G.R. No.

L-40411 August 7, 1935

DAVAO SAW MILL CO., INC., plaintiff-appellant,

vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees.

MALCOLM, J.:

The issue in this case, as announced in the opening sentence of the decision in the trial court and as set forth by counsel for the parties on
appeal, involves the determination of the nature of the properties described in the complaint. The trial judge found that those properties were
personal in nature, and as a consequence absolved the defendants from the complaint, with costs against the plaintiff.

The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. It has operated a sawmill in
the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However, the land upon which the business was conducted belonged
to another person. On the land the sawmill company erected a building which housed the machinery used by it. Some of the implements thus
used were clearly personal property, the conflict concerning machines which were placed and mounted on foundations of cement. In the contract
of lease between the sawmill company and the owner of the land there appeared the following provision:

That on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by the party of the second
part shall pass to the exclusive ownership of the party of the first part without any obligation on its part to pay any amount for said
improvements and buildings; also, in the event the party of the second part should leave or abandon the land leased before the time
herein stipulated, the improvements and buildings shall likewise pass to the ownership of the party of the first part as though the time
agreed upon had expired: Provided, however, That the machineries and accessories are not included in the improvements which will
pass to the party of the first part on the expiration or abandonment of the land leased.

In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was the defendant, a judgment
was rendered in favor of the plaintiff in that action against the defendant in that action; a writ of execution issued thereon, and the properties now
in question were levied upon as personalty by the sheriff. No third party claim was filed for such properties at the time of the sales thereof as is
borne out by the record made by the plaintiff herein. Indeed the bidder, which was the plaintiff in that action, and the defendant herein having
consummated the sale, proceeded to take possession of the machinery and other properties described in the corresponding certificates of sale
executed in its favor by the sheriff of Davao.

As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a number of occasions treated the
machinery as personal property by executing chattel mortgages in favor of third persons. One of such persons is the appellee by assignment from
the original mortgages.

Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of

1. Land, buildings, roads and constructions of all kinds adhering to the soil;

xxx xxx xxx

5. Machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection with any
industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade of industry.

Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt that the trial judge and appellees
are right in their appreciation of the legal doctrines flowing from the facts.

In the first place, it must again be pointed out that the appellant should have registered its protest before or at the time of the sale of this property.
It must further be pointed out that while not conclusive, the characterization of the property as chattels by the appellant is indicative of intention
and impresses upon the property the character determined by the parties. In this connection the decision of this court in the case of Standard Oil
Co. of New York vs. Jaramillo ( [1923], 44 Phil., 630), whether obiter dicta or not, furnishes the key to such a situation.

It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is machinery which is involved; moreover,
machinery not intended by the owner of any building or land for use in connection therewith, but intended by a lessee for use in a building erected
on the land by the latter to be returned to the lessee on the expiration or abandonment of the lease.

A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was held that machinery which is
movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant,
a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner. In the opinion written by Chief
Justice White, whose knowledge of the Civil Law is well known, it was in part said:

To determine this question involves fixing the nature and character of the property from the point of view of the rights of Valdes and its
nature and character from the point of view of Nevers & Callaghan as a judgment creditor of the Altagracia Company and the rights
derived by them from the execution levied on the machinery placed by the corporation in the plant. Following the Code Napoleon, the
Porto Rican Code treats as immovable (real) property, not only land and buildings, but also attributes immovability in some cases to
property of a movable nature, that is, personal property, because of the destination to which it is applied. "Things," says section 334 of
the Porto Rican Code, "may be immovable either by their own nature or by their destination or the object to which they are applicable."
Numerous illustrations are given in the fifth subdivision of section 335, which is as follows: "Machinery, vessels, instruments or
implements intended by the owner of the tenements for the industrial or works that they may carry on in any building or upon any land
and which tend directly to meet the needs of the said industry or works." (See also Code Nap., articles 516, 518 et seq. to and inclusive
of article 534, recapitulating the things which, though in themselves movable, may be immobilized.) So far as the subject-matter with
which we are dealing machinery placed in the plant it is plain, both under the provisions of the Porto Rican Law and of the Code
Napoleon, that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property
or plant. Such result would not be accomplished, therefore, by the placing of machinery in a plant by a tenant or a usufructuary or any
person having only a temporary right. (Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and
decisions quoted in Fuzier-Herman ed. Code Napoleon under articles 522 et seq.) The distinction rests, as pointed out by Demolombe,
upon the fact that one only having a temporary right to the possession or enjoyment of property is not presumed by the law to have
applied movable property belonging to him so as to deprive him of it by causing it by an act of immobilization to become the property of
another. It follows that abstractly speaking the machinery put by the Altagracia Company in the plant belonging to Sanchez did not lose
its character of movable property and become immovable by destination. But in the concrete immobilization took place because of the
express provisions of the lease under which the Altagracia held, since the lease in substance required the putting in of improved
machinery, deprived the tenant of any right to charge against the lessor the cost such machinery, and it was expressly stipulated that
the machinery so put in should become a part of the plant belonging to the owner without compensation to the lessee. Under such
conditions the tenant in putting in the machinery was acting but as the agent of the owner in compliance with the obligations resting
 upon him, and the immobilization of the machinery which resulted arose in legal effect from the act of the owner in giving by contract a
permanent destination to the machinery.

xxx xxx xxx

The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the Altagracia Company, being, as
regards Nevers & Callaghan, movable property, it follows that they had the right to levy on it under the execution upon the judgment in
their favor, and the exercise of that right did not in a legal sense conflict with the claim of Valdes, since as to him the property was a part
of the realty which, as the result of his obligations under the lease, he could not, for the purpose of collecting his debt, proceed
separately against. (Valdes vs. Central Altagracia [192], 225 U.S., 58.)

Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this instance to be paid by the appellant.
G.R. No. L-58469 May 16, 1983

MAKATI LEASING and FINANCE CORPORATION, petitioner,

vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.

DE CASTRO, J.:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SO ORDERED.

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

Abad Santos, J., concurs in the result.

 [G.R. No. 137705. August 22, 2000]

SERGS PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs. PCI LEASING AND FINANCE, INC., respondent.

DECISION

PANGANIBAN, J.:

After agreeing to a contract stipulating that a real or immovable property be considered as personal or movable, a party is estopped
from subsequently claiming otherwise. Hence, such property is a proper subject of a writ of replevin obtained by the other contracting
party.

The Case

Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision[1] of the Court of Appeals (CA)[2] in CA-GR
SP No. 47332 and its February 26, 1999 Resolution[3]denying reconsideration. The decretal portion of the CA Decision reads as follows:

WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and Resolution dated March 31, 1998 in Civil Case No. Q-98-
33500 are hereby AFFIRMED. The writ of preliminary injunction issued on June 15, 1998 is hereby LIFTED.[4]

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

The Facts

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

On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI Leasing for short) filed with the RTC-QC a complaint for [a] sum of money
(Annex E), with an application for a writ of replevin docketed as Civil Case No. Q-98-33500.

On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge issued a writ of replevin (Annex B) directing its sheriff to seize
and deliver the machineries and equipment to PCI Leasing after 5 days and upon the payment of the necessary expenses.

On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioners factory, seized one machinery with [the] word that he
[would] return for the other machineries.

On March 25, 1998, petitioners filed a motion for special protective order (Annex C), invoking the power of the court to control the conduct of its
officers and amend and control its processes, praying for a directive for the sheriff to defer enforcement of the writ of replevin.

This motion was opposed by PCI Leasing (Annex F), on the ground that the properties [were] still personal and therefore still subject to seizure
and a writ of replevin.

In their Reply, petitioners asserted that the properties sought to be seized [were] immovable as defined in Article 415 of the Civil Code, the parties
agreement to the contrary notwithstanding. They argued that to give effect to the agreement would be prejudicial to innocent third parties. They
further stated that PCI Leasing [was] estopped from treating these machineries as personal because the contracts in which the alleged agreement
[were] embodied [were] totally sham and farcical.

On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of the remaining properties. He was able to take two
more, but was prevented by the workers from taking the rest.

On April 7, 1998, they went to [the CA] via an original action for certiorari.

Ruling of the Court of Appeals

Citing the Agreement of the parties, the appellate court held that the subject machines were personal property, and that they had
only been leased, not owned, by petitioners. It also ruled that the words of the contract are clear and leave no doubt upon the true
intention of the contracting parties. Observing that Petitioner Goquiolay was an experienced businessman who was not unfamiliar with
the ways of the trade, it ruled that he should have realized the import of the document he signed. The CA further held:

Furthermore, to accord merit to this petition would be to preempt the trial court in ruling upon the case below, since the merits of the whole matter
are laid down before us via a petition whose sole purpose is to inquire upon the existence of a grave abuse of discretion on the part of the [RTC]
in issuing the assailed Order and Resolution. The issues raised herein are proper subjects of a full-blown trial, necessitating presentation of
evidence by both parties. The contract is being enforced by one, and [its] validity is attacked by the other a matter x x x which respondent court is
in the best position to determine.

Hence, this Petition.[11]

The Issues

In their Memorandum, petitioners submit the following issues for our consideration:

A. Whether or not the machineries purchased and imported by SERGS became real property by virtue of immobilization.

B. Whether or not the contract between the parties is a loan or a lease. [12]

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

The Petition is not meritorious.

Preliminary Matter:Procedural Questions

Respondent contends that the Petition failed to indicate expressly whether it was being filed under Rule 45 or Rule 65 of the Rules
of Court. It further alleges that the Petition erroneously impleaded Judge Hilario Laqui as respondent.

There is no question that the present recourse is under Rule 45. This conclusion finds support in the very title of the Petition,
which is Petition for Review on Certiorari.[13]

While Judge Laqui should not have been impleaded as a respondent,[14] substantial justice requires that such lapse by itself should
not warrant the dismissal of the present Petition. In this light, the Court deems it proper to remove, motu proprio, the name of Judge
Laqui from the caption of the present case.

Main Issue: Nature of the Subject Machinery

Petitioners contend that the subject machines used in their factory were not proper subjects of the Writ issued by the RTC,
because they were in fact real property. Serious policy considerations, they argue, militate against a contrary characterization.

Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only. [15] Section 3
thereof reads:

SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall issue an order and the corresponding writ of replevin
describing the personal property alleged to be wrongfully detained and requiring the sheriff forthwith to take such property into his custody.

On the other hand, Article 415 of the Civil Code enumerates immovable or real property as follows:

ART. 415. The following are immovable property:

x x x....................................x x x....................................x x x

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in
a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;

x x x....................................x x x....................................x x x

In the present case, the machines that were the subjects of the Writ of Seizure were placed by petitioners in the factory built on
their own land. Indisputably, they were essential and principal elements of their chocolate-making industry. Hence, although each of
them was movable or personal property on its own, all of them have become immobilized by destination because they are essential and
principal elements in the industry.[16] In that sense, petitioners are correct in arguing that the said machines are real, not personal,
property pursuant to Article 415 (5) of the Civil Code.[17]

Be that as it may, we disagree with the submission of the petitioners that the said machines are not proper subjects of the Writ of
Seizure.

The Court has held that contracting parties may validly stipulate that a real property be considered as personal.[18] After agreeing
to such stipulation, they are consequently estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is
ordinarily precluded from denying the truth of any material fact found therein.

Hence, in Tumalad v. Vicencio,[19] the Court upheld the intention of the parties to treat a house as a personal property because it
had been made the subject of a chattel mortgage. The Court ruled:

x x x. Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a property
by way of chattel mortgage defendants-appellants could only have meant to convey the house as chattel, or at least, intended to treat the same as
such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise.

Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile Mills[20] also held that the machinery used
in a factory and essential to the industry, as in the present case, was a proper subject of a writ of replevin because it was treated as
personal property in a contract. Pertinent portions of the Courts ruling are reproduced hereunder:

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

In the present case, the Lease Agreement clearly provides that the machines in question are to be considered as personal
property. Specifically, Section 12.1 of the Agreement reads as follows:[21]

12.1 The PROPERTY is, and shall at all times be and remain, personal property notwithstanding that the PROPERTY or any part thereof may
now be, or hereafter become, in any manner affixed or attached to or embedded in, or permanently resting upon, real property or any building
thereon, or attached in any manner to what is permanent.

Clearly then, petitioners are estopped from denying the characterization of the subject machines as personal property. Under the
circumstances, they are proper subjects of the Writ of Seizure.

It should be stressed, however, that our holding -- that the machines should be deemed personal property pursuant to the Lease
Agreement is good only insofar as the contracting parties are concerned.[22] Hence, while the parties are bound by the Agreement, third
persons acting in good faith are not affected by its stipulation characterizing the subject machinery as personal. [23] In any event, there
is no showing that any specific third party would be adversely affected.

Validity of the Lease Agreement

In their Memorandum, petitioners contend that the Agreement is a loan and not a lease. [24] Submitting documents supposedly
showing that they own the subject machines, petitioners also argue in their Petition that the Agreement suffers from intrinsic ambiguity
which places in serious doubt the intention of the parties and the validity of the lease agreement itself.[25] In their Reply to respondents
Comment, they further allege that the Agreement is invalid.[26]
 These arguments are unconvincing. The validity and the nature of the contract are the lis mota of the civil action pending before
the RTC. A resolution of these questions, therefore, is effectively a resolution of the merits of the case. Hence, they should be threshed
out in the trial, not in the proceedings involving the issuance of the Writ of Seizure.

Indeed, in La Tondea Distillers v. CA,[27] the Court explained that the policy under Rule 60 was that questions involving title to the
subject property questions which petitioners are now raising -- should be determined in the trial. In that case, the Court noted that the
remedy of defendants under Rule 60 was either to post a counter-bond or to question the sufficiency of the plaintiffs bond. They were
not allowed, however, to invoke the title to the subject property. The Court ruled:

In other words, the law does not allow the defendant to file a motion to dissolve or discharge the writ of seizure (or delivery) on ground of
insufficiency of the complaint or of the grounds relied upon therefor, as in proceedings on preliminary attachment or injunction, and thereby put at
issue the matter of the title or right of possession over the specific chattel being replevied, the policy apparently being that said matter should be
ventilated and determined only at the trial on the merits.[28]

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

Reliance on the Lease Agreement

It should be pointed out that the Court in this case may rely on the Lease Agreement, for nothing on record shows that it has been
nullified or annulled. In fact, petitioners assailed it first only in the RTC proceedings, which had ironically been instituted by
respondent. Accordingly, it must be presumed valid and binding as the law between the parties.

Makati Leasing and Finance Corporation[30] is also instructive on this point. In that case, the Deed of Chattel Mortgage, which
characterized the subject machinery as personal property, was also assailed because respondent had allegedly been required to sign
a printed form of chattel mortgage which was in a blank form at the time of signing. The Court rejected the argument and relied on the
Deed, ruling as follows:

x x x. Moreover, even granting that the charge is true, such fact alone does not render a contract void ab initio, but can only be a ground for
rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court. There is nothing on
record to show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same. x x x

Alleged Injustice Committed on the Part of Petitioners

Petitioners contend that if the Court allows these machineries to be seized, then its workers would be out of work and thrown into
the streets.[31] They also allege that the seizure would nullify all efforts to rehabilitate the corporation.

Petitioners arguments do not preclude the implementation of the Writ. As earlier discussed, law and jurisprudence support its
propriety. Verily, the above-mentioned consequences, if they come true, should not be blamed on this Court, but on the petitioners for
failing to avail themselves of the remedy under Section 5 of Rule 60, which allows the filing of a counter-bond. The provision states:

SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the applicants bond, or of the surety or sureties thereon, he cannot
immediately require the return of the property, but if he does not so object, he may, at any time before the delivery of the property to the applicant,
require the return thereof, by filing with the court where the action is pending a bond executed to the applicant, in double the value of the property
as stated in the applicants affidavit for the delivery thereof to the applicant, if such delivery be adjudged, and for the payment of such sum to him
as may be recovered against the adverse party, and by serving a copy bond on the applicant.

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED. Costs against petitioners.

SO ORDERED.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.
G.R. No. 155076 February 27, 2006

LUIS MARCOS P. LAUREL, Petitioner,

vs.
HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial Court, Makati City, Branch 150, PEOPLE OF THE PHILIPPINES&
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Respondents.

DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 68841 affirming the Order issued
by Judge Zeus C. Abrogar, Regional Trial Court (RTC), Makati City, Branch 150, which denied the "Motion to Quash (With Motion to Defer
Arraignment)" in Criminal Case No. 99-2425 for theft.

Philippine Long Distance Telephone Company (PLDT) is the holder of a legislative franchise to render local and international telecommunication
services under Republic Act No. 7082.2 Under said law, PLDT is authorized to establish, operate, manage, lease, maintain and purchase
telecommunication systems, including transmitting, receiving and switching stations, for both domestic and international calls. For this purpose, it
has installed an estimated 1.7 million telephone lines nationwide. PLDT also offers other services as authorized by Certificates of Public
Convenience and Necessity (CPCN) duly issued by the National Telecommunications Commission (NTC), and operates and maintains an
International Gateway Facility (IGF). The PLDT network is thus principally composed of the Public Switch Telephone Network (PSTN), telephone
handsets and/or telecommunications equipment used by its subscribers, the wires and cables linking said telephone handsets and/or
telecommunications equipment, antenna, the IGF, and other telecommunications equipment which provide interconnections.3 1avvphil.net

PLDT alleges that one of the alternative calling patterns that constitute network fraud and violate its network integrity is that which is known as
International Simple Resale (ISR). ISR is a method of routing and completing international long distance calls using International Private Leased
Lines (IPL), cables, antenna or air wave or frequency, which connect directly to the local or domestic exchange facilities of the terminating country
(the country where the call is destined). The IPL is linked to switching equipment which is connected to a PLDT telephone line/number. In the
process, the calls bypass the IGF found at the terminating country, or in some instances, even those from the originating country. 4

One such alternative calling service is that offered by Baynet Co., Ltd. (Baynet) which sells "Bay Super Orient Card" phone cards to people who
call their friends and relatives in the Philippines. With said card, one is entitled to a 27-minute call to the Philippines for about 37.03 per minute.
After dialing the ISR access number indicated in the phone card, the ISR operator requests the subscriber to give the PIN number also indicated
in the phone card. Once the callers identity (as purchaser of the phone card) is confirmed, the ISR operator will then provide a Philippine local line
to the requesting caller via the IPL. According to PLDT, calls made through the IPL never pass the toll center of IGF operators in the Philippines.
Using the local line, the Baynet card user is able to place a call to any point in the Philippines, provided the local line is National Direct Dial (NDD)
capable.5

PLDT asserts that Baynet conducts its ISR activities by utilizing an IPL to course its incoming international long distance calls from Japan. The IPL
is linked to switching equipment, which is then connected to PLDT telephone lines/numbers and equipment, with Baynet as subscriber. Through
the use of the telephone lines and other auxiliary equipment, Baynet is able to connect an international long distance call from Japan to any part of
the Philippines, and make it appear as a call originating from Metro Manila. Consequently, the operator of an ISR is able to evade payment of
access, termination or bypass charges and accounting rates, as well as compliance with the regulatory requirements of the NTC. Thus, the ISR
operator offers international telecommunication services at a lower rate, to the damage and prejudice of legitimate operators like PLDT.6

PLDT pointed out that Baynet utilized the following equipment for its ISR activities: lines, cables, and antennas or equipment or device capable of
transmitting air waves or frequency, such as an IPL and telephone lines and equipment; computers or any equipment or device capable of
accepting information applying the prescribed process of the information and supplying the result of this process; modems or any equipment or
device that enables a data terminal equipment such as computers to communicate with other data terminal equipment via a telephone line;
multiplexers or any equipment or device that enables two or more signals from different sources to pass through a common cable or transmission
line; switching equipment, or equipment or device capable of connecting telephone lines; and software, diskettes, tapes or equipment or device
used for recording and storing information.7

PLDT also discovered that Baynet subscribed to a total of 123 PLDT telephone lines/numbers. 8 Based on the Traffic Study conducted on the
volume of calls passing through Baynets ISR network which bypass the IGF toll center, PLDT incurred an estimated monthly loss of
P10,185,325.96.9 Records at the Securities and Exchange Commission (SEC) also revealed that Baynet was not authorized to provide
international or domestic long distance telephone service in the country. The following are its officers: Yuji Hijioka, a Japanese national (chairman
of the board of directors); Gina C. Mukaida, a Filipina (board member and president); Luis Marcos P. Laurel, a Filipino (board member and
corporate secretary); Ricky Chan Pe, a Filipino (board member and treasurer); and Yasushi Ueshima, also a Japanese national (board member).

Upon complaint of PLDT against Baynet for network fraud, and on the strength of two search warrants 10 issued by the RTC of Makati, Branch 147,
National Bureau of Investigation (NBI) agents searched its office at the 7th Floor, SJG Building, Kalayaan Avenue, Makati City on November 8,
1999. Atsushi Matsuura, Nobuyoshi Miyake, Edourd D. Lacson and Rolando J. Villegas were arrested by NBI agents while in the act of manning
the operations of Baynet. Seized in the premises during the search were numerous equipment and devices used in its ISR activities, such as
multiplexers, modems, computer monitors, CPUs, antenna, assorted computer peripheral cords and microprocessors, cables/wires, assorted
PLDT statement of accounts, parabolic antennae and voltage regulators.

State Prosecutor Ofelia L. Calo conducted an inquest investigation and issued a Resolution 11 on January 28, 2000, finding probable cause for
theft under Article 308 of the Revised Penal Code and Presidential Decree No. 401 12against the respondents therein, including Laurel.

On February 8, 2000, State Prosecutor Calo filed an Information with the RTC of Makati City charging Matsuura, Miyake, Lacson and Villegas with
theft under Article 308 of the Revised Penal Code. After conducting the requisite preliminary investigation, the State Prosecutor filed an Amended
Information impleading Laurel (a partner in the law firm of Ingles, Laurel, Salinas, and, until November 19, 1999, a member of the board of
directors and corporate secretary of Baynet), and the other members of the board of directors of said corporation, namely, Yuji Hijioka, Yasushi
Ueshima, Mukaida, Lacson and Villegas, as accused for theft under Article 308 of the Revised Penal Code. The inculpatory portion of the
Amended Information reads:

On or about September 10-19, 1999, or prior thereto, in Makati City, and within the jurisdiction of this Honorable Court, the accused, conspiring
and confederating together and all of them mutually helping and aiding one another, with intent to gain and without the knowledge and consent of
the Philippine Long Distance Telephone (PLDT), did then and there willfully, unlawfully and feloniously take, steal and use the international long
distance calls belonging to PLDT by conducting International Simple Resale (ISR), which is a method of routing and completing international long
distance calls using lines, cables, antennae, and/or air wave frequency which connect directly to the local or domestic exchange facilities of the
country where the call is destined, effectively stealing this business from PLDT while using its facilities in the estimated amount of P20,370,651.92
to the damage and prejudice of PLDT, in the said amount.
CONTRARY TO LAW.13

Accused Laurel filed a "Motion to Quash (with Motion to Defer Arraignment)" on the ground that the factual allegations in the Amended Information
do not constitute the felony of theft under Article 308 of the Revised Penal Code. He averred that the Revised Penal Code, or any other special
penal law for that matter, does not prohibit ISR operations. He claimed that telephone calls with the use of PLDT telephone lines, whether
domestic or international, belong to the persons making the call, not to PLDT. He argued that the caller merely uses the facilities of PLDT, and
what the latter owns are the telecommunication infrastructures or facilities through which the call is made. He also asserted that PLDT is
compensated for the callers use of its facilities by way of rental; for an outgoing overseas call, PLDT charges the caller per minute, based on the
duration of the call. Thus, no personal property was stolen from PLDT. According to Laurel, the P20,370,651.92 stated in the Information, if
anything, represents the rental for the use of PLDT facilities, and not the value of anything owned by it. Finally, he averred that the allegations in
the Amended Information are already subsumed under the Information for violation of Presidential Decree (P.D.) No. 401 filed and pending in the
Metropolitan Trial Court of Makati City, docketed as Criminal Case No. 276766.

The prosecution, through private complainant PLDT, opposed the motion, 14 contending that the movant unlawfully took personal property
belonging to it, as follows: 1) intangible telephone services that are being offered by PLDT and other telecommunication companies, i.e., the
connection and interconnection to their telephone lines/facilities; 2) the use of those facilities over a period of time; and 3) the revenues derived in
connection with the rendition of such services and the use of such facilities. 15

The prosecution asserted that the use of PLDTs intangible telephone services/facilities allows electronic voice signals to pass through the same,
and ultimately to the called partys number. It averred that such service/facility is akin to electricity which, although an intangible property, may,
nevertheless, be appropriated and be the subject of theft. Such service over a period of time for a consideration is the business that PLDT
provides to its customers, which enables the latter to send various messages to installed recipients. The service rendered by PLDT is akin to
merchandise which has specific value, and therefore, capable of appropriation by another, as in this case, through the ISR operations conducted
by the movant and his co-accused.

