaration No. 21109, issued by the
Assessor of Olongapo City with an assessed value of
P35,290.00. This building is the only improvement of the lot.
2. THE PROPERTY hereby conveyed by way of MORTGAGE
includes the right of occupancy on the lot where the above
property is erected, and more particularly described and
bounded, as follows:
A first class residential land Identffied as Lot No. 720,
(Ts-308, Olongapo Townsite Subdivision) Ardoin
Street, East Bajac-Bajac, Olongapo City, containing an
area of 465 sq. m. more or less, declared and assessed in
the name of FERNANDO MAGCALE under Tax
Duration No. 19595 issued by the Assessor of Olongapo
City with an assessed value of P1,860.00; bounded on
the
NORTH: By No. 6, Ardoin Street
SOUTH: By No. 2, Ardoin Street
EAST: By 37 Canda Street, and
WEST: By Ardoin Street.
All corners of the lot marked by conc. cylindrical
monuments of the Bureau of Lands as visible limits. (
Exhibit "A, " also Exhibit "1" for defendant).
Apart from the stipulations in the printed portion of the
aforestated deed of mortgage, there appears a rider
typed at the bottom of the reverse side of the document
under the lists of the properties mortgaged which reads,
as follows:
AND IT IS FURTHER AGREED that in the event the
Sales Patent on the lot applied for by the Mortgagors as
herein stated is released or issued by the Bureau of
Lands, the Mortgagors hereby authorize the Register of
Deeds to hold the Registration of same until this
Mortgage is cancelled, or to annotate this encumbrance
on the Title upon authority from the Secretary of
Agriculture and Natural Resources, which title with
annotation, shall be released in favor of the herein
Mortgage.
From the aforequoted stipulation, it is obvious that the
mortgagee (defendant Prudential Bank) was at the outset
aware of the fact that the mortgagors (plaintiffs) have
already filed a Miscellaneous Sales Application over the
lot, possessory rights over which, were mortgaged to it.
Exhibit "A" (Real Estate Mortgage) was registered
under the Provisions of Act 3344 with the Registry of
Deeds of Zambales on November 23, 1971.
On May 2, 1973, plaintiffs secured an additional loan
from defendant Prudential Bank in the sum of
P20,000.00. To secure payment of this additional loan,
plaintiffs executed in favor of the said defendant another
deed of Real Estate Mortgage over the same properties
previously mortgaged in Exhibit "A." (Exhibit "B;" also
Exhibit "2" for defendant). This second deed of Real
Estate Mortgage was likewise registered with the
Registry of Deeds, this time in Olongapo City, on May
2,1973.
On April 24, 1973, the Secretary of Agriculture issued
Miscellaneous Sales Patent No. 4776 over the parcel of
land, possessory rights over which were mortgaged to
defendant Prudential Bank, in favor of plaintiffs. On the
basis of the aforesaid Patent, and upon its transcription
in the Registration Book of the Province of Zambales,
Original Certificate of Title No. P-2554 was issued in
the name of Plaintiff Fernando Magcale, by the Ex-
Oficio Register of Deeds of Zambales, on May 15,
1972.
For failure of plaintiffs to pay their obligation to
defendant Bank after it became due, and upon
application of said defendant, the deeds of Real Estate
Mortgage (Exhibits "A" and "B") were extrajudicially
foreclosed. Consequent to the foreclosure was the sale
of the properties therein mortgaged to defendant as the
highest bidder in a public auction sale conducted by the
defendant City Sheriff on April 12, 1978 (Exhibit "E").
The auction sale aforesaid was held despite written
request from plaintiffs through counsel dated March 29,
1978, for the defendant City Sheriff to desist from going
with the scheduled public auction sale (Exhibit "D")."
(Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3, 1978
declared the deeds of Real Estate Mortgage as null and void
(Ibid., p. 35).
On December 14, 1978, petitioner filed a Motion for
Reconsideration (Ibid., pp. 41-53), opposed by private
respondents on January 5, 1979 (Ibid., pp. 54-62), and in an Order
dated January 10, 1979 (Ibid., p. 63), the Motion for
Reconsideration was denied for lack of merit. Hence, the instant
petition (Ibid., pp. 5-28).
The first Division of this Court, in a Resolution dated March 9,
1979, resolved to require the respondents to comment (Ibid., p.
65), which order was complied with the Resolution dated May
18,1979, (Ibid., p. 100), petitioner filed its Reply on June 2,1979
(Ibid., pp. 101-112).
7

Thereafter, in the Resolution dated June 13, 1979, the petition
was given due course and the parties were required to submit
simultaneously their respective memoranda. (Ibid., p. 114).
On July 18, 1979, petitioner filed its Memorandum (Ibid., pp.
116-144), while private respondents filed their Memorandum on
August 1, 1979 (Ibid., pp. 146-155).
In a Resolution dated August 10, 1979, this case was considered
submitted for decision (Ibid., P. 158).
In its Memorandum, petitioner raised the following issues:
1. WHETHER OR NOT THE DEEDS OF REAL ESTATE
MORTGAGE ARE VALID; AND
2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN
FAVOR OF PRIVATE RESPONDENTS OF
MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24,
1972 UNDER ACT NO. 730 AND THE COVERING
ORIGINAL CERTIFICATE OF TITLE NO. P-2554 ON MAY
15,1972 HAVE THE EFFECT OF INVALIDATING THE
DEEDS OF REAL ESTATE MORTGAGE. (Memorandum for
Petitioner, Rollo, p. 122).
This petition is impressed with merit.
The pivotal issue in this case is whether or not a valid real estate
mortgage can be constituted on the building erected on the land
belonging to another.
The answer is in the affirmative.
In the enumeration of properties under Article 415 of the Civil
Code of the Philippines, this Court ruled that, "it is obvious that
the inclusion of "building" separate and distinct from the land, in
said provision of law can only mean that a building is by itself an
immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18,
Feb. 28, 1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al.,
L-10837-38, May 30,1958).
Thus, while it is true that a mortgage of land necessarily includes,
in the absence of stipulation of the improvements thereon,
buildings, still a building by itself may be mortgaged apart from
the land on which it has been built. Such a mortgage would be
still a real estate mortgage for the building would still be
considered immovable property even if dealt with separately and
apart from the land (Leung Yee vs. Strong Machinery Co., 37
Phil. 644). In the same manner, this Court has also established
that possessory rights over said properties before title is vested on
the grantee, may be validly transferred or conveyed as in a deed
of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]).
Coming back to the case at bar, the records show, as aforestated
that the original mortgage deed on the 2-storey semi-concrete
residential building with warehouse and on the right of occupancy
on the lot where the building was erected, was executed on
November 19, 1971 and registered under the provisions of Act
3344 with the Register of Deeds of Zambales on November 23,
1971. Miscellaneous Sales Patent No. 4776 on the land was
issued on April 24, 1972, on the basis of which OCT No. 2554
was issued in the name of private respondent Fernando Magcale
on May 15, 1972. It is therefore without question that the original
mortgage was executed before the issuance of the final patent and
before the government was divested of its title to the land, an
event which takes effect only on the issuance of the sales patent
and its subsequent registration in the Office of the Register of
Deeds (Visayan Realty Inc. vs. Meer, 96 Phil. 515; Director of
Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L-
14702, May 23, 1961; Pena "Law on Natural Resources", p. 49).
Under the foregoing considerations, it is evident that the
mortgage executed by private respondent on his own building
which was erected on the land belonging to the government is to
all intents and purposes a valid mortgage.
As to restrictions expressly mentioned on the face of respondents'
OCT No. P-2554, it will be noted that Sections 121, 122 and 124
of the Public Land Act, refer to land already acquired under the
Public Land Act, or any improvement thereon and therefore have
no application to the assailed mortgage in the case at bar which
was executed before such eventuality. Likewise, Section 2 of
Republic Act No. 730, also a restriction appearing on the face of
private respondent's title has likewise no application in the instant
case, despite its reference to encumbrance or alienation before the
patent is issued because it refers specifically to encumbrance or
alienation on the land itself and does not mention anything
regarding the improvements existing thereon.
But it is a different matter, as regards the second mortgage
executed over the same properties on May 2, 1973 for an
additional loan of P20,000.00 which was registered with the
Registry of Deeds of Olongapo City on the same date. Relative
thereto, it is evident that such mortgage executed after the
issuance of the sales patent and of the Original Certificate of
Title, falls squarely under the prohibitions stated in Sections 121,
122 and 124 of the Public Land Act and Section 2 of Republic
Act 730, and is therefore null and void.
Petitioner points out that private respondents, after physically
possessing the title for five years, voluntarily surrendered the
same to the bank in 1977 in order that the mortgaged may be
annotated, without requiring the bank to get the prior approval of
the Ministry of Natural Resources beforehand, thereby implicitly
authorizing Prudential Bank to cause the annotation of said
mortgage on their title.
However, the Court, in recently ruling on violations of Section
124 which refers to Sections 118, 120, 122 and 123 of
Commonwealth Act 141, has held:
... Nonetheless, we apply our earlier rulings because we
believe that as in pari delicto may not be invoked to defeat
the policy of the State neither may the doctrine of estoppel
give a validating effect to a void contract. Indeed, it is
generally considered that as between parties to a contract,
validity cannot be given to it by estoppel if it is prohibited by
law or is against public policy (19 Am. Jur. 802). It is not
within the competence of any citizen to barter away what
public policy by law was to preserve (Gonzalo Puyat &
Sons, Inc. vs. De los Amas and Alino supra). ... (Arsenal vs.
IAC, 143 SCRA 54 [1986]).
This pronouncement covers only the previous transaction already
alluded to and does not pass upon any new contract between the
parties (Ibid), as in the case at bar. It should not preclude new
contracts that may be entered into between petitioner bank and
private respondents that are in accordance with the requirements
of the law. After all, private respondents themselves declare that
they are not denying the legitimacy of their debts and appear to be
open to new negotiations under the law (Comment; Rollo, pp. 95-
96). Any new transaction, however, would be subject to whatever
steps the Government may take for the reversion of the land in its
favor.
PREMISES CONSIDERED, the decision of the Court of First
Instance of Zambales & Olongapo City is hereby MODIFIED,
declaring that the Deed of Real Estate Mortgage for P70,000.00 is
valid but ruling that the Deed of Real Estate Mortgage for an
additional loan of P20,000.00 is null and void, without prejudice
to any appropriate action the Government may take against
private respondents.
SO ORDERED.
Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.
8


9

G.R. No. 106041 January 29, 1993
BENGUET CORPORATION, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD
OF ASSESSMENT APPEALS OF ZAMBALES,
PROVINCIAL ASSESSOR OF ZAMBALES, PROVINCE
OF ZAMBALES, and MUNICIPALITY OF SAN
MARCELINO, respondents.
CRUZ, J .:
The realty tax assessment involved in this case amounts to
P11,319,304.00. It has been imposed on the petitioner's tailings
dam and the land thereunder over its protest.
The controversy arose in 1985 when the Provincial Assessor of
Zambales assessed the said properties as taxable improvements.
The assessment was appealed to the Board of Assessment
Appeals of the Province of Zambales. On August 24, 1988, the
appeal was dismissed mainly on the ground of the petitioner's
"failure to pay the realty taxes that fell due during the pendency
of the appeal."
The petitioner seasonably elevated the matter to the Central Board
of Assessment Appeals,
1
one of the herein respondents. In its
decision dated March 22, 1990, the Board reversed the dismissal
of the appeal but, on the merits, agreed that "the tailings dam and
the lands submerged thereunder (were) subject to realty tax."
For purposes of taxation the dam is considered as real
property as it comes within the object mentioned in
paragraphs (a) and (b) of Article 415 of the New Civil
Code. It is a construction adhered to the soil which
cannot be separated or detached without breaking the
material or causing destruction on the land upon which
it is attached. The immovable nature of the dam as an
improvement determines its character as real property,
hence taxable under Section 38 of the Real Property Tax
Code. (P.D. 464).
Although the dam is partly used as an anti-pollution
device, this Board cannot accede to the request for tax
exemption in the absence of a law authorizing the same.
xxx xxx xxx
We find the appraisal on the land submerged as a result
of the construction of the tailings dam, covered by Tax
Declaration Nos.
002-0260 and 002-0266, to be in accordance with the
Schedule of Market Values for Zambales which was
reviewed and allowed for use by the Ministry
(Department) of Finance in the 1981-1982 general
revision. No serious attempt was made by Petitioner-
Appellant Benguet Corporation to impugn its
reasonableness, i.e., that the P50.00 per square meter
applied by Respondent-Appellee Provincial Assessor is
indeed excessive and unconscionable. Hence, we find
no cause to disturb the market value applied by
Respondent Appellee Provincial Assessor of Zambales
on the properties of Petitioner-Appellant Benguet
Corporation covered by Tax Declaration Nos. 002-0260
and 002-0266.
This petition for certiorari now seeks to reverse the
above ruling.
The principal contention of the petitioner is that the
tailings dam is not subject to realty tax because it is not
an "improvement" upon the land within the meaning of
the Real Property Tax Code. More particularly, it is
claimed
(1) as regards the tailings dam as an "improvement":
(a) that the tailings dam has no value separate from and
independent of the mine; hence, by itself it cannot be
considered an improvement separately assessable;
(b) that it is an integral part of the mine;
(c) that at the end of the mining operation of the
petitioner corporation in the area, the tailings dam will
benefit the local community by serving as an irrigation
facility;
(d) that the building of the dam has stripped the property
of any commercial value as the property is submerged
under water wastes from the mine;
(e) that the tailings dam is an environmental pollution
control device for which petitioner must be commended
rather than penalized with a realty tax assessment;
(f) that the installation and utilization of the tailings dam
as a pollution control device is a requirement imposed
by law;
(2) as regards the valuation of the tailings dam and the
submerged lands:
(a) that the subject properties have no market value as
they cannot be sold independently of the mine;
(b) that the valuation of the tailings dam should be based
on its incidental use by petitioner as a water reservoir
and not on the alleged cost of construction of the dam
and the annual build-up expense;
(c) that the "residual value formula" used by the
Provincial Assessor and adopted by respondent CBAA
is arbitrary and erroneous; and
(3) as regards the petitioner's liability for penalties for
non-declaration of the tailings dam and the submerged
lands for realty tax purposes:
(a) that where a tax is not paid in an honest belief that it
is not due, no penalty shall be collected in addition to
the basic tax;
(b) that no other mining companies in the Philippines
operating a tailings dam have been made to declare the
dam for realty tax purposes.
The petitioner does not dispute that the tailings dam
may be considered realty within the meaning of Article
415. It insists, however, that the dam cannot be
subjected to realty tax as a separate and independent
property because it does not constitute an "assessable
improvement" on the mine although a considerable sum
may have been spent in constructing and maintaining it.
To support its theory, the petitioner cites the following
cases:
1. Municipality of Cotabato v. Santos (105 Phil. 963),
where this Court considered the dikes and gates
constructed by the taxpayer in connection with a
fishpond operation as integral parts of the fishpond.
2. Bislig Bay Lumber Co. v. Provincial Government of
Surigao (100 Phil. 303), involving a road constructed by
the timber concessionaire in the area, where this Court
10

did not impose a realty tax on the road primarily for two
reasons:
In the first place, it cannot be disputed that the
ownership of the road that was constructed by appellee
belongs to the government by right of accession not
only because it is inherently incorporated or attached to
the timber land . . . but also because upon the expiration
of the concession said road would ultimately pass to the
national government. . . . In the second place, while the
road was constructed by appellee primarily for its use
and benefit, the privilege is not exclusive, for . . .
appellee cannot prevent the use of portions of the
concession for homesteading purposes. It is also duty
bound to allow the free use of forest products within the
concession for the personal use of individuals residing
in or within the vicinity of the land. . . . In other words,
the government has practically reserved the rights to use
the road to promote its varied activities. Since, as above
shown, the road in question cannot be considered as an
improvement which belongs to appellee, although in
part is for its benefit, it is clear that the same cannot be
the subject of assessment within the meaning of Section
2 of C.A.
No. 470.
Apparently, the realty tax was not imposed not because
the road was an integral part of the lumber concession
but because the government had the right to use the road
to promote its varied activities.
3. Kendrick v. Twin Lakes Reservoir Co. (144 Pacific
884), an American case, where it was declared that the
reservoir dam went with and formed part of the
reservoir and that the dam would be "worthless and
useless except in connection with the outlet canal, and
the water rights in the reservoir represent and include
whatever utility or value there is in the dam and
headgates."
4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498),
also from the United States. This case involved drain
tunnels constructed by plaintiff when it expanded its
mining operations downward, resulting in a constantly
increasing flow of water in the said mine. It was held
that:
Whatever value they have is connected with and in fact
is an integral part of the mine itself. Just as much so as
any shaft which descends into the earth or an
underground incline, tunnel, or drift would be which
was used in connection with the mine.
On the other hand, the Solicitor General argues that the
dam is an assessable improvement because it enhances
the value and utility of the mine. The primary function
of the dam is to receive, retain and hold the water
coming from the operations of the mine, and it also
enables the petitioner to impound water, which is then
recycled for use in the plant.
There is also ample jurisprudence to support this view,
thus:
. . . The said equipment and machinery, as
appurtenances to the gas station building or shed owned
by Caltex (as to which it is subject to realty tax) and
which fixtures are necessary to the operation of the gas
station, for without them the gas station would be
useless and which have been attached or affixed
permanently to the gas station site or embedded therein,
are taxable improvements and machinery within the
meaning of the Assessment Law and the Real Property
Tax Code. (Caltex [Phil.] Inc. v. CBAA, 114 SCRA
296).
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. (Manila Electric Co. v. CBAA, 114
SCRA 273).
The pipeline system in question is indubitably a
construction adhering to the soil. It is attached to the
land in such a way that it cannot be separated therefrom
without dismantling the steel pipes which were welded
to form the pipeline. (MERALCO Securities Industrial
Corp. v. CBAA, 114 SCRA 261).
The tax upon the dam was properly assessed to the
plaintiff as a tax upon real estate. (Flax-Pond Water Co.
v. City of Lynn, 16 N.E. 742).
The oil tanks are structures within the statute, that they
are designed and used by the owner as permanent
improvement of the free hold, and that for such reasons
they were properly assessed by the respondent taxing
district as improvements. (Standard Oil Co. of New
Jersey v. Atlantic City, 15 A 2d. 271)
The Real Property Tax Code does not carry a definition
of "real property" and simply says that the realty tax is
imposed on "real property, such as lands, buildings,
machinery and other improvements affixed or attached
to real property." In the absence of such a definition, we
apply Article 415 of the Civil Code, the pertinent
portions of which state:
Art. 415. The following are immovable property.
(1) Lands, buildings and constructions of all kinds
adhered to the soil;
xxx xxx xxx
(3) Everything attached to an immovable in a fixed
manner, in such a way that it cannot be separated
therefrom without breaking the material or deterioration
of the object.
Section 2 of C.A. No. 470, otherwise known as the
Assessment Law, provides that the realty tax is due "on
the real property, including land, buildings, machinery
and other improvements" not specifically exempted in
Section 3 thereof. A reading of that section shows that
the tailings dam of the petitioner does not fall under any
of the classes of exempt real properties therein
enumerated.
Is the tailings dam an improvement on the mine?
Section 3(k) of the Real Property Tax Code defines
improvement as follows:
(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 adopt it for new or further
purposes.
11

The term has also been interpreted as "artificial
alterations of the physical condition of the ground that
arereasonably permanent in character."
2

The Court notes that in the Ontario case the plaintiff
admitted that the mine involved therein could not be
operated without the aid of the drain tunnels, which
were indispensable to the successful development and
extraction of the minerals therein. This is not true in the
present case.
Even without the tailings dam, the petitioner's mining
operation can still be carried out because the primary
function of the dam is merely to receive and retain the
wastes and water coming from the mine. There is no
allegation that the water coming from the dam is the
sole source of water for the mining operation so as to
make the dam an integral part of the mine. In fact, as a
result of the construction of the dam, the petitioner can
now impound and recycle water without having to spend
for the building of a water reservoir. And as the
petitioner itself points out, even if the petitioner's mine
is shut down or ceases operation, the dam may still be
used for irrigation of the surrounding areas, again unlike
in the Ontario case.
As correctly observed by the CBAA, the Kendrick case
is also not applicable because it involved water reservoir
dams used for different purposes and for the benefit of
the surrounding areas. By contrast, the tailings dam in
question is being used exclusively for the benefit of the
petitioner.
Curiously, the petitioner, while vigorously arguing that
the tailings dam has no separate existence, just as
vigorously contends that at the end of the mining
operation the tailings dam will serve the local
community as an irrigation facility, thereby implying
that it can exist independently of the mine.
From the definitions and the cases cited above, it would
appear that whether a structure constitutes an
improvement so as to partake of the status of realty
would depend upon the degree of permanence intended
in its construction and use. The expression "permanent"
as applied to an improvement does not imply that the
improvement must be used perpetually but only until the
purpose to which the principal realty is devoted has
been accomplished. It is sufficient that the improvement
is intended to remain as long as the land to which it is
annexed is still used for the said purpose.
The Court is convinced that the subject dam falls within
the definition of an "improvement" because it is
permanent in character and it enhances both the value
and utility of petitioner's mine. Moreover, the
immovable nature of the dam defines its character as
real property under Article 415 of the Civil Code and
thus makes it taxable under Section 38 of the Real
Property Tax Code.
The Court will also reject the contention that the
appraisal at P50.00 per square meter made by the
Provincial Assessor is excessive and that his use of the
"residual value formula" is arbitrary and erroneous.
Respondent Provincial Assessor explained the use of the
"residual value formula" as follows:
A 50% residual value is applied in the computation
because, while it is true that when slime fills the dike, it
will then be covered by another dike or stage, the stage
covered is still there and still exists and since only one
face of the dike is filled, 50% or the other face is
unutilized.
In sustaining this formula, the CBAA gave the
following justification:
We find the appraisal on the land submerged as a result
of the construction of the tailings dam, covered by Tax
Declaration Nos.
002-0260 and 002-0266, to be in accordance with the
Schedule of Market Values for San Marcelino,
Zambales, which is fifty (50.00) pesos per square meter
for third class industrial land (TSN, page 17, July 5,
1989) and Schedule of Market Values for Zambales
which was reviewed and allowed for use by the Ministry
(Department) of Finance in the 1981-1982 general
revision. No serious attempt was made by Petitioner-
Appellant Benguet Corporation to impugn its
reasonableness, i.e, that the P50.00 per square meter
applied by Respondent-Appellee Provincial Assessor is
indeed excessive and unconscionable. Hence, we find
no cause to disturb the market value applied by
Respondent-Appellee Provincial Assessor of Zambales
on the properties of Petitioner-Appellant Benguet
Corporation covered by Tax Declaration Nos. 002-0260
and 002-0266.
It has been the long-standing policy of this Court to
respect the conclusions of quasi-judicial agencies like
the CBAA, which, because of the nature of its functions
and its frequent exercise thereof, has developed
expertise in the resolution of assessment problems. The
only exception to this rule is where it is clearly shown
that the administrative body has committed grave abuse
of discretion calling for the intervention of this Court in
the exercise of its own powers of review. There is no
such showing in the case at bar.
We disagree, however, with the ruling of respondent
CBAA that it cannot take cognizance of the issue of the
propriety of the penalties imposed upon it, which was
raised by the petitioner for the first time only on appeal.
The CBAA held that this "is an entirely new matter that
petitioner can take up with the Provincial Assessor (and)
can be the subject of another protest before the Local
Board or a negotiation with the local sanggunian . . .,
and in case of an adverse decision by either the Local
Board or the local sanggunian, (it can) elevate the same
to this Board for appropriate action."
There is no need for this time-wasting procedure. The
Court may resolve the issue in this petition instead of
referring it back to the local authorities. We have
studied the facts and circumstances of this case as above
discussed and find that the petitioner has acted in good
faith in questioning the assessment on the tailings dam
and the land submerged thereunder. It is clear that it has
not done so for the purpose of evading or delaying the
payment of the questioned tax. Hence, we hold that the
petitioner is not subject to penalty for its
non-declaration of the tailings dam and the submerged
lands for realty tax purposes.
WHEREFORE, the petition is DISMISSED for failure
to show that the questioned decision of respondent
Central Board of Assessment Appeals is tainted with
grave abuse of discretion except as to the imposition of
penalties upon the petitioner which is hereby SET
ASIDE. Costs against the petitioner. It is so ordered.
Narvasa, C.J., Gutierrez, Jr., Padilla, Bidin, Grio-
Aquino, Regalado, Davide, Jr., Romero, Nocon,
Bellosillo, Melo and Campos, Jr., JJ., concur.
12

Feliciano, J., took no part.

13

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-58469 May 16, 1983
MAKATI LEASING and FINANCE
CORPORATION, petitioner,
vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE
COURT OF APPEALS, respondents.
Petition for review on certiorari of the decision of the Court of
Appeals (now Intermediate Appellate Court) promulgated on
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 wen 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.
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 enfore 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 personality, 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.
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:
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 vs. Orosa, Jr. &
Plaza Theatre, Inc. & Leung Yee vs. 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 personality.
Examining the records of the instant case, We find no logical
justification to exclude the rule out, as the appellate court did, the
present case from the application of the abovequoted
pronouncement. If a house of strong materials, like what was
involved in the above Tumalad case, may be considered as
personal property for purposes of executing a chattel mortgage
thereon as long as the parties to the contract so agree and no
innocent third party will be prejudiced thereby, there is absolutely
no reason why a machinery, which is movable in its nature and
becomes immobilized only by destination or purpose, may not be
likewise treated as such. This is really because one who has so
agreed is estopped from denying the existence of the chattel
mortgage.
In rejecting petitioner's assertion on the applicability of the
Tumalad doctrine, the Court of Appeals lays stress on the fact that
the house involved therein was built on a land that did not belong
to the owner of such house. But the law makes no distinction with
respect to the ownership of the land on which the house is built
and We should not lay down distinctions not contemplated by
law.
It must be pointed out that the characterization of the subject
machinery as chattel by the private respondent is indicative of
intention and impresses upon the property the character
determined by the parties. As stated inStandard 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.
14

Private respondent contends that estoppel cannot apply against it
because it had never represented nor agreed that the machinery in
suit be considered as personal property but was merely required
and dictated on by herein petitioner to sign a printed form of
chattel mortgage which was in a blank form at the time of
signing. This contention lacks persuasiveness. As aptly pointed
out by petitioner and not denied by the respondent, the status of
the subject machinery as movable or immovable was never placed
in issue before the lower court and the Court of Appeals except in
a supplemental memorandum in support of the petition filed in
the appellate court. Moreover, even granting that the charge is
true, such fact alone does not render a contract void ab initio, but
can only be a ground for rendering said contract voidable, or
annullable pursuant to Article 1390 of the new Civil Code, by a
proper action in court. There is nothing on record to show that the
mortgage has been annulled. Neither is it disclosed that steps
were taken to nullify the same. On the other hand, as pointed out
by petitioner and again not refuted by respondent, the latter has
indubitably benefited from said contract. Equity dictates that one
should not benefit at the expense of another. Private respondent
could not now therefore, be allowed to impugn the efficacy of the
chattel mortgage after it has benefited therefrom,
From what has been said above, the error of the appellate court in
ruling that the questioned machinery is real, not personal
property, becomes very apparent. Moreover, the case
of Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70,
heavily relied upon by said court is not applicable to the case at
bar, the nature of the machinery and equipment involved therein
as real properties never having been disputed nor in issue, and
they were not the subject of a Chattel Mortgage. Undoubtedly, the
Tumalad case bears more nearly perfect parity with the instant
case to be the more controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the
Court of Appeals are hereby reversed and set aside, and the
Orders of the lower court are hereby reinstated, with costs against
the private respondent.
SO ORDERED.
Makasiar (Chairman), Aquino, Concepcion Jr., Guerrero and
Escolin JJ., concur.
Abad Santos, J., concurs in the result.

15

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 120098 October 2, 2001
RUBY L. TSAI, petitioner,
vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS,
INC. and MAMERTO R VILLALUZ, respondents.
x---------------------------------------------------------x
[G.R. No. 120109. October 2, 2001.]
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS and
MAMERTO R VILLALUZ, respondents.

