PD 1529

Section 44. Statutory liens affecting title. Every registered owner receiving a certificate of title in
pursuance of a decree of registration, and every subsequent purchaser of registered land taking a
certificate of title for value and in good faith, shall hold the same free from all encumbrances except
those noted in said certificate and any of the following encumbrances which may be subsisting,
namely:
First. Liens, claims or rights arising or existing under the laws and Constitution of the
Philippines which are not by law required to appear of record in the Registry of Deeds in
order to be valid against subsequent purchasers or encumbrancers of record.
Second. Unpaid real estate taxes levied and assessed within two years immediately
preceding the acquisition of any right over the land by an innocent purchaser for value,
without prejudice to the right of the government to collect taxes payable before that period
from the delinquent taxpayer alone.
Third. Any public highway or private way established or recognized by law, or any
government irrigation canal or lateral thereof, if the certificate of title does not state that the
boundaries of such highway or irrigation canal or lateral thereof have been determined.
Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or
pursuant to, Presidential Decree No. 27 or any other law or regulations on agrarian reform.
Section 46. General incidents of registered land. Registered land shall be subject to such burdens
and incidents as may arise by operation of law. Nothing contained in this decree shall in any way be
construed to relieve registered land or the owners thereof from any rights incident to the relation of
husband and wife, landlord and tenant, or from liability to attachment or levy on execution, or from
liability to any lien of any description established by law on the land and the buildings thereon, or on
the interest of the owner in such land or buildings, or to change the laws of descent, or the rights of
partition between co-owners, or the right to take the same by eminent domain, or to relieve such
land from liability to be recovered by an assignee in insolvency or trustee in bankcruptcy under the
laws relative to preferences, or to change or affect in any way other rights or liabilities created by law
and applicable to unregistered land, except as otherwise provided in this Decree.
Section 49. Splitting, or consolidation of titles. A registered owner of several distinct parcels of land
embraced in and covered by a certificate of title desiring in lieu thereof separate certificates, each
containing one or more parcels, may file a written request for that purpose with the Register of
Deeds concerned, and the latter, upon the surrender of the owner's duplicate, shall cancel it together
with its original and issue in lieu thereof separate certificates as desired. A registered owner of
several distinct parcels of land covered by separate certificates of title desiring to have in lieu thereof
a single certificate for the whole land, or several certificates for the different parcels thereof, may
also file a written request with the Register of Deeds concerned, and the latter, upon the surrender of
the owner's duplicates, shall cancel them together with their originals, and issue in lieu thereof one
or separate certificates as desired.
Section 50. Subdivision and consolidation plans. Any owner subdividing a tract of registered land
into lots which do not constitute a subdivision project has defined and provided for under P.D. No.
957, shall file with the Commissioner of Land Registration or with the Bureau of Lands a subdivision

plan of such land on which all boundaries, streets, passageways and waterways, if any, shall be
distinctly and accurately delineated.
PRESIDENTIAL DECREE No. 957 July 12, 1976
REGULATING THE SALE OF SUBDIVISION LOTS AND CONDOMINIUMS, PROVIDING
PENALTIES FOR VIOLATIONS THEREOF
WHEREAS, it is the policy of the State to afford its inhabitants the requirements of decent human
settlement and to provide them with ample opportunities for improving their quality of life;
WHEREAS, numerous reports reveal that many real estate subdivision owners, developers,
operators, and/or sellers have reneged on their representations and obligations to provide and
maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and other
similar basic requirements, thus endangering the health and safety of home and lot buyers;
WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent
manipulations perpetrated by unscrupulous subdivision and condominium sellers and operators,
such as failure to deliver titles to the buyers or titles free from liens and encumbrances, and to pay
real estate taxes, and fraudulent sales of the same subdivision lots to different innocent purchasers
for value;
WHEREAS, these acts not only undermine the land and housing program of the government but
also defeat the objectives of the New Society, particularly the promotion of peace and order and the
enhancement of the economic, social and moral condition of the Filipino people;
WHEREAS, this state of affairs has rendered it imperative that the real estate subdivision and
condominium businesses be closely supervised and regulated, and that penalties be imposed on
fraudulent practices and manipulations committed in connection therewith.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the
powers vested in me by the Constitution, do hereby decree and order:
Title I
TITLE AND DEFINITIONS
Section 1. Title. This Decree shall be known as THE SUBDIVISION AND CONDOMINIUM
BUYERS' PROTECTIVE DECREE.
Section 2. Definition of Terms When used in this Decree, the following terms shall, unless the
context otherwise indicates, have the following respective meanings:
(a) Person. "Person" shall mean a natural or a juridical person. A juridical person refers to a
business firm whether a corporation, partnership, cooperative or associations or a single
proprietorship.
(b) Sale or sell. "Sale" or "sell" shall include every disposition, or attempt to dispose, for a
valuable consideration, of a subdivision lot, including the building and other improvements

thereof, if any, in a subdivision project or a condominium unit in a condominium project.

"Sale" and "sell" shall also include a contract to sell, a contract of purchase and sale, an
exchange, an attempt to sell, an option of sale or purchase, a solicitation of a sale, or an
offer to sell, directly or by an agent, or by a circular, letter, advertisement or otherwise.
A privilege given to a member of a cooperative, corporation, partnership, or any association
and/or the issuance of a certificate or receipt evidencing or giving the right of participation in,
or right to, any land in consideration of payment of the membership fee or dues, shall be
deemed a sale within the meaning of this definition.
(c) Buy and purchase. The "buy" and "purchase" shall include any contract to buy, purchase,
or otherwise acquire for a valuable consideration a subdivision lot, including the building and
other improvements, if any, in a subdivision project or a condominium unit in a condominium
project.
(d) Subdivision project. "Subdivision project" shall mean a tract or a parcel of land registered
under Act No. 496 which is partitioned primarily for residential purposes into individual lots
with or without improvements thereon, and offered to the public for sale, in cash or in
installment terms. It shall include all residential, commercial, industrial and recreational areas
as well as open spaces and other community and public areas in the project.
(e) Subdivision lot. "Subdivision lot" shall mean any of the lots, whether residential,
commercial, industrial, or recreational, in a subdivision project.
(f) Complex subdivision plan. "Complex subdivision plan" shall mean a subdivision plan of a
registered land wherein a street, passageway or open space is delineated on the plan.
(g) Condominium project. "Condominium project" shall mean the entire parcel of real
property divided or to be divided primarily for residential purposes into condominium units,
including all structures thereon.
(h) Condominium unit. "Condominium unit" shall mean a part of the condominium project
intended for any type of independent use or ownership, including one or more rooms or
spaces located in one or more floors (or part of parts of floors) in a building or buildings and
such accessories as may be appended thereto.
(i) Owner. "Owner" shall refer to the registered owner of the land subject of a subdivision or a
condominium project.
(j) Developer. "Developer" shall mean the person who develops or improves the subdivision
project or condominium project for and in behalf of the owner thereof.
(k) Dealer. "Dealer" shall mean any person directly engaged as principal in the business of
buying, selling or exchanging real estate whether on a full-time or part-time basis.
(l) Broker. "Broker" shall mean any person who, for commission or other compensation,
undertakes to sell or negotiate the sale of a real estate belonging to another.

(m) Salesman. "Salesman" shall refer to the person regularly employed by a broker to
perform, for and in his behalf, any or all functions of a real estate broker.
(n) Authority. "Authority" shall mean the National Housing Authority.
Title II
REGISTRATION AND LICENSE TO SELL
Section 3. National Housing Authority The National Housing Authority shall have exclusive
jurisdiction to regulate the real estate trade and business in accordance with the provisions of this
Decree.
Section 4. Registration of Projects The registered owner of a parcel of land who wishes to convert
the same into a subdivision project shall submit his subdivision plan to the Authority which shall act
upon and approve the same, upon a finding that the plan complies with the Subdivision Standards'
and Regulations enforceable at the time the plan is submitted. The same procedure shall be
followed in the case of a plan for a condominium project except that, in addition, said Authority shall
act upon and approve the plan with respect to the building or buildings included in the condominium
project in accordance with the National Building Code (R.A. No. 6541).
The subdivision plan, as so approved, shall then be submitted to the Director of Lands for approval
in accordance with the procedure prescribed in Section 44 of the Land Registration Act (Act No. 496,
as amended by R.A. No. 440): Provided, that it case of complex subdivision plans, court approval
shall no longer be required. The condominium plan as likewise so approved, shall be submitted to
the Register of Deeds of the province or city in which the property lies and the same shall be acted
upon subject to the conditions and in accordance with the procedure prescribed in Section 4 of the
Condominium Act (R.A. No. 4726).
The owner or the real estate dealer interested in the sale of lots or units, respectively, in such
subdivision project or condominium project shall register the project with the Authority by filing
therewith a sworn registration statement containing the following information:
(a) Name of the owner;
(b) The location of the owner's principal business office, and if the owner is a non-resident
Filipino, the name and address of his agent or representative in the Philippines is authorized
to receive notice;
(c) The names and addresses of all the directors and officers of the business firm, if the
owner be a corporation, association, trust, or other entity, and of all the partners, if it be a
partnership;
(d) The general character of the business actually transacted or to be transacted by the
owner; and
(e) A statement of the capitalization of the owner, including the authorized and outstanding
amounts of its capital stock and the proportion thereof which is paid-up.

The following documents shall be attached to the registration statement:

(a) A copy of the subdivision plan or condominium plan as approved in accordance with the
first and second paragraphs of this section.
(b) A copy of any circular, prospectus, brochure, advertisement, letter, or communication to
be used for the public offering of the subdivision lots or condominium units;
(c) In case of a business firm, a balance sheet showing the amount and general character of
its assets and liabilities and a copy of its articles of incorporation or articles of partnership or
association, as the case may be, with all the amendments thereof and existing by-laws or
instruments corresponding thereto.
(d) A title to the property which is free from all liens and encumbrances: Provided, however,
that in case any subdivision lot or condominium unit is mortgaged, it is sufficient if the
instrument of mortgage contains a stipulation that the mortgagee shall release the mortgage
on any subdivision lot or condominium unit as soon as the full purchase price for the same is
paid by the buyer.
The person filing the registration statement shall pay the registration fees prescribed therefor by the
Authority.
Thereupon, the Authority shall immediately cause to be published a notice of the filing of the
registration statement at the expense of the applicant-owner or dealer, in two newspapers general
circulation, one published in English and another in Pilipino, once a week for two consecutive weeks,
reciting that a registration statement for the sale of subdivision lots or condominium units has been
filed in the National Housing Authority; that the aforesaid registration statement, as well as the
papers attached thereto, are open to inspection during business hours by interested parties, under
such regulations as the Authority may impose; and that copies thereof shall be furnished to any party
upon payment of the proper fees.
The subdivision project of the condominium project shall be deemed registered upon completion of
the above publication requirement. The fact of such registration shall be evidenced by a registration
certificate to be issued to the applicant-owner or dealer.
Section 5. License to sell. Such owner or dealer to whom has been issued a registration certificate
shall not, however, be authorized to sell any subdivision lot or condominium unit in the registered
project unless he shall have first obtained a license to sell the project within two weeks from the
registration of such project.
The Authority, upon proper application therefor, shall issue to such owner or dealer of a registered
project a license to sell the project if, after an examination of the registration statement filed by said
owner or dealer and all the pertinent documents attached thereto, he is convinced that the owner or
dealer is of good repute, that his business is financially stable, and that the proposed sale of the
subdivision lots or condominium units to the public would not be fraudulent.
Section 6. Performance Bond. No license to sell subdivision lots or condominium units shall be
issued by the Authority under Section 5 of this Decree unless the owner or dealer shall have filed an
adequate performance bond approved by said Authority to guarantee the construction and

maintenance of the roads, gutters, drainage, sewerage, water system, lighting systems, and full
development of the subdivision project or the condominium project and the compliance by the owner
or dealer with the applicable laws and rules and regulations.
The performance bond shall be executed in favor of the Republic of the Philippines and shall
authorize the Authority to use the proceeds thereof for the purposes of its undertaking in case of
forfeiture as provided in this Decree.
Section 7. Exempt transactions. A license to sell and performance bond shall not be required in any
of the following transactions:
(a) Sale of a subdivision lot resulting from the partition of land among co-owners and coheirs.
(b) Sale or transfer of a subdivision lot by the original purchaser thereof and any subsequent
sale of the same lot.
(c) Sale of a subdivision lot or a condominium unit by or for the account of a mortgagee in
the ordinary course of business when necessary to liquidate a bona fide debt.
Section 8. Suspension of license to sell. Upon verified complaint by a buyer of a subdivision lot or a
condominium unit in any interested party, the Authority may, in its discretion, immediately suspend
the owner's or dealer's license to sell pending investigation and hearing of the case as provided in
Section 13 hereof.
The Authority may motu proprio suspend the license to sell if, in its opinion, any information in the
registration statement filed by the owner or dealer is or has become misleading, incorrect,
inadequate or incomplete or the sale or offering for a sale of the subdivision or condominium project
may work or tend to work a fraud upon prospective buyers.
The suspension order may be lifted if, after notice and hearing, the Authority is convinced that the
registration statement is accurate or that any deficiency therein has been corrected or supplemented
or that the sale to the public of the subdivision or condominium project will neither be fraudulent not
result in fraud. It shall also be lifted upon dismissal of the complaint for lack of legal basis.
Until the final entry of an order of suspension, the suspension of the right to sell the project, though
binding upon all persons notified thereof, shall be deemed confidential unless it shall appear that the
order of suspension has in the meantime been violated.
Section 9. Revocation of registration certificate and license to sell. The Authority may, motu proprio
or upon verified complaint filed by a buyer of a subdivision lot or condominium unit, revoke the
registration of any subdivision project or condominium project and the license to sell any subdivision
lot or condominium unit in said project by issuing an order to this effect, with his findings in respect
thereto, if upon examination into the affairs of the owner or dealer during a hearing as provided for in
Section 14 hereof, if shall appear there is satisfactory evidence that the said owner or dealer:
(a) Is insolvent; or

(b) has violated any of the provisions of this Decree or any applicable rule or regulation of
the Authority, or any undertaking of his/its performance bond; or
(c) Has been or is engaged or is about to engage in fraudulent transactions; or
(d) Has made any misrepresentation in any prospectus, brochure, circular or other literature
about the subdivision project or condominium project that has been distributed to prospective
buyers; or
(e) Is of bad business repute; or
(f) Does not conduct his business in accordance with law or sound business principles.
Where the owner or dealer is a partnership or corporation or an unincorporated association, it shall
be sufficient cause for cancellation of its registration certificate and its license to sell, if any member
of such partnership or any officer or director of such corporation or association has been guilty of
any act or omission which would be cause for refusing or revoking the registration of an individual
dealer, broker or salesman as provided in Section 11 hereof.
Section 10. Registers of subdivision lots and condominium units. A record of subdivision lots and
condominium units shall be kept in the Authority wherein shall be entered all orders of the Authority
affecting the condition or status thereof. The registers of subdivision lots and condominium units
shall be open to public inspection subject to such reasonable rules as the Authority may prescribe.
Title III
DEALERS, BROKERS AND SALESMEN
Section 11. Registration of dealers, brokers and salesmen. No real estate dealer, broker or
salesman shall engage in the business of selling subdivision lots or condominium units unless he
has registered himself with the Authority in accordance with the provisions of this section.
If the Authority shall find that the applicant is of good repute and has complied with the applicable
rules of the Authority, including the payment of the prescribed fee, he shall register such applicant as
a dealer, broker or salesman upon filing a bond, or other security in lieu thereof, in such sum as may
be fixed by the Authority conditioned upon his faithful compliance with the provisions of this Decree:
Provided, that the registration of a salesman shall cease upon the termination of his employment
with a dealer or broker.
Every registration under this section shall expire on the thirty-first day of December of each year.
Renewal of registration for the succeeding year shall be granted upon written application therefor
made not less than thirty nor more than sixty days before the first day of the ensuing year and upon
payment of the prescribed fee, without the necessity of filing further statements or information,
unless specifically required by the Authority. All applications filed beyond said period shall be treated
as original applications.
The names and addresses of all persons registered as dealers, brokers, or salesmen shall be
recorded in a Register of Brokers, Dealers and Salesmen kept in the Authority which shall be open
to public inspection.