The prosecution further alleged that "international business calls and revenues constitute personal property envisaged in Article 308 of the
Revised Penal Code." Moreover, the intangible telephone services/facilities belong to PLDT and not to the movant and the other accused,
because they have no telephone services and facilities of their own duly authorized by the NTC; thus, the taking by the movant and his co-
accused of PLDT services was with intent to gain and without the latters consent.

The prosecution pointed out that the accused, as well as the movant, were paid in exchange for their illegal appropriation and use of PLDTs
telephone services and facilities; on the other hand, the accused did not pay a single centavo for their illegal ISR operations. Thus, the acts of the
accused were akin to the use of a "jumper" by a consumer to deflect the current from the house electric meter, thereby enabling one to steal
electricity. The prosecution emphasized that its position is fortified by the Resolutions of the Department of Justice in PLDT v. Tiongson, et al. (I.S.
No. 97-0925) and in PAOCTF-PLDT v. Elton John Tuason, et al. (I.S. No. 2000-370) which were issued on August 14, 2000 finding probable
cause for theft against the respondents therein.

On September 14, 2001, the RTC issued an Order16 denying the Motion to Quash the Amended Information. The court declared that, although
there is no law that expressly prohibits the use of ISR, the facts alleged in the Amended Information "will show how the alleged crime was
committed by conducting ISR," to the damage and prejudice of PLDT.

Laurel filed a Motion for Reconsideration17 of the Order, alleging that international long distance calls are not personal property, and are not
capable of appropriation. He maintained that business or revenue is not considered personal property, and that the prosecution failed to adduce
proof of its existence and the subsequent loss of personal property belonging to another. Citing the ruling of the Court in United States v. De
Guzman,18 Laurel averred that the case is not one with telephone calls which originate with a particular caller and terminates with the called party.
He insisted that telephone calls are considered privileged communications under the Constitution and cannot be considered as "the property of
PLDT." He further argued that there is no kinship between telephone calls and electricity or gas, as the latter are forms of energy which are
generated and consumable, and may be considered as personal property because of such characteristic. On the other hand, the movant argued,
the telephone business is not a form of energy but is an activity.

In its Order19 dated December 11, 2001, the RTC denied the movants Motion for Reconsideration. This time, it ruled that what was stolen from
PLDT was its "business" because, as alleged in the Amended Information, the international long distance calls made through the facilities of PLDT
formed part of its business. The RTC noted that the movant was charged with stealing the business of PLDT. To support its ruling, it cited
Strochecker v. Ramirez,20where the Court ruled that interest in business is personal property capable of appropriation. It further declared that,
through their ISR operations, the movant and his co-accused deprived PLDT of fees for international long distance calls, and that the ISR used by
the movant and his co-accused was no different from the "jumper" used for stealing electricity.

Laurel then filed a Petition for Certiorari with the CA, assailing the Order of the RTC. He alleged that the respondent judge gravely abused his
discretion in denying his Motion to Quash the Amended Information.21 As gleaned from the material averments of the amended information, he
was charged with stealing the international long distance calls belonging to PLDT, not its business. Moreover, the RTC failed to distinguish
between the business of PLDT (providing services for international long distance calls) and the revenues derived therefrom. He opined that a
"business" or its revenues cannot be considered as personal property under Article 308 of the Revised Penal Code, since a "business" is "(1) a
commercial or mercantile activity customarily engaged in as a means of livelihood and typically involving some independence of judgment and
power of decision; (2) a commercial or industrial enterprise; and (3) refers to transactions, dealings or intercourse of any nature." On the other
hand, the term "revenue" is defined as "the income that comes back from an investment (as in real or personal property); the annual or periodical
rents, profits, interests, or issues of any species of real or personal property." 22

Laurel further posited that an electric companys business is the production and distribution of electricity; a gas companys business is the
production and/or distribution of gas (as fuel); while a water companys business is the production and distribution of potable water. He argued
that the "business" in all these cases is the commercial activity, while the goods and merchandise are the products of such activity. Thus, in
prosecutions for theft of certain forms of energy, it is the electricity or gas which is alleged to be stolen and not the "business" of providing
electricity or gas. However, since a telephone company does not produce any energy, goods or merchandise and merely renders a service or, in
the words of PLDT, "the connection and interconnection to their telephone lines/facilities," such service cannot be the subject of theft as defined in
Article 308 of the Revised Penal Code.23

He further declared that to categorize "business" as personal property under Article 308 of the Revised Penal Code would lead to absurd
consequences; in prosecutions for theft of gas, electricity or water, it would then be permissible to allege in the Information that it is the gas
business, the electric business or the water business which has been stolen, and no longer the merchandise produced by such enterprise. 24

Laurel further cited the Resolution of the Secretary of Justice in Piltel v. Mendoza,25 where it was ruled that the Revised Penal Code, legislated as
it was before present technological advances were even conceived, is not adequate to address the novel means of "stealing" airwaves or airtime.
In said resolution, it was noted that the inadequacy prompted the filing of Senate Bill 2379 (sic) entitled "The Anti-Telecommunications Fraud of
1997" to deter cloning of cellular phones and other forms of communications fraud. The said bill "aims to protect in number (ESN) (sic) or
Capcode, mobile identification number (MIN), electronic-international mobile equipment identity (EMEI/IMEI), or subscriber identity module" and
"any attempt to duplicate the data on another cellular phone without the consent of a public telecommunications entity would be punishable by
law."26 Thus, Laurel concluded, "there is no crime if there is no law punishing the crime."
On August 30, 2002, the CA rendered judgment dismissing the petition. 27 The appellate court ruled that a petition for certiorari under Rule 65 of
the Rules of Court was not the proper remedy of the petitioner. On the merits of the petition, it held that while business is generally an activity

which is abstract and intangible in form, it is nevertheless considered "property" under Article 308 of the Revised Penal Code. The CA opined that
PLDTs business of providing international calls is personal property which may be the object of theft, and cited United States v. Carlos28 to
support such conclusion. The tribunal also cited Strochecker v. Ramirez, 29 where this Court ruled that one-half interest in a days business is
personal property under Section 2 of Act No. 3952, otherwise known as the Bulk Sales Law. The appellate court held that the operations of the
ISR are not subsumed in the charge for violation of P.D. No. 401.

Laurel, now the petitioner, assails the decision of the CA, contending that -

THE COURT OF APPEALS ERRED IN RULING THAT THE PERSONAL PROPERTY ALLEGEDLY STOLEN PER THE
INFORMATION IS NOT THE "INTERNATIONAL LONG DISTANCE CALLS" BUT THE "BUSINESS OF PLDT."

THE COURT OF APPEALS ERRED IN RULING THAT THE TERM "BUSINESS" IS PERSONAL PROPERTY WITHIN THE MEANING
OF ART. 308 OF THE REVISED PENAL CODE.30

Petitioner avers that the petition for a writ of certiorari may be filed to nullify an interlocutory order of the trial court which was issued with grave
abuse of discretion amounting to excess or lack of jurisdiction. In support of his petition before the Court, he reiterates the arguments in his
pleadings filed before the CA. He further claims that while the right to carry on a business or an interest or participation in business is considered
property under the New Civil Code, the term "business," however, is not. He asserts that the Philippine Legislature, which approved the Revised
Penal Code way back in January 1, 1932, could not have contemplated to include international long distance calls and "business" as personal
property under Article 308 thereof.

In its comment on the petition, the Office of the Solicitor General (OSG) maintains that the amended information clearly states all the essential
elements of the crime of theft. Petitioners interpretation as to whether an "international long distance call" is personal property under the law is
inconsequential, as a reading of the amended information readily reveals that specific acts and circumstances were alleged charging Baynet,
through its officers, including petitioner, of feloniously taking, stealing and illegally using international long distance calls belonging to respondent
PLDT by conducting ISR operations, thus, "routing and completing international long distance calls using lines, cables, antenna and/or airwave
frequency which connect directly to the local or domestic exchange facilities of the country where the call is destined." The OSG maintains that the
international long distance calls alleged in the amended information should be construed to mean "business" of PLDT, which, while abstract and
intangible in form, is personal property susceptible of appropriation. 31 The OSG avers that what was stolen by petitioner and his co-accused is the
business of PLDT providing international long distance calls which, though intangible, is personal property of the PLDT. 32

For its part, respondent PLDT asserts that personal property under Article 308 of the Revised Penal Code comprehends intangible property such
as electricity and gas which are valuable articles for merchandise, brought and sold like other personal property, and are capable of appropriation.
It insists that the business of international calls and revenues constitute personal property because the same are valuable articles of merchandise.
The respondent reiterates that international calls involve (a) the intangible telephone services that are being offered by it, that is, the connection
and interconnection to the telephone network, lines or facilities; (b) the use of its telephone network, lines or facilities over a period of time; and (c)
the income derived in connection therewith.33

PLDT further posits that business revenues or the income derived in connection with the rendition of such services and the use of its telephone
network, lines or facilities are personal properties under Article 308 of the Revised Penal Code; so is the use of said telephone services/telephone
network, lines or facilities which allow electronic voice signals to pass through the same and ultimately to the called partys number. It is akin to
electricity which, though intangible property, may nevertheless be appropriated and can be the object of theft. The use of respondent PLDTs
telephone network, lines, or facilities over a period of time for consideration is the business that it provides to its customers, which enables the
latter to send various messages to intended recipients. Such use over a period of time is akin to merchandise which has value and, therefore, can
be appropriated by another. According to respondent PLDT, this is what actually happened when petitioner Laurel and the other accused below
conducted illegal ISR operations.34

The petition is meritorious.

The issues for resolution are as follows: (a) whether or not the petition for certiorari is the proper remedy of the petitioner in the Court of Appeals;
(b) whether or not international telephone calls using Bay Super Orient Cards through the telecommunication services provided by PLDT for such
calls, or, in short, PLDTs business of providing said telecommunication services, are proper subjects of theft under Article 308 of the Revised
Penal Code; and (c) whether or not the trial court committed grave abuse of discretion amounting to excess or lack of jurisdiction in denying the
motion of the petitioner to quash the amended information.

On the issue of whether or not the petition for certiorari instituted by the petitioner in the CA is proper, the general rule is that a petition for
certiorari under Rule 65 of the Rules of Court, as amended, to nullify an order denying a motion to quash the Information is inappropriate because
the aggrieved party has a remedy of appeal in the ordinary course of law. Appeal and certiorari are mutually exclusive of each other. The remedy
of the aggrieved party is to continue with the case in due course and, when an unfavorable judgment is rendered, assail the order and the decision
on appeal. However, if the trial court issues the order denying the motion to quash the Amended Information with grave abuse of discretion
amounting to excess or lack of jurisdiction, or if such order is patently erroneous, or null and void for being contrary to the Constitution, and the
remedy of appeal would not afford adequate and expeditious relief, the accused may resort to the extraordinary remedy of certiorari. 35 A special
civil action for certiorari is also available where there are special circumstances clearly demonstrating the inadequacy of an appeal. As this Court
held in Bristol Myers Squibb (Phils.), Inc. v. Viloria:36

Nonetheless, the settled rule is that a writ of certiorari may be granted in cases where, despite availability of appeal after trial, there is at least a
prima facie showing on the face of the petition and its annexes that: (a) the trial court issued the order with grave abuse of discretion amounting to
lack of or in excess of jurisdiction; (b) appeal would not prove to be a speedy and adequate remedy; (c) where the order is a patent nullity; (d) the
decision in the present case will arrest future litigations; and (e) for certain considerations such as public welfare and public policy. 37

In his petition for certiorari in the CA, petitioner averred that the trial court committed grave abuse of its discretion amounting to excess or lack of
jurisdiction when it denied his motion to quash the Amended Information despite his claim that the material allegations in the Amended Information
do not charge theft under Article 308 of the Revised Penal Code, or any offense for that matter. By so doing, the trial court deprived him of his
constitutional right to be informed of the nature of the charge against him. He further averred that the order of the trial court is contrary to the
constitution and is, thus, null and void. He insists that he should not be compelled to undergo the rigors and tribulations of a protracted trial and
incur expenses to defend himself against a non-existent charge.

Petitioner is correct.

An information or complaint must state explicitly and directly every act or omission constituting an offense 38 and must allege facts establishing
conduct that a penal statute makes criminal;39 and describes the property which is the subject of theft to advise the accused with reasonable
certainty of the accusation he is called upon to meet at the trial and to enable him to rely on the judgment thereunder of a subsequent prosecution
for the same offense.40 It must show, on its face, that if the alleged facts are true, an offense has been committed. The rule is rooted on the
constitutional right of the accused to be informed of the nature of the crime or cause of the accusation against him. He cannot be convicted of an
offense even if proven unless it is alleged or necessarily included in the Information filed against him.

As a general prerequisite, a motion to quash on the ground that the Information does not constitute the offense charged, or any offense for that
matter, should be resolved on the basis of said allegations whose truth and veracity are hypothetically committed; 41 and on additional facts
admitted or not denied by the prosecution.42 If the facts alleged in the Information do not constitute an offense, the complaint or information should
be quashed by the court.43

We have reviewed the Amended Information and find that, as mentioned by the petitioner, it does not contain material allegations charging the
petitioner of theft of personal property under Article 308 of the Revised Penal Code. It, thus, behooved the trial court to quash the Amended
Information. The Order of the trial court denying the motion of the petitioner to quash the Amended Information is a patent nullity.

On the second issue, we find and so hold that the international telephone calls placed by Bay Super Orient Card holders, the telecommunication
services provided by PLDT and its business of providing said services are not personal properties under Article 308 of the Revised Penal Code.
The construction by the respondents of Article 308 of the said Code to include, within its coverage, the aforesaid international telephone calls,
telecommunication services and business is contrary to the letter and intent of the law.

The rule is that, penal laws are to be construed strictly. Such rule is founded on the tenderness of the law for the rights of individuals and on the
plain principle that the power of punishment is vested in Congress, not in the judicial department. It is Congress, not the Court, which is to define a
crime, and ordain its punishment.44 Due respect for the prerogative of Congress in defining crimes/felonies constrains the Court to refrain from a
broad interpretation of penal laws where a "narrow interpretation" is appropriate. The Court must take heed to language, legislative history and
purpose, in order to strictly determine the wrath and breath of the conduct the law forbids.45 However, when the congressional purpose is unclear,
the court must apply the rule of lenity, that is, ambiguity concerning the ambit of criminal statutes should be resolved in favor of lenity.46

Penal statutes may not be enlarged by implication or intent beyond the fair meaning of the language used; and may not be held to include
offenses other than those which are clearly described, notwithstanding that the Court may think that Congress should have made them more
comprehensive.47 Words and phrases in a statute are to be construed according to their common meaning and accepted usage.

As Chief Justice John Marshall declared, "it would be dangerous, indeed, to carry the principle that a case which is within the reason or

mischief of a statute is within its provision, so far as to punish a crime not enumerated in the statute because it is of equal atrocity, or of kindred
character with those which are enumerated. 48 When interpreting a criminal statute that does not explicitly reach the conduct in question, the Court
should not base an expansive reading on inferences from subjective and variable understanding. 49

Article 308 of the Revised Penal Code defines theft as follows:

Art. 308. Who are liable for theft. Theft is committed by any person who, with intent to gain but without violence, against or intimidation of
persons nor force upon things, shall take personal property of another without the latters consent.

The provision was taken from Article 530 of the Spanish Penal Code which reads:

1. Los que con nimo de lucrarse, y sin violencia o intimidacin en las personas ni fuerza en las cosas, toman las cosas muebles ajenas sin la
voluntad de su dueo.50

For one to be guilty of theft, the accused must have an intent to steal (animus furandi) personal property, meaning the intent to deprive another of
his ownership/lawful possession of personal property which intent is apart from and concurrently with the general criminal intent which is an
essential element of a felony of dolo (dolus malus).

An information or complaint for simple theft must allege the following elements: (a) the taking of personal property; (b) the said property belongs to
another; (c) the taking be done with intent to gain; and (d) the taking be accomplished without the use of violence or intimidation of person/s or
force upon things.51

One is apt to conclude that "personal property" standing alone, covers both tangible and intangible properties and are subject of theft under the
Revised Penal Code. But the words "Personal property" under the Revised Penal Code must be considered in tandem with the word "take" in the
law. The statutory definition of "taking" and movable property indicates that, clearly, not all personal properties may be the proper subjects of theft.
The general rule is that, only movable properties which have physical or material existence and susceptible of occupation by another are proper
objects of theft.52 As explained by Cuelo Callon: "Cosa juridicamente es toda sustancia corporal, material, susceptible de ser aprehendida que
tenga un valor cualquiera."53

According to Cuello Callon, in the context of the Penal Code, only those movable properties which can be taken and carried from the place they
are found are proper subjects of theft. Intangible properties such as rights and ideas are not subject of theft because the same cannot be "taken"
from the place it is found and is occupied or appropriated.

Solamente las cosas muebles y corporales pueden ser objeto de hurto. La sustraccin de cosas inmuebles y la cosas incorporales (v. gr., los
derechos, las ideas) no puede integrar este delito, pues no es posible asirlas, tomarlas, para conseguir su apropiacin. El Codigo emplea la
expresin "cosas mueble" en el sentido de cosa que es susceptible de ser llevada del lugar donde se encuentra, como dinero, joyas, ropas,
etctera, asi que su concepto no coincide por completo con el formulado por el Codigo civil (arts. 335 y 336). 54

Thus, movable properties under Article 308 of the Revised Penal Code should be distinguished from the rights or interests to which they relate. A
naked right existing merely in contemplation of law, although it may be very valuable to the person who is entitled to exercise it, is not the subject
of theft or larceny.55 Such rights or interests are intangible and cannot be "taken" by another. Thus, right to produce oil, good will or an interest in
business, or the right to engage in business, credit or franchise are properties. So is the credit line represented by a credit card. However, they are
not proper subjects of theft or larceny because they are without form or substance, the mere "breath" of the Congress. On the other hand, goods,
wares and merchandise of businessmen and credit cards issued to them are movable properties with physical and material existence and may be
taken by another; hence, proper subjects of theft.

There is "taking" of personal property, and theft is consummated when the offender unlawfully acquires possession of personal property even if for
a short time; or if such property is under the dominion and control of the thief. The taker, at some particular amount, must have obtained complete
and absolute possession and control of the property adverse to the rights of the owner or the lawful possessor thereof.56 It is not necessary that
the property be actually carried away out of the physical possession of the lawful possessor or that he should have made his escape with
it.57 Neither asportation nor actual manual possession of property is required. Constructive possession of the thief of the property is enough.58

The essence of the element is the taking of a thing out of the possession of the owner without his privity and consent and without animus
revertendi.59
Taking may be by the offenders own hands, by his use of innocent persons without any felonious intent, as well as any mechanical device, such
as an access device or card, or any agency, animate or inanimate, with intent to gain. Intent to gain includes the unlawful taking of personal
property for the purpose of deriving utility, satisfaction, enjoyment and pleasure. 60

We agree with the contention of the respondents that intangible properties such as electrical energy and gas are proper subjects of theft. The
reason for this is that, as explained by this Court in United States v. Carlos61 and United States v. Tambunting,62 based on decisions of the
Supreme Court of Spain and of the courts in England and the United States of America, gas or electricity are capable of appropriation by another
other than the owner. Gas and electrical energy may be taken, carried away and appropriated. In People v. Menagas,63 the Illinois State Supreme
Court declared that electricity, like gas, may be seen and felt. Electricity, the same as gas, is a valuable article of merchandise, bought and sold
like other personal property and is capable of appropriation by another. It is a valuable article of merchandise, bought and sold like other personal
property, susceptible of being severed from a mass or larger quantity and of being transported from place to place. Electrical energy may,
likewise, be taken and carried away. It is a valuable commodity, bought and sold like other personal property. It may be transported from place to
place. There is nothing in the nature of gas used for illuminating purposes which renders it incapable of being feloniously taken and carried away.

In People ex rel Brush Electric Illuminating Co. v. Wemple, 64 the Court of Appeals of New York held that electric energy is manufactured and sold
in determinate quantities at a fixed price, precisely as are coal, kerosene oil, and gas. It may be conveyed to the premises of the consumer, stored
in cells of different capacity known as an accumulator; or it may be sent through a wire, just as gas or oil may be transported either in a close tank
or forced through a pipe. Having reached the premises of the consumer, it may be used in any way he may desire, being, like illuminating gas,
capable of being transformed either into heat, light, or power, at the option of the purchaser. In Woods v. People, 65 the Supreme Court of Illinois
declared that there is nothing in the nature of gas used for illuminating purposes which renders it incapable of being feloniously taken and carried
away. It is a valuable article of merchandise, bought and sold like other personal property, susceptible of being severed from a mass or larger
quantity and of being transported from place to place.

Gas and electrical energy should not be equated with business or services provided by business entrepreneurs to the public. Business does not
have an exact definition. Business is referred as that which occupies the time, attention and labor of men for the purpose of livelihood or profit. It
embraces everything that which a person can be employed.66 Business may also mean employment, occupation or profession. Business is also
defined as a commercial activity for gain benefit or advantage. 67 Business, like services in business, although are properties, are not proper
subjects of theft under the Revised Penal Code because the same cannot be "taken" or "occupied." If it were otherwise, as claimed by the
respondents, there would be no juridical difference between the taking of the business of a person or the services provided by him for gain, vis--
vis, the taking of goods, wares or merchandise, or equipment comprising his business. 68 If it was its intention to include "business" as personal
property under Article 308 of the Revised Penal Code, the Philippine Legislature should have spoken in language that is clear and definite: that
business is personal property under Article 308 of the Revised Penal Code. 69

We agree with the contention of the petitioner that, as gleaned from the material averments of the Amended Information, he is charged of "stealing
the international long distance calls belonging to PLDT" and the use thereof, through the ISR. Contrary to the claims of the OSG and respondent
PLDT, the petitioner is not charged of stealing P20,370,651.95 from said respondent. Said amount of P20,370,651.95 alleged in the Amended
Information is the aggregate amount of access, transmission or termination charges which the PLDT expected from the international long distance
calls of the callers with the use of Baynet Super Orient Cards sold by Baynet Co. Ltd.

In defining theft, under Article 308 of the Revised Penal Code, as the taking of personal property without the consent of the owner thereof, the
Philippine legislature could not have contemplated the human voice which is converted into electronic impulses or electrical current which are
transmitted to the party called through the PSTN of respondent PLDT and the ISR of Baynet Card Ltd. within its coverage. When the Revised
Penal Code was approved, on December 8, 1930, international telephone calls and the transmission and routing of electronic voice signals or
impulses emanating from said calls, through the PSTN, IPL and ISR, were still non-existent. Case law is that, where a legislative history fails to
evidence congressional awareness of the scope of the statute claimed by the respondents, a narrow interpretation of the law is more consistent
with the usual approach to the construction of the statute. Penal responsibility cannot be extended beyond the fair scope of the statutory
mandate.70

Respondent PLDT does not acquire possession, much less, ownership of the voices of the telephone callers or of the electronic voice signals or
current emanating from said calls. The human voice and the electronic voice signals or current caused thereby are intangible and not susceptible
of possession, occupation or appropriation by the respondent PLDT or even the petitioner, for that matter. PLDT merely transmits the electronic
voice signals through its facilities and equipment. Baynet Card Ltd., through its operator, merely intercepts, reroutes the calls and passes them to
its toll center. Indeed, the parties called receive the telephone calls from Japan.

In this modern age of technology, telecommunications systems have become so tightly merged with computer systems that it is difficult to know
where one starts and the other finishes. The telephone set is highly computerized and allows computers to communicate across long
distances.71 The instrumentality at issue in this case is not merely a telephone but a telephone inexplicably linked to a computerized
communications system with the use of Baynet Cards sold by the Baynet Card Ltd. The corporation uses computers, modems and software,
among others, for its ISR.72

The conduct complained of by respondent PLDT is reminiscent of "phreaking" (a slang term for the action of making a telephone system to do
something that it normally should not allow by "making the phone company bend over and grab its ankles"). A "phreaker" is one who engages in
the act of manipulating phones and illegally markets telephone services.73 Unless the phone company replaces all its hardware, phreaking would
be impossible to stop. The phone companies in North America were impelled to replace all their hardware and adopted full digital switching
system known as the Common Channel Inter Office Signaling. Phreaking occurred only during the 1960s and 1970s, decades after the Revised
Penal Code took effect.

The petitioner is not charged, under the Amended Information, for theft of telecommunication or telephone services offered by PLDT. Even if he is,
the term "personal property" under Article 308 of the Revised Penal Code cannot be interpreted beyond its seams so as to include
"telecommunication or telephone services" or computer services for that matter. The word "service" has a variety of meanings dependent upon the
context, or the sense in which it is used; and, in some instances, it may include a sale. For instance, the sale of food by restaurants is usually
referred to as "service," although an actual sale is involved. 74 It may also mean the duty or labor to be rendered by one person to another;
performance of labor for the benefit of another.75 In the case of PLDT, it is to render local and international telecommunications services and such
other services as authorized by the CPCA issued by the NTC. Even at common law, neither time nor services may be taken and occupied or
appropriated.76 A service is generally not considered property and a theft of service would not, therefore, constitute theft since there can be no
caption or asportation.77 Neither is the unauthorized use of the equipment and facilities of PLDT by the petitioner theft under the aforequoted
provision of the Revised Penal Code.78

If it was the intent of the Philippine Legislature, in 1930, to include services to be the subject of theft, it should have incorporated the same in
Article 308 of the Revised Penal Code. The Legislature did not. In fact, the Revised Penal Code does not even contain a definition of services.