These consolidated cases assail the decision
1
of the Court of
Appeals in CA-G.R. CV No. 32986, affirming the decision
2
of the
Regional Trial Court of Manila, Branch 7, in Civil Case No. 89-
48265. Also assailed is respondent court's resolution denying
petitioners' motion for reconsideration.
On November 26, 1975, respondent Ever Textile Mills, Inc.
(EVERTEX) obtained a three million peso (P3,000,000.00) loan
from petitioner Philippine Bank of Communications (PBCom).
As security for the loan, EVERTEX executed in favor of PBCom,
a deed of Real and Chattel Mortgage over the lot under TCT No.
372097, where its factory stands, and the chattels located therein
as enumerated in a schedule attached to the mortgage contract.
The pertinent portions of the Real and Chattel Mortgage are
quoted below:
MORTGAGE
(REAL AND CHATTEL)
xxx xxx xxx
The MORTGAGOR(S) hereby transfer(s) and
convey(s), by way of First Mortgage, to the
MORTGAGEE, . . . certain parcel(s) of land, together
with all the buildings and improvements now existing or
which may hereafter exist thereon, situated in . . .
"Annex A"
(Real and Chattel Mortgage executed by Ever Textile
Mills in favor of PBCommunications continued)
LIST OF MACHINERIES & EQUIPMENT
A. Forty Eight (48) units of Vayrow Knitting Machines-
Tompkins made in Hongkong:
Serial Numbers Size of Machines
xxx xxx xxx
B. Sixteen (16) sets of Vayrow Knitting Machines made
in Taiwan.
xxx xxx xxx
C. Two (2) Circular Knitting Machines made in West
Germany.
xxx xxx xxx
D. Four (4) Winding Machines.
xxx xxx xxx
SCHEDULE "A"
I. TCT # 372097 - RIZAL
xxx xxx xxx
II. Any and all buildings and improvements now
existing or hereafter to exist on the above-mentioned lot.
III. MACHINERIES & EQUIPMENT situated, located
and/or installed on the above-mentioned lot located at . .
.
(a) Forty eight sets (48) Vayrow Knitting Machines . . .
(b) Sixteen sets (16) Vayrow Knitting Machines . . .
(c) Two (2) Circular Knitting Machines . . .
(d) Two (2) Winding Machines . . .
(e) Two (2) Winding Machines . . .
IV. Any and all replacements, substitutions, additions,
increases and accretions to above properties.
xxx xxx xxx
3

On April 23, 1979, PBCom granted a second loan of
P3,356,000.00 to EVERTEX. The loan was secured by a Chattel
Mortgage over personal properties enumerated in a list attached
thereto. These listed properties were similar to those listed in
Annex A of the first mortgage deed.
After April 23, 1979, the date of the execution of the second
mortgage mentioned above, EVERTEX purchased various
machines and equipments.
On November 19, 1982, due to business reverses, EVERTEX
filed insolvency proceedings docketed as SP Proc. No. LP-3091-P
before the defunct Court of First Instance of Pasay City, Branch
XXVIII. The CFI issued an order on November 24, 1982
declaring the corporation insolvent. All its assets were taken into
the custody of the Insolvency Court, including the collateral, real
and personal, securing the two mortgages as abovementioned.
In the meantime, upon EVERTEX's failure to meet its obligation
to PBCom, the latter commenced extrajudicial foreclosure
proceedings against EVERTEX under Act 3135, otherwise
known as "An Act to Regulate the Sale of Property under Special
Powers Inserted in or Annexed to Real Estate Mortgages" and Act
1506 or "The Chattel Mortgage Law". A Notice of Sheriff's Sale
was issued on December 1, 1982.
On December 15, 1982, the first public auction was held where
petitioner PBCom emerged as the highest bidder and a Certificate
of Sale was issued in its favor on the same date. On December 23,
1982, another public auction was held and again, PBCom was the
highest bidder. The sheriff issued a Certificate of Sale on the
same day.
On March 7, 1984, PBCom consolidated its ownership over the
lot and all the properties in it. In November 1986, it leased the
entire factory premises to petitioner Ruby L. Tsai for P50,000.00
a month. On May 3, 1988, PBCom sold the factory, lock, stock
and barrel to Tsai for P9,000,000.00, including the contested
machineries.
On March 16, 1989, EVERTEX filed a complaint for annulment
of sale, reconveyance, and damages with the Regional Trial Court
against PBCom, alleging inter alia that the extrajudicial
foreclosure of subject mortgage was in violation of the Insolvency
Law. EVERTEX claimed that no rights having been transmitted
to PBCom over the assets of insolvent EVERTEX, therefore Tsai
acquired no rights over such assets sold to her, and should
reconvey the assets.
Further, EVERTEX averred that PBCom, without any legal or
factual basis, appropriated the contested properties, which were
not included in the Real and Chattel Mortgage of November 26,
1975 nor in the Chattel Mortgage of April 23, 1979, and neither
were those properties included in the Notice of Sheriff's Sale
dated December 1, 1982 and Certificate of Sale . . . dated
December 15, 1982.
The disputed properties, which were valued at P4,000,000.00, are:
14 Interlock Circular Knitting Machines, 1 Jet Drying Equipment,
1 Dryer Equipment, 1 Raisin Equipment and 1 Heatset
Equipment.
The RTC found that the lease and sale of said personal properties
were irregular and illegal because they were not duly foreclosed
nor sold at the December 15, 1982 auction sale since these were
16

not included in the schedules attached to the mortgage contracts.
The trial court decreed:
WHEREFORE, judgment is hereby rendered in favor of
plaintiff corporation and against the defendants:
1. Ordering the annulment of the sale executed by
defendant Philippine Bank of Communications in favor
of defendant Ruby L. Tsai on May 3, 1988 insofar as it
affects the personal properties listed in par. 9 of the
complaint, and their return to the plaintiff corporation
through its assignee, plaintiff Mamerto R. Villaluz, for
disposition by the Insolvency Court, to be done within
ten (10) days from finality of this decision;
2. Ordering the defendants to pay jointly and severally
the plaintiff corporation the sum of P5,200,000.00 as
compensation for the use and possession of the
properties in question from November 1986 to February
1991 and P100,000.00 every month thereafter, with
interest thereon at the legal rate per annum until full
payment;
3. Ordering the defendants to pay jointly and severally
the plaintiff corporation the sum of P50,000.00 as and
for attorney's fees and expenses of litigation;
4. Ordering the defendants to pay jointly and severally
the plaintiff corporation the sum of P200,000.00 by way
of exemplary damages;
5. Ordering the dismissal of the counterclaim of the
defendants; and
6. Ordering the defendants to proportionately pay the
costs of suit.
SO ORDERED.
4

Dissatisfied, both PBCom and Tsai appealed to the Court of
Appeals, which issued its decision dated August 31, 1994, the
dispositive portion of which reads:
WHEREFORE, except for the deletion therefrom of the award;
for exemplary damages, and reduction of the actual damages,
from P100,000.00 to P20,000.00 per month, from November
1986 until subject personal properties are restored to appellees,
the judgment appealed from is hereby AFFIRMED, in all other
respects. No pronouncement as to costs.
5

Motion for reconsideration of the above decision having been
denied in the resolution of April 28, 1995, PBCom and Tsai filed
their separate petitions for review with this Court.
In G.R No. 120098, petitioner Tsai ascribed the following errors
to the respondent court:
I
THE HONORABLE COURT OF APPEALS (SECOND
DIVISION) ERRED IN EFFECT MAKING A
CONTRACT FOR THE PARTIES BY TREATING
THE 1981 ACQUIRED MACHINERIES AS
CHATTELS INSTEAD OF REAL PROPERTIES
WITHIN THEIR EARLIER 1975 DEED OF REAL
AND CHATTEL MORTGAGE OR 1979 DEED OF
CHATTEL MORTGAGE.
II
THE HONORABLE COURT OF APPEALS (SECOND
DIVISION) ERRED IN HOLDING THAT THE
DISPUTED 1981 MACHINERIES ARE NOT REAL
PROPERTIES DEEMED PART OF THE
MORTGAGE DESPITE THE CLEAR IMPORT OF
THE EVIDENCE AND APPLICABLE RULINGS OF
THE SUPREME COURT.
III
THE HONORABLE COURT OF APPEALS (SECOND
DIVISION) ERRED IN DEEMING PETITIONER A
PURCHASER IN BAD FAITH.
IV
THE HONORABLE COURT OF APPEALS (SECOND
DIVISION) ERRED IN ASSESSING PETITIONER
ACTUAL DAMAGES, ATTORNEY'S FEES AND
EXPENSES OF LITIGATION FOR WANT OF
VALID FACTUAL AND LEGAL BASIS.
V
THE HONORABLE COURT OF APPEALS (SECOND
DIVISION) ERRED IN HOLDING AGAINST
PETITIONER'S ARGUMENTS ON PRESCRIPTION
AND LACHES.
6

In G.R. No. 120098, PBCom raised the following issues:
I.
DID THE COURT OF APPEALS VALIDLY DECREE THE
MACHINERIES LISTED UNDER PARAGRAPH 9 OF THE
COMPLAINT BELOW AS PERSONAL PROPERTY OUTSIDE
OF THE 1975 DEED OF REAL ESTATE MORTGAGE AND
EXCLUDED THEM FROM THE REAL PROPERTY
EXTRAJUDICIALLY FORECLOSED BY PBCOM DESPITE
THE PROVISION IN THE 1975 DEED THAT ALL AFTER-
ACQUIRED PROPERTIES DURING THE LIFETIME OF THE
MORTGAGE SHALL FORM PART THEREOF, AND
DESPITE THE UNDISPUTED FACT THAT SAID
MACHINERIES ARE BIG AND HEAVY, BOLTED OR
CEMENTED ON THE REAL PROPERTY MORTGAGED BY
EVER TEXTILE MILLS TO PBCOM, AND WERE ASSESSED
FOR REAL ESTATE TAX PURPOSES?
II
CAN PBCOM, WHO TOOK POSSESSION OF THE
MACHINERIES IN QUESTION IN GOOD FAITH,
EXTENDED CREDIT FACILITIES TO EVER TEXTILE
MILLS WHICH AS OF 1982 TOTALLED P9,547,095.28, WHO
HAD SPENT FOR MAINTENANCE AND SECURITY ON
THE DISPUTED MACHINERIES AND HAD TO PAY ALL
THE BACK TAXES OF EVER TEXTILE MILLS BE
LEGALLY COMPELLED TO RETURN TO EVER THE SAID
MACHINERIES OR IN LIEU THEREOF BE ASSESSED
DAMAGES. IS THAT SITUATION TANTAMOUNT TO A
CASE OF UNJUST ENRICHMENT?
7

The principal issue, in our view, is whether or not the inclusion of
the questioned properties in the foreclosed properties is proper.
The secondary issue is whether or not the sale of these properties
to petitioner Ruby Tsai is valid.
For her part, Tsai avers that the Court of Appeals in effect made a
contract for the parties by treating the 1981 acquired units of
machinery as chattels instead of real properties within their earlier
1975 deed of Real and Chattel Mortgage or 1979 deed of Chattel
Mortgage.
8
Additionally, Tsai argues that respondent court erred
in holding that the disputed 1981 machineries are not real
properties.
9
Finally, she contends that the Court of Appeals erred
17

in holding against petitioner's arguments on prescription and
laches
10
and in assessing petitioner actual damages, attorney's fees
and expenses of litigation, for want of valid factual and legal
basis.
11

Essentially, PBCom contends that respondent court erred in
affirming the lower court's judgment decreeing that the pieces of
machinery in dispute were not duly foreclosed and could not be
legally leased nor sold to Ruby Tsai. It further argued that the
Court of Appeals' pronouncement that the pieces of machinery in
question were personal properties have no factual and legal basis.
Finally, it asserts that the Court of Appeals erred in assessing
damages and attorney's fees against PBCom.
In opposition, private respondents argue that the controverted
units of machinery are not "real properties" but chattels, and,
therefore, they were not part of the foreclosed real properties,
rendering the lease and the subsequent sale thereof to Tsai a
nullity.
12

Considering the assigned errors and the arguments of the parties,
we find the petitions devoid of merit and ought to be denied.
Well settled is the rule that the jurisdiction of the Supreme Court
in a petition for review on certiorari under Rule 45 of the Revised
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 misapprehension of facts.
13
This rule is applied more
stringently when the findings of fact of the RTC is affirmed by
the Court of Appeals.
14

The following are the facts as found by the RTC and affirmed by
the Court of Appeals that are decisive of the issues: (1) the
"controverted machineries" are not covered by, or included in,
either of the two mortgages, the Real Estate and Chattel
Mortgage, and the pure Chattel Mortgage; (2) the said
machineries were not included in the list of properties appended
to the Notice of Sale, and neither were they included in the
Sheriff's Notice of Sale of the foreclosed properties.
15

Petitioners contend that the nature of the disputed
machineries, i.e., that they were heavy, bolted or cemented on the
real property mortgaged by EVERTEX to PBCom, make
them ipso facto immovable under Article 415 (3) and (5) of the
New Civil Code. This assertion, however, does not settle the
issue. Mere nuts and bolts do not foreclose the controversy. We
have to look at the parties' intent.
While it is true that the controverted properties appear to be
immobile, a perusal of the contract of Real and Chattel Mortgage
executed by the parties herein gives us a contrary indication. In
the case at bar, both the trial and the appellate courts reached the
same finding that the true intention of PBCOM and the owner,
EVERTEX, is to treat machinery and equipment as chattels. The
pertinent portion of respondent appellate court's ruling is quoted
below:
As stressed upon by appellees, appellant bank treated
the machineries as chattels; never as real properties.
Indeed, the 1975 mortgage contract, which was actually
real and chattel mortgage, militates against appellants'
posture. It should be noted that the printed form used by
appellant bank was mainly for real estate mortgages.
But reflective of the true intention of appellant PBCOM
and appellee EVERTEX was the typing in capital letters,
immediately following the printed caption of mortgage,
of the phrase "real and chattel." So also, the
"machineries and equipment" in the printed form of the
bank had to be inserted in the blank space of the printed
contract and connected with the word "building" by
typewritten slash marks. Now, then, if the machineries
in question were contemplated to be included in the real
estate mortgage, there would have been no necessity to
ink a chattel mortgage specifically mentioning as part III
of Schedule A a listing of the machineries covered
thereby. It would have sufficed to list them as
immovables in the Deed of Real Estate Mortgage of the
land and building involved.
As regards the 1979 contract, the intention of the parties
is clear and beyond question. It refers solely tochattels.
The inventory list of the mortgaged properties is an
itemization of sixty-three (63) individually described
machineries while the schedule listed only machines and
2,996,880.50 worth of finished cotton fabrics and
natural cotton fabrics.
16

In the absence of any showing that this conclusion is baseless,
erroneous or uncorroborated by the evidence on record, we find
no compelling reason to depart therefrom.
Too, assuming arguendo that the properties in question are
immovable by nature, nothing detracts the parties from treating it
as chattels to secure an obligation under the principle of estoppel.
As far back as Navarro v. Pineda, 9 SCRA 631 (1963), an
immovable may be considered a personal property if there is a
stipulation as when it is used as security in the payment of an
obligation where a chattel mortgage is executed over it, as in the
case at bar.
In the instant case, the parties herein: (1) executed a contract
styled as "Real Estate Mortgage and Chattel Mortgage," instead
of just "Real Estate Mortgage" if indeed their intention is to treat
all properties included therein as immovable, and (2) attached to
the said contract a separate "LIST OF MACHINERIES &
EQUIPMENT". These facts, taken together, evince the
conclusion that the parties' intention is to treat these units of
machinery as chattels. A fortiori, the contested after-acquired
properties, which are of the same description as the units
enumerated under the title "LIST OF MACHINERIES &
EQUIPMENT," must also be treated as chattels.
Accordingly, we find no reversible error in the respondent
appellate court's ruling that inasmuch as the subject mortgages
were intended by the parties to involve chattels, insofar as
equipment and machinery were concerned, the Chattel Mortgage
Law applies, which provides in Section 7 thereof that: "a chattel
mortgage shall be deemed to cover only the property described
therein and not like or substituted property thereafter acquired by
the mortgagor and placed in the same depository as the property
originally mortgaged, anything in the mortgage to the contrary
notwithstanding."
And, since the disputed machineries were acquired in 1981 and
could not have been involved in the 1975 or 1979 chattel
mortgages, it was consequently an error on the part of the Sheriff
to include subject machineries with the properties enumerated in
said chattel mortgages.
As the auction sale of the subject properties to PBCom is void, no
valid title passed in its favor. Consequently, the sale thereof to
Tsai is also a nullity under the elementary principle of nemo dat
quod non habet, one cannot give what one does not have.
17

Petitioner Tsai also argued that assuming that PBCom's title over
the contested properties is a nullity, she is nevertheless a
purchaser in good faith and for value who now has a better right
than EVERTEX.
To the contrary, however, are the factual findings and conclusions
of the trial court that she is not a purchaser in good faith. Well-
settled is the rule that the person who asserts the status of a
purchaser in good faith and for value has the burden of proving
such assertion.
18
Petitioner Tsai failed to discharge this burden
persuasively.
18

Moreover, a purchaser in good faith and for value is one who
buys the property of another without notice that some other
person has a right to or interest in such property and pays a full
and fair price for the same, at the time of purchase, or before he
has notice of the claims or interest of some other person in the
property.
19
Records reveal, however, that when Tsai purchased
the controverted properties, she knew of respondent's claim
thereon. As borne out by the records, she received the letter of
respondent's counsel, apprising her of respondent's claim, dated
February 27, 1987.
20
She replied thereto on March 9,
1987.
21
Despite her knowledge of respondent's claim, she
proceeded to buy the contested units of machinery on May 3,
1988. Thus, the RTC did not err in finding that she was not a
purchaser in good faith.
Petitioner Tsai's defense of indefeasibility of Torrens Title of the
lot where the disputed properties are located is equally
unavailing. This defense refers to sale of lands and not to sale of
properties situated therein. Likewise, the mere fact that the lot
where the factory and the disputed properties stand is in PBCom's
name does not automatically make PBCom the owner of
everything found therein, especially in view of EVERTEX's letter
to Tsai enunciating its claim.
Finally, petitioners' defense of prescription and laches is less than
convincing. We find no cogent reason to disturb the consistent
findings of both courts below that the case for the reconveyance
of the disputed properties was filed within the reglementary
period. Here, in our view, the doctrine of laches does not apply.
Note that upon petitioners' adamant refusal to heed EVERTEX's
claim, respondent company immediately filed an action to recover
possession and ownership of the disputed properties. There is no
evidence showing any failure or neglect on its part, for an
unreasonable and unexplained length of time, to do that which, by
exercising due diligence, could or should have been done earlier.
The doctrine of stale demands would apply only where by reason
of the lapse of time, it would be inequitable to allow a party to
enforce his legal rights. Moreover, except for very strong reasons,
this Court is not disposed to apply the doctrine of laches to
prejudice or defeat the rights of an owner.
22

As to the award of damages, the contested damages are the actual
compensation, representing rentals for the contested units of
machinery, the exemplary damages, and attorney's fees.
As regards said actual compensation, the RTC awarded
P100,000.00 corresponding to the unpaid rentals of the contested
properties based on the testimony of John Chua, who testified that
the P100,000.00 was based on the accepted practice in banking
and finance, business and investments that the rental price must
take into account the cost of money used to buy them. The Court
of Appeals did not give full credence to Chua's projection and
reduced the award to P20,000.00.
Basic is the rule that to recover actual damages, the amount of
loss must not only be capable of proof but must actually be
proven with reasonable degree of certainty, premised upon
competent proof or best evidence obtainable of the actual amount
thereof.
23
However, the allegations of respondent company as to
the amount of unrealized rentals due them as actual damages
remain mere assertions unsupported by documents and other
competent evidence. In determining actual damages, the court
cannot rely on mere assertions, speculations, conjectures or
guesswork but must depend on competent proof and on the best
evidence obtainable regarding the actual amount of
loss.
24
However, we are not prepared to disregard the following
dispositions of the respondent appellate court:
. . . In the award of actual damages under scrutiny, there
is nothing on record warranting the said award of
P5,200,000.00, representing monthly rental income of
P100,000.00 from November 1986 to February 1991,
and the additional award of P100,000.00 per month
thereafter.
As pointed out by appellants, the testimonial evidence,
consisting of the testimonies of Jonh (sic) Chua and
Mamerto Villaluz, is shy of what is necessary to
substantiate the actual damages allegedly sustained by
appellees, by way of unrealized rental income of subject
machineries and equipments.
The testimony of John Cua (sic) is nothing but an
opinion or projection based on what is claimed to be a
practice in business and industry. But such a testimony
cannot serve as the sole basis for assessing the actual
damages complained of. What is more, there is no
showing that had appellant Tsai not taken possession of
the machineries and equipments in question, somebody
was willing and ready to rent the same for P100,000.00
a month.
xxx xxx xxx
Then, too, even assuming arguendo that the said
machineries and equipments could have generated a
rental income of P30,000.00 a month, as projected by
witness Mamerto Villaluz, the same would have been a
gross income. Therefrom should be deducted or
removed, expenses for maintenance and repairs . . .
Therefore, in the determination of the actual damages or
unrealized rental income sued upon, there is a good
basis to calculate that at least four months in a year, the
machineries in dispute would have been idle due to
absence of a lessee or while being repaired. In the light
of the foregoing rationalization and computation, We
believe that a net unrealized rental income of
P20,000.00 a month, since November 1986, is more
realistic and fair.
25

As to exemplary damages, the RTC awarded P200,000.00 to
EVERTEX which the Court of Appeals deleted. But according to
the CA, there was no clear showing that petitioners acted
malevolently, wantonly and oppressively. The evidence, however,
shows otherwise.It is a requisite to award exemplary damages that
the wrongful act must be accompanied by bad faith,
26
and the
guilty acted in a wanton, fraudulent, oppressive, reckless or
malevolent manner.
27
As previously stressed, petitioner Tsai's act
of purchasing the controverted properties despite her knowledge
of EVERTEX's claim was oppressive and subjected the already
insolvent respondent to gross disadvantage. Petitioner PBCom
also received the same letters of Atty. Villaluz, responding thereto
on March 24, 1987.
28
Thus, PBCom's act of taking all the
properties found in the factory of the financially handicapped
respondent, including those properties not covered by or included
in the mortgages, is equally oppressive and tainted with bad faith.
Thus, we are in agreement with the RTC that an award of
exemplary damages is proper.
The amount of P200,000.00 for exemplary damages is, however,
excessive. Article 2216 of the Civil Code provides that no proof
of pecuniary loss is necessary for the adjudication of exemplary
damages, their assessment being left to the discretion of the court
in accordance with the circumstances of each case.
29
While the
imposition of exemplary damages is justified in this case, equity
calls for its reduction. In Inhelder Corporation v. Court of
Appeals, G.R. No. L-52358, 122 SCRA 576, 585, (May 30,
1983), we laid down the rule that judicial discretion granted to the
courts in the assessment of damages must always be exercised
with balanced restraint and measured objectivity. Thus, here the
award of exemplary damages by way of example for the public
good should be reduced to P100,000.00.
By the same token, attorney's fees and other expenses of litigation
may be recovered when exemplary damages are awarded.
30
In our
view, RTC's award of P50,000.00 as attorney's fees and expenses
of litigation is reasonable, given the circumstances in these cases.
19

WHEREFORE, the petitions are DENIED. The assailed decision
and resolution of the Court of Appeals in CA-G.R. CV No. 32986
are AFFIRMED WITH MODIFICATIONS. Petitioners
Philippine Bank of Communications and Ruby L. Tsai are hereby
ordered to pay jointly and severally Ever Textile Mills, Inc. the
following: (1) P20,000.00 per month, as compensation for the use
and possession of the properties in question from November
1986
31
until subject personal properties are restored to respondent
corporation; (2) P100,000.00 by way of exemplary damages, and
(3) P50,000.00 as attorney's fees and litigation expenses. Costs
against petitioners.
SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.

20

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. Nos. L-10817-18 February 28, 1958
ENRIQUE LOPEZ, petitioner,
vs.
VICENTE OROSA, JR., and PLAZA THEATRE,
INC., respondents.
Enrique Lopez is a resident of Balayan, Batangas, doing business
under the trade name of Lopez-Castelo Sawmill. Sometime in
May, 1946, Vicente Orosa, Jr., also a resident of the same
province, dropped at Lopez' house and invited him to make an
investment in the theatre business. It was intimated that Orosa, his
family and close friends were organizing a corporation to be
known as Plaza Theatre, Inc., that would engage in such venture.
Although Lopez expressed his unwillingness to invest of the
same, he agreed to supply the lumber necessary for the
construction of the proposed theatre, and at Orosa's behest and
assurance that the latter would be personally liable for any
account that the said construction might incur, Lopez further
agreed that payment therefor would be on demand and not cash
on delivery basis. Pursuant to said verbal agreement, Lopez
delivered the lumber which was used for the construction of the
Plaza Theatre on May 17, 1946, up to December 4 of the same
year. But of the total cost of the materials amounting to
P62,255.85, Lopez was paid only P20,848.50, thus leaving a
balance of P41,771.35.
We may state at this juncture that the Plaza Theatre was erected
on a piece of land with an area of 679.17 square meters formerly
owned by Vicente Orosa, Jr., and was acquired by the corporation
on September 25, 1946, for P6,000. As Lopez was pressing Orosa
for payment of the remaining unpaid obligation, the latter and
Belarmino Rustia, the president of the corporation, promised to
obtain a bank loan by mortgaging the properties of the Plaza
Theatre., out of which said amount of P41,771.35 would be
satisfied, to which assurance Lopez had to accede. Unknown to
him, however, as early as November, 1946, the corporation
already got a loan for P30,000 from the Philippine National Bank
with the Luzon Surety Company as surety, and the corporation in
turn executed a mortgage on the land and building in favor of said
company as counter-security. As the land at that time was not yet
brought under the operation of the Torrens System, the mortgage
on the same was registered on November 16, 1946, under Act No.
3344. Subsequently, when the corporation applied for the
registration of the land under Act 496, such mortgage was not
revealed and thus Original Certificate of Title No. O-391 was
correspondingly issued on October 25, 1947, without any
encumbrance appearing thereon.
Persistent demand from Lopez for the payment of the amount due
him caused Vicente Orosa, Jr. to execute on March 17, 1947, an
alleged "deed of assignment" of his 420 shares of stock of the
Plaza Theater, Inc., at P100 per share or with a total value of
P42,000 in favor of the creditor, and as the obligation still
remained unsettled, Lopez filed on November 12, 1947, a
complaint with the Court of First Instance of Batangas (Civil
Case No. 4501 which later became R-57) against Vicente Orosa,
Jr. and Plaza Theater, Inc., praying that defendants be sentenced
to pay him jointly and severally the sum of P41,771.35, with legal
interest from the firing of the action; that in case defendants fail
to pay the same, that the building and the land covered by OCT
No. O-391 owned by the corporation be sold at public auction and
the proceeds thereof be applied to said indebtedness; or that the
420 shares of the capital stock of the Plaza Theatre, Inc., assigned
by Vicente Orosa, Jr., to said plaintiff be sold at public auction for
the same purpose; and for such other remedies as may be
warranted by the circumstances. Plaintiff also caused the
annotation of a notice of lis pendens on said properties with the
Register of Deeds.
Defendants Vicente Orosa, Jr. and Plaza Theatre, Inc., filed
separate answers, the first denying that the materials were
delivered to him as a promoter and later treasurer of the
corporation, because he had purchased and received the same on
his personal account; that the land on which the movie house was
constructed was not charged with a lien to secure the payment of
the aforementioned unpaid obligation; and that the 420 shares of
stock of the Plaza Theatre, Inc., was not assigned to plaintiff as
collaterals but as direct security for the payment of his
indebtedness. As special defense, this defendant contended that as
the 420 shares of stock assigned and conveyed by the assignor
and accepted by Lopez as direct security for the payment of the
amount of P41,771.35 were personal properties, plaintiff was
barred from recovering any deficiency if the proceeds of the sale
thereof at public auction would not be sufficient to cover and
satisfy the obligation. It was thus prayed that he be declared
exempted from the payment of any deficiency in case the
proceeds from the sale of said personal properties would not be
enough to cover the amount sought to be collected.
Defendant Plaza Theatre, Inc., on the other hand, practically set
up the same line of defense by alleging that the building materials
delivered to Orosa were on the latter's personal account; and that
there was no understanding that said materials would be paid
jointly and severally by Orosa and the corporation, nor was a lien
charged on the properties of the latter to secure payment of the
same obligation. As special defense, defendant corporation
averred that while it was true that the materials purchased by
Orosa were sold by the latter to the corporation, such transactions
were in good faith and for valuable consideration thus when
plaintiff failed to claim said materials within 30 days from the
time of removal thereof from Orosa, lumber became a different
and distinct specie and plaintiff lost whatever rights he might
have in the same and consequently had no recourse against the
Plaza Theatre, Inc., that the claim could not have been
refectionary credit, for such kind of obligation referred to an
indebtedness incurred in the repair or reconstruction of something
already existing and this concept did not include an entirely new
work; and that the Plaza Theatre, Inc., having been incorporated
on October 14, 1946, it could not have contracted any obligation
prior to said date. It was, therefore, prayed that the complaint be
dismissed; that said defendant be awarded the sum P 5,000 for
damages, and such other relief as may be just and proper in the
premises.
The surety company, in the meantime, upon discovery that the
land was already registered under the Torrens System and that
there was a notice of lis pendens thereon, filed on August 17,
1948, or within the 1-year period after the issuance of the
certificate of title, a petition for review of the decree of the land
registration court dated October 18, 1947, which was made the
basis of OCT No. O-319, in order to annotate the rights and
interests of the surety company over said properties (Land
Registration Case No. 17 GLRO Rec. No. 296). Opposition
thereto was offered by Enrique Lopez, asserting that the amount
demanded by him constituted a preferred lien over the properties
of the obligors; that the surety company was guilty of negligence
when it failed to present an opposition to the application for
registration of the property; and that if any violation of the rights
and interest of said surety would ever be made, same must be
subject to the lien in his favor.
The two cases were heard jointly and in a decision dated October
30, 1952, the lower Court, after making an exhaustive and
detailed analysis of the respective stands of the parties and the
evidence adduced at the trial, held that defendants Vicente Orosa,
Jr., and the Plaza Theatre, Inc., were jointly liable for the unpaid
balance of the cost of lumber used in the construction of
the building and the plaintiff thus acquired the materialman's lien
over the same. In making the pronouncement that the lien was
merely confined to the building and did not extend to the land on
which the construction was made, the trial judge took into
consideration the fact that when plaintiff started the delivery of
lumber in May, 1946, the land was not yet owned by the
corporation; that the mortgage in favor of Luzon Surety Company
was previously registered under Act No. 3344; that the codal
provision (Art. 1923 of the old Spanish Civil Code) specifying
21

that refection credits are preferred could refer only to buildings
which are also classified as real properties, upon which said
refection was made. It was, however, declared that plaintiff's lien
on the building was superior to the right of the surety company.
And finding that the Plaza Theatre, Inc., had no objection to the
review of the decree issued in its favor by the land registration
court and the inclusion in the title of the encumbrance in favor of
the surety company, the court a quo granted the petition filed by
the latter company. Defendants Orosa and the Plaza Theatre, Inc.,
were thus required to pay jointly the amount of P41,771.35 with
legal interest and costs within 90 days from notice of said
decision; that in case of default, the 420 shares of stock assigned
by Orosa to plaintiff be sold at public auction and the proceeds
thereof be applied to the payment of the amount due the plaintiff,
plus interest and costs; and that the encumbrance in favor of the
surety company be endorsed at the back of OCT No. O-391, with
notation I that with respect to the building, said mortgage was
subject to the materialman's lien in favor of Enrique Lopez.
Plaintiff tried to secure a modification of the decision in so far as
it declared that the obligation of therein defendants was joint
instead of solidary, and that the lien did not extend to the land, but
same was denied by order the court of December 23, 1952. The
matter was thus appealed to the Court of appeals, which affirmed
the lower court's ruling, and then to this Tribunal. In this instance,
plaintiff-appellant raises 2 issues: (1) whether a materialman's
lien for the value of the materials used in the construction of a
building attaches to said structure alone and does not extend to
the land on which the building is adhered to; and (2) whether the
lower court and the Court of Appeals erred in not providing that
the material mans liens is superior to the mortgage executed in
favor surety company not only on the building but also on the
land.
It is to be noted in this appeal that Enrique Lopez has not raised
any question against the part of the decision sentencing
defendants Orosa and Plaza Theatre, Inc., to pay jointly the sum
of P41,771.35, so We will not take up or consider anything on
that point. Appellant, however, contends that the lien created in
favor of the furnisher of the materials used for the construction,
repair or refection of a building, is also extended to the land
which the construction was made, and in support thereof he relies
on Article 1923 of the Spanish Civil Code, pertinent law on the
matter, which reads as follows:
ART. 1923. With respect to determinate real property
and real rights of the debtor, the following are preferred:
x x x x x x x x x
5. Credits for refection, not entered or recorded, with
respect to the estate upon which the refection was made,
and only with respect to other credits different from
those mentioned in four preceding paragraphs.
It is argued that in view of the employment of the phrase real
estate, or immovable property, and inasmuch as said provision
does not contain any specification delimiting the lien to the
building, said article must be construed as to embrace both the
land and the building or structure adhering thereto. We cannot
subscribe to this view, for while it is true that generally, real
estate connotes the land and the building constructed thereon, it is
obvious that the inclusion of the building, separate and distinct
from the land, in the enumeration of what may constitute real
properties
1
could mean only one thing that a building is by
itself an immovable property, a doctrine already pronounced by
this Court in the case of Leung Yee vs. Strong Machinery Co., 37
Phil., 644. Moreover, and in view of the absence of any specific
provision of law to the contrary, a building is an immovable
property, irrespective of whether or not said structure and the land
on which it is adhered to belong to the same owner.
A close examination of the provision of the Civil Code invoked
by appellant reveals that the law gives preference to unregistered
refectionary credits only with respect to the real estate upon
which the refection or work was made. This being so, the
inevitable conclusion must be that the lien so created attaches
merely to the immovable property for the construction or repair of
which the obligation was incurred. Evidently, therefore, the lien
in favor of appellant for the unpaid value of the lumber used in
the construction of the building attaches only to said structure and
to no other property of the obligors.
Considering the conclusion thus arrived at, i.e., that the
materialman's lien could be charged only to the building for
which the credit was made or which received the benefit of
refection, the lower court was right in, holding at the interest of
the mortgagee over the land is superior and cannot be made
subject to the said materialman's lien.
Wherefore, and on the strength of the foregoing considerations,
the decision appealed from is hereby affirmed, with costs against
appellant. It is so ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista
Angelo, Labrador, Concepcion, Reyes, J.B.L. and Endencia,
JJ., concur.