Section 12. Revocation of registration as dealers, brokers or salesmen. Registration under the
preceding section may be refused or any registration granted thereunder, revoked by the Authority if,
after reasonable notice and hearing, it shall determine that such applicant or registrant:
1. Has violated any provision of this Decree or any rule or regulation made hereunder; or
2. Has made a material false statement in his application for registration; or
3. Has been guilty of a fraudulent act in connection with any sale of a subdivision lot or
condominium unit; or
4. Has demonstrated his unworthiness to transact the business of dealer, broker, or
salesman, as the case may be.
In case of charges against a salesman, notice thereof shall also be given the broker or dealer
employing such salesman.
Pending hearing of the case, the Authority shall have the power to order the suspension of the
dealer's, broker's, of salesman's registration; provided, that such order shall state the cause for the
suspension.
The suspension or revocation of the registration of a dealer or broker shall carry with it all the
suspension or revocation of the registrations of all his salesmen.
Title IV
PROCEDURE FOR REVOCATION OF REGISTRATION CERTIFICATE
Section 13. Hearing. In the hearing for determining the existence of any ground or grounds for the
suspension and/or revocation of registration certificate and license to sell as provided in Section 8
and 9 hereof, the following shall be complied with:
(a) Notice. No such hearing shall proceed unless the respondent is furnished with a copy of
the complaint against him or is notified in writing of the purpose of such hearing.
(b) Venue. The hearing may be held before the officer or officers designated by the Authority
on the date and place specified in the notice.
(c) Nature of proceeding. The proceedings shall be non-litigious and summary in nature
without regard to legal technicalities obtaining in courts of law. The Rules of court shall not
apply in said hearing except by analogy or in a suppletory character and whenever
practicable and convenient.
(d) Power incidental to the hearing. For the purpose of the hearing or other proceeding under
this Decree, the officer or officers designated to hear the complaint shall have the power to
administer oaths, subpoena witnesses, conduct ocular inspections, take depositions, and
require the production of any book, paper, correspondence, memorandum, or other record
which are deemed relevant or material to the inquiry.

Section 14. Contempt.

(a) Direct contempt. The officer or officers designated by the Authority to hear the complaint
may summarily adjudge in direct contempt any person guilty of misbehavior in the presence
of or so near the said hearing officials as to obstruct or interrupt the proceedings before the
same or of refusal to be sworn or to answer as a witness or to subscribe an affidavit or
deposition when lawfully required to do so. The person found guilty of direct contempt under
this section shall be punished by a fine not exceeding Fifty (P50.00) Pesos or imprisonment
not exceeding five (5) days, or both.
(b) Indirect contempt. The officer or officers designated to hear the complaint may also
adjudge any person in indirect contempt on grounds and in the manner prescribed in Rule 71
of the Revised Rules of Court.
Section 15. Decision. The case shall be decided within thirty (30) days from the time the same is
submitted for decision. The Decision may order the revocation of the registration of the subdivision
or condominium project, the suspension, cancellation, or revocation of the license to sell and/or
forfeiture, in whole or in part, of the performance bond mentioned in Section 6 hereof. In case
forfeiture of the bond is ordered, the Decision may direct the provincial or city engineer to undertake
or cause the construction of roads and of other requirements for the subdivision or condominium as
stipulated in the bond, chargeable to the amount forfeited. Such decision shall be immediately
executory and shall become final after the lapse of 15 days from the date of receipt of the Decision.
Section 16. Cease and Desist Order. Whenever it shall appear to the Authority that any person is
engaged or about to engage in any act or practice which constitutes or will constitute a violation of
the provisions of this Decree, or of any rule or regulation thereunder, it may, upon due notice and
hearing as provided in Section 13 hereof, issue a cease and desist order to enjoin such act or
practices.
Section 17. Registration. All contracts to sell, deeds of sale and other similar instruments relative to
the sale or conveyance of the subdivision lots and condominium units, whether or not the purchase
price is paid in full, shall be registered by the seller in the Office of the Register of Deeds of the
province or city where the property is situated.
Whenever a subdivision plan duly approved in accordance with Section 4 hereof, together with the
corresponding owner's duplicate certificate of title, is presented to the Register of Deeds for
registration, the Register of Deeds shall register the same in accordance with the provisions of the
Land Registration Act, as amended: Provided, however, that it there is a street, passageway or
required open space delineated on a complex subdivision plan hereafter approved and as defined in
this Decree, the Register of Deeds shall annotate on the new certificate of title covering the street,
passageway or open space, a memorandum to the effect that except by way of donation in favor of a
city or municipality, no portion of any street, passageway, or open space so delineated on the plan
shall be closed or otherwise disposed of by the registered owner without the requisite approval as
provided under Section 22 of this Decree.
Section 18. Mortgages. No mortgage on any unit or lot shall be made by the owner or developer
without prior written approval of the Authority. Such approval shall not be granted unless it is shown
that the proceeds of the mortgage loan shall be used for the development of the condominium or
subdivision project and effective measures have been provided to ensure such utilization. The loan

value of each lot or unit covered by the mortgage shall be determined and the buyer thereof, if any,
shall be notified before the release of the loan. The buyer may, at his option, pay his installment for
the lot or unit directly to the mortgagee who shall apply the payments to the corresponding mortgage
indebtedness secured by the particular lot or unit being paid for, with a view to enabling said buyer to
obtain title over the lot or unit promptly after full payment thereto;
Section 19. Advertisements. Advertisements that may be made by the owner or developer through
newspaper, radio, television, leaflets, circulars or any other form about the subdivision or the
condominium or its operations or activities must reflect the real facts and must be presented in such
manner that will not tend to mislead or deceive the public.
The owner or developer shall answerable and liable for the facilities, improvements, infrastructures
or other forms of development represented or promised in brochures, advertisements and other
sales propaganda disseminated by the owner or developer or his agents and the same shall form
part of the sales warranties enforceable against said owner or developer, jointly and severally.
Failure to comply with these warranties shall also be punishable in accordance with the penalties
provided for in this Decree.
Section 20. Time of Completion. Every owner or developer shall construct and provide the facilities,
improvements, infrastructures and other forms of development, including water supply and lighting
facilities, which are offered and indicated in the approved subdivision or condominium plans,
brochures, prospectus, printed matters, letters or in any form of advertisement, within one year from
the date of the issuance of the license for the subdivision or condominium project or such other
period of time as may be fixed by the Authority.
Section 21. Sales Prior to Decree. In cases of subdivision lots or condominium units sold or
disposed of prior to the effectivity of this Decree, it shall be incumbent upon the owner or developer
of the subdivision or condominium project to complete compliance with his or its obligations as
provided in the preceding section within two years from the date of this Decree unless otherwise
extended by the Authority or unless an adequate performance bond is filed in accordance with
Section 6 hereof.
Failure of the owner or developer to comply with the obligations under this and the preceding
provisions shall constitute a violation punishable under Sections 38 and 39 of this Decree.
Section 22. Alteration of Plans. No owner or developer shall change or alter the roads, open
spaces, infrastructures, facilities for public use and/or other form of subdivision development as
contained in the approved subdivision plan and/or represented in its advertisements, without the
permission of the Authority and the written conformity or consent of the duly organized homeowners
association, or in the absence of the latter, by the majority of the lot buyers in the subdivision.
Section 23. Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision
or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner
or developer when the buyer, after due notice to the owner or developer, desists from further
payment due to the failure of the owner or developer to develop the subdivision or condominium
project according to the approved plans and within the time limit for complying with the same. Such
buyer may, at his option, be reimbursed the total amount paid including amortization interests but
excluding delinquency interests, with interest thereon at the legal rate.

Section 24. Failure to pay installments. The rights of the buyer in the event of this failure to pay the
installments due for reasons other than the failure of the owner or developer to develop the project
shall be governed by Republic Act No. 6552.
Where the transaction or contract was entered into prior to the effectivity of Republic Act No. 6552 on
August 26, 1972, the defaulting buyer shall be entitled to the corresponding refund based on the
installments paid after the effectivity of the law in the absence of any provision in the contract to the
contrary.
Section 25. Issuance of Title. The owner or developer shall deliver the title of the lot or unit to the
buyer upon full payment of the lot or unit. No fee, except those required for the registration of the
deed of sale in the Registry of Deeds, shall be collected for the issuance of such title. In the event a
mortgage over the lot or unit is outstanding at the time of the issuance of the title to the buyer, the
owner or developer shall redeem the mortgage or the corresponding portion thereof within six
months from such issuance in order that the title over any fully paid lot or unit may be secured and
delivered to the buyer in accordance herewith.
Section 26. Realty Tax. Real estate tax and assessment on a lot or unit shall de paid by the owner
or developer without recourse to the buyer for as long as the title has not passed the buyer;
Provided, however, that if the buyer has actually taken possession of and occupied the lot or unit, he
shall be liable to the owner or developer for such tax and assessment effective the year following
such taking of possession and occupancy.
Section 27. Other Charges. No owner or developer shall levy upon any lot or buyer a fee for an
alleged community benefit. Fees to finance services for common comfort, security and sanitation
may be collected only by a properly organized homeowners association and only with the consent of
a majority of the lot or unit buyers actually residing in the subdivision or condominium project.
Section 28. Access to Public Offices in the Subdivisions. No owner or developer shall deny any
person free access to any government office or public establishment located within the subdivision
or which may be reached only by passing through the subdivision.
Section 29. Right of Way to Public Road. The owner or developer of a subdivision without access to
any existing public road or street must secure a right of way to a public road or street and such right
of way must be developed and maintained according to the requirement of the government and
authorities concerned.
Section 30. Organization of Homeowners Association. The owner or developer of a subdivision
project or condominium project shall initiate the organization of a homeowners association among
the buyers and residents of the projects for the purpose of promoting and protecting their mutual
interest and assist in their community development.
Section 31. Donations of roads and open spaces to local government. The registered owner or
developer of the subdivision or condominium project, upon completion of the development of said
project may, at his option, convey by way of donation the roads and open spaces found within the
project to the city or municipality wherein the project is located. Upon acceptance of the donation by
the city or municipality concerned, no portion of the area donated shall thereafter be converted to
any other purpose or purposes unless after hearing, the proposed conversion is approved by the
Authority.

Section 32. Phases of Subdivision. For purposes of complying with the provisions of this Decree,
the owner or developer may divide the development and sale of the subdivision into phases, each
phase to cover not less than ten hectares. The requirement imposed by this Decree on the
subdivision as a whole shall be deemed imposed on each phase.
Section 33. Nullity of waivers. Any condition, stipulation, or provision in contract of sale whereby any
person waives compliance with any provision of this Decree or of any rule or regulation issued
thereunder shall be void.
Section 34. Visitorial powers. This Authority, through its duly authorized representative may, at any
time, make an examination into the business affairs, administration, and condition of any person,
corporation, partnership, cooperative, or association engaged in the business of selling subdivision
lots and condominium units. For this purpose, the official authorized so to do shall have the authority
to examine under oath the directors, officers, stockholders or members of any corporation,
partnership, association, cooperative or other persons associated or connected with the business
and to issue subpoena or subpoena duces tecum in relation to any investigation that may arise
therefrom.
The Authority may also authorize the Provincial, City or Municipal Engineer, as the case may be, to
conduct an ocular inspection of the project to determine whether the development of said project
conforms to the standards and specifications prescribed by the government.
The books, papers, letters, and other documents belonging to the person or entities herein
mentioned shall be open to inspection by the Authority or its duly authorized representative.
Section 35. Take-over Development. The Authority, may take over or cause the development and
completion of the subdivision or condominium project at the expenses of the owner or developer,
jointly and severally, in cases where the owner or developer has refused or failed to develop or
complete the development of the project as provided for in this Decree.
The Authority may, after such take-over, demand, collect and receive from the buyers the installment
payments due on the lots, which shall be utilized for the development of the subdivision.
Section 36. Rules and Regulations. The Authority shall issue the necessary standards, rules and
regulations for the effective implementation of the provisions of this Decree. Such standards, rules
and regulations shall take effect immediately after their publication three times a week for two
consecutive weeks in any newspaper of general circulation.
Section 37. Deputization of law enforcement agencies. The Authority may deputize the Philippine
Constabulary or any law enforcement agency in the execution of its final orders, rulings or decisions.
Section 38. Administrative Fines. The Authority may prescribe and impose fines not exceeding ten
thousand pesos for violations of the provisions of this Decree or of any rule or regulation thereunder.
Fines shall be payable to the Authority and enforceable through writs of execution in accordance
with the provisions of the Rules of Court.
Section 39. Penalties. Any person who shall violate any of the provisions of this Decree and/or any
rule or regulation that may be issued pursuant to this Decree shall, upon conviction, be punished by
a fine of not more than twenty thousand (P20,000.00) pesos and/or imprisonment of not more than

ten years: Provided, That in the case of corporations, partnership, cooperatives, or associations, the
President, Manager or Administrator or the person who has charge of the administration of the
business shall be criminally responsible for any violation of this Decree and/or the rules and
regulations promulgated pursuant thereto.
Section 40. Liability of controlling persons. Every person who directly or indirectly controls any
person liable under any provision of this Decree or of any rule or regulation issued thereunder shall
be liable jointly and severally with and to the same extent as such controlled person unless the
controlling person acted in good faith and did not directly or indirectly induce the act or acts
constituting the violation or cause of action.
Section 41. Other remedies. The rights and remedies provided in this Decree shall be in addition to
any and all other rights and remedies that may be available under existing laws.
Section 42. Repealing clause. All laws, executive orders, rules and regulations or part thereof
inconsistent with the provisions of this Decree are hereby repealed or modified accordingly.
Section 43. Effectivity. This Decree shall take effect upon its approval.

