LAND TITLES Forms&Contents (7)
G.R. No. 133250 July 9, 2002 On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for brevity) with
FRANCISCO I. CHAVEZ, petitioner,
vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, respondents.
CARPIO, J.:
This is an original Petition for Mandamus with prayer for a writ of preliminary injunction
and a temporary restraining order. The petition seeks to compel the Public Estates
Authority ("PEA" for brevity) to disclose all facts on PEA's then on-going renegotiations
with Amari Coastal Bay and Development Corporation ("AMARI" for brevity) to reclaim
portions of Manila Bay. The petition further seeks to enjoin PEA from signing a new
agreement with AMARI involving such reclamation.
The Facts
On November 20, 1973, the government, through the Commissioner of Public Highways,
signed a contract with the Construction and Development Corporation of the Philippines
("CDCP" for brevity) to reclaim certain foreshore and offshore areas of Manila Bay. The
contract also included the construction of Phases I and II of the Manila-Cavite Coastal
Road. CDCP obligated itself to carry out all the works in consideration of fifty percent of
the total reclaimed land.
On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree No.
1084 creating PEA. PD No. 1084 tasked PEA "to reclaim land, including foreshore and
submerged areas," and "to develop, improve, acquire, x x x lease and sell any and all
kinds of lands."1 On the same date, then President Marcos issued Presidential Decree
No. 1085 transferring to PEA the "lands reclaimed in the foreshore and offshore of the
Manila Bay"2 under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP).
On December 29, 1981, then President Marcos issued a memorandum directing PEA to
amend its contract with CDCP, so that "[A]ll future works in MCCRRP x x x shall be
funded and owned by PEA." Accordingly, PEA and CDCP executed a Memorandum of
Agreement dated December 29, 1981, which stated:
"(i) CDCP shall undertake all reclamation, construction, and such other works
in the MCCRRP as may be agreed upon by the parties, to be paid according
to progress of works on a unit price/lump sum basis for items of work to be
agreed upon, subject to price escalation, retention and other terms and
conditions provided for in Presidential Decree No. 1594. All the financing
required for such works shall be provided by PEA.
xxx
(iii) x x x CDCP shall give up all its development rights and hereby agrees to
cede and transfer in favor of PEA, all of the rights, title, interest and
participation of CDCP in and to all the areas of land reclaimed by CDCP in the
MCCRRP as of December 30, 1981 which have not yet been sold, transferred
or otherwise disposed of by CDCP as of said date, which areas consist of
approximately Ninety-Nine Thousand Four Hundred Seventy Three (99,473)
square meters in the Financial Center Area covered by land pledge No. 5 and
approximately Three Million Three Hundred Eighty Two Thousand Eight
Hundred Eighty Eight (3,382,888) square meters of reclaimed areas at
varying elevations above Mean Low Water Level located outside the
Financial Center Area and the First Neighborhood Unit."3
On January 19, 1988, then President Corazon C. Aquino issued Special Patent No. 3517,
granting and transferring to PEA "the parcels of land so reclaimed under the Manila-
Cavite Coastal Road and Reclamation Project (MCCRRP) containing a total area of one
million nine hundred fifteen thousand eight hundred ninety four (1,915,894) square
meters." Subsequently, on April 9, 1988, the Register of Deeds of the Municipality of
Paraaque issued Transfer Certificates of Title Nos. 7309, 7311, and 7312, in the name of
PEA, covering the three reclaimed islands known as the "Freedom Islands" located at the
southern portion of the Manila-Cavite Coastal Road, Paraaque City. The Freedom
Islands have a total land area of One Million Five Hundred Seventy Eight Thousand Four
Hundred and Forty One (1,578,441) square meters or 157.841 hectares.
Due to the approval of the Amended JVA by the Office of the President, petitioner now
AMARI, a private corporation, to develop the Freedom Islands. The JVA also required the
reclamation of an additional 250 hectares of submerged areas surrounding these islands
to complete the configuration in the Master Development Plan of the Southern
Reclamation Project-MCCRRP. PEA and AMARI entered into the JVA through negotiation
without public bidding.4 On April 28, 1995, the Board of Directors of PEA, in its
Resolution No. 1245, confirmed the JVA. 5 On June 8, 1995, then President Fidel V.
Ramos, through then Executive Secretary Ruben Torres, approved the JVA. 6
On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege
speech in the Senate and denounced the JVA as the "grandmother of all scams." As a
result, the Senate Committee on Government Corporations and Public Enterprises, and
the Committee on Accountability of Public Officers and Investigations, conducted a joint
investigation. The Senate Committees reported the results of their investigation in
Senate Committee Report No. 560 dated September 16, 1997. 7 Among the conclusions
of their report are: (1) the reclaimed lands PEA seeks to transfer to AMARI under the JVA
are lands of the public domain which the government has not classified as alienable
lands and therefore PEA cannot alienate these lands; (2) the certificates of title covering
the Freedom Islands are thus void, and (3) the JVA itself is illegal.
On December 5, 1997, then President Fidel V. Ramos issued Presidential Administrative
Order No. 365 creating a Legal Task Force to conduct a study on the legality of the JVA in
view of Senate Committee Report No. 560. The members of the Legal Task Force were
the Secretary of Justice,8 the Chief Presidential Legal Counsel, 9 and the Government
Corporate Counsel.10 The Legal Task Force upheld the legality of the JVA, contrary to the
conclusions reached by the Senate Committees. 11
On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that
there were on-going renegotiations between PEA and AMARI under an order issued by
then President Fidel V. Ramos. According to these reports, PEA Director Nestor Kalaw,
PEA Chairman Arsenio Yulo and retired Navy Officer Sergio Cruz composed the
negotiating panel of PEA.
On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition
with Application for the Issuance of a Temporary Restraining Order and Preliminary
Injunction docketed as G.R. No. 132994 seeking to nullify the JVA. The Court dismissed
the petition "for unwarranted disregard of judicial hierarchy, without prejudice to the
refiling of the case before the proper court." 12
On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a taxpayer, filed
the instant Petition for Mandamus with Prayer for the Issuance of a Writ of Preliminary
Injunction and Temporary Restraining Order. Petitioner contends the government stands
to lose billions of pesos in the sale by PEA of the reclaimed lands to AMARI. Petitioner
prays that PEA publicly disclose the terms of any renegotiation of the JVA, invoking
Section 28, Article II, and Section 7, Article III, of the 1987 Constitution on the right of
the people to information on matters of public concern. Petitioner assails the sale to
AMARI of lands of the public domain as a blatant violation of Section 3, Article XII of the
1987 Constitution prohibiting the sale of alienable lands of the public domain to private
corporations. Finally, petitioner asserts that he seeks to enjoin the loss of billions of
pesos in properties of the State that are of public dominion.
After several motions for extension of time, 13 PEA and AMARI filed their Comments on
October 19, 1998 and June 25, 1998, respectively. Meanwhile, on December 28, 1998,
petitioner filed an Omnibus Motion: (a) to require PEA to submit the terms of the
renegotiated PEA-AMARI contract; (b) for issuance of a temporary restraining order; and
(c) to set the case for hearing on oral argument. Petitioner filed a Reiterative Motion for
Issuance of a TRO dated May 26, 1999, which the Court denied in a Resolution dated
June 22, 1999.
In a Resolution dated March 23, 1999, the Court gave due course to the petition and
required the parties to file their respective memoranda.
On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement
("Amended JVA," for brevity). On May 28, 1999, the Office of the President under the
administration of then President Joseph E. Estrada approved the Amended JVA.
prays that on "constitutional and statutory grounds the renegotiated contract be
declared null and void."14
The Issues
The issues raised by petitioner, PEA15 and AMARI16 are as follows:
I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE PETITION ARE
MOOT AND ACADEMIC BECAUSE OF SUBSEQUENT EVENTS;
II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO OBSERVE
THE PRINCIPLE GOVERNING THE HIERARCHY OF COURTS;
III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION OF
ADMINISTRATIVE REMEDIES;
IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT;
V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES
OFFICIAL INFORMATION ON ON-GOING NEGOTIATIONS BEFORE A FINAL
AGREEMENT;
VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE
AGREEMENT FOR THE TRANSFER TO AMARI OF CERTAIN LANDS, RECLAIMED
AND STILL TO BE RECLAIMED, VIOLATE THE 1987 CONSTITUTION; AND
VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE ISSUE
OF WHETHER THE AMENDED JOINT VENTURE AGREEMENT IS GROSSLY
DISADVANTAGEOUS TO THE GOVERNMENT.
The Court's Ruling
First issue: whether the principal reliefs prayed for in the petition are moot and
academic because of subsequent events.
The petition prays that PEA publicly disclose the "terms and conditions of the on-going
negotiations for a new agreement." The petition also prays that the Court enjoin PEA
from "privately entering into, perfecting and/or executing any new agreement with
AMARI."
PEA and AMARI claim the petition is now moot and academic because AMARI furnished
petitioner on June 21, 1999 a copy of the signed Amended JVA containing the terms and
conditions agreed upon in the renegotiations. Thus, PEA has satisfied petitioner's prayer
for a public disclosure of the renegotiations. Likewise, petitioner's prayer to enjoin the
signing of the Amended JVA is now moot because PEA and AMARI have already signed
the Amended JVA on March 30, 1999. Moreover, the Office of the President has
approved the Amended JVA on May 28, 1999.
Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply
fast-tracking the signing and approval of the Amended JVA before the Court could act on
the issue. Presidential approval does not resolve the constitutional issue or remove it
from the ambit of judicial review.
We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the
President cannot operate to moot the petition and divest the Court of its jurisdiction.
PEA and AMARI have still to implement the Amended JVA. The prayer to enjoin the
signing of the Amended JVA on constitutional grounds necessarily includes preventing its
implementation if in the meantime PEA and AMARI have signed one in violation of the
Constitution. Petitioner's principal basis in assailing the renegotiation of the JVA is its
violation of Section 3, Article XII of the Constitution, which prohibits the government
from alienating lands of the public domain to private corporations. If the Amended JVA
indeed violates the Constitution, it is the duty of the Court to enjoin its implementation,
and if already implemented, to annul the effects of such unconstitutional contract.
The Amended JVA is not an ordinary commercial contract but one which seeks
to transfer title and ownership to 367.5 hectares of reclaimed lands and submerged
areas of Manila Bay to a single private corporation. It now becomes more compelling
for the Court to resolve the issue to insure the government itself does not violate a
provision of the Constitution intended to safeguard the national patrimony. Supervening
events, whether intended or accidental, cannot prevent the Court from rendering a
decision if there is a grave violation of the Constitution. In the instant case, if the
Amended JVA runs counter to the Constitution, the Court can still prevent the transfer of

title and ownership of alienable lands of the public domain in the name of AMARI. Even
in cases where supervening events had made the cases moot, the Court did not hesitate
to resolve the legal or constitutional issues raised to formulate controlling principles to
guide the bench, bar, and the public.17
Also, the instant petition is a case of first impression. All previous decisions of the Court
involving Section 3, Article XII of the 1987 Constitution, or its counterpart provision in
the 1973 Constitution,18 covered agricultural lands sold to private corporations which
acquired the lands from private parties. The transferors of the private corporations
claimed or could claim the right to judicial confirmation of their imperfect
titles19 under Title II of Commonwealth Act. 141 ("CA No. 141" for brevity). In the instant
case, AMARI seeks to acquire from PEA, a public corporation, reclaimed lands and
submerged areas for non-agricultural purposes by purchase under PD No. 1084 (charter
of PEA) and Title III of CA No. 141. Certain undertakings by AMARI under the Amended
JVA constitute the consideration for the purchase. Neither AMARI nor PEA can claim
judicial confirmation of their titles because the lands covered by the Amended JVA are
newly reclaimed or still to be reclaimed. Judicial confirmation of imperfect title requires
open, continuous, exclusive and notorious occupation of agricultural lands of the public
domain for at least thirty years since June 12, 1945 or earlier. Besides, the deadline for
filing applications for judicial confirmation of imperfect title expired on December 31,
1987.20
Lastly, there is a need to resolve immediately the constitutional issue raised in this
petition because of the possible transfer at any time by PEA to AMARI of title and
ownership to portions of the reclaimed lands. Under the Amended JVA, PEA is obligated
to transfer to AMARI the latter's seventy percent proportionate share in the reclaimed
areas as the reclamation progresses. The Amended JVA even allows AMARI to mortgage
at any time the entire reclaimed area to raise financing for the reclamation project. 21
Second issue: whether the petition merits dismissal for failing to observe the principle
governing the hierarchy of courts.
PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly
from the Court. The principle of hierarchy of courts applies generally to cases involving
factual questions. As it is not a trier of facts, the Court cannot entertain cases involving
factual issues. The instant case, however, raises constitutional issues of transcendental
importance to the public.22 The Court can resolve this case without determining any
factual issue related to the case. Also, the instant case is a petition for mandamus which
falls under the original jurisdiction of the Court under Section 5, Article VIII of the
Constitution. We resolve to exercise primary jurisdiction over the instant case.
Third issue: whether the petition merits dismissal for non-exhaustion of administrative
remedies.
PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose
publicly certain information without first asking PEA the needed information. PEA claims
petitioner's direct resort to the Court violates the principle of exhaustion of
administrative remedies. It also violates the rule that mandamus may issue only if there
is no other plain, speedy and adequate remedy in the ordinary course of law.
PEA distinguishes the instant case from Taada v. Tuvera 23 where the Court granted the
petition for mandamus even if the petitioners there did not initially demand from the
Office of the President the publication of the presidential decrees. PEA points out that in
Taada, the Executive Department had an affirmative statutory duty under Article 2 of
the Civil Code24 and Section 1 of Commonwealth Act No. 638 25 to publish the
presidential decrees. There was, therefore, no need for the petitioners in Taada to
make an initial demand from the Office of the President. In the instant case, PEA claims
it has no affirmative statutory duty to disclose publicly information about its
renegotiation of the JVA. Thus, PEA asserts that the Court must apply the principle of
exhaustion of administrative remedies to the instant case in view of the failure of
petitioner here to demand initially from PEA the needed information.
The original JVA sought to dispose to AMARI public lands held by PEA, a government
corporation. Under Section 79 of the Government Auditing Code, 26 the disposition of
government lands to private parties requires public bidding. PEA was under a positive
legal duty to disclose to the public the terms and conditions for the sale of its lands .
LAND TITLES Forms&Contents (7)
The law obligated PEA to make this public disclosure even without demand from
petitioner or from anyone. PEA failed to make this public disclosure because the original
JVA, like the Amended JVA, was the result of a negotiated contract, not of a public
bidding. Considering that PEA had an affirmative statutory duty to make the public
disclosure, and was even in breach of this legal duty, petitioner had the right to seek
direct judicial intervention.
Moreover, and this alone is determinative of this issue, the principle of exhaustion of
administrative remedies does not apply when the issue involved is a purely legal or
constitutional question.27 The principal issue in the instant case is the capacity of AMARI
to acquire lands held by PEA in view of the constitutional ban prohibiting the alienation
of lands of the public domain to private corporations. We rule that the principle of
exhaustion of administrative remedies does not apply in the instant case.
Fourth issue: whether petitioner has locus standi to bring this suit
PEA argues that petitioner has no standing to institute mandamus proceedings to
enforce his constitutional right to information without a showing that PEA refused to
perform an affirmative duty imposed on PEA by the Constitution. PEA also claims that
petitioner has not shown that he will suffer any concrete injury because of the signing or
implementation of the Amended JVA. Thus, there is no actual controversy requiring the
exercise of the power of judicial review.
The petitioner has standing to bring this taxpayer's suit because the petition seeks to
compel PEA to comply with its constitutional duties. There are two constitutional issues
involved here. First is the right of citizens to information on matters of public concern.
Second is the application of a constitutional provision intended to insure the equitable
distribution of alienable lands of the public domain among Filipino citizens. The thrust of
the first issue is to compel PEA to disclose publicly information on the sale of
government lands worth billions of pesos, information which the Constitution and
statutory law mandate PEA to disclose. The thrust of the second issue is to prevent PEA
from alienating hundreds of hectares of alienable lands of the public domain in violation
of the Constitution, compelling PEA to comply with a constitutional duty to the nation.
Moreover, the petition raises matters of transcendental importance to the public.
In Chavez v. PCGG,28 the Court upheld the right of a citizen to bring a taxpayer's suit on
matters of transcendental importance to the public, thus -
"Besides, petitioner emphasizes, the matter of recovering the ill-gotten
wealth of the Marcoses is an issue of 'transcendental importance to the
public.' He asserts that ordinary taxpayers have a right to initiate and
prosecute actions questioning the validity of acts or orders of government
agencies or instrumentalities, if the issues raised are of 'paramount public
interest,' and if they 'immediately affect the social, economic and moral well
being of the people.'
Moreover, the mere fact that he is a citizen satisfies the requirement of
personal interest, when the proceeding involves the assertion of a public
right, such as in this case. He invokes several decisions of this Court which
have set aside the procedural matter of locus standi, when the subject of the
case involved public interest.
xxx
In Taada v. Tuvera, the Court asserted that when the issue concerns a
public right and the object of mandamus is to obtain the enforcement of a
public duty, the people are regarded as the real parties in interest; and
because it is sufficient that petitioner is a citizen and as such is interested in
the execution of the laws, he need not show that he has any legal or special
interest in the result of the action. In the aforesaid case, the petitioners
sought to enforce their right to be informed on matters of public concern, a
right then recognized in Section 6, Article IV of the 1973 Constitution, in
connection with the rule that laws in order to be valid and enforceable must
be published in the Official Gazette or otherwise effectively promulgated. In
ruling for the petitioners' legal standing, the Court declared that the right
they sought to be enforced 'is a public right recognized by no less than the
fundamental law of the land.'
Legaspi v. Civil Service Commission, while reiterating Taada, further
declared that 'when a mandamus proceeding involves the assertion of a
public right, the requirement of personal interest is satisfied by the mere fact
that petitioner is a citizen and, therefore, part of the general 'public' which
possesses the right.'
Further, in Albano v. Reyes, we said that while expenditure of public funds
may not have been involved under the questioned contract for the
development, management and operation of the Manila International
Container Terminal, 'public interest [was] definitely involved considering the
important role [of the subject contract] . . . in the economic development of
the country and the magnitude of the financial consideration involved.' We
concluded that, as a consequence, the disclosure provision in the
Constitution would constitute sufficient authority for upholding the
petitioner's standing.
Similarly, the instant petition is anchored on the right of the people to
information and access to official records, documents and papers a right
guaranteed under Section 7, Article III of the 1987 Constitution. Petitioner, a
former solicitor general, is a Filipino citizen. Because of the satisfaction of
the two basic requisites laid down by decisional law to sustain petitioner's
legal standing, i.e. (1) the enforcement of a public right (2) espoused by a
Filipino citizen, we rule that the petition at bar should be allowed."
We rule that since the instant petition, brought by a citizen, involves the enforcement of
constitutional rights - to information and to the equitable diffusion of natural resources -
matters of transcendental public importance, the petitioner has the requisite locus
standi.
Fifth issue: whether the constitutional right to information includes official information
on on-going negotiations before a final agreement.
Section 7, Article III of the Constitution explains the people's right to information on
matters of public concern in this manner:
"Sec. 7. The right of the people to information on matters of public concern
shall be recognized. Access to official records, and to documents, and
papers pertaining to official acts, transactions, or decisions, as well as to
government research data used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may be provided by law."
(Emphasis supplied)
The State policy of full transparency in all transactions involving public interest reinforces
the people's right to information on matters of public concern. This State policy is
expressed in Section 28, Article II of the Constitution, thus:
"Sec. 28. Subject to reasonable conditions prescribed by law, the State
adopts and implements a policy of full public disclosure of all its
transactions involving public interest." (Emphasis supplied)
These twin provisions of the Constitution seek to promote transparency in policy-making
and in the operations of the government, as well as provide the people sufficient
information to exercise effectively other constitutional rights. These twin provisions are
essential to the exercise of freedom of expression. If the government does not disclose
its official acts, transactions and decisions to citizens, whatever citizens say, even if
expressed without any restraint, will be speculative and amount to nothing. These twin
provisions are also essential to hold public officials "at all times x x x accountable to the
people,"29 for unless citizens have the proper information, they cannot hold public
officials accountable for anything. Armed with the right information, citizens can
participate in public discussions leading to the formulation of government policies and
their effective implementation. An informed citizenry is essential to the existence and
proper functioning of any democracy. As explained by the Court in Valmonte v.
Belmonte, Jr.30
"An essential element of these freedoms is to keep open a continuing
dialogue or process of communication between the government and the
people. It is in the interest of the State that the channels for free political
discussion be maintained to the end that the government may perceive and