22

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-7057 October 29, 1954
MACHINERY & ENGINEERING SUPPLIES, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, HON.
POTENCIANO PECSON, JUDGE OF THE COURT OF
FIRST INSTANCE OF MANILA, IPO LIMESTONE CO.,
INC., and ANTONIO VILLARAMA, respondents.
This is an appeal by certiorari, taken by petitioner Machinery and
Engineering Supplies Inc., from a decision of the Court of
Appeals denying an original petition for certiorari filed by said
petitioner against Hon. Potenciano Pecson, Ipo Limestone Co.,
Inc., and Antonio Villarama, the respondents herein.
The pertinent facts are set forth in the decision of the Court of
Appeals, from which we quote:
On March 13, 1953, the herein petitioner filed a
complaint for replevin in the Court of First Instance of
Manila, Civil Case No. 19067, entitled "Machinery and
Engineering Supplies, Inc., Plaintiff, vs. Ipo Limestone
Co., Inc., and Dr. Antonio Villarama, defendants", for
the recovery of the machinery and equipment sold and
delivered to said defendants at their factory in barrio
Bigti, Norzagaray, Bulacan. Upon application ex-parte
of the petitioner company, and upon approval of
petitioner's bond in the sum of P15,769.00, on March
13,1953, respondent judge issued an order, commanding
the Provincial Sheriff of Bulacan to seize and take
immediate possession of the properties specified in the
order (Appendix I, Answer). On March 19, 1953, two
deputy sheriffs of Bulacan, the said Ramon S. Roco, and
a crew of technical men and laborers proceeded to Bigti,
for the purpose of carrying the court's order into effect.
Leonardo Contreras, Manager of the respondent
Company, and Pedro Torres, in charge thereof, met the
deputy sheriffs, and Contreras handed to them a letter
addressed to Atty. Leopoldo C. Palad, ex-oficio
Provincial Sheriff of Bulacan, signed by Atty. Adolfo
Garcia of the defendants therein, protesting against the
seizure of the properties in question, on the ground that
they are not personal properties. Contending that the
Sheriff's duty is merely ministerial, the deputy sheriffs,
Roco, the latter's crew of technicians and laborers,
Contreras and Torres, went to the factory. Roco's
attention was called to the fact that the equipment could
not possibly be dismantled without causing damages or
injuries to the wooden frames attached to them. As Roco
insisted in dismantling the equipment on his own
responsibility, alleging that the bond was posted for
such eventuality, the deputy sheriffs directed that some
of the supports thereof be cut (Appendix 2). On March
20, 1953, the defendant Company filed an urgent
motion, with a counter-bond in the amount of P15,769,
for the return of the properties seized by the deputy
sheriffs. On the same day, the trial court issued an order,
directing the Provincial Sheriff of Bulacan to return the
machinery and equipment to the place where they were
installed at the time of the seizure (Appendix 3). On
March 21, 1953, the deputy sheriffs returned the
properties seized, by depositing them along the road,
near the quarry, of the defendant Company, at Bigti,
without the benefit of inventory and without re-
installing hem in their former position and replacing the
destroyed posts, which rendered their use impracticable.
On March 23, 1953, the defendants' counsel asked the
provincial Sheriff if the machinery and equipment,
dumped on the road would be re-installed tom their
former position and condition (letter, Appendix 4). On
March 24, 1953, the Provincial Sheriff filed an urgent
motion in court, manifesting that Roco had been asked
to furnish the Sheriff's office with the expenses,
laborers, technical men and equipment, to carry into
effect the court's order, to return the seized properties in
the same way said Roco found them on the day of
seizure, but said Roco absolutely refused to do so, and
asking the court that the Plaintiff therein be ordered to
provide the required aid or relieve the said Sheriff of the
duty of complying with the said order dated March 20,
1953 (Appendix 5). On March 30, 1953, the trial court
ordered the Provincial Sheriff and the Plaintiff to
reinstate the machinery and equipment removed by
them in their original condition in which they were
found before their removal at the expense of the
Plaintiff (Appendix 7). An urgent motion of the
Provincial Sheriff dated April 15, 1953, praying for an
extension of 20 days within which to comply with the
order of the Court (appendix 10) was denied; and on
May 4, 1953, the trial court ordered the Plaintiff therein
to furnish the Provincial Sheriff within 5 days with the
necessary funds, technical men, laborers, equipment and
materials to effect the repeatedly mentioned re-
installation (Appendix 13). (Petitioner's brief, Appendix
A, pp. I-IV.)
Thereupon petitioner instituted in the Court of Appeals civil case
G.R. No. 11248-R, entitled "Machinery and Engineering
Supplies, Inc. vs. Honorable Potenciano Pecson, Provincial
Sheriff of Bulacan, Ipo Limestone Co., Inc., and Antonio
Villarama." In the petition therein filed, it was alleged that, in
ordering the petitioner to furnish the provincial sheriff of Bulacan
"with necessary funds, technical men, laborers, equipment and
materials, to effect the installation of the machinery and
equipment" in question, the Court of Firs Instance of Bulacan had
committed a grave abuse if discretion and acted in excess of its
jurisdiction, for which reason it was prayed that its order to this
effect be nullified, and that, meanwhile, a writ of preliminary
injunction be issued to restrain the enforcement o said order of
may 4, 1953. Although the aforementioned writ was issued by the
Court of Appeals, the same subsequently dismissed by the case
for lack of merit, with costs against the petitioner, upon the
following grounds:
While the seizure of the equipment and personal
properties was ordered by the respondent Court, it is,
however, logical to presume that said court did not
authorize the petitioner or its agents to destroy, as they
did, said machinery and equipment, by dismantling and
unbolting the same from their concrete basements, and
cutting and sawing their wooden supports, thereby
rendering them unserviceable and beyond repair, unless
those parts removed, cut and sawed be replaced, which
the petitioner, not withstanding the respondent Court's
order, adamantly refused to do. The Provincial Sheriff' s
tortious act, in obedience to the insistent proddings of
the president of the Petitioner, Ramon S. Roco, had no
justification in law, notwithstanding the Sheriffs' claim
that his duty was ministerial. It was the bounden duty of
the respondent Judge to give redress to the respondent
Company, for the unlawful and wrongful acts
committed by the petitioner and its agents. And as this
was the true object of the order of March 30, 1953, we
cannot hold that same was within its jurisdiction to
issue. The ministerial duty of the Sheriff should have its
limitations. The Sheriff knew or must have known what
is inherently right and inherently wrong, more so when,
as in this particular case, the deputy sheriffs were shown
a letter of respondent Company's attorney, that the
machinery were not personal properties and, therefore,
not subject to seizure by the terms of the order. While it
may be conceded that this was a question of law too
technical to decide on the spot, it would not have costs
the Sheriff much time and difficulty to bring the letter to
the court's attention and have the equipment and
machinery guarded, so as not to frustrate the order of
seizure issued by the trial court. But acting upon the
directives of the president of the Petitioner, to seize the
23

properties at any costs, in issuing the order sought to be
annulled, had not committed abuse of discretion at all or
acted in an arbitrary or despotic manner, by reason of
passion or personal hostility; on the contrary, it issued
said order, guided by the well known principle that of
the property has to be returned, it should be returned in
as good a condition as when taken (Bachrach Motor
Co., Inc., vs. Bona, 44 Phil., 378). If any one had gone
beyond the scope of his authority, it is the respondent
Provincial Sheriff. But considering that fact that he
acted under the pressure of Ramon S. Roco, and that the
order impugned was issued not by him, but by the
respondent Judge, We simply declare that said Sheriff'
act was most unusual and the result of a poor judgment.
Moreover, the Sheriff not being an officer exercising
judicial functions, the writ may not reach him,
forcertiorari lies only to review judicial actions.
The Petitioner complains that the respondent Judge had
completely disregarded his manifestation that the
machinery and equipment seized were and still are the
Petitioner's property until fully paid for and such never
became immovable. The question of ownership and the
applicability of Art. 415 of the new Civil Code are
immaterial in the determination of the only issue
involved in this case. It is a matter of evidence which
should be decided in the hearing of the case on the
merits. The question as to whether the machinery or
equipment in litigation are immovable or not is likewise
immaterial, because the only issue raised before the trial
court was whether the Provincial Sheriff of Bulacan, at
the Petitioner's instance, was justified in destroying the
machinery and in refusing to restore them to their
original form , at the expense of the Petitioner.
Whatever might be the legal character of the machinery
and equipment, would not be in any way justify their
justify their destruction by the Sheriff's and the said
Petitioner's. (Petitioner's brief, Appendix A, pp. IV-VII.)
A motion for reconsideration of this decision of the Court of
Appeals having been denied , petitioner has brought the case to
Us for review by writ of certiorari. Upon examination of the
record, We are satisfied, however that the Court of Appeals was
justified in dismissing the case.
The special civil action known as replevin, governed by Rule 62
of Court, is applicable only to "personal property".
Ordinarily replevin may be brought to recover any
specific personal property unlawfully taken or detained
from the owner thereof, provided such property is
capable of identification and delivery; but replevin will
not lie for the recovery of real property or incorporeal
personal property. (77 C. J. S. 17) (Emphasis supplied.)
When the sheriff repaired to the premises of respondent, Ipo
Limestone Co., Inc., machinery and equipment in question
appeared to be attached to the land, particularly to the concrete
foundation of said premises, in a fixed manner, in such a way that
the former could not be separated from the latter "without
breaking the material or deterioration of the object." Hence, in
order to remove said outfit, it became necessary, not only to
unbolt the same, but , also, to cut some of its wooden supports.
Moreover, said machinery and equipment were "intended by the
owner of the tenement for an industry" carried on said immovable
and tended." For these reasons, they were already immovable
property pursuant to paragraphs 3 and 5 of Article 415 of Civil
Code of the Philippines, which are substantially identical to
paragraphs 3 and 5 of Article 334 of the Civil Code of Spain. As
such immovable property, they were not subject to replevin.
In so far as an article, including a fixture annexed by a
tenant, is regarded as part of the realty, it is not the
subject for personality; . . . .
. . . the action of replevin does not lie for articles so
annexed to the realty as to be part as to be part thereof,
as, for example, a house or a turbine pump constituting
part of a building's cooling system; . . . (36 C. J. S. 1000
& 1001)
Moreover, as the provincial sheriff hesitated to remove the
property in question, petitioner's agent and president, Mr. Ramon
Roco, insisted "on the dismantling at his own responsibility,"
stating that., precisely, "that is the reason why plaintiff posted a
bond ." In this manner, petitioner clearly assumed the
corresponding risks.
Such assumption of risk becomes more apparent when we
consider that, pursuant to Section 5 of Rule 62 of the Rules of
Court, the defendant in an action for replevin is entitled to the
return of the property in dispute upon the filing of a counterbond,
as provided therein. In other words, petitioner knew that the
restitution of said property to respondent company might be
ordered under said provision of the Rules of Court, and that,
consequently, it may become necessary for petitioner to meet the
liabilities incident to such return.
Lastly, although the parties have not cited, and We have not
found, any authority squarely in point obviously real property
are not subject to replevin it is well settled that, when the
restitution of what has been ordered, the goods in question shall
be returned in substantially the same condition as when taken (54
C.J., 590-600, 640-641). Inasmuch as the machinery and
equipment involved in this case were duly installed and affixed in
the premises of respondent company when petitioner's
representative caused said property to be dismantled and then
removed, it follows that petitioner must also do everything
necessary to the reinstallation of said property in conformity with
its original condition.
Wherefore, the decision of the Court of Appeals is hereby
affirmed, with costs against the petitioner. So ordered.
Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Bautista
Angelo and Reyes, J.B.L., JJ., concur.
Paras, C.J., concurs in the result.

24

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-24440 March 28, 1968
THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-
appellee,
vs.
CITY OF ZAMBOANGA, SECRETARY OF FINANCE and
COMMISSIONER OF INTERNAL REVENUE,defendants-
appellants.
BENGZON, J.P., J .:
Prior to its incorporation as a chartered city, the
Municipality of Zamboanga used to be the provincial capital of
the then Zamboanga Province. On October 12, 1936,
Commonwealth Act 39 was approved converting the Municipality
of Zamboanga into Zamboanga City. Sec. 50 of the Act also
provided that
Buildings and properties which the province shall
abandon upon the transfer of the capital to another place
will be acquired and paid for by the City of Zamboanga
at a price to be fixed by the Auditor General.
The properties and buildings referred to consisted of 50 lots
and some buildings constructed thereon, located in the City of
Zamboanga and covered individually by Torrens certificates of
title in the name of Zamboanga Province. As far as can be
gleaned from the records,
1
said properties were being utilized as
follows
No. of
Lots
Use
1 ................................................ Capitol Site
3 ................................................ School Site
3 ................................................ Hospital Site
3 ................................................ Leprosarium
1 ................................................ Curuan School
1 ................................................ Trade School
2 ................................................ Burleigh School
2
................................................ High School
Playground
9 ................................................ Burleighs
1
................................................ Hydro-Electric
Site (Magay)
1 ................................................ San Roque
23 ................................................ vacant
It appears that in 1945, the capital of Zamboanga Province
was transferred to Dipolog.
2
Subsequently, or on June 16, 1948,
Republic Act 286 was approved creating the municipality of
Molave and making it the capital of Zamboanga Province.
On May 26, 1949, the Appraisal Committee formed by the
Auditor General, pursuant to Commonwealth Act 39, fixed the
value of the properties and buildings in question left by
Zamboanga Province in Zamboanga City at P1,294,244.00.
3

On June 6, 1952, Republic Act 711 was approved dividing
the province of Zamboanga into two (2): Zamboanga del Norte
and Zamboanga del Sur. As to how the assets and obligations of
the old province were to be divided between the two new ones,
Sec. 6 of that law provided:
Upon the approval of this Act, the funds, assets
and other properties and the obligations of the province
of Zamboanga shall be divided equitably between the
Province of Zamboanga del Norte and the Province of
Zamboanga del Sur by the President of the Philippines,
upon the recommendation of the Auditor General.
Pursuant thereto, the Auditor General, on January 11, 1955,
apportioned the assets and obligations of the defunct Province of
Zamboanga as follows: 54.39% for Zamboanga del Norte and
45.61% for Zamboanga del Sur. Zamboanga del Norte therefore
became entitled to 54.39% of P1,294,244.00, the total value of the
lots and buildings in question, or P704,220.05 payable by
Zamboanga City.
On March 17, 1959, the Executive Secretary, by order of
the President, issued a ruling
4
holding that Zamboanga del Norte
had a vested right as owner (should be co-owner pro-indiviso) of
the properties mentioned in Sec. 50 of Commonwealth Act 39,
and is entitled to the price thereof, payable by Zamboanga City.
This ruling revoked the previous Cabinet Resolution of July 13,
1951 conveying all the said 50 lots and buildings thereon to
Zamboanga City for P1.00, effective as of 1945, when the
provincial capital of the then Zamboanga Province was
transferred to Dipolog.
The Secretary of Finance then authorized the
Commissioner of Internal Revenue to deduct an amount equal to
25% of the regular internal revenue allotment for the City of
Zamboanga for the quarter ending March 31, 1960, then for the
quarter ending June 30, 1960, and again for the first quarter of the
fiscal year 1960-1961. The deductions, all aggregating
P57,373.46, was credited to the province of Zamboanga del
Norte, in partial payment of the P764,220.05 due it.
However, on June 17, 1961, Republic Act 3039 was
approved amending Sec. 50 of Commonwealth Act 39 by
providing that
All buildings, properties and assets belonging to
the former province of Zamboanga and located within
the City of Zamboanga are hereby transferred, free of
charge, in favor of the said City of Zamboanga.
(Stressed for emphasis).
Consequently, the Secretary of Finance, on July 12, 1961,
ordered the Commissioner of Internal Revenue to stop from
effecting further payments to Zamboanga del Norte and to return
to Zamboanga City the sum of P57,373.46 taken from it out of the
internal revenue allotment of Zamboanga del Norte. Zamboanga
City admits that since the enactment of Republic Act 3039,
P43,030.11 of the P57,373.46 has already been returned to it.
This constrained plaintiff-appellee Zamboanga del Norte to
file on March 5, 1962, a complaint entitled "Declaratory Relief
with Preliminary Mandatory Injunction" in the Court of First
Instance of Zamboanga del Norte against defendants-appellants
Zamboanga City, the Secretary of Finance and the Commissioner
of Internal Revenue. It was prayed that: (a) Republic Act 3039 be
declared unconstitutional for depriving plaintiff province of
property without due process and just compensation; (b)
Plaintiff's rights and obligations under said law be declared; (c)
The Secretary of Finance and the Internal Revenue Commissioner
be enjoined from reimbursing the sum of P57,373.46 to defendant
City; and (d) The latter be ordered to continue paying the balance
of P704,220.05 in quarterly installments of 25% of its internal
revenue allotments.
On June 4, 1962, the lower court ordered the issuance of
preliminary injunction as prayed for. After defendants filed their
respective answers, trial was held. On August 12, 1963, judgment
was rendered, the dispositive portion of which reads:
25

WHEREFORE, judgment is hereby rendered
declaring Republic Act No. 3039 unconstitutional
insofar as it deprives plaintiff Zamboanga del Norte of
its private properties, consisting of 50 parcels of land
and the improvements thereon under certificates of title
(Exhibits "A" to "A-49") in the name of the defunct
province of Zamboanga; ordering defendant City of
Zamboanga to pay to the plaintiff the sum of
P704,220.05 payment thereof to be deducted from its
regular quarterly internal revenue allotment equivalent
to 25% thereof every quarter until said amount shall
have been fully paid; ordering defendant Secretary of
Finance to direct defendant Commissioner of Internal
Revenue to deduct 25% from the regular quarterly
internal revenue allotment for defendant City of
Zamboanga and to remit the same to plaintiff
Zamboanga del Norte until said sum of P704,220.05
shall have been fully paid; ordering plaintiff Zamboanga
del Norte to execute through its proper officials the
corresponding public instrument deeding to defendant
City of Zamboanga the 50 parcels of land and the
improvements thereon under the certificates of title
(Exhibits "A" to "A-49") upon payment by the latter of
the aforesaid sum of P704,220.05 in full; dismissing the
counterclaim of defendant City of Zamboanga; and
declaring permanent the preliminary mandatory
injunction issued on June 8, 1962, pursuant to the order
of the Court dated June 4, 1962. No costs are assessed
against the defendants.
It is SO ORDERED.
Subsequently, but prior to the perfection of defendants'
appeal, plaintiff province filed a motion to reconsider praying that
Zamboanga City be ordered instead to pay the P704,220.05 in
lump sum with 6% interest per annum. Over defendants'
opposition, the lower court granted plaintiff province's motion.
The defendants then brought the case before Us on appeal.
Brushing aside the procedural point concerning the
property of declaratory relief filed in the lower court on the
assertion that the law had already been violated and that plaintiff
sought to give it coercive effect, since assuming the same to be
true, the Rules anyway authorize the conversion of the
proceedings to an ordinary action,
5
We proceed to the more
important and principal question of the validity of Republic Act
3039.
The validity of the law ultimately depends on the nature of
the 50 lots and buildings thereon in question. For, the matter
involved here is the extent of legislative control over the
properties of a municipal corporation, of which a province is one.
The principle itself is simple: If the property is owned by the
municipality (meaning municipal corporation) in its public and
governmental capacity, the property is public and Congress
has absolute control over it. But if the property is owned in its
private or proprietary capacity, then it is patrimonial and
Congress has no absolute control. The municipality cannot be
deprived of it without due process and payment of just
compensation.
6

The capacity in which the property is held is, however,
dependent on the use to which it is intended and devoted. Now,
which of two norms, i.e., that of the Civil Code or that obtaining
under the law of Municipal Corporations, must be used in
classifying the properties in question?
The Civil Code classification is embodied in its Arts. 423
and 424 which provide:1wph1.t
ART. 423. The property of provinces, cities, and
municipalities is divided into property for public use
and patrimonial property.
ART. 424. Property for public use, in the
provinces, cities, and municipalities, consists of the
provincial roads, city streets, municipal streets, the
squares, fountains, public waters, promenades, and
public works for public service paid for by said
provinces, cities, or municipalities.
All other property possessed by any of them is
patrimonial and shall be governed by this Code, without
prejudice to the provisions of special laws. (Stressed for
emphasis).
Applying the above cited norm, all the properties in
question, except the two (2) lots used as High School
playgrounds, could be considered as patrimonial properties of the
former Zamboanga province. Even the capital site, the hospital
and leprosarium sites, and the school sites will be considered
patrimonial for they are not for public use. They would fall under
the phrase "public works for public service" for it has been held
that under theejusdem generis rule, such public works must be
for free and indiscriminate use by anyone, just like the preceding
enumerated properties in the first paragraph of Art 424.
7
The
playgrounds, however, would fit into this category.
This was the norm applied by the lower court. And it
cannot be said that its actuation was without jurisprudential
precedent for in Municipality of Catbalogan v. Director of
Lands,
8
and in Municipality of Tacloban v. Director of Lands,
9
it
was held that the capitol site and the school sites in municipalities
constitute their patrimonial properties. This result is
understandable because, unlike in the classification regarding
State properties, properties for public service in the municipalities
are not classified as public. Assuming then the Civil Code
classification to be the chosen norm, the lower court must be
affirmed except with regard to the two (2) lots used as
playgrounds.
On the other hand, applying the norm obtaining under the
principles constituting the law of Municipal Corporations, all
those of the 50 properties in question which are devoted to public
service are deemed public; the rest remain patrimonial. Under this
norm, to be considered public, it is enough that the property be
held and, devoted for governmental purposes like local
administration, public education, public health, etc.
10

Supporting jurisprudence are found in the following cases:
(1) HINUNANGAN V. DIRECTOR OF LANDS,
11
where it was
stated that "... where the municipality has occupied lands
distinctly for public purposes, such as for the municipal court
house, the public school, the public market, or other necessary
municipal building, we will, in the absence of proof to the
contrary, presume a grant from the States in favor of the
municipality; but, as indicated by the wording, that rule may be
invoked only as to property which is used distinctly for public
purposes...." (2) VIUDA DE TANTOCO V. MUNICIPAL
COUNCIL OF ILOILO
12
held that municipal properties
necessary for governmental purposes are public in nature. Thus,
the auto trucks used by the municipality for street sprinkling, the
police patrol automobile, police stations and concrete structures
with the corresponding lots used as markets were declared exempt
from execution and attachment since they were not patrimonial
properties. (3) MUNICIPALITY OF BATANGAS VS.
CANTOS
13
held squarely that a municipal lot which had always
been devoted to school purposes is one dedicated to public use
and is not patrimonial property of a municipality.
Following this classification, Republic Act 3039 is valid
insofar as it affects the lots used as capitol site, school sites and
its grounds, hospital and leprosarium sites and the high school
playground sites a total of 24 lots since these were held by
the former Zamboanga province in its governmental capacity and
therefore are subject to the absolute control of Congress. Said lots
considered as public property are the following:
26

TCT
Num
ber
Lot Number U s e
2200
..........................
............
4-B
..........................
............
Capitol
Site
2816
..........................
............
149
..........................
............
School
Site
3281
..........................
............
1224
..........................
............
Hospital
Site
3282
..........................
............
1226
..........................
............
Hospital
Site
3283
..........................
............
1225
..........................
............
Hospital
Site
3748
..........................
............
434-
A-1
..........................
............
School
Site
5406
..........................
............
171
..........................
............
School
Site
5564
..........................
............
168
..........................
............
High
School
Play-
ground
5567
..........................
............
157
&
158
..........................
............
Trade
School
5583
..........................
............
167
..........................
............
High
School
Play-
ground
6181
..........................
............
(O.C.
T.)
..........................
............
Curuan
School
1194
2
..........................
............
926
..........................
............
Leprosar
ium
1194
3
..........................
............
927
..........................
............
Leprosar
ium
1194
4
..........................
............
925
..........................
............
Leprosar
ium
5557
..........................
............
170
..........................
............
Burleigh
School
5562
..........................
............
180
..........................
............
Burleigh
School
5565
..........................
............
172-
B
..........................
............
Burleigh
5570
..........................
............
171-
A
..........................
............
Burleigh
5571
..........................
............
172-
C
..........................
............
Burleigh
5572
..........................
............
174
..........................
............
Burleigh
5573
..........................
............
178
..........................
............
Burleigh
5585
..........................
............
171-
B
..........................
............
Burleigh
5586
..........................
............
173
..........................
............
Burleigh
5587
..........................
............
172-
A
..........................
............
Burleigh
We noticed that the eight Burleigh lots above described are
adjoining each other and in turn are between the two lots wherein
the Burleigh schools are built, as per records appearing herein and
in the Bureau of Lands. Hence, there is sufficient basis for
holding that said eight lots constitute the appurtenant grounds of
the Burleigh schools, and partake of the nature of the same.
Regarding the several buildings existing on the lots above-
mentioned, the records do not disclose whether they were
constructed at the expense of the former Province of Zamboanga.
Considering however the fact that said buildings must have been
erected even before 1936 when Commonwealth Act 39 was
enacted and the further fact that provinces then had no power to
authorize construction of buildings such as those in the case at
bar at their own expense,
14
it can be assumed that said buildings
were erected by the National Government, using national funds.
Hence, Congress could very well dispose of said buildings in the
same manner that it did with the lots in question.
But even assuming that provincial funds were used, still the
buildings constitute mere accessories to the lands, which are
public in nature, and so, they follow the nature of said lands,
i.e., public. Moreover, said buildings, though located in the city,
will not be for the exclusive use and benefit of city residents for
they could be availed of also by the provincial residents. The
province then and its successors-in-interest are not really
deprived of the benefits thereof.
But Republic Act 3039 cannot be applied to deprive
Zamboanga del Norte of its share in the value of the rest of the 26
remaining lots which are patrimonial properties since they are not
being utilized for distinctly, governmental purposes. Said lots are:
TCT Number Lot Number U s e
557
7
............................
..........
177
............................
..........
Mydro,
Magay
131
98
............................
..........
127
-0
............................
..........
San
Roque
556
9
............................
..........
169
............................
..........
Burleig
h
15