CASES:
G.R. No. 164687

February 12, 2009

SM PRIME HOLDINGS, INC., Petitioner,

vs.
ANGELA V. MADAYAG, Respondent.
DECISION
NACHURA, J.:
This is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) dated March
19, 2004 and Resolution dated July 15, 2004, which set aside the lower courts order to suspend the
proceedings on respondents application for land registration.
On July 12, 2001, respondent Angela V. Madayag filed with the Regional Trial Court (RTC) of
Urdaneta, Pangasinan an application for registration of a parcel of land with an area of 1,492 square
meters located in Barangay Anonas, Urdaneta City, Pangasinan.2 Attached to the application was a
tracing cloth of Survey Plan Psu-01-008438, approved by the Land Management Services (LMS) of
the Department of Environment and Natural Resources (DENR), Region 1, San Fernando City.
On August 20, 2001, petitioner SM Prime Holdings, Inc., through counsel, wrote the Chief, Regional
Survey Division, DENR, Region I, demanding the cancellation of the respondents survey plan
because the lot encroached on the properties it recently purchased from several lot owners and that,
despite being the new owner of the adjoining lots, it was not notified of the survey conducted on
June 8, 2001.3
Petitioner then manifested its opposition to the respondents application for registration. The
Republic of the Philippines, through the Office of the Solicitor General, and the heirs of Romulo
Visperas also filed their respective oppositions.
On February 6, 2002, petitioner filed its formal opposition. Petitioner alleged that it had recently
bought seven parcels of land in Barangay Anonas, Urdaneta, delineated as Lots B, C, D, E, G, H
and I in Consolidation-Subdivision Plan No. (LRC) Pcs-21329, approved by the Land Registration
Commission on August 26, 1976, and previously covered by Survey Plan No. Psu-236090 approved
by the Bureau of Lands on December 29, 1970. These parcels of land are covered by separate
certificates of title, some of which are already in the name of the petitioner while the others are still in
the name of the previous owners.
On February 20, 2002, the RTC declared a general default, except as to the petitioner, the Republic,
and the heirs of Romulo Visperas. Thereafter, respondent commenced the presentation of evidence.
Meanwhile, acting on petitioners request for the cancellation of the respondents survey plan, DENR
Assistant Regional Executive Director for Legal Services and Public Affairs, Allan V. Barcena,
advised the petitioner to file a petition for cancellation in due form so that the DENR could properly
act on the same.4 Accordingly, petitioner formally filed with the DENR a petition5 for cancellation of
the survey plan sometime in March 2002, alleging the following grounds:

I.
THERE IS NO SUCH THING AS ALIENABLE OR DISPOSABLE PROPERTY WHICH IS THE
SUBJECT LOT IN THIS CASE
II.
NO NOTICE WAS MADE UPON PETITIONER (AS ADJOINING LANDOWNER AND WHO BEARS
INTEREST OVER THE SUBJECT LOT) MUCH LESS THE OWNERS OF ADJOINING LANDS.
III.
THE CIRCUMSTANCES EVIDENTLY SHOW THAT BAD FAITH AND/OR MALICE ATTENDED THE
APPROVAL OF (PLAN WITH PSU NO. 01-008438).6
On July 17, 2002, petitioner filed an Urgent Motion to Suspend Proceedings 7 in the land registration
case, alleging that the court should await the DENR resolution of the petition for the cancellation of
the survey plan "as the administrative case is prejudicial to the determination" of the land registration
case.
On October 8, 2002, the RTC issued an Order granting the motion, thus:
WHEREFORE, PREMISES CONSIDERED, the Court hereby GRANTS the instant motion and
suspends the proceedings herein. In the meantime, and until receipt by this Court of a copy of the
resolution of the petition for cancellation by the DENR, the instant case is hereby ARCHIVED.
SO ORDERED.8
Emphasizing that a survey plan is one of the mandatory requirements in land registration
proceedings, the RTC agreed with the petitioner that the cancellation of the survey plan would be
prejudicial to the petition for land registration.9
On February 13, 2003, the RTC denied the respondents motion for reconsideration of its
order.10 Respondent thereafter filed a petition for certiorari with the CA assailing the order
suspending the proceedings.
On March 19, 2004, finding that the RTC committed grave abuse of discretion in suspending the
proceedings, the CA granted the petition for certiorari, thus:
WHEREFORE, premises considered, the instant petition is hereby GRANTED. The challenged
Orders dated October 8, 2002 and February 13, 2003 of the respondent Court are declared NULL
and VOID.
The Court a quo is directed to continue the proceedings until its final determination. No
pronouncement as to costs.
SO ORDERED.11

The CA ratiocinated that the survey plan which was duly approved by the DENR should be accorded
the presumption of regularity, and that the RTC has the power to hear and determine all questions
arising from an application for registration.12
On July 15, 2004, the CA issued a Resolution13 denying the petitioners motion for reconsideration.
Petitioner was, thus, compelled to file this petition for review, ascribing the following errors to the CA:
I. THE COURT OF APPEALS COMMITTED MANIFEST ERROR IN NOT FINDING THAT THE
SUSPENSION OF THE PROCEEDINGS IN THE LAND REGISTRATION CASE IS LEGAL AND
PROPER PENDING THE DETERMINATION AND RESOLUTION OF THE ADMINISTRATIVE CASE
BEFORE THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES-REGION 1.
II. THE COURT OF APPEALS COMMITTED MANIFEST ERROR IN FAILING TO FIND THAT THE
ASSAILED ORDERS OF THE LOWER COURT HAVE PROPER AND SUFFICIENT BASES IN
FACT AND IN LAW.
III. THE COURT OF APPEALS COMMITTED MANIFEST ERROR IN HOLDING THAT THE LOWER
COURT HAS ACTED WITH GRAVE ABUSE OF DISCRETION IN SUSPENDING THE
PROCEEDINGS AND ARCHIVING THE CASE.
IV. THE COURT OF APPEALS COMMITTED MANIFEST ERROR IN FAILING TO FIND THAT THE
FILING OF THE PETITION FOR CERTIORARI, UNDER RULE 65 OF THE REVISED RULES OF
CIVIL PROCEDURE, IS NOT THE ONLY PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE
ORDINARY COURSE OF LAW ON THE PART OF HEREIN RESPONDENT.14
The petition has no merit.
Petitioner contends that, since the respondents cause of action in the land registration case
depends heavily on the survey plan, it was only prudent for the RTC to suspend the proceedings
therein pending the resolution of the petition for cancellation of the survey plan by the DENR. 15 It,
therefore, insists that recourse to a petition for certiorari was not proper considering that respondent
was not arbitrarily deprived of her right to prosecute her application for registration. 16
Undeniably, the power to stay proceedings is an incident to the power inherent in every court to
control the disposition of the cases in its dockets, with economy of time and effort for the court,
counsel and litigants. But courts should be mindful of the right of every party to a speedy disposition
of his case and, thus, should not be too eager to suspend proceedings of the cases before them.
Hence, every order suspending proceedings must be guided by the following precepts: it shall be
done in order to avoid multiplicity of suits and prevent vexatious litigations, conflicting judgments,
confusion between litigants and courts,17 or when the rights of parties to the second action cannot be
properly determined until the questions raised in the first action are settled. 18 Otherwise, the
suspension will be regarded as an arbitrary exercise of the courts discretion and can be corrected
only by a petition for certiorari.
None of the circumstances that would justify the stay of proceedings is present. In fact, to await the
resolution of the petition for cancellation would only delay the resolution of the land registration case
and undermine the purpose of land registration.

The fundamental purpose of the Land Registration Law (Presidential Decree No. 1529) is to finally
settle title to real property in order to preempt any question on the legality of the title except claims
that were noted on the certificate itself at the time of registration or those that arose subsequent
thereto. Consequently, once the title is registered under the said law, owners can rest secure on
their ownership and possession.19
1avvphi1

Glaringly, the petition for cancellation raises practically the very same issues that the herein
petitioner raised in its opposition to the respondents application for registration. Principally, it alleges
that the survey plan should be cancelled because it includes portions of the seven properties that it
purchased from several landowners, which properties are already covered by existing certificates of
title.
Petitioner posits that it is the DENR that has the sole authority to decide the validity of the survey
plan that was approved by the LMS.20 It cites Section 4(15), Chapter 1, Title XIV, Administrative Code
of 1987 which provides that the DENR shall
(15) Exercise (of) 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.
However, respondent argues that the land registration court is clothed with adequate authority to
resolve the conflicting claims of the parties, and that even if the DENR cancels her survey plan, the
land registration court is not by duty bound to dismiss the application for registration based solely on
the cancellation of the survey plan.21
lawphil.net

Without delving into the jurisdiction of the DENR to resolve the petition for cancellation, we hold that,
as an incident to its authority to settle all questions over the title of the subject property, the land
registration court may resolve the underlying issue of whether the subject property overlaps the
petitioners properties without necessarily having to declare the survey plan as void.
It is well to note at this point that, in its bid to avoid multiplicity of suits and to promote the
expeditious resolution of cases, Presidential Decree (P.D.) No. 1529 eliminated the distinction
between the general jurisdiction vested in the RTC and the latters limited jurisdiction when acting
merely as a land registration court. Land registration courts, as such, can now hear and decide even
controversial and contentious cases, as well as those involving substantial issues. 22 When the law
confers jurisdiction upon a court, the latter is deemed to have all the necessary powers to exercise
such jurisdiction to make it effective.23 It may, therefore, hear and determine all questions that arise
from a petition for registration.
In view of the nature of a Torrens title, a land registration court has the duty to determine whether the
issuance of a new certificate of title will alter a valid and existing certificate of title. 24 An application for
registration of an already titled land constitutes a collateral attack on the existing title, 25 which is not
allowed by law.26 But the RTC need not wait for the decision of the DENR in the petition to cancel the
survey plan in order to determine whether the subject property is already titled or forms part of
already titled property. The court may now verify this allegation based on the respondents survey
plan vis--vis the certificates of title of the petitioner and its predecessors-in-interest. After all, a
survey plan precisely serves to establish the true identity of the land to ensure that it does not
overlap a parcel of land or a portion thereof already covered by a previous land registration, and to
forestall the possibility that it will be overlapped by a subsequent registration of any adjoining land. 27

Should the court find it difficult to do so, the court may require the filing of additional papers to aid in
its determination of the propriety of the application, based on Section 21 of P.D. No. 1529:
SEC. 21. Requirement of additional facts and papers; ocular inspection. The court may require
facts to be stated in the application in addition to those prescribed by this Decree not inconsistent
therewith and may require the filing of any additional papers.
The court may also directly require the DENR and the Land Registration Authority to submit a report
on whether the subject property has already been registered and covered by certificates of title, like
what the court did in Carvajal v. Court of Appeals.28 In that case, we commended such move by
the land registration court for being "in accordance with the purposes of the Land Registration
Law."29
WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated
March 19, 2004 and Resolution dated July 15, 2004 are AFFIRMED. The Regional Trial Court of
Urdaneta, Pangasinan is DIRECTED to continue with the proceedings in L.R.C. Case No. U-1134
and to resolve the same with dispatch.
SO ORDERED.

[G.R. No. 133250. July 9, 2002]

FRANCISCO I. CHAVEZ, petitioner, vs. PUBLIC ESTATES AUTHORITY

and
AMARI
COASTAL
BAY
DEVELOPMENT
CORPORATION, respondents.
DECISION
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 PEAs 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. 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 under the Manila-Cavite Coastal Road and Reclamation
Project (MCCRRP).
[1]

[2]

On December 29, 1981, then President Marcos issued a memorandum directing

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

(i) CDCP shall undertake all reclamation, construction, and such other works
in the MCCRRP as may be agreed upon by the parties, to be paid according

to progress of works on a unit price/lump sum basis for items of work to be

agreed upon, subject to price escalation, retention and other terms and
conditions provided for in Presidential Decree No. 1594. All the financing
required for such works shall be provided by PEA.
xxx
(iii) x x x CDCP shall give up all its development rights and hereby agrees to
cede and transfer in favor of PEA, all of the rights, title, interest and
participation of CDCP in and to all the areas of land reclaimed by CDCP in the
MCCRRP as of December 30, 1981 which have not yet been sold, transferred
or otherwise disposed of by CDCP as of said date, which areas consist of
approximately Ninety-Nine Thousand Four Hundred Seventy Three (99,473)
square meters in the Financial Center Area covered by land pledge No. 5 and
approximately Three Million Three Hundred Eighty Two Thousand Eight
Hundred Eighty Eight (3,382,888) square meters of reclaimed areas at varying
elevations above Mean Low Water Level located outside the Financial Center
Area and the First Neighborhood Unit.
[3]

On January 19, 1988, then President Corazon C. Aquino issued Special Patent No.
3517, granting and transferring to PEA the parcels of land so reclaimed under the
Manila-Cavite Coastal Road and Reclamation Project (MCCRRP) containing a total
area of one million nine hundred fifteen thousand eight hundred ninety four (1,915,894)
square meters. Subsequently, on April 9, 1988, the Register of Deeds of the Municipality
of 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. On April 28, 1995, the Board of Directors of PEA, in
its Resolution No. 1245, confirmed the JVA. On June 8, 1995, then President Fidel V.
Ramos, through then Executive Secretary Ruben Torres, approved the JVA.
[4]

[5]

[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. 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.
[7]