If taking of telecommunication services or the business of a person, is to be proscribed, it must be by special statute 79 or an amendment of the
Revised Penal Code. Several states in the United States, such as New York, New Jersey, California and Virginia, realized that their criminal
statutes did not contain any provisions penalizing the theft of services and passed laws defining and penalizing theft of telephone and computer
services. The Pennsylvania Criminal Statute now penalizes theft of services, thus:

(a) Acquisition of services. --

(1) A person is guilty of theft if he intentionally obtains services for himself or for another which he knows are available only for compensation, by
deception or threat, by altering or tampering with the public utility meter or measuring device by which such services are delivered or by causing or
permitting such altering or tampering, by making or maintaining any unauthorized connection, whether physically, electrically or inductively, to a
distribution or transmission line, by attaching or maintaining the attachment of any unauthorized device to any cable, wire or other component of
an electric, telephone or cable television system or to a television receiving set connected to a cable television system, by making or maintaining
any unauthorized modification or alteration to any device installed by a cable television system, or by false token or other trick or artifice to avoid
payment for the service.

In the State of Illinois in the United States of America, theft of labor or services or use of property is penalized:

(a) A person commits theft when he obtains the temporary use of property, labor or services of another which are available only for hire, by means
of threat or deception or knowing that such use is without the consent of the person providing the property, labor or services.

In 1980, the drafters of the Model Penal Code in the United States of America arrived at the conclusion that labor and services, including
professional services, have not been included within the traditional scope of the term "property" in ordinary theft statutes. Hence, they decided to
incorporate in the Code Section 223.7, which defines and penalizes theft of services, thus:

(1) A person is guilty of theft if he purposely obtains services which he knows are available only for compensation, by deception or threat, or by
false token or other means to avoid payment for the service. "Services" include labor, professional service, transportation, telephone or other
public service, accommodation in hotels, restaurants or elsewhere, admission to exhibitions, use of vehicles or other movable property. Where
compensation for service is ordinarily paid immediately upon the rendering of such service, as in the case of hotels and restaurants, refusal to pay
or absconding without payment or offer to pay gives rise to a presumption that the service was obtained by deception as to intention to pay; (2) A
person commits theft if, having control over the disposition of services of others, to which he is not entitled, he knowingly diverts such services to
his own benefit or to the benefit of another not entitled thereto.

Interestingly, after the State Supreme Court of Virginia promulgated its decision in Lund v. Commonwealth, 80declaring that neither time nor
services may be taken and carried away and are not proper subjects of larceny, the General Assembly of Virginia enacted Code No. 18-2-98
which reads:

Computer time or services or data processing services or information or data stored in connection therewith is hereby defined to be property which
may be the subject of larceny under 18.2-95 or 18.2-96, or embezzlement under 18.2-111, or false pretenses under 18.2-178.

In the State of Alabama, Section 13A-8-10(a)(1) of the Penal Code of Alabama of 1975 penalizes theft of services:

"A person commits the crime of theft of services if: (a) He intentionally obtains services known by him to be available only for compensation by
deception, threat, false token or other means to avoid payment for the services "

In the Philippines, Congress has not amended the Revised Penal Code to include theft of services or theft of business as felonies. Instead, it
approved a law, Republic Act No. 8484, otherwise known as the Access Devices Regulation Act of 1998, on February 11, 1998. Under the law, an
access device means any card, plate, code, account number, electronic serial number, personal identification number and other
telecommunication services, equipment or instrumentalities-identifier or other means of account access that can be used to obtain money, goods,
services or any other thing of value or to initiate a transfer of funds other than a transfer originated solely by paper instrument. Among the
prohibited acts enumerated in Section 9 of the law are the acts of obtaining money or anything of value through the use of an access device, with
intent to defraud or intent to gain and fleeing thereafter; and of effecting transactions with one or more access devices issued to another person or
persons to receive payment or any other thing of value. Under Section 11 of the law, conspiracy to commit access devices fraud is a crime.
However, the petitioner is not charged of violation of R.A. 8484.

Significantly, a prosecution under the law shall be without prejudice to any liability for violation of any provisions of the Revised Penal Code
inclusive of theft under Rule 308 of the Revised Penal Code and estafa under Article 315 of the Revised Penal Code. Thus, if an individual steals
a credit card and uses the same to obtain services, he is liable of the following: theft of the credit card under Article 308 of the Revised Penal
Code; violation of Republic Act No. 8484; and estafa under Article 315(2)(a) of the Revised Penal Code with the service provider as the private
complainant. The petitioner is not charged of estafa before the RTC in the Amended Information.

Section 33 of Republic Act No. 8792, Electronic Commerce Act of 2000 provides:

Sec. 33. Penalties. The following Acts shall be penalized by fine and/or imprisonment, as follows:

a) Hacking or cracking which refers to unauthorized access into or interference in a computer system/server or information and communication
system; or any access in order to corrupt, alter, steal, or destroy using a computer or other similar information and communication devices, without
the knowledge and consent of the owner of the computer or information and communications system, including the introduction of computer
viruses and the like, resulting on the corruption, destruction, alteration, theft or loss of electronic data messages or electronic documents shall be
punished by a minimum fine of One hundred thousand pesos (P100,000.00) and a maximum commensurate to the damage incurred and a
mandatory imprisonment of six (6) months to three (3) years.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Orders of the Regional Trial Court and the Decision of the Court of
Appeals are REVERSED and SET ASIDE. The Regional Trial Court is directed to issue an order granting the motion of the petitioner to quash the
Amended Information.

SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice
G.R. No. 163072 April 2, 2009

MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioner,

vs.
CITY OF PASAY, SANGGUNIANG PANGLUNGSOD NG PASAY, CITY MAYOR OF PASAY, CITY TREASURER OF PASAY, and CITY
ASSESSOR OF PASAY, Respondents.

DECISION

CARPIO, J.:

This is a petition for review on certiorari1 of the Decision2 dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court of Appeals
in CA-G.R. SP No. 67416.

The Facts

Petitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino International Airport (NAIA) Complex under
Executive Order No. 903 (EO 903),3 otherwise known as the Revised Charter of the Manila International Airport Authority. EO 903 was issued on
21 July 1983 by then President Ferdinand E. Marcos. Under Sections 34 and 225 of EO 903, approximately 600 hectares of land, including the
runways, the airport tower, and other airport buildings, were transferred to MIAA. The NAIA Complex is located along the border between Pasay
City and Paraaque City.

On 28 August 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 2001.
MIAAs real property tax delinquency for its real properties located in NAIA Complex, Ninoy Aquino Avenue, Pasay City (NAIA Pasay properties) is
tabulated as follows:
TAX DECLA-RATION TAXABLE YEAR TAX DUE PENALTY TOTAL

A7-183-08346 1997-2001 243,522,855.00 123,351,728.18 366,874,583.18

A7-183-05224 1992-2001 113,582,466.00 71,159,414.98 184,741,880.98

A7-191-00843 1992-2001 54,454,800.00 34,115,932.20 88,570,732.20

A7-191-00140 1992-2001 1,632,960.00 1,023,049.44 2,656,009.44

A7-191-00139 1992-2001 6,068,448.00 3,801,882.85 9,870,330.85

A7-183-05409 1992-2001 59,129,520.00 37,044,644.28 96,174,164.28

A7-183-05410 1992-2001 20,619,720.00 12,918,254.58 33,537,974.58

A7-183-05413 1992-2001 7,908,240.00 4,954,512.36 12,862,752.36

A7-183-05412 1992-2001 18,441,981.20 11,553,901.13 29,995,882.33

A7-183-05411 1992-2001 109,946,736.00 68,881,630.13 178,828,366.13

A7-183-05245 1992-2001 7,440,000.00 4,661,160.00 12,101,160.00

GRAND TOTAL 642,747,726.20 373,466,110.13 1,016,213,836.33

On 24 August 2001, the City of Pasay, through its City Treasurer, issued notices of levy and warrants of levy for the NAIA Pasay properties. MIAA
received the notices and warrants of levy on 28 August 2001. Thereafter, the City Mayor of Pasay threatened to sell at public auction the NAIA
Pasay properties if the delinquent real property taxes remain unpaid.

On 29 October 2001, MIAA filed with the Court of Appeals a petition for prohibition and injunction with prayer for preliminary injunction or
temporary restraining order. The petition sought to enjoin the City of Pasay from imposing real property taxes on, levying against, and auctioning
for public sale the NAIA Pasay properties.

On 30 October 2002, the Court of Appeals dismissed the petition and upheld the power of the City of Pasay to impose and collect realty taxes on
the NAIA Pasay properties. MIAA filed a motion for reconsideration, which the Court of Appeals denied. Hence, this petition.

The Court of Appeals Ruling

The Court of Appeals held that Sections 193 and 234 of Republic Act No. 7160 or the Local Government Code, which took effect on 1 January
1992, withdrew the exemption from payment of real property taxes granted to natural or juridical persons, including government-owned or
controlled corporations, except local water districts, cooperatives duly registered under Republic Act No. 6938, non-stock and non-profit hospitals
and educational institutions. Since MIAA is a government-owned corporation, it follows that its tax exemption under Section 21 of EO 903 has
been withdrawn upon the effectivity of the Local Government Code.

The Issue

The issue raised in this petition is whether the NAIA Pasay properties of MIAA are exempt from real property tax.

The Courts Ruling

The petition is meritorious.

In ruling that MIAA is not exempt from paying real property tax, the Court of Appeals cited Sections 193 and 234 of the Local Government Code
which read:

SECTION 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this Code, tax exemptions or incentives granted to, or
presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the
effectivity of this Code.

SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has
been granted, for consideration or otherwise to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all
lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government owned or
controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and environment protection.

Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether
natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code.

The Court of Appeals held that as a government-owned corporation, MIAAs tax exemption under Section 21 of EO 903 has already been
withdrawn upon the effectivity of the Local Government Code in 1992.

In Manila International Airport Authority v. Court of Appeals 6 (2006 MIAA case), this Court already resolved the issue of whether the airport lands
and buildings of MIAA are exempt from tax under existing laws. The 2006 MIAA case originated from a petition for prohibition and injunction which
MIAA filed with the Court of Appeals, seeking to restrain the City of Paraaque from imposing real property tax on, levying against, and auctioning
for public sale the airport lands and buildings located in Paraaque City. The only difference between the 2006 MIAA case and this case is that
the 2006 MIAA case involved airport lands and buildings located in Paraaque City while this case involved airport lands and buildings located in
Pasay City. The 2006 MIAA case and this case raised the same threshold issue: whether the local government can impose real property tax on
the airport lands, consisting mostly of the runways, as well as the airport buildings, of MIAA. In the 2006 MIAA case, this Court held:

To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative
Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under
Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government
instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of
the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the
Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under
the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity.

Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of
public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides:

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

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of
the national wealth.

The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and Buildings of MIAA are intended for public
use, and at the very least intended for public service. Whether intended for public use or public service, the Airport Lands and Buildings
are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt
from real estate tax under Section 234(a) of the Local Government Code.7 (Emphasis in the original)

The definition of "instrumentality" under Section 2(10) of the Introductory Provisions of the Administrative Code of 1987 uses the phrase "includes
x x x government-owned or controlled corporations" which means that a government "instrumentality" may or may not be a "government-owned or
controlled corporation." Obviously, the term government "instrumentality" is broader than the term "government-owned or controlled corporation."
Section 2(10) provides:

SEC. 2. General Terms Defined. x x x

(10) Instrumentality refers to any agency of the national Government, not integrated within the department framework, vested with special
functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy,
usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations.

The term "government-owned or controlled corporation" has a separate definition under Section 2(13)8 of the Introductory Provisions of the
Administrative Code of 1987:

SEC. 2. General Terms Defined. x x x

(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions
relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities
either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided,
That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and
the Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to
such corporations.

The fact that two terms have separate definitions means that while a government "instrumentality" may include a "government-owned or controlled
corporation," there may be a government "instrumentality" that will not qualify as a "government-owned or controlled corporation."
A close scrutiny of the definition of "government-owned or controlled corporation" in Section 2(13) will show that MIAA would not fall under such
definition. MIAA is a government "instrumentality" that does not qualify as a "government-owned or controlled corporation." As explained
in the 2006 MIAA case:

A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-
stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares.
xxx

Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute
to the holders of such shares dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting
shares. Hence, MIAA is not a stock corporation.

xxx

MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one
where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if
we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock
corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its
annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a non-stock corporation.

Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional,
cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA
is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is
the legal status of MIAA within the National Government?

MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other
government instrumentality, the only difference is that MIAA is vested with corporate powers. x x x

When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government
instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also
corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the levying of fees and charges. At the
same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the
provisions of this Executive Order."9

Thus, MIAA is not a government-owned or controlled corporation but a government instrumentality which is exempt from any kind of tax from the
local governments. Indeed, the exercise of the taxing power of local government units is subject to the limitations enumerated in Section 133 of
the Local Government Code.10 Under Section 133(o)11 of the Local Government Code, local government units have no power to tax
instrumentalities of the national government like the MIAA. Hence, MIAA is not liable to pay real property tax for the NAIA Pasay properties.

Furthermore, the airport lands and buildings of MIAA are properties of public dominion intended for public use, and as such are exempt from real
property tax under Section 234(a) of the Local Government Code. However, under the same provision, if MIAA leases its real property to a taxable
person, the specific property leased becomes subject to real property tax. 12 In this case, only those portions of the NAIA Pasay properties which
are leased to taxable persons like private parties are subject to real property tax by the City of Pasay.

WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 30 October 2002 and the Resolution dated 19 March 2004 of the
Court of Appeals in CA-G.R. SP No. 67416. We DECLARE the NAIA Pasay properties of the Manila International Airport Authority EXEMPT from
real property tax imposed by the City of Pasay. We declare VOID all the real property tax assessments, including the final notices of real property
tax delinquencies, issued by the City of Pasay on the NAIA Pasay properties of the Manila International Airport Authority, except for the portions
that the Manila International Airport Authority has leased to private parties.

No costs.

SO ORDERED.
PHILIPPINE PORTS AUTHORITY, petitioner, vs. CITY OF ILOILO, respondent.

D E CI S I O N

AZCUNA, J.:

Before us is a petition for review on certiorari assailing the Decision of the Regional Trial Court of Iloilo City, Branch 39, dated February 26,
1993 in Civil Case No. 18477, a case for collection of a sum of money. Seeking to raise questions purely of law, petitioner Philippine Ports Authority
(PPA) would want us to set aside the ruling ordering it to pay real property and business taxes to respondent City of Iloilo.

The factual antecedents are summarized by the trial court:

This is an action for the recovery of sum of money filed by [respondent] City of Iloilo, a public corporation organized under the laws of the Republic of the
Philippines, represented by the Hon. Rodolfo T. Ganzon as City Mayor, against petitioner, Philippine Ports Authority (PPA), a government corporation created
by P.D. 857.

[Respondent] seeks to collect from [petitioner] real property taxes as well as business taxes, computed from the last quarter of 1984 up to fourth quarter of 1988.

[Respondent] alleges that [petitioner] is engaged in the business of arrastre and stevedoring services and the leasing of real estate for which it should be obligated
to pay business taxes. It further alleges that [petitioner] is the declared and registered owner of a warehouse which is used in the operation of its business and is
also thereby subject to real property taxes.

It demands the aggregate amount of P510,888.86 in realty and business taxes as of December 1988 (real property tax last quarter of 1984 to 1988; business tax-
1984 to 1988) including its corresponding interests and penalty charges.

On July 19, 1989, [petitioner] filed a motion to dismiss but [it] was denied by this court. A motion for reconsideration was filed, but the same was still denied,
after which [petitioner] filed its answer.

During the pre-trial conference, the following factual and legal issues were defined and clarified.

Factual Issues:

1. Whether or not [petitioner] is engaged in business;

2. Whether or not the assessment of tax by [respondent] is accurate as of 4 th quarter of 1988 from the year 1984; real property tax in
the amount of P180,953.93 and business tax in the amount of P329,934.93 as of December 31, 1988.

Legal Issues:

1. Whether or not Philippine Ports Authority is exempt from the payment of real property tax and business tax;

2. Whether by filing a motion to dismiss, [petitioner] impliedly admitted the allegations in the complaint;

3. Whether Philippine Ports Authority is engaged in business. If in the negative, whether or not it is exempt from payment of business
taxes.

During trial, [respondent] presented two witnesses, namely: Mrs. Rizalina F. Tulio and Mr. Leoncio Macrangala.

xxxxxxxxx

After [respondent] had rested its case, [petitioner] did not present any evidence. Instead, its counsel asked the court to give him time to file a memorandum, as
said counsel is convinced that the issues involved in this case are purely legal issues.

He has no quarrel as regards the computation of the real property and business taxes made by [respondent]. He is convinced, however, that the issue in this case
involves a question of law and that [petitioner] is not liable to pay any kind of taxes to the City of Iloilo. [1]

The court a quo rendered its decision holding petitioner liable for real property taxes from the last quarter of 1984 to December 1986, and for
business taxes with respect to petitioners lease of real property from the last quarter of 1984 up to 1988. It, however, held that respondent may not
collect business taxes on petitioners arrastre and stevedoring services, as these form part of petitioners governmental functions. The dispositive
portion of said decision states:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter to pay the plaintiff, as
follows:

1. the amount of P98,519.16 as real property tax, from [the] last quarter of 1984 up to December 1986;

2. the amount of P3,828.07, as business tax, for leasing of real estate from [the] last quarter of 1984 up to 1988. [2]

Petitioner now seeks a review of the case, contending that the court a quo decided a question of substance which has not been decided by
us in that:

(i) It decreed a property of public dominion (port facility) as subject to realty taxes just because the mentioned property is being
administered by what it perceived to be a taxable government corporation. And,

(ii) It declared that petitioner PPA is subject to business taxes for leasing to private persons or entities real estate without considering
that petitioner PPA is not engaged in business.[3]

In its Comment, respondent in addition raises the issue of whether or not petitioner may change its theory on appeal. It points out that petitioner
never raised the issue that the subject property is of public dominion during the trial nor did it mention it in the memorandum it filed with the lower
court. It further contends that such change of theory patently contradicts petitioners admission in its pleadings and is disallowed under applicable
jurisprudence.[4]

The records show that the theory of petitioner before the trial court was different from that of the present petition. In fact, even while at the trial
court stage, petitioner was not consistent in its theory.[5] Initially in its pleadings therein, it argued that as a government-owned corporation, it is
exempt from paying real property taxes by virtue of its specific exemption in its charter,[6] Section 40 of the Real Property Tax Code and Executive
Order No. 93. Subsequently, in the memorandum it filed with the trial court, it omitted its earlier argument and changed its theory by alleging that it
is a government instrumentality, which, according to applicable jurisprudence, may not be taxed by the local government. After obtaining an adverse
decision from the trial court, it adopts yet another stance on appeal before us, contesting the taxability of its warehouse. It argued for the first time
that since ports constructed by the State are considered under the Civil Code as properties of public dominion, its warehouse, which it insists to be
part of its port, should be treated likewise. To support this, it invokes Article 420 of the Civil Code, which provides:

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

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;

xxxxxxxxx

[Emphasis supplied]

Insisting that the subject warehouse is considered as part of its port, it points to Section 3 (e) of its charter quoted hereunder:

e) port means a place where ships may anchor or tie up for the purpose of shelter, repair, loading or discharge of cargo, or for other such activities connected
with water-borne commerce, and including all the land and water areas and the structures, equipment and facilities related to these functions. [Emphasis
supplied]

A perusal of the records shows that this thesis was never presented nor discussed at the trial stage.

As a rule, a party who deliberately adopts a certain theory upon which the case is tried and decided by the lower court will not be permitted to
change theory on appeal.[7] Points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily
will not be, considered by a reviewing court, as these cannot be raised for the first time at such late stage. Basic considerations of due process
underlie this rule.[8] It would be unfair to the adverse party who would have no opportunity to present further evidence material to the new theory,
which it could have done had it been aware of it at the time of the hearing before the trial court. [9] To permit petitioner in this case to change its
theory on appeal would thus be unfair to respondent, and offend the basic rules of fair play, justice and due process. [10]

Petitioner however cites an exception to the rule, as enunciated in Lianga Lumber Co. v. Lianga Timber Co., Inc.,[11] wherein we said:

[I]n the interest of justice and within the sound discretion of the appellate court, a party may change his theory on appeal only when the factual bases thereof
would not require presentation of any further evidence by the adverse party in order to enable it to properly meet the issue raised in the new theory.

Petitioner contends that its new theory falls under the aforecited exception, as the issue does not involve any disputed evidentiary matter.

Contrary to petitioners claim, we find that the new issue raised is not a purely legal question. It must be emphasized that the enumeration of
properties of public dominion under Article 420 of the Civil Code specifically states ports constructed by the State. Thus, in order to consider the
port in the case at bar as falling under the said classification, the fact that the port was constructed by the State must first be established by sufficient
evidence. This fact proved crucial in Santos v. Moreno,[12] where the issue raised was whether the canals constructed by private persons were of
public or private ownership. We ruled that the canals were privately owned, thus:

Under Art. 420, canals constructed by the State and devoted and devoted to public use are of public ownership. Conversely, canals constructed by private
persons within private lands and devoted exclusively for private use must be of private ownership.

In the case at bar, no proof was adduced to establish that the port was constructed by the State. Petitioner cannot have us automatically conclude
that its port qualified as property of public dominion. It would be unfair to respondent, which would be deprived of its opportunity to present evidence
to disprove the factual basis of the new theory. It is thus clear that the Lianga exception cannot apply in the case at bar.

Moreover, as correctly pointed out by respondent, we cannot ignore the fact that petitioners new position runs contrary to its own admission
in the pleadings filed in the trial court. Under paragraph 3 of respondents complaint quoted hereunder, the fact of petitioners ownership of the
property was specifically alleged as follows:

III

Defendant is likewise the declared and registered owner of a warehouse standing on Lot No. 1065 situated at Bgy. Concepcion, City Proper, declared under Tax
Declaration No. 56325. Xerox copy of the said Tax Declaration is hereto attached as annex D and form[s] an integral part of herein complaint;[13]

In its Answer, referring to the abovecited complaint, petitioner stated, Paragraph 3 is admitted.[14] Notably, this admission was never questioned nor
put at issue during the trial.

Now before us, petitioner contradicts its earlier admission by claiming that the subject warehouse is a property of public dominion. This
inconsistency is made more apparent by looking closely at what public dominion means. Tolentino explains this in this wise:

Private ownership is defined elsewhere in the Code; but the meaning of public dominion is nowhere defined. From the context of various provisions, it is clear
that public dominion does not carry the idea of ownership; property of public dominion is not owned by the State, but pertains to the State, which as territorial
sovereign exercises certain judicial prerogatives over such property. The ownership of such property, which has the special characteristics of a collective
ownership for the general use and enjoyment, by virtue of their application to the satisfaction of collective needs, is in the social group, whether national,
provincial, or municipal. Their purpose is not to serve the State as a juridical person, but the citizens; they are intended for the common and public welfare, and
so they cannot be the object of appropriation, either by the State or by private persons.[15] [Emphasis supplied]

Following the above, properties of public dominion are owned by the general public and cannot be declared to be owned by a public
corporation, such as petitioner.

As the object of the pleadings is to draw the lines of battle, so to speak, between the litigants and to indicate fairly the nature of the claims or
defenses of both parties, a party cannot subsequently take a position contrary to, or inconsistent, with his pleadings.[16] Unless a party alleges
palpable mistake or denies such admission, judicial admissions cannot be controverted. [17] Petitioner is thus bound by its admission of ownership of
the subject property and is barred from claiming otherwise.

We also note that petitioner failed to raise the issue of ownership during the pre-trial. In its petition, it insists that to determine liability for real
property tax, the ownership of the property must first be ascertained.[18] In the pre-trial order, however, to which petitioner did not object, nowhere
was the issue of ownership included in the stipulated factual or legal issues. [19]

We have ruled that a pre-trial is primarily intended to make certain that all issues necessary to the disposition of a case are properly raised.
Thus to obviate the element of surprise, parties are expected to disclose at the pre-trial conference all issues of law and fact which they intend to
raise at the trial. Consequently, the determination of issues at a pre-trial conference bars the consideration of other questions on appeal. [20] Hence,
in the case at bar, the fact that the issue of ownership is outside of what has been delimited during the pre-trial further justifies the disallowance of
petitioners new theory.