be responsive to the people's will. Yet, this open dialogue can be effective
only to the extent that the citizenry is informed and thus able to formulate
its will intelligently. Only when the participants in the discussion are aware
of the issues and have access to information relating thereto can such bear
fruit."
PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations the right to
information is limited to "definite propositions of the government." PEA maintains the
right does not include access to "intra-agency or inter-agency recommendations or
communications during the stage when common assertions are still in the process of
being formulated or are in the 'exploratory stage'."
Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage
or before the closing of the transaction. To support its contention, AMARI cites the
following discussion in the 1986 Constitutional Commission:
"Mr. Suarez. And when we say 'transactions' which should be distinguished
from contracts, agreements, or treaties or whatever, does the Gentleman
refer to the steps leading to the consummation of the contract, or does he
refer to the contract itself?
Mr. Ople: The 'transactions' used here, I suppose is generic and therefore,
it can cover both steps leading to a contract and already a consummated
contract, Mr. Presiding Officer.
Mr. Suarez: This contemplates inclusion of negotiations leading to the
consummation of the transaction.
Mr. Ople: Yes, subject only to reasonable safeguards on the national
interest.
Mr. Suarez: Thank you."32 (Emphasis supplied)
AMARI argues there must first be a consummated contract before petitioner can invoke
the right. Requiring government officials to reveal their deliberations at the pre-
decisional stage will degrade the quality of decision-making in government agencies.
Government officials will hesitate to express their real sentiments during deliberations if
there is immediate public dissemination of their discussions, putting them under all
kinds of pressure before they decide.
We must first distinguish between information the law on public bidding requires PEA to
disclose publicly, and information the constitutional right to information requires PEA to
release to the public. Before the consummation of the contract, PEA must, on its own
and without demand from anyone, disclose to the public matters relating to the
disposition of its property. These include the size, location, technical description and
nature of the property being disposed of, the terms and conditions of the disposition,
the parties qualified to bid, the minimum price and similar information. PEA must
prepare all these data and disclose them to the public at the start of the disposition
process, long before the consummation of the contract, because the Government
Auditing Code requires public bidding. If PEA fails to make this disclosure, any citizen can
demand from PEA this information at any time during the bidding process.
Information, however, on on-going evaluation or review of bids or proposals being
undertaken by the bidding or review committee is not immediately accessible under the
right to information. While the evaluation or review is still on-going, there are no
"official acts, transactions, or decisions" on the bids or proposals. However, once the
committee makes its official recommendation, there arises a "definite proposition" on
the part of the government. From this moment, the public's right to information
attaches, and any citizen can access all the non-proprietary information leading to such
definite proposition. In Chavez v. PCGG,33 the Court ruled as follows:
"Considering the intent of the framers of the Constitution, we believe that it
is incumbent upon the PCGG and its officers, as well as other government
representatives, to disclose sufficient public information on any proposed
settlement they have decided to take up with the ostensible owners and
holders of ill-gotten wealth. Such information, though, must pertain
to definite propositions of the government, not necessarily to intra-agency
or inter-agency recommendations or communications during the stage when
common assertions are still in the process of being formulated or are in the
LAND TITLES Forms&Contents (7)
"exploratory" stage. There is need, of course, to observe the same
restrictions on disclosure of information in general, as discussed earlier
such as on matters involving national security, diplomatic or foreign
relations, intelligence and other classified information." (Emphasis supplied)
Contrary to AMARI's contention, the commissioners of the 1986 Constitutional
Commission understood that the right to information "contemplates inclusion of
negotiations leading to the consummation of the transaction."Certainly, a
consummated contract is not a requirement for the exercise of the right to information.
Otherwise, the people can never exercise the right if no contract is consummated, and if
one is consummated, it may be too late for the public to expose its defects.1wphi1.nt
Requiring a consummated contract will keep the public in the dark until the contract,
which may be grossly disadvantageous to the government or even illegal, becomes a fait
accompli. This negates the State policy of full transparency on matters of public concern,
a situation which the framers of the Constitution could not have intended. Such a
requirement will prevent the citizenry from participating in the public discussion of
any proposed contract, effectively truncating a basic right enshrined in the Bill of Rights.
We can allow neither an emasculation of a constitutional right, nor a retreat by the State
of its avowed "policy of full disclosure of all its transactions involving public interest."
The right covers three categories of information which are "matters of public concern,"
namely: (1) official records; (2) documents and papers pertaining to official acts,
transactions and decisions; and (3) government research data used in formulating
policies. The first category refers to any document that is part of the public records in
the custody of government agencies or officials. The second category refers to
documents and papers recording, evidencing, establishing, confirming, supporting,
justifying or explaining official acts, transactions or decisions of government agencies or
officials. The third category refers to research data, whether raw, collated or processed,
owned by the government and used in formulating government policies.
The information that petitioner may access on the renegotiation of the JVA includes
evaluation reports, recommendations, legal and expert opinions, minutes of meetings,
terms of reference and other documents attached to such reports or minutes, all relating
to the JVA. However, the right to information does not compel PEA to prepare lists,
abstracts, summaries and the like relating to the renegotiation of the JVA. 34 The right
only affords access to records, documents and papers, which means the opportunity to
inspect and copy them. One who exercises the right must copy the records, documents
and papers at his expense. The exercise of the right is also subject to reasonable
regulations to protect the integrity of the public records and to minimize disruption to
government operations, like rules specifying when and how to conduct the inspection
and copying.35
The right to information, however, does not extend to matters recognized as privileged
information under the separation of powers. 36 The right does not also apply to
information on military and diplomatic secrets, information affecting national security,
and information on investigations of crimes by law enforcement agencies before the
prosecution of the accused, which courts have long recognized as confidential. 37 The
right may also be subject to other limitations that Congress may impose by law.
There is no claim by PEA that the information demanded by petitioner is privileged
information rooted in the separation of powers. The information does not cover
Presidential conversations, correspondences, or discussions during closed-door Cabinet
meetings which, like internal deliberations of the Supreme Court and other collegiate
courts, or executive sessions of either house of Congress, 38 are recognized as
confidential. This kind of information cannot be pried open by a co-equal branch of
government. A frank exchange of exploratory ideas and assessments, free from the glare
of publicity and pressure by interested parties, is essential to protect the independence
of decision-making of those tasked to exercise Presidential, Legislative and Judicial
power.39 This is not the situation in the instant case.
We rule, therefore, that the constitutional right to information includes official
information on on-going negotiationsbefore a final contract. The information, however,
must constitute definite propositions by the government and should not cover
recognized exceptions like privileged information, military and diplomatic secrets and
similar matters affecting national security and public order. 40 Congress has also
prescribed other limitations on the right to information in several legislations.41
Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of
lands, reclaimed or to be reclaimed, violate the Constitution.
The Regalian Doctrine
The ownership of lands reclaimed from foreshore and submerged areas is rooted in the
Regalian doctrine which holds that the State owns all lands and waters of the public
domain. Upon the Spanish conquest of the Philippines, ownership of all "lands,
territories and possessions" in the Philippines passed to the Spanish Crown. 42 The King,
as the sovereign ruler and representative of the people, acquired and owned all lands
and territories in the Philippines except those he disposed of by grant or sale to private
individuals.
The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting,
however, the State, in lieu of the King, as the owner of all lands and waters of the public
domain. The Regalian doctrine is the foundation of the time-honored principle of land
ownership that "all lands that were not acquired from the Government, either by
purchase or by grant, belong to the public domain." 43 Article 339 of the Civil Code of
1889, which is now Article 420 of the Civil Code of 1950, incorporated the Regalian
doctrine.
Ownership and Disposition of Reclaimed Lands
The Spanish Law of Waters of 1866 was the first statutory law governing the ownership
and disposition of reclaimed lands in the Philippines. On May 18, 1907, the Philippine
Commission enacted Act No. 1654 which provided for the lease, but not the sale, of
reclaimed lands of the government to corporations and individuals. Later, on
November 29, 1919, the Philippine Legislature approved Act No. 2874, the Public Land
Act, which authorized the lease, but not the sale, of reclaimed lands of the government
to corporations and individuals. On November 7, 1936, the National Assembly passed
Commonwealth Act No. 141, also known as the Public Land Act, which authorized the
lease, but not the sale, of reclaimed lands of the government to corporations and
individuals. CA No. 141 continues to this day as the general law governing the
classification and disposition of lands of the public domain.
The Spanish Law of Waters of 1866 and the Civil Code of 1889
Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters
within the maritime zone of the Spanish territory belonged to the public domain for
public use.44 The Spanish Law of Waters of 1866 allowed the reclamation of the sea
under Article 5, which provided as follows:
"Article 5. Lands reclaimed from the sea in consequence of works
constructed by the State, or by the provinces, pueblos or private persons,
with proper permission, shall become the property of the party constructing
such works, unless otherwise provided by the terms of the grant of
authority."
Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party
undertaking the reclamation, provided the government issued the necessary permit and
did not reserve ownership of the reclaimed land to the State.
Article 339 of the Civil Code of 1889 defined property of public dominion as follows:
"Art. 339. Property of public dominion is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, riverbanks, shores, roadsteads, and
that of a similar character;
2. That belonging exclusively to the State which, without being of general
public use, is employed in some public service, or in the development of the
national wealth, such as walls, fortresses, and other works for the defense of
the territory, and mines, until granted to private individuals."
Property devoted to public use referred to property open for use by the public. In
contrast, property devoted to public service referred to property used for some specific
public service and open only to those authorized to use the property.

Property of public dominion referred not only to property devoted to public use, but
also to property not so used but employed to develop the national wealth. This class of
property constituted property of public dominion although employed for some
economic or commercial activity to increase the national wealth.
Article 341 of the Civil Code of 1889 governed the re-classification of property of public
dominion into private property, to wit:
"Art. 341. Property of public dominion, when no longer devoted to public
use or to the defense of the territory, shall become a part of the private
property of the State."
This provision, however, was not self-executing. The legislature, or the executive
department pursuant to law, must declare the property no longer needed for public use
or territorial defense before the government could lease or alienate the property to
private parties.45
Act No. 1654 of the Philippine Commission
On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the
lease of reclaimed and foreshore lands. The salient provisions of this law were as
follows:
"Section 1. The control and disposition of the foreshore as defined in
existing law, and the title to all Government or public lands made or
reclaimed by the Government by dredging or filling or otherwise
throughout the Philippine Islands, shall be retained by the
Government without prejudice to vested rights and without prejudice to
rights conceded to the City of Manila in the Luneta Extension.
Section 2. (a) The Secretary of the Interior shall cause all Government or
public lands made or reclaimed by the Government by dredging or filling or
otherwise to be divided into lots or blocks, with the necessary streets and
alleyways located thereon, and shall cause plats and plans of such surveys to
be prepared and filed with the Bureau of Lands.
(b) Upon completion of such plats and plans the Governor-General shall
give notice to the public that such parts of the lands so made or reclaimed
as are not needed for public purposes will be leased for commercial and
business purposes, x x x.
xxx
(e) The leases above provided for shall be disposed of to the highest and
best bidder therefore, subject to such regulations and safeguards as the
Governor-General may by executive order prescribe." (Emphasis supplied)
Act No. 1654 mandated that the government should retain title to all lands reclaimed
by the government. The Act also vested in the government control and disposition of
foreshore lands. Private parties could lease lands reclaimed by the government only if
these lands were no longer needed for public purpose. Act No. 1654 mandated public
bidding in the lease of government reclaimed lands. Act No. 1654 made government
reclaimed lands sui generis in that unlike other public lands which the government could
sell to private parties, these reclaimed lands were available only for lease to private
parties.
Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866.
Act No. 1654 did not prohibit private parties from reclaiming parts of the sea under
Section 5 of the Spanish Law of Waters. Lands reclaimed from the sea by private parties
with government permission remained private lands.
Act No. 2874 of the Philippine Legislature
On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public Land
Act.46 The salient provisions of Act No. 2874, on reclaimed lands, were as follows:
"Sec. 6. The Governor-General, upon the recommendation of the Secretary
of Agriculture and Natural Resources, shall from time to time classify the
lands of the public domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands, x x x.
LAND TITLES Forms&Contents (7)
Sec. 7. For the purposes of the government and disposition of alienable or
disposable public lands, the Governor-General, upon recommendation by
the Secretary of Agriculture and Natural Resources, shall from time to time
declare what lands are open to disposition or concession under this Act."
Sec. 8. Only those lands shall be declared open to disposition or concession
which have been officially delimited or classified x x x.
xxx
Sec. 55. Any tract of land of the public domain which, being neither timber
nor mineral land, shall be classified as suitable for residential purposes or
for commercial, industrial, or other productive purposes other than
agricultural purposes, and shall be open to disposition or concession, shall
be disposed of under the provisions of this chapter, and not otherwise.
Sec. 56. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or
other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon
the shores or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six
shall be disposed of to private parties by lease only and not otherwise, as
soon as the Governor-General, upon recommendation by the Secretary of
Agriculture and Natural Resources, shall declare that the same are not
necessary for the public service and are open to disposition under this
chapter. The lands included in class (d) may be disposed of by sale or lease
under the provisions of this Act." (Emphasis supplied)
Section 6 of Act No. 2874 authorized the Governor-General to "classify lands of the
public domain into x x x alienable or disposable" 47 lands. Section 7 of the Act
empowered the Governor-General to "declare what lands are open to disposition or
concession." Section 8 of the Act limited alienable or disposable lands only to those
lands which have been "officially delimited and classified."
Section 56 of Act No. 2874 stated that lands "disposable under this title 48 shall be
classified" as government reclaimed, foreshore and marshy lands, as well as other lands.
All these lands, however, must be suitable for residential, commercial, industrial or other
productive non-agricultural purposes. These provisions vested upon the Governor-
General the power to classify inalienable lands of the public domain into disposable
lands of the public domain. These provisions also empowered the Governor-General to
classify further such disposable lands of the public domain into government reclaimed,
foreshore or marshy lands of the public domain, as well as other non-agricultural lands.
Section 58 of Act No. 2874 categorically mandated that disposable lands of the public
domain classified as government reclaimed, foreshore and marshy lands "shall be
disposed of to private parties by lease only and not otherwise." The Governor-General,
before allowing the lease of these lands to private parties, must formally declare that
the lands were "not necessary for the public service." Act No. 2874 reiterated the State
policy to lease and not to sell government reclaimed, foreshore and marshy lands of the
public domain, a policy first enunciated in 1907 in Act No. 1654. Government reclaimed,
foreshore and marshy lands remained sui generis, as the only alienable or disposable
lands of the public domain that the government could not sell to private parties.
The rationale behind this State policy is obvious. Government reclaimed, foreshore and
marshy public lands for non-agricultural purposes retain their inherent potential as areas
for public service. This is the reason the government prohibited the sale, and only
allowed the lease, of these lands to private parties. The State always reserved these
lands for some future public service.
Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore
and marshy lands into other non-agricultural lands under Section 56 (d). Lands falling
under Section 56 (d) were the only lands for non-agricultural purposes the government
could sell to private parties. Thus, under Act No. 2874, the government could not sell
government reclaimed, foreshore and marshy lands to private parties, unless the
legislature passed a law allowing their sale.49
Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant
to Section 5 of the Spanish Law of Waters of 1866. Lands reclaimed from the sea by
private parties with government permission remained private lands.
Dispositions under the 1935 Constitution
On May 14, 1935, the 1935 Constitution took effect upon its ratification by the Filipino
people. The 1935 Constitution, in adopting the Regalian doctrine, declared in Section 1,
Article XIII, that
"Section 1. All agricultural, timber, and mineral lands of the public domain,
waters, minerals, coal, petroleum, and other mineral oils, all forces of
potential energy and other natural resources of the Philippines belong to the
State, and their disposition, exploitation, development, or utilization shall be
limited to citizens of the Philippines or to corporations or associations at
least sixty per centum of the capital of which is owned by such citizens,
subject to any existing right, grant, lease, or concession at the time of the
inauguration of the Government established under this
Constitution. Natural resources, with the exception of public agricultural
land, shall not be alienated, and no license, concession, or lease for the
exploitation, development, or utilization of any of the natural resources shall
be granted for a period exceeding twenty-five years, renewable for another
twenty-five years, except as to water rights for irrigation, water supply,
fisheries, or industrial uses other than the development of water power, in
which cases beneficial use may be the measure and limit of the grant."
(Emphasis supplied)
The 1935 Constitution barred the alienation of all natural resources except public
agricultural lands, which were the only natural resources the State could alienate. Thus,
foreshore lands, considered part of the State's natural resources, became inalienable by
constitutional fiat, available only for lease for 25 years, renewable for another 25 years.
The government could alienate foreshore lands only after these lands were reclaimed
and classified as alienable agricultural lands of the public domain. Government
reclaimed and marshy lands of the public domain, being neither timber nor mineral
lands, fell under the classification of public agricultural lands. 50 However, government
reclaimed and marshy lands, although subject to classification as disposable public
agricultural lands, could only be leased and not sold to private parties because of Act No.
2874.
The prohibition on private parties from acquiring ownership of government reclaimed
and marshy lands of the public domain was only a statutory prohibition and the
legislature could therefore remove such prohibition. The 1935 Constitution did not
prohibit individuals and corporations from acquiring government reclaimed and marshy
lands of the public domain that were classified as agricultural lands under existing public
land laws. Section 2, Article XIII of the 1935 Constitution provided as follows:
"Section 2. No private corporation or association may acquire, lease, or
hold public agricultural lands in excess of one thousand and twenty four
hectares, nor may any individual acquire such lands by purchase in excess
of one hundred and forty hectares, or by lease in excess of one thousand
and twenty-four hectares, or by homestead in excess of twenty-four
hectares. Lands adapted to grazing, not exceeding two thousand hectares,
may be leased to an individual, private corporation, or association."
(Emphasis supplied)
Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section
58 of Act No. 2874 to open for sale to private parties government reclaimed and marshy
lands of the public domain. On the contrary, the legislature continued the long
established State policy of retaining for the government title and ownership of
government reclaimed and marshy lands of the public domain.
Commonwealth Act No. 141 of the Philippine National Assembly