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, the Chief Presidential Legal Counsel,
and the Government Corporate Counsel. The Legal Task Force upheld the legality of
the JVA, contrary to the conclusions reached by the Senate Committees.
[8]

[9]

[10]

[11]

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

On April 27, 1998, petitioner Frank I. Chavez (Petitioner for brevity) as a taxpayer,
filed the instant Petition for Mandamus with Prayer for the Issuance of a Writ of
Preliminary Injunction and Temporary Restraining Order. Petitioner contends the
government stands to lose billions of pesos in the sale by PEA of the reclaimed lands to
AMARI. Petitioner prays that PEA publicly disclose the terms of any renegotiation of the
JVA, invoking Section 28, Article II, and Section 7, Article III, of the 1987 Constitution on
the right of the people to information on matters of public concern. Petitioner assails the
sale to AMARI of lands of the public domain as a blatant violation of Section 3, Article
XII of the 1987 Constitution prohibiting the sale of alienable lands of the public domain
to private corporations. Finally, petitioner asserts that he seeks to enjoin the loss of
billions of pesos in properties of the State that are of public dominion.
After several motions for extension of time, 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.
[13]

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 and AMARI are as follows:
[15]

[16]

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 Courts 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 ongoing 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
petitioners prayer for a public disclosure of the renegotiations. Likewise, petitioners
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. Petitioners 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, covered agricultural lands sold to private
corporations which acquired the lands from private parties. The transferors of the
private corporations claimed or could claim the right to judicial confirmation of their
imperfect titles under Title IIof Commonwealth Act. 141 (CA No. 141 for brevity). In
the instant case, AMARI seeks to acquire from PEA, a public corporation,
reclaimed lands
and
submerged
areas
for non-agricultural purposes
by purchase under PD No. 1084 (charter of PEA) and Title III of CA No. 141. Certain
undertakings by AMARI under the Amended JVA constitute the consideration for the
purchase. Neither AMARI nor PEA can claim judicial confirmation of their titles because
the lands covered by the Amended JVA are newly reclaimed or still to be
[18]

[19]

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 latters seventy percent proportionate share in the reclaimed
areas as the reclamation progresses. The Amended JVA even allows AMARI to
mortgage at any time theentire reclaimed area to raise financing for the reclamation
project.
[21]

Second issue: whether the petition merits dismissal for failing to observe the
principle governing the hierarchy of courts.
PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief
directly from the Court. The principle of hierarchy of courts applies generally to cases
involving factual questions. As it is not a trier of facts, the Court cannot entertain cases
involving factual issues. The instant case, however, raises constitutional issues of
transcendental importance to the public. 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.
[22]

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
petitioners 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 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 and Section 1 of Commonwealth Act No. 638 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
[23]

[24]

[25]

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, 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.
[26]2

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. 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.
[27]

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 taxpayers 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, the Court upheld the right of a citizen to bring a taxpayers
suit on matters of transcendental importance to the public, thus [28]

Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth

of the Marcoses is an issue of transcendental importance to the public.He
asserts that ordinary taxpayers have a right to initiate and prosecute actions
questioning the validity of acts or orders of government agencies or
instrumentalities, if the issues raised are of paramount public interest, and if
they immediately affect the social, economic and moral well being of the
people.
Moreover, the mere fact that he is a citizen satisfies the requirement of
personal interest, when the proceeding involves the assertion of a public right,
such as in this case. He invokes several decisions of this Court which have
set aside the procedural matter of locus standi, when the subject of the case
involved public interest.
xxx
In 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
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 peoples 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 peoples 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 policymaking 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, for unless citizens have the proper information, they cannot hold public officials
accountable for anything. Armed with the right information, citizens can participate in
[29]

public discussions leading to the formulation of government policies and their effective
implementation. An informed citizenry is essential to the existence and proper
functioning of any democracy. As explained by the Court in Valmonte v. Belmonte, Jr.
[30]

An essential element of these freedoms is to keep open a continuing dialogue

or process of communication between the government and the people.It is in
the interest of the State that the channels for free political discussion be
maintained to the end that the government may perceive and be responsive to
the peoples 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, 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.
[31]

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. (Emphasis supplied)
[32]

AMARI argues there must first be a consummated contract before petitioner can invoke
the right. Requiring government officials to reveal their deliberations at the predecisional stage will degrade the quality of decision-making in government
agencies. Government officials will hesitate to express their real sentiments during

deliberations if there is immediate public dissemination of their discussions, putting

them under all kinds of pressure before they decide.
We must first distinguish between information the law on public bidding requires
PEA to disclose publicly, and information the constitutional right to information requires
PEA to release to the public. Before the consummation of the contract, PEA must, on its
own and without demand from anyone, disclose to the public matters relating to the
disposition of its property. These include the size, location, technical description and
nature of the property being disposed of, the terms and conditions of the disposition, the
parties qualified to bid, the minimum price and similar information. PEA must prepare all
these data and disclose them to the public at the start of the disposition process, long
before the consummation of the contract, because the Government Auditing Code
requires public bidding. If PEA fails to make this disclosure, any citizen can demand
from PEA this information at any time during the bidding process.
Information, however, on on-going evaluation or review of bids or proposals being
undertaken by the bidding or review committee is not immediately accessible under the
right to information. While the evaluation or review is still on-going, there are no official
acts, transactions, or decisions on the bids or proposals. However, once the committee
makes its official recommendation, there arises a definite proposition on the part of
the government. From this moment, the publics right to information attaches, and any
citizen can access all the non-proprietary information leading to such definite
proposition. In Chavez v. PCGG, the Court ruled as follows:
[33]

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 interagency 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 AMARIs 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.

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. 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.
[34]

[35]

The right to information, however, does not extend to matters recognized as

privileged information under the separation of powers. 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. The
right may also be subject to other limitations that Congress may impose by law.
[36]

[37]

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, 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
[38]

independence of decision-making of those tasked to exercise Presidential, Legislative

and Judicial power. This is not the situation in the instant case.
[39]

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. Congress has also
prescribed other limitations on the right to information in several legislations.
[40]

[41]

Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of
lands, reclaimed or to be reclaimed, violate the Constitution.
The Regalian Doctrine
The ownership of lands reclaimed from foreshore and submerged areas is rooted in
the Regalian doctrine which holds that the State owns all lands and waters of the public
domain. Upon the Spanish conquest of the Philippines, ownership of all lands, territories
and possessions in the Philippines passed to the Spanish Crown. 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.
[42]

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. Article 339 of the Civil Code of
1889, which is now Article 420 of the Civil Code of 1950, incorporated the Regalian
doctrine.
[43]

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. The Spanish Law of Waters of 1866 allowed the reclamation of the sea
under Article 5, which provided as follows:
[44]

Article 5. Lands reclaimed from the sea in consequence of works constructed

by the State, or by the provinces, pueblos or private persons, with proper
permission, shall become the property of the party constructing such works,
unless otherwise provided by the terms of the grant of authority.
Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party
undertaking the reclamation, provided the government issued the necessary permit and
did not reserve ownership of the reclaimed land to the State.
Article 339 of the Civil Code of 1889 defined property of public dominion as follows:

Art. 339. Property of public dominion is

1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, riverbanks, shores, roadsteads, and that of a similar
character;
2. That belonging exclusively to the State which, without being of general public use, is
employed in some public service, or in the development of the national wealth, such
as walls, fortresses, and other works for the defense of the territory, and mines, until
granted to private individuals.

Property devoted to public use referred to property open for use by the public. In
contrast, property devoted to public service referred to property used for some specific
public service and open only to those authorized to use the property.
Property of public dominion referred not only to property devoted to public use, but
also to property not so used but employed to develop the national wealth. This class
of property constituted property of public dominion although employed for some
economic or commercial activity to increase the national wealth.
Article 341 of the Civil Code of 1889 governed the re-classification of property of
public dominion into private property, to wit:

Art. 341. Property of public dominion, when no longer devoted to public use or
to the defense of the territory, shall become a part of the private property of
the State.
This provision, however, was not self-executing. The legislature, or the executive
department pursuant to law, must declare the property no longer needed for public use
or territorial defense before the government could lease or alienate the property to
private parties.
[45]

Act No. 1654 of the Philippine Commission

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

Section 1. The control and disposition of the foreshore as defined in

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

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

Sec. 6. The Governor-General, upon the recommendation of the

Secretary of Agriculture and Natural Resources, shall from time to time
classify the lands of the public domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands, x x x.
Sec. 7. For the purposes of the government and disposition of alienable or
disposable public lands, the Governor-General, upon recommendation by
the Secretary of Agriculture and Natural Resources, shall from time to
time declare what lands are open to disposition or concession under
this Act.
Sec. 8. Only those lands shall be declared open to disposition or
concession which have been officially delimited or classified x x x.
xxx
Sec. 55. Any tract of land of the public domain which, being neither timber nor
mineral land, shall be classified as suitable for residential purposes or for
commercial, industrial, or other productive purposes other than
agricultural purposes, and shall be open to disposition or concession, shall
be disposed of under the provisions of this chapter, and not otherwise.
Sec. 56. The lands disposable under this title shall be classified as
follows:
(a) Lands reclaimed by the Government by dredging, filling, or
other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the
shores or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b), and (c) of section fiftysix 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 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.
[47]

Section 56 of Act No. 2874 stated that lands disposable under this title 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-agriculturalpurposes. 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 GovernorGeneral 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 nonagricultural lands.
[48]

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 GovernorGeneral, 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 twentyfive years, renewable for another twenty-five years, except as to water rights
for irrigation, water supply, fisheries, or industrial uses other than the
development of water power, in which cases beneficial use may be the
measure and limit of the grant. (Emphasis supplied)
The 1935 Constitution barred the alienation of all natural resources except public
agricultural lands, which were the only natural resources the State could alienate. Thus,
foreshore lands, considered part of the States 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.
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.
[50]

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 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:
[52]

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, for the purpose of their administration and disposition.
[53]

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

non-agricultural purposes not classified as government reclaimed, foreshore and

marshy disposable lands of the public domain. Foreshore lands, however, became
inalienable under the 1935 Constitution which only allowed the lease of these lands to
qualified private parties.
Section 58 of CA No. 141 expressly states that disposable lands of the public
domain intended for residential, commercial, industrial or other productive purposes
other than agricultural shall be disposed of under the provisions of this chapter
and not otherwise. Under Section 10 of CA No. 141, the term disposition includes
lease of the land. Any disposition of government reclaimed, foreshore and marshy
disposable lands for non-agricultural purposes must comply with Chapter IX, Title III of
CA No. 141, unless a subsequent law amended or repealed these provisions.
[54]

In his concurring opinion in the landmark case of Republic Real Estate

Corporation v. Court of Appeals, Justice Reynato S. Puno summarized succinctly
the law on this matter, as follows:
[55]

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. These lands remained sui generis, as the only alienable or disposable
lands of the public domain the government could not sell to private parties.
[56]

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 nonagricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the
only alienable or disposable lands for non-agricultural purposes that the government
could sell to private parties.
Moreover, Section 60 of CA No. 141 expressly requires congressional authority
before lands under Section 59 that the government previously transferred to
government units or entities could be sold to private parties. Section 60 of CA No. 141
declares that

Sec. 60. x x x The area so leased or sold shall be such as shall, in the
judgment of the Secretary of Agriculture and Natural Resources, be
reasonably necessary for the purposes for which such sale or lease is
requested, and shall not exceed one hundred and forty-four hectares:
Provided, however, That this limitation shall not apply to grants, donations, or
transfers made to a province, municipality or branch or subdivision of the
Government for the purposes deemed by said entities conducive to the public
interest; but the land so granted, donated, or transferred to a province,
municipality or branch or subdivision of the Government shall not be
alienated, encumbered, or otherwise disposed of in a manner affecting
its title, except when authorized by Congress: x x x. (Emphasis supplied)
The congressional authority required in Section 60 of CA No. 141 mirrors the legislative
authority required in Section 56 of Act No. 2874.
One reason for the congressional authority is that Section 60 of CA No. 141
exempted government units and entities from the maximum area of public lands that
could be acquired from the State. These government units and entities should not just
turn around and sell these lands to private parties in violation of constitutional or
statutory limitations. Otherwise, the transfer of lands for non-agricultural purposes to
government units and entities could be used to circumvent constitutional limitations on
ownership of alienable or disposable lands of the public domain. In the same manner,
such transfers could also be used to evade the statutory prohibition in CA No. 141 on
the sale of government reclaimed and marshy lands of the public domain to private
parties. Section 60 of CA No. 141 constitutes by operation of law a lien on these lands.
[57]

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

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

Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5
of the Spanish Law of Waters of 1866. Private parties could still reclaim portions of the
sea with government permission. However, the reclaimed land could become private
land only if classified as alienable agricultural land of the public domain open to
disposition under CA No. 141. The 1935 Constitution prohibited the alienation of all
natural resources except public agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the definition of property of public
dominion found in the Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950
state that

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

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks, shores, roadsteads, and others of similar
character;
(2) Those which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth.

x x x.
Art. 422. Property of public dominion, when no longer intended for public use
or for public service, shall form part of the patrimonial property of the State.
Again, the government must formally declare that the property of public dominion is
no longer needed for public use or public service, before the same could be classified
as patrimonial property of the State. 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.
[59]

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. 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.
[60]

The 1973 Constitution, however, limited the alienation of lands of the public domain
to individuals who were citizens of the Philippines. Private corporations, even if wholly
owned by Philippine citizens, were no longer allowed to acquire alienable lands of the
public domain unlike in the 1935 Constitution. Section 11, Article XIV of the 1973
Constitution declared that

Sec. 11. The Batasang Pambansa, taking into account conservation,

ecological, and development requirements of the natural resources, shall
determine by law the size of land of the public domain which may be
developed, held or acquired by, or leased to, any qualified individual,
corporation, or association, and the conditions therefor. No private

corporation or association may hold alienable lands of the public

domain except by lease not to exceed one thousand hectares in area nor
may any citizen hold such lands by lease in excess of five hundred hectares
or acquire by purchase, homestead or grant, in excess of twenty-four
hectares. No private corporation or association may hold by lease,
concession, license or permit, timber or forest lands and other timber or forest
resources in excess of one hundred thousand hectares. However, such area
may be increased by the Batasang Pambansa upon recommendation of the
National Economic and Development Authority. (Emphasis supplied)
Thus, under the 1973 Constitution, private corporations could hold alienable lands
of the public domain only through lease. Only individuals could now acquire alienable
lands of the public domain, and private corporations became absolutely barred
from acquiring any kind of alienable land of the public domain. The constitutional
ban extended to all kinds of alienable lands of the public domain, while the statutory ban
under CA No. 141 applied only to government reclaimed, foreshore and marshy
alienable lands of the public domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree
No. 1084 creating PEA, a wholly government owned and controlled corporation with a
special charter. Sections 4 and 8 of PD No. 1084, vests PEA with the following purposes
and powers:

Sec. 4. Purpose. The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by
dredging, filling or other means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in, subdivide,
dispose, lease and sell any and all kinds of lands, buildings, estates
and other forms of real property, owned, managed, controlled and/or
operated by the government;
(c) To provide for, operate or administer such service as may be necessary for
the efficient, economical and beneficial utilization of the above properties.
Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying
out the purposes for which it is created, have the following powers and
functions:
(a)To prescribe its by-laws.
xxx
(i) To hold lands of the public domain in excess of the area
permitted to private corporations by statute.