555
8
............................
..........
175
............................
..........
Vacant

555
9
............................
..........
188
............................
..........
"

556
0
............................
..........
183
............................
..........
"

556
1
............................
..........
186
............................
..........
"

556
3
............................
..........
191
............................
..........
"

556
6
............................
..........
176
............................
..........
"

556
8
............................
..........
179
............................
..........
"

557
4
............................
..........
196
............................
..........
"

557
5
............................
..........
181
-A
............................
..........
"

557
6
............................
..........
181
-B
............................
..........
"

557
8
............................
..........
182
............................
..........
"

557
9
............................
..........
197
............................
..........
"

558
0
............................
..........
195
............................
..........
"

558
1
............................
..........
159
-B
............................
..........
"

558
2
............................
..........
194
............................
..........
"

558
4
............................
..........
190
............................
..........
"

558
8
............................
..........
184
............................
..........
"

558
9
............................
..........
187
............................
..........
"

559
0
............................
..........
189
............................
..........
"

559
1
............................
..........
192
............................
..........
"

27

559
2
............................
..........
193
............................
..........
"

559
3
............................
..........
185
............................
..........
"

737
9
............................
..........
414
7
............................
..........
"

Moreover, the fact that these 26 lots
are registered strengthens the proposition that they are truly
private in nature. On the other hand, that the 24 lots used for
governmental purposes are also registered is of no significance
since registration cannot convert public property to private.
16

We are more inclined to uphold this latter view. The
controversy here is more along the domains of the Law of
Municipal Corporations State vs. Province than along that
of Civil Law. Moreover, this Court is not inclined to hold that
municipal property held and devoted to public service is in the
same category as ordinary private property. The consequences are
dire. As ordinary private properties, they can be levied upon and
attached. They can even be acquired thru adverse possession
all these to the detriment of the local community. Lastly, the
classification of properties other than those for public use in the
municipalities as patrimonial under Art. 424 of the Civil Code
is "... without prejudice to the provisions of special laws." For
purpose of this article, the principles, obtaining under the Law of
Municipal Corporations can be considered as "special laws".
Hence, the classification of municipal property devoted for
distinctly governmental purposes as public should prevail over
the Civil Code classification in this particular case.
Defendants' claim that plaintiff and its predecessor-in-
interest are "guilty of laches is without merit. Under
Commonwealth Act 39, Sec. 50, the cause of action in favor of
the defunct Zamboanga Province arose only in 1949 after the
Auditor General fixed the value of the properties in question.
While in 1951, the Cabinet resolved transfer said properties
practically for free to Zamboanga City, a reconsideration thereof
was seasonably sought. In 1952, the old province was dissolved.
As successor-in-interest to more than half of the properties
involved, Zamboanga del Norte was able to get a reconsideration
of the Cabinet Resolution in 1959. In fact, partial payments were
effected subsequently and it was only after the passage of
Republic Act 3039 in 1961 that the present controversy arose.
Plaintiff brought suit in 1962. All the foregoing, negative laches.
It results then that Zamboanga del Norte is still entitled to
collect from the City of Zamboanga the former's 54.39% share in
the 26 properties which are patrimonial in nature, said share to
computed on the basis of the valuation of said 26 properties as
contained in Resolution No. 7, dated March 26, 1949, of the
Appraisal Committee formed by the Auditor General.
Plaintiff's share, however, cannot be paid in lump sum,
except as to the P43,030.11 already returned to defendant City.
The return of said amount to defendant was without legal basis.
Republic Act 3039 took effect only on June 17, 1961 after a
partial payment of P57,373.46 had already been made. Since the
law did not provide for retroactivity, it could not have validly
affected a completed act. Hence, the amount of P43,030.11
should be immediately returned by defendant City to plaintiff
province. The remaining balance, if any, in the amount of
plaintiff's 54.39% share in the 26 lots should then be paid by
defendant City in the same manner originally adopted by the
Secretary of Finance and the Commissioner of Internal Revenue,
and not in lump sum. Plaintiff's prayer, particularly pars. 5 and 6,
read together with pars. 10 and 11 of the first cause of action
recited in the complaint
17
clearly shows that the relief sought was
merely the continuance of the quarterly payments from the
internal revenue allotments of defendant City. Art. 1169 of the
Civil Code on reciprocal obligations invoked by plaintiff to
justify lump sum payment is inapplicable since there has been so
far in legal contemplation no complete delivery of the lots in
question. The titles to the registered lots are not yet in the name of
defendant Zamboanga City.
WHEREFORE, the decision appealed from is hereby set
aside and another judgment is hereby entered as follows:.
(1) Defendant Zamboanga City is hereby ordered to return
to plaintiff Zamboanga del Norte in lump sum the amount of
P43,030.11 which the former took back from the latter out of the
sum of P57,373.46 previously paid to the latter; and
(2) Defendants are hereby ordered to effect payments in
favor of plaintiff of whatever balance remains of plaintiff's
54.39% share in the 26 patrimonial properties, after deducting
therefrom the sum of P57,373.46, on the basis of Resolution No.
7 dated March 26, 1949 of the Appraisal Committee formed by
the Auditor General, by way of quarterly payments from the
allotments of defendant City, in the manner originally adopted by
the Secretary of Finance and the Commissioner of Internal
Revenue. No costs. So ordered.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez,
Castro, Angeles and Fernando, JJ., concur.
Concepcion, C.J., is on leave.

28

G.R. No. L-29788 August 30, 1972
RAFAEL S. SALAS, in his capacity as Executive Secretary;
CONRADO F. ESTRELLA, in his capacity as Governor of
the Land Authority; and LORENZO GELLA, in his capacity
as Register of Deeds of Manila,petitioners-appellants,
vs.
HON. HILARION U. JARENCIO, as Presiding Judge of
Branch XXIII, Court of First Instance of Manila; ANTONIO
J. VILLEGAS, in his capacity as Mayor of the City of
Manila; and the CITY OF MANILA,respondents-appellees.
Office of the Solicitor General Felix V. Makasiar, Assistant
Solicitor-General Antonio A. Torres, Solicitor Raul I. Goco and
Magno B. Pablo & Cipriano A. Tan, Legal Staff, Land Authority
for petitioners-appellants.
Gregorio A. Ejercito and Felix C. Chavez for respondents-
appellees.

ESGUERRA, J .:p
This is a petition for review of the decision of the Court of First
Instance of Manila, Branch XXIII, in Civil Case No. 67946, dated
September 23, 1968, the dispositive portion of which is as
follows:
WHEREFORE, the Court renders judgment
declaring Republic Act No. 4118
unconstitutional and invalid in that it deprived
the City of Manila of its property without due
process and payment of just compensation.
Respondent Executive Secretary and Governor
of the Land Authority are hereby restrained
and enjoined from implementing the
provisions of said law. Respondent Register of
Deeds of the City of Manila is ordered to
cancel Transfer Certificate of Title No. 80876
which he had issued in the name of the Land
Tenure Administration and reinstate Transfer
Certificate of Title No. 22547 in the name of
the City of Manila which he cancelled, if that
is feasible, or issue a new certificate of title for
the same parcel of land in the name of the City
of Manila.
1

The facts necessary for a clear understanding of this case are as
follows:
On February 24, 1919, the 4th Branch of the Court of First
Instance of Manila, acting as a land registration court, rendered
judgment in Case No. 18, G.L.R.O. Record No. 111, declaring the
City of Manila the owner in fee simple of a parcel of land known
as Lot No. 1, Block 557 of the Cadastral Survey of the City of
Mani1a, containing an area of 9,689.8 square meters, more or
less. Pursuant to said judgment the Register of Deeds of Manila
on August 21, 1920, issued in favor of the City of Manila,
Original Certificate of Title No. 4329 covering the
aforementioned parcel of land. On various dates in 1924, the City
of Manila sold portions of the aforementioned parcel of land in
favor of Pura Villanueva. As a consequence of the transactions
Original Certificate of Title No. 4329 was cancelled and transfer
certificates of title were issued in favor of Pura Villanueva for the
portions purchased by her. When the last sale to Pura Villanueva
was effected on August 22, 1924, Transfer Certificate of Title No.
21974 in the name of the City of Manila was cancelled and in lieu
thereof Transfer Certificate of Title (TCT) No. 22547 covering
the residue thereof known as Lot 1-B-2-B of Block 557, with an
area of 7,490.10 square meters, was issued in the name of the City
of Manila.
On September 21, 1960, the Municipal Board of Manila, presided
by then Vice-Mayor Antono J. Villegas, adopted a resolution
requesting His Excellency, the President of the Philippines to
consider the feasibility of declaring the City property bounded by
Florida, San Andres, and Nebraska Streets, under Transfer
Certificate of Title Nos. 25545 and 22547, containing a total area
of 7,450 square meters as a patrimonial property of the City of
Manila for the purpose of reselling these lots to the actual
occupants thereof.
2

The said resolution of the Municipil Board of the City of Manila
was officially transmitted to the President of the Philippines by
then Vice-Mayor Antonio J. Villegas on September 21, 1960,
with the information that the same resolution was, on the same
date, transmitted to the Senate and House of Representatives of
the Congress of the Philippines.
3

During the First Session of the Fifth Congress of the Philippines,
House Bill No. 191 was filed in the House of Representatives by
then Congressman Bartolome Cabangbang seeking to declare the
property in question as patrimonial property of the City of
Manila, and for other purposes. The explanatory note of the Bill
gave the grounds for its enactment, to wit:
In the particular case of the property subject of
this bill, the City of Manila does not seem to
have use thereof as a public communal
property. As a matter of fact, a resolution was
adopted by the Municipal Board of Manila at
its regular session held on September 21, 1960,
to request the feasibility of declaring the city
property bounded by Florida, San Andres and
Nebraska Streets as a patrimonial property of
the City of Manila for the purpose of reselling
these lots to the actual occupants thereof.
Therefore, it will be to the best interest of
society that the said property be used in one
way or another. Since this property has been
occupied for a long time by the present
occupants thereof and since said occupants
have expressed their willingness to buy the
said property, it is but proper that the same be
sold to them.
4

Subsequently, a revised version of the Bill was introduced in the
House of Representatives by Congressmen Manuel Cases,
Antonio Raquiza and Nicanor Yiguez as House Bill No. 1453,
with the following explanatory note:
The accompanying bill seeks to convert one (1) parcel
of land in the district of Malate, which is reserved as
communal property into a disposable or alienable
property of the State and to provide its subdivision and
sale to bona fide occupants or tenants.
This parcel of land in question was originally an
aggregate part of a piece of land with an area of 9,689.8
square meters, more or less. ... On September 21, 1960,
the Municipal Board of Manila in its regular session
unanimously adopted a resolution requesting the
President of the Philippines and Congress of the
Philippines the feasibility of declaring this property into
disposable or alienable property of the State. There is
therefore a precedent that this parcel of land could be
subdivided and sold to bona fide occupants. This parcel
of land will not serve any useful public project because
it is bounded on all sides by private properties which
were formerly parts of this lot in question.
Approval of this bill will implement the policy of the
Administration of land for the landless and the Fifth
Declaration of Principles of the Constitution, which
states that the promotion of Social Justice to insure the
well-being and economic security of all people should
29

be the concern of the State. We are ready and willing to
enact legislation promoting the social and economic
well-being of the people whenever an opportunity for
enacting such kind of legislation arises.
In view of the foregoing consideration and to insure fairness and
justice to the present bona fide occupants thereof, approval of this
Bill is strongly urged.
5

The Bill having been passed by the House of Representatives, the
same was thereafter sent to the Senate where it was thoroughly
discussed, as evidenced by the Congressional Records for May
20, 1964, pertinent portion of which is as follows:
SENATOR FERNANDEZ: Mr. President, it will be re
called that when the late Mayor Lacson was still alive,
we approved a similar bill. But afterwards, the late
Mayor Lacson came here and protested against the
approval, and the approval was reconsidered. May I
know whether the defect in the bill which we approved,
has already been eliminated in this present bill?
SENATOR TOLENTINO: I understand Mr. President,
that that has already been eliminated and that is why the
City of Manila has no more objection to this bill.
SENATOR FERNANDEZ: Mr. President, in view of
that manifestation and considering that Mayor Villegas
and Congressman Albert of the Fourth District of
Manila are in favor of the bill. I would not want to
pretend to know more what is good for the City of
Manila.
SENATOR TOLENTINO: Mr. President, there being no
objection, I move that we approve this bill on second
reading.
PRESIDENT PRO-TEMPORE: The biII is approved on
second reading after several Senetors said aye and
nobody said nay.
The bill was passed by the Senate, approved by the President on
June 20, 1964, and became Republic Act No. 4118. It reads as
follows:
Lot I-B-2-B of Block 557 of the cadastral survey of the
City of Manila, situated in the District of Malate, City of
Manila, which is reserved as communal property, is
hereby converted into disposal or alienable land of the
State, to be placed under the disposal of the Land
Tenure Administration. The Land Tenure
Administration shall subdivide the property into small
lots, none of which shall exceed one hundred and twenty
square meters in area and sell the same on installment
basis to the tenants or bona fide occupants thereof and
to individuals, in the order mentioned: Provided, That
no down payment shall be required of tenants or bona
fide occupants who cannot afford to pay such down
payment: Provided, further, That no person can
purchase more than one lot: Provided, furthermore, That
if the tenant or bona fide occupant of any given lot is not
able to purchase the same, he shall be given a lease from
month to month until such time that he is able to
purchase the lot: Provided, still further, That in the
event of lease the rentals which may be charged shall
not exceed eight per cent per annum of the assessed
value of the property leased: And provided, finally, That
in fixing the price of each lot, which shall not exceed
twenty pesos per square meter, the cost of subdivision
and survey shall not be included.
Sec. 2. Upon approval of this Act no ejectment
proceedings against any tenant or bona fide occupant of
the above lots shall be instituted and any ejectment
proceedings pending in court against any such tenant or
bona fide occupant shall be dismissed upon motion of
the defendant: Provided, That any demolition order
directed against any tenant or bona fide occupant shall
be lifted.
Sec. 3. Upon approval of this Act, if the tenant or bona
fide occupant is in arrears in the payment of any rentals,
the amount legally due shall be liquidated and shall be
payable in twenty-four equal monthly installments from
the date of liquidation.
Sec. 4. No property acquired by virtue of this Act shall
be transferred, sold, mortgaged, or otherwise disposed
of within a period of five years from the date full
ownership thereof has been vested in the purchaser
without the consent of the Land Tenure Administration.
Sec. 5. In the event of the death of the purchaser prior to
the complete payment of the price of the lot purchased
by him, his widow and children shall succeed in all his
rights and obligations with respect to his lot.
Sec. 6. The Chairman of the Land Tenure
Administration shall implement and issue such rules and
regulations as may be necessary to carry out the
provisions of this Act.
Sec. 7. The sum of one hundred fifty thousand pesos is
appropriated out of any funds in the National Treasury
not otherwise appropriated, to carry out the purposes of
this Act.
Sec. 8. All laws or parts of laws inconsistent with this
Act are repealed or modified accordingly.
Sec. 9. This Act shall take effect upon its approval.
Approved, June 20, 1964.
To implement the provisions of Republic Act No. 4118, and
pursuant to the request of the occupants of the property involved,
then Deputy Governor Jose V. Yap of the Land Authority (which
succeeded the Land Tenure Administration) addressed a letter,
dated February 18, 1965, to Mayor Antonio Villegas, furnishing
him with a copy of the proposed subdivision plan of said lot as
prepared for the Republic of the Philippines for resale of the
subdivision lots by the Land Authority to bona fide applicants.
6

On March 2, 1965, the City Mayor of Manila, through his
Executive and Technical Adviser, acknowledged receipt of the
proposed subdivision plan of the property in question and
informed the Land Authority that his office would interpose no
objection to the implementation of said law, provided that its
provisions be strictly complied with.
7

With the above-mentioned written conformity of the City of
Manila for the implementation of Republic Act No. 4118, the
Land Authority, thru then Deputy Governor Jose V. Yap,
requested the City Treasurer of Manila, thru the City Mayor, for
the surrender and delivery to the former of the owner's duplicate
of Transfer Certificate of Title No. 22547 in order to obtain title
thereto in the name of the Land Authority. The request was duly
granted with the knowledge and consent of the Office of the City
Mayor.
8

With the presentation of Transfer Certificate of Title No. 22547,
which had been yielded as above stated by the, City authorities to
the Land Authority, Transfer Certificate of Title (T.C.T. No.
22547) was cancelled by the Register of Deeds of Manila and in
lieu thereof Transfer Certificate of Title No. 80876 was issued in
the name of the Land Tenure Administration (now Land
30

Authority) pursuant to the provisions of Republic Act No.
4118.
9

But due to reasons which do not appear in the record, the City of
Manila made a complete turn-about, for on December 20, 1966,
Antonio J. Villegas, in his capacity as the City Mayor of Manila
and the City of Manila as a duly organized public corporation,
brought an action for injunction and/or prohibition with
preliminary injunction to restrain, prohibit and enjoin the herein
appellants, particularly the Governor of the Land Authority and
the Register of Deeds of Manila, from further implementing
Republic Act No. 4118, and praying for the declaration of
Republic Act No. 4118 as unconstitutional.
With the foregoing antecedent facts, which are all contained in
the partial stipulation of facts submitted to the trial court and
approved by respondent Judge, the parties waived the
presentation of further evidence and submitted the case for
decision. On September 23, 1968, judgment was rendered by the
trial court declaring Republic Act No. 4118 unconstitutional and
invalid on the ground that it deprived the City of Manila of its
property without due process of law and payment of just
compensation. The respondents were ordered to undo all that had
been done to carry out the provisions of said Act and were
restrained from further implementing the same.
Two issues are presented for determination, on the resolution of
which the decision in this case hinges, to wit:
I. Is the property involved private or
patrimonial property of the City of Manila?
II. Is Republic Act No. 4118 valid and not
repugnant to the Constitution?
I.
As regards the first issue, appellants maintain that the land
involved is a communal land or "legua comunal" which is a
portion of the public domain owned by the State; that it came into
existence as such when the City of Manila, or any pueblo or town
in the Philippines for that matter, was founded under the laws of
Spain, the former sovereign; that upon the establishment of a
pueblo, the administrative authority was required to allot and set
aside portions of the public domain for a public plaza, a church
site, a site for public buildings, lands to serve as common pastures
and for streets and roads; that in assigning these lands some lots
were earmarked for strictly public purposes, and ownership of
these lots (for public purposes) immediately passed to the new
municipality; that in the case of common lands or "legua
comunal", there was no such immediate acquisition of ownership
by the pueblo, and the land though administered thereby, did not
automatically become its property in the absence of an express
grant from the Central Government, and that the reason for this
arrangement is that this class of land was not absolutely needed
for the discharge of the municipality's governmental functions.
It is argued that the parcel of land involved herein has not been
used by the City of Manila for any public purpose and had not
been officially earmarked as a site for the erection of some public
buildings; that this circumstance confirms the fact that it was
originally "communal" land alloted to the City of Manila by the
Central Government not because it was needed in connection with
its organization as a municipality but simply for the common use
of its inhabitants; that the present City of Manila as successor of
the Ayuntamiento de Manila under the former Spanish sovereign
merely enjoys the usufruct over said land, and its exercise of acts
of ownership by selling parts thereof did not necessarily convert
the land into a patrimonial property of the City of Manila nor
divest the State of its paramount title.
Appellants further argue that a municipal corporation, like a city
is a governmental agent of the State with authority to govern a
limited portion of its territory or to administer purely local affairs
in a given political subdivision, and the extent of its authority is
strictly delimited by the grant of power conferred by the State;
that Congress has the exclusive power to create, change or
destroy municipal corporations; that even if We admit that
legislative control over municipal corporations is not absolute and
even if it is true that the City of Manila has a registered title over
the property in question, the mere transfer of such land by an act
of the legislature from one class of public land to another, without
compensation, does not invade the vested rights of the City.
Appellants finally argue that Republic Act No. 4118 has treated
the land involved as one reserved for communal use, and this
classification is conclusive upon the courts; that if the City of
Manila feels that this is wrong and its interests have been thereby
prejudiced, the matter should be brought to the attention of
Congress for correction; and that since Congress, in the exercise
of its wide discretionary powers has seen fit to classify the land in
question as communal, the Courts certainly owe it to a coordinate
branch of the Government to respect such determination and
should not interfere with the enforcement of the law.
Upon the other hand, appellees argue by simply quoting portions
of the appealed decision of the trial court, which read thus:
The respondents (petitioners-appellants herein) contend,
among other defenses, that the property in question is
communal property. This contention is, however,
disproved by Original Certificate of Title No. 4329
issued on August 21, 1920 in favor of the City of Manila
after the land in question was registered in the City's
favor. The Torrens Title expressly states that the City of
Manila was the owner in 'fee simple' of the said land.
Under Sec. 38 of the Land Registration Act, as
amended, the decree of confirmation and registration in
favor of the City of Manila ... shall be conclusive upon
and against all persons including the Insular
Government and all the branches there ... There is
nothing in the said certificate of title indicating that the
land was 'communal' land as contended by the
respondents. The erroneous assumption by the
Municipal Board of Manila that the land in question was
communal land did not make it so. The Municipal Board
had no authority to do that.
The respondents, however, contend that Congress had
the power and authority to declare that the land in
question was 'communal' land and the courts have no
power or authority to make a contrary finding. This
contention is not entirely correct or accurate. Congress
has the power to classify 'land of the public domain',
transfer them from one classification to another and
declare them disposable or not. Such power does not,
however, extend to properties which are owned by
cities, provinces and municipalities in their 'patrimonial'
capacity.
Art. 324 of the Civil Code provides that properties of
provinces, cities and municipalities are divided into
properties for public use and patrimonial property. Art.
424 of the same code provides that properties for public
use consist of provincial roads, city streets, municipal
streets, the squares, fountains, public waters,
promenades and public works for public service paid for
by said province, cities or municipalities. All other
property possessed by any of them is patrimonial.
Tested by this criterion the Court finds and holds that
the land in question is patrimonial property of the City
of Manila.
Respondents contend that Congress has declared the
land in question to be 'communal' and, therefore, such
designation is conclusive upon the courts. The Courts
holds otherwise. When a statute is assailed as
unconstitutional the Courts have the power and
31

authority to inquire into the question and pass upon it.
This has long ago been settled in Marbury vs. Madison,
2 L. ed. 60, when the United States Supreme Court
speaking thru Chief Justice Marshall held:
... If an act of the legislature, repugnant to the
constitution, is void, does it, notwithstanding its
validity, bind the courts, and oblige them to give effect?
It is emphatically the province and duty of the judicial
department to say what the law is ... So if a law be in
opposition to the constitution; if both the law and the
constitution apply to a particular case, so that the court
must either decide that case conformable to the
constitution, disregarding the law, the court must
determine which of these conflicting rules governs the
case. This is of the very essence of unconstitutional
judicial duty.
Appellees finally concluded that when the courts declare a law
unconstitutional it does not mean that the judicial power is
superior to the legislative power. It simply means that the power
of the people is superior to both and that when the will of the
legislature, declared in statutes, stands in opposition to that of the
people, declared in the Constitution, the judges ought to be
governed by the Constitution rather than by the statutes.
There is one outstanding factor that should be borne in mind in
resolving the character of the land involved, and it is that the City
of Manila, although declared by the Cadastral Court as owner in
fee simple, has not shown by any shred of evidence in what
manner it acquired said land as its private or patrimonial property.
It is true that the City of Manila as well as its predecessor, the
Ayuntamiento de Manila, could validly acquire property in its
corporate or private capacity, following the accepted doctrine on
the dual character public and private of a municipal
corporation. And when it acquires property in its private capacity,
it acts like an ordinary person capable of entering into contracts or
making transactions for the transmission of title or other real
rights. When it comes to acquisition of land, it must have done so
under any of the modes established by law for the acquisition of
ownership and other real rights. In the absence of a title deed to
any land claimed by the City of Manila as its own, showing that it
was acquired with its private or corporate funds, the presumption
is that such land came from the State upon the creation of the
municipality (Unson vs. Lacson, et al., 100 Phil. 695). Originally
the municipality owned no patrimonial property except those that
were granted by the State not for its public but for private use.
Other properties it owns are acquired in the course of the exercise
of its corporate powers as a juridical entity to which category a
municipal corporation pertains.
Communal lands or "legua comunal" came into existence when a
town or pueblo was established in this country under the laws of
Spain (Law VII, Title III, Book VI, Recopilacion de las Leyes de
Indios). The municipalities of the Philippines were not entitled, as
a matter of right, to any part of the public domain for use as
communal lands. The Spanish law provided that the usufruct of a
portion of the public domain adjoining municipal territory might
be granted by the Government for communal purposes, upon
proper petition, but, until granted, no rights therein passed to the
municipalities, and, in any event, the ultimate title remained in the
sovereign (City of Manila vs. Insular Government, 10 Phil. 327).
For the establishment, then, of new pueblos the
administrative authority of the province, in representation
of the Governor General, designated the territory for their
location and extension and the metes and bounds of the
same; and before alloting the lands among the new
settlers, a special demarcation was made of the places
which were to serve as the public square of the pueblo,
for the erection of the church, and as sites for the public
buildings, among others, the municipal building or
the casa real, as well as of the lands whick were to
constitute the common pastures, and propios of the
municipality and the streets and roads which were to
intersect the new town were laid out, ... . (Municipality of
Catbalogan vs. Director of Lands, 17 Phil. 216, 220)
(Emphasis supplied)
It may, therefore, be laid down as a general rule that regardless of
the source or classification of land in the possession of a
municipality, excepting those acquired with its own funds in its
private or corporate capacity, such property is held in trust for the
State for the benefit of its inhabitants, whether it be for
governmental or proprietary purposes. It holds such lands subject
to the paramount power of the legislature to dispose of the same,
for after all it owes its creation to it as an agent for the
performance of a part of its public work, the municipality being
but a subdivision or instrumentality thereof for purposes of local
administration. Accordingly, the legal situation is the same as if
the State itself holds the property and puts it to a different use (2
McQuilin,Municipal Corporations, 3rd Ed., p. 197, citing
Monagham vs. Armatage, 218 Minn. 27, 15 N. W. 2nd 241).
True it is that the legislative control over a municipal corporation
is not absolute even when it comes to its property devoted to
public use, for such control must not be exercised to the extent of
depriving persons of their property or rights without due process
of law, or in a manner impairing the obligations of contracts.
Nevertheless, when it comes to property of the municipality
which it did not acquire in its private or corporate capacity with
its own funds, the legislature can transfer its administration and
disposition to an agency of the National Government to be
disposed of according to its discretion. Here it did so in obedience
to the constitutional mandate of promoting social justice to insure
the well-being and economic security of the people.
It has been held that a statute authorizing the transfer of a
Municipal airport to an Airport Commission created by the
legislature, even without compensation to the city, was not
violative of the due process clause of the American Federal
Constitution. The Supreme Court of Minnessota in Monagham vs.
Armatage, supra, said:
... The case is controlled by the further rule that the
legislature, having plenary control of the local
municipality, of its creation and of all its affairs, has the
right to authorize or direct the expenditures of money in
its treasury, though raised, for a particular purpose, for
any legitimate municipal purpose, or to order and direct
a distribution thereof upon a division of the territory into
separate municipalities ... . The local municipality has
no such vested right in or to its public funds, like that
which the Constitution protects in the individual as
precludes legislative interferences. People vs. Power, 25
Ill. 187; State Board (of Education) vs. City, 56 Miss.
518. As remarked by the supreme court of Maryland
in Mayor vs. Sehner, 37 Md. 180: "It is of the essence of
such a corporation, that the government has the sole
right as trustee of the public interest, at its own good
will and pleasure, to inspect, regulate, control, and direct
the corporation, its funds, and franchises."
We therefore hold that c.500, in authorizing the transfer
of the use and possession of the municipal airport to the
commission without compensation to the city or to the
park board, does not violate the Fourteenth Amendment
to the Constitution of the United States.
The Congress has dealt with the land involved as one reserved for
communal use (terreno comunal). The act of classifying State
property calls for the exercise of wide discretionary legislative
power and it should not be interfered with by the courts.
This brings Us to the second question as regards the validity of
Republic Act No. 4118, viewed in the light of Article III, Sections
1, subsection (1) and (2) of the Constitution which ordain that no
person shall be deprived of his property without due process of
32