On November 7, 1936, the National Assembly approved Commonwealth Act No. 141,
also known as the Public Land Act, which compiled the then existing laws on lands of the
public domain. CA No. 141, as amended, remains to this day the existing general
law governing the classification and disposition of lands of the public domain other than
timber and mineral lands.51
Section 6 of CA No. 141 empowers the President to classify lands of the public domain
into "alienable or disposable"52 lands of the public domain, which prior to such
classification are inalienable and outside the commerce of man. Section 7 of CA No. 141
authorizes the President to "declare what lands are open to disposition or concession."
Section 8 of CA No. 141 states that the government can declare open for disposition or
concession only lands that are "officially delimited and classified." Sections 6, 7 and 8 of
CA No. 141 read as follows:
"Sec. 6. The President, upon the recommendation of the Secretary of
Agriculture and Commerce, shall from time to time classify the lands of the
public domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in like manner transfer such lands from one class to
another,53 for the purpose of their administration and disposition.
Sec. 7. For the purposes of the administration and disposition of alienable or
disposable public lands, the President, upon recommendation by the
Secretary of Agriculture and Commerce, shall from time to time declare
what lands are open to disposition or concession under this Act.
Sec. 8. Only those lands shall be declared open to disposition or concession
which have been officially delimited and classified and, when practicable,
surveyed, and which have not been reserved for public or quasi-public uses,
nor appropriated by the Government, nor in any manner become private
property, nor those on which a private right authorized and recognized by
this Act or any other valid law may be claimed, or which, having been
reserved or appropriated, have ceased to be so. x x x."
Thus, before the government could alienate or dispose of lands of the public domain,
the President must first officially classify these lands as alienable or disposable, and then
declare them open to disposition or concession. There must be no law reserving these
lands for public or quasi-public uses.
The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy
lands of the public domain, are as follows:
"Sec. 58. Any tract of land of the public domain which, being neither
timber nor mineral land, is intended to be used for residential purposes or
for commercial, industrial, or other productive purposes other than
agricultural, and is open to disposition or concession, shall be disposed of
under the provisions of this chapter and not otherwise.
Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or
other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon
the shores or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
Sec. 60. Any tract of land comprised under this title may be leased or sold, as
the case may be, to any person, corporation, or association authorized to
purchase or lease public lands for agricultural purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine
shall be disposed of to private parties by lease only and not otherwise, as
soon as the President, upon recommendation by the Secretary of
Agriculture, shall declare that the same are not necessary for the public
service and are open to disposition under this chapter. The lands included in
LAND TITLES Forms&Contents (7)
class (d) may be disposed of by sale or lease under the provisions of this
Act." (Emphasis supplied)
Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution,
Section 58 of Act No. 2874 prohibiting the sale of government reclaimed, foreshore and
marshy disposable lands of the public domain. All these lands are intended for
residential, commercial, industrial or other non-agricultural purposes. As before, Section
61 allowed only the lease of such lands to private parties. The government could sell to
private parties only lands falling under Section 59 (d) of CA No. 141, or those lands for
non-agricultural purposes not classified as government reclaimed, foreshore and marshy
disposable lands of the public domain. Foreshore lands, however, became inalienable
under the 1935 Constitution which only allowed the lease of these lands to qualified
private parties.
Section 58 of CA No. 141 expressly states that disposable lands of the public domain
intended for residential, commercial, industrial or other productive purposes other than
agricultural "shall be disposed of under the provisions of this chapter and not
otherwise." Under Section 10 of CA No. 141, the term "disposition" includes lease of the
land. Any disposition of government reclaimed, foreshore and marshy disposable lands
for non-agricultural purposes must comply with Chapter IX, Title III of CA No.
141,54 unless a subsequent law amended or repealed these provisions.
In his concurring opinion in the landmark case of Republic Real Estate Corporation v.
Court of Appeals,55Justice Reynato S. Puno summarized succinctly the law on this matter,
as follows:
"Foreshore lands are lands of public dominion intended for public use. So
too are lands reclaimed by the government by dredging, filling, or other
means. Act 1654 mandated that the control and disposition of the foreshore
and lands under water remained in the national government. Said law
allowed only the 'leasing' of reclaimed land. The Public Land Acts of 1919
and 1936 also declared that the foreshore and lands reclaimed by the
government were to be "disposed of to private parties by lease only and not
otherwise." Before leasing, however, the Governor-General, upon
recommendation of the Secretary of Agriculture and Natural Resources, had
first to determine that the land reclaimed was not necessary for the public
service. This requisite must have been met before the land could be
disposed of. But even then, the foreshore and lands under water were not
to be alienated and sold to private parties. The disposition of the reclaimed
land was only by lease. The land remained property of the State."
(Emphasis supplied)
As observed by Justice Puno in his concurring opinion, "Commonwealth Act No. 141 has
remained in effect at present."
The State policy prohibiting the sale to private parties of government reclaimed,
foreshore and marshy alienable lands of the public domain, first implemented in 1907
was thus reaffirmed in CA No. 141 after the 1935 Constitution took effect. The
prohibition on the sale of foreshore lands, however, became a constitutional edict under
the 1935 Constitution. Foreshore lands became inalienable as natural resources of the
State, unless reclaimed by the government and classified as agricultural lands of the
public domain, in which case they would fall under the classification of government
reclaimed lands.
After the effectivity of the 1935 Constitution, government reclaimed and marshy
disposable lands of the public domain continued to be only leased and not sold to
private parties.56 These lands remained sui generis, as the only alienable or disposable
lands of the public domain the government could not sell to private parties.
Since then and until now, the only way the government can sell to private parties
government reclaimed and marshy disposable lands of the public domain is for the
legislature to pass a law authorizing such sale. CA No. 141 does not authorize the
President to reclassify government reclaimed and marshy lands into other non-
agricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the only
alienable or disposable lands for non-agricultural purposes that the government could
sell to private parties.
Moreover, Section 60 of CA No. 141 expressly requires congressional authority before
lands under Section 59 that the government previously transferred to government units
or entities could be sold to private parties. Section 60 of CA No. 141 declares that
"Sec. 60. x x x The area so leased or sold shall be such as shall, in the
judgment of the Secretary of Agriculture and Natural Resources, be
reasonably necessary for the purposes for which such sale or lease is
requested, and shall not exceed one hundred and forty-four hectares:
Provided, however, That this limitation shall not apply to grants, donations,
or transfers made to a province, municipality or branch or subdivision of the
Government for the purposes deemed by said entities conducive to the
public interest; but the land so granted, donated, or transferred to a
province, municipality or branch or subdivision of the Government shall
not be alienated, encumbered, or otherwise disposed of in a manner
affecting its title, except when authorized by Congress: x x x." (Emphasis
supplied)
The congressional authority required in Section 60 of CA No. 141 mirrors the legislative
authority required in Section 56 of Act No. 2874.
One reason for the congressional authority is that Section 60 of CA No. 141 exempted
government units and entities from the maximum area of public lands that could be
acquired from the State. These government units and entities should not just turn
around and sell these lands to private parties in violation of constitutional or statutory
limitations. Otherwise, the transfer of lands for non-agricultural purposes to government
units and entities could be used to circumvent constitutional limitations on ownership of
alienable or disposable lands of the public domain. In the same manner, such transfers
could also be used to evade the statutory prohibition in CA No. 141 on the sale of
government reclaimed and marshy lands of the public domain to private parties. Section
60 of CA No. 141 constitutes by operation of law a lien on these lands. 57
In case of sale or lease of disposable lands of the public domain falling under Section 59
of CA No. 141, Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA No.
141 provide as follows:
"Sec. 63. Whenever it is decided that lands covered by this chapter are not
needed for public purposes, the Director of Lands shall ask the Secretary of
Agriculture and Commerce (now the Secretary of Natural Resources) for
authority to dispose of the same. Upon receipt of such authority, the
Director of Lands shall give notice by public advertisement in the same
manner as in the case of leases or sales of agricultural public land, x x x.
Sec. 67. The lease or sale shall be made by oral bidding; and adjudication
shall be made to the highest bidder. x x x." (Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to public auction all leases or sales
of alienable or disposable lands of the public domain. 58
Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the
Spanish Law of Waters of 1866. Private parties could still reclaim portions of the sea with
government permission. However, the reclaimed land could become private land only if
classified as alienable agricultural land of the public domain open to disposition under
CA No. 141. The 1935 Constitution prohibited the alienation of all natural resources
except public agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the definition of property of public
dominion found in the Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950
state that
"Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads, and
others of similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth.

x x x.
Art. 422. Property of public dominion, when no longer intended for public
use or for public service, shall form part of the patrimonial property of the
State."
Again, the government must formally declare that the property of public dominion is no
longer needed for public use or public service, before the same could be classified as
patrimonial property of the State. 59 In the case of government reclaimed and marshy
lands of the public domain, the declaration of their being disposable, as well as the
manner of their disposition, is governed by the applicable provisions of CA No. 141.
Like the Civil Code of 1889, the Civil Code of 1950 included as property of public
dominion those properties of the State which, without being for public use, are intended
for public service or the "development of the national wealth." Thus, government
reclaimed and marshy lands of the State, even if not employed for public use or public
service, if developed to enhance the national wealth, are classified as property of public
dominion.
Dispositions under the 1973 Constitution
The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the
Regalian doctrine. Section 8, Article XIV of the 1973 Constitution stated that
"Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and
other mineral oils, all forces of potential energy, fisheries, wildlife, and other
natural resources of the Philippines belong to the State. With the exception
of agricultural, industrial or commercial, residential, and resettlement
lands of the public domain, natural resources shall not be alienated, and no
license, concession, or lease for the exploration, development, exploitation,
or utilization of any of the natural resources shall be granted for a period
exceeding twenty-five years, renewable for not more than twenty-five years,
except as to water rights for irrigation, water supply, fisheries, or industrial
uses other than the development of water power, in which cases, beneficial
use may be the measure and the limit of the grant." (Emphasis supplied)
The 1973 Constitution prohibited the alienation of all natural resources with the
exception of "agricultural, industrial or commercial, residential, and resettlement lands
of the public domain." In contrast, the 1935 Constitution barred the alienation of all
natural resources except "public agricultural lands." However, the term "public
agricultural lands" in the 1935 Constitution encompassed industrial, commercial,
residential and resettlement lands of the public domain. 60 If the land of public domain
were neither timber nor mineral land, it would fall under the classification of agricultural
land of the public domain. Both the 1935 and 1973 Constitutions, therefore, prohibited
the alienation of all natural resources except agricultural lands of the public domain.
The 1973 Constitution, however, limited the alienation of lands of the public domain to
individuals who were citizens of the Philippines. Private corporations, even if wholly
owned by Philippine citizens, were no longer allowed to acquire alienable lands of the
public domain unlike in the 1935 Constitution. Section 11, Article XIV of the 1973
Constitution declared that
"Sec. 11. The Batasang Pambansa, taking into account conservation,
ecological, and development requirements of the natural resources, shall
determine by law the size of land of the public domain which may be
developed, held or acquired by, or leased to, any qualified individual,
corporation, or association, and the conditions therefor. No private
corporation or association may hold alienable lands of the public domain
except by lease not to exceed one thousand hectares in area nor may any
citizen hold such lands by lease in excess of five hundred hectares or acquire
by purchase, homestead or grant, in excess of twenty-four hectares. No
private corporation or association may hold by lease, concession, license or
permit, timber or forest lands and other timber or forest resources in excess
of one hundred thousand hectares. However, such area may be increased by
the Batasang Pambansa upon recommendation of the National Economic
and Development Authority." (Emphasis supplied)
LAND TITLES Forms&Contents (7)
Thus, under the 1973 Constitution, private corporations could hold alienable lands of the
public domain only through lease. Only individuals could now acquire alienable lands of
the public domain, and private corporations became absolutely barred from acquiring
any kind of alienable land of the public domain. The constitutional ban extended to all
kinds of alienable lands of the public domain, while the statutory ban under CA No. 141
applied only to government reclaimed, foreshore and marshy alienable lands of the
public domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No.
1084 creating PEA, a wholly government owned and controlled corporation with a
special charter. Sections 4 and 8 of PD No. 1084, vests PEA with the following purposes
and powers:
"Sec. 4. Purpose. The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by dredging,
filling or other means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in, subdivide,
dispose, lease and sell any and all kinds of lands, buildings, estates and
other forms of real property, owned, managed, controlled and/or operated
by the government;
(c) To provide for, operate or administer such service as may be necessary for
the efficient, economical and beneficial utilization of the above properties.
Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying
out the purposes for which it is created, have the following powers and
functions:
(a)To prescribe its by-laws.
xxx
(i) To hold lands of the public domain in excess of the area permitted to
private corporations by statute.
(j) To reclaim lands and to construct work across, or otherwise, any stream,
watercourse, canal, ditch, flume x x x.
xxx
(o) To perform such acts and exercise such functions as may be necessary for
the attainment of the purposes and objectives herein specified." (Emphasis
supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the
public domain. Foreshore areas are those covered and uncovered by the ebb and flow of
the tide.61 Submerged areas are those permanently under water regardless of the ebb
and flow of the tide.62 Foreshore and submerged areas indisputably belong to the public
domain63 and are inalienable unless reclaimed, classified as alienable lands open to
disposition, and further declared no longer needed for public service.
The ban in the 1973 Constitution on private corporations from acquiring alienable lands
of the public domain did not apply to PEA since it was then, and until today, a fully
owned government corporation. The constitutional ban applied then, as it still applies
now, only to "private corporations and associations." PD No. 1084 expressly
empowers PEA "to hold lands of the public domain" even "in excess of the area
permitted to private corporations by statute." Thus, PEA can hold title to private lands,
as well as title to lands of the public domain.
In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the
public domain, there must be legislative authority empowering PEA to sell these lands.
This legislative authority is necessary in view of Section 60 of CA No.141, which states
"Sec. 60. x x x; but the land so granted, donated or transferred to a province,
municipality, or branch or subdivision of the Government shall not be
alienated, encumbered or otherwise disposed of in a manner affecting its
title, except when authorized by Congress; x x x." (Emphasis supplied)
Without such legislative authority, PEA could not sell but only lease its reclaimed
foreshore and submerged alienable lands of the public domain. Nevertheless, any
legislative authority granted to PEA to sell its reclaimed alienable lands of the public
domain would be subject to the constitutional ban on private corporations from
acquiring alienable lands of the public domain. Hence, such legislative authority could
only benefit private individuals.
Dispositions under the 1987 Constitution
The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the
Regalian doctrine. The 1987 Constitution declares that all natural resources are "owned
by the State," and except for alienable agricultural lands of the public domain, natural
resources cannot be alienated. Sections 2 and 3, Article XII of the 1987 Constitution state
that
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum
and other mineral oils, all forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and other natural resources are owned by
the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and
utilization of natural resources shall be under the full control and supervision
of the State. x x x.
Section 3. Lands of the public domain are classified into agricultural, forest
or timber, mineral lands, and national parks. Agricultural lands of the public
domain may be further classified by law according to the uses which they
may be devoted. Alienable lands of the public domain shall be limited to
agricultural lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, for a period not
exceeding twenty-five years, renewable for not more than twenty-five
years, and not to exceed one thousand hectares in area. Citizens of the
Philippines may lease not more than five hundred hectares, or acquire not
more than twelve hectares thereof by purchase, homestead, or grant.
Taking into account the requirements of conservation, ecology, and
development, and subject to the requirements of agrarian reform, the
Congress shall determine, by law, the size of lands of the public domain
which may be acquired, developed, held, or leased and the conditions
therefor." (Emphasis supplied)
The 1987 Constitution continues the State policy in the 1973 Constitution banning
private corporations from acquiring any kind of alienable land of the public domain.
Like the 1973 Constitution, the 1987 Constitution allows private corporations to hold
alienable lands of the public domain only through lease. As in the 1935 and 1973
Constitutions, the general law governing the lease to private corporations of reclaimed,
foreshore and marshy alienable lands of the public domain is still CA No. 141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on corporations from acquiring, except
through lease, alienable lands of the public domain is not well understood. During the
deliberations of the 1986 Constitutional Commission, the commissioners probed the
rationale behind this ban, thus:
"FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line
5 which says:
`No private corporation or association may hold alienable lands of the public
domain except by lease, not to exceed one thousand hectares in area.'
If we recall, this provision did not exist under the 1935 Constitution, but this
was introduced in the 1973 Constitution. In effect, it prohibits private
corporations from acquiring alienable public lands. But it has not been very
clear in jurisprudence what the reason for this is. In some of the cases
decided in 1982 and 1983, it was indicated that the purpose of this is to
prevent large landholdings. Is that the intent of this provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were
instances where the Iglesia ni Cristo was not allowed to acquire a mere 313-
square meter land where a chapel stood because the Supreme Court said it
would be in violation of this." (Emphasis supplied)

In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional ban in this
way:
"Indeed, one purpose of the constitutional prohibition against purchases of
public agricultural lands by private corporations is to equitably diffuse land
ownership or to encourage 'owner-cultivatorship and the economic family-
size farm' and to prevent a recurrence of cases like the instant case. Huge
landholdings by corporations or private persons had spawned social unrest."
However, if the constitutional intent is to prevent huge landholdings, the Constitution
could have simply limited the size of alienable lands of the public domain that
corporations could acquire. The Constitution could have followed the limitations on
individuals, who could acquire not more than 24 hectares of alienable lands of the public
domain under the 1973 Constitution, and not more than 12 hectares under the 1987
Constitution.
If the constitutional intent is to encourage economic family-size farms, placing the land
in the name of a corporation would be more effective in preventing the break-up of
farmlands. If the farmland is registered in the name of a corporation, upon the death of
the owner, his heirs would inherit shares in the corporation instead of subdivided parcels
of the farmland. This would prevent the continuing break-up of farmlands into smaller
and smaller plots from one generation to the next.
In actual practice, the constitutional ban strengthens the constitutional limitation on
individuals from acquiring more than the allowed area of alienable lands of the public
domain. Without the constitutional ban, individuals who already acquired the maximum
area of alienable lands of the public domain could easily set up corporations to acquire
more alienable public lands. An individual could own as many corporations as his means
would allow him. An individual could even hide his ownership of a corporation by
putting his nominees as stockholders of the corporation. The corporation is a convenient
vehicle to circumvent the constitutional limitation on acquisition by individuals of
alienable lands of the public domain.
The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer
ownership of only a limited area of alienable land of the public domain to a qualified
individual. This constitutional intent is safeguarded by the provision prohibiting
corporations from acquiring alienable lands of the public domain, since the vehicle to
circumvent the constitutional intent is removed. The available alienable public lands are
gradually decreasing in the face of an ever-growing population. The most effective way
to insure faithful adherence to this constitutional intent is to grant or sell alienable lands
of the public domain only to individuals. This, it would seem, is the practical benefit
arising from the constitutional ban.
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its second Whereas clause, consists
of three properties, namely:
1. "[T]hree partially reclaimed and substantially eroded islands along Emilio
Aguinaldo Boulevard in Paranaque and Las Pinas, Metro Manila, with a
combined titled area of 1,578,441 square meters;"
2. "[A]nother area of 2,421,559 square meters contiguous to the three
islands;" and
3. "[A]t AMARI's option as approved by PEA, an additional 350 hectares
more or less to regularize the configuration of the reclaimed area." 65
PEA confirms that the Amended JVA involves "the development of the Freedom Islands
and further reclamation of about 250 hectares x x x," plus an option "granted to AMARI
to subsequently reclaim another 350 hectares x x x."66
In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84
hectares of the 750-hectare reclamation project have been reclaimed, and the rest of
the 592.15 hectares are still submerged areas forming part of Manila Bay.
Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for
PEA's "actual cost" in partially reclaiming the Freedom Islands. AMARI will also
complete, at its own expense, the reclamation of the Freedom Islands. AMARI will
further shoulder all the reclamation costs of all the other areas, totaling 592.15 hectares,
LAND TITLES Forms&Contents (7)
still to be reclaimed. AMARI and PEA will share, in the proportion of 70 percent and 30
percent, respectively, the total net usable area which is defined in the Amended JVA as
the total reclaimed area less 30 percent earmarked for common areas. Title to AMARI's
share in the net usable area, totaling 367.5 hectares, will be issued in the name of
AMARI. Section 5.2 (c) of the Amended JVA provides that
"x x x, PEA shall have the duty to execute without delay the necessary deed
of transfer or conveyance of the title pertaining to AMARI's Land share based
on the Land Allocation Plan. PEA, when requested in writing by AMARI,
shall then cause the issuance and delivery of the proper certificates of title
covering AMARI's Land Share in the name of AMARI, x x x; provided, that if
more than seventy percent (70%) of the titled area at any given time
pertains to AMARI, PEA shall deliver to AMARI only seventy percent (70%) of
the titles pertaining to AMARI, until such time when a corresponding
proportionate area of additional land pertaining to PEA has been titled."
(Emphasis supplied)
Indisputably, under the Amended JVA AMARI will acquire and own a maximum of
367.5 hectares of reclaimed land which will be titled in its name.
To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint
venture PEA's statutory authority, rights and privileges to reclaim foreshore and
submerged areas in Manila Bay. Section 3.2.a of the Amended JVA states that
"PEA hereby contributes to the joint venture its rights and privileges to
perform Rawland Reclamation and Horizontal Development as well as own
the Reclamation Area, thereby granting the Joint Venture the full and
exclusive right, authority and privilege to undertake the Project in
accordance with the Master Development Plan."
The Amended JVA is the product of a renegotiation of the original JVA dated April 25,
1995 and its supplemental agreement dated August 9, 1995.
The Threshold Issue
The threshold issue is whether AMARI, a private corporation, can acquire and own under
the Amended JVA 367.5 hectares of reclaimed foreshore and submerged areas in Manila
Bay in view of Sections 2 and 3, Article XII of the 1987 Constitution which state that:
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum,
and other mineral oils, all forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and other natural resources are owned by
the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. x x x.
xxx
Section 3. x x x Alienable lands of the public domain shall be limited to
agricultural lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, x x x."(Emphasis
supplied)
Classification of Reclaimed Foreshore and Submerged Areas
PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila
Bay are alienable or disposable lands of the public domain. In its Memorandum, 67 PEA
admits that
"Under the Public Land Act (CA 141, as amended), reclaimed lands are
classified as alienable and disposable lands of the public domain:
'Sec. 59. The lands disposable under this title shall be classified
as follows:
(a) Lands reclaimed by the government by dredging, filling, or
other means;
x x x.'" (Emphasis supplied)
Likewise, the Legal Task Force68 constituted under Presidential Administrative Order No.
365 admitted in its Report and Recommendation to then President Fidel V.
Ramos, "[R]eclaimed lands are classified as alienable and disposable lands of the
public domain."69 The Legal Task Force concluded that
"D. Conclusion
Reclaimed lands are lands of the public domain. However, by statutory
authority, the rights of ownership and disposition over reclaimed lands have
been transferred to PEA, by virtue of which PEA, as owner, may validly
convey the same to any qualified person without violating the Constitution
or any statute.
The constitutional provision prohibiting private corporations from holding
public land, except by lease (Sec. 3, Art. XVII, 70 1987 Constitution), does not
apply to reclaimed lands whose ownership has passed on to PEA by
statutory grant."
Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas
of Manila Bay are part of the "lands of the public domain, waters x x x and other natural
resources" and consequently "owned by the State." As such, foreshore and submerged
areas "shall not be alienated," unless they are classified as "agricultural lands" of the
public domain. The mere reclamation of these areas by PEA does not convert these
inalienable natural resources of the State into alienable or disposable lands of the public
domain. There must be a law or presidential proclamation officially classifying these
reclaimed lands as alienable or disposable and open to disposition or concession.
Moreover, these reclaimed lands cannot be classified as alienable or disposable if the
law has reserved them for some public or quasi-public use.71
Section 8 of CA No. 141 provides that "only those lands shall be declared open to
disposition or concession which have been officially delimited and classified."72 The
President has the authority to classify inalienable lands of the public domain into
alienable or disposable lands of the public domain, pursuant to Section 6 of CA No. 141.
In Laurel vs. Garcia,73 the Executive Department attempted to sell the Roppongi property
in Tokyo, Japan, which was acquired by the Philippine Government for use as the
Chancery of the Philippine Embassy. Although the Chancery had transferred to another
location thirteen years earlier, the Court still ruled that, under Article 422 74 of the Civil
Code, a property of public dominion retains such character until formally declared
otherwise. The Court ruled that
"The fact that the Roppongi site has not been used for a long time for actual
Embassy service does not automatically convert it to patrimonial property.
Any such conversion happens only if the property is withdrawn from public
use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A
property continues to be part of the public domain, not available for
private appropriation or ownership 'until there is a formal declaration on
the part of the government to withdraw it from being such' (Ignacio v.
Director of Lands, 108 Phil. 335 [1960]." (Emphasis supplied)
PD No. 1085, issued on February 4, 1977, authorized the issuance of special land patents
for lands reclaimed by PEA from the foreshore or submerged areas of Manila Bay. On
January 19, 1988 then President Corazon C. Aquino issued Special Patent No. 3517 in the
name of PEA for the 157.84 hectares comprising the partially reclaimed Freedom
Islands. Subsequently, on April 9, 1999 the Register of Deeds of the Municipality of
Paranaque issued TCT Nos. 7309, 7311 and 7312 in the name of PEA pursuant to Section
103 of PD No. 1529 authorizing the issuance of certificates of title corresponding to land
patents. To this day, these certificates of title are still in the name of PEA.
PD No. 1085, coupled with President Aquino's actual issuance of a special patent
covering the Freedom Islands, is equivalent to an official proclamation classifying the
Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085 and
President Aquino's issuance of a land patent also constitute a declaration that the
Freedom Islands are no longer needed for public service. The Freedom Islands are thus
alienable or disposable lands of the public domain, open to disposition or concession
to qualified parties.
At the time then President Aquino issued Special Patent No. 3517, PEA had already
reclaimed the Freedom Islands although subsequently there were partial erosions on
some areas. The government had also completed the necessary surveys on these
islands. Thus, the Freedom Islands were no longer part of Manila Bay but part of the
land mass. Section 3, Article XII of the 1987 Constitution classifies lands of the public
domain into "agricultural, forest or timber, mineral lands, and national parks." Being