(j) To reclaim lands and to construct work across, or otherwise, any

stream, watercourse, canal, ditch, flume x x x.
xxx
(o) To perform such acts and exercise such functions as may be necessary for
the attainment of the purposes and objectives herein specified. (Emphasis
supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the
public domain. Foreshore areas are those covered and uncovered by the ebb and flow
of the tide. Submerged areas are those permanently under water regardless of the ebb
and flow of the tide. Foreshore and submerged areas indisputably belong to the public
domain and are inalienable unless reclaimed, classified as alienable lands open to
disposition, and further declared no longer needed for public service.
[61]

[62]

[63]

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 twentyfive years, and not to exceed one thousand hectares in area. Citizens of
the Philippines may lease not more than five hundred hectares, or acquire not
more than twelve hectares thereof by purchase, homestead, or grant.
Taking into account the requirements of conservation, ecology, and
development, and subject to the requirements of agrarian reform, the
Congress shall determine, by law, the size of lands of the public domain which
may be acquired, developed, held, or leased and the conditions therefor.
(Emphasis supplied)
The 1987 Constitution continues the State policy in the 1973 Constitution banning
private corporations from acquiring any kind of alienable land of the public
domain. Like the 1973 Constitution, the 1987 Constitution allows private corporations to
hold alienable lands of the public domain only through lease. As in the 1935 and 1973
Constitutions, the general law governing the lease to private corporations of reclaimed,
foreshore and marshy alienable lands of the public domain is still CA No. 141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on corporations from acquiring, except
through lease, alienable lands of the public domain is not well understood. During the
deliberations of the 1986 Constitutional Commission, the commissioners probed the
rationale behind this ban, thus:

FR. BERNAS: Mr. Vice-President, my questions have reference to page 3,

line 5 which says:
`No private corporation or association may hold alienable lands of the
public domain except by lease, not to exceed one thousand hectares
in area.
If we recall, this provision did not exist under the 1935 Constitution, but this
was introduced in the 1973 Constitution. In effect, it prohibits private
corporations from acquiring alienable public lands. But it has not been very
clear in jurisprudence what the reason for this is. In some of the cases
decided in 1982 and 1983, it was indicated that the purpose of this is to
prevent large landholdings. Is that the intent of this provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were
instances where the Iglesia ni Cristo was not allowed to acquire a mere 313square meter land where a chapel stood because the Supreme Court said it
would be in violation of this. (Emphasis supplied)
In Ayog v. Cusi, the Court explained the rationale behind this constitutional ban in
this way:
[64]

Indeed, one purpose of the constitutional prohibition against purchases of

public agricultural lands by private corporations is to equitably diffuse land
ownership or to encourage owner-cultivatorship and the economic family-size
farm and to prevent a recurrence of cases like the instant case. Huge
landholdings by corporations or private persons had spawned social unrest.
However, if the constitutional intent is to prevent huge landholdings, the Constitution
could have simply limited the size of alienable lands of the public domain that
corporations could acquire. The Constitution could have followed the limitations on
individuals, who could acquire not more than 24 hectares of alienable lands of the public
domain under the 1973 Constitution, and not more than 12 hectares under the 1987
Constitution.
If the constitutional intent is to encourage economic family-size farms, placing the
land in the name of a corporation would be more effective in preventing the break-up of
farmlands. If the farmland is registered in the name of a corporation, upon the death of
the owner, his heirs would inherit shares in the corporation instead of subdivided parcels
of the farmland. This would prevent the continuing break-up of farmlands into smaller
and smaller plots from one generation to the next.

In actual practice, the constitutional ban strengthens the constitutional limitation on

individuals from acquiring more than the allowed area of alienable lands of the public
domain. Without the constitutional ban, individuals who already acquired the maximum
area of alienable lands of the public domain could easily set up corporations to acquire
more alienable public lands. An individual could own as many corporations as his
means would allow him. An individual could even hide his ownership of a corporation by
putting his nominees as stockholders of the corporation. The corporation is a convenient
vehicle to circumvent the constitutional limitation on acquisition by individuals of
alienable lands of the public domain.
The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer
ownership of only a limited area of alienable land of the public domain to a qualified
individual. This constitutional intent is safeguarded by the provision prohibiting
corporations from acquiring alienable lands of the public domain, since the vehicle to
circumvent the constitutional intent is removed. The available alienable public lands are
gradually decreasing in the face of an ever-growing population. The most effective way
to insure faithful adherence to this constitutional intent is to grant or sell alienable lands
of the public domain only to individuals. This, it would seem, is the practical benefit
arising from the constitutional ban.
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its second Whereas clause,
consists of three properties, namely:
1. [T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo
Boulevard in Paranaque and Las Pinas, Metro Manila, with a combined titled area of
1,578,441 square meters;
2. [A]nother area of 2,421,559 square meters contiguous to the three islands; and
3. [A]t AMARIs 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 PEAs 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 AMARIs

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 AMARIs 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 AMARIs Land Share in the name of AMARI, x x x; provided, that if
more than seventy percent (70%) of the titled area at any given time pertains
to AMARI, PEA shall deliver to AMARI only seventy percent (70%) of the titles
pertaining to AMARI, until such time when a corresponding proportionate area
of additional land pertaining to PEA has been titled. (Emphasis supplied)
Indisputably, under the Amended JVA AMARI will acquire and own a maximum of
367.5 hectares of reclaimed land which will be titled in its name.
To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI
joint venture PEAs statutory authority, rights and privileges to reclaim foreshore and
submerged areas in Manila Bay. Section 3.2.a of the Amended JVA states that

PEA hereby contributes to the joint venture its rights and privileges to perform
Rawland Reclamation and Horizontal Development as well as own the
Reclamation Area, thereby granting the Joint Venture the full and exclusive
right, authority and privilege to undertake the Project in accordance with the
Master Development Plan.
The Amended JVA is the product of a renegotiation of the original JVA dated April 25,
1995 and its supplemental agreement dated August 9, 1995.
The Threshold Issue
The threshold issue is whether AMARI, a private corporation, can acquire and own
under the Amended JVA 367.5 hectares of reclaimed foreshore and submerged areas in
Manila Bay in view of Sections 2 and 3, Article XII of the 1987 Constitution which state
that:

Section 2. All lands of the public domain, waters, minerals, coal, petroleum,
and other mineral oils, all forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and other natural resources are owned by the
State. With the exception of agricultural lands, all other natural
resources shall not be alienated. x x x.
xxx

Section 3. x x x Alienable lands of the public domain shall be limited to

agricultural lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, x x x.(Emphasis
supplied)
Classification of Reclaimed Foreshore and Submerged Areas
PEA readily concedes that lands reclaimed from foreshore or submerged areas of
Manila Bay are alienable or disposable lands of the public domain. In its Memorandum,
PEA admits that
[67]

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 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. The Legal Task Force concluded that
[68]

[69]

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, 1987 Constitution), does not
apply to reclaimed lands whose ownership has passed on to PEA by statutory
grant.
[70]

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. 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, 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 of the
Civil Code, a property of public dominion retains such character until formally
declared otherwise. The Court ruled that
[72]

[73]

[74]

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 Aquinos actual issuance of a special patent
covering the Freedom Islands, is equivalent to an official proclamation classifying the
Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085
and President Aquinos issuance of a land patent also constitute a declaration that the
Freedom Islands are no longer needed for public service. The Freedom Islands are
thus alienable or disposable lands of the public domain, open to disposition or
concession to qualified parties.
At the time then President Aquino issued Special Patent No. 3517, PEA had already
reclaimed the Freedom Islands although subsequently there were partial erosions on
some areas. The government had also completed the necessary surveys on these

islands. Thus, the Freedom Islands were no longer part of Manila Bay but part of the
land mass. Section 3, Article XII of the 1987 Constitution classifies lands of the public
domain into agricultural, forest or timber, mineral lands, and national parks. Being
neither timber, mineral, nor national park lands, the reclaimed Freedom Islands
necessarily fall under the classification of agricultural lands of the public domain. Under
the 1987 Constitution, agricultural lands of the public domain are the only natural
resources that the State may alienate to qualified private parties. All other natural
resources, such as the seas or bays, are waters x x x owned by the State forming part
of the public domain, and are inalienable pursuant to Section 2, Article XII of the 1987
Constitution.
AMARI claims that the Freedom Islands are private lands because CDCP, then a
private corporation, reclaimed the islands under a contract dated November 20, 1973
with the Commissioner of Public Highways. AMARI, citing Article 5 of the Spanish Law
of Waters of 1866, argues that if the ownership of reclaimed lands may be given to the
party constructing the works, then it cannot be said that reclaimed lands are lands of the
public domain which the State may not alienate. Article 5 of the Spanish Law of Waters
reads as follows:
[75]

Article 5. Lands reclaimed from the sea in consequence of works constructed

by the State, or by the provinces, pueblos or private persons, with proper
permission, shall become the property of the party constructing such
works, unless otherwise provided by the terms of the grant of authority.
(Emphasis supplied)
Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim
from the sea only with proper permission from the State.Private parties could own the
reclaimed land only if not otherwise provided by the terms of the grant of authority. This
clearly meant that no one could reclaim from the sea without permission from the State
because the sea is property of public dominion. It also meant that the State could grant
or withhold ownership of the reclaimed land because any reclaimed land, like the sea
from which it emerged, belonged to the State. Thus, a private person reclaiming from
the sea without permission from the State could not acquire ownership of the reclaimed
land which would remain property of public dominion like the sea it replaced. 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.
[76]

[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. 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.
[78]

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 Governments 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 PEAs 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. 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.
[79]

Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA shall belong
to or be owned by the PEA, could not automatically operate to classify inalienable lands
into alienable or disposable lands of the public domain. Otherwise, reclaimed foreshore
and submerged lands of the public domain would automatically become alienable once
reclaimed by PEA, whether or not classified as alienable or disposable.
The Revised Administrative Code of 1987, a later law than either PD No. 1084 or
EO No. 525, vests in the Department of Environment and Natural Resources (DENR for
brevity) the following powers and functions:

Sec. 4. Powers and Functions. The Department shall:

(1) x x x
xxx
(4) Exercise supervision and control over forest lands, alienable and
disposable public lands, mineral resources and, in the process of exercising
such control, impose appropriate taxes, fees, charges, rentals and any such
form of levy and collect such revenues for the exploration, development,
utilization or gathering of such resources;
xxx

(14) Promulgate rules, regulations and guidelines on the issuance of

licenses, permits, concessions, lease agreements and such other
privileges concerning the development, exploration and utilization of the
countrys 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. (Emphasis supplied)
[80]

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 and 7 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.
[81]

[82]

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 of CA No. 141 and other applicable laws.
[83]

[84]

PEAs 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. (Emphasis by PEA)
[85]

In Laurel vs. Garcia, the Court cited Section 48 of the Revised Administrative
Code of 1987, which states that
[86]

Sec. 48. Official Authorized to Convey Real Property. Whenever real property
of the Government is authorized by law to be conveyed, the deed of
conveyance shall be executed in behalf of the government by the following: x
x x.
Thus, the Court concluded that a law is needed to convey any real property belonging to
the Government. The Court declared that -

It is not for the President to convey real property of the government on his or
her own sole will. Any such conveyance must be authorized and
approved by a law enacted by the Congress. It requires executive and
legislative concurrence. (Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority
allowing PEA to sell its reclaimed lands. PD No. 1085, issued on February 4, 1977,
provides that

The land reclaimed in the foreshore and offshore area of Manila

Bay pursuant to the contract for the reclamation and construction of the
Manila-Cavite Coastal Road Project between the Republic of the Philippines
and the Construction and Development Corporation of the Philippines dated
November 20, 1973 and/or any other contract or reclamation covering the
same area is hereby transferred, conveyed and assigned to the
ownership and administration of the Public Estates Authority established
pursuant to PD No. 1084; Provided, however, That the rights and interests of

the Construction and Development Corporation of the Philippines pursuant to

the aforesaid contract shall be recognized and respected.
Henceforth, the Public Estates Authority shall exercise the rights and assume
the obligations of the Republic of the Philippines (Department of Public
Highways) arising from, or incident to, the aforesaid contract between the
Republic of the Philippines and the Construction and Development
Corporation of the Philippines.
In consideration of the foregoing transfer and assignment, the Public Estates
Authority shall issue in favor of the Republic of the Philippines the
corresponding shares of stock in said entity with an issued value of said
shares of stock (which) shall be deemed fully paid and non-assessable.
The Secretary of Public Highways and the General Manager of the Public
Estates Authority shall execute such contracts or agreements, including
appropriate agreements with the Construction and Development Corporation
of the Philippines, as may be necessary to implement the above.
Special land patent/patents shall be issued by the Secretary of Natural
Resources in favor of the Public Estates Authority without prejudice to
the subsequent transfer to the contractor or his assignees of such
portion or portions of the land reclaimed or to be reclaimed as provided
for in the above-mentioned contract. On the basis of such patents, the
Land Registration Commission shall issue the corresponding certificate
of title. (Emphasis supplied)
On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides
that -

Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the

PEA which shall be responsible for its administration, development, utilization
or disposition in accordance with the provisions of Presidential Decree No.
1084. Any and all income that the PEA may derive from the sale, lease or use
of reclaimed lands shall be used in accordance with the provisions of
Presidential Decree No. 1084.
There is no express authority under either PD No. 1085 or EO No. 525 for PEA to
sell its reclaimed lands. PD No. 1085 merely transferred ownership and administration
of lands reclaimed from Manila Bay to PEA, while EO No. 525 declared that lands
reclaimed by PEA shall belong to or be owned by PEA. EO No. 525 expressly states
that PEA should dispose of its reclaimed lands in accordance with the provisions of
Presidential Decree No. 1084, the charter of PEA.