Therefore, on the basis of the foregoing considerations and in the absence of compelling reasons to rule otherwise, we hold that petitioner
may not be permitted to change its theory at this stage. Well-settled is the rule that questions that were not raised in the lower court cannot be raised
for the first time on appeal.[21]
 In any case, granting that petitioners present theory is allowed at this stage, we nevertheless find it untenable. Concededly, ports constructed
by the State are properties of the public dominion, as Article 420 of the Civil Code enumerates these as properties intended for public use. It must
be stressed however that what is being taxed in the present case is petitioners warehouse, which, although located within the port, is distinct from
the port itself. In Light Rail Transit Authority v. Central Board of Assessment Appeals et al.,[22] petitioner therein similarly sought an exemption from
real estate taxes on its passenger terminals, arguing that said properties are considered as part of the public roads, which are classified as property
of public dominion in the Civil Code.[23] We ruled therein that:

[T]he properties of petitioner are not exclusively considered as public roads being improvements placed upon the public road, and this [separable] nature of the
structure in itself physically distinguishes it from a public road. Considering further that carriageways or passenger terminals are elevated structures which are
not freely accessible to the public, vis--vis roads which are public improvements openly utilized by the public, the former are entirely different from the latter.

Using the same reasoning, the warehouse in the case at bar may not be held as part of the port, considering its separable nature as an improvement
upon the port, and the fact that it is not open for use by everyone and freely accessible to the public. In the same way that we ruled in one case that
the exemption of public property from taxation does not extend to improvements made thereon by homesteaders or occupants at their own
expense,[24] we likewise uphold the taxability of the warehouse in the instant case, it being a mere improvement built on an alleged property of public
dominion, assuming petitioners port to be so. Moreover, petitioner may not invoke the definition of port in its charter to expand the meaning of ports
constructed by the State in the Civil Code to include improvements built thereon. It must be noted that the charter itself limited the use of said
definition only for the interpretation of Presidential Decree (P.D.) No. 857, its by-laws, regulations and rules,[25] and not of other statutes such as the
Civil Code. Given these parameters, therefore, petitioners move to present its new theory, even if allowed, would nonetheless prove to be futile.

The trial court correctly ruled that for the assessed period of 1984 to 1988, petitioners exemption from real property taxes was withdrawn by
P.D. No. 1931, at least for the period of 1984 to 1986.

Originally, petitioner was exempt from real property taxes on the basis of the Real Property Tax Code[26] then governing, which provided:

SECTION 40. Exemptions from Real Property Tax. The exemption shall be as follows:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any government-owned corporation so exempt by its charter:
Provided; however, That this exemption shall not apply to real property of the above-named entities the beneficial use of which has been granted, for
consideration or otherwise, to a taxable person.

Petitioners charter, P.D. 857,[27] further specifically exempted it from real property taxes:

SECTION 25. Exemption from Realty Taxes The Authority shall be exempt from the payment of real property taxes imposed by the Republic of the Philippines,
its agencies, instrumentalities or political subdivisions; Provided, That no tax exemptions shall be extended to any subsidiaries of the Authority that may be
organized; Provided, finally, That investments in fixed assets shall be deductible for income tax purposes.

It can thus be seen from the foregoing that petitioner, as a government-owned or controlled corporation, enjoyed an exemption from real
property taxes.

On June 11, 1984, however, P.D. 1931 effectively withdrew all tax exemption privileges granted to government-owned or controlled
corporations as stated in Section 1 thereof, which reads:

Sec. 1. The provisions of special or general law to the contrary notwithstanding, all exemptions from the payment of duties, taxes, fees, imposts and other
charges heretofore granted in favor of government-owned or controlled corporations including their subsidiaries, are hereby withdrawn.

Under the same law, the exemption can be restored in special cases through an application for restoration with the Secretary of Finance,[28] which,
notably, petitioner did not avail.

Subsequently, Executive Order (E.O.) No. 93 was enacted on December 17, 1986 restoring tax exemptions provided under certain laws, one
of which is the Real Property Tax Code. The pertinent portion of said law provides:

SECTION 1. The provisions of any general or special law to the contrary notwithstanding, all tax and duty incentives granted to government and private entities
are hereby withdrawn, except:

xxxxxxxxx

e) those conferred under four basic codes namely:

(i) the Tariff and Customs Code, as amended;

(ii) the National Internal Revenue Code, as amended;

(iii) the Local Tax Code, as amended;

(iv) the Real Property Tax Code, as amended;

[Emphasis supplied]

The abovecited laws, therefore, indicate that petitioners tax exemption from real property taxes was withdrawn by P.D. 1931 effective June
11, 1984, but was subsequently restored by virtue of E.O. 93, starting December 17, 1986. [29] Hence, petitioner is liable for real property taxes on
its warehouse, computed from the last quarter of 1984 up to December 1986.

Petitioner, however, seeks to be excused from liability for taxes by invoking the pronouncement in Basco v. PAGCOR[30] (Basco) quoted
hereunder:

PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places it in the category of an agency or
instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its
operation might be burdened, impeded or subject to control by a mere Local government. [Emphasis supplied]

Petitioner points out that its exercise of regulatory functions as decreed by its charter [31] places it within the category of an agency or instrumentality of the
government, which, according to Basco, is beyond the reach of local taxation.

Reliance in the abovecited case is unavailing considering that P.D. 1931 was never raised therein, and given that the issue in said case focused on the
constitutionality of P.D. 1869, the charter of PAGCOR. The said decision did not absolutely prohibit local governments from taxing government
instrumentalities. In fact we stated therein:
The power of local government to impose taxes and fees is always subject to limitations which Congress may provide by law. Since P.D. 1869 remains an
operative law until amended, repealed or revokedits exemption clause remains an exemption to the exercise of the power of local governments to impose taxes
and fees.[32]

Furthermore, in the more recent case of Mactan Cebu International Airport Authority v. Marcos,[33] where the Basco case was similarly invoked
for tax exemption, we stated: [N]othing can prevent Congress from decreeing that even instrumentalities or agencies of the Government performing
governmental functions may be subject to tax. Where it is done precisely to fulfill a constitutional mandate and national policy, no one can doubt its
wisdom. The fact that tax exemptions of government-owned or controlled corporations have been expressly withdrawn by the present Local
Government Code[34] clearly attests against petitioners claim of absolute exemption of government instrumentalities from local taxation.

Petitioner also contends that the term government-owned or controlled corporations referred in P.D. 1931 covers only those not performing
governmental functions. This argument is without legal basis for it reads into the law a distinction that is not there. It runs contrary to the clear intent
of the law to withdraw from all units of the government, including government-owned or controlled corporations, their exemptions from taxes. Had it
been otherwise, the law would have said so.[35]

Moreover, the trial court correctly pointed out that if indeed petitioner were not subject to local taxation, petitioners charter would not have
specifically provided for its exemption from the payment of real property tax. Its exemption therein therefore proves that it was only an exception to
the general rule of taxability of petitioner. Given that said privilege was withdrawn by subsequent law, petitioners claim for exemption from real
property taxes for the entire assessed period fails.

We affirm the finding of the lower court on petitioners liability for business taxes for the lease of its building to private corporations. During the
trial, petitioner did not present any evidence to refute respondents proof of petitioners income from the lease of its property. Neither did it present
any proof of exemption from business taxes. Instead, it emphasized its charter provisions defining its functions as governmental in nature. It averred
that it allowed port users to occupy certain premises within the port area only to ensure order and convenience in discharging its governmental
functions. It hence claimed that it is not engaged in business, as the act of leasing out its property was not motivated by profit, but by its duty to
manage and control port operations.

The argument is unconvincing. As admitted by petitioner, it leases out its premises to private persons for convenience and not necessarily as
part of its governmental function of administering port operations. In fact, its charter classifies such act of leasing out port facilities as one of
petitioners corporate powers.[36] Any income or profit generated by an entity, even of a corporation organized without any intention of realizing profit
in the conduct of its activities, is subject to tax.[37] What matters is the established fact that it leased out its building to ten private entities from which
it regularly earned substantial income. Thus, in the absence of any proof of exemption therefrom, petitioner is liable for the assessed business taxes.

In closing, we reiterate that in taxing government-owned or controlled corporations, the State ultimately suffers no loss. In National Power
Corp. v. Presiding Judge, RTC, Br. XXV,[38] we elucidated:

Actually, the State has no reason to decry the taxation of NAPOCORs properties, as and by way of real property taxes. Real property taxes, after all, form part
and parcel of the financing apparatus of the Government in development and nation-building, particularly in the local government level.

xxxxxxxxx

To all intents and purposes, real property taxes are funds taken by the State with one hand and given to the other. In no measure can the government be said to
have lost anything.

Finally, we find it appropriate to restate that the primary reason for the withdrawal of tax exemption privileges granted to government-owned and
controlled corporations and all other units of government was that such privilege resulted in serious tax base erosion and distortions in the tax
treatment of similarly situated enterprises, hence resulting in the need for these entities to share in the requirements of development, fiscal or
otherwise, by paying the taxes and other charges due from them. [39]

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.

No pronouncement as to costs.

SO ORDERED.
Davide, Jr., (Chairman), Vitug, Ynares-Santiago, and Carpio, JJ., concur.
TEOFILO C. VILLARICO, petitioner, vs. VIVENCIO SARMIENTO, SPOUSES BESSIE SARMIENTO-DEL MUNDO & BETH DEL MUNDO,
ANDOKS LITSON CORPORATION and MARITES CARINDERIA, respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals dated December 7, 1998 in CA-G.R. CV No. 54883,
affirming in toto the Decision[2] of the Regional Trial Court (RTC) of Paraaque City, Branch 259, dated November 14, 1996, in Civil Case No. 95-
044.

The facts of this case, as gleaned from the findings of the Court of Appeals, are:

Teofilo C. Villarico, petitioner, is the owner of a lot in La Huerta, Paraaque City, Metro Manila with an area of sixty-six (66) square meters and
covered by Transfer Certificate of Title (T.C.T.) No. 95453 issued by the Registry of Deeds, same city.

Petitioners lot is separated from the Ninoy Aquino Avenue (highway) by a strip of land belonging to the government. As this highway was
elevated by four (4) meters and therefore higher than the adjoining areas, the Department of Public Works and Highways (DPWH) constructed
stairways at several portions of this strip of public land to enable the people to have access to the highway.

Sometime in 1991, Vivencio Sarmiento, his daughter Bessie Sarmiento and her husband Beth Del Mundo, respondents herein, had a building
constructed on a portion of said government land. In November that same year, a part thereof was occupied by Andoks Litson Corporation and
Marites Carinderia, also impleaded as respondents.

In 1993, by means of a Deed of Exchange of Real Property, petitioner acquired a 74.30 square meter portion of the same area owned by the
government. The property was registered in his name as T.C.T. No. 74430 in the Registry of Deeds of Paraaque City.

In 1995, petitioner filed with the RTC, Branch 259, Paraaque City, a complaint for accion publiciana against respondents, docketed as Civil
Case No. 95-044. He alleged inter alia that respondents structures on the government land closed his right of way to the Ninoy Aquino Avenue; and
encroached on a portion of his lot covered by T.C.T. No. 74430.

Respondents, in their answer, specifically denied petitioners allegations, claiming that they have been issued licenses and permits by
Paraaque City to construct their buildings on the area; and that petitioner has no right over the subject property as it belongs to the government.

After trial, the RTC rendered its Decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring the defendants to have a better right of possession over the subject land except the portion thereof covered by
Transfer Certificate of Title No. 74430 of the Register of Deeds of Paraaque;

2. Ordering the defendants to vacate the portion of the subject premises described in Transfer Certificate of Title No. 74430 and
gives its possession to plaintiff; and

3. Dismissing the claim for damages of the plaintiff against the defendants, and likewise dismissing the claim for attorneys fees
of the latter against the former.

Without pronouncement as to costs.

SO ORDERED.[3]

The trial court found that petitioner has never been in possession of any portion of the public land in question. On the contrary, the defendants
are the ones who have been in actual possession of the area. According to the trial court, petitioner was not deprived of his right of way as he could
use the Kapitan Tinoy Street as passageway to the highway.

On appeal by petitioner, the Court of Appeals issued its Decision affirming the trial courts Decision in toto, thus:

WHEREFORE, the judgment hereby appealed from is hereby AFFIRMED in toto, with costs against the plaintiff-appellant.

SO ORDERED.[4]

In this petition, petitioner ascribes to the Court of Appeals the following assignments of error:

THE FINDINGS OF FACT OF THE HON. COURT OF APPEALS CONTAINED A CONCLUSION WITHOUT CITATION OF SPECIFIC EVIDENCE ON
WHICH THE SAME WAS BASED.

II

THE HON. COURT OF APPEALS ERRED IN CONSIDERING THAT THE ONLY ISSUE IN THIS CASE IS WHETHER OR NOT THE PLAINTIFF-
APPELLANT HAS ACQUIRED A RIGHT OF WAY OVER THE LAND OF THE GOVERNMENT WHICH IS BETWEEN HIS PROPERTY AND THE
NINOY AQUINO AVENUE.

III

THE HON. COURT OF APPEALS ERRED IN CONCLUDING THAT ACCION PUBLICIANA IS NOT THE PROPER REMEDY IN THE CASE AT BAR.

IV

THE HON. COURT OF APPEALS ERRED IN CONCLUDING THAT THE EXISTENCE OF THE PLAINTIFF-APPELLANTS RIGHT OF WAY DOES
NOT CARRY POSSESSION OVER THE SAME.

THE HON. COURT OF APPEALS ERRED IN NOT RESOLVING THE ISSUE OF WHO HAS THE BETTER RIGHT OF POSSESSION OVER THE
SUBJECT LAND BETWEEN THE PLAINTIFF-APPELLANT AND THE DEFENDANT-APPELLEES.[5]
 In their comment, respondents maintain that the Court of Appeals did not err in ruling that petitioners action for accion publiciana is not the
proper remedy in asserting his right of way on a lot owned by the government.

Here, petitioner claims that respondents, by constructing their buildings on the lot in question, have deprived him of his right of way and his
right of possession over a considerable portion of the same lot, which portion is covered by his T.C.T. No. 74430 he acquired by means of exchange
of real property.

It is not disputed that the lot on which petitioners alleged right of way exists belongs to the state or property of public dominion. Property of
public dominion is defined by Article 420 of the Civil Code as follows:

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

(1) Those intended for public use such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and other of
similar character.

(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.

Public use is use that is not confined to privileged individuals, but is open to the indefinite public. [6] Records show that the lot on which the
stairways were built is for the use of the people as passageway to the highway. Consequently, it is a property of public dominion.

Property of public dominion is outside the commerce of man and hence it: (1) cannot be alienated or leased or otherwise be the subject matter
of contracts; (2) cannot be acquired by prescription against the State; (3) is not subject to attachment and execution; and (4) cannot be burdened
by any voluntary easement.[7]

Considering that the lot on which the stairways were constructed is a property of public dominion, it can not be burdened by a voluntary
easement of right of way in favor of herein petitioner. In fact, its use by the public is by mere tolerance of the government through the DPWH.
Petitioner cannot appropriate it for himself. Verily, he can not claim any right of possession over it. This is clear from Article 530 of the Civil Code
which provides:

ART. 530. Only things and rights which are susceptible of being appropriated may be the object of possession.

Accordingly, both the trial court and the Court of Appeals erred in ruling that respondents have better right of possession over the subject lot.

However, the trial court and the Court of Appeals found that defendants buildings were constructed on the portion of the same lot now covered
by T.C.T. No. 74430 in petitioners name. Being its owner, he is entitled to its possession.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated December 7, 1998 in CA-G.R. CV No. 54883 is
AFFIRMED with MODIFICATION in the sense that neither petitioner nor respondents have a right of possession over the disputed lot where the
stairways were built as it is a property of public dominion. Costs against petitioner.

SO ORDERED.
Panganiban, (Chairman), Carpio Morales and Garcia, JJ., concur.
G.R. No. 183416, October 05, 2016

PROVINCIAL ASSESSOR OF AGUSAN DEL SUR, Petitioner, v. FILIPINAS PALM OIL PLANTATION, INC., Respondent.

DECISION

LEONEN, J.:

The exemption from real property taxes given to cooperatives applies regardless of whether or not the land owned is leased.
This exemption benefits the cooperative's lessee. The characterization of machinery as real property is governed by the Local
Government Code and not the Civil Code.

This Petition1 for review assails the Decision2 dated September 26, 2007 and the Resolution3 dated May 26, 2008 of the Court
of Appeals in CA-G.R. SP No. 74060. The Court of Appeals affirmed the Decision of the Central Board of Assessment Appeals
(CBAA) exempting Filipinas Palm Oil Plantation Inc. from payment of real property taxes.4chanrobleslaw

Filipinas Palm Oil Plantation Inc. (Filipinas) is a private organization engaged in palm oil plantation5 with a total land area of
more than 7,000 hectares of National Development Company (NDC) lands in Agusan del Sur.6 Harvested fruits from oil palm
trees are converted into oil through Filipinas' milling plant in the middle of the plantation area.7 Within the plantation, there are
also three (3) plantation roads and a number of residential homes constructed by Filipinas for its employees.8chanrobleslaw

After the Comprehensive Agrarian Reform Law9 was passed, NDC lands were transferred to Comprehensive Agrarian Reform
Law beneficiaries who formed themselves as the merged NDC-Guthrie Plantations, Inc. - NDC-Guthrie Estates, Inc. (NGPI-
NGEI) Cooperatives.10 Filipinas entered into a lease contract agreement with NGPI-NGEI.11chanrobleslaw

The Provincial-Assessor of Agusan del Sur (Provincial Assessor) is a government agency in charge with the assessment of lands
under the public domain.12 It assessed Filipinas' properties found within the plantation area,13 which Filipinas assailed before
the Local Board of Assessment Appeals (LBAA) on the following grounds:

chanRoblesvirtualLawlibrary
(1.) The [petitioner] Provincial Assessors of Agusan del Sur ERRED in finding that the Market Value of a single fruit bearing oil
palm tree is P207.00 when it should only be P42.00 pesos per tree;

(2.) The [petitioner] ERRED in finding that the total number of standing and fruit bearing oil palm tree is PI 10 [sic] trees per
hectare when it should be only 92 trees;

(3.) The [petitioner] ERRED in finding that the Market Value[s] of the plantation roads are:ChanRoblesVirtualawlibrary
A.) P270,000.00 per kilometer for primary roads
B.) P135,000.00 for secondary roads
C.) P67,567.00 for tertiary roads constructed by the company.
It should only be:ChanRoblesVirtualawlibrary
A.) P105,000.00 for primary roads
B.) P52,300.00 for secondary roads
C.) P26,250.00 for tertiary roads
Likewise, bridges, culverts, canals and pipes should not be assessed separately from plantation roads, the same being
components of the roads thereof;

(4.) The [petitioner] ERRED in imposing real property taxes against the petitioner for roads, bridges, culverts, pipes and canals
as these belonged to the cooperatives;

([5].) The [petitioner] ERRED in finding that the Market Value of NDC service area is P11,000.00 per hectare when it should
only be P6,000.00 per hectare;

([6].) The [petitioner] ERRED in imposing realty taxes on Residential areas built by [respondent] except for three of them;

([7].) The [petitioner] ERRED when it included haulers and other equipments [sic] which are unmovable as taxable real
properties.14

In its Decision15 dated June 8, 1999, the LBAA found that the P207.00 market value declared in the assessment by the
Provincial Assessor was unreasonable.16 It found that the market value should not have been more than P85.00 per oil palm
tree.17 The sudden increase of realty tax assessment level from P42.00 for each oil palm tree in 1993 to P207.00 was
confiscatory.18chanrobleslaw

The LBAA adopted Filipinas' claim that the basis for assessment should only be 98 trees.19 Although one (1) hectare of land can
accommodate 124 oil palm trees, the mountainous terrain of the plantation should be considered.20 Because of the terrain, not
every meter of land can be fully planted with trees.21 The LBAA found that roads of any kind, as well as all their improvements,
should not be taxed since these roads were intermittently used by the public.22 It resolved that the market valuation should be
based on the laws of the Department of Agrarian Reform since the area is owned by the NDC, a quasi-governmental body of
the Philippines.23chanrobleslaw

The LBAA exempted the low-cost housing units from taxation except those with a market value of more than P150,000.00
under the Local Government Code.24 Finally, the LBAA considered the road equipment and mini haulers as movables that are
vital to Filipinas' business.

Filipinas appealed before the CBAA on July 16, 1999.26 On November 21, 2001, the CBAA rendered a decision, the dispositive
portion of which reads:

chanRoblesvirtualLawlibrary
WHEREFORE, this Board has decided to set aside, as it does hereby set aside, the decision rendered by the Local Board of
Assessment Appeals of the Province of Agusan del Sur on June 8, 1999 in an unnumbered case entitled "[F]ilipinas Palm Oil
Co., Inc. Petitioner, versus the Provincial Assessors Office of Agusan del Sur, Respondent" and hereby orders as follows:

chanRoblesvirtualLawlibraryA. The market value for each oil palm tree should be FIFTY- SEVEN & 55/100 PESOS (57.55),
effective January 1, 1991. The assessment for each municipality shall be based on the corresponding number of trees as listed
in Petitioner-Appellee's "Hectarage Statement" discussed hereinabove;

B. Petitioner-Appellee should not be made to pay for the real property taxes due on the roads starting from January 1, 1991;
C. Petitioner-Appellee is not liable to the Government for real property taxes on the lands owned by the Multi-purpose
Cooperative;

D. The housing units with a market value of PI75,000.00 or less each shall be subjected to 0% assessment level, starting
1994;

E. Road Equipment and haulers are not real properties and, accordingly, Petitioner-Appellee is not liable for real property tax
thereon;

F. Any real property taxes already paid by Petitioner-Appellee which, by virtue "of this decision, were not due, shall be applied
to future taxes rightfully due from Petitioner-Appellee.

SO ORDERED.27 (Emphasis supplied)

The CBAA denied the Motion for Reconsideration filed by the Provincial Assessor.28 The Provincial Assessor filed a Petition for
Review before the Court of Appeals, which, in turn, sustained the CBAA's Decision.29chanrobleslaw

The Court of Appeals held that the land owned by NGPI-NGEI, which Filipinas has been leasing, cannot be subjected to real
property tax since these are owned by cooperatives that are tax-exempt.30 Section 133(n) of the Local Government Code
provides:

chanRoblesvirtualLawlibrary
SECTION 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
....
(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No.
6810 and Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of
the Philippines." (Emphasis supplied)

Section 234(d) of the Local Government Code exempts duly registered cooperatives, like NGPI-NGEI, from payment of real
property taxes:

chanRoblesvirtualLawlibrary
SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax:
....
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938[.] (Emphasis supplied)

The Court of Appeals held that the pertinent provisions "neither distinguishes nor specifies" that the exemption only applies to
real properties used by the cooperatives.31 It ruled that "[t]he clear absence of any restriction or limitation in the provision
could only mean that the exemption applies to wherever the properties are situated and to whoever uses them."32 Therefore,
the exemption privilege extends to Filipinas as the cooperatives' lessee.33chanrobleslaw

On the roads constructed by Filipinas, the Court of Appeals held that although it is undisputed that the roads were built
primarily for Filipinas' benefit, the roads should be tax-exempt since these roads were also being used by the cooperatives and
the public.34 It applied, by analogy, Bislig Bay Lumber Company, Inc. v. Provincial Government of Surigao:35chanrobleslaw
We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that the ownership of the road that
was constructed by appellee belongs to the government by right accession not only because it is inherently incorporated or
attached to the timber land leased to appellee but also because upon the expiration of the concession, said road would
ultimately pass to the national government. In the second place, while the road was constructed by appellee primarily for its
use and benefit, the privilege is not exclusive, for, under the lease contract entered into by the appellee and the government
and by public in by the general. Thus, under said lease contract, appellee cannot prevent the use of portions, of the concession
for homesteading purposes. It is also in duty bound to allow the free use of forest products within the concession for the
personal use of individuals residing in or within the vicinity of the land. . . . In other words, the government has practically
reserved the rights to use the road to promote its varied activities. Since, as above shown, the road in question cannot be
considered as an improvement which belongs to appellee, although in part is for its benefit, it is clear that the same cannot be
the subject of assessment within the meaning of section 2 of Commonwealth Act No. 470.36 (Citations omitted)

Furthermore, the Court of Appeals agreed with the CBAA that the roads constructed by Filipinas had become permanent
improvements on the land owned by NGPI-NGEI.37 Articles 440 and 445 of the Civil Code provide that these improvements
redound to the benefit of the land owner under the right of accession:38chanrobleslaw
Article 440. The ownership of property gives the right by accession to everything which is produced thereby, or which is
incorporated or attached thereto, either naturally or artificially.
....

Article 445. Whatever is built, planted or sown on the land of another and the improvements or repairs made thereon, belong
to the owner of the land, subject to the provisions of the following articles.

On the road equipment and mini haulers as real properties subject to tax, the Court of Appeals affirmed the CBAA's Decision
that these are only movables.39 Section 199(o) of the Local Government Code provides a definition of machinery subject to real
property taxation:

chanRoblesvirtualLawlibrary
SECTION 199. Definition of Terms. When used in this Title, the term:
....