neither timber, mineral, nor national park lands, the reclaimed Freedom Islands
necessarily fall under the classification of agricultural lands of the public domain. Under
the 1987 Constitution, agricultural lands of the public domain are the only natural
resources that the State may alienate to qualified private parties. All other natural
resources, such as the seas or bays, are "waters x x x owned by the State" forming part
of the public domain, and are inalienable pursuant to Section 2, Article XII of the 1987
Constitution.
AMARI claims that the Freedom Islands are private lands because CDCP, then a private
corporation, reclaimed the islands under a contract dated November 20, 1973 with the
Commissioner of Public Highways. AMARI, citing Article 5 of the Spanish Law of Waters
of 1866, argues that "if the ownership of reclaimed lands may be given to the party
constructing the works, then it cannot be said that reclaimed lands are lands of the
public domain which the State may not alienate." 75 Article 5 of the Spanish Law of
Waters reads as follows:
"Article 5. Lands reclaimed from the sea in consequence of works
constructed by the State, or by the provinces, pueblos or private
persons, with proper permission, shall become the property of the party
constructing such works, unless otherwise provided by the terms of the
grant of authority." (Emphasis supplied)
Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from
the sea only with "proper permission" from the State. Private parties could own the
reclaimed land only if not "otherwise provided by the terms of the grant of authority."
This clearly meant that no one could reclaim from the sea without permission from the
State because the sea is property of public dominion. It also meant that the State could
grant or withhold ownership of the reclaimed land because any reclaimed land, like the
sea from which it emerged, belonged to the State. Thus, a private person reclaiming
from the sea without permission from the State could not acquire ownership of the
reclaimed land which would remain property of public dominion like the sea it
replaced.76 Article 5 of the Spanish Law of Waters of 1866 adopted the time-honored
principle of land ownership that "all lands that were not acquired from the government,
either by purchase or by grant, belong to the public domain." 77
Article 5 of the Spanish Law of Waters must be read together with laws subsequently
enacted on the disposition of public lands. In particular, CA No. 141 requires that lands
of the public domain must first be classified as alienable or disposable before the
government can alienate them. These lands must not be reserved for public or quasi-
public purposes.78 Moreover, the contract between CDCP and the government was
executed after the effectivity of the 1973 Constitution which barred private corporations
from acquiring any kind of alienable land of the public domain. This contract could not
have converted the Freedom Islands into private lands of a private corporation.
Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing the
reclamation of areas under water and revested solely in the National Government the
power to reclaim lands. Section 1 of PD No. 3-A declared that
"The provisions of any law to the contrary notwithstanding, the
reclamation of areas under water, whether foreshore or inland, shall
be limited to the National Government or any person authorized by it
under a proper contract. (Emphasis supplied)
x x x."
PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because
reclamation of areas under water could now be undertaken only by the National
Government or by a person contracted by the National Government. Private parties may
reclaim from the sea only under a contract with the National Government, and no longer
by grant or permission as provided in Section 5 of the Spanish Law of Waters of 1866.
Executive Order No. 525, issued on February 14, 1979, designated PEA as the National
Government's implementing arm to undertake "all reclamation projects of the
government," which "shall be undertaken by the PEA or through a proper contract
executed by it with any person or entity." Under such contract, a private party receives
compensation for reclamation services rendered to PEA. Payment to the contractor may
be in cash, or in kind consisting of portions of the reclaimed land, subject to the
LAND TITLES Forms&Contents (7)
constitutional ban on private corporations from acquiring alienable lands of the public
domain. The reclaimed land can be used as payment in kind only if the reclaimed land is
first classified as alienable or disposable land open to disposition, and then declared no
longer needed for public service.
The Amended JVA covers not only the Freedom Islands, but also an additional 592.15
hectares which are still submerged and forming part of Manila Bay. There is no
legislative or Presidential act classifying these submerged areas as alienable or
disposable lands of the public domain open to disposition. These submerged areas are
not covered by any patent or certificate of title. There can be no dispute that these
submerged areas form part of the public domain, and in their present state
are inalienable and outside the commerce of man. Until reclaimed from the sea, these
submerged areas are, under the Constitution, "waters x x x owned by the State," forming
part of the public domain and consequently inalienable. Only when actually reclaimed
from the sea can these submerged areas be classified as public agricultural lands, which
under the Constitution are the only natural resources that the State may alienate. Once
reclaimed and transformed into public agricultural lands, the government may then
officially classify these lands as alienable or disposable lands open to disposition.
Thereafter, the government may declare these lands no longer needed for public service.
Only then can these reclaimed lands be considered alienable or disposable lands of the
public domain and within the commerce of man.
The classification of PEA's reclaimed foreshore and submerged lands into alienable or
disposable lands open to disposition is necessary because PEA is tasked under its charter
to undertake public services that require the use of lands of the public domain. Under
Section 5 of PD No. 1084, the functions of PEA include the following: "[T]o own or
operate railroads, tramways and other kinds of land transportation, x x x; [T]o construct,
maintain and operate such systems of sanitary sewers as may be necessary; [T]o
construct, maintain and operate such storm drains as may be necessary." PEA is
empowered to issue "rules and regulations as may be necessary for the proper use by
private parties of any or all of the highways, roads, utilities, buildings and/or any of its
properties and to impose or collect fees or tolls for their use." Thus, part of the
reclaimed foreshore and submerged lands held by the PEA would actually be needed for
public use or service since many of the functions imposed on PEA by its charter
constitute essential public services.
Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily
responsible for integrating, directing, and coordinating all reclamation projects for and
on behalf of the National Government." The same section also states that "[A]ll
reclamation projects shall be approved by the President upon recommendation of the
PEA, and shall be undertaken by the PEA or through a proper contract executed by it
with any person or entity; x x x." Thus, under EO No. 525, in relation to PD No. 3-A and
PD No.1084, PEA became the primary implementing agency of the National Government
to reclaim foreshore and submerged lands of the public domain. EO No. 525 recognized
PEA as the government entity "to undertake the reclamation of lands and ensure their
maximum utilization in promoting public welfare and interests."79 Since large portions
of these reclaimed lands would obviously be needed for public service, there must be a
formal declaration segregating reclaimed lands no longer needed for public service from
those still needed for public service.1wphi1.nt
Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to or
be owned by the PEA," could not automatically operate to classify inalienable lands into
alienable or disposable lands of the public domain. Otherwise, reclaimed foreshore and
submerged lands of the public domain would automatically become alienable once
reclaimed by PEA, whether or not classified as alienable or disposable.
The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No.
525, vests in the Department of Environment and Natural Resources ("DENR" for brevity)
the following powers and functions:
"Sec. 4. Powers and Functions. The Department shall:
(1) x x x
xxx
(4) Exercise supervision and control over forest lands, alienable and
disposable public lands, mineral resources and, in the process of exercising
such control, impose appropriate taxes, fees, charges, rentals and any such
form of levy and collect such revenues for the exploration, development,
utilization or gathering of such resources;
xxx
(14) Promulgate rules, regulations and guidelines on the issuance of
licenses, permits, concessions, lease agreements and such other privileges
concerning the development, exploration and utilization of the country's
marine, freshwater, and brackish water and over all aquatic resources of
the country and shall continue to oversee, supervise and police our natural
resources; cancel or cause to cancel such privileges upon failure, non-
compliance or violations of any regulation, order, and for all other causes
which are in furtherance of the conservation of natural resources and
supportive of the national interest;
(15) Exercise exclusive jurisdiction on the management and disposition of
all lands of the public domain and serve as the sole agency responsible for
classification, sub-classification, surveying and titling of lands in consultation
with appropriate agencies."80 (Emphasis supplied)
As manager, conservator and overseer of the natural resources of the State, DENR
exercises "supervision and control over alienable and disposable public lands." DENR
also exercises "exclusive jurisdiction on the management and disposition of all lands of
the public domain." Thus, DENR decides whether areas under water, like foreshore or
submerged areas of Manila Bay, should be reclaimed or not. This means that PEA needs
authorization from DENR before PEA can undertake reclamation projects in Manila Bay,
or in any part of the country.
DENR also exercises exclusive jurisdiction over the disposition of all lands of the public
domain. Hence, DENR decides whether reclaimed lands of PEA should be classified as
alienable under Sections 681 and 782 of CA No. 141. Once DENR decides that the
reclaimed lands should be so classified, it then recommends to the President the
issuance of a proclamation classifying the lands as alienable or disposable lands of the
public domain open to disposition. We note that then DENR Secretary Fulgencio S.
Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the Revised
Administrative Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under
water, while PEA is vested with the power to undertake the physical reclamation of areas
under water, whether directly or through private contractors. DENR is also empowered
to classify lands of the public domain into alienable or disposable lands subject to the
approval of the President. On the other hand, PEA is tasked to develop, sell or lease the
reclaimed alienable lands of the public domain.
Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas
does not make the reclaimed lands alienable or disposable lands of the public domain,
much less patrimonial lands of PEA. Likewise, the mere transfer by the National
Government of lands of the public domain to PEA does not make the lands alienable or
disposable lands of the public domain, much less patrimonial lands of PEA.
Absent two official acts a classification that these lands are alienable or disposable and
open to disposition and a declaration that these lands are not needed for public service,
lands reclaimed by PEA remain inalienable lands of the public domain. Only such an
official classification and formal declaration can convert reclaimed lands into alienable or
disposable lands of the public domain, open to disposition under the Constitution, Title I
and Title III83 of CA No. 141 and other applicable laws. 84
PEA's Authority to Sell Reclaimed Lands
PEA, like the Legal Task Force, argues that as alienable or disposable lands of the public
domain, the reclaimed lands shall be disposed of in accordance with CA No. 141, the
Public Land Act. PEA, citing Section 60 of CA No. 141, admits that reclaimed lands
transferred to a branch or subdivision of the government "shall not be alienated,
encumbered, or otherwise disposed of in a manner affecting its title, except when
authorized by Congress: x x x."85 (Emphasis by PEA)

In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised Administrative Code of
1987, which states that
"Sec. 48. Official Authorized to Convey Real Property. Whenever real
property of the Government is authorized by law to be conveyed, the deed
of conveyance shall be executed in behalf of the government by the
following: x x x."
Thus, the Court concluded that a law is needed to convey any real property belonging to
the Government. The Court declared that -
"It is not for the President to convey real property of the government on his
or her own sole will. Any such conveyance must be authorized and
approved by a law enacted by the Congress. It requires executive and
legislative concurrence." (Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority
allowing PEA to sell its reclaimed lands. PD No. 1085, issued on February 4, 1977,
provides that
"The land reclaimed in the foreshore and offshore area of Manila
Bay pursuant to the contract for the reclamation and construction of the
Manila-Cavite Coastal Road Project between the Republic of the Philippines
and the Construction and Development Corporation of the Philippines dated
November 20, 1973 and/or any other contract or reclamation covering the
same area is hereby transferred, conveyed and assigned to the ownership
and administration of the Public Estates Authority established pursuant to
PD No. 1084; Provided, however, That the rights and interests of the
Construction and Development Corporation of the Philippines pursuant to
the aforesaid contract shall be recognized and respected.
Henceforth, the Public Estates Authority shall exercise the rights and assume
the obligations of the Republic of the Philippines (Department of Public
Highways) arising from, or incident to, the aforesaid contract between the
Republic of the Philippines and the Construction and Development
Corporation of the Philippines.
In consideration of the foregoing transfer and assignment, the Public Estates
Authority shall issue in favor of the Republic of the Philippines the
corresponding shares of stock in said entity with an issued value of said
shares of stock (which) shall be deemed fully paid and non-assessable.
The Secretary of Public Highways and the General Manager of the Public
Estates Authority shall execute such contracts or agreements, including
appropriate agreements with the Construction and Development
Corporation of the Philippines, as may be necessary to implement the above.
Special land patent/patents shall be issued by the Secretary of Natural
Resources in favor of the Public Estates Authority without prejudice to the
subsequent transfer to the contractor or his assignees of such portion or
portions of the land reclaimed or to be reclaimed as provided for in the
above-mentioned contract. On the basis of such patents, the Land
Registration Commission shall issue the corresponding certificate of title."
(Emphasis supplied)
On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that -
"Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the
PEA which shall be responsible for its administration, development,
utilization or disposition in accordance with the provisions of Presidential
Decree No. 1084. Any and all income that the PEA may derive from the sale,
lease or use of reclaimed lands shall be used in accordance with the
provisions of Presidential Decree No. 1084."
There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its
reclaimed lands. PD No. 1085 merely transferred "ownership and administration" of
lands reclaimed from Manila Bay to PEA, while EO No. 525 declared that lands reclaimed
by PEA "shall belong to or be owned by PEA." EO No. 525 expressly states that PEA
LAND TITLES Forms&Contents (7)
should dispose of its reclaimed lands "in accordance with the provisions of Presidential
Decree No. 1084," the charter of PEA.
PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer,
deal in, subdivide, dispose, lease and sell any and all kinds of lands x x x owned,
managed, controlled and/or operated by the government." 87(Emphasis supplied) There
is, therefore, legislative authority granted to PEA to sell its lands, whether patrimonial
or alienable lands of the public domain. PEA may sell to private parties its patrimonial
propertiesin accordance with the PEA charter free from constitutional limitations. The
constitutional ban on private corporations from acquiring alienable lands of the public
domain does not apply to the sale of PEA's patrimonial lands.
PEA may also sell its alienable or disposable lands of the public domain to private
individuals since, with the legislative authority, there is no longer any statutory
prohibition against such sales and the constitutional ban does not apply to individuals.
PEA, however, cannot sell any of its alienable or disposable lands of the public domain to
private corporations since Section 3, Article XII of the 1987 Constitution expressly
prohibits such sales. The legislative authority benefits only individuals. Private
corporations remain barred from acquiring any kind of alienable land of the public
domain, including government reclaimed lands.
The provision in PD No. 1085 stating that portions of the reclaimed lands could be
transferred by PEA to the "contractor or his assignees" (Emphasis supplied) would not
apply to private corporations but only to individuals because of the constitutional ban.
Otherwise, the provisions of PD No. 1085 would violate both the 1973 and 1987
Constitutions.
The requirement of public auction in the sale of reclaimed lands
Assuming the reclaimed lands of PEA are classified as alienable or disposable lands open
to disposition, and further declared no longer needed for public service, PEA would have
to conduct a public bidding in selling or leasing these lands. PEA must observe the
provisions of Sections 63 and 67 of CA No. 141 requiring public auction, in the absence
of a law exempting PEA from holding a public auction.88 Special Patent No. 3517
expressly states that the patent is issued by authority of the Constitution and PD No.
1084, "supplemented by Commonwealth Act No. 141, as amended." This is an
acknowledgment that the provisions of CA No. 141 apply to the disposition of reclaimed
alienable lands of the public domain unless otherwise provided by law. Executive Order
No. 654,89 which authorizes PEA "to determine the kind and manner of payment for the
transfer" of its assets and properties, does not exempt PEA from the requirement of
public auction. EO No. 654 merely authorizes PEA to decide the mode of payment,
whether in kind and in installment, but does not authorize PEA to dispense with public
auction.
Moreover, under Section 79 of PD No. 1445, otherwise known as the Government
Auditing Code, the government is required to sell valuable government property through
public bidding. Section 79 of PD No. 1445 mandates that
"Section 79. When government property has become unserviceable for any
cause, or is no longer needed, it shall, upon application of the officer
accountable therefor, be inspected by the head of the agency or his duly
authorized representative in the presence of the auditor concerned and, if
found to be valueless or unsaleable, it may be destroyed in their presence. If
found to be valuable, it may be sold at public auction to the highest
bidder under the supervision of the proper committee on award or similar
body in the presence of the auditor concerned or other authorized
representative of the Commission, after advertising by printed notice in the
Official Gazette, or for not less than three consecutive days in any
newspaper of general circulation, or where the value of the property does
not warrant the expense of publication, by notices posted for a like period in
at least three public places in the locality where the property is to be sold. In
the event that the public auction fails, the property may be sold at a
private sale at such price as may be fixed by the same committee or body
concerned and approved by the Commission."
It is only when the public auction fails that a negotiated sale is allowed, in which case
the Commission on Audit must approve the selling price. 90 The Commission on Audit
implements Section 79 of the Government Auditing Code through Circular No. 89-
29691 dated January 27, 1989. This circular emphasizes that government assets must be
disposed of only through public auction, and a negotiated sale can be resorted to only in
case of "failure of public auction."
At the public auction sale, only Philippine citizens are qualified to bid for PEA's reclaimed
foreshore and submerged alienable lands of the public domain. Private corporations are
barred from bidding at the auction sale of any kind of alienable land of the public
domain.
PEA originally scheduled a public bidding for the Freedom Islands on December 10,
1991. PEA imposed a condition that the winning bidder should reclaim another 250
hectares of submerged areas to regularize the shape of the Freedom Islands, under a 60-
40 sharing of the additional reclaimed areas in favor of the winning bidder. 92 No one,
however, submitted a bid. On December 23, 1994, the Government Corporate Counsel
advised PEA it could sell the Freedom Islands through negotiation, without need of
another public bidding, because of the failure of the public bidding on December 10,
1991.93
However, the original JVA dated April 25, 1995 covered not only the Freedom Islands
and the additional 250 hectares still to be reclaimed, it also granted an option to AMARI
to reclaim another 350 hectares. The original JVA, a negotiated contract, enlarged the
reclamation area to 750 hectares.94 The failure of public bidding on December 10, 1991,
involving only 407.84 hectares,95 is not a valid justification for a negotiated sale of 750
hectares, almost double the area publicly auctioned. Besides, the failure of public
bidding happened on December 10, 1991, more than three years before the signing of
the original JVA on April 25, 1995. The economic situation in the country had greatly
improved during the intervening period.
Reclamation under the BOT Law and the Local Government Code
The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is
absolute and clear: "Private corporations or associations may not hold such alienable
lands of the public domain except by lease, x x x." Even Republic Act No. 6957 ("BOT
Law," for brevity), cited by PEA and AMARI as legislative authority to sell reclaimed lands
to private parties, recognizes the constitutional ban. Section 6 of RA No. 6957 states
"Sec. 6. Repayment Scheme. - For the financing, construction, operation and
maintenance of any infrastructure projects undertaken through the build-
operate-and-transfer arrangement or any of its variations pursuant to the
provisions of this Act, the project proponent x x x may likewise be repaid in
the form of a share in the revenue of the project or other non-monetary
payments, such as, but not limited to, the grant of a portion or percentage of
the reclaimed land, subject to the constitutional requirements with respect
to the ownership of the land: x x x." (Emphasis supplied)
A private corporation, even one that undertakes the physical reclamation of a
government BOT project, cannot acquire reclaimed alienable lands of the public domain
in view of the constitutional ban.
Section 302 of the Local Government Code, also mentioned by PEA and AMARI,
authorizes local governments in land reclamation projects to pay the contractor or
developer in kind consisting of a percentage of the reclaimed land, to wit:
"Section 302. Financing, Construction, Maintenance, Operation, and
Management of Infrastructure Projects by the Private Sector. x x x
xxx
In case of land reclamation or construction of industrial estates, the
repayment plan may consist of the grant of a portion or percentage of the
reclaimed land or the industrial estate constructed."
Although Section 302 of the Local Government Code does not contain a proviso similar
to that of the BOT Law, the constitutional restrictions on land ownership automatically
apply even though not expressly mentioned in the Local Government Code.