PEAs 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. (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 itspatrimonial 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 PEAs patrimonial
lands.
[87]

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. 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, 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.
[88]

[89]

Moreover, under Section 79 of PD No. 1445, otherwise known as the Government

Auditing Code, the government is required to sell valuable government property through
public bidding. Section 79 of PD No. 1445 mandates that

Section 79. When government property has become unserviceable for any
cause, or is no longer needed, it shall, upon application of the officer
accountable therefor, be inspected by the head of the agency or his duly
authorized representative in the presence of the auditor concerned and, if
found to be valueless or unsaleable, it may be destroyed in their presence. If
found to be valuable, it may be sold at public auction to the highest
bidder under the supervision of the proper committee on award or similar
body in the presence of the auditor concerned or other authorized
representative of the Commission, after advertising by printed notice in the
Official Gazette, or for not less than three consecutive days in any
newspaper of general circulation, or where the value of the property does
not warrant the expense of publication, by notices posted for a like period in at
least three public places in the locality where the property is to be sold. In the
event that the public auction fails, the property may be sold at a private
sale at such price as may be fixed by the same committee or body
concerned and approved by the Commission.
It is only when the public auction fails that a negotiated sale is allowed, in which case
the Commission on Audit must approve the selling price. The Commission on Audit
implements Section 79 of the Government Auditing Code through Circular No. 89296 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.
[90]

[91]

At the public auction sale, only Philippine citizens are qualified to bid for PEAs
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. 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.
[92]

[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. The failure of public bidding on
December 10, 1991, involving only 407.84 hectares, 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
[94]

[95]

the signing of the original JVA on April 25, 1995. The economic situation in the country
had greatly improved during the intervening period.
Reclamation under the BOT Law and the Local Government Code
The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is
absolute and clear: Private corporations or associations may not hold such alienable
lands of the public domain except by lease, x x x. Even Republic Act No. 6957 (BOT
Law, for brevity), cited by PEA and AMARI as legislative authority to sell reclaimed lands
to private parties, recognizes the constitutional ban. Section 6 of RA No. 6957 states

Sec. 6. Repayment Scheme. - For the financing, construction, operation and

maintenance of any infrastructure projects undertaken through the buildoperate-and-transfer arrangement or any of its variations pursuant to the
provisions of this Act, the project proponent x x x may likewise be repaid in the
form of a share in the revenue of the project or other non-monetary payments,
such as, but not limited to, the grant of a portion or percentage of the
reclaimed land, subject to the constitutional requirements with respect to
the ownership of the land: x x x. (Emphasis supplied)
A private corporation, even one that undertakes the physical reclamation of a
government BOT project, cannot acquire reclaimed alienable lands of the public domain
in view of the constitutional ban.
Section 302 of the Local Government Code, also mentioned by PEA and AMARI,
authorizes local governments in land reclamation projects to pay the contractor or
developer in kind consisting of a percentage of the reclaimed land, to wit:

Section 302. Financing, Construction, Maintenance, Operation, and

Management of Infrastructure Projects by the Private Sector. x x x
xxx
In case of land reclamation or construction of industrial estates, the repayment
plan may consist of the grant of a portion or percentage of the reclaimed land
or the industrial estate constructed.
Although Section 302 of the Local Government Code does not contain a proviso similar
to that of the BOT Law, the constitutional restrictions on land ownership automatically
apply even though not expressly mentioned in the Local Government Code.
Thus, under either the BOT Law or the Local Government Code, the contractor or
developer, if a corporate entity, can only be paid with leaseholds on portions of the
reclaimed land. If the contractor or developer is an individual, portions of the reclaimed
land, not exceeding 12 hectares of non-agricultural lands, may be conveyed to him in
ownership in view of the legislative authority allowing such conveyance. This is the only
[96]

way these provisions of the BOT Law and the Local Government Code can avoid a
direct collision with Section 3, Article XII of the 1987 Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the act of conveying the ownership of the reclaimed
lands to public respondent PEA transformed such lands of the public domain to private
lands. This theory is echoed by AMARI which maintains that the issuance of the special
patent leading to the eventual issuance of title takes the subject land away from the land
of public domain and converts the property into patrimonial or private property. In short,
PEA and AMARI contend that with the issuance of Special Patent No. 3517 and the
corresponding certificates of titles, the 157.84 hectares comprising the Freedom Islands
have become private lands of PEA. In support of their theory, PEA and AMARI cite the
following rulings of the Court:
1. Sumail v. Judge of CFI of Cotabato,[97] where the Court held
Once the patent was granted and the corresponding certificate of title was issued,
the land ceased to be part of the public domain and became private property over
which the Director of Lands has neither control nor jurisdiction.
2. Lee Hong Hok v. David,[98] where the Court declared After the registration and issuance of the certificate and duplicate certificate of title
based on a public land patent, the land covered thereby automatically comes under
the operation of Republic Act 496 subject to all the safeguards provided therein.
3. Heirs of Gregorio Tengco v. Heirs of Jose Aliwalas,[99] where the Court ruled While the Director of Lands has the power to review homestead patents, he may do
so only so long as the land remains part of the public domain and continues to be
under his exclusive control; but once the patent is registered and a certificate of title
is issued, the land ceases to be part of the public domain and becomes private
property over which the Director of Lands has neither control nor jurisdiction.
4. Manalo v. Intermediate Appellate Court,[100] where the Court held
When the lots in dispute were certified as disposable on May 19, 1971, and free
patents were issued covering the same in favor of the private respondents, the said
lots ceased to be part of the public domain and, therefore, the Director of Lands lost
jurisdiction over the same.
5.Republic v. Court of Appeals,[101] where the Court stated
Proclamation No. 350, dated October 9, 1956, of President Magsaysay legally
effected a land grant to the Mindanao Medical Center, Bureau of Medical Services,
Department of Health, of the whole lot, validly sufficient for initial registration under
the Land Registration Act. Such land grant is constitutive of a fee simple title or
absolute title in favor of petitioner Mindanao Medical Center. Thus, Section 122 of
the Act, which governs the registration of grants or patents involving public lands,
provides that Whenever public lands in the Philippine Islands belonging to the
Government of the United States or to the Government of the Philippines are

alienated, granted or conveyed to persons or to public or private corporations, the

same shall be brought forthwith under the operation of this Act (Land Registration
Act, Act 496) and shall become registered lands.

The first four cases cited involve petitions to cancel the land patents and the
corresponding certificates of titles issued to private parties. These four cases
uniformly hold that the Director of Lands has no jurisdiction over private lands or that
upon issuance of the certificate of title the land automatically comes under the Torrens
System. The fifth case cited involves the registration under the Torrens System of a
12.8-hectare public land granted by the National Government to Mindanao Medical
Center, a government unit under the Department of Health. The National Government
transferred the 12.8-hectare public land to serve as the site for the hospital buildings
and other facilities of Mindanao Medical Center, which performed a public service. The
Court affirmed the registration of the 12.8-hectare public land in the name of Mindanao
Medical Center under Section 122 of Act No. 496. This fifth case is an example of a
public land being registered under Act No. 496 without the land losing its character as a
property of public dominion.
In the instant case, the only patent and certificates of title issued are those in the
name of PEA, a wholly government owned corporation performing public as well as
proprietary functions. No patent or certificate of title has been issued to any private
party. No one is asking the Director of Lands to cancel PEAs patent or certificates of
title. In fact, the thrust of the instant petition is that PEAs 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. The registration of
lands of the public domain under the Torrens system, by itself, cannot convert public
lands into private lands.
[102]

[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. 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.
[104]

The grant of legislative authority to sell public lands in accordance with Section 60
of CA No. 141 does not automatically convert alienable lands of the public domain into
private or patrimonial lands. The alienable lands of the public domain must be
transferred to qualified private parties, or to government entities not tasked to dispose of
public lands, before these lands can become private or patrimonial lands. Otherwise,
the constitutional ban will become illusory if Congress can declare lands of the public
domain as private or patrimonial lands in the hands of a government agency tasked to
dispose of public lands. This will allow private corporations to acquire directly from
government agencies limitless areas of lands which, prior to such law, are concededly
public lands.
Under EO No. 525, PEA became the central implementing agency of the National
Government to reclaim foreshore and submerged areas of the public domain. Thus, EO
No. 525 declares that

EXECUTIVE ORDER NO. 525

Designating the Public Estates Authority as the Agency Primarily Responsible
for all Reclamation Projects
Whereas, there are several reclamation projects which are ongoing or being
proposed to be undertaken in various parts of the country which need to be
evaluated for consistency with national programs;
Whereas, there is a need to give further institutional support to the
Governments 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.
xxx.
As the central implementing agency tasked to undertake reclamation projects
nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the
government agency charged with leasing or selling reclaimed lands of the public
domain. The reclaimed lands being leased or sold by PEA are not private lands, in the
same manner that DENR, when it disposes of other alienable lands, does not dispose of
private lands but alienable lands of the public domain. Only when qualified private
parties acquire these lands will the lands become private lands. In the hands of the
government agency tasked and authorized to dispose of alienable of disposable
lands of the public domain, these lands are still public, not private lands.
Furthermore, PEAs 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 PEAs name does not automatically make such lands private.

To allow vast areas of reclaimed lands of the public domain to be transferred to PEA
as private lands will sanction a gross violation of the constitutional ban on private
corporations from acquiring any kind of alienable land of the public domain. PEA will
simply turn around, as PEA has now done under the Amended JVA, and transfer
several hundreds of hectares of these reclaimed and still to be reclaimed lands to a
single private corporation in only one transaction. This scheme will effectively nullify the
constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended
to diffuse equitably the ownership of alienable lands of the public domain among
Filipinos, now numbering over 80 million strong.
This scheme, if allowed, can even be applied to alienable agricultural lands of the
public domain since PEA can acquire x x x any and all kinds of lands. This will open the
floodgates to corporations and even individuals acquiring hundreds of hectares of
alienable lands of the public domain under the guise that in the hands of PEA these
lands are private lands. This will result in corporations amassing huge landholdings
never before seen in this country - creating the very evil that the constitutional ban was
designed to prevent. This will completely reverse the clear direction of constitutional
development in this country. The 1935 Constitution allowed private corporations to
acquire not more than 1,024 hectares of public lands. The 1973 Constitution
prohibited private corporations from acquiring any kind of public land, and the 1987
Constitution has unequivocally reiterated this prohibition.
[105]

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 ofin 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. 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.
[106]

Private lands taken by the Government for public use under its power of eminent
domain become unquestionably part of the public domain.Nevertheless, Section 85 of
PD No. 1529 authorizes the Register of Deeds to issue in the name of the National
Government new certificates of title covering such expropriated lands. Section 85 of PD
No. 1529 states

Sec. 85. Land taken by eminent domain. Whenever any registered land, or
interest therein, is expropriated or taken by eminent domain, the National
Government, province, city or municipality, or any other agency or
instrumentality exercising such right shall file for registration in the proper
Registry a certified copy of the judgment which shall state definitely by an
adequate description, the particular property or interest expropriated, the

number of the certificate of title, and the nature of the public use. A
memorandum of the right or interest taken shall be made on each certificate of
title by the Register of Deeds, and where the fee simple is taken, a new
certificate shall be issued in favor of the National Government, province,
city, municipality, or any other agency or instrumentality exercising such
right for the land so taken. The legal expenses incident to the memorandum of
registration or issuance of a new certificate of title shall be for the account of
the authority taking the land or interest therein. (Emphasis supplied)
Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively
private or patrimonial lands. Lands of the public domain may also be registered
pursuant to existing laws.
AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the
Freedom Islands or of the lands to be reclaimed from submerged areas of Manila
Bay. In the words of AMARI, the Amended JVA is not a sale but a joint venture with a
stipulation for reimbursement of the original cost incurred by PEA for the earlier
reclamation and construction works performed by the CDCP under its 1973 contract
with the Republic.Whether the Amended JVA is a sale or a joint venture, the fact
remains that the Amended JVA requires PEA to cause the issuance and delivery of the
certificates of title conveying AMARIs 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, the Government Auditing Code, and Section 3, Article
XII of the 1987 Constitution.
[108]

[109]

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 of the Civil Code, contracts whose object or purpose
is contrary to law, or whose object is outside the commerce of men, are inexistent and
void from the beginning. The Court must perform its duty to defend and uphold the
Constitution, and therefore declares the Amended JVA null and void ab initio.
[112]

Seventh issue: whether the Court is the proper forum to raise the issue of
whether the Amended JVA is grossly disadvantageous to the government.
Considering that the Amended JVA is null and void ab initio, there is no necessity to
rule on this last issue. Besides, the Court is not a trier of facts, and this last issue
involves a determination of factual matters.
WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari
Coastal Bay Development Corporation are PERMANENTLY ENJOINED from
implementing the Amended Joint Venture Agreement which is hereby declared NULL
and VOID ab initio.
SO ORDERED.