(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or
may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the
installations and appurtenant service facilities, those which are mobile, self-powered or self-propelled, and those not
permanently attached to the real property which are actually, directly, and exclusively used to meet the needs of the particular
industry, business or activity and which by their very nature and purpose are designed for, or necessary to its manufacturing,
mining.

The Court of Appeals held that Section 19^(o) of the Local Government Code should be construed to include machineries
covered by the meaning of real properties provided for under Article 415(5) of the Civil Code:40chanrobleslaw
Article 415. The following are immovable property:
....
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which
may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works[.]
The Court of Appeals cited Davao Sawmill Company v. Castillo,41 where it has been held that machinery that is movable by
nature becomes immobilized only when placed by the owner of the tenement, but not so when placed by a tenant or any other
person having a temporary right unless this person acts as an agent of the owner.42 Thus, the mini haulers and other road
equipment retain their nature as movables.43chanrobleslaw

The Provincial Assessor filed before this Court a Petition for Review raising the following issues:

chanRoblesvirtualLawlibraryFirst, whether the exemption privilege of NGPI-NGEI from payment of real property tax extends to
respondent Filipinas Palm Oil Plantation Inc. as lessee of the parcel of land owned by cooperatives; and cralawlawlibrary

Second, whether respondent's road equipment and mini haulers are movable properties and have not been immobilized by
destination for real property taxation.

Petitioner argues that based on Mactan Cebu International Airport Authority v. Ferdinand J. Marcos,44cooperatives cannot
extend its exemption from real property tax to taxable persons.45 It argues that Sections 198, 199, 205, and 217 of the Local
Government Code provide that real property taxes are assessed based on actual use. 46 Moreover, the exemption of
cooperatives applies only when it is the cooperative that actually, directly, and exclusively uses and possesses the
properties.47 Sections 198, 199, 205, and 217 of the Local Government Code provide:

chanRoblesvirtualLawlibrary
SECTION 198. Fundamental Principles. The appraisal, assessment, levy and collection of real property tax shall be guided by
the following fundamental principles:
....
(b) Real property shall be classified for assessment purposes on the basis of its actual use[.]
....
SECTION 199. Definition of Terms. When used in this Title, the term:
....
(b) "Actual Use" refers to the purpose for which the property is principally or predominantly utilized by the person in possession
thereof[.]
....
SECTION 205. Listing of Real Property in the Assessment Rolls.
....
(d) Real property owned by the Republic of the Philippines, its instrumentalities and political subdivisions, the beneficial use of
which has been granted, for consideration or otherwise, to a taxable person, shall be listed, valued and assessed in the name of
the possessor, grantee or of the public entity if such property has been acquired or held for resale or lease.
....

SECTION 217. Actual Use of Real Property as Basis for Assessment. Real property shall be classified, valued and assessed on
the basis of its actual use regardless of where located, whoever owns it, and whoever uses it. (Emphasis supplied)

Petitioner claims that Section 199(o) of the Local Government Code specifically covers respondent's road equipment and mini
haulers since these are directly and exclusively used to meet the needs of respondent's industry, business, or activity.48 Article
415(5) of the Civil Code, which defines real property, should not be made to control the Local Government Code, 49 a
subsequent legislation that specifically defines "machinery" for taxation purposes.50chanrobleslaw

In the Resolution51 dated October 13, 2008, this Court denied the Petition for Review due to procedural missteps, which
included the failure to attach legible duplicate original or certified true copies of the assailed decision and failure to pay proper
fees. On November 25, 2008, petitioner moved for reconsideration,52 praying for the reversal of the Petition's denial due to
mere technicalities.

On January 26, 2009, this Court granted Petitioner's Motion for Reconsideration.53 It directed the reinstatement of the Petition
and required respondent to comment.54chanrobleslaw

On November 20, 2009, respondent filed its Comment.55chanrobleslaw

Respondent reiterates the rulings of the CBAA and the Court of Appeals that the exemption of cooperatives from real property
taxes extends to it as the lessee.56 It asserts that under its lease agreement with NGPI-NGEI, it pays an Annual Fixed Rental,
which includes the payment of taxes.57 It claims that in case NGPI-NGEI is liable to the local government for real property tax
on the land, the tax should be taken from the Annual Fixed Rental.58 To make respondent pay real property taxes on the leased
land would be equivalent to assessing it twice for the same property.59chanrobleslaw

On the road equipment and mini haulers being subjected to real property taxation, respondent maintains that it should be
spared from real property tax since the equipment and mini haulers are movables.60chanrobleslaw

The Petition is granted to modify the Court of Appeals Decision, but only with respect to the nature of respondent's road
equipment and mini haulers.

Under Section 133(n) of the Local Government Code, the taxing power of local government units shall not extend to the levy of
taxes, fees, or charges on duly registered cooperatives under the Cooperative Code.61 Section 234(d) of the Local Government
Code specifically provides for real property tax exemption to cooperatives:

chanRoblesvirtualLawlibrary
SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real property tax:
....

(d) All real property owned by duly registered cooperatives as provided for under [Republic Act] No. 6938[.] (Emphasis
supplied)

NGPI-NGEI, as the owner of the land being leased by respondent, falls within the purview of the law. Section 234 of the Local
Government Code exempts all real property owned by cooperatives without distinction. Nothing in the law suggests that the
real property tax exemption only applies when the property is used by the cooperative itself. Similarly, the instance that the
real property is leased to either an individual or corporation is not a ground for withdrawal of tax exemption. 62chanrobleslaw

In arguing the first issue, petitioner hinges its claim on a misplaced reliance in Mactan, which refers to the revocation of tax
exemption due to the effectivity of the Local Government Code. However, Mactan does not refer to the tax exemption extended
to cooperatives. The portion that petitioner cited specifically mentions that the exemption granted to cooperatives has not been
withdrawn by the effectivity of the Local Government Code:
chanRoblesvirtualLawlibrary
[S]ection 232 must be deemed to qualify Section 133.

Thus, reading together Sections 133, 232, and 234 of the L[ocal] G[overnment] C[ode], we conclude that as a general rule, as
laid down in Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, "taxes, fees and
charges of any kind on the National Government, its agencies and instrumentalities, and local government units"; however,
pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the real property tax
except on, inter alia, "real property owned by the Republic of the Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable person," as provided in item (a) of the first
paragraph of Section 234.

As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government-owned
and controlled corporations, Section 193 of the L[ocal] G[overnment] C[ode] prescribes the general rule, viz., they
are withdrawn upon the effectivity of the L[ocal] G[overnment] C[ode], except those granted to local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, and unless
otherwise provided in the L[ocal] Gfovernment] C[ode]. The latter proviso could refer to Section 234 which enumerates the
properties exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption
insofar as real property taxes are concerned by limiting the retention only to those enumerated therein; all others not included
in the enumeration lost the privilege upon the effectivity of the L[ocal] G[overnment] C[ode]. Moreover, even as to real
property owned by the Republic of the Philippines or any of its political subdivisions covered by item (a) of the first paragraph
of Section 234, the exemption is withdrawn if the beneficial use of such property has been granted to a taxable person for
consideration or otherwise.

Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the L[ocal] G[overnment] C[ode],
exemptions from payment of real property taxes granted to natural or juridical persons, including government-owned or
controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned
corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has
been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under any of the exceptions
provided in Section 234, but not under Section 133, as it now asserts, since, as shown above, the said section is qualified by
Sections 232 and 234.

In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing powers of the local government
units cannot extend to the levy of:

chanRoblesvirtualLawlibrary
(o) taxes, fees or charges of any kind on the National Government, its agencies or instrumentalities, and local government
units.

It must show that the parcels of land in question, which are real property, are any one of those enumerated in Section 234,
either by virtue of ownership, character, or use of the property.63 (Emphasis supplied)

The roads that respondent constructed within the leased area should not be assessed with real property taxes. Bislig Bay finds
application here. Bislig Bay Lumber Company, Inc. (Bislig Bay) was a timber concessionaire of a portion of public forest in the
provinces of Agusan and Surigao.64 To aid in developing its concession, Bislig Bay built a road at its expense from a barrio
leading towards its area.65The Provincial Assessor of Surigao assessed Bislig Bay with real property tax on the constructed road,
which was paid by the company under protest.66 It claimed that even if the road was constructed on public land, it should be
subjected to real property tax because it was built by the company for its own benefit.67 On the other hand, Bislig Bay asserted
that the road should be exempted from real property tax because it belonged to national government by right of
accession.68 Moreover, the road constructed already became an inseparable part of the land.69 The records also showed that the
road was not only built for the benefit of Bislig Bay, but also of the public. 70 This Court ruled for Bislig Bay, thus:

chanRoblesvirtualLawlibrary
We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that the ownership of the road that
was constructed by appellee belongs to the government by right accession not only because it is inherently incorporated or
attached to the timber land leased to appellee but also because upon the expiration of the concession, said road would
ultimately pass to the national government. ... In the second place, while the road was constructed by appellee primarily for its
use and benefit, the privilege is not exclusive, for, under the lease contract entered into by the appellee and the government
and by public in by the general. Thus, under said lease contract, appellee cannot prevent the use of portions, of the concession
for homesteading purposes. ... It is also in duty bound to allow the free use of forest products within the concession for the
personal use of individuals residing in or within the vicinity of the land. ... In other words, the government has practically
reserved the rights to use the road to promote its varied activities. Since, as above shown, the road in question cannot be
considered as an improvement which belongs to appellee, although in part is for its benefit, it is clear that the same cannot be
the subject of assessment within the meaning of section 2 of Commonwealth Act No. 470.71

This was reiterated in Board of Assessment Appeals ofZamboanga del Sur v. Samar Mining Company, Inc.72 Samar Mining
Company, Inc. (Samar Mining) was a domestic corporation engaged in the mining industry.73 Since Samar Mining's mining site
and mill were in an inland location entailing long distance from its area to the loading point, Samar Mining was constrained to
construct a road for its convenience.74 Initially, Samar Mining filed miscellaneous lease applications for a road right of way
covering lands under the jurisdiction of the Bureau of Lands and the Bureau of Forestry where the proposed road would pass
through.75 Samar Mining was given a "temporary permit to occupy and use the lands applied for by it"; 76 hence, it was able to
build what was eventually known as the Samico Road. Samar Mining was assessed by the Provincial Assessor of Zamboanga
del Sur with real property taxes on the road, which prompted it to appeal before the Board of Assessment
Appeals.77 Invoking Bislig Bay, Samar Mining claimed that it should not be assessed with real property tax since the road was
constructed on public land. This Court ruled for Samar Mining, thus:

chanRoblesvirtualLawlibrary
There is no question that the road constructed by respondent Saimar on the public lands leased to it by the government is an
improvement. But as to whether the same is taxable under the aforequoted provision of the Assessment Law, this question has
already been answered in the negaitive by this Court. In the case of Bislig Bay Lumber Co., Inc. vs. Provincial Government of
Surigao, where a similar issue was raised. . ..
....

. . . What is emphasized in the Bislig case is that the improvement is exempt from taxation because it is an integral part of the
public land on which it is constructed and the improvement is the property of the government by right of accession. Under
Section 3(a) of the Assessment Law, all properties owned by the government, without any distinction, are exempt from
taxation.79 (Emphasis supplied, citations omitted)

The roads that respondent constructed became permanent improvements on the land owned by the NGPI-NGEI by right of
accession under the Civil Code, thus:

chanRoblesvirtualLawlibrary
Article 440. The ownership of property gives the right by accession to everything which is produced thereby, or which
is incorporated or attached thereto, either naturally or artificially.
....
Article 445. Whatever is built, planted or sown on the land of another and the improvements or repairs made thereon, belong
to the owner of the land[.]

Despite the land being leased by respondent when the roads were constructed, the ownership of the improvement still belongs
to NGPI-NGEI. As provided under Article 440 and 445 of the Civil Code, the land is owned by the cooperatives at the time
respondent built the roads. Hence, whatever is incorporated in the land, either naturally or artificially, belongs to the NGPI-
NGEI as the landowner.

Although the roads were primarily built for respondent's benefit, the roads were also being used by the members of NGPI and
the public.80 Furthermore, the roads inured to the benefit of NGPI-NGEI as owners of the land not only by right of accession but
through the express provision in the lease agreement:

chanRoblesvirtualLawlibrary
On March 7, 1990 NGPI Multi-Purpose Cooperative, Inc., as Lessor, and NDC-Guthrie Plantations, Inc., as Lessee, entered into
a "Lease Agreement" . . . covering the agricultural lands transferred by NDC to the DAR, which lands the DAR ultimately
distributed undivided to qualified workers-beneficiaries. . . .
....

Clause No. 6.3 of the same lease agreement provides that "All taxes due on the improvements on the Leased Property except
those improvements on the Area that the LESSOR shall have utilized under Clause 1.2 hereof, shall be for the account of the
LESSEE."

Clause No. 9.4 of the same lease agreement provides that ". . . All fixed and permanent improvements, such as roads and palm
trees introduced on the Leased Property, shall automatically accrue to the LESSOR upon termination of this Lease Agreement
without need of reimbursement."

All the above-cited stipulations in the lease agreement between NGPI Multi-Purpose Cooperative and NDC-Guthrie Plantations,
Inc. were reconfirmed and reaffirmed in the Addendum to Lease Agreement entered into by and between NGPI Multi-Purpose
Cooperative and Filipinas Palmoil Plantations, Inc. on January 30, 1998. . . . The main subject of the said Addendum was the
extension of the term of the lease agreement up to December 31, 2032, along with economic benefits to the lessor other than
rentals.

There is no dispute that the roads are on the land owned by NGPI Multi-Purpose Cooperative which leased the same to
Petitioner-Appellee. These roads belong to the Multi-Purpose Cooperative, not only by right of accession but also by express
provisions of the Contract of Lease[.]81

Respondent claims that under its lease agreement with NGPI-NGEI, it pays an Annual Fixed Rental, which includes the payment
of taxes.82 If NGPI-NGEI were liable to the local government for real property tax on the land, the tax should be taken from the
Annual Fixed Rental:

chanRoblesvirtualLawlibrary
"2.1. In consideration of this Lease Agreement, the LESSEE shall pay the LESSOR the following annual
rentals:ChanRoblesVirtualawlibrary
"1) An annual fixed rental, in the following amount "SIX HUNDRED THIRTY FIVE PESOS" (P635.00) PER HECTARE PER
ANNUM which would cover the following:

chanRoblesvirtualLawlibrary"(1) All Taxes on the Land

"(2) Administration Charges
"(3) Amortization charges

"It is understood that, if the annual fixed rental of "SIX HUNDRED THIRTY FIVE PESOS" (p 635.00) is insufficient to pay any
increase on the land taxes, the Lessee shall pay the difference, provided such increase does not exceed ten percent (10%) of
the immediately preceding tax imposed on the land; provided further, that any increase beyond these percentage shall be
borne equally by the LESSOR and LESSEE.

"The foregoing notwithstanding, it is understood and agreed that at all times, liability for realty taxes on the Leased Property
Primarily and principally lies with the LESSOR and any reference herein to payment by LESSEE of said taxes is only for
purposes of earmarking the proceeds of the rentals herein agreed upon."
Clause No. 6.3 of the same lease agreement provides that "All taxes due on the improvements on the Leased Property except
those improvements on the Area that the LESSOR shall have utilized under Clause 1.2 hereof, shall be for the account of the
LESSEE."83 (Emphasis supplied)

Therefore, NGPI-NGEI, as owner of the roads that permanently became part of the land being leased by respondent, shall be
liable for real property taxes, if any. However, by express provision of the Local Government Code, NGPI-NGEI is exempted
from payment of real property tax.84chanrobleslaw
II

The road equipment and mini haulers shall be considered as real property, subject to real property tax.

Section 199(o) of the Local Government Code defines "machinery" as real property subject to real property tax, 85 thus:

chanRoblesvirtualLawlibrary
SECTION 199. Definition of Terms. When used in this Title, the term:
....
(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or
may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the
installations and appurtenant service facilities, those which are mobile, self-powered or self-propelled, and those not
permanently attached to the real property which are actually, directly, and exclusively used to meet the needs of the particular
industry, business or activity and which by their very nature and purpose are designed for, or necessary to its manufacturing,
mining, logging, commercial, industrial or agricultural purposes[.]

Article 415(5) of the New Civil Code defines "machinery" as that which constitutes an immovable property:
chanRoblesvirtualLawlibrary
Article 415. The following are immovable property:
....
(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which
may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works[.]
(Emphasis supplied)

Petitioner contends that the second sentence of Section 199(o) includes the road equipment and mini haulers since these are
directly and exclusively used by respondent to meet the needs of its operations.86 It further claims that Article 415(5) of the
New Civil Code should not control the Local Government Code, a subsequent legislation.87chanrobleslaw

On the other hand, respondent claims that the road equipment and mini haulers are movables by nature. It asserts that
although there may be a difference between the meaning of "machinery" under the Local Government Code arid that of
immovable property under Article 415(5) of the Civil Code, "the controlling interpretation of Section 199(o) of [the Local
Government Code] is the interpretation of Article 415(5) of the Civil Code."88chanrobleslaw

In Manila Electric Company v. City Assessor,89 a similar issue of which definition of "machinery" prevails to warrant the
assessment of real property tax on it was raised.

Manila Electric Company (MERALCO) insisted on harmonizing the provisions of the Civil Code and the Local Government Code
and asserted that "machinery" contemplated under Section 199(o) of the Local Government must still be within the
contemplation of immovable property under Article 415 of the Civil Code.90 However, this Court ruled that harmonizing such
laws "would necessarily mean imposing additional requirements for classifying machinery as real property for real property tax
purposes not provided for, or even in direct conflict with, the provisions of the Local Government Code." 91 Thus:

chanRoblesvirtualLawlibrary
While the Local Government Code still does not provide for a specific definition of "real property," Sections 199(o) and 232 of
the said Code, respectively, gives an extensive definition of what constitutes "machinery" and unequivocally subjects such
machinery to real property tax. The Court reiterates that the machinery subject to real property tax under the Local
Government Code "may or may not be attached, permanently or temporarily to the real property"; and the physical facilities
for production, installations, and appurtenant service facilities, those which are mobile, self-powered or self-propelled, or are
not permanently attached must (a) be actually, directly, and exclusively used to meet the needs of the particular industry,
business, or activity; and (b) by their very nature and purpose, be designed for, or necessary for manufacturing, mining,
logging, commercial, industrial, or agricultural purposes.
....

Article 415, paragraph (5) of the Civil Code considers as immovables or real properties "[m]achinery, receptacles, instruments
or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a
piece of land, and which tend directly to meet the needs of the said industry or works." The Civil Code, however, does not
define "machinery."

The properties under Article 415, paragraph (5) of the Civil Code are immovables by destination, or "those which are
essentially movables, but by the purpose for which they have been placed in an immovable, partake of the nature of the latter
because of the added utility derived therefrom." These properties, including machinery, become immobilized if the following
requisites concur: (a) they are placed in the tenement by the owner of such tenement; (b) they are destined for use in the
industry or work in the tenement; and (c) they tend to directly meet the needs of said industry or works. The first two
requisites are not found anywhere in the Local Government Code.92 (Emphasis supplied, citations omitted)

Section 199(o) of the Local Government prevails over Article 415(5) of the Civil Code. In Manila Electric Company:

chanRoblesvirtualLawlibrary
As between the Civil Code, a general law governing property and property relations, and the Local Government Code, a special
law granting local government units the power to impose real property tax, then the latter shall prevail. As the Court
pronounced in Disomangcop v. The Secretary of the Department of Public Works and Highways Simeon A.
Datumanong:ChanRoblesVirtualawlibrary
It is a finely-imbedded principle in statutory construction that a special provision or law prevails over a general one. Lex
specialis derogant generali. As this Court expressed in the case of Leveriza v. Intermediate Appellate Court, "another basic
principle of statutory construction mandates that general legislation must give way to special legislation on the same subject,
and generally be so interpreted as to embrace only cases in which the special provisions are not applicable, that specific statute
prevails over a general statute and that where two statutes are of equal theoretical application to a particular case, the one
designed therefor specially should prevail."

The Court also very clearly explicated in Vinzons-Chato v. Fortune Tobacco Corporationthat:

chanRoblesvirtualLawlibrary
A general law and a special law on the same subject are statutes in pari materia and should, accordingly, be read together and
harmonized, if possible, with a view to giving effect to both. The rule is that where there are two acts, one of which is special
and particular and the other general which, if standing alone, would include the same matter and thus conflict with the special
act, the special law must prevail since it evinces the legislative intent more clearly than that of a general statute and must not
be taken as intended to affect the more particular and specific provisions of the earlier act, unless it is absolutely necessary so
to construe it in order to give its words any meaning at all.

The circumstance that the special law is passed before or after the general act does not change the principle. Where the special
law is later, it will be regarded as an exception to, or a qualification of, the prior general act; and where the general act is later,
the special statute will be construed as remaining an exception to its terms, unless repealed expressly or by necessary
implication.
Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals, the Court acknowledged that "[i]t is a
familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be
considered personal property[.]"

Therefore, for determining whether machinery is real property subject to real property tax, the definition and requirements
under the Local Government Code are controlling.93(Emphasis supplied, citations omitted)

Respondent is engaged in palm oil plantation.94 Thus, it harvests fruits from palm trees for oil conversion through its milling
plant.95 By the nature of respondent's business, transportation is indispensable for its operations.

Under the definition provided in Section 199(o) of the Local Government Code, the road equipment and the mini haulers are
classified as machinery, thus:
chanRoblesvirtualLawlibrary
SECTION 199. Definition of Terms. When used in this Title, the terra:
....
(o) "Machinery" . . . includes the physical facilities for production, the installations and appurtenant service facilities, those
which are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are
actually, directly, and exclusively used to meet the needs of the particular industry, business or activity and which
by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or
agricultural purposes [.] (Emphasis supplied)

Petitioner is correct in claiming that the phrase pertaining to physical facilities for production is comprehensive enough to
include the road equipment and mini haulers as actually, directly, and exclusively used by respondent to meet the needs of its
operations in palm oil production.96 Moreover, "mini-haulers are farm tractors pulling attached trailers used in the hauling of
seedlings during planting season and in transferring fresh palm fruits from the farm [or] field to the processing plant within the
plantation area."97 The indispensability of the road equipment and mini haulers in transportation makes it actually, directly, and
exclusively used in the operation of respondent's business.

In its Comment, respondent claims that the equipment is no longer vital to its operation because it is currently employing
equipment outside the company to do the task.98 However, respondent never raised this contention before the lower courts.
Hence, this is a factual issue of which this Court cannot take cognizance. This Court is not a trier of facts.99 Only questions of
law are entertained in a petition for review assailing a Court of Appeals decision.100chanrobleslaw

WHEREFORE, the Petition is PARTLY GRANTED. The Decision of the Court of Appeals dated September 26, 2007 and the
Resolution dated May 26, 2008 in CA-G.R. SP No. 74060 are AFFIRMED with MODIFICATION, in that the road equipment
and the mini haulers should be assessed with real property taxes.

SO ORDERED.
G.R. No. 92013 July 25, 1990

SALVADOR H. LAUREL, petitioner,

vs.
RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as Secretary of Foreign Affairs, and CATALINO
MACARAIG, as Executive Secretary, respondents.

G.R. No. 92047 July 25, 1990

DIONISIO S. OJEDA, petitioner,

vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON
DEL ROSARIO, et al., as members of the PRINCIPAL AND BIDDING COMMITTEES ON THE UTILIZATION/DISPOSITION PETITION OF
PHILIPPINE GOVERNMENT PROPERTIES IN JAPAN, respondents.

Arturo M. Tolentino for petitioner in 92013.

GUTIERREZ, JR., J.:

These are two petitions for prohibition seeking to enjoin respondents, their representatives and agents from proceeding with the
bidding for the sale of the 3,179 square meters of land at 306 Roppongi, 5-Chome Minato-ku Tokyo, Japan scheduled on February 21,
1990. We granted the prayer for a temporary restraining order effective February 20, 1990. One of the petitioners (in G.R. No. 92047)
likewise prayes for a writ of mandamus to compel the respondents to fully disclose to the public the basis of their decision to push
through with the sale of the Roppongi property inspire of strong public opposition and to explain the proceedings which effectively
prevent the participation of Filipino citizens and entities in the bidding process.

The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court on March 13, 1990. After G.R. No. 92047, Ojeda v.
Secretary Macaraig, et al. was filed, the respondents were required to file a comment by the Court's resolution dated February 22, 1990.
The two petitions were consolidated on March 27, 1990 when the memoranda of the parties in the Laurel case were deliberated upon.

The Court could not act on these cases immediately because the respondents filed a motion for an extension of thirty (30) days to file
comment in G.R. No. 92047, followed by a second motion for an extension of another thirty (30) days which we granted on May 8, 1990,
a third motion for extension of time granted on May 24, 1990 and a fourth motion for extension of time which we granted on June 5,
1990 but calling the attention of the respondents to the length of time the petitions have been pending. After the comment was filed, the
petitioner in G.R. No. 92047 asked for thirty (30) days to file a reply. We noted his motion and resolved to decide the two (2) cases.