law and that no private property shall be taken for public use
without just compensation.
II .
The trial court declared Republic Act No. 4118 unconstitutional
for allegedly depriving the City of Manila of its property without
due process of law and without payment of just compensation. It
is now well established that the presumption is always in favor of
the constitutionality of a law (U S. vs. Ten Yu, 24 Phil. 1; Go
Ching, et al. vs. Dinglasan, et al., 45 O.G. No. 2, pp. 703, 705).
To declare a law unconstitutional, the repugnancy of that law to
the Constitution must be clear and unequivocal, for even if a law
is aimed at the attainment of some public good, no infringement
of constitutional rights is allowed. To strike down a law there
must be a clear showing that what the fundamental law condemns
or prohibits, the statute allows it to be done (Morfe vs. Mutuc, et
al., G.R. No. L-20387, Jan. 31, 1968; 22 SCRA 424). That
situation does not obtain in this case as the law assailed does not
in any manner trench upon the constitution as will hereafter be
shown. Republic Act No. 4118 was intended to implement the
social justice policy of the Constitution and the Government
program of "Land for the Landless". The explanatory note of
House Bill No. 1453 which became Republic Act No. 4118, reads
in part as follows:
Approval of this bill will implement the policy of the
administration of "land for the landless" and the Fifth
Declaration of Principles of the Constitution which
states that "the promotion of social justice to insure the
well-being and economic security of all people should
be the concern of the State." We are ready and willing to
enact legislation promoting the social and economic
well-being of the people whenever an opportunity for
enacting such kind of legislation arises.
The respondent Court held that Republic Act No. 4118, "by
converting the land in question which is the patrimonial
property of the City of Manila into disposable alienable land of
the State and placing it under the disposal of the Land Tenure
Administration violates the provisions of Article III (Secs. 1
and 2) of the Constitution which ordain that "private property
shall not be taken for public use without just compensation, and
that no person shall be deprived of life, liberty or property
without due process of law". In support thereof reliance is placed
on the ruling in Province of Zamboanga del Norte vs. City of
Zamboanga, G.R. No. 2440, March 28, 1968; 22 SCRA 1334,
which holds that Congress cannot deprive a municipality of its
private or patrimonial property without due process of law and
without payment of just compensation since it has no absolute
control thereof. There is no quarrel over this rule if it is
undisputed that the property sought to be taken is in reality a
private or patrimonial property of the municipality or city. But it
would be simply begging the question to classify the land in
question as such. The property, as has been previously shown,
was not acquired by the City of Manila with its own funds in its
private or proprietary capacity. That it has in its name a registered
title is not questioned, but this title should be deemed to be held
in trust for the State as the land covered thereby was part of the
territory of the City of Manila granted by the sovereign upon its
creation. That the National Government, through the Director of
Lands, represented by the Solicitor General, in the cadastral
proceedings did not contest the claim of the City of Manila that
the land is its property, does not detract from its character as State
property and in no way divests the legislature of its power to deal
with it as such, the state not being bound by the mistakes and/or
negligence of its officers.
One decisive fact that should be noted is that the City of Manila
expressly recognized the paramount title of the State over said
land when by its resolution of September 20, 1960, the Municipal
Board, presided by then Vice-Mayor Antonio Villegas, requested
"His Excellency the President of the Philippines to consider the
feasibility of declaring the city property bounded by Florida, San
Andres and Nebraska Streets, under Transfer Certificate of Title
Nos. 25545 and 25547, containing an area of 7,450 square
meters, as patrimonial property of the City of Manila for the
purpose of reselling these lots to the actual occupants thereof."
(See Annex E, Partial Stipulation of Facts, Civil Case No. 67945,
CFI, Manila, p. 121, Record of the Case) [Emphasis Supplied]
The alleged patrimonial character of the land under the ownership
of the City of Manila is totally belied by the City's own official
act, which is fatal to its claim since the Congress did not do as
bidden. If it were its patrimonial property why should the City of
Manila be requesting the President to make representation to the
legislature to declare it as such so it can be disposed of in favor of
the actual occupants? There could be no more blatant recognition
of the fact that said land belongs to the State and was simply
granted in usufruct to the City of Manila for municipal purposes.
But since the City did not actually use said land for any
recognized public purpose and allowed it to remain idle and
unoccupied for a long time until it was overrun by squatters, no
presumption of State grant of ownership in favor of the City of
Manila may be acquiesced in to justify the claim that it is its own
private or patrimonial property (Municipality of Tigbauan vs.
Director of Lands, 35 Phil. 798; City of Manila vs. Insular
Government, 10 Phil. 327; Municipality of Luzuriaga vs. Director
of Lands, 24 Phil. 193). The conclusion of the respondent court
that Republic Act No. 4118 converted a patrimonial property of
the City of Manila into a parcel of disposable land of the State
and took it away from the City without compensation is,
therefore, unfounded. In the last analysis the land in question
pertains to the State and the City of Manila merely acted as
trustee for the benefit of the people therein for whom the State
can legislate in the exercise of its legitimate powers.
Republic Act No. 4118 was never intended to expropriate the
property involved but merely to confirm its character as
communal land of the State and to make it available for
disposition by the National Government: And this was done at the
instance or upon the request of the City of Manila itself. The
subdivision of the land and conveyance of the resulting
subdivision lots to the occupants by Congressional authorization
does not operate as an exercise of the power of eminent domain
without just compensation in violation of Section 1, subsection
(2), Article III of the Constitution, but simply as a manifestation
of its right and power to deal with state property.
It should be emphasized that the law assailed was enacted upon
formal written petition of the Municipal Board of Manila in the
form of a legally approved resolution. The certificate of title over
the property in the name of the City of Manila was accordingly
cancelled and another issued to the Land Tenure Administration
after the voluntary surrender of the City's duplicate certificate of
title by the City Treasurer with the knowledge and consent of the
City Mayor. To implement the provisions of Republic Act No.
4118, the then Deputy Governor of the Land Authority sent a
letter, dated February 18, 1965, to the City Mayor furnishing him
with a copy of the "proposed subdivision plan of the said lot as
prepared for the Republic of the Philippines for subdivision and
resale by the Land Authority to bona fide applicants." On March
2, 1965, the Mayor of Manila, through his Executive and
Technical Adviser, acknowledged receipt of the subdivision plan
and informed the Land Authority that his Office "will interpose
no objection to the implementation of said law provided that its
provisions are strictly complied with." The foregoing sequence of
events, clearly indicate a pattern of regularity and observance of
due process in the reversion of the property to the National
Government. All such acts were done in recognition by the City
of Manila of the right and power of the Congress to dispose of the
land involved.
Consequently, the City of Manila was not deprived of anything it
owns, either under the due process clause or under the eminent
domain provisions of the Constitution. If it failed to get from the
Congress the concession it sought of having the land involved
given to it as its patrimonial property, the Courts possess no
power to grant that relief. Republic Act No. 4118 does not,
therefore, suffer from any constitutional infirmity.
33

WHEREFORE, the appealed decision is hereby reversed, and
petitioners shall proceed with the free and untrammeled
implementation of Republic Act No. 4118 without any obstacle
from the respondents. Without costs.
Concepcion, C.J., Makalintal, Zaldivar, Castro, Fernando,
Teehankee and Antonio, JJ., concur.
Barredo and Makasiar, JJ., took no part.

34

G.R. No. L40474 August 29, 1975
CEBU OXYGEN & ACETYLENE CO., INC., petitioner,
vs.
HON. PASCUAL A. BERCILLES Presiding Judge, Branch
XV, 14th Judicial District, and JOSE L. ESPELETA,
Assistant Provincial Fiscal, Province of Cebu, representing
the Solicitor General's Office and the Bureau of
Lands, respondents.
This is a petition for the review of the order of the Court of First
Instance of Cebu dismissing petitioner's application for
registration of title over a parcel of land situated in the City of
Cebu.
The parcel of land sought to be registered was only a portion of
M. Borces Street, Mabolo, Cebu City. On September 23, 1968,
the City Council of Cebu, through Resolution No. 2193, approved
on October 3, 1968, declared the terminal portion of M. Borces
Street, Mabolo, Cebu City, as an abandoned road, the same not
being included in the City Development Plan.
1
Subsequently, on
December 19, 1968, the City Council of Cebu passed Resolution
No. 2755, authorizing the Acting City Mayor to sell the land
through a public bidding.
2
Pursuant thereto, the lot was awarded
to the herein petitioner being the highest bidder and on March 3,
1969, the City of Cebu, through the Acting City Mayor, executed
a deed of absolute sale to the herein petitioner for a total
consideration of P10,800.00.
3
By virtue of the aforesaid deed of
absolute sale, the petitioner filed an application with the Court of
First instance of Cebu to have its title to the land registered.
4

On June 26, 1974, the Assistant Provincial Fiscal of Cebu filed a
motion to dismiss the application on the ground that the property
sought to be registered being a public road intended for public use
is considered part of the public domain and therefore outside the
commerce of man. Consequently, it cannot be subject to
registration by any private individual.
5

After hearing the parties, on October 11, 1974 the trial court
issued an order dismissing the petitioner's application for
registration of title.
6
Hence, the instant petition for review.
For the resolution of this case, the petitioner poses the following
questions:
(1) Does the City Charter of Cebu City
(Republic Act No. 3857) under Section 31,
paragraph 34, give the City of Cebu the valid
right to declare a road as abandoned? and
(2) Does the declaration of the road, as
abandoned, make it the patrimonial property of
the City of Cebu which may be the object of a
common contract?
(1) The pertinent portions of the Revised Charter of Cebu City
provides:
Section 31. Legislative Powers. Any provision
of law and executive order to the contrary
notwithstanding, the City Council shall have
the following legislative powers:
xxx xxx xxx
(34) ...; to close any city road, street or alley,
boulevard, avenue, park or square. Property
thus withdrawn from public servitude may be
used or conveyed for any purpose for which
other real property belonging to the City may
be lawfully used or conveyed.
From the foregoing, it is undoubtedly clear that the City of Cebu
is empowered to close a city road or street. In the case of Favis
vs. City of Baguio,
7
where the power of the city Council of
Baguio City to close city streets and to vacate or withdraw the
same from public use was similarly assailed, this court said:
5. So it is, that appellant may not challenge the city
council's act of withdrawing a strip of Lapu-Lapu Street
at its dead end from public use and converting the
remainder thereof into an alley. These are acts well
within the ambit of the power to close a city street. The
city council, it would seem to us, is the authority
competent to determine whether or not a certain
property is still necessary for public use.
Such power to vacate a street or alley is discretionary.
And the discretion will not ordinarily be controlled or
interfered with by the courts, absent a plain case of
abuse or fraud or collusion. Faithfulness to the public
trust will be presumed. So the fact that some private
interests may be served incidentally will not invalidate
the vacation ordinance.
(2) Since that portion of the city street subject of petitioner's
application for registration of title was withdrawn from public
use, it follows that such withdrawn portion becomes patrimonial
property which can be the object of an ordinary contract.
Article 422 of the Civil Code expressly provides that "Property of
public dominion, when no longer intended for public use or for
public service, shall form part of the patrimonial property of the
State."
Besides, the Revised Charter of the City of Cebu heretofore
quoted, in very clear and unequivocal terms, states that: "Property
thus withdrawn from public servitude may be used or conveyed
for any purpose for which other real property belonging to the
City may be lawfully used or conveyed."
Accordingly, the withdrawal of the property in question from
public use and its subsequent sale to the petitioner is valid. Hence,
the petitioner has a registerable title over the lot in question.
WHEREFORE, the order dated October 11, 1974, rendered by
the respondent court in Land Reg. Case No. N-948, LRC Rec.
No. N-44531 is hereby set aside, and the respondent court is
hereby ordered to proceed with the hearing of the petitioner's
application for registration of title.
SO ORDERED.
Makalintal, C.J, Fernando, Barredo and Aquino, JJ., concur.

35

G.R. No. 133250 July 9, 2002
FRANCISCO I. CHAVEZ, petitioner,
vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL
BAY DEVELOPMENT CORPORATION, respondents.
CARPIO, J .:
This is an original Petition for Mandamus with prayer for a writ
of preliminary injunction and a temporary restraining order. The
petition seeks to compel the Public Estates Authority ("PEA" for
brevity) to disclose all facts on PEA's then on-going
renegotiations with Amari Coastal Bay and Development
Corporation ("AMARI" for brevity) to reclaim portions of Manila
Bay. The petition further seeks to enjoin PEA from signing a new
agreement with AMARI involving such reclamation.
The Facts
On November 20, 1973, the government, through the
Commissioner of Public Highways, signed a contract with the
Construction and Development Corporation of the Philippines
("CDCP" for brevity) to reclaim certain foreshore and offshore
areas of Manila Bay. The contract also included the construction
of Phases I and II of the Manila-Cavite Coastal Road. CDCP
obligated itself to carry out all the works in consideration of fifty
percent of the total reclaimed land.
On February 4, 1977, then President Ferdinand E. Marcos issued
Presidential Decree No. 1084 creating PEA. PD No. 1084 tasked
PEA "to reclaim land, including foreshore and submerged areas,"
and "to develop, improve, acquire, x x x lease and sell any and all
kinds of lands."
1
On the same date, then President Marcos issued
Presidential Decree No. 1085 transferring to PEA the "lands
reclaimed in the foreshore and offshore of the Manila Bay"
2
under
the Manila-Cavite Coastal Road and Reclamation Project
(MCCRRP).
On December 29, 1981, then President Marcos issued a
memorandum directing PEA to amend its contract with CDCP, so
that "[A]ll future works in MCCRRP x x x shall be funded and
owned by PEA." Accordingly, PEA and CDCP executed a
Memorandum of Agreement dated December 29, 1981, which
stated:
"(i) CDCP shall undertake all reclamation, construction,
and such other works in the MCCRRP as may be agreed
upon by the parties, to be paid according to progress of
works on a unit price/lump sum basis for items of work
to be agreed upon, subject to price escalation, retention
and other terms and conditions provided for in
Presidential Decree No. 1594. All the financing required
for such works shall be provided by PEA.
x x x
(iii) x x x CDCP shall give up all its development rights
and hereby agrees to cede and transfer in favor of PEA,
all of the rights, title, interest and participation of CDCP
in and to all the areas of land reclaimed by CDCP in the
MCCRRP as of December 30, 1981 which have not yet
been sold, transferred or otherwise disposed of by
CDCP as of said date, which areas consist of
approximately Ninety-Nine Thousand Four Hundred
Seventy Three (99,473) square meters in the Financial
Center Area covered by land pledge No. 5 and
approximately Three Million Three Hundred Eighty
Two Thousand Eight Hundred Eighty Eight (3,382,888)
square meters of reclaimed areas at varying elevations
above Mean Low Water Level located outside the
Financial Center Area and the First Neighborhood
Unit."
3

On January 19, 1988, then President Corazon C. Aquino issued
Special Patent No. 3517, granting and transferring to PEA "the
parcels of land so reclaimed under the Manila-Cavite Coastal
Road and Reclamation Project (MCCRRP) containing a total area
of one million nine hundred fifteen thousand eight hundred ninety
four (1,915,894) square meters." Subsequently, on April 9, 1988,
the Register of Deeds of the Municipality of Paraaque issued
Transfer Certificates of Title Nos. 7309, 7311, and 7312, in the
name of PEA, covering the three reclaimed islands known as the
"Freedom Islands" located at the southern portion of the Manila-
Cavite Coastal Road, Paraaque City. The Freedom Islands have
a total land area of One Million Five Hundred Seventy Eight
Thousand Four Hundred and Forty One (1,578,441) square
meters or 157.841 hectares.
On April 25, 1995, PEA entered into a Joint Venture Agreement
("JVA" for brevity) with AMARI, a private corporation, to
develop the Freedom Islands. The JVA also required the
reclamation of an additional 250 hectares of submerged areas
surrounding these islands to complete the configuration in the
Master Development Plan of the Southern Reclamation Project-
MCCRRP. PEA and AMARI entered into the JVA through
negotiation without public bidding.
4
On April 28, 1995, the Board
of Directors of PEA, in its Resolution No. 1245, confirmed the
JVA.
5
On June 8, 1995, then President Fidel V. Ramos, through
then Executive Secretary Ruben Torres, approved the JVA.
6

On November 29, 1996, then Senate President Ernesto Maceda
delivered a privilege speech in the Senate and denounced the JVA
as the "grandmother of all scams." As a result, the Senate
Committee on Government Corporations and Public Enterprises,
and the Committee on Accountability of Public Officers and
Investigations, conducted a joint investigation. The Senate
Committees reported the results of their investigation in Senate
Committee Report No. 560 dated September 16, 1997.
7
Among
the conclusions of their report are: (1) the reclaimed lands PEA
seeks to transfer to AMARI under the JVA are lands of the public
domain which the government has not classified as alienable
lands and therefore PEA cannot alienate these lands; (2) the
certificates of title covering the Freedom Islands are thus void,
and (3) the JVA itself is illegal.
On December 5, 1997, then President Fidel V. Ramos issued
Presidential Administrative Order No. 365 creating a Legal Task
Force to conduct a study on the legality of the JVA in view of
Senate Committee Report No. 560. The members of the Legal
Task Force were the Secretary of Justice,
8
the Chief Presidential
Legal Counsel,
9
and the Government Corporate Counsel.
10
The
Legal Task Force upheld the legality of the JVA, contrary to the
conclusions reached by the Senate Committees.
11

On April 4 and 5, 1998, the Philippine Daily
Inquirer and Today published reports that there were on-going
renegotiations between PEA and AMARI under an order issued
by then President Fidel V. Ramos. According to these reports,
PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo and
retired Navy Officer Sergio Cruz composed the negotiating panel
of PEA.
On April 13, 1998, Antonio M. Zulueta filed before the Court
a Petition for Prohibition with Application for the Issuance of a
Temporary Restraining Order and Preliminary
Injunction docketed as G.R. No. 132994 seeking to nullify the
JVA. The Court dismissed the petition "for unwarranted disregard
of judicial hierarchy, without prejudice to the refiling of the case
before the proper court."
12

On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for
brevity) as a taxpayer, filed the instant Petition for Mandamus
with Prayer for the Issuance of a Writ of Preliminary Injunction
and Temporary Restraining Order. Petitioner contends the
government stands to lose billions of pesos in the sale by PEA of
the reclaimed lands to AMARI. Petitioner prays that PEA
publicly disclose the terms of any renegotiation of the JVA,
36

invoking Section 28, Article II, and Section 7, Article III, of the
1987 Constitution on the right of the people to information on
matters of public concern. Petitioner assails the sale to AMARI of
lands of the public domain as a blatant violation of Section 3,
Article XII of the 1987 Constitution prohibiting the sale of
alienable lands of the public domain to private corporations.
Finally, petitioner asserts that he seeks to enjoin the loss of
billions of pesos in properties of the State that are of public
dominion.
After several motions for extension of time,
13
PEA and AMARI
filed their Comments on October 19, 1998 and June 25, 1998,
respectively. Meanwhile, on December 28, 1998, petitioner filed
an Omnibus Motion: (a) to require PEA to submit the terms of the
renegotiated PEA-AMARI contract; (b) for issuance of a
temporary restraining order; and (c) to set the case for hearing on
oral argument. Petitioner filed a Reiterative Motion for Issuance
of a TRO dated May 26, 1999, which the Court denied in a
Resolution dated June 22, 1999.
In a Resolution dated March 23, 1999, the Court gave due course
to the petition and required the parties to file their respective
memoranda.
On March 30, 1999, PEA and AMARI signed the Amended Joint
Venture Agreement ("Amended JVA," for brevity). On May 28,
1999, the Office of the President under the administration of then
President Joseph E. Estrada approved the Amended JVA.
Due to the approval of the Amended JVA by the Office of the
President, petitioner now prays that on "constitutional and
statutory grounds the renegotiated contract be declared null and
void."
14

The Issues
The issues raised by petitioner, PEA
15
and AMARI
16
are as
follows:
I. WHETHER THE PRINCIPAL RELIEFS PRAYED
FOR IN THE PETITION ARE MOOT AND
ACADEMIC BECAUSE OF SUBSEQUENT
EVENTS;
II. WHETHER THE PETITION MERITS DISMISSAL
FOR FAILING TO OBSERVE THE PRINCIPLE
GOVERNING THE HIERARCHY OF COURTS;
III. WHETHER THE PETITION MERITS
DISMISSAL FOR NON-EXHAUSTION OF
ADMINISTRATIVE REMEDIES;
IV. WHETHER PETITIONER HAS LOCUS
STANDI TO BRING THIS SUIT;
V. WHETHER THE CONSTITUTIONAL RIGHT TO
INFORMATION INCLUDES OFFICIAL
INFORMATION ON ON-GOING NEGOTIATIONS
BEFORE A FINAL AGREEMENT;
VI. WHETHER THE STIPULATIONS IN THE
AMENDED JOINT VENTURE AGREEMENT FOR
THE TRANSFER TO AMARI OF CERTAIN LANDS,
RECLAIMED AND STILL TO BE RECLAIMED,
VIOLATE THE 1987 CONSTITUTION; AND
VII. WHETHER THE COURT IS THE PROPER
FORUM FOR RAISING THE ISSUE OF WHETHER
THE AMENDED JOINT VENTURE AGREEMENT IS
GROSSLY DISADVANTAGEOUS TO THE
GOVERNMENT.
The Court's Ruling
First issue: whether the principal reliefs prayed for in the
petition are moot and academic because of subsequent events.
The petition prays that PEA publicly disclose the "terms and
conditions of the on-going negotiations for a new agreement."
The petition also prays that the Court enjoin PEA from "privately
entering into, perfecting and/or executing any new agreement
with AMARI."
PEA and AMARI claim the petition is now moot and academic
because AMARI furnished petitioner on June 21, 1999 a copy of
the signed Amended JVA containing the terms and conditions
agreed upon in the renegotiations. Thus, PEA has satisfied
petitioner's prayer for a public disclosure of the renegotiations.
Likewise, petitioner's prayer to enjoin the signing of the Amended
JVA is now moot because PEA and AMARI have already signed
the Amended JVA on March 30, 1999. Moreover, the Office of
the President has approved the Amended JVA on May 28, 1999.
Petitioner counters that PEA and AMARI cannot avoid the
constitutional issue by simply fast-tracking the signing and
approval of the Amended JVA before the Court could act on the
issue. Presidential approval does not resolve the constitutional
issue or remove it from the ambit of judicial review.
We rule that the signing of the Amended JVA by PEA and
AMARI and its approval by the President cannot operate to moot
the petition and divest the Court of its jurisdiction. PEA and
AMARI have still to implement the Amended JVA. The prayer to
enjoin the signing of the Amended JVA on constitutional grounds
necessarily includes preventing its implementation if in the
meantime PEA and AMARI have signed one in violation of the
Constitution. Petitioner's principal basis in assailing the
renegotiation of the JVA is its violation of Section 3, Article XII
of the Constitution, which prohibits the government from
alienating lands of the public domain to private corporations. If
the Amended JVA indeed violates the Constitution, it is the duty
of the Court to enjoin its implementation, and if already
implemented, to annul the effects of such unconstitutional
contract.
The Amended JVA is not an ordinary commercial contract but
one which seeks to transfer title and ownership to 367.5 hectares
of reclaimed lands and submerged areas of Manila Bay to a
single private corporation. It now becomes more compelling for
the Court to resolve the issue to insure the government itself does
not violate a provision of the Constitution intended to safeguard
the national patrimony. Supervening events, whether intended or
accidental, cannot prevent the Court from rendering a decision if
there is a grave violation of the Constitution. In the instant case, if
the Amended JVA runs counter to the Constitution, the Court can
still prevent the transfer of title and ownership of alienable lands
of the public domain in the name of AMARI. Even in cases where
supervening events had made the cases moot, the Court did not
hesitate to resolve the legal or constitutional issues raised to
formulate controlling principles to guide the bench, bar, and the
public.
17

Also, the instant petition is a case of first impression. All previous
decisions of the Court involving Section 3, Article XII of the
1987 Constitution, or its counterpart provision in the 1973
Constitution,
18
covered agricultural landssold to private
corporations which acquired the lands from private parties. The
transferors of the private corporations claimed or could claim the
right to judicial confirmation of their imperfect
titles
19
under Title I I of Commonwealth Act. 141 ("CA No. 141"
for brevity). In the instant case, AMARI seeks to acquire from
PEA, a public corporation, reclaimed lands and submerged areas
for non-agricultural purposes by purchaseunder PD No. 1084
(charter of PEA) and Title I I I of CA No. 141. Certain
undertakings by AMARI under the Amended JVA constitute the
consideration for the purchase. Neither AMARI nor PEA can
37

claim judicial confirmation of their titles because the lands
covered by the Amended JVA are newly reclaimed or still to be
reclaimed. Judicial confirmation of imperfect title requires open,
continuous, exclusive and notorious occupation of agricultural
lands of the public domain for at least thirty years since June 12,
1945 or earlier. Besides, the deadline for filing applications for
judicial confirmation of imperfect title expired on December 31,
1987.
20

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

Second issue: whether the petition merits dismissal for failing to
observe the principle governing the hierarchy of courts.
PEA and AMARI claim petitioner ignored the judicial hierarchy
by seeking relief directly from the Court. The principle of
hierarchy of courts applies generally to cases involving factual
questions. As it is not a trier of facts, the Court cannot entertain
cases involving factual issues. The instant case, however, raises
constitutional issues of transcendental importance to the
public.
22
The Court can resolve this case without determining any
factual issue related to the case. Also, the instant case is a petition
for mandamus which falls under the original jurisdiction of the
Court under Section 5, Article VIII of the Constitution. We
resolve to exercise primary jurisdiction over the instant case.
Third issue: whether the petition merits dismissal for non-
exhaustion of administrative remedies.
PEA faults petitioner for seeking judicial intervention in
compelling PEA to disclose publicly certain information without
first asking PEA the needed information. PEA claims petitioner's
direct resort to the Court violates the principle of exhaustion of
administrative remedies. It also violates the rule that mandamus
may issue only if there is no other plain, speedy and adequate
remedy in the ordinary course of law.
PEA distinguishes the instant case from Taada v. Tuvera
23
where
the Court granted the petition for mandamus even if the
petitioners there did not initially demand from the Office of the
President the publication of the presidential decrees. PEA points
out that in Taada, the Executive Department had an affirmative
statutory duty under Article 2 of the Civil Code
24
and Section 1 of
Commonwealth Act No. 638
25
to publish the presidential decrees.
There was, therefore, no need for the petitioners in Taada to
make an initial demand from the Office of the President. In the
instant case, PEA claims it has no affirmative statutory duty to
disclose publicly information about its renegotiation of the JVA.
Thus, PEA asserts that the Court must apply the principle of
exhaustion of administrative remedies to the instant case in view
of the failure of petitioner here to demand initially from PEA the
needed information.
The original JVA sought to dispose to AMARI public lands held
by PEA, a government corporation. Under Section 79 of the
Government Auditing Code,
26
the disposition of government
lands to private parties requires public bidding. PEA was under a
positive legal duty to disclose to the public the terms and
conditions for the sale of its lands. The law obligated PEA to
make this public disclosure even without demand from petitioner
or from anyone. PEA failed to make this public disclosure
because the original JVA, like the Amended JVA, was the result
of a negotiated contract, not of a public bidding. Considering that
PEA had an affirmative statutory duty to make the public
disclosure, and was even in breach of this legal duty, petitioner
had the right to seek direct judicial intervention.
Moreover, and this alone is determinative of this issue, the
principle of exhaustion of administrative remedies does not apply
when the issue involved is a purely legal or constitutional
question.
27
The principal issue in the instant case is the capacity
of AMARI to acquire lands held by PEA in view of the
constitutional ban prohibiting the alienation of lands of the public
domain to private corporations. We rule that the principle of
exhaustion of administrative remedies does not apply in the
instant case.
Fourth issue: whether petitioner has locus standi to bring this
suit
PEA argues that petitioner has no standing to
institute mandamus proceedings to enforce his constitutional right
to information without a showing that PEA refused to perform an
affirmative duty imposed on PEA by the Constitution. PEA also
claims that petitioner has not shown that he will suffer any
concrete injury because of the signing or implementation of the
Amended JVA. Thus, there is no actual controversy requiring the
exercise of the power of judicial review.
The petitioner has standing to bring this taxpayer's suit because
the petition seeks to compel PEA to comply with its constitutional
duties. There are two constitutional issues involved here. First is
the right of citizens to information on matters of public concern.
Second is the application of a constitutional provision intended to
insure the equitable distribution of alienable lands of the public
domain among Filipino citizens. The thrust of the first issue is to
compel PEA to disclose publicly information on the sale of
government lands worth billions of pesos, information which the
Constitution and statutory law mandate PEA to disclose. The
thrust of the second issue is to prevent PEA from alienating
hundreds of hectares of alienable lands of the public domain in
violation of the Constitution, compelling PEA to comply with a
constitutional duty to the nation.
Moreover, the petition raises matters of transcendental
importance to the public. In Chavez v. PCGG,
28
the Court upheld
the right of a citizen to bring a taxpayer's suit on matters of
transcendental importance to the public, thus -
"Besides, petitioner emphasizes, the matter of
recovering the ill-gotten wealth of the Marcoses is an
issue of 'transcendental importance to the public.' He
asserts that ordinary taxpayers have a right to initiate
and prosecute actions questioning the validity of acts or
orders of government agencies or instrumentalities, if
the issues raised are of 'paramount public interest,' and if
they 'immediately affect the social, economic and moral
well being of the people.'
Moreover, the mere fact that he is a citizen satisfies the
requirement of personal interest, when the proceeding
involves the assertion of a public right, such as in this
case. He invokes several decisions of this Court which
have set aside the procedural matter of locus standi,
when the subject of the case involved public interest.
x x x
In Taada v. Tuvera, the Court asserted that when the
issue concerns a public right and the object of
mandamus is to obtain the enforcement of a public duty,
the people are regarded as the real parties in interest;
and because it is sufficient that petitioner is a citizen and
as such is interested in the execution of the laws, he
need not show that he has any legal or special interest in
the result of the action. In the aforesaid case, the
petitioners sought to enforce their right to be informed
on matters of public concern, a right then recognized in
Section 6, Article IV of the 1973 Constitution, in
connection with the rule that laws in order to be valid
and enforceable must be published in the Official
38