G.R. No. 202947, December 09, 2015

ASB REALTY CORPORATION, Petitioner, v. ORTIGAS & COMPANY LIMITED
PARTNERSHIP,Respondent.
DECISION
BERSAMIN, J.:
This appeal seeks the review and reversal of the amended decision promulgated on January 9,
2012,1 whereby the Court of Appeals (CA) disposed thusly:
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WHEREFORE, premises considered, judgment is rendered:

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1. Granting the appeal of plaintiff-appellant and herein movant Ortigas and Company Limited Partnership,
and reversing the Decision of the court a quo dated December 14, 2009;
2. Rescinding the June 24, 1994 Deed of Sale between Ortigas and Company Limited Partnership and
Amethyst Pearl Corporation in view of the material breached (sic) thereof by AMETHYST;
3. Ordering ASB Realty Corporation, by way of mutual restitution, the RECONVEYANCE to ORTIGAS of the
subject property covered by TCT No. PT-105797 upon payment by ORTIGAS to ASB of the amount of Two
Million Twenty Four Thousand Pesos (PhP 2,024,000.00) plus legal interest at the rate of 6% per annum
from the time of the finality of this judgment until the same shall have been fully paid; and
4. Ordering the Register of Deeds of Pasig City to cancel TCT No. PT-105797 and issue a new title over the
subject property under the name of ORTIGAS & COMPANY LIMITED PARTNERSHIP.
No pronouncement as to cost.
SO ORDERED.2
The petitioner also assails the resolution promulgated on July 26, 2012, 3 whereby the CA denied itsMotion
for Reconsideration.
Antecedents
On June 29, 1994, respondent Ortigas & Company Limited Partnership (Ortigas) entered into a Deed of
Sale with Amethyst Pearl Corporation (Amethyst) involving the parcel of land with an area of 1,012 square
meters situated in Barrio Oranbo, Pasig City and registered under Transfer Certificate of Title (TCT) No.
65118 of the Register of Deeds of Rizal 4 for the consideration of P2,024,000.00. The Deed of Sale5 contained
the following stipulations, among others:
COVENANTS, CONDITIONS AND RESTRICTIONS
This lot has been segregated by ORTIGAS from its subdivisions to form part of a zonified BUILDING AREA
pursuant to its controlled real estate development project and subdivision scheme, and is subject to the
following covenants which form part of the consideration of ORTIGAS' sale to VENDEE and its assigns,
namely:
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xxxx
B. BUILDING WORKS AND ARCHITECTURE:
1. The building to be constructed on the lot shall be of reinforced concrete, cement hollow blocks and other
high-quality materials and shall be of the following height of not more than: fourteen (14) storeys plus one
penthouse.
xxxx

L. SUBMISSION OF PLANS:
The final plans and specifications of the said building shall be submitted to ORTIGAS for approval not later
than six (6) months from date hereof. Should ORTIGAS object to the same, it shall notify and specify to the
VENDEE in writing the amendments required to conform with its building restrictions and VENDEE shall
submit the amended plans within sixty (60) days from receipt of said notice.
M. CONSTRUCTION AND COMPLETION OF BUILDING:
The VENDEE shall finish construction of its building within four (4) years from December 31, 1991. 6

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As a result, the Register of Deeds of Rizal cancelled TCT No. 65118 and issued TCT No. PT-94175 in the
name of Amethyst.7 The conditions contained in the Deed of Sale were also annotated on TCT No. PT-94175
as encumbrances.8
On December 28, 1996, Amethyst assigned the subject property to its sole stockholder, petitioner ASB
Realty Corporation (the petitioner), under a so-called Deed of Assignment in Liquidation in consideration of
10,000 shares of the petitioner's outstanding capital stock.9 Thus, the property was transferred to the
petitioner free from any liens or encumbrances except those duly annotated on TCT No. PT-94175. 10 The
Register of Deeds of Rizal cancelled TCT No. PT-94175 and issued TCT No. PT-105797 in the name of the
petitioner with the same encumbrances annotated on TCT No. PT-94175. 11
On July 7, 2000, Ortigas filed its complaint for specific performance against the petitioner,12 which was
docketed as Civil Case No. 67978 of the Regional Trial Court (RTC) in Pasig City.13 Ortigas amended the
complaint, and alleged,14 among others, that:
5. Defendant has violated the terms of the Deed of Absolute Sale (Annex "A") in the following manner:
a. While the lot may be used only "for office and residential purposes", defendant introduced constructions
on the property which are commercial in nature, like restaurants, retail stores and the like (see par. A, Deed
of Absolute Sale, Annex "A").
b. The commercial structures constructed by defendant on the property extend up to the boundary lines of
the lot in question violating the setbacks established in the contract (see par. B.A., ibid).
c. Defendant likewise failed to submit the final plans and specifications of its proposed building not later than
six (6) months from June 29, 1994 and to complete construction of the same within four (4) years from
December 31, 1991. (see pars. L and M, ibid).
d. Being situated in a first-class office building area, it was agreed that no advertisements or any kind of
commercial signs shall be allowed on the lot or the improvements therein but this was violated by defendant
when it put up commercial signs and advertisements all over the area, (see par. F, ibid).
6. Any of the afore-described violations committed by the defendant empower the plaintiff to sue under
parangraph "N. Unilateral Cancellation", plaintiff may have the Deed of Absolute Sale (Annex "A") cancelled
and the property reverted to it by paying the defendant the amount it has paid less the items indicated
therein.15
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For reliefs, Ortigas prayed for the reconveyance of the subject property, or, alternatively, for the demolition
of the structures and improvements thereon, plus the payment of penalties, attorney's fees and costs of
suit.16
During the pendency of the proceedings in the RTC, the petitioner amended its Articles of Incorporation to
change its name to St. Francis Square Realty Corporation.17
After trial on the merits, the RTC rendered its decision on December 14, 2009, 18 and dismissed the
complaint, pertinently holding as follows:
Ortigas sold the property [to] Amethyst on 29 June 1994. Amethyst was supposed to finish construction on
31 December 1995. Yet, up to the time the property was transferred to ASB on 28 December 1996, Ortigas
never initiated any action against Amethyst to enforce said provision. Ortigas is therefore guilty of laches
or negligence or omission to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert it. (Tijam v. Sibonghanoy, L-21450,
15 April 1968, 23 SCRA 29).
It is worth mentioning that the restrictions annotated in TCT No. 94175 (in the name of Amethyst Pearl
Corporation) and TCT No. PT-105797 (in the name of ASB) repeatedly and consistently refer to the VENDEE.

The term VENDEE in the said restrictions obviously refer to Amethyst Pearls Corporation considering the fact
that the date referred to in Paragraph N thereof (Construction and Completion of Building), which is four (4)
years from December 31, 1991, obviously refer to the plaintiffs VENDEE Amethyst Pearl Corporation.
Definitely, it cannot refer to the defendant ASB which is not a vendee of the plaintiff. Therefore, all
references to VENDEE in the restrictions evidently refer to Amethyst Pearl Corporation, the VENDEE in the
sale from the plaintiff. Such explanation is more consistent with logic than the plaintiffs convoluted
assertions that the said restrictions apply to the defendant ASB.
Reconveyance of the property to Ortigas necessarily implies rescission of the sale or transfer from Amethyst
to ASB and from Ortigas to Amethyst. But Amethyst was not made a party to the case. Reconveyance of the
property to the original seller (Ortigas) applies only on the sale to the original vendee (Amethyst) and not to
subsequent vendees to whom the property was sold (Ayala Corp. v. Rosa Diana Realty and Dev. Corp., G.R.
No. 134284, Dec. 1, 2000, 346 SCRA 663).
The non-compliance by the plaintiff with the requisites of its own restrictions further proves that it had
no intention whatsoever to enforce or implement the same. If at all, this evinces an afterthought of the
plaintiff to belatedly and unjustifiably single out the defendant for alleged non compliance of the said
restrictions which are not applicable to it anyway.
WHEREFORE, foregoing premises considered, the present complaint is herebydismissed for lack of basis.
SO ORDERED.19

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Ortigas appealed to the CA, which initially affirmed the RTC under the decision promulgated on September
6, 2011,20 ruling thusly:
x x x x ORTIGAS can no longer enforce the said restrictions as against ASB.
The "Covenants, Conditions and Restrictions" of ORTIGAS with respect to the property clearly states the
following purpose:
"This lot has been segregated by ORTIGAS from its subdivisions to form part of a zonified BUILDING AREA
pursuant to its controlled real estate development project and subdivision scheme. x x x"
However, it appears from the circumstances obtaining in this case that ORTIGAS failed to pursue the
aforequoted purpose. It never filed a complaint against its vendee, AMETHYST, notwithstanding that it
required the latter to complete construction of the building within four (4) years from the execution of
the Deed of Sale. Neither did it make a demand to enforce the subject restriction. Moreover, while it
imposed a restriction on the registration and issuance of title in the name of the vendee underParagraph
"P" on "Registration of Sale", to wit:
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"P. REGISTRATION OF SALE:

The VENDEE hereby agrees that, for the time being, this Deed will not be registered and that its title shall
not be issued until the satisfactory construction of the contemplated Office Building and VENDEE's
compliance with all conditions therein. x x x"
AMETHYST was nonetheless able to procure the title to the property in its name, and subsequently, assigned
the same to ASB.
Besides, records show that there are registered owner-corporations of several properties within the Ortigas
area, where the subject property is located, that have likewise failed to comply with the restriction on
building construction notwithstanding the fact of its annotation on the titles covering their properties. In
fact, the tax declarations covering these properties in the respective names of UNIMART INC., CHAILEASE
DEVELOPMENT CO. INC., CANOGA PARK DEVELOPMENT CORPORATION, and MAKATI SUPERMARKET
CORPORATION reveal that no improvements or buildings have been erected thereon.
Notwithstanding such blatant non-compliance, however, records are bereft of evidence to prove that
ORTIGAS took steps to demand observance of the said restriction from these corporations, or that it opted
to institute any case against them in order to enforce its rights as seller. Thus, while ORTIGAS effectively
tolerated the non-compliance of these other corporations, it nonetheless proceeded with the filing of the
Complaint a quo against ASB, seeking the rescission of the original Deed of Sale on the ground of noncompliance of the very same restriction being violated by other property owners similarly situated.
On the basis of the foregoing acts or omissions of ORTIGAS, and the factual milieu of the present case, it

cannot be pretended that it failed to actively pursue the attainment of its objective of having a "controlled
real estate development project and subdivision scheme". The Court thus concurs with the ratiocinations of
the RTC when it posited that the restrictions imposed by ORTIGAS on ASB have been "rendered obsolete and
inexistent" for failure of ORTIGAS to enforce the same uniformly and indiscriminatelyagainst all noncomplying property owners. If the purpose of ORTIGAS for imposing the restrictions was for its "controlled
real estate development project and subdivision scheme", then it should have sought compliance from all
property owners that have violated the restriction on building completion. As things stand, ASB would
appear to have been singled out by ORTIGAS, rendering the present action highly suspect and a mere
afterthought.
Consequently, while it may be true that ASB was bound by the restrictions annotated on its title, specifically
the restriction on building completion, ORTIGAS is now effectivelyestopped from enforcing the same by
virtue of its inaction and silence.
xxxx
In this case, ORTIGAS acquiesced to the conveyance of the property from AMETHYST to ASB with nary a
demand, reservation or complaint for the enforcement of the restriction on building construction. It allowed
the four-year period within which to construct a building to lapse before it decided that it wanted, after all,
to enforce the restriction, which cannot be allowed lest the property rights of the registered owner, ASB, be
transgressed. Such a silence or inaction, which in effect led ASB to believe that ORTIGAS no longer sought
the enforcement of the restrictions on the contract, therefore bars ORTIGAS from enforcing the restriction it
imposed on the subject property.
xxxx
WHEREFORE, premises considered, the instant appeal is DENIED. The assailed Decision is
hereby AFFIRMED.
SO ORDERED.21

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Acting on Ortigas' Motion for Reconsideration, however, the CA promulgated its assailed amended decision
on January 9, 2012,22 whereby it reversed the decision promulgated on September 6, 2011. It observed and
ruled as follows:
It is not disputed that AMETHYST failed to finish construction within the period stated in the 1994 Deed of
Sale. As correctly pointed out by ORTIGAS, in accordance with Article 1144 of the Civil Code, the
prescriptive period within which to enforce remedies under the 1994 Deed of sale is ten (10) years from the
time the right of action accrues.
ORTIGAS, therefore, had ten (10) years from 31 December 1995 or until 31 December 2005 within which to
file suit to enforce the restriction. ORTIGAS filed the present complaint on 07 July 2000 well within
the prescriptive period for filing the same.
ASB contends that it could not have complied with the particular restriction to finish construction of the
building as the period to finish the same had already lapsed by the time ASB acquired the property by way
of a Deed of Assignment in Liquidation between AMETHYST and ASB on 28 December 1996. We hold,
however, that the mere assignment or transfer of the subject property from AMETHYST to ASB
does not serve to defeat the vested right of ORTIGAS to avail of remedies to enforce the subject
restriction within the applicable prescriptive period.
xxxx
As to the argument that the inaction of ORTIGAS with respect to other non-compliant properties in the
Ortigas area is tantamount to consenting to such non-compliance, it must be mentioned that it is the sole
prerogative and discretion of Ortigas to initiate any action against the violators of the deed restrictions. This
Court cannot interfere with the exercise of such prerogative/discretion. Furthermore, We cannot sustain
estoppel in doubtful inference. Absent the conclusive proof that its essential elements are present, estoppel
must fail. Estoppel, when misapplied, becomes an effective weapon to accomplish an injustice, inasmuch as
it shuts a man's mouth from speaking the truth.23
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By its resolution promulgated on July 26, 2012, the CA denied the petitioner's Motion for
Reconsideration24 for being filed out of time.25
cralawred