The subject property in this case is one of the four (4) properties in Japan acquired by the Philippine government under the Reparations
Agreement entered into with Japan on May 9, 1956, the other lots being:

(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area of approximately 2,489.96 square meters,
and is at present the site of the Philippine Embassy Chancery;

(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72 square meters and categorized as a
commercial lot now being used as a warehouse and parking lot for the consulate staff; and

(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a residential lot which is now vacant.

The properties and the capital goods and services procured from the Japanese government for national development projects are part
of the indemnification to the Filipino people for their losses in life and property and their suffering during World War II.

The Reparations Agreement provides that reparations valued at $550 million would be payable in twenty (20) years in accordance with
annual schedules of procurements to be fixed by the Philippine and Japanese governments (Article 2, Reparations Agreement). Rep.
Act No. 1789, the Reparations Law, prescribes the national policy on procurement and utilization of reparations and development loans.
The procurements are divided into those for use by the government sector and those for private parties in projects as the then National
Economic Council shall determine. Those intended for the private sector shall be made available by sale to Filipino citizens or to one
hundred (100%) percent Filipino-owned entities in national development projects.

The Roppongi property was acquired from the Japanese government under the Second Year Schedule and listed under the heading
"Government Sector", through Reparations Contract No. 300 dated June 27, 1958. The Roppongi property consists of the land and
building "for the Chancery of the Philippine Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As intended, it became the
site of the Philippine Embassy until the latter was transferred to Nampeidai on July 22, 1976 when the Roppongi building needed major
repairs. Due to the failure of our government to provide necessary funds, the Roppongi property has remained undeveloped since that
time.

A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to Japan, Carlos J. Valdez, to make the
property the subject of a lease agreement with a Japanese firm - Kajima Corporation which shall construct two (2) buildings in
Roppongi and one (1) building in Nampeidai and renovate the present Philippine Chancery in Nampeidai. The consideration of the
construction would be the lease to the foreign corporation of one (1) of the buildings to be constructed in Roppongi and the two (2)
buildings in Nampeidai. The other building in Roppongi shall then be used as the Philippine Embassy Chancery. At the end of the lease
period, all the three leased buildings shall be occupied and used by the Philippine government. No change of ownership or title shall
occur. (See Annex "B" to Reply to Comment) The Philippine government retains the title all throughout the lease period and thereafter.
However, the government has not acted favorably on this proposal which is pending approval and ratification between the parties.
Instead, on August 11, 1986, President Aquino created a committee to study the disposition/utilization of Philippine government
properties in Tokyo and Kobe, Japan through Administrative Order No. 3, followed by Administrative Orders Numbered 3-A, B, C and D.

On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino citizens or entities to avail of separations' capital
goods and services in the event of sale, lease or disposition. The four properties in Japan including the Roppongi were specifically
mentioned in the first "Whereas" clause.

Amidst opposition by various sectors, the Executive branch of the government has been pushing, with great vigor, its decision to sell
the reparations properties starting with the Roppongi lot. The property has twice been set for bidding at a minimum floor price of $225
million. The first bidding was a failure since only one bidder qualified. The second one, after postponements, has not yet materialized.
The last scheduled bidding on February 21, 1990 was restrained by his Court. Later, the rules on bidding were changed such that the
$225 million floor price became merely a suggested floor price.

The Court finds that each of the herein petitions raises distinct issues. The petitioner in G.R. No. 92013 objects to the alienation of the
Roppongi property to anyone while the petitioner in G.R. No. 92047 adds as a principal objection the alleged unjustified bias of the
Philippine government in favor of selling the property to non-Filipino citizens and entities. These petitions have been consolidated and
are resolved at the same time for the objective is the same - to stop the sale of the Roppongi property.

The petitioner in G.R. No. 92013 raises the following issues:

(1) Can the Roppongi property and others of its kind be alienated by the Philippine Government?; and

(2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to sell the Roppongi property?

Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of the government to alienate the Roppongi property
assails the constitutionality of Executive Order No. 296 in making the property available for sale to non-Filipino citizens and entities. He
also questions the bidding procedures of the Committee on the Utilization or Disposition of Philippine Government Properties in Japan
for being discriminatory against Filipino citizens and Filipino-owned entities by denying them the right to be informed about the bidding
requirements.

II

In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related lots were acquired as part of the reparations
from the Japanese government for diplomatic and consular use by the Philippine government. Vice-President Laurel states that the
Roppongi property is classified as one of public dominion, and not of private ownership under Article 420 of the Civil Code (See infra).

The petitioner submits that the Roppongi property comes under "property intended for public service" in paragraph 2 of the above
provision. He states that being one of public dominion, no ownership by any one can attach to it, not even by the State. The Roppongi
and related properties were acquired for "sites for chancery, diplomatic, and consular quarters, buildings and other improvements"
(Second Year Reparations Schedule). The petitioner states that they continue to be intended for a necessary service. They are held by
the State in anticipation of an opportune use. (Citing 3 Manresa 65-66). Hence, it cannot be appropriated, is outside the commerce of
man, or to put it in more simple terms, it cannot be alienated nor be the subject matter of contracts (Citing Municipality of Cavite v.
Rojas, 30 Phil. 20 [1915]). Noting the non-use of the Roppongi property at the moment, the petitioner avers that the same remains
property of public dominion so long as the government has not used it for other purposes nor adopted any measure constituting a
removal of its original purpose or use.

The respondents, for their part, refute the petitioner's contention by saying that the subject property is not governed by our Civil Code
but by the laws of Japan where the property is located. They rely upon the rule of lex situs which is used in determining the applicable
law regarding the acquisition, transfer and devolution of the title to a property. They also invoke Opinion No. 21, Series of 1988, dated
January 27, 1988 of the Secretary of Justice which used the lex situs in explaining the inapplicability of Philippine law regarding a
property situated in Japan.

The respondents add that even assuming for the sake of argument that the Civil Code is applicable, the Roppongi property has ceased
to become property of public dominion. It has become patrimonial property because it has not been used for public service or for
diplomatic purposes for over thirteen (13) years now (Citing Article 422, Civil Code) and because the intention by the Executive
Department and the Congress to convert it to private use has been manifested by overt acts, such as, among others: (1) the transfer of
the Philippine Embassy to Nampeidai (2) the issuance of administrative orders for the possibility of alienating the four government
properties in Japan; (3) the issuance of Executive Order No. 296; (4) the enactment by the Congress of Rep. Act No. 6657 [the
Comprehensive Agrarian Reform Law] on June 10, 1988 which contains a provision stating that funds may be taken from the sale of
Philippine properties in foreign countries; (5) the holding of the public bidding of the Roppongi property but which failed; (6) the
deferment by the Senate in Resolution No. 55 of the bidding to a future date; thus an acknowledgment by the Senate of the
government's intention to remove the Roppongi property from the public service purpose; and (7) the resolution of this Court
dismissing the petition in Ojeda v. Bidding Committee, et al., G.R. No. 87478 which sought to enjoin the second bidding of the Roppongi
property scheduled on March 30, 1989.

III

In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the constitutionality of Executive Order No. 296. He had earlier
filed a petition in G.R. No. 87478 which the Court dismissed on August 1, 1989. He now avers that the executive order contravenes the
constitutional mandate to conserve and develop the national patrimony stated in the Preamble of the 1987 Constitution. It also allegedly
violates:

(1) The reservation of the ownership and acquisition of alienable lands of the public domain to Filipino citizens. (Sections 2 and 3,
Article XII, Constitution; Sections 22 and 23 of Commonwealth Act 141).itc-asl

(2) The preference for Filipino citizens in the grant of rights, privileges and concessions covering the national economy and patrimony
(Section 10, Article VI, Constitution);

(3) The protection given to Filipino enterprises against unfair competition and trade practices;

(4) The guarantee of the right of the people to information on all matters of public concern (Section 7, Article III, Constitution);

(5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned by Filipino citizens of capital goods received by
the Philippines under the Reparations Act (Sections 2 and 12 of Rep. Act No. 1789); and

(6) The declaration of the state policy of full public disclosure of all transactions involving public interest (Section 28, Article III,
Constitution).

Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional executive order is a misapplication of public
funds He states that since the details of the bidding for the Roppongi property were never publicly disclosed until February 15, 1990 (or
a few days before the scheduled bidding), the bidding guidelines are available only in Tokyo, and the accomplishment of requirements
and the selection of qualified bidders should be done in Tokyo, interested Filipino citizens or entities owned by them did not have the
chance to comply with Purchase Offer Requirements on the Roppongi. Worse, the Roppongi shall be sold for a minimum price of $225
million from which price capital gains tax under Japanese law of about 50 to 70% of the floor price would still be deducted.

IV

The petitioners and respondents in both cases do not dispute the fact that the Roppongi site and the three related properties were
through reparations agreements, that these were assigned to the government sector and that the Roppongi property itself was
specifically designated under the Reparations Agreement to house the Philippine Embassy.

The nature of the Roppongi lot as property for public service is expressly spelled out. It is dictated by the terms of the Reparations
Agreement and the corresponding contract of procurement which bind both the Philippine government and the Japanese government.

There can be no doubt that it is of public dominion unless it is convincingly shown that the property has become patrimonial. This, the
respondents have failed to do.

As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be alienated. Its ownership is a special
collective ownership for general use and enjoyment, an application to the satisfaction of collective needs, and resides in the social
group. The purpose is not to serve the State as a juridical person, but the citizens; it is intended for the common and public welfare and
cannot be the object of appropration. (Taken from 3 Manresa, 66-69; cited in Tolentino, Commentaries on the Civil Code of the
Philippines, 1963 Edition, Vol. II, p. 26).

The applicable provisions of the Civil Code are:

ART. 419. Property is either of public dominion or of private ownership.

ART. 420. The following things are property of public dominion

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
banks shores roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some public service or for the
development of the national wealth.

ART. 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial
property.

The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code as property belonging to the State and
intended for some public service.

Has the intention of the government regarding the use of the property been changed because the lot has been Idle for some years? Has
it become patrimonial?

The fact that the Roppongi site has not been used for a long time for actual Embassy service does not automatically convert it to
patrimonial property. Any such conversion happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene Co.
v. Bercilles, 66 SCRA 481 [1975]). A property continues to be part of the public domain, not available for private appropriation or
ownership until there is a formal declaration on the part of the government to withdraw it from being such (Ignacio v. Director of Lands,
108 Phil. 335 [1960]).

The respondents enumerate various pronouncements by concerned public officials insinuating a change of intention. We emphasize,
however, that an abandonment of the intention to use the Roppongi property for public service and to make it patrimonial property
under Article 422 of the Civil Code must be definiteAbandonment cannot be inferred from the non-use alone specially if the non-use
was attributable not to the government's own deliberate and indubitable will but to a lack of financial support to repair and improve the
property (See Heirs of Felino Santiago v. Lazaro, 166 SCRA 368 [1988]). Abandonment must be a certain and positive act based on
correct legal premises.

A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the Roppongi property's original purpose.
Even the failure by the government to repair the building in Roppongi is not abandonment since as earlier stated, there simply was a
shortage of government funds. The recent Administrative Orders authorizing a study of the status and conditions of government
properties in Japan were merely directives for investigation but did not in any way signify a clear intention to dispose of the properties.

Executive Order No. 296, though its title declares an "authority to sell", does not have a provision in its text expressly authorizing the
sale of the four properties procured from Japan for the government sector. The executive order does not declare that the properties lost
their public character. It merely intends to make the properties available to foreigners and not to Filipinos alone in case of a sale, lease
or other disposition. It merely eliminates the restriction under Rep. Act No. 1789 that reparations goods may be sold only to Filipino
citizens and one hundred (100%) percent Filipino-owned entities. The text of Executive Order No. 296 provides:

Section 1. The provisions of Republic Act No. 1789, as amended, and of other laws to the contrary notwithstanding,
the above-mentioned properties can be made available for sale, lease or any other manner of disposition to non-
Filipino citizens or to entities owned by non-Filipino citizens.

Executive Order No. 296 is based on the wrong premise or assumption that the Roppongi and the three other properties were earlier
converted into alienable real properties. As earlier stated, Rep. Act No. 1789 differentiates the procurements for the government sector
and the private sector (Sections 2 and 12, Rep. Act No. 1789). Only the private sector properties can be sold to end-users who must be
Filipinos or entities owned by Filipinos. It is this nationality provision which was amended by Executive Order No. 296.

Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the sources of funds for its implementation, the proceeds
of the disposition of the properties of the Government in foreign countries, did not withdraw the Roppongi property from being
classified as one of public dominion when it mentions Philippine properties abroad. Section 63 (c) refers to properties which are
alienable and not to those reserved for public use or service. Rep Act No. 6657, therefore, does not authorize the Executive Department
to sell the Roppongi property. It merely enumerates possible sources of future funding to augment (as and when needed) the Agrarian
Reform Fund created under Executive Order No. 299. Obviously any property outside of the commerce of man cannot be tapped as a
source of funds.
The respondents try to get around the public dominion character of the Roppongi property by insisting that Japanese law and not our
Civil Code should apply.

It is exceedingly strange why our top government officials, of all people, should be the ones to insist that in the sale of extremely
valuable government property, Japanese law and not Philippine law should prevail. The Japanese law - its coverage and effects, when
enacted, and exceptions to its provision is not presented to the Court It is simply asserted that the lex loci rei sitae or Japanese law
should apply without stating what that law provides. It is a ed on faith that Japanese law would allow the sale.

We see no reason why a conflict of law rule should apply when no conflict of law situation exists. A conflict of law situation arises only
when: (1) There is a dispute over the title or ownership of an immovable, such that the capacity to take and transfer immovables, the
formalities of conveyance, the essential validity and effect of the transfer, or the interpretation and effect of a conveyance, are to be
determined (See Salonga, Private International Law, 1981 ed., pp. 377-383); and (2) A foreign law on land ownership and its conveyance
is asserted to conflict with a domestic law on the same matters. Hence, the need to determine which law should apply.

In the instant case, none of the above elements exists.

The issues are not concerned with validity of ownership or title. There is no question that the property belongs to the Philippines. The
issue is the authority of the respondent officials to validly dispose of property belonging to the State. And the validity of the procedures
adopted to effect its sale. This is governed by Philippine Law. The rule of lex situs does not apply.

The assertion that the opinion of the Secretary of Justice sheds light on the relevance of the lex situs rule is misplaced. The opinion
does not tackle the alienability of the real properties procured through reparations nor the existence in what body of the authority to
sell them. In discussing who are capable of acquiring the lots, the Secretary merely explains that it is the foreign law which should
determine who can acquire the properties so that the constitutional limitation on acquisition of lands of the public domain to Filipino
citizens and entities wholly owned by Filipinos is inapplicable. We see no point in belaboring whether or not this opinion is correct.
Why should we discuss who can acquire the Roppongi lot when there is no showing that it can be sold?

The subsequent approval on October 4, 1988 by President Aquino of the recommendation by the investigating committee to sell the
Roppongi property was premature or, at the very least, conditioned on a valid change in the public character of the Roppongi property.
Moreover, the approval does not have the force and effect of law since the President already lost her legislative powers. The Congress
had already convened for more than a year.

Assuming for the sake of argument, however, that the Roppongi property is no longer of public dominion, there is another obstacle to
its sale by the respondents.

There is no law authorizing its conveyance.

Section 79 (f) of the Revised Administrative Code of 1917 provides

Section 79 (f ) Conveyances and contracts to which the Government is a party. In cases in which the Government
of the Republic of the Philippines is a party to any deed or other instrument conveying the title to real estate or to
any other property the value of which is in excess of one hundred thousand pesos, the respective Department
Secretary shall prepare the necessary papers which, together with the proper recommendations, shall be submitted
to the Congress of the Philippines for approval by the same. Such deed, instrument, or contract shall be executed
and signed by the President of the Philippines on behalf of the Government of the Philippines unless the
Government of the Philippines unless the authority therefor be expressly vested by law in another officer. (Emphasis
supplied)

The requirement has been retained in Section 48, Book I of the Administrative Code of 1987 (Executive Order No. 292).

SEC. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is authorized by
law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines, by the President, unless the
authority therefor is expressly vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of
any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis
supplied)

It is not for the President to convey valuable real property of the government on his or her own sole will. Any such conveyance must be
authorized and approved by a law enacted by the Congress. It requires executive and legislative concurrence.

Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the sale of the Roppongi property does not withdraw
the property from public domain much less authorize its sale. It is a mere resolution; it is not a formal declaration abandoning the
public character of the Roppongi property. In fact, the Senate Committee on Foreign Relations is conducting hearings on Senate
Resolution No. 734 which raises serious policy considerations and calls for a fact-finding investigation of the circumstances behind the
decision to sell the Philippine government properties in Japan.

The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass upon the constitutionality of Executive Order No.
296. Contrary to respondents' assertion, we did not uphold the authority of the President to sell the Roppongi property. The Court
stated that the constitutionality of the executive order was not the real issue and that resolving the constitutional question was "neither
necessary nor finally determinative of the case." The Court noted that "[W]hat petitioner ultimately questions is the use of the proceeds
of the disposition of the Roppongi property." In emphasizing that "the decision of the Executive to dispose of the Roppongi property to
finance the CARP ... cannot be questioned" in view of Section 63 (c) of Rep. Act No. 6657, the Court did not acknowledge the fact that
the property became alienable nor did it indicate that the President was authorized to dispose of the Roppongi property. The resolution
should be read to mean that in case the Roppongi property is re-classified to be patrimonial and alienable by authority of law, the
proceeds of a sale may be used for national economic development projects including the CARP.

Moreover, the sale in 1989 did not materialize. The petitions before us question the proposed 1990 sale of the Roppongi property. We
are resolving the issues raised in these petitions, not the issues raised in 1989.
Having declared a need for a law or formal declaration to withdraw the Roppongi property from public domain to make it alienable and a
need for legislative authority to allow the sale of the property, we see no compelling reason to tackle the constitutional issues raised by
petitioner Ojeda.

The Court does not ordinarily pass upon constitutional questions unless these questions are properly raised in appropriate cases and
their resolution is necessary for the determination of the case (People v. Vera, 65 Phil. 56 [1937]). The Court will not pass upon a
constitutional question although properly presented by the record if the case can be disposed of on some other ground such as the
application of a statute or general law (Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909], Railroad Commission v. Pullman Co.,
312 U.S. 496 [1941]).

The petitioner in G.R. No. 92013 states why the Roppongi property should not be sold:

The Roppongi property is not just like any piece of property. It was given to the Filipino people in reparation for the
lives and blood of Filipinos who died and suffered during the Japanese military occupation, for the suffering of
widows and orphans who lost their loved ones and kindred, for the homes and other properties lost by countless
Filipinos during the war. The Tokyo properties are a monument to the bravery and sacrifice of the Filipino people in
the face of an invader; like the monuments of Rizal, Quezon, and other Filipino heroes, we do not expect economic
or financial benefits from them. But who would think of selling these monuments? Filipino honor and national
dignity dictate that we keep our properties in Japan as memorials to the countless Filipinos who died and suffered.
Even if we should become paupers we should not think of selling them. For it would be as if we sold the lives and
blood and tears of our countrymen. (Rollo- G.R. No. 92013, p.147)

The petitioner in G.R. No. 92047 also states:

Roppongi is no ordinary property. It is one ceded by the Japanese government in atonement for its past belligerence
for the valiant sacrifice of life and limb and for deaths, physical dislocation and economic devastation the whole
Filipino people endured in World War II.

It is for what it stands for, and for what it could never bring back to life, that its significance today remains
undimmed, inspire of the lapse of 45 years since the war ended, inspire of the passage of 32 years since the property
passed on to the Philippine government.

Roppongi is a reminder that cannot should not be dissipated ... (Rollo-92047, p. 9)

It is indeed true that the Roppongi property is valuable not so much because of the inflated prices fetched by real property in Tokyo but
more so because of its symbolic value to all Filipinos veterans and civilians alike. Whether or not the Roppongi and related
properties will eventually be sold is a policy determination where both the President and Congress must concur. Considering the
properties' importance and value, the laws on conversion and disposition of property of public dominion must be faithfully followed.

WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of prohibition is issued enjoining the respondents from
proceeding with the sale of the Roppongi property in Tokyo, Japan. The February 20, 1990 Temporary Restraining Order is made
PERMANENT.

SO ORDERED.

Melencio-Herrera, Paras, Bidin, Grio-Aquino and Regalado, JJ., concur.

 G.R. No. 174964, October 05, 2016

SANGGUNIANG PANLALAWIGAN OF BATAAN, Petitioner, v. CONGRESSMAN ENRIQUE T. GARCIA, JR., MEMBERS OF

THE FACULTY, CONCERNED STUDENTS AND THE BOARD OF TRUSTEES OF THE BATAAN POLYTECHNIC STATE
COLLEGE, Respondents.

DECISION

REYES, J.:

Before this Court is a Petition for Review on Certiorart1 of the Decision2 dated February 7, 2006 of the Court of Appeals (CA) in
CA-G.R. SP No. 85902 upholding the Decision dated November 29, 2002 of the Regional Trial Court (RTC) of Bataan which
granted the petition for a writ of mandamus in Special Civil Action No. 7043.chanroblesvirtuallawlibrary
Antecedent Facts

Lot Nos. 2193 and 2194 of the Bataan Cadastre, containing 1,222 square meters and 10,598 sq m, respectively, were
registered in the name of the Province of Bataan. Both lots were embraced in Original Certificate of Title (OCT) No. N-182, and
occupied by the Bataan Community Colleges (BCC) and the Medina Lacson de Leon School of Arts and Trades (MLLSAT), both
State-run schools.3

On February 26, 1998, the Congress of the Philippines passed Republic Act (R.A.) No. 8562, authored by Congressman Enrique
T. Garcia, Jr. (Cong. Garcia), converting the MLLSAT into a polytechnic college, to be known as the Bataan Polytechnic State
College (BPSC), and integrating thereto the BCC.4 Section 24 of R.A. No. 8562 provides that:chanRoblesvirtualLawlibrary
All parcels of land belonging to the government occupied by the Medina Lacson de Leon School of Arts and Trades and the
Bataan Community Colleges are hereby declared to be the property of the Bataan Polytechnic State College and shall be titled
under that name: Provided, That should the State College cease to exist or be abolished or should such parcels of land
aforementioned be no longer needed by the State College, the same shall revert to the Province of Bataan.
chanrobleslaw
On the basis of the above provision, Cong. Garcia wrote to then Governor of Bataan Leonardo Roman, and the Sangguniang
Panlalawigan of Bataan (petitioner), requesting them to cause the transfer of the title of the aforesaid lots to BPSC. No transfer
was effected.5

Thus, Cong. Garcia, along with the faculty members and some concerned students of BPSC (collectively, the respondents) filed
a Special Civil Action for Mandamus with the RTC of Balanga, Bataan against the Governor and the petitioner. Initially, the
Board of Trustees of the BPSC was impleaded as an unwilling plaintiff but was eventually included as co-petitioner in the civil
suit pursuant to Resolution No. 14, Series of 2000 of the BPSC.6

In their Comment, the Governor and the petitioner took issue with the standing of the respondents, arguing that they were not
the real parties in interest who would be benefited or injured by the judgment, or the party entitled to the avails of the suit.
They asserted that the subject properties were owned by the Province of Bataan and not the State, for them to be simply
transferred to the BPSC by virtue of the law.7

In its Decision dated November 29, 2002, the RTC granted the writ of mandamus. The fallo of the RTC decision
reads:chanRoblesvirtualLawlibrary
WHEREFORE, a writ of mandamus is hereby issued, ordering respondents to forthwith:cralawlawlibrary

1. Deliver the owner's duplicate copy of [OCX] No. N-182 to the Register of Deeds of Bataan, free from any hen or
encumbrance;ChanRoblesVirtualawlibrary

2. Execute the corresponding deed of conveyance of the parcels of land in issue in favor of the [BPSC]; and

3. Cause the transfer and registration of the title to and in the name of the [BPSC].

SO ORDERED.8
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The Governor and the petitioner appealed to the CA alleging that the subject lots were the patrimonial properties of the
Province of Bataan, and as such they cannot be taken by the National Government without due process of law and without just
compensation. They also pointed out that certain loan obligations of the Province of Bataan to the Land Bank of the Philippines
(LBP) were secured with a mortgage on the lots; and since the mortgage lien was duly annotated on its title, OCT No. N-182,
the writ of mandamus violated the non-impairment clause of the Constitution. The Governor and the petitioner reiterated that
the respondents had no legal standing since they were not the real parties in interest.9

In the Decision10 dated February 7, 2006, the CA affirmed the RTC.