Thus, under either the BOT Law or the Local Government Code, the contractor or
developer, if a corporate entity, can only be paid with leaseholds on portions of the
reclaimed land. If the contractor or developer is an individual, portions of the reclaimed
land, not exceeding 12 hectares96 of non-agricultural lands, may be conveyed to him in
ownership in view of the legislative authority allowing such conveyance. This is the only
way these provisions of the BOT Law and the Local Government Code can avoid a direct
collision with Section 3, Article XII of the 1987 Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the "act of conveying the ownership of the reclaimed lands to
public respondent PEA transformed such lands of the public domain to private lands."
This theory is echoed by AMARI which maintains that the "issuance of the special patent
leading to the eventual issuance of title takes the subject land away from the land of
public domain and converts the property into patrimonial or private property." In short,
PEA and AMARI contend that with the issuance of Special Patent No. 3517 and the
corresponding certificates of titles, the 157.84 hectares comprising the Freedom Islands
have become private lands of PEA. In support of their theory, PEA and AMARI cite the
following rulings of the Court:
1. Sumail v. Judge of CFI of Cotabato,97 where the Court held
"Once the patent was granted and the corresponding certificate of title was
issued, the land ceased to be part of the public domain and became private
property over which the Director of Lands has neither control nor
jurisdiction."
2. Lee Hong Hok v. David,98 where the Court declared -
"After the registration and issuance of the certificate and duplicate
certificate of title based on a public land patent, the land covered thereby
automatically comes under the operation of Republic Act 496 subject to all
the safeguards provided therein."3. Heirs of Gregorio Tengco v. Heirs of Jose
Aliwalas,99 where the Court ruled -
"While the Director of Lands has the power to review homestead patents, he
may do so only so long as the land remains part of the public domain and
continues to be under his exclusive control; but once the patent is registered
and a certificate of title is issued, the land ceases to be part of the public
domain and becomes private property over which the Director of Lands has
neither control nor jurisdiction."
4. Manalo v. Intermediate Appellate Court,100 where the Court held
"When the lots in dispute were certified as disposable on May 19, 1971, and
free patents were issued covering the same in favor of the private
respondents, the said lots ceased to be part of the public domain and,
therefore, the Director of Lands lost jurisdiction over the same."
5.Republic v. Court of Appeals,101 where the Court stated
"Proclamation No. 350, dated October 9, 1956, of President Magsaysay
legally effected a land grant to the Mindanao Medical Center, Bureau of
Medical Services, Department of Health, of the whole lot, validly sufficient
for initial registration under the Land Registration Act. Such land grant is
constitutive of a 'fee simple' title or absolute title in favor of petitioner
Mindanao Medical Center. Thus, Section 122 of the Act, which governs the
registration of grants or patents involving public lands, provides that
'Whenever public lands in the Philippine Islands belonging to the
Government of the United States or to the Government of the Philippines
are alienated, granted or conveyed to persons or to public or private
corporations, the same shall be brought forthwith under the operation of
this Act (Land Registration Act, Act 496) and shall become registered lands.'"
The first four cases cited involve petitions to cancel the land patents and the
corresponding certificates of titles issued to private parties. These four cases uniformly
hold that the Director of Lands has no jurisdiction over private lands or that upon
issuance of the certificate of title the land automatically comes under the Torrens
System. The fifth case cited involves the registration under the Torrens System of a 12.8-
LAND TITLES Forms&Contents (7)
hectare public land granted by the National Government to Mindanao Medical Center, a Under EO No. 525, PEA became the central implementing agency of the National
government unit under the Department of Health. The National Government transferred Government to reclaim foreshore and submerged areas of the public domain. Thus, EO
the 12.8-hectare public land to serve as the site for the hospital buildings and other No. 525 declares that
facilities of Mindanao Medical Center, which performed a public service. The Court "EXECUTIVE ORDER NO. 525
affirmed the registration of the 12.8-hectare public land in the name of Mindanao Designating the Public Estates Authority as the Agency Primarily Responsible
Medical Center under Section 122 of Act No. 496. This fifth case is an example of a public for all Reclamation Projects
land being registered under Act No. 496 without the land losing its character as a Whereas, there are several reclamation projects which are ongoing or being
property of public dominion. proposed to be undertaken in various parts of the country which need to be
In the instant case, the only patent and certificates of title issued are those in the name evaluated for consistency with national programs;
of PEA, a wholly government owned corporation performing public as well as Whereas, there is a need to give further institutional support to the
proprietary functions. No patent or certificate of title has been issued to any private Government's declared policy to provide for a coordinated, economical and
party. No one is asking the Director of Lands to cancel PEA's patent or certificates of title. efficient reclamation of lands;
In fact, the thrust of the instant petition is that PEA's certificates of title should remain Whereas, Presidential Decree No. 3-A requires that all reclamation of areas
with PEA, and the land covered by these certificates, being alienable lands of the public shall be limited to the National Government or any person authorized by it
domain, should not be sold to a private corporation. under proper contract;
Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant Whereas, a central authority is needed to act on behalf of the National
private or public ownership of the land. Registration is not a mode of acquiring Government which shall ensure a coordinated and integrated approach in
ownership but is merely evidence of ownership previously conferred by any of the the reclamation of lands;
recognized modes of acquiring ownership. Registration does not give the registrant a
Whereas, Presidential Decree No. 1084 creates the Public Estates Authority
better right than what the registrant had prior to the registration. 102 The registration of
as a government corporation to undertake reclamation of lands and
lands of the public domain under the Torrens system, by itself, cannot convert public
ensure their maximum utilization in promoting public welfare and
lands into private lands.103
interests; and
Jurisprudence holding that upon the grant of the patent or issuance of the certificate of
Whereas, Presidential Decree No. 1416 provides the President with
title the alienable land of the public domain automatically becomes private land cannot
continuing authority to reorganize the national government including the
apply to government units and entities like PEA. The transfer of the Freedom Islands to
transfer, abolition, or merger of functions and offices.
PEA was made subject to the provisions of CA No. 141 as expressly stated in Special
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
Patent No. 3517 issued by then President Aquino, to wit:
by virtue of the powers vested in me by the Constitution and pursuant to
"NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the
Presidential Decree No. 1416, do hereby order and direct the following:
Philippines and in conformity with the provisions of Presidential Decree No.
Section 1. The Public Estates Authority (PEA) shall be primarily responsible
1084, supplemented by Commonwealth Act No. 141, as amended, there are
for integrating, directing, and coordinating all reclamation projects for and
hereby granted and conveyed unto the Public Estates Authority the aforesaid
on behalf of the National Government. All reclamation projects shall be
tracts of land containing a total area of one million nine hundred fifteen
approved by the President upon recommendation of the PEA, and shall be
thousand eight hundred ninety four (1,915,894) square meters; the technical
undertaken by the PEA or through a proper contract executed by it with any
description of which are hereto attached and made an integral part hereof."
person or entity; Provided, that, reclamation projects of any national
(Emphasis supplied)
government agency or entity authorized under its charter shall be
Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered
undertaken in consultation with the PEA upon approval of the President.
by PD No. 1084. Section 60 of CA No. 141 prohibits, "except when authorized by
x x x ."
Congress," the sale of alienable lands of the public domain that are transferred to
government units or entities. Section 60 of CA No. 141 constitutes, under Section 44 of As the central implementing agency tasked to undertake reclamation projects
nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the
PD No. 1529, a "statutory lien affecting title" of the registered land even if not annotated
government agency charged with leasing or selling reclaimed lands of the public domain.
on the certificate of title.104Alienable lands of the public domain held by government
The reclaimed lands being leased or sold by PEA are not private lands, in the same
entities under Section 60 of CA No. 141 remain public lands because they cannot be
manner that DENR, when it disposes of other alienable lands, does not dispose of
alienated or encumbered unless Congress passes a law authorizing their disposition.
private lands but alienable lands of the public domain. Only when qualified private
Congress, however, cannot authorize the sale to private corporations of reclaimed
parties acquire these lands will the lands become private lands. In the hands of the
alienable lands of the public domain because of the constitutional ban. Only individuals
government agency tasked and authorized to dispose of alienable of disposable lands
can benefit from such law.
of the public domain, these lands are still public, not private lands.
The grant of legislative authority to sell public lands in accordance with Section 60 of CA
Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public
No. 141 does not automatically convert alienable lands of the public domain into private
domain" as well as "any and all kinds of lands." PEA can hold both lands of the public
or patrimonial lands. The alienable lands of the public domain must be transferred to
domain and private lands. Thus, the mere fact that alienable lands of the public domain
qualified private parties, or to government entities not tasked to dispose of public lands,
like the Freedom Islands are transferred to PEA and issued land patents or certificates of
before these lands can become private or patrimonial lands. Otherwise, the
title in PEA's name does not automatically make such lands private.
constitutional ban will become illusory if Congress can declare lands of the public
To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as
domain as private or patrimonial lands in the hands of a government agency tasked to
private lands will sanction a gross violation of the constitutional ban on private
dispose of public lands. This will allow private corporations to acquire directly from
corporations from acquiring any kind of alienable land of the public domain. PEA will
government agencies limitless areas of lands which, prior to such law, are concededly
simply turn around, as PEA has now done under the Amended JVA, and transfer several
public lands.
hundreds of hectares of these reclaimed and still to be reclaimed lands to a single
private corporation in only one transaction. This scheme will effectively nullify the

constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended
to diffuse equitably the ownership of alienable lands of the public domain among
Filipinos, now numbering over 80 million strong.
This scheme, if allowed, can even be applied to alienable agricultural lands of the public
domain since PEA can "acquire x x x any and all kinds of lands." This will open the
floodgates to corporations and even individuals acquiring hundreds of hectares of
alienable lands of the public domain under the guise that in the hands of PEA these
lands are private lands. This will result in corporations amassing huge landholdings never
before seen in this country - creating the very evil that the constitutional ban was
designed to prevent. This will completely reverse the clear direction of constitutional
development in this country. The 1935 Constitution allowed private corporations to
acquire not more than 1,024 hectares of public lands. 105 The 1973 Constitution
prohibited private corporations from acquiring any kind of public land, and the 1987
Constitution has unequivocally reiterated this prohibition.
The contention of PEA and AMARI that public lands, once registered under Act No. 496
or PD No. 1529, automatically become private lands is contrary to existing laws. Several
laws authorize lands of the public domain to be registered under the Torrens System or
Act No. 496, now PD No. 1529, without losing their character as public lands. Section
122 of Act No. 496, and Section 103 of PD No. 1529, respectively, provide as follows:
Act No. 496
"Sec. 122. Whenever public lands in the Philippine Islands belonging to the x
x x Government of the Philippine Islands are alienated, granted, or conveyed
to persons or the public or private corporations, the same shall be brought
forthwith under the operation of this Act and shall become registered
lands."
PD No. 1529
"Sec. 103. Certificate of Title to Patents. Whenever public land is by the
Government alienated, granted or conveyed to any person, the same shall
be brought forthwith under the operation of this Decree." (Emphasis
supplied)
Based on its legislative history, the phrase "conveyed to any person" in Section 103 of PD
No. 1529 includes conveyances of public lands to public corporations.
Alienable lands of the public domain "granted, donated, or transferred to a province,
municipality, or branch or subdivision of the Government," as provided in Section 60 of
CA No. 141, may be registered under the Torrens System pursuant to Section 103 of PD
No. 1529. Such registration, however, is expressly subject to the condition in Section 60
of CA No. 141 that the land "shall not be alienated, encumbered or otherwise
disposed of in a manner affecting its title, except when authorized by Congress." This
provision refers to government reclaimed, foreshore and marshy lands of the public
domain that have been titled but still cannot be alienated or encumbered unless
expressly authorized by Congress. The need for legislative authority prevents the
registered land of the public domain from becoming private land that can be disposed of
to qualified private parties.
The Revised Administrative Code of 1987 also recognizes that lands of the public domain
may be registered under the Torrens System. Section 48, Chapter 12, Book I of the Code
states
"Sec. 48. Official Authorized to Convey Real Property. Whenever real
property of the Government is authorized by law to be conveyed, the deed
of conveyance shall be executed in behalf of the government by the
following:
(1) x x x
(2) For property belonging to the Republic of the Philippines, but titled in
the name of any political subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or instrumentality."
(Emphasis supplied)
Thus, private property purchased by the National Government for expansion of a public
wharf may be titled in the name of a government corporation regulating port operations
LAND TITLES Forms&Contents (7)
in the country. Private property purchased by the National Government for expansion of
an airport may also be titled in the name of the government agency tasked to administer
the airport. Private property donated to a municipality for use as a town plaza or public
school site may likewise be titled in the name of the municipality. 106 All these properties
become properties of the public domain, and if already registered under Act No. 496 or
PD No. 1529, remain registered land. There is no requirement or provision in any existing
law for the de-registration of land from the Torrens System.
Private lands taken by the Government for public use under its power of eminent
domain become unquestionably part of the public domain. Nevertheless, Section 85 of
PD No. 1529 authorizes the Register of Deeds to issue in the name of the National
Government new certificates of title covering such expropriated lands. Section 85 of PD
No. 1529 states
"Sec. 85. Land taken by eminent domain. Whenever any registered land, or
interest therein, is expropriated or taken by eminent domain, the National
Government, province, city or municipality, or any other agency or
instrumentality exercising such right shall file for registration in the proper
Registry a certified copy of the judgment which shall state definitely by an
adequate description, the particular property or interest expropriated, the
number of the certificate of title, and the nature of the public use. A
memorandum of the right or interest taken shall be made on each certificate
of title by the Register of Deeds, and where the fee simple is taken, a new
certificate shall be issued in favor of the National Government, province,
city, municipality, or any other agency or instrumentality exercising such
right for the land so taken. The legal expenses incident to the memorandum
of registration or issuance of a new certificate of title shall be for the account
of the authority taking the land or interest therein." (Emphasis supplied)
Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively
private or patrimonial lands. Lands of the public domain may also be registered pursuant
to existing laws.
AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the
Freedom Islands or of the lands to be reclaimed from submerged areas of Manila Bay. In
the words of AMARI, the Amended JVA "is not a sale but a joint venture with a
stipulation for reimbursement of the original cost incurred by PEA for the earlier
reclamation and construction works performed by the CDCP under its 1973 contract
with the Republic." Whether the Amended JVA is a sale or a joint venture, the fact
remains that the Amended JVA requires PEA to "cause the issuance and delivery of the
certificates of title conveying AMARI's Land Share in the name of AMARI." 107
This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which
provides that private corporations "shall not hold such alienable lands of the public
domain except by lease." The transfer of title and ownership to AMARI clearly means
that AMARI will "hold" the reclaimed lands other than by lease. The transfer of title and
ownership is a "disposition" of the reclaimed lands, a transaction considered a sale or
alienation under CA No. 141,108 the Government Auditing Code,109 and Section 3, Article
XII of the 1987 Constitution.
The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged
areas form part of the public domain and are inalienable. Lands reclaimed from
foreshore and submerged areas also form part of the public domain and are also
inalienable, unless converted pursuant to law into alienable or disposable lands of the
public domain. Historically, lands reclaimed by the government are sui generis, not
available for sale to private parties unlike other alienable public lands. Reclaimed lands
retain their inherent potential as areas for public use or public service. Alienable lands of
the public domain, increasingly becoming scarce natural resources, are to be distributed
equitably among our ever-growing population. To insure such equitable distribution, the
1973 and 1987 Constitutions have barred private corporations from acquiring any kind
of alienable land of the public domain. Those who attempt to dispose of inalienable
natural resources of the State, or seek to circumvent the constitutional ban on alienation
of lands of the public domain to private corporations, do so at their own risk.
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands,
now covered by certificates of title in the name of PEA, are alienable lands
of the public domain. PEA may lease these lands to private corporations but
may not sell or transfer ownership of these lands to private corporations.
PEA may only sell these lands to Philippine citizens, subject to the ownership
limitations in the 1987 Constitution and existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable
natural resources of the public domain until classified as alienable or
disposable lands open to disposition and declared no longer needed for
public service. The government can make such classification and declaration
only after PEA has reclaimed these submerged areas. Only then can these
lands qualify as agricultural lands of the public domain, which are the only
natural resources the government can alienate. In their present state, the
592.15 hectares of submerged areas are inalienable and outside the
commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI, a private corporation,
ownership of 77.34 hectares110of the Freedom Islands, such transfer is void
for being contrary to Section 3, Article XII of the 1987 Constitution which
prohibits private corporations from acquiring any kind of alienable land of
the public domain.
4. Since the Amended JVA also seeks to transfer to AMARI ownership of
290.156 hectares111 of still submerged areas of Manila Bay, such transfer is
void for being contrary to Section 2, Article XII of the 1987 Constitution
which prohibits the alienation of natural resources other than agricultural
lands of the public domain. PEA may reclaim these submerged areas.
Thereafter, the government can classify the reclaimed lands as alienable or
disposable, and further declare them no longer needed for public service.
Still, the transfer of such reclaimed alienable lands of the public domain to
AMARI will be void in view of Section 3, Article XII of the 1987 Constitution
which prohibits private corporations from acquiring any kind of alienable
land of the public domain.
Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987
Constitution. Under Article 1409112 of the Civil Code, contracts whose "object or purpose
is contrary to law," or whose "object is outside the commerce of men," are "inexistent
and void from the beginning." The Court must perform its duty to defend and uphold
the Constitution, and therefore declares the Amended JVA null and void ab initio.
Seventh issue: whether the Court is the proper forum to raise the issue of whether the
Amended JVA is grossly disadvantageous to the government.
Considering that the Amended JVA is null and void ab initio, there is no necessity to rule
on this last issue. Besides, the Court is not a trier of facts, and this last issue involves a
determination of factual matters.
WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari Coastal
Bay Development Corporation are PERMANENTLY ENJOINED from implementing the
Amended Joint Venture Agreement which is hereby declared NULL and VOID ab initio.
SO ORDERED.
DIGEST
FRANCISCO I. CHAVEZ vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY
DEVELOPMENT CORPORATION
The Public Estates Authority (PEA) is the central implementing agency tasked to
undertake reclamation projects nationwide. It took over the leasing and selling functions