Issues
Hence, this appeal in which ASB submits: (1) that its Motion for Reconsideration vis-a-vis the CA's amended
decision was filed on time; and (2) that the amended decision promulgated on January 9, 2012 by CA be
reversed and set aside, and the decision promulgated on September 6, 2011 be reinstated. 26
The petitioner essentially seeks the resolution of the issue of whether or not Ortigas validly rescinded
the Deed of Sale due to the failure of Amethyst and its assignee, the petitioner, to fulfil the covenants under
the Deed of Sale.
Ruling of the Court
The petition for review is meritorious.
1.
Petitioner's motion for reconsideration vis-a-vis the amended decision of the CA was timely filed
In denying the petitioner's Motion for Reconsideration, the CA concluded as follows:
Per allegation of material dates, the Motion for Reconsideration filed by Balgos Gumara & Jalandoni, cocounsel with Jose, Mendoza & Associates, on January 30, 2012 appears to have been filed on time. However,
per registry return attached at the back of p. 212 of the Rollo, the Motion for Reconsideration was filed three
(3) days late considering that the Amended Decision was received by defendant appellee's counsel of record,
Jose, Mendoza & Associates, on January 12, 2012.27
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The conclusion of the CA was unwarranted because the petitioner established that its filing of theMotion for
Reconsideration was timely.
It is basic that the party who asserts a fact or the affirmative of an issue has the burden of proving
it.28 Here, that party was the petitioner. To comply with its burden, it attached to its petition for review
on certiorari: (1) the affidavit executed by Noel S.R. Rose, Senior Partner of Jose, Mendoza & Associates
attesting that he had requested the postmaster of the Mandaluyong City Post Office to certify the date when
Jose, Mendoza & Associates had received the copy of the amended decision of the CA; 29 and (2) the
certification issued on August 15, 2012 by Postmaster Rufino C. Robles, and Letter Carrier, Jojo Salvador,
both of the Mandaluyong Central Post Office, certifying that Registered Letter No. MVC 457 containing the
copy of the amended decision had been delivered to and received on January 18, 2012 by Jose, Mendoza &
Associates, through Ric Ancheta.30 It thereby sought to prove that it had received the copy of the amended
decision only on January 18, 2012, not January 12, 2012 as stated in the registry return card on record.
Thus, it had until February 2, 2012, or 15 days from January 18, 2012, within which to file the same. In
contrast, Ortigas relied only on the copy of the registry return to refute the petitioner's assertion. 31 Under
the circumstances, the filing on January 30, 2012 of the Motion for Reconsideration was timely.
2.
Ortigas' action for rescission could not prosper
The petitioner reiterates that although the restrictions and covenants imposed by Ortigas under theDeed of
Sale with Amethyst, particularly with regard to the construction of the building, were similarly imposed on
Ortigas' other buyers and annotated on the latter's respective certificates of title, 32Ortigas never took to task
such other buyers and Amethyst for failing to construct the buildings within the periods contractually
imposed.33 It maintains, therefore, that Ortigas slept on its rights because it did not take any action against
Amethyst during the period prescribed in the Deed of Sale.34 It argues that even assuming that it was bound
by the terms of the Deed of Sale, certain circumstances occurred in the interim that rendered it impossible
for the petitioner to comply with the covenants embodied in the Deed of Sale, namely: (1) the delay in the
petitioner's possession of the property resulted from the complaint for forcible entry it had filed in the
Metropolitan Trial Court in Pasig City; (2) at the time the property was transferred to the petitioner, the
period within which to construct the building had already expired without Ortigas enforcing the obligation
against Amethyst; and (3) the petitioner was placed under corporate rehabilitation by the Securities and
Exchange Commission (SEC) by virtue of which a stay order was issued on May 4, 2000. 35
In contrast, Ortigas contends that it had the sole discretion whether or not to commence any action against
a party who violated a restriction in the Deed of Sale;36 and that it could not be estopped because the Deed

of Sale with Amethyst and the deeds of sale with its other buyers contained a uniform provision to the effect
that "any inaction, delay or tolerance by OCLP (Ortigas) in respect to violation of any of the covenants and
restrictions committed by these buyers shall not bar or estop the institution of an action to enforce them." 37
In asserting its right to rescind, Ortigas insists that the petitioner was bound by the covenants of theDeed of
Sale annotated on TCT No. PT-10597 in the name of the petitioner; 38 and that the petitioner's privity to
the Deed of Sale was by virtue of its being the successor-in-interest or assignee of Amethyst. 39
After evaluating the parties' arguments and the records of the case, the Court holds that Ortigas could not
validly demand the reconveyance of the property, or the demolition of the structures thereon through
rescission.
The Deed of Assignment in Liquidation executed between Amethyst and the petitioner expressly stated, in
part, that:
x x x x [T]he ASSIGNOR hereby assigns, transfers and conveys unto the ASSIGNEE, its successors
and assigns, free from any lien or encumbrance except those that are duly annotated on the Transfer
Certificate of Title (TCT), one parcel of real property (with improvements). x x x.
xxxx
The ASSIGNEE in turn in consideration of the foregoing assignment of assets to it, hereby surrenders to
ASSIGNOR, Amethyst Pearl Corporation, Stock Certificate Nos. (006, 007, 008, 009, 010, 011), covering a
total of TEN THOUSAND SHARES (10,000) registered in the name of the ASSIGNEE and its nominees in the
books of ASSIGNOR, receipt of which is hereby acknowledged, and in addition hereby releases ASSIGNOR
from any and all claims.40
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The express terms of the Deed of Assignment in Liquidation, supra, indicate that Amethyst transferred to
the petitioner only the tangible asset consisting of the parcel of land covered by TCT No. PT-94175
registered in the name of Amethyst. By no means did Amethyst assign the rights or duties it had assumed
under the Deed of Sale. The petitioner thus became vested with the ownership of the parcel of land "free
from any lien or encumbrance except those that are duly annotated on the [title]" from the time Amethyst
executed the Deed of Assignment in Liquidation.
Although the Deed of Sale stipulated that:
3. The lot, together with any improvements thereon, or any rights thereto, shall not be transferred, sold or
encumbered before the final completion of the building as herein provided unless it is with the prior express
written approval of ORTIGAS.41
xxxx
The VENDEE hereby agrees that, for the time being, this Deed will not be registered and that its title shall
not be issued until the satisfactory construction of the contemplated Office Building and VENDEE's
compliance with all conditions herein. x x x42
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Ortigas apparently recognized without any reservation the issuance of the new certificate of title in the name
of Amethyst and the subsequent transfer by assignment from Amethyst to the petitioner that resulted in the
issuance of the new certificate of title under the name of the petitioner. As such, Ortigas was estopped from
assailing the petitioner's acquisition and ownership of the property.
The application of estoppel was appropriate. The doctrine of estoppel was based on public policy, fair
dealing, good faith and justice, and its purpose was to forbid a party to speak against his own act or
omission, representation, or commitment to the injury of another to whom the act, omission,
representation, or commitment was directed and who reasonably relied thereon. The doctrine sprang from
equitable principles and the equities in the case, and was designed to aid the law in the administration of
justice where without its aid injustice would result. Estoppel has been applied by the Court wherever and
whenever special circumstances of the case so demanded. 43
Yet, the query that persists is whether or not the covenants annotated on TCT No. PT-10597 bound the
petitioner to the performance of the obligations assumed by Amethyst under the Deed of Sale.
We agree with Ortigas that the annotations on TCT No. PT-10597 bound the petitioner but not to the extent
that rendered the petitioner liable for the non-performance of the covenants stipulated in theDeed of Sale.

Section 39 of Act No. 496 (The Land Registration Act) requires that every person receiving a certificate of
title in pursuance of a decree of registration, and every subsequent purchaser of registered land who takes a
certificate of title for value in good faith shall hold the same free of all encumbrances except those noted on
said certificate. An encumbrance in the context of the provision is "anything that impairs the use or transfer
of property; anything which constitutes a burden on the title; a burden or charge upon property; a claim or
lien upon property."44 It denotes "any right to, or interest in, land which may subsist in another to the
diminution of its value, but consistent with the passing of the fee by conveyance." 45 An annotation, on the
other hand, is "a remark, note, case summary, or commentary on some passage of a book, statutory
provision, court decision, of the like, intended to illustrate or explain its meaning." 46 The purpose of the
annotation is to charge the purchaser or title holder with notice of such burden and claims. 47 Being aware of
the annotation, the purchaser must face the possibility that the title or the real property could be subject to
the rights of third parties.48
By acquiring the parcel of land with notice of the covenants contained in the Deed of Sale between the
vendor (Ortigas) and the vendee (Amethyst), the petitioner bound itself to acknowledge and respect the
encumbrance. Even so, the petitioner did not step into the shoes of Amethyst as a party in the Deed of Sale.
Thus, the annotation of the covenants contained in the Deed of Sale did not give rise to a liability on the part
of the petitioner as the purchaser/successor-in-interest without its express assumption of the duties or
obligations subject of the annotation. As stated, the annotation was only the notice to the
purchaser/successor-in-interest of the burden, claim or lien subject of the annotation. In that respect, the
Court has observed in Garcia v. Villar:49
The sale or transfer of the mortgaged property cannot affect or release the mortgage; thus the purchaser or
transferee is necessarily bound to acknowledge and respect the encumbrance.
xxxx
x x x However, Villar, in buying the subject property with notice that it was mortgaged, only undertook to
pay such mortgage or allow the subject property to be sold upon failure of the mortgage creditor to obtain
payment from the principal debtor once the debt matures. Villar did not obligate herself to replace the
debtor in the principal obligation, and could not do so in law without the creditors consent. Article 1293 of
the Civil Code provides:
Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, may be
made even without the knowledge or against the will of the latter, but not without the consent of the
creditor. Payment by the new debtor gives him the rights mentioned in articles 1236 and 1237.
Therefore, the obligation to pay the mortgage indebtedness remains with the original debtors Galas and
Pingol. x x x
To be clear, contractual obligations, unlike contractual rights or benefits, are generally not assignable. But
there are recognized means by which obligations may be transferred, such as by sub-contract and novation.
In this case, the substitution of the petitioner in the place of Amethyst did not result in the novation of
the Deed of Sale. To start with, it does not appear from the records that the consent of Ortigas to the
substitution had been obtained despite its essentiality to the novation. Secondly, the petitioner did not
expressly assume Amethyst's obligations under the Deed of Sale, whether through the Deed of Assignment
in Liquidation or another document. And, thirdly, the consent of the new obligor (i.e., the petitioner), which
was as essential to the novation as that of the obligee (i.e., Ortigas), was not obtained.50
Even if we would regard the petitioner as the assignee of Amethyst as far as the Deed of Sale was
concerned, instead of being the buyer only of the subject property, there would still be no express or implied
indication that the petitioner had assumed Amethyst's obligations. In short, the burden to perform the
covenants under the Deed of Sale, or the liability for the non-performance thereof, remained with Amethyst.
As held in an American case:
The mere assignment of a bilateral executory contract may not be interpreted as a promise by the assignee
to the assignor to assume the performance of the assignor's duties, so as to have the effect of creating a
new liability on the part of the assignee to the other party to the contract assigned. The assignee of the
vendee is under no personal engagement to the vendor where there is no privity between them. (Champion
v. Brown, 6 Johns. Ch. 398; Anderson v. N. Y. & H. R. R. Co., 132 App. Div. 183, 187, 188; Hugel v. Habel,
132 App. Div. 327, 328.) The assignee may, however, expressly or impliedly, bind himself to perform the
assignor's duties. This he may do by contract with the assignor or with the other party to the contract. It has
been held (Epstein v. Gluckin, 233 N. Y. 490) that where the assignee of the vendee invokes the aid of a
court of equity in an action for specific performance, he impliedly binds himself to perform on his part and
subjects himself to the conditions of the judgment appropriate thereto. "He who seeks equity must do
equity." The converse of the proposition, that the assignee of the vendee would be bound when the vendor

began the action, did not follow from the decision in that case. On the contrary, the question was wholly one
of remedy rather than right and it was held that mutuality of remedy is important only so far as its presence
is essential to the attainment of the ends of justice. This holding was necessary to sustain the decision. No
change was made in the law of contracts nor in the rule for the interpretation of an assignment of a
contract.
A judgment requiring the assignee of the vendee to perform at the suit of the vendor would operate as the
imposition of a new liability on the assignee which would be an act of oppression and injustice, unless the
assignee had, expressly or by implication, entered into a personal and binding contract with the assignor or
with the vendor to assume the obligations of the assignor.51
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Is rescission the proper remedy for Ortigas to recover the subject property from the petitioner?
The Civil Code uses rescission in two different contexts, namely: (1) rescission on account of breach of
contract under Article 1191; and (2) rescission by reason of lesion or economic prejudice under Article 1381.
Cogently explaining the differences between the contexts of rescission in his concurring opinion in Universal
Food Corp. v. Court of Appeals,52 the eminent Justice J.B.L. Reyes observed:
x x x The rescission on account of breach of stipulations is not predicated on injury to economic interests of
the party plaintiff but on the breach of faith by the defendant, that violates the reciprocity between the
parties. It is not a subsidiary action, and Article 1191 may be scanned without disclosing anywhere that the
action for rescission thereunder is subordinated to anything; other than the culpable breach of his
obligations by the defendant. This rescission is in principal action retaliatory in character, it being unjust that
a party be held bound to fulfill his promises when the other violates his, as expressed in the old Latin
aphorism: "Non servanti fidem, non est fides servanda." Hence, the reparation of damages for the breach is
purely secondary.
On the contrary, in the rescission by reason of lesion or economic prejudice, the cause of action is
subordinated to the existence of that prejudice, because it is the raison d'etre as well as the measure of the
right to rescind. Hence, where the defendant makes good the damages caused, the action cannot be
maintained or continued, as expressly provided in Articles 1383 and 1384. But the operation of these two
articles is limited to the cases of rescission for lesion enumerated in Article 1381 of the Civil Code of the
Philippines, and does not apply to cases under Article 1191.
Based on the foregoing, Ortigas' complaint was predicated on Article 1191 of the Civil Code, which provides:
Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment
of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter
should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in
accordance with articles 1385 and 1388 and the Mortgage Law.
Rescission under Article 1191 of the Civil Code is proper if one of the parties to the contract commits a
substantial breach of its provisions. It abrogates the contract from its inception and requires the mutual
restitution of the benefits received;53 hence, it can be carried out only when the party who demands
rescission can return whatever he may be obliged to restore.
Considering the foregoing, Ortigas did not have a cause of action against the petitioner for the rescission of
the Deed of Sale. Under Section 2, Rule 2 of the Rules of Court, a cause of action is the act or omission by
which a party violates a right of another. The essential elements of a cause of action are: (1) a right in favor
of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the
part of the defendant not to violate such right; and (3) an act or omission on the part of the defendant in
violation of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff
for which the latter may maintain an action for recovery of damages or other relief. It is only upon the
occurrence of the last element that the cause of action arises, giving the plaintiff the right to file an action in
court for the recovery of damages or other relief.54
The second and third elements were absent herein. The petitioner was not privy to the Deed of Sale because
it was not the party obliged thereon. Not having come under the duty not to violate any covenant in
the Deed of Sale when it purchased the subject property despite the annotation on the title, its failure to

comply with the covenants in the Deed of Sale did not constitute a breach of contract that gave rise to
Ortigas' right of rescission. It was rather Amethyst that defaulted on the covenants under the Deed of Sale;
hence, the action to enforce the provisions of the contract or to rescind the contract should be against
Amethyst. In other words, rescission could not anymore take place against the petitioner once the subject
property legally came into the juridical possession of the petitioner, who was a third party to the Deed of
Sale.55
In view of the outcome, we consider to be superfluous any discussion of the other matters raised in the
petition, like the effects of the petitioner's corporate rehabilitation and whether Ortigas was guilty of laches.
WHEREFORE, the Court GRANTS the petition for review on certiorari; ANNULS and REVERSES the
amended decision promulgated on January 9, 2012 and the resolution promulgated on July 26, 2012 by the
Court of Appeals in C.A.-G.R. CV No. 94997; DISMISSES Civil Case No. 67978 for lack of cause of action;
and ORDERS respondent ORTIGAS & COMPANY LIMITED PARTNERSHIP to pay the costs of suit.
SO ORDERED.

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