The CA rejected the claim that the subject lots were the patrimonial properties of the Province of Bataan, declaring that the
petitioner failed to provide proof that the Province of Bataan acquired them with its own private or corporate funds, and for this
reason the lots must be presumed to belong to the State, citing Salas, etc., et al. v. Hon. Jarencio, etc., et al.11 Concerning the
mortgage to the LBP, the appellate court agreed with the RTC that the consent of the LBP to the transfer of title to BPSC must
be obtained, and the mortgage lien must be carried over to the new title. The CA also held that BPSC is a real party in interest
on the basis of Section 24 of R.A. No. 8562, and was correctly impleaded as a co-petitioner. The subsequent motion for
reconsideration was denied in the CA Resolution12 dated September 20, 2006; hence, this petition.
Issues

WHETHER OR NOT THE SUBJECT PARCELS OF LAND ARE PATRIMONIAL PROPERTIES OF THE PROVINCE OF BATAAN WHICH
CANNOT BE TAKEN WITHOUT DUE PROCESS OF LAW AND WITHOUT JUST COMPENSATION.chanroblesvirtuallawlibrary
II

WHETHER OR NOT A WRIT OF MANDAMUS MAY BE ISSUED AGAINST THE PETITIONER TO COMPEL THE TRANSFER OF THE
SUBJECT PROPERTIES WITHOUT DUE PROCESS OF LAW AND WITHOUT JUST COMPENSATION.13
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The petitioner insists that the subject lots are not communal lands, or legua comunal as they were known under the laws of
colonial Spain, but are the patrimonial properties of the Province of Bataan, which were issued a Torrens title by the Cadastral
Court on August 11, 1969 in Cadastral Case No. 5;14that while in Salas,15 the title of the State over the disputed lot was
expressly recognized by the City of Manila, this is not so in the case at bar;16 that in the exercise of its proprietary rights over
the subject lots, the Province of Bataan has used them as collateral for its loan obligations with the LBP;17 that in its
Manifestation and Motion dated February 24, 2000, the Board of Trustees of BPSC even acknowledged the titles of the Province
of Bataan over the subject properties.18

In addition to the above contentions, the petitioner proffers an alleged novel argument that R.A. No. 8562 infringes on the
State's underlying policy of local autonomy for its territorial and political subdivisions, found in Article X of the 1987
Constitution (formerly Article XI, 1973 Constitution) and now fleshed out in a landmark legislation, R.A. No. 7160, better known
as the Local Government Code of 1991 (LGC). Thus, for this Court to still sustain its ruling in Salas would render the State's
policy of local autonomy purely illusory.19
Ruling of the Court

The decision of the CA is affirmed.

A. Under the well-entrenched and

time-honored Regalian Doctrine, all
lands of the public domain are
under the absolute control and
ownership of the State.

The State's ownership of and control over all lands and resources of the public domain are beyond dispute. Reproducing almost
verbatim from the 1973 Constitution,20 Section 2, Article XII of the 1987 Constitution provides that "[a]ll lands of the public
domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources are owned by the State, x x x." In Section 1, Article XIII of the Amended
1935 Constitution, it was also provided that "[a]ll 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 x x x."

Thus, in Cario v. Insular Government,21 a case of Philippine origin, the Supreme Court of the United States of America
acknowledged that "Spain in its earlier decrees embodied the universal feudal theory that all lands were held from the Crown x
x x." In Hong Hok v. David,22 citing Cario, the Court likewise said that the theory is a manifestation of the concept of the
Regalian Doctrine, or jura regalia,23 which is enshrined in our 1935, 1973, and 1987 Constitutions. As adopted in our republican
system, this medieval concept is stripped of royal overtones; and ownership of all lands belonging to the public domain is
vested in the State.24 Under this well-entrenched and time-honored Regalian Doctrine, all lands of the public domain are under
the absolute control and ownership of the State.

B. Local government property

devoted to governmental purposes,
such as local administration, public
education, and public health, as
may be provided under special
laws, is classified as public.

In The Province of Zamboanga del Norte v. City of Zamboanga, et al.25 cited by the CA, the Province of Zamboanga del Norte
sought to declare unconstitutional R.A. No. 3039, which ordered the transfer of properties belonging to the Province of
Zamboanga located within the territory of the City of Zamboanga to the said City, for depriving the province of property
without due process and just compensation. In said case, the Court classified properties of local governments as either (a)
properties for public use, or (b) patrimonial properties, and held that the capacity in which the property is held by a local
government is dependent on the use to which it is intended and for which it is devoted. If the property is owned by the
municipal corporation in its public and governmental capacity, it is public and Congress has absolute control over it; but if the
property is owned in its private or proprietary capacity, then it is patrimonial and Congress has no absolute control, in which
case, the municipality cannot be deprived of it without due process and payment of just compensation.26 In upholding the
validity of R.A. No. 3 039, the Court noted that it affected "lots used as capitol site, school sites and its grounds, hospital and
leprosarium sites and the high school playground sites - a total of 24 lots - since these were held by the former Zamboanga
province in its governmental capacity and therefore are subject to the absolute control of Congress." 27

According to the Court, there are two established norms to determine the classification of the properties: that of the Civil Code,
particularly Articles 423 and 424 thereof, and that obtaining under the law of Municipal Corporations. Articles 423 and 424 of
the Civil Code provide, as follows:chanRoblesvirtualLawlibrary
Art. 423. The property of provinces, cities and municipalities is divided into property for public use and patrimonial property.

Art. 424. Property for public use, in the provinces, cities, and municipalities, consists of the provincial roads, city streets,
municipal streets, the squares, fountains, public waters, promenades, and public works for public service paid for by said
provinces, cities, or municipalities.

All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to the
provisions of special laws.
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In Province of Zamboanga del Norte,28 properties for the free and indiscriminate use of everyone are classified under the Civil
Code norm as for public use, while all other properties are patrimonial in nature. In contrast, under the Municipal Corporations
Law norm, to be considered public property, it is 'enough that a property is held and devoted to a governmental purpose, such
as local administration, public education, and public health.29 Nonetheless, the Court clarified that the classification of
properties in the municipalities, other than those for public use, as patrimonial under Article 424 of the Civil Code, is "without
prejudice to the provisions of special laws,"30 holding that the principles obtaining under the Law of Municipal Corporations can
be considered as "special laws"31

Moreover, in the 2009 case of Heirs of Mario Malabanan v. Republic of the Philippines,32 the Court reiterated that Article 420(2)
of the Civil Code makes clear that properties "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," are public dominion property. For as long as the property
belongs to the State, although already classified as alienable or disposable, it remains property of the public dominion when it
is "intended for some public service or for the development of the national wealth." 33

C. Property registered in the name

of the municipal corporation but
without proof that it was acquired
with its corporate funds is deemed
held by it in trust for the State.
The Court takes instructions from the case, of Salas as to properties belonging to the municipal government. In Salas, at issue
was the constitutionality of R.A. No. 4118 passed on June 20, 1964,34whereby Congress reserved a lot, long titled in the name
of the City of Manila, as communal property, and converted it into disposable land of the State for resale in small lots to its
bona fide occupants. On February 24, 1919, Lot No. 1, Block 557 of the Cadastre of the City of Manila, containing 9,689.80 sq
m, was declared by the Court of First Instance of Manila, Branch 4, acting as a land registration court in Case No. 18, G.L.R.O.
Record No. 111, as owned by the City of Manila in fee simple. On August 21, 1920, OCT No. 4329 was issued in the name of
the City of Manila over the said lot. On various dates in 1924, the City of Manila sold portions of Lot No. 1, Block 557 to a
certain Pura Villanueva (Villanueva). OCT No. 4329 was cancelled, and transfer certificates of title (TCT) were issued to
Villanueva for the portions sold to her, while TCT No. 22547 was issued to the City of Manila for the remainder of Lot No. 1
containing 7,490.10 sq m, now designated, as Lot No. 1-B-2-B of Block 557.35

On September 21, 1960, the local board of the City of Manila wrote to the President of the Philippines seeking assistance in
declaring the aforesaid lot as patrimonial property of the city for the purpose of reselling the same in small lots to the actual
occupants thereof. R.A. No. 4118 was passed by Congress on June 20, 1964 for this purpose. 36 On February 18, 1965, Manila
Mayor Antonio Villegas (Mayor Villegas) was furnished a copy of a subdivision plan for TCT No. 22547. He interposed no
objection to the implementation of R.A. No. 4118, and TCT No. 22547 was duly surrendered to the Land Authority. 37

Inexplicably, now claiming that R.A. No. 4118 was unconstitutional, Mayor Villegas brought on December 20, 1966 an action
for injunction and/or prohibition with preliminary injunction, to restrain, prohibit and enjoin the Land Authority and the Register
of Deeds of Manila from implementing R.A. No. 4118. On September 23, 1968, the RTC declared the said law unconstitutional
for depriving the City of Manila of its property without due process and just compensation.38

Acting on the petition for review, the Court declared that Lot 1-B-2-B of Block 557 was a communal property held in trust by
the City of Manila for the State, and therefore subject to the paramount power of Congress to dispose of.
Thus:chanRoblesvirtualLawlibrary
[T]he City of Manila, although declared by the Cadastral Court as owner in fee simple, has not shown by any shred of evidence
in what manner it acquired said land as its private or patrimonial property. It is true that the City of Manila as well as its
predecessor, the Ayuntamiento de Manila, could validly acquire property in its corporate or private capacity, following the
accepted doctrine on the dual character - public and private - of a municipal corporation. And when it acquires property in its
private capacity, it acts like an ordinary person capable of entering into contracts or making transactions for the transmission of
title or other real rights. When it comes to acquisition of land, it must have done so under any of the modes established by law
for the acquisition of ownership and other real rights. In the absence of a title deed to any land claimed by the City of Manila as
its own, showing that it was acquired with its private or corporate funds, the presumption is that such land came from the State
upon the creation of the municipality (Unson vs. Lacson, et al., 100 Phil. 695). Originally the municipality owned no patrimonial
property except those that were granted by the State not for its public but for private use. Other properties it owns are
acquired in the course of the exercise of its corporate powers as a juridical entity to which category a municipal corporation
pertains.

Communal lands or "legua comunal" came into existence when a town or pueblo was established in this country under the laws
of Spain (Law VII, Title III, Book VI, Recopilacion de las Leyes de Indios). The municipalities of the Philippines were not
entitled, as a matter of right, to any part of the public domain for use as communal lands. The Spanish law provided that the
usufruct of a portion of the public domain adjoining municipal territory might be granted by the Government for communal
purposes, upon proper petition, but, until granted, no rights therein passed to the municipalities, and, in any event, the
ultimate title remained in the sovereign (City of Manila vs. Insular Government, 10 Phil. 327).

xxxx

It may, therefore, be laid down as a general rule that regardless of the source or classification of land in the possession of a
municipality, excepting those acquired with its own funds in its private or corporate capacity, such property is held in trust for
the State for the benefit of its inhabitants, whether it be for governmental or proprietary purposes. It holds such lands subject
to the paramount power of the legislature to dispose of the same, for after all it owes its creation to it as an agent for the
performance of a part of its public work, the municipality being but a subdivision or instrumentality thereof for purposes of local
administration. Accordingly, the legal situation is the same as if the State itself holds the property and puts it to a different use
(2 Mc Quilin, Municipal Corporations, 3rd Ed. p. 197, citing Monagham vs. Armatage, 218 Minn. 27, 15 N. W. 2nd 241).

True it is that the legislative control over a municipal corporation is not absolute even when it comes to its property devoted to
public use, for such control must not be exercised to the extent of depriving persons of their property or rights without due
process of law, or in a manner impairing the obligations of contracts. Nevertheless, when it comes to property of the
municipality which it did not acquire in its private or corporate capacity with its own funds, the legislature can transfer its
administration and disposition to an agency of the National Government to be exposed of according to its discretion. Here it did
so in obedience to the constitutional mandate of promoting social justice to insure the well-being and economic security of the
people.39 (Underscoring ours)
chanrobleslaw
D. R.A. No. 8562 was not intended
to expropriate the subject lots titled
in the name of the Province of
Bataan, but to confirm their
character as communal land of the
State and to make them available
for disposition by the National
Government.

The case of Rabuco v. Hon. Villegas,40 decided in 1974, is a virtual reprise of the 1968 case of Salas. In Rabuco, the
constitutionality of R.A. No. 312041 was challenged, which provided for the subdivision of Lot No. 21-B, Block 610 of the
Cadastre of the City of Manila, containing about 10,198 sq m into residential lots, and the sale thereof to the tenants and bona
fide occupants. The law declared Lot No. 21-B "reserved as communal property" and then ordered it converted into "disposable
and alienable lands of the State."42

The Court ruled that, like R.A. No. 4118 in Salas, R.A. No. 3120 was intended to implement the social justice policy of the
Constitution and the government's program of land for the landless. Thus, the sale of the subdivided lots to the bona fide
occupants by authority of Congress was not an exercise of eminent domain or expropriation without just compensation, which
would have been in violation of Section 1(2),43 Article III of the 1935 Constitution, but simply a manifestation of its right and
power to deal with State property.44 "It is established doctrine that the act of classifying State property calls for the exercise of
wide discretionary legislative power which will not be interfered with by the courts."45 In Rabuco, the rule in Salas was
reiterated that property of the public domain, although titled to the local government, is held by it in trust for the State. It
stated:chanRoblesvirtualLawlibrary
The Court [in Salas] reaffirmed the established general rule that "regardless of the source or classification of land in the
possession of a municipality, excepting those acquired with its own funds in its private or corporate capacity, such property is
held in trust for the State for the benefit of its inhabitants, whether it be for governmental or proprietary purposes. It holds
such lands subject to the paramount power of the legislature to dispose of the same, for after all it owes its creation to it as
an agent for the performance of a part of its public work, the municipality being but a subdivision or instrumentality thereof for
purposes of local administration. Accordingly, the legal situation is the same as if the State itself holds the property and puts it
to a different use" and stressed that "the property, as has been previously shown, was not acquired by the City of Manila with
its own funds in its private or proprietary capacity. That it has in its name a registered title is not questioned, but this title
should be deemed to be held in trust for the State as the land covered thereby was part of the territory of the City of Manila
granted by the sovereign upon its creation."46
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E. The State's policy to promote
local autonomy and to devolve the
powers of the National Government
to its political subdivisions has for
its purpose to improve the quality
of local governance.

Sections 2 and 3, Article X of the 1987 Constitution, relied upon by the petitioner, provide:chanRoblesvirtualLawlibrary
Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.

Sec. 3. The Congress shall enact a local government code which shall provide for a more responsive and accountable local
government structure instituted through a system of decentralization with effective mechanisms of recall, initiative, and
referendum, allocate among the different local government units their powers, responsibilities, and resources, and provide for
the qualifications, election, appointment and removal, term, salaries, powers and functions and duties of local officials, and all
other matters relating to the organization and operation of the local units.
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Pursuant to its mandate, the Congress passed the LGC in 1991 to spell out the above-declared policy of the State, which is now
amplified in Section 2 of R.A. No. 7160. It states, as follows:chanRoblesvirtualLawlibrary
Sec. 2. Declaration of Policy. - (a) It is hereby declared the policy of the State that the territorial and political subdivisions of
the State shall enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant
communities and make them more effective partners in the attainment of national goals. Toward this end, the State shall
provide for a more responsive and accountable local government structure instituted through a system of decentralization
whereby local government units shall be given more powers, authority, responsibilities, and resources. The process of
decentralization shall proceed from the National Government to the local government units.

xxxx
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Also invoked by the petitioners are Sections 18 and 22 of the LGC, which state as follows:chanRoblesvirtualLawlibrary
Sec. 18. Power to Generate and Apply Resources. Local government units shall have the power and authority to establish an
organization that shall be responsible for the efficient and effective implementation of their development plans, program
objectives and priorities; to create their own sources of revenues and to levy taxes, fees, and charges which shall accrue
exclusively for their use and disposition and which shall be retained by them; to have a just share in national taxes which shall
be automatically and directly released to them without need of any further action; to have an equitable share in the, proceeds
from the utilization and development of the national wealth and resources within their respective territorial jurisdictions
including sharing the same with the inhabitants by way of direct benefits; to acquire, develop, lease, encumber, alienate, or
otherwise dispose of real or personal property held by them in their proprietary capacity and to apply their resources and
assets for productive, developmental, or welfare purposes, in the exercise or furtherance of their governmental or proprietary
powers and functions and thereby ensure their development into self-reliant communities and active participants in the
attainment of national goals.

Sec. 22. Corporate Powers. - x x x

xxxx

(d) Local government units shall enjoy full autonomy in the exercise of their proprietary functions and in the management of
their economic enterprises, subject to the limitations provided in this Code and other applicable laws.
chanrobleslaw
In the instant petition, it is essentially the petitioner's assertion that the State's policy of local autonomy and decentralization
endows the Province of Bataan with patrimonial rights to use or dispose of the subject lots according to its own development
plans, program objectives and priorities.

The Court disagrees.

Local autonomy and decentralization of State powers to the local political subdivisions are the results of putting restraints upon
the exercise by the Presidents of executive powers over local governments. Section 4, Article X of the 1987 Constitution reads
in part: "The President of the Philippines shall exercise general supervision over local governments." As with the counterpart
provisions of our earlier Constitutions, the aforesaid provision has been interpreted to exclude the President's power of control
over local governments.47 The Constitutions of 1935, 1973 and 1987 have uniformly differentiated the President's power of
supervision over local governments and his power of control of the executive departments, bureaus and offices.48 In Pimentel,
Jr. v. Hon. Aguirre,49 it was held that Section 4 confines the President's power over local governments to one of general
supervision, thus:chanRoblesvirtualLawlibrary
Under our present system of government, executive power is vested in the President. The members of the Cabinet and other
executive officials are merely alter egos. As such, they are subject to the power of control of the President, at whose will and
behest they can be removed from office; or their actions and decisions changed, suspended or reversed. In contrast, the heads
of political subdivisions are elected by the people. Their sovereign powers emanate from the electorate, to whom they are
directly accountable. By constitutional fiat, they are subject to the President's supervision only, not control, so long as their
acts are exercised within the sphere of their legitimate powers. By the same token, the President may not withhold or alter any
authority or power given them by the Constitution and the law.50
chanrobleslaw
On the other hand, local autonomy and decentralization of State powers to the local political subdivisions have for their object
to make governance directly responsive at the local levels by giving them a free hand to chart their own destiny and shape
their future with minimum intervention from central authorities, thereby rendering them accountable to their local
constituencies.51 Thus, [h]and in hand with the constitutional restraint on the President's power over local governments is the
state policy of ensuring local autonomy"52 As farther explained in Pimentel, Jr.:chanRoblesvirtualLawlibrary
Under the Philippine concept of local autonomy, the national government has not completely relinquished all its powers over
local governments, including autonomous regions. Only administrative powers over local affairs are delegated to political
subdivisions. The purpose of the delegation is to make governance more directly responsive and effective at the local levels. In
turn, economic, political and social development at the smaller political units are expected to propel social and economic growth
and development. But to enable the country to develop as a whole, the programs and policies effected locally must be
integrated and coordinated towards a common national goal. Thus, policy-setting for the entire country still lies in the President
and Congress. As we stated in Magtajas v. Pryce Properties Corp., Inc., municipal governments are still agents of the national
government.53 (Citation omitted)
chanrobleslaw
It is clear, then, that local autonomy and decentralization do not deal directly with Issues concerning ownership, classification,
use or control of properties of the public domain held by local governments. The State retains power over property of the public
domain, exercised through Congress.

F. The grant of autonomy to local

governments, although a radical
policy change under the 1973 and
1987 Constitutions, does not affect
the settled rule that they possess
property of the public domain in
trust for the State.

The 1973 Constitution devoted an entire Article, Article XI, consisting of five sections, to laying down its policy for the
empowerment of the local governments. The 1987 Constitution, in turn, fully devotes all 21 sections of its Article X for local
government. It introduces significant new provisions, such as the establishment of autonomous regions (Section 18) and the
guarantee of just share of the local governments in the national taxes and equitable share in the proceeds from the utilization
of the national wealth (Sections 6 and 7). It was unlike in the 1935 Constitution, which simply provided in Section 10 of Article
VII, dealing with the Executive Department, that "[t]he President shall have control of all executive departments, bureaus or
offices, exercise general provision over all local governments as may be provided by law, and take care that the laws be
faithfully executed."

The erudite Justice Enrique Fernando (Justice Fernando), in his highly instructive separate concurring opinion in Rabuco,54 did
at first admit to doubts as to the continuing authoritativeness of Province of Zamboanga del Norte and Salas, both promulgated
before the effectivity of the 1973 Constitution, in view of the significant innovations introduced therein pertaining to the
autonomy of local governments. He stated that the goal of the 1973 Constitution was "the fullest autonomy to local
government units consistent with the basic theory of a unitary, not a federal, polity," 55 hoping thereby to attain "their fullest
development as self-reliant communities."56 According to him, under the 1973 Constitution, "[tjhings have changed
radically,"57 noting that under the 1935 Constitution, "[i]t could hardly be assumed x x x that x x x the [local governments]
could justifiably lay claim to real autonomy."58 He observed thus:chanRoblesvirtualLawlibrary
We start with the declared principle of the State guaranteeing and promoting the autonomy of local government units. We have
likewise noted the earnestness of the framers as to the attainment of such declared objective as set forth in the specific article
on the matter. It is made obligatory on the National Assembly to enact a local government code. What is more, unlike the
general run of statutes, it cannot be amended except by a majority vote of all its members. It is made to include "a more
responsive and accountable local government structure with an effective system of recall," with an expressed reference to
"qualifications, election and removal, term, salaries, powers, functions, and duties of local officials, [as well as] all other
matters relating to the organization and operation of the local units." Mention is likewise made of the "powers, responsibilities,
and resources," items that are identified with local autonomy. As if that were not enough, the last sentence of this particular
provision reads: "However, any change in the existing form of local government shall not take effect until ratified by a majority
of the votes cast in a plebiscite called for the purpose." To the extent that the last section requires that the creation, division,
merger, abolition or alteration of a boundary of a province, city, municipality, or barrio, must be in accordance with the criteria
established in the local government code and subject to the approval by a majority of the votes cast in a plebiscite in such unit
or units, the adherence to the basic principle of local self government is quite clear. Equally significant is the stress on the
competence of a province, city, municipality or barrio "to create its own sources of revenue and to levy taxes subject to such
limitations as may be provided by law." The care and circumspection with which the framers saw to the enjoyment of real local
self-government not only in terms of administration but also in terms of resources is thus manifest. Their intent is
unmistakable. Unlike the case under the 1935 Constitution, there is thus a clear manifestation of the presumption now in favor
of a local government unit. It is a well-nigh complete departure from what was. Nor should it be ignored that a highly urbanized
city "shall be independent" not only of the national government but also of a province. Would it not follow then that under the
present dispensation, the moment property is transferred to it by the national government, its control over the same should be
as extensive and as broad as possible, x x x.59 (Citations omitted)
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Up to that point, it could almost be presumed that Justice Fernando would dissent from the lucid ponencia of Justice Claudio
Teehankee (Justice Teehankee), borne of logical doubts as to whether Province of Zamboanga del Norte and Salas still retained
their unimpaired doctrinal force under the then new 1973 Constitution. But two considerations kept him reined in, so to speak.
One was Justice Teehankee's "reference to the ratio decidendi of [Salas] as to the trust character impressed on communal
property of a municipal corporation, even if already titled,"60 "regardless of the source of classification of land in the possession
of a municipality, excepting those acquired with its own funds in its private or corporate capacity." 61 Justice Fernando
acknowledged that the local government "holds such [communal property] subject to the paramount power of the legislature to
dispose of the same, for after all it owes its creation to it as an agent for the performance of a part of its public work, the
municipality being but a subdivision or instrumentality thereof for purposes of local administration." 62

Rabuco stressed that the properties in controversy were not acquired by the City of Manila with its own private funds. Thus,
according to Justice Fernando, "That [the City of Manila] has in its name a registered title is not questioned, but this title should
be deemed to be held in trust for the State as the land covered thereby was part of the territory of the City of Manila granted
by the sovereign upon its creation."63 This doctrine, according to Justice Fernando, has its basis in the Regalian Doctrine and is
unaffected by the grant of extensive local autonomy under the 1973 Constitution. "It is my view that under the [1973]
Constitution, as was the case under the 1935 charter, the holding of a municipal corporation as a unit of state does not impair
the plenary power of the national government exercising dominical rights to dispose of it in a manner it sees fit, subject to
applicable constitutional limitations as to the citizenship of the grantee."64

The other consideration noted by Justice Fernando in the ponencia of Justice Teehankee in Rabuco he found further compelling
was "the even more fundamental principle of social justice, which was given further stress and a wider scope in the present
Constitution."65 He concluded that R.A. No. 3120, like R.A. No. 4118, was intended to implement the social justice policy of the
Constitution and the government program of land for the landless, and was not "intended to expropriate the property involved
but merely to confirm its character as communal land of the State and to make it available for disposition by the National
Government."66

G. The Province of Bataan has the

duty to provide an adequate
security for its loans with the LBP,
without defeating BPSC's right to
hold title to the contested lots.