Gazette or otherwise effectively promulgated. In ruling
for the petitioners' legal standing, the Court declared
that the right they sought to be enforced 'is a public right
recognized by no less than the fundamental law of the
land.'
Legaspi v. Civil Service Commission, while reiterating
Taada, further declared that 'when a mandamus
proceeding involves the assertion of a public right, the
requirement of personal interest is satisfied by the mere
fact that petitioner is a citizen and, therefore, part of the
general 'public' which possesses the right.'
Further, in Albano v. Reyes, we said that while
expenditure of public funds may not have been involved
under the questioned contract for the development,
management and operation of the Manila International
Container Terminal, 'public interest [was] definitely
involved considering the important role [of the subject
contract] . . . in the economic development of the
country and the magnitude of the financial consideration
involved.' We concluded that, as a consequence, the
disclosure provision in the Constitution would constitute
sufficient authority for upholding the petitioner's
standing.
Similarly, the instant petition is anchored on the right of
the people to information and access to official records,
documents and papers a right guaranteed under
Section 7, Article III of the 1987 Constitution.
Petitioner, a former solicitor general, is a Filipino
citizen. Because of the satisfaction of the two basic
requisites laid down by decisional law to sustain
petitioner's legal standing, i.e. (1) the enforcement of a
public right (2) espoused by a Filipino citizen, we rule
that the petition at bar should be allowed."
We rule that since the instant petition, brought by a citizen,
involves the enforcement of constitutional rights - to information
and to the equitable diffusion of natural resources - matters of
transcendental public importance, the petitioner has the
requisite locus standi.
Fifth issue: whether the constitutional right to information
includes official information on on-going negotiations before a
final agreement.
Section 7, Article III of the Constitution explains the people's
right to information on matters of public concern in this manner:
"Sec. 7. The right of the people to information on
matters of public concern shall be recognized. Access to
official records, and to documents, and papers
pertaining to official acts, transactions, or decisions, as
well as to government research data used as basis for
policy development, shall be afforded the citizen,
subject to such limitations as may be provided by law."
(Emphasis supplied)
The State policy of full transparency in all transactions involving
public interest reinforces the people's right to information on
matters of public concern. This State policy is expressed in
Section 28, Article II of the Constitution, thus:
"Sec. 28. Subject to reasonable conditions prescribed by
law, the State adopts and implements a policy of full
public disclosure of all its transactions involving
public interest." (Emphasis supplied)
These twin provisions of the Constitution seek to promote
transparency in policy-making and in the operations of the
government, as well as provide the people sufficient information
to exercise effectively other constitutional rights. These twin
provisions are essential to the exercise of freedom of expression.
If the government does not disclose its official acts, transactions
and decisions to citizens, whatever citizens say, even if expressed
without any restraint, will be speculative and amount to nothing.
These twin provisions are also essential to hold public officials
"at all times x x x accountable to the people,"
29
for unless citizens
have the proper information, they cannot hold public officials
accountable for anything. Armed with the right information,
citizens can participate in public discussions leading to the
formulation of government policies and their effective
implementation. An informed citizenry is essential to the
existence and proper functioning of any democracy. As explained
by the Court inValmonte v. Belmonte, J r.
30

"An essential element of these freedoms is to keep open
a continuing dialogue or process of communication
between the government and the people. It is in the
interest of the State that the channels for free political
discussion be maintained to the end that the government
may perceive and be responsive to the people's will.
Yet, this open dialogue can be effective only to the
extent that the citizenry is informed and thus able to
formulate its will intelligently. Only when the
participants in the discussion are aware of the issues and
have access to information relating thereto can such bear
fruit."
PEA asserts, citing Chavez v. PCGG,
31
that in cases of on-going
negotiations the right to information is limited to "definite
propositions of the government." PEA maintains the right does
not include access to "intra-agency or inter-agency
recommendations or communications during the stage when
common assertions are still in the process of being formulated or
are in the 'exploratory stage'."
Also, AMARI contends that petitioner cannot invoke the right at
the pre-decisional stage or before the closing of the transaction.
To support its contention, AMARI cites the following discussion
in the 1986 Constitutional Commission:
"Mr. Suarez. And when we say 'transactions' which
should be distinguished from contracts, agreements, or
treaties or whatever, does the Gentleman refer to the
steps leading to the consummation of the contract, or
does he refer to the contract itself?
Mr. Ople: The 'transactions' used here, I suppose is
generic and therefore, it can cover both steps leading
to a contract and already a consummated contract, Mr.
Presiding Officer.
Mr. Suarez: This contemplates inclusion of
negotiations leading to the consummation of the
transaction.
Mr. Ople: Yes, subject only to reasonable safeguards
on the national interest.
Mr. Suarez: Thank you."
32
(Emphasis supplied)
AMARI argues there must first be a consummated contract before
petitioner can invoke the right. Requiring government officials to
reveal their deliberations at the pre-decisional stage will degrade
the quality of decision-making in government agencies.
Government officials will hesitate to express their real sentiments
during deliberations if there is immediate public dissemination of
their discussions, putting them under all kinds of pressure before
they decide.
We must first distinguish between information the law on public
bidding requires PEA to disclose publicly, and information the
constitutional right to information requires PEA to release to the
public. Before the consummation of the contract, PEA must, on
39

its own and without demand from anyone, disclose to the public
matters relating to the disposition of its property. These include
the size, location, technical description and nature of the property
being disposed of, the terms and conditions of the disposition, the
parties qualified to bid, the minimum price and similar
information. PEA must prepare all these data and disclose them to
the public at the start of the disposition process, long before the
consummation of the contract, because the Government Auditing
Code requires public bidding. If PEA fails to make this
disclosure, any citizen can demand from PEA this information at
any time during the bidding process.
Information, however, on on-going evaluation or review of bids
or proposals being undertaken by the bidding or review
committee is not immediately accessible under the right to
information. While the evaluation or review is still on-going,
there are no "official acts, transactions, or decisions" on the bids
or proposals. However, once the committee makes its official
recommendation, there arises a "definite proposition" on the
part of the government. From this moment, the public's right to
information attaches, and any citizen can access all the non-
proprietary information leading to such definite proposition.
In Chavez v. PCGG,
33
the Court ruled as follows:
"Considering the intent of the framers of the
Constitution, we believe that it is incumbent upon the
PCGG and its officers, as well as other government
representatives, to disclose sufficient public information
on any proposed settlement they have decided to take up
with the ostensible owners and holders of ill-gotten
wealth. Such information, though, must pertain
to definite propositions of the government, not
necessarily to intra-agency or inter-agency
recommendations or communications during the stage
when common assertions are still in the process of being
formulated or are in the "exploratory" stage. There is
need, of course, to observe the same restrictions on
disclosure of information in general, as discussed earlier
such as on matters involving national security,
diplomatic or foreign relations, intelligence and other
classified information." (Emphasis supplied)
Contrary to AMARI's contention, the commissioners of the 1986
Constitutional Commission understood that the right to
information "contemplates inclusion of negotiations leading to
the consummation of the transaction." Certainly, a
consummated contract is not a requirement for the exercise of the
right to information. Otherwise, the people can never exercise the
right if no contract is consummated, and if one is consummated, it
may be too late for the public to expose its defects.1wphi1.nt
Requiring a consummated contract will keep the public in the
dark until the contract, which may be grossly disadvantageous to
the government or even illegal, becomes a fait accompli. This
negates the State policy of full transparency on matters of public
concern, a situation which the framers of the Constitution could
not have intended. Such a requirement will prevent the citizenry
from participating in the public discussion of
any proposedcontract, effectively truncating a basic right
enshrined in the Bill of Rights. We can allow neither an
emasculation of a constitutional right, nor a retreat by the State of
its avowed "policy of full disclosure of all its transactions
involving public interest."
The right covers three categories of information which are
"matters of public concern," namely: (1) official records; (2)
documents and papers pertaining to official acts, transactions and
decisions; and (3) government research data used in formulating
policies. The first category refers to any document that is part of
the public records in the custody of government agencies or
officials. The second category refers to documents and papers
recording, evidencing, establishing, confirming, supporting,
justifying or explaining official acts, transactions or decisions of
government agencies or officials. The third category refers to
research data, whether raw, collated or processed, owned by the
government and used in formulating government policies.
The information that petitioner may access on the renegotiation of
the JVA includes evaluation reports, recommendations, legal and
expert opinions, minutes of meetings, terms of reference and
other documents attached to such reports or minutes, all relating
to the JVA. However, the right to information does not compel
PEA to prepare lists, abstracts, summaries and the like relating to
the renegotiation of the JVA.
34
The right only affords access to
records, documents and papers, which means the opportunity to
inspect and copy them. One who exercises the right must copy the
records, documents and papers at his expense. The exercise of the
right is also subject to reasonable regulations to protect the
integrity of the public records and to minimize disruption to
government operations, like rules specifying when and how to
conduct the inspection and copying.
35

The right to information, however, does not extend to matters
recognized as privileged information under the separation of
powers.
36
The right does not also apply to information on military
and diplomatic secrets, information affecting national security,
and information on investigations of crimes by law enforcement
agencies before the prosecution of the accused, which courts have
long recognized as confidential.
37
The right may also be subject to
other limitations that Congress may impose by law.
There is no claim by PEA that the information demanded by
petitioner is privileged information rooted in the separation of
powers. The information does not cover Presidential
conversations, correspondences, or discussions during closed-
door Cabinet meetings which, like internal deliberations of the
Supreme Court and other collegiate courts, or executive sessions
of either house of Congress,
38
are recognized as confidential. This
kind of information cannot be pried open by a co-equal branch of
government. A frank exchange of exploratory ideas and
assessments, free from the glare of publicity and pressure by
interested parties, is essential to protect the independence of
decision-making of those tasked to exercise Presidential,
Legislative and Judicial power.
39
This is not the situation in the
instant case.
We rule, therefore, that the constitutional right to information
includes official information on on-going negotiations before a
final contract. The information, however, must constitute definite
propositions by the government and should not cover recognized
exceptions like privileged information, military and diplomatic
secrets and similar matters affecting national security and public
order.
40
Congress has also prescribed other limitations on the right
to information in several legislations.
41

Sixth issue: whether stipulations in the Amended J VA for the
transfer to AMARI of lands, reclaimed or to be reclaimed,
violate the Constitution.
The Regalian Doctrine
The ownership of lands reclaimed from foreshore and submerged
areas is rooted in the Regalian doctrine which holds that the State
owns all lands and waters of the public domain. Upon the Spanish
conquest of the Philippines, ownership of all "lands, territories
and possessions" in the Philippines passed to the Spanish
Crown.
42
The King, as the sovereign ruler and representative of
the people, acquired and owned all lands and territories in the
Philippines except those he disposed of by grant or sale to private
individuals.
The 1935, 1973 and 1987 Constitutions adopted the Regalian
doctrine substituting, however, the State, in lieu of the King, as
the owner of all lands and waters of the public domain. The
Regalian doctrine is the foundation of the time-honored principle
of land ownership that "all lands that were not acquired from the
Government, either by purchase or by grant, belong to the public
domain."
43
Article 339 of the Civil Code of 1889, which is now
40

Article 420 of the Civil Code of 1950, incorporated the Regalian
doctrine.
Ownership and Disposition of Reclaimed Lands
The Spanish Law of Waters of 1866 was the first statutory law
governing the ownership and disposition of reclaimed lands in the
Philippines. On May 18, 1907, the Philippine Commission
enacted Act No. 1654 which provided for the lease, but not the
sale, of reclaimed lands of the government to corporations and
individuals. Later, on November 29, 1919, the Philippine
Legislature approved Act No. 2874, the Public Land Act, which
authorized the lease, but not the sale, of reclaimed lands of the
government to corporations and individuals. On November 7,
1936, the National Assembly passed Commonwealth Act No.
141, also known as the Public Land Act, which authorized the
lease, but not the sale, of reclaimed lands of the government to
corporations and individuals. CA No. 141 continues to this day
as the general law governing the classification and disposition of
lands of the public domain.
The Spanish Law of Waters of 1866 and the Civil Code of 1889
Under the Spanish Law of Waters of 1866, the shores, bays,
coves, inlets and all waters within the maritime zone of the
Spanish territory belonged to the public domain for public
use.
44
The Spanish Law of Waters of 1866 allowed the
reclamation of the sea under Article 5, which provided as follows:
"Article 5. Lands reclaimed from the sea in consequence
of works constructed by the State, or by the provinces,
pueblos or private persons, with proper permission, shall
become the property of the party constructing such
works, unless otherwise provided by the terms of the
grant of authority."
Under the Spanish Law of Waters, land reclaimed from the sea
belonged to the party undertaking the reclamation, provided the
government issued the necessary permit and did not reserve
ownership of the reclaimed land to the State.
Article 339 of the Civil Code of 1889 defined property of public
dominion as follows:
"Art. 339. Property of public dominion is
1. That devoted to public use, such as roads, canals,
rivers, torrents, ports and bridges constructed by the
State, riverbanks, shores, roadsteads, and that of a
similar character;
2. That belonging exclusively to the State which,
without being of general public use, is employed in
some public service, or in the development of the
national wealth, such as walls, fortresses, and other
works for the defense of the territory, and mines, until
granted to private individuals."
Property devoted to public use referred to property open for use
by the public. In contrast, property devoted to public service
referred to property used for some specific public service and
open only to those authorized to use the property.
Property of public dominion referred not only to property devoted
to public use, but also to property not so used but employed to
develop the national wealth. This class of property constituted
property of public dominion although employed for some
economic or commercial activity to increase the national wealth.
Article 341 of the Civil Code of 1889 governed the re-
classification of property of public dominion into private
property, to wit:
"Art. 341. Property of public dominion, when no longer
devoted to public use or to the defense of the territory,
shall become a part of the private property of the State."
This provision, however, was not self-executing. The legislature,
or the executive department pursuant to law, must declare the
property no longer needed for public use or territorial defense
before the government could lease or alienate the property to
private parties.
45

Act No. 1654 of the Philippine Commission
On May 8, 1907, the Philippine Commission enacted Act No.
1654 which regulated the lease of reclaimed and foreshore lands.
The salient provisions of this law were as follows:
"Section 1. The control and disposition of the
foreshoreas defined in existing law, and the title to all
Government or public lands made or reclaimed by the
Government by dredging or filling or otherwise
throughout the Philippine Islands, shall be retained by
the Government without prejudice to vested rights and
without prejudice to rights conceded to the City of
Manila in the Luneta Extension.
Section 2. (a) The Secretary of the Interior shall cause
all Government or public lands made or reclaimed by
the Government by dredging or filling or otherwise to
be divided into lots or blocks, with the necessary streets
and alleyways located thereon, and shall cause plats and
plans of such surveys to be prepared and filed with the
Bureau of Lands.
(b) Upon completion of such plats and plans
the Governor-General shall give notice to the public
that such parts of the lands so made or reclaimed as
are not needed for public purposes will be leased for
commercial and business purposes, x x x.
x x x
(e) The leases above provided for shall be disposed of
to the highest and best bidder therefore, subject to such
regulations and safeguards as the Governor-General
may by executive order prescribe." (Emphasis supplied)
Act No. 1654 mandated that the government should retain title to
all lands reclaimed by the government. The Act also vested in
the government control and disposition of foreshore lands. Private
parties could lease lands reclaimed by the government only if
these lands were no longer needed for public purpose. Act No.
1654 mandated public bidding in the lease of government
reclaimed lands. Act No. 1654 made government reclaimed
lands sui generis in that unlike other public lands which the
government could sell to private parties, these reclaimed lands
were available only for lease to private parties.
Act No. 1654, however, did not repeal Section 5 of the Spanish
Law of Waters of 1866. Act No. 1654 did not prohibit private
parties from reclaiming parts of the sea under Section 5 of the
Spanish Law of Waters. Lands reclaimed from the sea by private
parties with government permission remained private lands.
Act No. 2874 of the Philippine Legislature
On November 29, 1919, the Philippine Legislature enacted Act
No. 2874, the Public Land Act.
46
The salient provisions of Act
No. 2874, on reclaimed lands, were as follows:
"Sec. 6. The Governor-General, upon the
recommendation of the Secretary of Agriculture and
41

Natural Resources, shall from time to time classify the
lands of the public domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands, x x x.
Sec. 7. For the purposes of the government and
disposition of alienable or disposable public lands, the
Governor-General, upon recommendation by the
Secretary of Agriculture and Natural Resources, shall
from time to time declare what lands are open to
disposition or concession under this Act."
Sec. 8. Only those lands shall be declared open to
disposition or concession which have been officially
delimited or classified x x x.
x x x
Sec. 55. Any tract of land of the public domain which,
being neither timber nor mineral land, shall be classified
as suitable for residential purposes or for commercial,
industrial, or other productive purposes other than
agricultural purposes, and shall be open to disposition
or concession, shall be disposed of under the provisions
of this chapter, and not otherwise.
Sec. 56. The lands disposable under this title shall be
classified as follows:
(a) Lands reclaimed by the Government by
dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water
bordering upon the shores or banks of
navigable lakes or rivers;
(d) Lands not included in any of the foregoing
classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b), and (c)
of section fifty-six shall be disposed of to private
parties by lease only and not otherwise, as soon as the
Governor-General, upon recommendation by the
Secretary of Agriculture and Natural Resources, shall
declare that the same are not necessary for the public
service and are open to disposition under this
chapter. The lands included in class (d) may be
disposed of by sale or lease under the provisions of this
Act." (Emphasis supplied)
Section 6 of Act No. 2874 authorized the Governor-General to
"classify lands of the public domain into x x x alienable or
disposable"
47
lands. Section 7 of the Act empowered the
Governor-General to "declare what lands are open to disposition
or concession." Section 8 of the Act limited alienable or
disposable lands only to those lands which have been "officially
delimited and classified."
Section 56 of Act No. 2874 stated that lands "disposable under
this title
48
shall be classified" as government reclaimed, foreshore
and marshy lands, as well as other lands. All these lands,
however, must be suitable for residential, commercial, industrial
or other productive non-agricultural purposes. These provisions
vested upon the Governor-General the power to classify
inalienable lands of the public domain into disposable lands of the
public domain. These provisions also empowered the Governor-
General to classify further such disposable lands of the public
domain into government reclaimed, foreshore or marshy lands of
the public domain, as well as other non-agricultural lands.
Section 58 of Act No. 2874 categorically mandated that
disposable lands of the public domain classified as government
reclaimed, foreshore and marshy lands "shall be disposed of to
private parties by lease only and not otherwise." The Governor-
General, before allowing the lease of these lands to private
parties, must formally declare that the lands were "not necessary
for the public service." Act No. 2874 reiterated the State policy to
lease and not to sell government reclaimed, foreshore and marshy
lands of the public domain, a policy first enunciated in 1907 in
Act No. 1654. Government reclaimed, foreshore and marshy
lands remained sui generis, as the only alienable or disposable
lands of the public domain that the government could not sell to
private parties.
The rationale behind this State policy is obvious. Government
reclaimed, foreshore and marshy public lands for non-agricultural
purposes retain their inherent potential as areas for public service.
This is the reason the government prohibited the sale, and only
allowed the lease, of these lands to private parties. The State
always reserved these lands for some future public service.
Act No. 2874 did not authorize the reclassification of government
reclaimed, foreshore and marshy lands into other non-agricultural
lands under Section 56 (d). Lands falling under Section 56 (d)
were the only lands for non-agricultural purposes the government
could sell to private parties. Thus, under Act No. 2874, the
government could not sell government reclaimed, foreshore and
marshy lands to private parties, unless the legislature passed a
law allowing their sale.
49

Act No. 2874 did not prohibit private parties from reclaiming
parts of the sea pursuant to Section 5 of the Spanish Law of
Waters of 1866. Lands reclaimed from the sea by private parties
with government permission remained private lands.
Dispositions under the 1935 Constitution
On May 14, 1935, the 1935 Constitution took effect upon its
ratification by the Filipino people. The 1935 Constitution, in
adopting the Regalian doctrine, declared in Section 1, Article
XIII, that
"Section 1. All agricultural, timber, and mineral lands of
the public domain, waters, minerals, coal, petroleum,
and other mineral oils, all forces of potential energy and
other natural resources of the Philippines belong to the
State, and their disposition, exploitation, development,
or utilization shall be limited to citizens of the
Philippines or to corporations or associations at least
sixty per centum of the capital of which is owned by
such citizens, subject to any existing right, grant, lease,
or concession at the time of the inauguration of the
Government established under this
Constitution. Natural resources, with the exception of
public agricultural land, shall not be alienated, and no
license, concession, or lease for the exploitation,
development, or utilization of any of the natural
resources shall be granted for a period exceeding
twenty-five years, renewable for another twenty-five
years, except as to water rights for irrigation, water
supply, fisheries, or industrial uses other than the
development of water power, in which cases beneficial
use may be the measure and limit of the grant."
(Emphasis supplied)
The 1935 Constitution barred the alienation of all natural
resources except public agricultural lands, which were the only
natural resources the State could alienate. Thus, foreshore lands,
42

considered part of the State's natural resources, became
inalienable by constitutional fiat, available only for lease for 25
years, renewable for another 25 years. The government could
alienate foreshore lands only after these lands were reclaimed and
classified as alienable agricultural lands of the public domain.
Government reclaimed and marshy lands of the public domain,
being neither timber nor mineral lands, fell under the
classification of public agricultural lands.
50
However, government
reclaimed and marshy lands, although subject to classification as
disposable public agricultural lands, could only be leased and not
sold to private parties because of Act No. 2874.
The prohibition on private parties from acquiring ownership of
government reclaimed and marshy lands of the public domain
was only a statutory prohibition and the legislature could
therefore remove such prohibition. The 1935 Constitution did not
prohibit individuals and corporations from acquiring government
reclaimed and marshy lands of the public domain that were
classified as agricultural lands under existing public land laws.
Section 2, Article XIII of the 1935 Constitution provided as
follows:
"Section 2. No private corporation or association may
acquire, lease, or hold public agricultural lands in
excess of one thousand and twenty four hectares, nor
may any individual acquire such lands by purchase in
excess of one hundred and forty hectares, or by lease
in excess of one thousand and twenty-four hectares, or
by homestead in excess of twenty-four hectares. Lands
adapted to grazing, not exceeding two thousand
hectares, may be leased to an individual, private
corporation, or association." (Emphasis supplied)
Still, after the effectivity of the 1935 Constitution, the legislature
did not repeal Section 58 of Act No. 2874 to open for sale to
private parties government reclaimed and marshy lands of the
public domain. On the contrary, the legislature continued the long
established State policy of retaining for the government title and
ownership of government reclaimed and marshy lands of the
public domain.
Commonwealth Act No. 141 of the Philippine National
Assembly
On November 7, 1936, the National Assembly approved
Commonwealth Act No. 141, also known as the Public Land Act,
which compiled the then existing laws on lands of the public
domain. CA No. 141, as amended, remains to this day
the existing general law governing the classification and
disposition of lands of the public domain other than timber and
mineral lands.
51

Section 6 of CA No. 141 empowers the President to classify lands
of the public domain into "alienable or disposable"
52
lands of the
public domain, which prior to such classification are inalienable
and outside the commerce of man. Section 7 of CA No. 141
authorizes the President to "declare what lands are open to
disposition or concession." Section 8 of CA No. 141 states that
the government can declare open for disposition or concession
only lands that are "officially delimited and classified." Sections
6, 7 and 8 of CA No. 141 read as follows:
"Sec. 6. The President, upon the recommendation of
the Secretary of Agriculture and Commerce, shall
from time to time classify the lands of the public
domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in like manner transfer such
lands from one class to another,
53
for the purpose of
their administration and disposition.
Sec. 7. For the purposes of the administration and
disposition of alienable or disposable public lands, the
President, upon recommendation by the Secretary of
Agriculture and Commerce, shall from time to time
declare what lands are open to disposition or
concession under this Act.
Sec. 8. Only those lands shall be declared open to
disposition or concession which have been officially
delimited and classified and, when practicable,
surveyed, and which have not been reserved for public
or quasi-public uses, nor appropriated by the
Government, nor in any manner become private
property, nor those on which a private right authorized
and recognized by this Act or any other valid law may
be claimed, or which, having been reserved or
appropriated, have ceased to be so. x x x."
Thus, before the government could alienate or dispose of lands of
the public domain, the President must first officially classify these
lands as alienable or disposable, and then declare them open to
disposition or concession. There must be no law reserving these
lands for public or quasi-public uses.
The salient provisions of CA No. 141, on government reclaimed,
foreshore and marshy lands of the public domain, are as follows:
"Sec. 58. Any tract of land of the public domain which,
being neither timber nor mineral land, is intended to
be used for residential purposes or for commercial,
industrial, or other productive purposes other than
agricultural, and is open to disposition or concession,
shall be disposed of under the provisions of this
chapter and not otherwise.
Sec. 59. The lands disposable under this title shall be
classified as follows:
(a) Lands reclaimed by the Government by
dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water
bordering upon the shores or banks of
navigable lakes or rivers;
(d) Lands not included in any of the foregoing
classes.
Sec. 60. Any tract of land comprised under this title may
be leased or sold, as the case may be, to any person,
corporation, or association authorized to purchase or
lease public lands for agricultural purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b), and (c)
of section fifty-nine shall be disposed of to private
parties by lease only and not otherwise, as soon as the
President, upon recommendation by the Secretary of
Agriculture, shall declare that the same are not
necessary for the public serviceand are open to
disposition under this chapter. The lands included in
class (d) may be disposed of by sale or lease under the
provisions of this Act." (Emphasis supplied)
Section 61 of CA No. 141 readopted, after the effectivity of the
1935 Constitution, Section 58 of Act No. 2874 prohibiting the
sale of government reclaimed, foreshore and marshy disposable
43

lands of the public domain. All these lands are intended for
residential, commercial, industrial or other non-agricultural
purposes. As before, Section 61 allowed only the lease of such
lands to private parties. The government could sell to private
parties only lands falling under Section 59 (d) of CA No. 141, or
those lands for non-agricultural purposes not classified as
government reclaimed, foreshore and marshy disposable lands of
the public domain. Foreshore lands, however, became inalienable
under the 1935 Constitution which only allowed the lease of these
lands to qualified private parties.
Section 58 of CA No. 141 expressly states that disposable lands
of the public domain intended for residential, commercial,
industrial or other productive purposes other than agricultural
"shall be disposed of under the provisions of this chapter and
not otherwise." Under Section 10 of CA No. 141, the term
"disposition" includes lease of the land. Any disposition of
government reclaimed, foreshore and marshy disposable lands for
non-agricultural purposes must comply with Chapter IX, Title III
of CA No. 141,
54
unless a subsequent law amended or repealed
these provisions.
In his concurring opinion in the landmark case of Republic Real
Estate Corporation v. Court of Appeals,
55
Justice Reynato S.
Puno summarized succinctly the law on this matter, as follows:
"Foreshore lands are lands of public dominion intended
for public use. So too are lands reclaimed by the
government by dredging, filling, or other means. Act
1654 mandated that the control and disposition of the
foreshore and lands under water remained in the
national government. Said law allowed only the 'leasing'
of reclaimed land. The Public Land Acts of 1919 and
1936 also declared that the foreshore and lands
reclaimed by the government were to be "disposed of to
private parties by lease only and not otherwise." Before
leasing, however, the Governor-General, upon
recommendation of the Secretary of Agriculture and
Natural Resources, had first to determine that the land
reclaimed was not necessary for the public service. This
requisite must have been met before the land could be
disposed of. But even then, the foreshore and lands
under water were not to be alienated and sold to
private parties. The disposition of the reclaimed land
was only by lease. The land remained property of the
State." (Emphasis supplied)
As observed by Justice Puno in his concurring opinion,
"Commonwealth Act No. 141 has remained in effect at present."
The State policy prohibiting the sale to private parties of
government reclaimed, foreshore and marshy alienable lands of
the public domain, first implemented in 1907 was thus reaffirmed
in CA No. 141 after the 1935 Constitution took effect. The
prohibition on the sale of foreshore lands, however, became a
constitutional edict under the 1935 Constitution. Foreshore lands
became inalienable as natural resources of the State, unless
reclaimed by the government and classified as agricultural lands
of the public domain, in which case they would fall under the
classification of government reclaimed lands.
After the effectivity of the 1935 Constitution, government
reclaimed and marshy disposable lands of the public domain
continued to be only leased and not sold to private
parties.
56
These lands remained sui generis, as the only alienable
or disposable lands of the public domain the government could
not sell to private parties.
Since then and until now, the only way the government can sell to
private parties government reclaimed and marshy disposable
lands of the public domain is for the legislature to pass a law
authorizing such sale. CA No. 141 does not authorize the
President to reclassify government reclaimed and marshy lands
into other non-agricultural lands under Section 59 (d). Lands
classified under Section 59 (d) are the only alienable or
disposable lands for non-agricultural purposes that the
government could sell to private parties.
Moreover, Section 60 of CA No. 141 expressly requires
congressional authority before lands under Section 59 that the
government previously transferred to government units or entities
could be sold to private parties. Section 60 of CA No. 141
declares that
"Sec. 60. x x x The area so leased or sold shall be such
as shall, in the judgment of the Secretary of Agriculture
and Natural Resources, be reasonably necessary for the
purposes for which such sale or lease is requested, and
shall not exceed one hundred and forty-four hectares:
Provided, however, That this limitation shall not apply
to grants, donations, or transfers made to a province,
municipality or branch or subdivision of the
Government for the purposes deemed by said entities
conducive to the public interest;but the land so granted,
donated, or transferred to a province, municipality or
branch or subdivision of the Government shall not be
alienated, encumbered, or otherwise disposed of in a
manner affecting its title, except when authorized by
Congress: x x x." (Emphasis supplied)
The congressional authority required in Section 60 of CA No. 141
mirrors the legislative authority required in Section 56 of Act No.
2874.
One reason for the congressional authority is that Section 60 of
CA No. 141 exempted government units and entities from the
maximum area of public lands that could be acquired from the
State. These government units and entities should not just turn
around and sell these lands to private parties in violation of
constitutional or statutory limitations. Otherwise, the transfer of
lands for non-agricultural purposes to government units and
entities could be used to circumvent constitutional limitations on
ownership of alienable or disposable lands of the public domain.
In the same manner, such transfers could also be used to evade
the statutory prohibition in CA No. 141 on the sale of government
reclaimed and marshy lands of the public domain to private
parties. Section 60 of CA No. 141 constitutes by operation of law
a lien on these lands.
57