of the DENR (Department of Environmental and Natural Resources) insofar as reclaimed
or about to be reclaimed foreshore lands are concerned.
PEA sought the transfer to the Amari Coastal Bay and Development Corporation, a
private corporation, of the ownership of 77.34 hectares of the Freedom Islands. PEA also
sought to have 290.156 hectares of submerged areas of Manila Bay to Amari.
ISSUE: Whether or not the transfer is valid.
HELD: No. To allow vast areas of reclaimed lands of the public domain to be transferred
to Amari as private lands will sanction a gross violation of the constitutional ban on
private corporations from acquiring any kind of alienable land of the public domain.
The Supreme Court affirmed that the 157.84 hectares of reclaimed lands comprising the
Freedom Islands, now covered by certificates of title in the name of PEA, are alienable
lands of the public domain. The 592.15 hectares of submerged areas of Manila Bay
remain inalienable natural resources of the public domain. The transfer (as embodied in
a joint venture agreement) to AMARI, a private corporation, ownership of 77.34 hectares
of the Freedom Islands, is void for being contrary to Section 3, Article XII of the 1987
Constitution which prohibits private corporations from acquiring any kind of alienable
land of the public domain. Furthermore, since the Amended JVA also seeks to transfer to
Amari ownership of 290.156 hectares of still submerged areas of Manila Bay, such
transfer is void for being contrary to Section 2, Article XII of the 1987 Constitution which
prohibits the alienation of natural resources other than agricultural lands of the public
domain.
Chavez v. National Housing Authority
G.R. No. 164527 15 August 2007
DECISION
VELASCO, JR., J.:
In this Petition for Prohibition and Mandamus with Prayer for Temporary Restraining
Order and/or Writ of Preliminary Injunction under Rule 65, petitioner, in his capacity as
taxpayer, seeks:
to declare NULL AND VOID the Joint Venture Agreement (JVA) dated March 9, 1993
between the National Housing Authority and R-II Builders, Inc. and the Smokey
Mountain Development and Reclamation Project embodied therein; the subsequent
amendments to the said JVA; and all other agreements signed and executed in relation
thereto including, but not limited to the Smokey Mountain Asset Pool Agreement dated
LAND TITLES Forms&Contents (7)
26 September 1994 and the separate agreements for Phase I and Phase II of the
Projectas well as all other transactions which emanated therefrom, for being
UNCONSTITUTIONAL and INVALID;
to enjoin respondentsparticularly respondent NHAfrom further implementing and/or
enforcing the said project and other agreements related thereto, and from further
deriving and/or enjoying any rights, privileges and interest therefrom x x x; and
to compel respondents to disclose all documents and information relating to the
projectincluding, but not limited to, any subsequent agreements with respect to the
different phases of the project, the revisions over the original plan, the additional works
incurred thereon, the current financial condition of respondent R-II Builders, Inc., and
the transactions made respecting the project.[1]
The Facts
On March 1, 1988, then President Corazon C. Aquino issued Memorandum Order No.
(MO) 161[2] approving and directing the implementation of the Comprehensive and
Integrated Metropolitan Manila Waste Management Plan (the Plan). The Metro Manila
Commission, in coordination with various government agencies, was tasked as the lead
agency to implement the Plan as formulated by the Presidential Task Force on Waste
Management created by Memorandum Circular No. 39. A day after, on March 2, 1988,
MO 161-A[3] was issued, containing the guidelines which prescribed the functions and
responsibilities of fifteen (15) various government departments and offices tasked to
implement the Plan, namely: Department of Public Works and Highway (DPWH),
Department of Health (DOH), Department of Environment and Natural Resources
(DENR), Department of Transportation and Communication, Department of Budget and
Management, National Economic and Development Authority (NEDA), Philippine
Constabulary Integrated National Police, Philippine Information Agency and the Local
Government Unit (referring to the City of Manila), Department of Social Welfare and
Development, Presidential Commission for Urban Poor, National Housing Authority
(NHA), Department of Labor and Employment, Department of Education, Culture and
Sports (now Department of Education), and Presidential Management Staff.
Specifically, respondent NHA was ordered to conduct feasibility studies and develop low-
cost housing projects at the dumpsite and absorb scavengers in NHA resettlement/low-
cost housing projects.[4] On the other hand, the DENR was tasked to review and
evaluate proposed projects under the Plan with regard to their environmental impact,
conduct regular monitoring of activities of the Plan to ensure compliance with
environmental standards and assist DOH in the conduct of the study on hospital waste
management.[5]
At the time MO 161-A was issued by President Aquino, Smokey Mountain was a
wasteland in Balut, Tondo, Manila, where numerous Filipinos resided in subhuman
conditions, collecting items that may have some monetary value from the garbage. The
Smokey Mountain dumpsite is bounded on the north by the Estero Marala, on the south
by the property of the National Government, on the east by the property of B and I
Realty Co., and on the west by Radial Road 10 (R-10).
Pursuant to MO 161-A, NHA prepared the feasibility studies of the Smokey Mountain
low-cost housing project which resulted in the formulation of the Smokey Mountain
Development Plan and Reclamation of the Area Across R-10 or the Smokey Mountain
Development and Reclamation Project (SMDRP; the Project). The Project aimed to
convert the Smokey Mountain dumpsite into a habitable housing project, inclusive of the
reclamation of the area across R-10, adjacent to the Smokey Mountain as the enabling
component of the project.[6] Once finalized, the Plan was submitted to President Aquino
for her approval.
On July 9, 1990, the Build-Operate-and-Transfer (BOT) Law (Republic Act No. [RA] 6957)
was enacted.[7] Its declared policy under Section 1 is [t]o recognize the indispensable
role of the private sector as the main engine for national growth and development and
provide the most appropriate favorable incentives to mobilize private resources for the
purpose. Sec. 3 authorized and empowered [a]ll government infrastructure agencies,
including government-owned and controlled corporations and local government units x x
x to enter into contract with any duly pre-qualified private contractor for the financing,
construction, operation and maintenance of any financially viable infrastructure facilities
through the build-operate-transfer or build and transfer scheme.
RA 6957 defined build-and-transfer scheme as [a] contractual arrangement whereby the
contractor undertakes the construction, including financing, of a given infrastructure
facility, and its turnover after the completion to the government agency or local
government unit concerned which shall pay the contractor its total investment
expended on the project, plus reasonable rate of return thereon. The last paragraph of
Sec. 6 of the BOT Law provides that the repayment scheme in the case of land
reclamation or the building of industrial estates may consist of [t]he grant of a portion or
percentage of the reclaimed land or industrial estate built, subject to the constitutional
requirements with respect to the ownership of lands.
On February 10, 1992, Joint Resolution No. 03[8] was passed by both houses of
Congress. Sec. 1 of this resolution provided, among other things, that:
Section 1. There is hereby approved the following national infrastructure projects for
implementation under the provisions of Republic Act No. 6957 and its implementing
rules and regulations:
xxxx
(d) Port infrastructure like piers, wharves, quays, storage handling, ferry service and
related facilities;
xxxx
(k) Land reclamation, dredging and other related development facilities;
(l) Industrial estates, regional industrial centers and export processing zones including
steel mills, iron-making and petrochemical complexes and related infrastructure and
utilities;
xxxx
(p) Environmental and solid waste management-related facilities such as collection
equipment, composting plants, incinerators, landfill and tidal barriers, among others;
and
(q) Development of new townsites and communities and related facilities.
This resolution complied with and conformed to Sec. 4 of the BOT Law requiring the
approval of all national infrastructure projects by the Congress.
On January 17, 1992, President Aquino proclaimed MO 415[9] approving and directing
the implementation of the SMDRP. Secs. 3 and 4 of the Memorandum Order stated:
Section 3. The National Housing Authority is hereby directed to implement the Smokey
Mountain Development Plan and Reclamation of the Area Across R-10 through a private
sector joint venture scheme at the least cost to the government.
Section 4. The land area covered by the Smokey Mountain dumpsite is hereby conveyed
to the National Housing Authority as well as the area to be reclaimed across R-10.
In addition, the Public Estates Authority (PEA) was directed to assist in the evaluation of
proposals regarding the technical feasibility of reclamation, while the DENR was directed
to (1) facilitate titling of Smokey Mountain and of the area to be reclaimed and (2) assist
in the technical evaluation of proposals regarding environmental impact statements.[10]
In the same MO 415, President Aquino created an Executive Committee (EXECOM) to
oversee the implementation of the Plan, chaired by the National Capital Region-Cabinet
Officer for Regional Development (NCR-CORD) with the heads of the NHA, City of
Manila, DPWH, PEA, Philippine Ports Authority (PPA), DENR, and Development Bank of
the Philippines (DBP) as members.[11] The NEDA subsequently became a member of the
EXECOM. Notably, in a September 2, 1994 Letter,[12] PEA General Manager Amado
Lagdameo approved the plans for the reclamation project prepared by the NHA.
In conformity with Sec. 5 of MO 415, an inter-agency technical committee (TECHCOM)
was created composed of the technical representatives of the EXECOM [t]o assist the
NHA in the evaluation of the project proposals, assist in the resolution of all issues and
problems in the project to ensure that all aspects of the development from squatter
relocation, waste management, reclamation, environmental protection, land and house

construction meet governing regulation of the region and to facilitate the completion of
the project.[13]
Subsequently, the TECHCOM put out the Public Notice and Notice to Pre-Qualify and Bid
for the right to become NHAs joint venture partner in the implementation of the SMDRP.
The notices were published in newspapers of general circulation on January 23 and 26
and February 1, 14, 16, and 23, 1992, respectively. Out of the thirteen (13) contractors
who responded, only five (5) contractors fully complied with the required pre-
qualification documents. Based on the evaluation of the pre-qualification documents,
the EXECOM declared the New San Jose Builders, Inc. and R-II Builders, Inc. (RBI) as the
top two contractors.[14]
Thereafter, the TECHCOM evaluated the bids (which include the Pre-feasibility Study and
Financing Plan) of the top two (2) contractors in this manner:
(1) The DBP, as financial advisor to the Project, evaluated their Financial Proposals;
(2) The DPWH, PPA, PEA and NHA evaluated the Technical Proposals for the Housing
Construction and Reclamation;
(3) The DENR evaluated Technical Proposals on Waste Management and Disposal by
conducting the Environmental Impact Analysis; and
(4) The NHA and the City of Manila evaluated the socio-economic benefits presented by
the proposals.
On June 30, 1992, Fidel V. Ramos assumed the Office of the President (OP) of the
Philippines.
On August 31, 1992, the TECHCOM submitted its recommendation to the EXECOM to
approve the R-II Builders, Inc. (RBI) proposal which garnered the highest score of
88.475%.
Subsequently, the EXECOM made a Project briefing to President Ramos. As a result,
President Ramos issued Proclamation No. 39[15] on September 9, 1992, which reads:
WHEREAS, the National Housing Authority has presented a viable conceptual plan to
convert the Smokey Mountain dumpsite into a habitable housing project, inclusive of the
reclamation of the area across Road Radial 10 (R-10) adjacent to the Smokey Mountain
as the enabling component of the project;
xxxx
These parcels of land of public domain are hereby placed under the administration and
disposition of the National Housing Authority to develop, subdivide and dispose to
qualified beneficiaries, as well as its development for mix land use
(commercial/industrial) to provide employment opportunities to on-site families and
additional areas for port-related activities.
In order to facilitate the early development of the area for disposition, the Department
of Environment and Natural Resources, through the Lands and Management Bureau, is
hereby directed to approve the boundary and subdivision survey and to issue a special
LAND TITLES Forms&Contents (7)
patent and title in the name of the National Housing Authority, subject to final survey
and private rights, if any there be. (Emphasis supplied.)
On October 7, 1992, President Ramos authorized NHA to enter into a Joint Venture
Agreement with RBI [s]ubject to final review and approval of the Joint Venture
Agreement by the Office of the President.[16]
On March 19, 1993, the NHA and RBI entered into a Joint Venture Agreement[17] (JVA)
for the development of the Smokey Mountain dumpsite and the reclamation of the area
across R-10 based on Presidential Decree No. (PD) 757[18] which mandated NHA [t]o
undertake the physical and socio-economic upgrading and development of lands of the
public domain identified for housing, MO 161-A which required NHA to conduct the
feasibility studies and develop a low-cost housing project at the Smokey Mountain, and
MO 415 as amended by MO 415-A which approved the Conceptual Plan for Smokey
Mountain and creation of the EXECOM and TECHCOM. Under the JVA, the Project
involves the clearing of Smokey Mountain for eventual development into a low cost
medium rise housing complex and industrial/commercial site with the reclamation of
the area directly across [R-10] to act as the enabling component of the Project.[19] The
JVA covered a lot in Tondo, Manila with an area of two hundred twelve thousand two
hundred thirty-four (212,234) square meters and another lot to be reclaimed also in
Tondo with an area of four hundred thousand (400,000) square meters.
The Scope of Work of RBI under Article II of the JVA is as follows:
a) To fully finance all aspects of development of Smokey Mountain and reclamation of
no more than 40 hectares of Manila Bay area across Radial Road 10.
b) To immediately commence on the preparation of feasibility report and detailed
engineering with emphasis to the expedient acquisition of the Environmental Clearance
Certificate (ECC) from the DENR.
c) The construction activities will only commence after the acquisition of the ECC, and
d) Final details of the contract, including construction, duration and delivery timetables,
shall be based on the approved feasibility report and detailed engineering.
Other obligations of RBI are as follows:
2.02 The [RBI] shall develop the PROJECT based on the Final Report and Detailed
Engineering as approved by the Office of the President. All costs and expenses for hiring
technical personnel, date gathering, permits, licenses, appraisals, clearances, testing and
similar undertaking shall be for the account of the [RBI].
2.03 The [RBI] shall undertake the construction of 3,500 temporary housing units
complete with basic amenities such as plumbing, electrical and sewerage facilities within
the temporary housing project as staging area to temporarily house the squatter families
from the Smokey Mountain while development is being undertaken. These temporary
housing units shall be turned over to the [NHA] for disposition.
2.04 The [RBI] shall construct 3,500 medium rise low cost permanent housing units on
the leveled Smokey Mountain complete with basic utilities and amenities, in accordance
with the plans and specifications set forth in the Final Report approved by the [NHA].
Completed units ready for mortgage take out shall be turned over by the [RBI] to NHA
on agreed schedule.
2.05 The [RBI] shall reclaim forty (40) hectares of Manila Bay area directly across [R-10]
as contained in Proclamation No. 39 as the enabling component of the project and
payment to the [RBI] as its asset share.
2.06 The [RBI] shall likewise furnish all labor materials and equipment necessary to
complete all herein development works to be undertaken on a phase to phase basis in
accordance with the work program stipulated therein.
The profit sharing shall be based on the approved pre-feasibility report submitted to the
EXECOM, viz:
For the developer (RBI):
1. To own the forty (40) hectares of reclaimed land.
2. To own the commercial area at the Smokey Mountain area composed of 1.3 hectares,
and
3. To own all the constructed units of medium rise low cost permanent housing units
beyond the 3,500 units share of the [NHA].
For the NHA:
1. To own the temporary housing consisting of 3,500 units.
2. To own the cleared and fenced incinerator site consisting of 5 hectares situated at the
Smokey Mountain area.
3. To own the 3,500 units of permanent housing to be constructed by [RBI] at the
Smokey Mountain area to be awarded to qualified on site residents.
4. To own the Industrial Area site consisting of 3.2 hectares, and
5. To own the open spaces, roads and facilities within the Smokey Mountain area.
In the event of extraordinary increase in labor, materials, fuel and non-recoverability of
total project expenses,[20] the OP, upon recommendation of the NHA, may approve a
corresponding adjustment in the enabling component.
The functions and responsibilities of RBI and NHA are as follows:
For RBI:
4.01 Immediately commence on the preparation of the FINAL REPORT with emphasis to
the expedient acquisition, with the assistance of the [NHA] of Environmental Compliance
Certificate (ECC) from the Environmental Management Bureau (EMB) of the [DENR].

Construction shall only commence after the acquisition of the ECC. The Environment
Compliance Certificate (ECC) shall form part of the FINAL REPORT.
The FINAL REPORT shall provide the necessary subdivision and housing plans, detailed
engineering and architectural drawings, technical specifications and other related and
required documents relative to the Smokey Mountain area.
With respect to the 40-hectare reclamation area, the [RBI] shall have the discretion to
develop the same in a manner that it deems necessary to recover the [RBIs] investment,
subject to environmental and zoning rules.
4.02 Finance the total project cost for land development, housing construction and
reclamation of the PROJECT.
4.03 Warrant that all developments shall be in compliance with the requirements of the
FINAL REPORT.
4.04 Provide all administrative resources for the submission of project accomplishment
reports to the [NHA] for proper evaluation and supervision on the actual
implementation.
4.05 Negotiate and secure, with the assistance of the [NHA] the grant of rights of way to
the PROJECT, from the owners of the adjacent lots for access road, water, electrical
power connections and drainage facilities.
4.06 Provide temporary field office and transportation vehicles (2 units), one (1)
complete set of computer and one (1) unit electric typewriter for the [NHAs] field
personnel to be charged to the PROJECT.
For the NHA:
4.07 The [NHA] shall be responsible for the removal and relocation of all squatters within
Smokey Mountain to the Temporary Housing Complex or to other areas prepared as
relocation areas with the assistance of the [RBI]. The [RBI] shall be responsible in
releasing the funds allocated and committed for relocation as detailed in the FINAL
REPORT.
4.08 Assist the [RBI] and shall endorse granting of exemption fees in the acquisition of all
necessary permits, licenses, appraisals, clearances and accreditations for the PROJECT
subject to existing laws, rules and regulations.
4.09 The [NHA] shall inspect, evaluate and monitor all works at the Smokey Mountain
and Reclamation Area while the land development and construction of housing units are
in progress to determine whether the development and construction works are
undertaken in accordance with the FINAL REPORT. If in its judgment, the PROJECT is not
pursued in accordance with the FINAL REPORT, the [NHA] shall require the [RBI] to
undertake necessary remedial works. All expenses, charges and penalties incurred for
such remedial, if any, shall be for the account of the [RBI].
4.10 The [NHA] shall assist the [RBI] in the complete electrification of the PROJECT. x x x
LAND TITLES Forms&Contents (7)
The PROJECT shall consist of Phase I and Phase II.
4.11 Handle the processing and documentation of all sales transactions related to its
assets shares from the venture such as the 3,500 units of permanent housing and the Phase I shall involve the following:
allotted industrial area of 3.2 hectares.
a. the construction of 2,992 units of temporary housing for the affected
4.12 All advances outside of project costs made by the [RBI] to the [NHA] shall be residents while clearing and development of Smokey Mountain [are] being undertaken
deducted from the proceeds due to the [NHA].
b. the clearing of Smokey Mountain and the subsequent construction of 3,520
4.13 The [NHA] shall be responsible for the acquisition of the Mother Title for the units of medium rise housing and the development of the industrial/commercial site
Smokey Mountain and Reclamation Area within 90 days upon submission of Survey within the Smokey Mountain area
returns to the Land Management Sector. The land titles to the 40-hectare reclaimed
land, the 1.3 hectare commercial area at the Smokey Mountain area and the constructed
units of medium-rise permanent housing units beyond the 3,500 units share of the c. the reclamation and development of a 79 hectare area directly across Radial
[NHA] shall be issued in the name of the [RBI] upon completion of the project. However, Road 10 to serve as the enabling component of Phase I
the [RBI] shall have the authority to pre-sell its share as indicated in this agreement.
Phase II shall involve the following:
The final details of the JVA, which will include the construction duration, costs, extent of
reclamation, and delivery timetables, shall be based on the FINAL REPORT which will be
contained in a Supplemental Agreement to be executed later by the parties. a. the construction and operation of an incinerator plant that will conform to
the emission standards of the DENR
The JVA may be modified or revised by written agreement between the NHA and RBI
specifying the clauses to be revised or modified and the corresponding amendments. b. the reclamation and development of 119-hectare area contiguous to that to be
reclaimed under Phase I to serve as the enabling component of Phase II.
If the Project is revoked or terminated by the Government through no fault of RBI or by
Under the ARJVA, RBI shall construct 2,992 temporary housing units, a reduction from
mutual agreement, the Government shall compensate RBI for its actual expenses
incurred in the Project plus a reasonable rate of return not exceeding that stated in the 3,500 units under the JVA.[27] However, it was required to construct 3,520 medium-rise
feasibility study and in the contract as of the date of such revocation, cancellation, or low-cost permanent housing units instead of 3,500 units under the JVA. There was a
termination on a schedule to be agreed upon by both parties. substantial change in the design of the permanent housing units such that a loft shall be
incorporated in each unit so as to increase the living space from 20 to 32 square meters.
The additions and changes in the Original Project Component are as follows:
As a preliminary step in the project implementation, consultations and dialogues were
conducted with the settlers of the Smokey Mountain Dumpsite Area. At the same time,
DENR started processing the application for the Environmental Clearance Certificate ORIGINAL CHANGES/REVISIONS
(ECC) of the SMDRP. As a result however of the consultative dialogues, public hearings,
the report on the on-site field conditions, the Environmental Impact Statement (EIS)
1. TEMPORARY HOUSING
published on April 29 and May 12, 1993 as required by the Environmental Management
Bureau of DENR, the evaluation of the DENR, and the recommendations from other
government agencies, it was discovered that design changes and additional work have to Wood/Plywood, ga. 31 G.I. Concrete/Steel Frame Structure Sheet usable life of 3 years,
be undertaken to successfully implement the Project.[21] gauge 26 G.I. roofing sheets future 12 SM floor area. use as permanent structures for
factory and warehouses mixed 17 sm & 12 sm floor area.
Thus, on February 21, 1994, the parties entered into another agreement denominated
as the Amended and Restated Joint Venture Agreement[22] (ARJVA) which delineated 2. MEDIUM RISE MASS
the different phases of the Project. Phase I of the Project involves the construction of HOUSING
temporary housing units for the current residents of the Smokey Mountain dumpsite,
the clearing and leveling-off of the dumpsite, and the construction of medium-rise low-
Box type precast Shelter Conventional and precast component 20 square meter concrete
cost housing units at the cleared and leveled dumpsite.[23] Phase II of the Project
structures, 32 square floor area with 2.4 meter meter floor area with loft floor height;
involves the construction of an incineration area for the on-site disposal of the garbage
bare type, 160 units/ (sleeping quarter) 3.6 m. floor building. height, painted and
at the dumpsite.[24] The enabling component or consideration for Phase I of the Project
improved
was increased from 40 hectares of reclaimed lands across R-10 to 79 hectares.[25] The
revision also provided for the enabling component for Phase II of 119 hectares of architectural faade, 80 units/
reclaimed lands contiguous to the 79 hectares of reclaimed lands for Phase I.[26] building.
Furthermore, the amended contract delineated the scope of works and the terms and 3. MITIGATING MEASURES
conditions of Phases I and II, thus:

3.1 For reclamation work Use of clean dredgefill material below the MLLW and SM
material mixed with dredgefill above MLLW.
a. 100% use of Smokey
Mountain material as
dredgefill Use of Steel Sheet Piles needed
for longer depth of embedment.
b. Concrete Sheet Piles
short depth of
embedment
c. Silt removal approximately Need to remove more than 3.0
1.0 meter only meters of silt after sub-soil investigation.[28]
These material and substantial modifications served as justifications for the increase in
the share of RBI from 40 hectares to 79 hectares of reclaimed land.
Under the JVA, the specific costs of the Project were not stipulated but under the ARJVA,
the stipulated cost for Phase I was pegged at six billion six hundred ninety-three million
three hundred eighty-seven thousand three hundred sixty-four pesos (PhP
6,693,387,364).
In his February 10, 1994 Memorandum, the Chairperson of the SMDRP EXECOM
submitted the ARJVA for approval by the OP. After review of said agreement, the OP
directed that certain terms and conditions of the ARJVA be further clarified or amended
preparatory to its approval. Pursuant to the Presidents directive, the parties reached an
agreement on the clarifications and amendments required to be made on the ARJVA.
On August 11, 1994, the NHA and RBI executed an Amendment To the Amended and
Restated Joint Venture Agreement (AARJVA)[29] clarifying certain terms and condition of
the ARJVA, which was submitted to President Ramos for approval, to wit:
Phase II shall involve the following:
a. the construction and operation of an incinerator plant that will conform to the
emission standards of the DENR
b. the reclamation and development of 119-hectare area contiguous to that to be
reclaimed under Phase I to serve as the enabling component of Phase II, the exact size
and configuration of which shall be approved by the SMDRP Committee[30]
Other substantial amendments are the following:
4. Paragraph 2.05 of Article II of the ARJVA is hereby amended to read as follows:
2.05. The DEVELOPER shall reclaim seventy nine (79) hectares of the Manila Bay area
directly across Radial Road 10 (R-10) to serve as payment to the DEVELOPER as its asset
share for Phase I and to develop such land into commercial area with port facilities;
provided, that the port plan shall be integrated with the Philippine Port Authoritys North
Harbor plan for the Manila Bay area and provided further, that the final reclamation and
port plan for said reclaimed area shall be submitted for approval by the Public Estates
Authority and the Philippine Ports Authority, respectively: provided finally, that subject
LAND TITLES Forms&Contents (7)
to par. 2.02 above, actual reclamation work may commence upon approval of the final
reclamation plan by the Public Estates Authority.
xxxx
9. A new paragraph to be numbered 5.05 shall be added to Article V of the ARJVA, and
shall read as follows:
5.05. In the event this Agreement is revoked, cancelled or terminated by the AUTHORITY
through no fault of the DEVELOPER, the AUTHORITY shall compensate the DEVELOPER
for the value of the completed portions of, and actual expenditures on the PROJECT plus
a reasonable rate of return thereon, not exceeding that stated in the Cost Estimates of
Items of Work previously approved by the SMDRP Executive Committee and the
AUTHORITY and stated in this Agreement, as of the date of such revocation, cancellation,
or termination, on a schedule to be agreed upon by the parties, provided that said
completed portions of Phase I are in accordance with the approved FINAL REPORT.
Afterwards, President Ramos issued Proclamation No. 465 dated August 31, 1994[31]
increasing the proposed area for reclamation across R-10 from 40 hectares to 79
hectares,[32] to wit:
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by
virtue of the powers vested in me by the law, and as recommended by the SMDRP
Executive Committee, do hereby authorize the increase of the area of foreshore or
submerged lands of Manila Bay to be reclaimed, as previously authorized under
Proclamation No. 39 (s. 1992) and Memorandum Order No. 415 (s. 1992), from Four
Hundred Thousand (400,000) square meters, more or less, to Seven Hundred Ninety
Thousand (790,000) square meters, more or less.
On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued Special Patent
No. 3591 conveying in favor of NHA an area of 211,975 square meters covering the
Smokey Mountain Dumpsite.
In its September 7, 1994 letter to the EXECOM, the OP through then Executive Secretary
Teofisto T. Guingona, Jr., approved the ARJVA as amended by the AARJVA.
On September 8, 1994, the DENR issued Special Patent 3592 pursuant to Proclamation
No. 39, conveying in favor of NHA a 401,485-square meter area.
On September 26, 1994, the NHA, RBI, Home Insurance and Guaranty Corporation
(HIGC), now known as the Home Guaranty Corporation, and the Philippine National
Bank (PNB)[33] executed the Smokey Mountain Asset Pool Formation Trust Agreement
(Asset Pool Agreement).[34] Thereafter, a Guaranty Contract was entered into by NHA,
RBI, and HIGC.
On June 23, 1994, the Legislature passed the Clean Air Act.[35] The Act made the
establishment of an incinerator illegal and effectively barred the implementation of the
planned incinerator project under Phase II. Thus, the off-site disposal of the garbage at
the Smokey Mountain became necessary.[36]
The land reclamation was completed in August 1996.[37]
Sometime later in 1996, pursuant likewise to Proclamation No. 39, the DENR issued
Special Patent No. 3598 conveying in favor of NHA an additional 390,000 square meter
area.
During the actual construction and implementation of Phase I of the SMDRP, the Inter-
Agency Technical Committee found and recommended to the EXECOM on December 17,
1997 that additional works were necessary for the completion and viability of the
Project. The EXECOM approved the recommendation and so, NHA instructed RBI to
implement the change orders or necessary works.[38]
Such necessary works comprised more than 25% of the original contract price and as a
result, the Asset Pool incurred direct and indirect costs. Based on C1 12 A of the
Implementing Rules and Regulations of PD 1594, a supplemental agreement is required
for all change orders and extra work orders, the total aggregate cost of which being
more than twenty-five (25%) of the escalated original contract price.
The EXECOM requested an opinion from the Department of Justice (DOJ) to determine
whether a bidding was required for the change orders and/or necessary works. The DOJ,
through DOJ Opinion Nos. 119 and 155 dated August 26, 1993 and November 12, 1993,
opined that a rebidding, pursuant to the aforequoted provisions of the implementing
rules (referring to PD 1594) would not be necessary where the change orders
inseparable from the original scope of the project, in which case, a negotiation with the
incumbent contractor may be allowed.
Thus, on February 19, 1998, the EXECOM issued a resolution directing NHA to enter into
a supplemental agreement covering said necessary works.
On March 20, 1998, the NHA and RBI entered into a Supplemental Agreement covering
the aforementioned necessary works and submitted it to the President on March 24,
1998 for approval.
Outgoing President Ramos decided to endorse the consideration of the Supplemental
Agreement to incoming President Joseph E. Estrada. On June 30, 1998, Estrada became
the 13th Philippine President.
However, the approval of the Supplemental Agreement was unacted upon for five
months. As a result, the utilities and the road networks were constructed to cover only
the 79-hectare original enabling component granted under the ARJVA. The 220-hectare
extension of the 79-hectare area was no longer technically feasible. Moreover, the
financial crises and unreliable real estate situation made it difficult to sell the remaining
reclaimed lots. The devaluation of the peso and the increase in interest cost led to the
substantial increase in the cost of reclamation.
On August 1, 1998, the NHA granted RBIs request to suspend work on the SMDRP due to
the delay in the approval of the Supplemental Agreement, the consequent absence of an
enabling component to cover the cost of the necessary works for the project, and the
resulting inability to replenish the Asset Pool funds partially used for the completion of
the necessary works.[39]
As of August 1, 1998 when the project was suspended, RBI had already accomplished a
portion of the necessary works and change orders which resulted in [RBI] and the Asset
Pool incurring advances for direct and indirect cost which amount can no longer be
covered by the 79-hectare enabling component under the ARJVA.[40]

Repeated demands were made by RBI in its own capacity and on behalf of the asset pool
on NHA for payment for the advances for direct and indirect costs subject to NHA
validation.
In November 1998, President Estrada issued Memorandum Order No. 33 reconstituting
the SMDRP EXECOM and further directed it to review the Supplemental Agreement and
submit its recommendation on the completion of the SMDRP.
The reconstituted EXECOM conducted a review of the project and recommended the
amendment of the March 20, 1998 Supplemental Agreement to make it more feasible
and to identify and provide new sources of funds for the project and provide for a new
enabling component to cover the payment for the necessary works that cannot be
covered by the 79-hectare enabling component under the ARJVA.[41]
The EXECOM passed Resolution Nos. 99-16-01 and 99-16-02[42] which approved the
modification of the Supplemental Agreement, to wit:
a) Approval of 150 hectares additional reclamation in order to make the reclamation
feasible as part of the enabling component.
b) The conveyance of the 15-hectare NHA Vitas property (actually 17 hectares based on
surveys) to the SMDRP Asset Pool.
c) The inclusion in the total development cost of other additional, necessary and
indispensable infrastructure works and the revision of the original cost stated in the
Supplemental Agreement dated March 20, 1998 from PhP 2,953,984,941.40 to PhP
2,969,134,053.13.
d) Revision in the sharing agreement between the parties.
In the March 23, 2000 OP Memorandum, the EXECOM was authorized to proceed and
complete the SMDRP subject to certain guidelines and directives.
After the parties in the case at bar had complied with the March 23, 2000
Memorandum, the NHA November 9, 2000 Resolution No. 4323 approved the
conveyance of the 17-hectare Vitas property in favor of the existing or a newly created
Asset Pool of the project to be developed into a mixed commercial-industrial area,
subject to certain conditions.
On January 20, 2001, then President Estrada was considered resigned. On the same day,
President Gloria M. Arroyo took her oath as the 14th President of the Philippines.
As of February 28, 2001, the estimated total project cost of the SMDRP has reached
P8.65 billion comprising of P4.78 billion in direct cost and P3.87 billion in indirect cost,
[43] subject to validation by the NHA.
On August 28, 2001, NHA issued Resolution No. 4436 to pay for the various necessary
works/change orders to SMDRP, to effect the corresponding enabling component
LAND TITLES Forms&Contents (7)
consisting of the conveyance of the NHAs Vitas Property and an additional 150-hectare
reclamation area and to authorize the release by NHA of PhP 480 million as advance to
the project to make the Permanent Housing habitable, subject to reimbursement from
the proceeds of the expanded enabling component.[44]
On November 19, 2001, the Amended Supplemental Agreement (ASA) was signed by the
parties, and on February 28, 2002, the Housing and Urban Development Coordinating
Council (HUDCC) submitted the agreement to the OP for approval.
In the July 20, 2002 Cabinet Meeting, HUDCC was directed to submit the works covered
by the PhP 480 million [advance to the Project] and the ASA to public bidding.[45] On
August 28, 2002, the HUDCC informed RBI of the decision of the Cabinet.
In its September 2, 2002 letter to the HUDCC Chairman, RBI lamented the decision of the
government to bid out the remaining works under the ASA thereby unilaterally
terminating the Project with RBI and all the agreements related thereto. RBI demanded
the payment of just compensation for all accomplishments and costs incurred in
developing the SMDRP plus a reasonable rate of return thereon pursuant to Section 5.05
of the ARJVA and Section 6.2 of the ASA.[46]
Consequently, the parties negotiated the terms of the termination of the JVA and other
subsequent agreements.
On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement (MOA)
whereby both parties agreed to terminate the JVA and other subsequent agreements,
thus:
1. TERMINATION
1.1 In compliance with the Cabinet directive dated 30 July 2002 to submit the works
covered by the P480 Million and the ASA to public bidding, the following agreements
executed by and between the NHA and the DEVELOPER are hereby terminated, to wit:
a. Joint Venture Agreement (JVA) dated 19 March 1993
b. Amended and Restated Joint Venture Agreement (ARJVA) dated 21 February 1994
c. Amendment and Restated Joint Venture Agreement dated 11 August 1994
d. Supplemental Agreement dated 24 March 1998
e. Amended Supplemental Agreement (ASA) dated 19 November 2001.
xxxx
5. SETTLEMENT OF CLAIMS
5.1 Subject to the validation of the DEVELOPERs claims, the NHA hereby agrees to
initially compensate the Developer for the abovementioned costs as follows:
a. Direct payment to DEVELOPER of the amounts herein listed in the following manner:
a.1 P250 Million in cash from the escrow account in accordance with Section 2 herewith;
a.2 Conveyance of a 3 hectare portion of the Vitas Industrial area immediately after joint
determination of the appraised value of the said property in accordance with the
procedure herein set forth in the last paragraph of Section 5.3. For purposes of all
payments to be made through conveyance of real properties, the parties shall secure
from the NHA Board of Directors all documents necessary and sufficient to effect the
transfer of title over the properties to be conveyed to RBI, which documents shall be
issued within a reasonable period.
5.2 Any unpaid balance of the DEVELOPERS claims determined after the validation
process referred to in Section 4 hereof, may be paid in cash, bonds or through the
conveyance of properties or any combination thereof. The manner, terms and conditions
of payment of the balance shall be specified and agreed upon later within a period of
three months from the time a substantial amount representing the unpaid balance has
been validated pursuant hereto including, but not limited to the programming of
quarterly cash payments to be sourced by the NHA from its budget for debt servicing,
from its income or from any other sources.
5.3 In any case the unpaid balance is agreed to be paid, either partially or totally through
conveyance of properties, the parties shall agree on which properties shall be subject to
conveyance. The NHA and DEVELOPER hereby agree to determine the valuation of the
properties to be conveyed by getting the average of the appraisals to be made by two (2)
mutually acceptable independent appraisers.
Meanwhile, respondent Harbour Centre Port Terminal, Inc. (HCPTI) entered into an
agreement with the asset pool for the development and operations of a port in the
Smokey Mountain Area which is a major component of SMDRP to provide a source of
livelihood and employment for Smokey Mountain residents and spur economic growth.
A Subscription Agreement was executed between the Asset Pool and HCPTI whereby the
asset pool subscribed to 607 million common shares and 1,143 million preferred shares
of HCPTI. The HCPTI preferred shares had a premium and penalty interest of 7.5% per
annum and a mandatory redemption feature. The asset pool paid the subscription by
conveying to HCPTI a 10-hectare land which it acquired from the NHA being a portion of
the reclaimed land of the SMDRP. Corresponding certificates of titles were issued to
HCPTI, namely: TCT Nos. 251355, 251356, 251357, and 251358.
Due to HCPTIs failure to obtain a license to handle foreign containerized cargo from PPA,
it suffered a net income loss of PhP 132,621,548 in 2002 and a net loss of PhP
15,540,063 in 2003. The Project Governing Board of the Asset Pool later conveyed by
way of dacion en pago a number of HCPTI shares to RBI in lieu of cash payment for the
latters work in SMDRP.
On August 5, 2004, former Solicitor General Francisco I. Chavez, filed the instant petition
which impleaded as respondents the NHA, RBI, R-II Holdings, Inc. (RHI), HCPTI, and Mr.
Reghis Romero II, raising constitutional issues.
The NHA reported that thirty-four (34) temporary housing structures and twenty-one
(21) permanent housing structures had been turned over by respondent RBI. It claimed
that 2,510 beneficiary-families belonging to the poorest of the poor had been
transferred to their permanent homes and benefited from the Project.
The Issues
The grounds presented in the instant petition are:
I

NEITHER RESPONDENT NHA NOR RESPONDENT R-II BUILDERS MAY VALIDLY RECLAIM
FORESHORE AND SUBMERGED LAND BECAUSE:
1. RESPONDENT NHA AND R-II BUILDERS WERE NEVER GRANTED ANY POWER AND
AUTHORITY TO RECLAIM LANDS OF THE PUBLIC DOMAIN AS THIS POWER IS VESTED
EXCLUSIVELY WITH THE PEA.
2. EVEN ASSUMING THAT RESPONDENTS NHA AND R-II BUILDERS WERE GIVEN THE
POWER AND AUTHORITY TO RECLAIM FORESHORE AND SUBMERGED LAND, THEY WERE
NEVER GIVEN THE AUTHORITY BY THE DENR TO DO SO.
II
RESPONDENT R-II BUILDERS CANNOT ACQUIRE THE RECLAIMED FORESHORE AND
SUBMERGED LAND AREAS BECAUSE:
1. THE RECLAIMED FORESHORE AND SUBMERGED PARCELS OF LAND ARE INALIENABLE
PUBLIC LANDS WHICH ARE BEYOND THE COMMERCE OF MAN.
2. ASSUMING ARGUENDO THAT THE SUBJECT RECLAIMED FORESHORE AND
SUBMERGED PARCELS OF LAND WERE ALREADY DECLARED ALIENABLE LANDS OF THE
PUBLIC DOMAIN, RESPONDENT R-II BUILDERS STILL COULD NOT ACQUIRE THE SAME
BECAUSE THERE WAS NEVER ANY DECLARATION THAT THE SAID LANDS WERE NO
LONGER NEEDED FOR PUBLIC USE.
3. EVEN ASSUMING THAT THE SUBJECT RECLAIMED LANDS ARE ALIENABLE AND NO
LONGER NEEDED FOR PUBLIC USE, RESPONDENT R-II BUILDERS STILL CANNOT ACQUIRE
THE SAME BECAUSE THERE WAS NEVER ANY LAW AUTHORIZING THE SALE THEREOF.
4. THERE WAS NEVER ANY PUBLIC BIDDING AWARDING OWNERSHIP OF THE SUBJECT
LAND TO RESPONDENT R-II BUILDERS.
5. ASSUMING THAT ALL THE REQUIREMENTS FOR A VALID TRANSFER OF ALIENABLE
PUBLIC HAD BEEN PERFORMED, RESPONDENT R-II BUILDERS, BEING PRIVATE
CORPORATION IS NONETHELESS EXPRESSLYPROHIBITED BY THE PHILIPPINE
CONSTITUTION TO ACQUIRE LANDS OF THE PUBLIC DOMAIN.
III
RESPONDENT HARBOUR, BEING A PRIVATE CORPORATION WHOSE MAJORITY STOCKS
ARE OWNED AND CONTROLLED BY RESPONDENT ROMEROS CORPORATIONS R-II
BUILDERS AND R-II HOLDINGS IS DISQUALIFIED FROM BEING A TRANSFEREE OF PUBLIC
LAND.
IV
RESPONDENTS MUST BE COMPELLED TO DISCLOSE ALL INFORMATION RELATED TO THE
SMOKEY MOUNTAIN DEVELOPMENT AND RECLAMATION PROJECT.
LAND TITLES Forms&Contents (7)
The Courts Ruling
Before we delve into the substantive issues raised in this petition, we will first deal with
several procedural matters raised by respondents.
Whether petitioner has the requisite locus standi to file this case
Respondents argue that petitioner Chavez has no legal standing to file the petition.
Only a person who stands to be benefited or injured by the judgment in the suit or
entitled to the avails of the suit can file a complaint or petition.[47] Respondents claim
that petitioner is not a proper party-in-interest as he was unable to show that he has
sustained or is in immediate or imminent danger of sustaining some direct and personal
injury as a result of the execution and enforcement of the assailed contracts or
agreements.[48] Moreover, they assert that not all government contracts can justify a
taxpayers suit especially when no public funds were utilized in contravention of the
Constitution or a law.
We explicated in Chavez v. PCGG[49] that in cases where issues of transcendental public
importance are presented, there is no necessity to show that petitioner has experienced
or is in actual danger of suffering direct and personal injury as the requisite injury is
assumed. We find our ruling in Chavez v. PEA[50] as conclusive authority on locus standi
in the case at bar since the issues raised in this petition are averred to be in breach of
the fair diffusion of the countrys natural resources and the constitutional right of a
citizen to information which have been declared to be matters of transcendental public
importance. Moreover, the pleadings especially those of respondents readily reveal that
public funds have been indirectly utilized in the Project by means of Smokey Mountain
Project Participation Certificates (SMPPCs) bought by some government agencies.
Hence, petitioner, as a taxpayer, is a proper party to the instant petition before the
court.
Whether petitioners direct recourse to this Court was proper
Respondents are one in asserting that petitioner circumvents the principle of hierarchy
of courts in his petition. Judicial hierarchy was made clear in the case of People v.
Cuaresma, thus:
There is after all a hierarchy of courts. That hierarchy is determinative of the venue of
appeals, and should also serve as a general determinant of the appropriate forum for
petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most
certainly indicates that petitions for the issuance of extraordinary writs against first level
(inferior) courts should be filed with the Regional Trial Court, and those against the
latter, with the Court of Appeals. A direct invocation of the Supreme Courts original
jurisdiction to issue these writs should be allowed only when there are special and
important reasons therefor, clearly and specifically set out in the petition. This is
established policy. It is a policy that is necessary to prevent inordinate demands upon
the Courts time and attention which are better devoted to those matters within its
exclusive jurisdiction, and to prevent further over-crowding of the Courts docket.[51] x x
x
The OSG claims that the jurisdiction over petitions for prohibition and mandamus is
concurrent with other lower courts like the Regional Trial Courts and the Court of
Appeals. Respondent NHA argues that the instant petition is misfiled because it does not
introduce special and important reasons or exceptional and compelling circumstances to
warrant direct recourse to this Court and that the lower courts are more equipped for
factual issues since this Court is not a trier of facts. Respondents RBI and RHI question
the filing of the petition as this Court should not be unduly burdened with repetitions,
invocation of jurisdiction over constitutional questions it had previously resolved and
settled.
In the light of existing jurisprudence, we find paucity of merit in respondents
postulation.
While direct recourse to this Court is generally frowned upon and discouraged, we have
however ruled in Santiago v. Vasquez that such resort to us may be allowed in certain
situations, wherein this Court ruled that petitions for certiorari, prohibition, or
mandamus, though cognizable by other courts, may directly be filed with us if the
redress desired cannot be obtained in the appropriate courts or where exceptional
compelling circumstances justify availment of a remedy within and calling for the
exercise of [this Courts] primary jurisdiction.[52]
The instant petition challenges the constitutionality and legality of the SMDRP involving
several hectares of government land and hundreds of millions of funds of several
government agencies. Moreover, serious constitutional challenges are made on the
different aspects of the Project which allegedly affect the right of Filipinos to the
distribution of natural resources in the country and the right to information of a
citizenmatters which have been considered to be of extraordinary significance and grave
consequence to the public in general. These concerns in the instant action compel us to
turn a blind eye to the judicial structure meant to provide an orderly dispensation of
justice and consider the instant petition as a justified deviation from an established
precept.
Core factual matters undisputed
Respondents next challenge the projected review by this Court of the alleged factual
issues intertwined in the issues propounded by petitioner. They listed a copious number
of questions seemingly factual in nature which would make this Court a trier of facts.[53]
We find the position of respondents bereft of merit.
For one, we already gave due course to the instant petition in our January 18, 2005
Resolution.[54] In said issuance, the parties were required to make clear and concise
statements of established facts upon which our decision will be based.
Secondly, we agree with petitioner that there is no necessity for us to make any factual
findings since the facts needed to decide the instant petition are well established from
the admissions of the parties in their pleadings[55] and those derived from the
documents appended to said submissions. Indeed, the core facts which are the subject
matter of the numerous issues raised in this petition are undisputed.
Now we will tackle the issues that prop up the instant petition.
Since petitioner has cited our decision in PEA as basis for his postulations in a number of
issues, we first resolve the queryis PEA applicable to the case at bar?
A juxtaposition of the facts in the two cases constrains the Court to rule in the negative.