The RTC ordered the Province of Bataan to deliver the owner's duplicate copy of OCT No. N-182 to the Register of Deeds of
Bataan, free from any lien or encumbrance, to execute the corresponding deed of conveyance in favor of BPSC, and to cause
the transfer and registration of the title to and in the name of the said college. The Province of Bataan erroneously believed
that it could mortgage the subject lots, notwithstanding that it held the same in trust for the State and despite the fact that the
said lots were actually being occupied by two government schools. As the RTC urged, then, the Province of Bataan must
address this issue of security for its loans with LBP. It cannot complain that its compliance with the order of the RTC might
violate the non-impairment clause of the Constitution, since its duty to provide a replacement security for its loans with LBP is
clear.

H. BPSC is entitled to a writ of

mandamus.

Section 3, Rule 65 of the 1997 Rules of Civil Procedure provides that a writ of mandamus shall issue where a tribunal,
corporation, board, officer or person unlawfully neglects the performance of an act which the law specifically enjoins as a duty,
to command the respondent to do the act required to be done to protect the rights of the petitioner. Herein petitioner has
argued that the mandamus applicants are not entitled thereto because they are not real parties in interest. It is a rule re-
echoed in a long line of cases that every action must be prosecuted or defended in the name of the real party in interest,
meaning "the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the
suit."67

At issue in this petition is Section 24 of R.A. No. 8562, which directs that "[a]ll parcels of land belonging to the government
occupied by the [MLLSAT] and the [BCC] are hereby declared to be the property of the [BPSC] and shall be titled under that
name." There is no dispute that the Congress has expressly intended to entrust to BPSC the titles to the subject lots. Being the
sole beneficiary of Section 24 of R.A. No. 8562, BPSC is the real party in interest, and is entitled to mandamus to enforce its
right thereunder.68

WHEREFORE, in view of the foregoing, the petition for review on certiorari is DENIED. The Decision of the Court of Appeals
dated February 7, 2006 in CA-G.R. SP No. 85902 is AFFIRMED.

SO ORDERED.ChanRoblesVirtualawlibrary

Velasco, Jr., (Chairperson), Peralta, Perez, and Jardeleza, JJ., concur.

 G.R. No. 193618, November 28, 2016

HEIRS OF LEOPOLDO DELFIN AND SOLEDAD DELFIN, NAMELY EMELITA D. FABRIGAR AND LEONILO C.
DELFIN, Petitioners, v. NATIONAL HOUSING AUTHORITY, Respondent.

DECISION

LEONEN, J.:

Under Commonwealth Act No. 141, a claimant may acquire alienable and disposable public land upon evidence of exclusive and
notorious possession of the land since June 12, 1945. The period to acquire public land by acquisitive prescription under
Presidential Decree No. 1529 begins to run only after the promulgation of a law or a proclamation by the President stating that
the land is no longer intended for public use or the development of national wealth.

This resolves a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure praying that the assailed
February 26, 2010 Decision2 and July 2, 2010 Resolution3 of the Court of Appeals in CA-G.R. CV No. 80017 be reversed, and
that the May 20, 2002 Decision4 of the Regional Trial Court in Civil Case No. II-1801 be reinstated.

The Regional Trial Court's May 20, 2002 Decision awarded compensation to Leopoldo and Soledad Delfin (Delfin Spouses) for
an Iligan City property subsequently occupied by respondent National Housing Authority.

The assailed Court of Appeals Decision reversed the Regional Trial Court's May 20, 2002 Decision and dismissed the Delfin
Spouses' complaint seeking compensation. The assailed Court of Appeals Resolution denied their Motion for Reconsideration.

In a Complaint for "Payment of Parcel(s) of Land and Improvements and Damages"5 the Delfin Spouses claimed that they were
the owners of a 28,800 square meter parcel of land in Townsite, Suarez, Iligan City (the "Iligan Property"). 6 They allegedly
bought the property in 1951 from Felix Natingo and Carlos Carbonay, who, allegedly, had been in actual possession of the
property since time immemorial.7 The Delfin Spouses had been declaring the Iligan Property in their names for tax purposes
since 1952,8 and had been planting it with mangoes, coconuts, corn, seasonal crops, and vegetables.9

They farther alleged that, sometime in 1982, respondent National Housing Authority forcibly took possession of a 10,798
square meter portion of the property.10 Despite their repeated demands for compensation, the National Housing Authority failed
to pay the value of the property.11 The Delfin Spouses thus, filed their Complaint.12

They asserted that the property's reasonable market value was not less than P40 per square meter13and that its improvements
consisting of fruit-bearing trees should be valued at P13,360.00 at the time of taking.14 They similarly claimed that because the
National Housing Authority occupied the property, they were deprived of an average net yearly income of P10,000.00. 15

In its Answer,16 the National Housing Authority alleged that the Delfin Spouses' property was part of a military reservation
area.17 It cited Proclamation No. 2151 (actually, Proclamation No. 2143, the National Housing Authority made an erroneous
citation) as having supposedly reserved the area in which property is situated for Iligan City's slum improvement and
resettlement program, and the relocation of families who were dislocated by the National Steel Corporation's five-year
expansion program.18

According to the National Housing Authority, Proclamation No. 2151 also mandated it to determine the improvements'
valuation.19 Based on the study of the committee it created, the value of the property was supposedly only P4.00 per square
meter, regardless of the nature of the improvements on it.20

It emphasized that among all claimants, only the Delfin Spouses and two others remained unpaid because of their
disagreement on the property's valuation.21

The National Housing Authority failed to appear during the pre-trial conference.22 Upon the Delfin Spouses' motion, the
Regional Trial Court declared the National Housing Authority in default.23 The case was set for the ex-parte reception of the
Delfin Spouses' evidence.24

On May 20, 2002, the Regional Trial Court rendered a Decision in favor of the Delfin Spouses.25cralawred The dispositive
portion of the Decision read:
chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, and by virtue of the existence of preponderance of evidence, the Court hereby enters a
judgment in favor of spouses-plaintiffs Leopoldo Delfin and Soledad Delfin against defendant National Housing Authority, its
agents or representative/s ordering to pay the former the following, to wit:

1) P400,000.00 representing the reasonable market value of a portion of the land taken by the defendant containing an
area of 10,000 square meters at the rate of P40.00 per square meters plus legal interest per annum from the filing
in Court of the complaint until fully paid;

2) P13,360.00 representing the value of the permanent improvements that were damaged and destroyed plus legal
interest per annum from the time of the filing of this case until fully paid;

3) P10,000.00, representing attorney's fees;

4) The costs of this suit.26

The Regional Trial Court stated that it had no reason to doubt the evidence presented by the Delfin Spouses:
chanRoblesvirtualLawlibrary
On this regards (sic), the Court finds no reason to doubt the veracity of the plaintiff['s evidence], there being none to
controvert the same. If said. evidence did not ring true, the defendant should have and could have easily destroyed their
probatory value. Such indifference can only mean that defendant had not (sic) equitable rights to protect or assert over the
disputed property together with all the improvements existing thereon. This, the defendant did not do so and the Court finds no
cogent reasons to disbelieve or reject the plaintiffs categorical declarations on the witness stand under a solemn oath, for the
same are entitled to full faith and credence. Indeed, if the defendant National Housing Authority have been blinded with the
consequence of their neglect and apathy, then defendant have no right to pass on to the spouses-plaintiffs of their negligence
and expect the Court to come to their rescue. For it is now much too late in the day to assail the decision which has become
final and executory.27ChanRoblesVirtualawlibrary
The National Housing Authority filed a Motion for Reconsideration, but this was denied in the Regional trial Court's September
10, 2002 Resolution.28

On the National Housing Authority's appeal, the Court of Appeals rendered the assailed February 26, 2010 Decision reversing
the Regional Trial Court:29
WHEREFORE, the appeal is GRANTED. The assailed Decision is REVERSED and SET ASIDE. Consequently, appellees' complaint
for compensation is DISMISSED for lack of merit. The property taken by appellant NHA and for which compensation is sought
by appellees is hereby DECLARED land of the public domain.30ChanRoblesVirtualawlibrary
The Court of Appeals ruled that the characterization of the property is no longer an issue because the National Housing
Authority already conceded that the property is disposable public land by citing Proclamation No. 2151, which characterized the
property as "a certain disposable parcel of public land."31 However, the Delfin Spouses supposedly failed to establish their
possession of the property since June 12, 1945, as required in Section 48(b) of the Public Land Act. 32

During the pendency of their petition before the Court of Appeals. Both Leopoldo and Soledad Delfin both passed away. Lepoldo
passed away on February 3, 2005 and Soledad on June 22, 2004. Their surviving heirs, Emelita D. Fabrigar and Leonilo C.
Delfin filed a Motion for Substitution before the Court of Appeals, which was not acted upon.33

In its assailed July 2, 2010 Resolution,34 the Court of Appeals denied the Motion for Reconsideration filed by the heirs of the
Delfin Spouses.

Hence, this petition which was filed by the surviving heirs of the Delfin Spouses, Emelita D. Fabrigar and Leonilo C. Delfin
(petitioners).35

For resolution is the issue of whether petitioners are entitled to just compensation for the Iligan City property occupied by
respondent National Housing Authority.chanroblesvirtuallawlibrary
I

The right to be justly compensated whenever private property is taken for public use cannot be disputed. Article III, Section 9
of the 1987 Constitution states that
Section 9. Private property shall not be taken for public use without just compensation.ChanRoblesVirtualawlibrary
The case now hinges on whether the petitioners and their predecessors-in-interests have been in possession of the Iligan
Property for such duration and under such circumstances as will enable them to claim ownership.

Petitioners argue that they and their predecessors-in-interests' open, continuous, exclusive, and notorious possession of the
Iligan Property for more than 30 years converted the property from public to private.36 They then posit that they acquired
ownership of the property through acquisitive prescription under Section 14(2) of Presidential Decree No. 1529. 37

Petitioners also assert that the Court of Appeals disregarded certifications and letters from government agencies, which support
their claims, particularly, their and their predecessors-in-interest's possession since June 12, 1945.38

Respondent counters, citing the Court of Appeals Decision, that petitioners cannot rely on'Section 14(2) of Presidential Decree
No. 1529 because the property was not yet declared private land when they filed their Complaint.39chanroblesvirtuallawlibrary
II

Petitioners are erroneously claiming title based on acquisitive prescription under Section 14(2) of Presidential Decree No. 1529.

Section 14 reads in full:

chanRoblesvirtualLawlibrary
Section 14. Who may apply. The following persons may file in the proper Court of First Instance an application for registration
of title to land, whether personally or through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and
notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of
ownership since June 12, 1945, or earlier.

(2) Those who have acquired ownership of private lands by prescription under the provision of existing laws.

(3) Those who have acquired ownership of private lands or abandoned river beds by right of accession or accretion under
the existing laws.

(4) Those who have acquired ownership of land in any other manner provided for by law.

Where the land is owned in common, all the co-owners shall file the application jointly.

Where the land has been sold under pacto de retro, the vendor a retro may file an application for the original registration of the
land, provided, however, that should the period for redemption expire during the pendency of the registration proceedings and
ownership to the property consolidated in the vendee a retro, the latter shall be substituted for the applicant and may continue
the proceedings.

A trustee on behalf of his principal may apply for original registration of any land held in trust by him, unless prohibited by the
instrument creating the trust. [Emphasis supplied]ChanRoblesVirtualawlibrary
For acquisitive prescription to set in pursuant to Section 14(2) of Presidential Decree No. 1529, two (2) requirements must be
satisifled: first, the property is established to be private in character; and second the applicable prescriptive period under
existing laws had passed.

Property - such as land - is either of public dominion or private ownership.40

"Land is considered of public dominion if it either: (a) is intended for public use; or (b) belongs to the State, without being for
public use, and is intended for some public service or for the development of the national wealth." 41 Land that belongs to the
state but which is not or is no longer intended for public use, for some public service or for the development of the national
wealth, is patrimonial property;42 it is property owned by the State in its private capacity. Provinces, cities, and municipalities
may also hold patrimonial lands.43

Private property "consists of all property belonging to private persons, either individually or collectively,"44 as well as "the
patrimonial property of the State, provinces, cities, and municipalities."45

Accordingly, only publicly owned lands which are patrimonial in character are susceptible to prescription under Section 14(2) of
Presidential Decree No. 1529. Consistent with this, Article 1113 of Civil Code demarcates properties of the state, which are not
patrimonial in character, as being not susceptible to prescription:
chanRoblesvirtualLawlibrary
Art. 1113. All things which are within the commerce of men are susceptible of prescription, unless provided. Property of the
State or any of its subdivisions not patrimonial in character shall not be the object of prescription.ChanRoblesVirtualawlibrary
Contrary to petitioners' theory then, for prescription to be viable, the publicly-owned land must be patrimonial or private in
character at the onset. Possession for thirty (30) years does not convert it into patrimonial property.

For land of the public domain to be converted into patrimonial property, there must be an express declaration - "in the form of
a law duly enacted by Congress or a Presidential Proclamation in cases where the President is duly authorized by law" 46 - that
"the public dominion property is no longer intended for public service or the development of the national wealth or that the
property has been converted into patrimonial."47

This Court's 2009 Decision in Heirs of Malabanan v. Republic48 explains:

chanRoblesvirtualLawlibrary
Nonetheless, Article 422 of the Civil Code states that "[p]roperty of public dominion, when no longer intended for public use or
for public service, shall form part of the patrimonial property of the State". It is this provision that controls how public dominion
property may be converted into patrimonial properly susceptible to acquisition by prescription. After all, Article 420 (2) makes
clear that those property "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" are public dominion property. For as long as the property belongs to the State,
although already classified as alienable or disposable, it remains property of the public dominion if when * it is "intended for
some public service or for the development of the national wealth".

Accordingly, there must be an express declaration by the State that the public dominion property is no longer intended for
public service or the development of the national wealth or that the property has been converted into patrimonial. Without such
express declaration, the property, even if classified as alienable or disposable, remains property of the public dominion,
pursuant to Article 420 (2), and thus incapable of acquisition by prescription. It is only when such alienable and disposable
lands are expressly declared by the State to be no longer intended for public service or for the development of the national
wealth that the period of acquisitive prescription can begin to run. Such declaration shall be in the form of a law duly enacted
by Congress or a Presidential Proclamation in cases where the President is duly authorized by law. 49ChanRoblesVirtualawlibrary
This was reiterated in this Court's 2013 Resolution in Heirs of Malabanan v. Republic:50
[W]hen public land is no longer intended for public service or for the development of the national wealth, thereby effectively
removing the land from the ambit of public dominion, a declaration of such conversion must be made in the form of a law duly
enacted by Congress or by a Presidential proclamation in cases where the President is duly authorized by law to that
effect.51ChanRoblesVirtualawlibrary
Attached to the present Petition was a copy of a May 18, 1988 supplemental letter to the Director of the Land Management
Bureau.52 This referred to an executive order, which stated that petitioners' property was no longer needed for any public or
quasi-public purposes:
chanRoblesvirtualLawlibrary
That it is very clear in the 4th Indorsement of the Executive Secretary dated April 24, 1954 the portion thereof that will not be
needed for any public or quasi-public purposes, be disposed in favor of the actual occupants under the administration of the
Bureau of Lands (copy of the Executive Order is herewith attached for ready reference)53ChanRoblesVirtualawlibrary
However, a mere indorsement of the executive secretary is not the law or presidential proclamation required for converting
land of the public domain into patrimonial property and rendering it susceptible to prescription. There then was no viable
declaration rendering the Iligan property to have been patrimonial property at the onset. Accordingly, regardless of the length
of petitioners' possession, no title could vest on them by way of prescription.chanroblesvirtuallawlibrary
III

While petitioners may not claim title by prescription, they may, nevertheless, claim title pursuant to Section 48 (b) of
Commonwealth Act No. 141 (the Public Land Act).

Section 48 enabled the confirmation of claims and issuance of titles in favor of citizens occupying or claiming to own lands of
the public domain or an interest therein. Section 48 (b) specifically pertained to those who "have been in open, continuous,
exclusive, and notorious possession and, occupation of agricultural lands of the public domain, under a bona fide claim of
acquisition or ownership, since June 12, 1945":
chanRoblesvirtualLawlibrary
Sec. 48. The following-described citizens of the Philippines, occupying lands of the public domain or claiming to own any such
lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of
the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefor under
the Land Registration Act, to wit:

(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive, and
notorious possession and, occupation of agricultural lands of the public domain, under a bona fide claim of acquisition
or ownership, since June 12, 1945, immediately preceding the filing of the application for confirmation of title, except
when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions
essential to a government grant and shall be entitled to a certificate of title under the provisions of this chapter. (As
amended by PD 1073.)

Section 48(b) of the Public Land Act therefore requires that two (2) requisites be satisfied before claims of title to public domain
lands may be confirmed: first, that the land subject of the claim is agricultural land; and second, open, continuous, notorious,
and exclusive possession of the land since June 12, 1945.

The need for the land subject of the claim to have been classified as agricultural is in conformity with the constitutional precept
that "[a]lienable lands of the public domain shall be limited to agricultural lands."54 As explained in this Court's 2013 Resolution
in Heirs of Malabanan v. Republic:
chanRoblesvirtualLawlibrary
Whether or not land of the public domain is alienable and disposable primarily rests on the classification of public lands made
under the Constitution. Under the 1935 Constitution, lands of the public domain were classified into three, namely, agricultural,
timber and mineral. Section 10, Article XTV of the 1973 Constitution classified lands of the public domain into seven,
specifically, agricultural, industrial or commercial, residential, resettlement, mineral, timber or forest, and grazing land, with
the reservation that the law might provide other classifications. The 1987 Constitution adopted the classification under the
1935 Constitution into agricultural, forest or timber, and mineral, but added national parks. Agricultural lands may be further
classified by law according to the uses to which they may be devoted. The identification of lands according to their legal
classification is done exclusively by and through a positive act of the Executive Department.

Based on the foregoing, the Constitution places a limit on the type of public land that may be alienated. Under Section 2,
Article XII of the 1987 Constitution, only agricultural lands of the public domain may be alienated; all other natural resources
may not be.

Alienable and disposable lands of the State fall into two categories, to wit: (a) patrimonial lands of the State, or those classified
as lands of private ownership under Article 425 of the Civil Code, without limitation; and (b) lands of the public domain, or the
public lands as provided by the Constitution, but with the limitation that the lands must only be agricultural. Consequently,
lands classified as forest or timber, mineral, or national parks are not susceptible of alienation or disposition unless they are
reclassified as agricultural. A positive act of the Government is necessary to enable such reclassification, and the exclusive
prerogative to classify public lands under existing laws is vested in the Executive Department, not in the
courts.55ChanRoblesVirtualawlibrary
As the Court of Appeals emphasized, respondent has conceded that the Iligan property was alienable and disposable land:
chanRoblesvirtualLawlibrary
As to the first requirement: There was no need for appellees to establish that the property involved was alienable and
disposable public land. This characterization of the property is conceded by [respondent] who cites Proclamation No. 2151 as
declaring that the disputed property was a certain disposable parcel of public land.56ChanRoblesVirtualawlibrary
That the Iligan property was alienable and disposable, agricultural land, has been admitted. What is claimed instead is that
petitioners' possession is debunked by how the Iligan Property was supposedly part of a military reservation area57 which was
subsequently reserved for Iligan City's slum improvement and resettlement program, and the relocation of families who were
dislocated by the National Steel Corporation's five-year expansion program.58

Indeed, by virtue of Proclamation No. 2143 (erroneously referred to by respondent as Proclamation No. 2151) certain parcels of
land in Barrio Suarez, Iligan City were reserved for slum-improvement and resettlement program purposes.59 The proclamation
characterized the covered area as "disposable parcel of public land":
chanRoblesvirtualLawlibrary
WHEREAS, a certain disposable parcel of public land situated at Barrio Suarez, Iligan City consisting of one million one hundred
seventy-four thousand eight hundred fifty-three (1,174,853) square meters, more or less, has been chosen by National Steel
Corporation and the City Government of Iligan with the conformity of the National Housing/Authority, as the most suitable site
for the relocation of the families to be affected/dislocated as a result of National Steel Corporation's program and for the
establishment of a slum improvement and resettlement project in the City of Iligan;60ChanRoblesVirtualawlibrary
However, even if the Iligan Property was subsumed by Proclamation No. 2143, the same proclamation recognized private
rights, which may have already attached, and the rights of qualified free patent applicants:
chanRoblesvirtualLawlibrary
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by law, do
hereby reserve for relocation of the families to be affected/dislocated by the 5-year expansion program of the National Steel
Corporation and for the slum improvement and resettlement project of the City of Iligan under the administration and
disposition of the National Housing Authority, subject to private rights, if any there be, Lot 5258 (portion) of the Iligan
Cadastre, which parcel of land is of the public domain, situated in Barrio Suarez, City of Iligan and more particularly described
as follows:

....

This Proclamation is subject to the condition that the qualified free patent applicants occupying portions of the aforedescribed
parcel of land, if any, may be compensated for the value of their respective portions and existing improvements thereon, as
may be determined by the National Housing Authority.61ChanRoblesVirtualawlibrary
Whatever rights petitioners (and their predecessors-in-interest) may have had over the Iligan property was, thus, not
obliterated by Proclamation No. 2143. On the contrary, the Proclamation itself facilitated compensation.

More importantly, there is documentary evidence to the effect that the Iligan Property was not even within the area claimed by
respondent. In a letter62 to the Director of Lands, dated December 22, 1987, Deputy Public Land Inspector Pio Lucero, Jr. noted
that:
chanRoblesvirtualLawlibrary
That this land known as Lot No. 5258, Cad. 292, Iligan Cadastre which portion was claimed also by the Human Settlement
and/or National Housing Authority; but the area applied for by Leopoldo Delfin is outside the claim of the said agency as per
certification issued dated June 10, 1988; copy of which is herewith attached for ready reference; 63ChanRoblesVirtualawlibrary
The same letter likewise indicated that the Iligan Property was already occupied by June 1945 and that it had even been
released for agricultural purposes in favor of its occupants.64 Accordingly, the Deputy Public Land Inspector recommended the
issuance of a patent in favor of petitioner Leopoldo Delfin:65
Upon investigation conducted by the undersigned in the premises of the land, it was found and ascertained that the land
applied for by Leopoldo Delfrn was first entered, occupied, possessed and cultivated by him since the year June, 1945 up to the
present; he have already well improved the land and introduced some considerable improvements such as coconut trees and
different kinds of fruit trees which are presently all fruit bearing trees; declared the same for taxation purposes and taxes have
been paid every year; and that there is no other person or persons who bothered him in his peaceful occupation and cultivation
thereof;chanrobleslaw

Records of this Office show that said land was surveyed and claimed by the Military Reservation, but the portion of which has
been released in favor of the actual occupants and the area of Leopoldo Delfin is one of the portions released for agricultural
purposes;chanrobleslaw

....

That the applicant caused the survey of the land under Sgs-12-000099, approved by the Regional Land Director, Region XII,
Bureau of Lands, Cotabato City on April 3, 1979 (see approved plan attached hereof);chanrobleslaw

In view hereof, it is therefore respectfully recommended that the entry of the application be now confirmed and that patent be
yes issued in favor of Leopoldo Delfin.66ChanRoblesVirtualawlibrary
A May 18, 1988 supplemental letter to the Director of the Land Management Bureau further stated:
chanRoblesvirtualLawlibrary
That the land applied for by Leopoldo Delfin is a portion of Lot No. 5258, Cad. 292, Iligan Cadastre which was entered,
occupied and possessed by the said applicant since the year June 1945 up to the present; well improved the same and
introduced some considerable improvements such as different kinds of fruit trees, coconut trees and other permanent
improvements thereon;chanrobleslaw
....

That is very clear in the 4th Indorsement of the Executive Secretary dated April 24, 1954 the portion thereof that will not be
needed for any public or quasi-public purposes, be disposed in favor of the actual occupants under the administration of the
Bureau of Lands[.]67ChanRoblesVirtualawlibrary
Clearly then, petitioners acquired title over the Iligan Property pursuant to Section 48(b) of the Public Land Act.

First, there is no issue that the Iligan Property had already been declared to be alienable and disposable land. Respondent has
admitted this and Deputy Public Land Inspector Pio Lucero, Jr.'s letters to the Director of Land attest to this.

Second, although the Delfin Spouses' testimonial evidence and tax declarations showed that their possession went only as far
back as 1952, Deputy Public Land Inspector Pio Lucero, Jr.'s letters to the Director of Land nevertheless attest to a previous
finding that the property had already been occupied as early as June 1945.

Having shown that the requisites of Section 48(b) of the Public Land Act have been satisfied and having established their rights
to the Iligan Property, it follows that petitioners must be compensated for its taking.

WHEREFORE, the Petition is GRANTED. The assailed Court of Appeals Decision dated February 26, 2010 and Resolution dated
July 2, 2010 in CA-G.R. CV No. 80017 are REVERSED and SET ASIDE. The Regional Trial Court's Decision dated May 20,
2002 in Civil Case No. II-1801 is REINSTATED.

SO ORDERED.