In case of sale or leaseof disposable lands of the public domain
falling under Section 59 of CA No. 141, Sections 63 and 67
require a public bidding. Sections 63 and 67 of CA No. 141
provide as follows:
"Sec. 63. Whenever it is decided that lands covered by
this chapter are not needed for public purposes, the
Director of Lands shall ask the Secretary of Agriculture
and Commerce (now the Secretary of Natural
Resources) for authority to dispose of the same. Upon
receipt of such authority, the Director of Lands shall
give notice by public advertisement in the same manner
as in the case of leases or sales of agricultural public
land, x x x.
Sec. 67. The lease or sale shall be made by oral
bidding; and adjudication shall be made to the highest
bidder. x x x." (Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to public
auction all leases or sales of alienable or disposable lands of the
public domain.
58

Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did
not repeal Section 5 of the Spanish Law of Waters of 1866.
Private parties could still reclaim portions of the sea with
government permission. However, the reclaimed land could
become private land only if classified as alienable agricultural
land of the public domain open to disposition under CA No. 141.
44

The 1935 Constitution prohibited the alienation of all natural
resources except public agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the definition of
property of public dominion found in the Civil Code of 1889.
Articles 420 and 422 of the Civil Code of 1950 state that
"Art. 420. The following things are property of public
dominion:
(1) Those intended for public use, such as roads, canals,
rivers, torrents, ports and bridges constructed by the
State, banks, shores, roadsteads, and others of similar
character;
(2) Those which belong to the State, without being for
public use, and are intended for some public service or
for the development of the national wealth.
x x x.
Art. 422. Property of public dominion, when no longer
intended for public use or for public service, shall form
part of the patrimonial property of the State."
Again, the government must formally declare that the property of
public dominion is no longer needed for public use or public
service, before the same could be classified as patrimonial
property of the State.
59
In the case of government reclaimed and
marshy lands of the public domain, the declaration of their being
disposable, as well as the manner of their disposition, is governed
by the applicable provisions of CA No. 141.
Like the Civil Code of 1889, the Civil Code of 1950 included as
property of public dominion those properties of the State which,
without being for public use, are intended for public service or the
"development of the national wealth." Thus, government
reclaimed and marshy lands of the State, even if not employed for
public use or public service, if developed to enhance the national
wealth, are classified as property of public dominion.
Dispositions under the 1973 Constitution
The 1973 Constitution, which took effect on January 17, 1973,
likewise adopted the Regalian doctrine. Section 8, Article XIV of
the 1973 Constitution stated that
"Sec. 8. All lands of the public domain, waters,
minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, wildlife, and other
natural resources of the Philippines belong to the
State. With the exception of agricultural, industrial or
commercial, residential, and resettlement lands of the
public domain, natural resources shall not be
alienated, and no license, concession, or lease for the
exploration, development, exploitation, or utilization of
any of the natural resources shall be granted for a period
exceeding twenty-five years, renewable for not more
than twenty-five years, except as to water rights for
irrigation, water supply, fisheries, or industrial uses
other than the development of water power, in which
cases, beneficial use may be the measure and the limit
of the grant." (Emphasis supplied)
The 1973 Constitution prohibited the alienation of all natural
resources with the exception of "agricultural, industrial or
commercial, residential, and resettlement lands of the public
domain." In contrast, the 1935 Constitution barred the alienation
of all natural resources except "public agricultural lands."
However, the term "public agricultural lands" in the 1935
Constitution encompassed industrial, commercial, residential and
resettlement lands of the public domain.
60
If the land of public
domain were neither timber nor mineral land, it would fall under
the classification of agricultural land of the public domain. Both
the 1935 and 1973 Constitutions, therefore, prohibited the
alienation of all natural resources except agricultural lands of
the public domain.
The 1973 Constitution, however, limited the alienation of lands of
the public domain to individuals who were citizens of the
Philippines. Private corporations, even if wholly owned by
Philippine citizens, were no longer allowed to acquire alienable
lands of the public domain unlike in the 1935 Constitution.
Section 11, Article XIV of the 1973 Constitution declared that
"Sec. 11. The Batasang Pambansa, taking into account
conservation, ecological, and development requirements
of the natural resources, shall determine by law the size
of land of the public domain which may be developed,
held or acquired by, or leased to, any qualified
individual, corporation, or association, and the
conditions therefor. No private corporation or
association may hold alienable lands of the public
domain except by leasenot to exceed one thousand
hectares in area nor may any citizen hold such lands by
lease in excess of five hundred hectares or acquire by
purchase, homestead or grant, in excess of twenty-four
hectares. No private corporation or association may hold
by lease, concession, license or permit, timber or forest
lands and other timber or forest resources in excess of
one hundred thousand hectares. However, such area
may be increased by the Batasang Pambansa upon
recommendation of the National Economic and
Development Authority." (Emphasis supplied)
Thus, under the 1973 Constitution, private corporations could
hold alienable lands of the public domain only through lease.
Only individuals could now acquire alienable lands of the public
domain, and private corporations became absolutely barred from
acquiring any kind of alienable land of the public domain. The
constitutional ban extended to all kinds of alienable lands of the
public domain, while the statutory ban under CA No. 141 applied
only to government reclaimed, foreshore and marshy alienable
lands of the public domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos issued
Presidential Decree No. 1084 creating PEA, a wholly government
owned and controlled corporation with a special charter. Sections
4 and 8 of PD No. 1084, vests PEA with the following purposes
and powers:
"Sec. 4. Purpose. The Authority is hereby created for the
following purposes:
(a) To reclaim land, including foreshore and
submerged areas, by dredging, filling or other means,
or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in,
subdivide, dispose, lease and sell any and all kinds of
lands, buildings, estates and other forms of real
property, owned, managed, controlled and/or operated
by the government;
(c) To provide for, operate or administer such service as
may be necessary for the efficient, economical and
beneficial utilization of the above properties.
Sec. 5. Powers and functions of the Authority. The
Authority shall, in carrying out the purposes for which it
is created, have the following powers and functions:
45

(a)To prescribe its by-laws.
x x x
(i) To hold lands of the public domain in excess of the
area permitted to private corporations by statute.
(j) To reclaim lands and to construct work across, or
otherwise, any stream, watercourse, canal, ditch, flume
x x x.
x x x
(o) To perform such acts and exercise such functions as
may be necessary for the attainment of the purposes and
objectives herein specified." (Emphasis supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore and
submerged areas of the public domain. Foreshore areas are those
covered and uncovered by the ebb and flow of the
tide.
61
Submerged areas are those permanently under water
regardless of the ebb and flow of the tide.
62
Foreshore and
submerged areas indisputably belong to the public domain
63
and
are inalienable unless reclaimed, classified as alienable lands
open to disposition, and further declared no longer needed for
public service.
The ban in the 1973 Constitution on private corporations from
acquiring alienable lands of the public domain did not apply to
PEA since it was then, and until today, a fully owned government
corporation. The constitutional ban applied then, as it still applies
now, only to "private corporations and associations." PD No.
1084 expressly empowers PEA "to hold lands of the public
domain" even "in excess of the area permitted to private
corporations by statute." Thus, PEA can hold title to private
lands, as well as title to lands of the public domain.
In order for PEA to sell its reclaimed foreshore and submerged
alienable lands of the public domain, there must be legislative
authority empowering PEA to sell these lands. This legislative
authority is necessary in view of Section 60 of CA No.141, which
states
"Sec. 60. x x x; but the land so granted, donated or
transferred to a province, municipality, or branch or
subdivision of the Government shall not be alienated,
encumbered or otherwise disposed of in a manner
affecting its title, except when authorized by Congress;
x x x." (Emphasis supplied)
Without such legislative authority, PEA could not sell but only
lease its reclaimed foreshore and submerged alienable lands of the
public domain. Nevertheless, any legislative authority granted to
PEA to sell its reclaimed alienable lands of the public domain
would be subject to the constitutional ban on private corporations
from acquiring alienable lands of the public domain. Hence, such
legislative authority could only benefit private individuals.
Dispositions under the 1987 Constitution
The 1987 Constitution, like the 1935 and 1973 Constitutions
before it, has adopted the Regalian doctrine. The 1987
Constitution declares that all natural resources are "owned by the
State," and except for alienable agricultural lands of the public
domain, natural resources cannot be alienated. Sections 2 and 3,
Article XII of the 1987 Constitution state that
"Section 2. All lands of the public domain, waters,
minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources are
owned by the State. With the exception of agricultural
lands, all other natural resources shall not be
alienated. The exploration, development, and utilization
of natural resources shall be under the full control and
supervision of the State. x x x.
Section 3. Lands of the public domain are classified into
agricultural, forest or timber, mineral lands, and national
parks. Agricultural lands of the public domain may be
further classified by law according to the uses which
they may be devoted. Alienable lands of the public
domain shall be limited to agricultural lands. Private
corporations or associations may not hold such
alienable lands of the public domain except by lease,
for a period not exceeding twenty-five years, renewable
for not more than twenty-five years, and not to exceed
one thousand hectares in area. Citizens of the
Philippines may lease not more than five hundred
hectares, or acquire not more than twelve hectares
thereof by purchase, homestead, or grant.
Taking into account the requirements of conservation,
ecology, and development, and subject to the
requirements of agrarian reform, the Congress shall
determine, by law, the size of lands of the public domain
which may be acquired, developed, held, or leased and
the conditions therefor." (Emphasis supplied)
The 1987 Constitution continues the State policy in the 1973
Constitution banning private corporations fromacquiring any
kind of alienable land of the public domain. Like the 1973
Constitution, the 1987 Constitution allows private corporations to
hold alienable lands of the public domain only through lease. As
in the 1935 and 1973 Constitutions, the general law governing the
lease to private corporations of reclaimed, foreshore and marshy
alienable lands of the public domain is still CA No. 141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on corporations from
acquiring, except through lease, alienable lands of the public
domain is not well understood. During the deliberations of the
1986 Constitutional Commission, the commissioners probed the
rationale behind this ban, thus:
"FR. BERNAS: Mr. Vice-President, my questions have
reference to page 3, line 5 which says:
`No private corporation or association may hold
alienable lands of the public domain except by lease, not
to exceed one thousand hectares in area.'
If we recall, this provision did not exist under the 1935
Constitution, but this was introduced in the 1973
Constitution. In effect, it prohibits private corporations
from acquiring alienable public lands. But it has not
been very clear in jurisprudence what the reason for
this is. In some of the cases decided in 1982 and 1983, it
was indicated that the purpose of this is to prevent
large landholdings. Is that the intent of this provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the
Iglesia ni Cristo, there were instances where the Iglesia
ni Cristo was not allowed to acquire a mere 313-square
meter land where a chapel stood because the Supreme
Court said it would be in violation of this." (Emphasis
supplied)
In Ayog v. Cusi,
64
the Court explained the rationale behind this
constitutional ban in this way:
46

"Indeed, one purpose of the constitutional prohibition
against purchases of public agricultural lands by private
corporations is to equitably diffuse land ownership or to
encourage 'owner-cultivatorship and the economic
family-size farm' and to prevent a recurrence of cases
like the instant case. Huge landholdings by corporations
or private persons had spawned social unrest."
However, if the constitutional intent is to prevent huge
landholdings, the Constitution could have simply limited the size
of alienable lands of the public domain that corporations could
acquire. The Constitution could have followed the limitations on
individuals, who could acquire not more than 24 hectares of
alienable lands of the public domain under the 1973 Constitution,
and not more than 12 hectares under the 1987 Constitution.
If the constitutional intent is to encourage economic family-size
farms, placing the land in the name of a corporation would be
more effective in preventing the break-up of farmlands. If the
farmland is registered in the name of a corporation, upon the
death of the owner, his heirs would inherit shares in the
corporation instead of subdivided parcels of the farmland. This
would prevent the continuing break-up of farmlands into smaller
and smaller plots from one generation to the next.
In actual practice, the constitutional ban strengthens the
constitutional limitation on individuals from acquiring more than
the allowed area of alienable lands of the public domain. Without
the constitutional ban, individuals who already acquired the
maximum area of alienable lands of the public domain could
easily set up corporations to acquire more alienable public lands.
An individual could own as many corporations as his means
would allow him. An individual could even hide his ownership of
a corporation by putting his nominees as stockholders of the
corporation. The corporation is a convenient vehicle to
circumvent the constitutional limitation on acquisition by
individuals of alienable lands of the public domain.
The constitutional intent, under the 1973 and 1987 Constitutions,
is to transfer ownership of only a limited area of alienable land of
the public domain to a qualified individual. This constitutional
intent is safeguarded by the provision prohibiting corporations
from acquiring alienable lands of the public domain, since the
vehicle to circumvent the constitutional intent is removed. The
available alienable public lands are gradually decreasing in the
face of an ever-growing population. The most effective way to
insure faithful adherence to this constitutional intent is to grant or
sell alienable lands of the public domain only to individuals. This,
it would seem, is the practical benefit arising from the
constitutional ban.
The Amended J oint Venture Agreement
The subject matter of the Amended JVA, as stated in its second
Whereas clause, consists of three properties, namely:
1. "[T]hree partially reclaimed and substantially eroded
islands along Emilio Aguinaldo Boulevard in Paranaque
and Las Pinas, Metro Manila, with a combined titled
area of 1,578,441 square meters;"
2. "[A]nother area of 2,421,559 square meters
contiguous to the three islands;" and
3. "[A]t AMARI's option as approved by PEA, an
additional 350 hectares more or less to regularize the
configuration of the reclaimed area."
65

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

In short, the Amended JVA covers a reclamation area of 750
hectares. Only 157.84 hectares of the 750-hectare reclamation
project have been reclaimed, and the rest of the 592.15 hectares
are still submerged areas forming part of Manila Bay.
Under the Amended JVA, AMARI will reimburse PEA the sum
of P1,894,129,200.00 for PEA's "actual cost" in partially
reclaiming the Freedom Islands. AMARI will also complete, at its
own expense, the reclamation of the Freedom Islands. AMARI
will further shoulder all the reclamation costs of all the other
areas, totaling 592.15 hectares, still to be reclaimed. AMARI and
PEA will share, in the proportion of 70 percent and 30 percent,
respectively, the total net usable area which is defined in the
Amended JVA as the total reclaimed area less 30 percent
earmarked for common areas. Title to AMARI's share in the net
usable area, totaling 367.5 hectares, will be issued in the name of
AMARI. Section 5.2 (c) of the Amended JVA provides that
"x x x, PEA shall have the duty to execute without delay
the necessary deed of transfer or conveyance of the title
pertaining to AMARI's Land share based on the Land
Allocation Plan. PEA, when requested in writing by
AMARI , shall then cause the issuance and delivery of
the proper certificates of title covering AMARI 's Land
Share in the name of AMARI , x x x; provided, that if
more than seventy percent (70%) of the titled area at any
given time pertains to AMARI, PEA shall deliver to
AMARI only seventy percent (70%) of the titles
pertaining to AMARI, until such time when a
corresponding proportionate area of additional land
pertaining to PEA has been titled." (Emphasis supplied)
I ndisputably, under the Amended J VA AMARI will acquire and
own a maximum of 367.5 hectares of reclaimed land which will
be titled in its name.
To implement the Amended JVA, PEA delegated to the
unincorporated PEA-AMARI joint venture PEA's statutory
authority, rights and privileges to reclaim foreshore and
submerged areas in Manila Bay. Section 3.2.a of the Amended
JVA states that
"PEA hereby contributes to the joint venture its rights
and privileges to perform Rawland Reclamation and
Horizontal Development as well as own the
Reclamation Area, thereby granting the Joint Venture
the full and exclusive right, authority and privilege to
undertake the Project in accordance with the Master
Development Plan."
The Amended JVA is the product of a renegotiation of the
original JVA dated April 25, 1995 and its supplemental
agreement dated August 9, 1995.
The Threshold I ssue
The threshold issue is whether AMARI, a private corporation, can
acquire and own under the Amended JVA 367.5 hectares of
reclaimed foreshore and submerged areas in Manila Bay in view
of Sections 2 and 3, Article XII of the 1987 Constitution which
state that:
"Section 2. All lands of the public domain, waters,
minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources are
owned by the State. With the exception of agricultural
lands, all other natural resources shall not be
alienated. x x x.
x x x
47

Section 3. x x x Alienable lands of the public domain
shall be limited to agricultural lands. Private
corporations or associations may not hold such
alienable lands of the public domain except by lease, x
x x."(Emphasis supplied)
Classification of Reclaimed Foreshore and Submerged Areas
PEA readily concedes that lands reclaimed from foreshore or
submerged areas of Manila Bay are alienable or disposable lands
of the public domain. In its Memorandum,
67
PEA admits that
"Under the Public Land Act (CA 141, as
amended), reclaimed lands are classified as alienable
and disposable lands of the public domain:
'Sec. 59. The lands disposable under this title
shall be classified as follows:
(a) Lands reclaimed by the government by
dredging, filling, or other means;
x x x.'" (Emphasis supplied)
Likewise, the Legal Task Force
68
constituted under Presidential
Administrative Order No. 365 admitted in its Report and
Recommendation to then President Fidel V.
Ramos, "[R]eclaimed lands are classified as alienable and
disposable lands of the public domain."
69
The Legal Task Force
concluded that
"D. Conclusion
Reclaimed lands are lands of the public domain.
However, by statutory authority, the rights of ownership
and disposition over reclaimed lands have been
transferred to PEA, by virtue of which PEA, as owner,
may validly convey the same to any qualified person
without violating the Constitution or any statute.
The constitutional provision prohibiting private
corporations from holding public land, except by lease
(Sec. 3, Art. XVII,
70
1987 Constitution), does not apply
to reclaimed lands whose ownership has passed on to
PEA by statutory grant."
Under Section 2, Article XII of the 1987 Constitution, the
foreshore and submerged areas of Manila Bay are part of the
"lands of the public domain, waters x x x and other natural
resources" and consequently "owned by the State." As such,
foreshore and submerged areas "shall not be alienated," unless
they are classified as "agricultural lands" of the public domain.
The mere reclamation of these areas by PEA does not convert
these inalienable natural resources of the State into alienable or
disposable lands of the public domain. There must be a law or
presidential proclamation officially classifying these reclaimed
lands as alienable or disposable and open to disposition or
concession. Moreover, these reclaimed lands cannot be classified
as alienable or disposable if the law has reserved them for some
public or quasi-public use.
71

Section 8 of CA No. 141 provides that "only those lands shall be
declared open to disposition or concession which have
been officially delimited and classified."
72
The President has the
authority to classify inalienable lands of the public domain into
alienable or disposable lands of the public domain, pursuant to
Section 6 of CA No. 141. In Laurel vs. Garcia,
73
the Executive
Department attempted to sell the Roppongi property in Tokyo,
Japan, which was acquired by the Philippine Government for use
as the Chancery of the Philippine Embassy. Although the
Chancery had transferred to another location thirteen years
earlier, the Court still ruled that, under Article 422
74
of the Civil
Code, a property of public dominion retains such character until
formally declared otherwise. The Court ruled that
"The fact that the Roppongi site has not been used for a
long time for actual Embassy service does not
automatically convert it to patrimonial property. Any
such conversion happens only if the property is
withdrawn from public use (Cebu Oxygen and
Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A
property continues to be part of the public domain, not
available for private appropriation or ownership 'until
there is a formal declaration on the part of the
government to withdraw it from being such' (Ignacio v.
Director of Lands, 108 Phil. 335 [1960]." (Emphasis
supplied)
PD No. 1085, issued on February 4, 1977, authorized the issuance
of special land patents for lands reclaimed by PEA from the
foreshore or submerged areas of Manila Bay. On January 19,
1988 then President Corazon C. Aquino issued Special Patent No.
3517 in the name of PEA for the 157.84 hectares comprising the
partially reclaimed Freedom Islands. Subsequently, on April 9,
1999 the Register of Deeds of the Municipality of Paranaque
issued TCT Nos. 7309, 7311 and 7312 in the name of PEA
pursuant to Section 103 of PD No. 1529 authorizing the issuance
of certificates of title corresponding to land patents. To this day,
these certificates of title are still in the name of PEA.
PD No. 1085, coupled with President Aquino's actual issuanceof
a special patent covering the Freedom Islands, is equivalent to an
official proclamation classifying the Freedom Islands as alienable
or disposable lands of the public domain. PD No. 1085 and
President Aquino's issuance of a land patent also constitute a
declaration that the Freedom Islands are no longer needed for
public service. The Freedom I slands are thus alienable or
disposable lands of the public domain, open to disposition or
concession to qualified parties.
At the time then President Aquino issued Special Patent No.
3517, PEA had already reclaimed the Freedom Islands although
subsequently there were partial erosions on some areas. The
government had also completed the necessary surveys on these
islands. Thus, the Freedom Islands were no longer part of Manila
Bay but part of the land mass. Section 3, Article XII of the 1987
Constitution classifies lands of the public domain into
"agricultural, forest or timber, mineral lands, and national parks."
Being neither timber, mineral, nor national park lands, the
reclaimed Freedom Islands necessarily fall under the
classification of agricultural lands of the public domain. Under
the 1987 Constitution, agricultural lands of the public domain are
the only natural resources that the State may alienate to qualified
private parties. All other natural resources, such as the seas or
bays, are "waters x x x owned by the State" forming part of the
public domain, and are inalienable pursuant to Section 2, Article
XII of the 1987 Constitution.
AMARI claims that the Freedom Islands are private lands
because CDCP, then a private corporation, reclaimed the islands
under a contract dated November 20, 1973 with the
Commissioner of Public Highways. AMARI, citing Article 5 of
the Spanish Law of Waters of 1866, argues that "if the ownership
of reclaimed lands may be given to the party constructing the
works, then it cannot be said that reclaimed lands are lands of the
public domain which the State may not alienate."
75
Article 5 of
the Spanish Law of Waters reads as follows:
"Article 5. Lands reclaimed from the sea in consequence
of works constructed by the State, or by the provinces,
pueblos or private persons, with proper permission,
shall become the property of the party constructing such
works, unless otherwise provided by the terms of the
grant of authority." (Emphasis supplied)
48

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

Article 5 of the Spanish Law of Waters must be read together
with laws subsequently enacted on the disposition of public lands.
In particular, CA No. 141 requires that lands of the public domain
must first be classified as alienable or disposable before the
government can alienate them. These lands must not be reserved
for public or quasi-public purposes.
78
Moreover, the contract
between CDCP and the government was executed after the
effectivity of the 1973 Constitution which barred private
corporations from acquiring any kind of alienable land of the
public domain. This contract could not have converted the
Freedom Islands into private lands of a private corporation.
Presidential Decree No. 3-A, issued on January 11, 1973, revoked
all laws authorizing the reclamation of areas under water and
revested solely in the National Government the power to reclaim
lands. Section 1 of PD No. 3-A declared that
"The provisions of any law to the contrary
notwithstanding, the reclamation of areas under water,
whether foreshore or inland, shall be limited to the
National Government or any person authorized by it
under a proper contract. (Emphasis supplied)
x x x."
PD No. 3-A repealed Section 5 of the Spanish Law of Waters of
1866 because reclamation of areas under water could now be
undertaken only by the National Government or by a person
contracted by the National Government. Private parties may
reclaim from the sea only under a contract with the National
Government, and no longer by grant or permission as provided in
Section 5 of the Spanish Law of Waters of 1866.
Executive Order No. 525, issued on February 14, 1979,
designated PEA as the National Government's implementing arm
to undertake "all reclamation projects of the government," which
"shall be undertaken by the PEA or through a proper contract
executed by it with any person or entity." Under such contract, a
private party receives compensation for reclamation services
rendered to PEA. Payment to the contractor may be in cash, or in
kind consisting of portions of the reclaimed land, subject to the
constitutional ban on private corporations from acquiring
alienable lands of the public domain. The reclaimed land can be
used as payment in kind only if the reclaimed land is first
classified as alienable or disposable land open to disposition, and
then declared no longer needed for public service.
The Amended JVA covers not only the Freedom Islands, but also
an additional 592.15 hectares which are still submerged and
forming part of Manila Bay. There is no legislative or
Presidential act classifying these submerged areas as alienable
or disposable lands of the public domain open to disposition.
These submerged areas are not covered by any patent or
certificate of title. There can be no dispute that these submerged
areas form part of the public domain, and in their present state
are inalienable and outside the commerce of man. Until
reclaimed from the sea, these submerged areas are, under the
Constitution, "waters x x x owned by the State," forming part of
the public domain and consequently inalienable. Only when
actually reclaimed from the sea can these submerged areas be
classified as public agricultural lands, which under the
Constitution are the only natural resources that the State may
alienate. Once reclaimed and transformed into public agricultural
lands, the government may then officially classify these lands as
alienable or disposable lands open to disposition. Thereafter, the
government may declare these lands no longer needed for public
service. Only then can these reclaimed lands be considered
alienable or disposable lands of the public domain and within the
commerce of man.
The classification of PEA's reclaimed foreshore and submerged
lands into alienable or disposable lands open to disposition is
necessary because PEA is tasked under its charter to undertake
public services that require the use of lands of the public domain.
Under Section 5 of PD No. 1084, the functions of PEA include
the following: "[T]o own or operate railroads, tramways and other
kinds of land transportation, x x x; [T]o construct, maintain and
operate such systems of sanitary sewers as may be necessary;
[T]o construct, maintain and operate such storm drains as may be
necessary." PEA is empowered to issue "rules and regulations as
may be necessary for the proper use by private parties of any or
all of the highways, roads, utilities, buildings and/or any of its
properties and to impose or collect fees or tolls for their use."
Thus, part of the reclaimed foreshore and submerged lands held
by the PEA would actually be needed for public use or service
since many of the functions imposed on PEA by its charter
constitute essential public services.
Moreover, Section 1 of Executive Order No. 525 provides that
PEA "shall be primarily responsible for integrating, directing, and
coordinating all reclamation projects for and on behalf of the
National Government." The same section also states that "[A]ll
reclamation projects shall be approved by the President upon
recommendation of the PEA, and shall be undertaken by the PEA
or through a proper contract executed by it with any person or
entity; x x x." Thus, under EO No. 525, in relation to PD No. 3-A
and PD No.1084, PEA became the primary implementing agency
of the National Government to reclaim foreshore and submerged
lands of the public domain. EO No. 525 recognized PEA as the
government entity "to undertake the reclamation of lands and
ensure their maximum utilization in promoting public welfare
and interests."
79
Since large portions of these reclaimed lands
would obviously be needed for public service, there must be a
formal declaration segregating reclaimed lands no longer needed
for public service from those still needed for public
service.1wphi1.nt
Section 3 of EO No. 525, by declaring that all lands reclaimed by
PEA "shall belong to or be owned by the PEA," could not
automatically operate to classify inalienable lands into alienable
or disposable lands of the public domain. Otherwise, reclaimed
foreshore and submerged lands of the public domain would
automatically become alienable once reclaimed by PEA, whether
or not classified as alienable or disposable.
The Revised Administrative Code of 1987, a later law than either
PD No. 1084 or EO No. 525, vests in the Department of
Environment and Natural Resources ("DENR" for brevity) the
following powers and functions:
"Sec. 4. Powers and Functions. The Department shall:
(1) x x x
x x x
(4) Exercise supervision and control over forest
lands, alienable and disposable public lands, mineral
resources and, in the process of exercising such control,
impose appropriate taxes, fees, charges, rentals and any
such form of levy and collect such revenues for the
49

exploration, development, utilization or gathering of
such resources;
x x x
(14) Promulgate rules, regulations and guidelines on
the issuance of licenses, permits, concessions, lease
agreements and such other privileges concerning the
development, exploration and utilization of the
country's marine, freshwater, and brackish water and
over all aquatic resources of the country and shall
continue to oversee, supervise and police our natural
resources; cancel or cause to cancel such privileges
upon failure, non-compliance or violations of any
regulation, order, and for all other causes which are in
furtherance of the conservation of natural resources and
supportive of the national interest;
(15) Exercise exclusive jurisdiction on the
management and disposition of all lands of the public
domain and serve as the sole agency responsible for
classification, sub-classification, surveying and titling
of lands in consultation with appropriate
agencies."
80
(Emphasis supplied)
As manager, conservator and overseer of the natural resources of
the State, DENR exercises "supervision and control over
alienable and disposable public lands." DENR also exercises
"exclusive jurisdiction on the management and disposition of all
lands of the public domain." Thus, DENR decides whether areas
under water, like foreshore or submerged areas of Manila Bay,
should be reclaimed or not. This means that PEA needs
authorization from DENR before PEA can undertake reclamation
projects in Manila Bay, or in any part of the country.
DENR also exercises exclusive jurisdiction over the disposition
of all lands of the public domain. Hence, DENR decides whether
reclaimed lands of PEA should be classified as alienable under
Sections 6
81
and 7
82
of CA No. 141. Once DENR decides that the
reclaimed lands should be so classified, it then recommends to the
President the issuance of a proclamation classifying the lands as
alienable or disposable lands of the public domain open to
disposition. We note that then DENR Secretary Fulgencio S.
Factoran, Jr. countersigned Special Patent No. 3517 in
compliance with the Revised Administrative Code and Sections 6
and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the
reclamation of areas under water, while PEA is vested with the
power to undertake the physical reclamation of areas under water,
whether directly or through private contractors. DENR is also
empowered to classify lands of the public domain into alienable
or disposable lands subject to the approval of the President. On
the other hand, PEA is tasked to develop, sell or lease the
reclaimed alienable lands of the public domain.
Clearly, the mere physical act of reclamation by PEA of foreshore
or submerged areas does not make the reclaimed lands alienable
or disposable lands of the public domain, much less patrimonial
lands of PEA. Likewise, the mere transfer by the National
Government of lands of the public domain to PEA does not make
the lands alienable or disposable lands of the public domain,
much less patrimonial lands of PEA.
Absent two official acts a classification that these lands are
alienable or disposable and open to disposition and a declaration
that these lands are not needed for public service, lands reclaimed
by PEA remain inalienable lands of the public domain. Only such
an official classification and formal declaration can convert
reclaimed lands into alienable or disposable lands of the public
domain, open to disposition under the Constitution, Title I and
Title III
83
of CA No. 141 and other applicable laws.
84

PEA's Authority to Sell Reclaimed Lands
PEA, like the Legal Task Force, argues that as alienable or
disposable lands of the public domain, the reclaimed lands shall
be disposed of in accordance with CA No. 141, the Public Land
Act. PEA, citing Section 60 of CA No. 141, admits that reclaimed
lands transferred to a branch or subdivision of the government
"shall not be alienated, encumbered, or otherwise disposed of in a
manner affecting its title, except when authorized by Congress: x
x x."
85
(Emphasis by PEA)
In Laurel vs. Garcia,
86
the Court cited Section 48 of the Revised
Administrative Code of 1987, which states that
"Sec. 48. Official Authorized to Convey Real Property.
Whenever real property of the Government is
authorized by law to be conveyed, the deed of
conveyance shall be executed in behalf of the
government by the following: x x x."
Thus, the Court concluded that a law is needed to convey any real
property belonging to the Government. The Court declared that -
"It is not for the President to convey real property of the
government on his or her own sole will. Any such
conveyance must be authorized and approved by a law
enacted by the Congress. It requires executive and
legislative concurrence." (Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525 constitute the
legislative authority allowing PEA to sell its reclaimed lands. PD
No. 1085, issued on February 4, 1977, provides that
"The land reclaimed in the foreshore and offshore
area of Manila Bay pursuant to the contract for the
reclamation and construction of the Manila-Cavite
Coastal Road Project between the Republic of the
Philippines and the Construction and Development
Corporation of the Philippines dated November 20,
1973 and/or any other contract or reclamation covering
the same area is hereby transferred, conveyed and
assigned to the ownership and administration of the
Public Estates Authority established pursuant to PD No.
1084; Provided, however, That the rights and interests
of the Construction and Development Corporation of the
Philippines pursuant to the aforesaid contract shall be
recognized and respected.
Henceforth, the Public Estates Authority shall exercise
the rights and assume the obligations of the Republic of
the Philippines (Department of Public Highways)
arising from, or incident to, the aforesaid contract
between the Republic of the Philippines and the
Construction and Development Corporation of the
Philippines.
In consideration of the foregoing transfer and
assignment, the Public Estates Authority shall issue in
favor of the Republic of the Philippines the
corresponding shares of stock in said entity with an
issued value of said shares of stock (which) shall be
deemed fully paid and non-assessable.
The Secretary of Public Highways and the General
Manager of the Public Estates Authority shall execute
such contracts or agreements, including appropriate
agreements with the Construction and Development
Corporation of the Philippines, as may be necessary to
implement the above.
Special land patent/patents shall be issued by the
Secretary of Natural Resources in favor of the Public
Estates Authority without prejudice to the subsequent
transfer to the contractor or his assignees of such
portion or portions of the land reclaimed or to be
50

reclaimed as provided for in the above-mentioned
contract. On the basis of such patents, the Land
Registration Commission shall issue the corresponding
certificate of title." (Emphasis supplied)
On the other hand, Section 3 of EO No. 525, issued on February
14, 1979, provides that -
"Sec. 3. All lands reclaimed by PEA shall belong to or
be owned by the PEA which shall be responsible for its
administration, development, utilization or disposition
in accordance with the provisions of Presidential Decree
No. 1084. Any and all income that the PEA may derive
from the sale, lease or use of reclaimed lands shall be
used in accordance with the provisions of Presidential
Decree No. 1084."
There is no express authority under either PD No. 1085 or EO
No. 525 for PEA to sell its reclaimed lands. PD No. 1085 merely
transferred "ownership and administration" of lands reclaimed
from Manila Bay to PEA, while EO No. 525 declared that lands
reclaimed by PEA "shall belong to or be owned by PEA." EO No.
525 expressly states that PEA should dispose of its reclaimed
lands "in accordance with the provisions of Presidential Decree
No. 1084," the charter of PEA.
PEA's charter, however, expressly tasks PEA "to develop,
improve, acquire, administer, deal in, subdivide, dispose, lease
and sell any and all kinds of lands x x x owned, managed,
controlled and/or operated by the government."
87
(Emphasis
supplied) There is, therefore, legislative authority granted to
PEA to sell its lands, whether patrimonial or alienable lands of
the public domain. PEA may sell to private parties
its patrimonial properties in accordance with the PEA charter
free from constitutional limitations. The constitutional ban on
private corporations from acquiring alienable lands of the public
domain does not apply to the sale of PEA's patrimonial lands.
PEA may also sell its alienable or disposable lands of the public
domain to private individuals since, with the legislative authority,
there is no longer any statutory prohibition against such sales and
the constitutional ban does not apply to individuals. PEA,
however, cannot sell any of its alienable or disposable lands of
the public domain to private corporations since Section 3, Article
XII of the 1987 Constitution expressly prohibits such sales. The
legislative authority benefits only individuals. Private
corporations remain barred from acquiring any kind of alienable
land of the public domain, including government reclaimed lands.
The provision in PD No. 1085 stating that portions of the
reclaimed lands could be transferred by PEA to the "contractor or
his assignees" (Emphasis supplied) would not apply to private
corporations but only to individuals because of the constitutional
ban. Otherwise, the provisions of PD No. 1085 would violate both
the 1973 and 1987 Constitutions.
The requirement of public auction in the sale of reclaimed lands
Assuming the reclaimed lands of PEA are classified as alienable
or disposable lands open to disposition, and further declared no
longer needed for public service, PEA would have to conduct a
public bidding in selling or leasing these lands. PEA must observe
the provisions of Sections 63 and 67 of CA No. 141 requiring
public auction, in the absence of a law exempting PEA from
holding a public auction.
88
Special Patent No. 3517 expressly
states that the patent is issued by authority of the Constitution and
PD No. 1084, "supplemented by Commonwealth Act No. 141, as
amended." This is an acknowledgment that the provisions of CA
No. 141 apply to the disposition of reclaimed alienable lands of
the public domain unless otherwise provided by law. Executive
Order No. 654,
89
which authorizes PEA "to determine the kind
and manner of payment for the transfer" of its assets and
properties, does not exempt PEA from the requirement of public
auction. EO No. 654 merely authorizes PEA to decide the mode
of payment, whether in kind and in installment, but does not
authorize PEA to dispense with public auction.
Moreover, under Section 79 of PD No. 1445, otherwise known as
the Government Auditing Code, the government is required to
sell valuable government property through public bidding.
Section 79 of PD No. 1445 mandates that
"Section 79. When government property has become
unserviceable for any cause, or is no longer needed, it
shall, upon application of the officer accountable
therefor, be inspected by the head of the agency or his
duly authorized representative in the presence of the
auditor concerned and, if found to be valueless or
unsaleable, it may be destroyed in their presence. I f
found to be valuable, it may be sold at public auction
to the highest bidder under the supervision of the proper
committee on award or similar body in the presence of
the auditor concerned or other authorized representative
of the Commission, after advertising by printed notice
in the Official Gazette, or for not less than three
consecutive days in any newspaper of general
circulation, or where the value of the property does not
warrant the expense of publication, by notices posted for
a like period in at least three public places in the locality
where the property is to be sold. I n the event that the
public auction fails, the property may be sold at a
private sale at such price as may be fixed by the same
committee or body concerned and approved by the
Commission."
It is only when the public auction fails that a negotiated sale is
allowed, in which case the Commission on Audit must approve
the selling price.
90
The Commission on Audit implements Section
79 of the Government Auditing Code through Circular No. 89-
296
91
dated January 27, 1989. This circular emphasizes that
government assets must be disposed of only through public
auction, and a negotiated sale can be resorted to only in case of
"failure of public auction."
At the public auction sale, only Philippine citizens are qualified to
bid for PEA's reclaimed foreshore and submerged alienable lands
of the public domain. Private corporations are barred from
bidding at the auction sale of any kind of alienable land of the
public domain.
PEA originally scheduled a public bidding for the Freedom
Islands on December 10, 1991. PEA imposed a condition that the
winning bidder should reclaim another 250 hectares of submerged
areas to regularize the shape of the Freedom Islands, under a 60-
40 sharing of the additional reclaimed areas in favor of the
winning bidder.
92
No one, however, submitted a bid. On
December 23, 1994, the Government Corporate Counsel advised
PEA it could sell the Freedom Islands through negotiation,
without need of another public bidding, because of the failure of
the public bidding on December 10, 1991.
93

However, the original JVA dated April 25, 1995 covered not only
the Freedom Islands and the additional 250 hectares still to be
reclaimed, it also granted an option to AMARI to reclaim another
350 hectares. The original JVA, a negotiated contract, enlarged
the reclamation area to 750 hectares.
94
The failure of public
bidding on December 10, 1991, involving only 407.84
hectares,
95
is not a valid justification for a negotiated sale of 750
hectares, almost double the area publicly auctioned. Besides, the
failure of public bidding happened on December 10, 1991, more
than three years before the signing of the original JVA on April
25, 1995. The economic situation in the country had greatly
improved during the intervening period.
Reclamation under the BOT Law and the Local Government
Code
51

The constitutional prohibition in Section 3, Article XII of the
1987 Constitution is absolute and clear: "Private corporations or
associations may not hold such alienable lands of the public
domain except by lease, x x x." Even Republic Act No. 6957
("BOT Law," for brevity), cited by PEA and AMARI as
legislative authority to sell reclaimed lands to private parties,
recognizes the constitutional ban. Section 6 of RA No. 6957
states
"Sec. 6. Repayment Scheme. - For the financing,
construction, operation and maintenance of any
infrastructure projects undertaken through the build-
operate-and-transfer arrangement or any of its variations
pursuant to the provisions of this Act, the project
proponent x x x may likewise be repaid in the form of a
share in the revenue of the project or other non-
monetary payments, such as, but not limited to, the grant
of a portion or percentage of the reclaimed land, subject
to the constitutional requirements with respect to the
ownership of the land: x x x." (Emphasis supplied)
A private corporation, even one that undertakes the physical
reclamation of a government BOT project, cannot acquire
reclaimed alienable lands of the public domain in view of the
constitutional ban.
Section 302 of the Local Government Code, also mentioned by
PEA and AMARI, authorizes local governments in land
reclamation projects to pay the contractor or developer in kind
consisting of a percentage of the reclaimed land, to wit:
"Section 302. Financing, Construction, Maintenance,
Operation, and Management of Infrastructure Projects
by the Private Sector. x x x
x x x
In case of land reclamation or construction of industrial
estates, the repayment plan may consist of the grant of a
portion or percentage of the reclaimed land or the
industrial estate constructed."
Although Section 302 of the Local Government Code does not
contain a proviso similar to that of the BOT Law, the
constitutional restrictions on land ownership automatically apply
even though not expressly mentioned in the Local Government
Code.
Thus, under either the BOT Law or the Local Government Code,
the contractor or developer, if a corporate entity, can only be paid
with leaseholds on portions of the reclaimed land. If the
contractor or developer is an individual, portions of the reclaimed
land, not exceeding 12 hectares
96
of non-agricultural lands, may
be conveyed to him in ownership in view of the legislative
authority allowing such conveyance. This is the only way these
provisions of the BOT Law and the Local Government Code can
avoid a direct collision with Section 3, Article XII of the 1987
Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the "act of conveying the ownership
of the reclaimed lands to public respondent PEA transformed
such lands of the public domain to private lands." This theory is
echoed by AMARI which maintains that the "issuance of the
special patent leading to the eventual issuance of title takes the
subject land away from the land of public domain and converts
the property into patrimonial or private property." In short, PEA
and AMARI contend that with the issuance of Special Patent No.
3517 and the corresponding certificates of titles, the 157.84
hectares comprising the Freedom Islands have become private
lands of PEA. In support of their theory, PEA and AMARI cite
the following rulings of the Court:
1. Sumail v. Judge of CFI of Cotabato,
97
where the
Court held
"Once the patent was granted and the corresponding
certificate of title was issued, the land ceased to be part
of the public domain and became private property over
which the Director of Lands has neither control nor
jurisdiction."
2. Lee Hong Hok v. David,
98
where the Court declared -
"After the registration and issuance of the certificate and
duplicate certificate of title based on a public land
patent, the land covered thereby automatically comes
under the operation of Republic Act 496 subject to all
the safeguards provided therein."3. Heirs of Gregorio
Tengco v. Heirs of Jose Aliwalas,
99
where the Court
ruled -
"While the Director of Lands has the power to review
homestead patents, he may do so only so long as the
land remains part of the public domain and continues to
be under his exclusive control; but once the patent is
registered and a certificate of title is issued, the land
ceases to be part of the public domain and becomes
private property over which the Director of Lands has
neither control nor jurisdiction."
4. Manalo v. Intermediate Appellate Court,
100
where the
Court held
"When the lots in dispute were certified as disposable on
May 19, 1971, and free patents were issued covering the
same in favor of the private respondents, the said lots
ceased to be part of the public domain and, therefore,
the Director of Lands lost jurisdiction over the same."
5.Republic v. Court of Appeals,
101
where the Court
stated
"Proclamation No. 350, dated October 9, 1956, of
President Magsaysay legally effected a land grant to the
Mindanao Medical Center, Bureau of Medical Services,
Department of Health, of the whole lot, validly
sufficient for initial registration under the Land
Registration Act. Such land grant is constitutive of a 'fee
simple' title or absolute title in favor of petitioner
Mindanao Medical Center. Thus, Section 122 of the
Act, which governs the registration of grants or patents
involving public lands, provides that 'Whenever public
lands in the Philippine Islands belonging to the
Government of the United States or to the Government
of the Philippines are alienated, granted or conveyed to
persons or to public or private corporations, the same
shall be brought forthwith under the operation of this
Act (Land Registration Act, Act 496) and shall become
registered lands.'"
The first four cases cited involve petitions to cancel the land
patents and the corresponding certificates of titlesissued to
private parties. These four cases uniformly hold that the Director
of Lands has no jurisdiction over private lands or that upon
issuance of the certificate of title the land automatically comes
under the Torrens System. The fifth case cited involves the
registration under the Torrens System of a 12.8-hectare public
land granted by the National Government to Mindanao Medical
Center, a government unit under the Department of Health. The
National Government transferred the 12.8-hectare public land to
serve as the site for the hospital buildings and other facilities of
Mindanao Medical Center, which performed a public service. The
Court affirmed the registration of the 12.8-hectare public land in
the name of Mindanao Medical Center under Section 122 of Act
No. 496. This fifth case is an example of a public land being
52

registered under Act No. 496 without the land losing its character
as a property of public dominion.
In the instant case, the only patent and certificates of title issued
are those in the name of PEA, a wholly government owned
corporation performing public as well as proprietary functions.
No patent or certificate of title has been issued to any private
party. No one is asking the Director of Lands to cancel PEA's
patent or certificates of title. In fact, the thrust of the instant
petition is that PEA's certificates of title should remain with PEA,
and the land covered by these certificates, being alienable lands of
the public domain, should not be sold to a private corporation.
Registration of land under Act No. 496 or PD No. 1529 does not
vest in the registrant private or public ownership of the land.
Registration is not a mode of acquiring ownership but is merely
evidence of ownership previously conferred by any of the
recognized modes of acquiring ownership. Registration does not
give the registrant a better right than what the registrant had prior
to the registration.
102
The registration of lands of the public
domain under the Torrens system, by itself, cannot convert public
lands into private lands.
103

Jurisprudence holding that upon the grant of the patent or
issuance of the certificate of title the alienable land of the public
domain automatically becomes private land cannot apply to
government units and entities like PEA. The transfer of the
Freedom Islands to PEA was made subject to the provisions of
CA No. 141 as expressly stated in Special Patent No. 3517 issued
by then President Aquino, to wit:
"NOW, THEREFORE, KNOW YE, that by authority of
the Constitution of the Philippines and in conformity
with the provisions of Presidential Decree No. 1084,
supplemented by Commonwealth Act No. 141, as
amended, there are hereby granted and conveyed unto
the Public Estates Authority the aforesaid tracts of land
containing a total area of one million nine hundred
fifteen thousand eight hundred ninety four (1,915,894)
square meters; the technical description of which are
hereto attached and made an integral part hereof."
(Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the Freedom Islands
on matters not covered by PD No. 1084. Section 60 of CA No.
141 prohibits, "except when authorized by Congress," the sale of
alienable lands of the public domain that are transferred to
government units or entities. Section 60 of CA No. 141
constitutes, under Section 44 of PD No. 1529, a "statutory lien
affecting title" of the registered land even if not annotated on the
certificate of title.
104
Alienable lands of the public domain held by
government entities under Section 60 of CA No. 141 remain
public lands because they cannot be alienated or encumbered
unless Congress passes a law authorizing their disposition.
Congress, however, cannot authorize the sale to private
corporations of reclaimed alienable lands of the public domain
because of the constitutional ban. Only individuals can benefit
from such law.
The grant of legislative authority to sell public lands in
accordance with Section 60 of CA No. 141 does not automatically
convert alienable lands of the public domain into private or
patrimonial lands. The alienable lands of the public domain must
be transferred to qualified private parties, or to government
entities not tasked to dispose of public lands, before these lands
can become private or patrimonial lands. Otherwise, the
constitutional ban will become illusory if Congress can declare
lands of the public domain as private or patrimonial lands in the
hands of a government agency tasked to dispose of public lands.
This will allow private corporations to acquire directly from
government agencies limitless areas of lands which, prior to such
law, are concededly public lands.
Under EO No. 525, PEA became the central implementing
agencyof the National Government to reclaim foreshore and
submerged areas of the public domain. Thus, EO No. 525
declares that
"EXECUTIVE ORDER NO. 525
Designating the Public Estates Authority as the Agency
Primarily Responsible for all Reclamation Projects
Whereas, there are several reclamation projects which
are ongoing or being proposed to be undertaken in
various parts of the country which need to be evaluated
for consistency with national programs;
Whereas, there is a need to give further institutional
support to the Government's declared policy to provide
for a coordinated, economical and efficient reclamation
of lands;
Whereas, Presidential Decree No. 3-A requires that all
reclamation of areas shall be limited to the National
Government or any person authorized by it under proper
contract;
Whereas, a central authority is needed to act on behalf
of the National Government which shall ensure a
coordinated and integrated approach in the
reclamation of lands;
Whereas, Presidential Decree No. 1084 creates the
Public Estates Authority as a government corporation
to undertake reclamation of lands and ensure their
maximum utilization in promoting public welfare and
interests; and
Whereas, Presidential Decree No. 1416 provides the
President with continuing authority to reorganize the
national government including the transfer, abolition, or
merger of functions and offices.
NOW, THEREFORE, I, FERDINAND E. MARCOS,
President of the Philippines, by virtue of the powers
vested in me by the Constitution and pursuant to
Presidential Decree No. 1416, do hereby order and
direct the following:
Section 1. The Public Estates Authority (PEA) shall be
primarily responsible for integrating, directing, and
coordinating all reclamation projects for and on behalf
of the National Government. All reclamation projects
shall be approved by the President upon
recommendation of the PEA, and shall be undertaken by
the PEA or through a proper contract executed by it with
any person or entity; Provided, that, reclamation
projects of any national government agency or entity
authorized under its charter shall be undertaken in
consultation with the PEA upon approval of the
President.
x x x ."
As the central implementing agency tasked to undertake
reclamation projects nationwide, with authority to sell reclaimed
lands, PEA took the place of DENR as the government agency
charged with leasing or selling reclaimed lands of the public
domain. The reclaimed lands being leased or sold by PEA are not
private lands, in the same manner that DENR, when it disposes of
other alienable lands, does not dispose of private lands but
alienable lands of the public domain. Only when qualified private
parties acquire these lands will the lands become private lands. I n
the hands of the government agency tasked and authorized to
53

dispose of alienable of disposable lands of the public domain,
these lands are still public, not private lands.
Furthermore, PEA's charter expressly states that PEA "shall hold
lands of the public domain" as well as "any and all kinds of
lands." PEA can hold both lands of the public domain and private
lands. Thus, the mere fact that alienable lands of the public
domain like the Freedom Islands are transferred to PEA and
issued land patents or certificates of title in PEA's name does not
automatically make such lands private.
To allow vast areas of reclaimed lands of the public domain to be
transferred to PEA as private lands will sanction a gross violation
of the constitutional ban on private corporations from acquiring
any kind of alienable land of the public domain. PEA will simply
turn around, as PEA has now done under the Amended J VA,
and transfer several hundreds of hectares of these reclaimed and
still to be reclaimed lands to a single private corporation in only
one transaction. This scheme will effectively nullify the
constitutional ban in Section 3, Article XII of the 1987
Constitution which was intended to diffuse equitably the
ownership of alienable lands of the public domain among
Filipinos, now numbering over 80 million strong.
This scheme, if allowed, can even be applied to alienable
agricultural lands of the public domain since PEA can "acquire x
x x any and all kinds of lands." This will open the floodgates to
corporations and even individuals acquiring hundreds of hectares
of alienable lands of the public domain under the guise that in the
hands of PEA these lands are private lands. This will result in
corporations amassing huge landholdings never before seen in
this country - creating the very evil that the constitutional ban was
designed to prevent. This will completely reverse the clear
direction of constitutional development in this country. The 1935
Constitution allowed private corporations to acquire not more
than 1,024 hectares of public lands.
105
The 1973 Constitution
prohibited private corporations from acquiring any kind of public
land, and the 1987 Constitution has unequivocally reiterated this
prohibition.
The contention of PEA and AMARI that public lands, once
registered under Act No. 496 or PD No. 1529, automatically
become private lands is contrary to existing laws. Several laws
authorize lands of the public domain to be registered under the
Torrens System or Act No. 496, now PD No. 1529, without
losing their character as public lands. Section 122 of Act No. 496,
and Section 103 of PD No. 1529, respectively, provide as follows:
Act No. 496
"Sec. 122. Whenever public lands in the Philippine
Islands belonging to the x x x Government of the
Philippine Islands are alienated, granted, or conveyed to
persons or the public or private corporations, the same
shall be brought forthwith under the operation of this
Act and shall become registered lands."
PD No. 1529
"Sec. 103. Certificate of Title to Patents. Whenever
public land is by the Government alienated, granted or
conveyed to any person, the same shall be brought
forthwith under the operation of this Decree." (Emphasis
supplied)
Based on its legislative history, the phrase "conveyed to any
person" in Section 103 of PD No. 1529 includes conveyances of
public lands to public corporations.
Alienable lands of the public domain "granted, donated, or
transferred to a province, municipality, or branch or subdivision
of the Government," as provided in Section 60 of CA No. 141,
may be registered under the Torrens System pursuant to Section
103 of PD No. 1529. Such registration, however, is expressly
subject to the condition in Section 60 of CA No. 141 that the land
"shall not be alienated, encumbered or otherwise disposed of in a
manner affecting its title, except when authorized by Congress."
This provision refers to government reclaimed, foreshore and
marshy lands of the public domain that have been titled but still
cannot be alienated or encumbered unless expressly authorized by
Congress. The need for legislative authority prevents the
registered land of the public domain from becoming private land
that can be disposed of to qualified private parties.
The Revised Administrative Code of 1987 also recognizes that
lands of the public domain may be registered under the Torrens
System. Section 48, Chapter 12, Book I of the Code states
"Sec. 48. Official Authorized to Convey Real Property.
Whenever real property of the Government is authorized
by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following:
(1) x x x
(2) For property belonging to the Republic of the
Philippines, but titled in the name of any political
subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or
instrumentality." (Emphasis supplied)
Thus, private property purchased by the National Government for
expansion of a public wharf may be titled in the name of a
government corporation regulating port operations in the country.
Private property purchased by the National Government for
expansion of an airport may also be titled in the name of the
government agency tasked to administer the airport. Private
property donated to a municipality for use as a town plaza or
public school site may likewise be titled in the name of the
municipality.
106
All these properties become properties of the
public domain, and if already registered under Act No. 496 or PD
No. 1529, remain registered land. There is no requirement or
provision in any existing law for the de-registration of land from
the Torrens System.
Private lands taken by the Government for public use under its
power of eminent domain become unquestionably part of the
public domain. Nevertheless, Section 85 of PD No. 1529
authorizes the Register of Deeds to issue in the name of the
National Government new certificates of title covering such
expropriated lands. Section 85 of PD No. 1529 states
"Sec. 85. Land taken by eminent domain. Whenever any
registered land, or interest therein, is expropriated or
taken by eminent domain, the National Government,
province, city or municipality, or any other agency or
instrumentality exercising such right shall file for
registration in the proper Registry a certified copy of the
judgment which shall state definitely by an adequate
description, the particular property or interest
expropriated, the number of the certificate of title, and
the nature of the public use. A memorandum of the right
or interest taken shall be made on each certificate of title
by the Register of Deeds, and where the fee simple is
taken, a new certificate shall be issued in favor of the
National Government, province, city, municipality, or
any other agency or instrumentality exercising such
right for the land so taken. The legal expenses incident
to the memorandum of registration or issuance of a new
certificate of title shall be for the account of the
authority taking the land or interest therein." (Emphasis
supplied)
Consequently, lands registered under Act No. 496 or PD No.
1529 are not exclusively private or patrimonial lands. Lands of
the public domain may also be registered pursuant to existing
laws.
54

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

This stipulation still contravenes Section 3, Article XII of the
1987 Constitution which provides that private corporations "shall
not hold such alienable lands of the public domain except by
lease." The transfer of title and ownership to AMARI clearly
means that AMARI will "hold" the reclaimed lands other than by
lease. The transfer of title and ownership is a "disposition" of the
reclaimed lands, a transaction considered a sale or alienation
under CA No. 141,
108
the Government Auditing Code,
109
and
Section 3, Article XII of the 1987 Constitution.
The Regalian doctrine is deeply implanted in our legal system.
Foreshore and submerged areas form part of the public domain
and are inalienable. Lands reclaimed from foreshore and
submerged areas also form part of the public domain and are also
inalienable, unless converted pursuant to law into alienable or
disposable lands of the public domain. Historically, lands
reclaimed by the government are sui generis, not available for
sale to private parties unlike other alienable public lands.
Reclaimed lands retain their inherent potential as areas for public
use or public service. Alienable lands of the public domain,
increasingly becoming scarce natural resources, are to be
distributed equitably among our ever-growing population. To
insure such equitable distribution, the 1973 and 1987
Constitutions have barred private corporations from acquiring any
kind of alienable land of the public domain. Those who attempt to
dispose of inalienable natural resources of the State, or seek to
circumvent the constitutional ban on alienation of lands of the
public domain to private corporations, do so at their own risk.
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands comprising
the Freedom Islands, now covered by certificates of title
in the name of PEA, are alienable lands of the public
domain. PEA may lease these lands to private
corporations but may not sell or transfer ownership of
these lands to private corporations. PEA may only sell
these lands to Philippine citizens, subject to the
ownership limitations in the 1987 Constitution and
existing laws.
2. The 592.15 hectares of submerged areas of Manila
Bay remain inalienable natural resources of the public
domain until classified as alienable or disposable lands
open to disposition and declared no longer needed for
public service. The government can make such
classification and declaration only after PEA has
reclaimed these submerged areas. Only then can these
lands qualify as agricultural lands of the public domain,
which are the only natural resources the government can
alienate. In their present state, the 592.15 hectares of
submerged areas are inalienable and outside the
commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI,
a private corporation, ownership of 77.34 hectares
110
of
the Freedom Islands, such transfer is void for being
contrary to Section 3, Article XII of the 1987
Constitution which prohibits private corporations from
acquiring any kind of alienable land of the public
domain.
4. Since the Amended JVA also seeks to transfer to
AMARI ownership of 290.156 hectares
111
of still
submerged areas of Manila Bay, such transfer is void for
being contrary to Section 2, Article XII of the 1987
Constitution which prohibits the alienation of natural
resources other than agricultural lands of the public
domain. PEA may reclaim these submerged areas.
Thereafter, the government can classify the reclaimed
lands as alienable or disposable, and further declare
them no longer needed for public service. Still, the
transfer of such reclaimed alienable lands of the public
domain to AMARI will be void in view of Section 3,
Article XII of the 1987 Constitution which prohibits
private corporations from acquiring any kind of
alienable land of the public domain.
Clearly, the Amended JVA violates glaringly Sections 2 and 3,
Article XII of the 1987 Constitution. Under Article 1409
112
of the
Civil Code, contracts whose "object or purpose is contrary to
law," or whose "object is outside the commerce of men," are
"inexistent and void from the beginning." The Court must
perform its duty to defend and uphold the Constitution, and
therefore declares the Amended J VA null and void ab initio.
Seventh issue: whether the Court is the proper forum to raise
the issue of whether the Amended J VA is grossly
disadvantageous to the government.
Considering that the Amended JVA is null and void ab initio,
there is no necessity to rule on this last issue. Besides, the Court is
not a trier of facts, and this last issue involves a determination of
factual matters.
WHEREFORE, the petition is GRANTED. The Public Estates
Authority and Amari Coastal Bay Development Corporation
are PERMANENTLY ENJOINED from implementing the
Amended Joint Venture Agreement which is hereby
declared NULL and VOID ab initio.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Puno, Vitug, Kapunan, Mendoza,
Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez,
Austria-Martinez, and Corona, JJ., concu