The Court finds that PEA is not a binding precedent to the instant petition because the
facts in said case are substantially different from the facts and circumstances in the case
at bar, thus:
(1) The reclamation project in PEA was undertaken through a JVA entered into between
PEA and AMARI. The reclamation project in the instant NHA case was undertaken by the
NHA, a national government agency in consultation with PEA and with the approval of
two Philippine Presidents;
(2) In PEA, AMARI and PEA executed a JVA to develop the Freedom Islands and reclaim
submerged areas without public bidding on April 25, 1995. In the instant NHA case, the
NHA and RBI executed a JVA after RBI was declared the winning bidder on August 31,
1992 as the JVA partner of the NHA in the SMDRP after compliance with the requisite
public bidding.
(3) In PEA, there was no law or presidential proclamation classifying the lands to be
reclaimed as alienable and disposal lands of public domain. In this RBI case, MO 415 of
former President Aquino and Proclamation No. 39 of then President Ramos, coupled
with Special Patents Nos. 3591, 3592, and 3598, classified the reclaimed lands as
alienable and disposable;
(4) In PEA, the Chavez petition was filed before the amended JVA was executed by PEA
and AMARI. In this NHA case, the JVA and subsequent amendments were already
substantially implemented. Subsequently, the Project was terminated through a MOA
signed on August 27, 2003. Almost one year later on August 5, 2004, the Chavez petition
was filed;
(5) In PEA, AMARI was considered to be in bad faith as it signed the amended JVA after
the Chavez petition was filed with the Court and after Senate Committee Report No. 560
was issued finding that the subject lands are inalienable lands of public domain. In the
instant petition, RBI and other respondents are considered to have signed the
agreements in good faith as the Project was terminated even before the Chavez petition
was filed;
(6) The PEA-AMARI JVA was executed as a result of direct negotiation between the
parties and not in accordance with the BOT Law. The NHA-RBI JVA and subsequent
amendments constitute a BOT contract governed by the BOT Law; and
(7) In PEA, the lands to be reclaimed or already reclaimed were transferred to PEA, a
government entity tasked to dispose of public lands under Executive Order No. (EO) 525.
[56] In the NHA case, the reclaimed lands were transferred to NHA, a government entity
NOT tasked to dispose of public land and therefore said alienable lands were converted
to patrimonial lands upon their transfer to NHA.[57]
Thus the PEA Decision[58] cannot be considered an authority or precedent to the instant
case. The principle of stare decisis[59] has no application to the different factual setting
of the instant case.
We will now dwell on the substantive issues raised by petitioner. After a perusal of the
grounds raised in this petition, we find that most of these issues are moored on our PEA
Decision which, as earlier discussed, has no application to the instant petition. For this
reason alone, the petition can already be rejected. Nevertheless, on the premise of the
applicability of said decision to the case at bar, we will proceed to resolve said issues.
LAND TITLES Forms&Contents (7)
First Issue: Whether respondents NHA and RBI have been granted
the power and authority to reclaim lands of the public domain as
this power is vested exclusively in PEA as claimed by petitioner
Petitioner contends that neither respondent NHA nor respondent RBI may validly
reclaim foreshore and submerged land because they were not given any power and
authority to reclaim lands of the public domain as this power was delegated by law to
PEA.
Asserting that existing laws did not empower the NHA and RBI to reclaim lands of public
domain, the Public Estates Authority (PEA), petitioner claims, is the primary authority for
the reclamation of all foreshore and submerged lands of public domain, and relies on
PEA where this Court held:
Moreover, Section 1 of Executive Order No. 525 provides that PEA shall be primarily
responsible for integrating, directing, and coordinating all reclamation projects for and
on behalf of the National Government. The same section also states that [A]ll
reclamation projects shall be approved by the President upon recommendation of the
PEA, and shall be undertaken by the PEA or through a proper contract executed by it
with any person or entity; x x x. Thus, under EO No. 525, in relation to PD No. 3-A and PD
No. 1084, PEA became the primary implementing agency of the National Government to
reclaim foreshore and submerged lands of the public domain. EO No. 525 recognized
PEA as the government entity to undertake the reclamation of lands and ensure their
maximum utilization in promoting public welfare and interests. Since large portions of
these reclaimed lands would obviously be needed for public service, there must be a
formal declaration segregating reclaimed lands no longer needed for public service from
those still needed for public service.[60]
In the Smokey Mountain Project, petitioner clarifies that the reclamation was not done
by PEA or through a contract executed by PEA with another person or entity but by the
NHA through an agreement with respondent RBI. Therefore, he concludes that the
reclamation is null and void.
Petitioners contention has no merit.
EO 525 reads:
Section 1. The Public Estates Authority (PEA) shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of the
National Government. All reclamation projects shall be approved by the President upon
recommendation of the PEA, and shall be undertaken by the PEA or through a proper
contract executed by it with any person or entity; Provided, that, reclamation projects of
any national government agency or entity authorized under its charter shall be
undertaken in consultation with the PEA upon approval of the President.
The aforequoted provision points to three (3) requisites for a legal and valid reclamation
project, viz:
(1) approval by the President;
(2) favorable recommendation of PEA; and
(3) undertaken by any of the following:
a. by PEA
b. by any person or entity pursuant to a contract it executed with PEA
c. by the National Government agency or entity authorized under its charter to reclaim
lands subject to consultation with PEA
Without doubt, PEA under EO 525 was designated as the agency primarily responsible
for integrating, directing, and coordinating all reclamation projects. Primarily means
mainly, principally, mostly, generally. Thus, not all reclamation projects fall under PEAs
authority of supervision, integration, and coordination. The very charter of PEA, PD
1084,[61] does not mention that PEA has the exclusive and sole power and authority to
reclaim lands of public domain. EO 525 even reveals the exceptionreclamation projects
by a national government agency or entity authorized by its charter to reclaim land. One
example is EO 405 which authorized the Philippine Ports Authority (PPA) to reclaim and
develop submerged areas for port related purposes. Under its charter, PD 857, PPA has
the power to reclaim, excavate, enclose or raise any of the lands vested in it.
Thus, while PEA under PD 1084 has the power to reclaim land and under EO 525 is
primarily responsible for integrating, directing and coordinating reclamation projects,
such authority is NOT exclusive and such power to reclaim may be granted or delegated
to another government agency or entity or may even be undertaken by the National
Government itself, PEA being only an agency and a part of the National Government.
Let us apply the legal parameters of Sec. 1, EO 525 to the reclamation phase of SMDRP.
After a scrutiny of the facts culled from the records, we find that the project met all the
three (3) requirements, thus:
1. There was ample approval by the President of the Philippines; as a matter of fact, two
Philippine Presidents approved the same, namely: Presidents Aquino and Ramos.
President Aquino sanctioned the reclamation of both the SMDRP housing and
commercial-industrial sites through MO 415 (s. 1992) which approved the SMDRP under
Sec. 1 and directed NHA x x x to implement the Smokey Mountain Development Plan
and Reclamation of the Area across R-10 through a private sector joint venture scheme
at the least cost to government under Section 3.
For his part, then President Ramos issued Proclamation No. 39 (s. 1992) which expressly
reserved the Smokey Mountain Area and the Reclamation Area for a housing project and
related commercial/industrial development.
Moreover, President Ramos issued Proclamation No. 465 (s. 1994) which authorized the
increase of the Reclamation Area from 40 hectares of foreshore and submerged land of
the Manila Bay to 79 hectares. It speaks of the reclamation of 400,000 square meters,
more or less, of the foreshore and submerged lands of Manila Bay adjoining R-10 as an
enabling component of the SMDRP.
As a result of Proclamations Nos. 39 and 465, Special Patent No. 3591 covering 211,975
square meters of Smokey Mountain, Special Patent No. 3592 covering 401,485 square
meters of reclaimed land, and Special Patent No. 3598 covering another 390,000 square
meters of reclaimed land were issued by the DENR.
Thus, the first requirement of presidential imprimatur on the SMDRP has been satisfied.
2. The requisite favorable endorsement of the reclamation phase was impliedly granted
by PEA. President Aquino saw to it that there was coordination of the project with PEA
by designating its general manager as member of the EXECOM tasked to supervise the
project implementation. The assignment was made in Sec. 2 of MO 415 which provides:
Section 2. An Executive Committee is hereby created to oversee the implementation of
the Plan, chaired by the NCR-CORD, with the heads of the following agencies as
members: The National Housing Authority, the City of Manila, the Department of Public
Works and Highways, the Public Estates Authority, the Philippine Ports Authority, the

Department of Environment and Natural Resources and the Development Bank of the
Philippines. (Emphasis supplied.)
The favorable recommendation by PEA of the JVA and subsequent amendments were
incorporated as part of the recommendations of the EXECOM created under MO 415.
While there was no specific recommendation on the SMDRP emanating solely from PEA,
we find that the approbation of the Project and the land reclamation as an essential
component by the EXECOM of which PEA is a member, and its submission of the SMDRP
and the agreements on the Project to the President for approval amply met the second
requirement of EO 525.
3. The third element was also presentthe reclamation was undertaken either by PEA or
any person or entity under contract with PEA or by the National Government agency or
entity authorized under its charter to reclaim lands subject to consultation with PEA. It
cannot be disputed that the reclamation phase was not done by PEA or any person or
entity under contract with PEA. However, the reclamation was implemented by the NHA,
a national government agency whose authority to reclaim lands under consultation with
PEA is derived from its charterPD 727 and other pertinent lawsRA 7279[62] and RA 6957
as amended by RA 7718.
While the authority of NHA to reclaim lands is challenged by petitioner, we find that the
NHA had more than enough authority to do so under existing laws. While PD 757, the
charter of NHA, does not explicitly mention reclamation in any of the listed powers of
the agency, we rule that the NHA has an implied power to reclaim land as this is vital or
incidental to effectively, logically, and successfully implement an urban land reform and
housing program enunciated in Sec. 9 of Article XIII of the 1987 Constitution.
Basic in administrative law is the doctrine that a government agency or office has
express and implied powers based on its charter and other pertinent statutes. Express
powers are those powers granted, allocated, and delegated to a government agency or
office by express provisions of law. On the other hand, implied powers are those that
can be inferred or are implicit in the wordings of the law[63] or conferred by necessary
or fair implication in the enabling act.[64] In Angara v. Electoral Commission, the Court
clarified and stressed that when a general grant of power is conferred or duty enjoined,
every particular power necessary for the exercise of the one or the performance of the
other is also conferred by necessary implication.[65] It was also explicated that when the
statute does not specify the particular method to be followed or used by a government
agency in the exercise of the power vested in it by law, said agency has the authority to
adopt any reasonable method to carry out its functions.[66]
The power to reclaim on the part of the NHA is implicit from PD 757, RA 7279, MO 415,
RA 6957, and PD 3-A,[67] viz:
1. NHAs power to reclaim derived from PD 757 provisions:
a. Sec. 3 of PD 757 implies that reclamation may be resorted to in order to attain the
goals of NHA:
Section 3. Progress and Objectives. The Authority shall have the following purposes and
objectives:
xxxx
LAND TITLES Forms&Contents (7)
b) To undertake housing, development, resettlement or other activities as
would enhance the provision of housing to every Filipino;
c) To harness and promote private participation in housing ventures in terms of
capital expenditures, land, expertise, financing and other facilities for the sustained
growth of the housing industry. (Emphasis supplied.)
Land reclamation is an integral part of the development of resources for some of the
housing requirements of the NHA. Private participation in housing projects may also take
the form of land reclamation.
b. Sec. 5 of PD 757 serves as proof that the NHA, as successor of the Tondo Foreshore
Development Authority (TFDA), has the power to reclaim, thus:
Section 5. Dissolution of Existing Housing Agencies. The People's Homesite and Housing
Corporation (PHHC), the Presidential Assistant on Housing Resettlement Agency
(PAHRA), the Tondo Foreshore Development Authority (TFDA), the Central Institute for
the Training and Relocation of Urban Squatters (CITRUS), the Presidential Committee for
Housing and Urban Resettlement (PRECHUR), Sapang Palay Development Committee,
Inter-Agency Task Force to Undertake the Relocation of Families in Barrio Nabacaan,
Villanueva, Misamis Oriental and all other existing government housing and
resettlement agencies, task forces and ad-hoc committees, are hereby dissolved. Their
powers and functions, balance of appropriations, records, assets, rights, and choses in
action, are transferred to, vested in, and assumed by the Authority. x x x (Emphasis
supplied.)
PD 570 dated October 30, 1974 created the TFDA, which defined its objectives, powers,
and functions. Sec. 2 provides:
Section 2. Objectives and Purposes. The Authority shall have the following purposes and
objectives:
a) To undertake all manner of activity, business or development projects for the
establishment of harmonious, comprehensive, integrated and healthy living community
in the Tondo Foreshoreland and its resettlement site;
b) To undertake and promote the physical and socio-economic amelioration of the Tondo
Foreshore residents in particular and the nation in general (Emphasis supplied.)
The powers and functions are contained in Sec. 3, to wit:
a) To develop and implement comprehensive and integrated urban renewal programs for
the Tondo Foreshore and Dagat-dagatan lagoon and/or any other additional/alternative
resettlement site and to formulate and enforce general and specific policies for its
development which shall ensure reasonable degree of compliance with environmental
standards.
b) To prescribe guidelines and standards for the reservation, conservation and utilization
of public lands covering the Tondo Foreshore land and its resettlement sites;
c) To construct, acquire, own, lease, operate and maintain infrastructure facilities,
housing complex, sites and services;
d) To determine, regulate and supervise the establishment and operation of housing,
sites, services and commercial and industrial complexes and any other enterprises to be
constructed or established within the Tondo Foreshore and its resettlement sites;
e) To undertake and develop, by itself or through joint ventures with other public or
private entities, all or any of the different phases of development of the Tondo
Foreshore land and its resettlement sites;
f) To acquire and own property, property-rights and interests, and encumber or
otherwise dispose of the same as it may deem appropriate (Emphasis supplied.)
From the foregoing provisions, it is readily apparent that the TFDA has the explicit power
to develop public lands covering the Tondo foreshore land and any other additional and
alternative resettlement sites under letter b, Sec. 3 of PD 570. Since the additional
and/or alternative sites adjacent to Tondo foreshore land cover foreshore and
submerged areas, the reclamation of said areas is necessary in order to convert them
into a comprehensive and integrated resettlement housing project for the slum dwellers
and squatters of Tondo. Since the powers of TFDA were assumed by the NHA, then the
NHA has the power to reclaim lands in the Tondo foreshore area which covers the 79-
hectare land subject of Proclamations Nos. 39 and 465 and Special Patents Nos. 3592
and 3598.
c. Sec. 6 of PD 757 delineates the functions and powers of the NHA which embrace the
authority to reclaim land, thus:
Sec. 6. Powers and functions of the Authority.The Authority shall have the following
powers and functions to be exercised by the Board in accordance with its established
national human settlements plan prepared by the Human Settlements Commission:
(a) Develop and implement the comprehensive and integrated housing program
provided for in Section hereof;
xxx
(c) Prescribe guidelines and standards for the reservation, conservation and utilization of
public lands identified for housing and resettlement;
xxxx
(e) Develop and undertake housing development and/or resettlement projects through
joint ventures or other arrangements with public and private entities;
xxx
(k) Enter into contracts whenever necessary under such terms and conditions as it may
deem proper and reasonable;
(l) Acquire property rights and interests and encumber or otherwise dispose the same as
it may deem appropriate;
xxxx
(s) Perform such other acts not inconsistent with this Decree, as may be necessary to
effect the policies and objectives herein declared. (Emphasis supplied.)
The NHAs authority to reclaim land can be inferred from the aforequoted provisions. It
can make use of public lands under letter (c) of Sec. 6 which includes reclaimed land as
site for its comprehensive and integrated housing projects under letter (a) which can be
undertaken through joint ventures with private entities under letter (e). Taken together
with letter (s) which authorizes NHA to perform such other activities necessary to effect
the policies and objectives of PD 757, it is safe to conclude that the NHAs power to
reclaim lands is a power that is implied from the exercise of its explicit powers under
Sec. 6 in order to effectively accomplish its policies and objectives under Sec. 3 of its
charter. Thus, the reclamation of land is an indispensable component for the
development and construction of the SMDRP housing facilities.
2. NHAs implied power to reclaim land is enhanced by RA 7279.

PD 757 identifies NHAs mandate to [d]evelop and undertake housing development
and/or resettlement projects through joint ventures or other arrangements with public
and private entities.
The power of the NHA to undertake reclamation of land can be inferred from Secs. 12
and 29 of RA 7279, which provide:
Section 12. Disposition of Lands for Socialized Housing.The National Housing Authority,
with respect to lands belonging to the National Government, and the local government
units with respect to other lands within their respective localities, shall coordinate with
each other to formulate and make available various alternative schemes for the
disposition of lands to the beneficiaries of the Program. These schemes shall not be
limited to those involving transfer of ownership in fee simple but shall include lease,
with option to purchase, usufruct or such other variations as the local government units
or the National Housing Authority may deem most expedient in carrying out the
purposes of this Act.
xxxx
Section 29. Resettlement.With two (2) years from the effectivity of this Act, the local
government units, in coordination with the National Housing Authority, shall implement
the relocation and resettlement of persons living in danger areas such as esteros,
railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and in other public
places as sidewalks, roads, parks, and playgrounds. The local government unit, in
coordination with the National Housing Authority, shall provide relocation or
resettlement sites with basic services and facilities and access to employment and
livelihood opportunities sufficient to meet the basic needs of the affected families.
Lands belonging to the National Government include foreshore and submerged lands
which can be reclaimed to undertake housing development and resettlement projects.
3. MO 415 explains the undertaking of the NHA in SMDRP:
WHEREAS, Memorandum Order No. 161-A mandated the National Housing Authority to
conduct feasibility studies and develop low-cost housing projects at the dumpsites of
Metro Manila;
WHEREAS, the National Housing Authority has presented a viable Conceptual Plan to
convert the Smokey Mountain dumpsite into a habitable housing project inclusive of the
reclamation area across R-10 as enabling component of the Project;
WHEREAS, the said Plan requires the coordinated and synchronized efforts of the City of
Manila and other government agencies and instrumentalities to ensure effective and
efficient implementation;
WHEREAS, the government encourages private sector initiative in the implementation of
its projects. (Emphasis supplied.)
Proceeding from these whereas clauses, it is unequivocal that reclamation of land in the
Smokey Mountain area is an essential and vital power of the NHA to effectively
implement its avowed goal of developing low-cost housing units at the Smokey
Mountain dumpsites. The interpretation made by no less than the President of the
Philippines as Chief of the Executive Branch, of which the NHA is a part, must necessarily
command respect and much weight and credit.
4. RA 6957 as amended by RA 7718the BOT Lawserves as an exception to PD 1084 and
EO 525.
Based on the provisions of the BOT Law and Implementing Rules and Regulations, it is
unequivocal that all government infrastructure agencies like the NHA can undertake
infrastructure or development projects using the contractual arrangements prescribed
by the law, and land reclamation is one of the projects that can be resorted to in the BOT
LAND TITLES Forms&Contents (7)
project implementation under the February 10, 1992 Joint Resolution No. 3 of the 8th
Congress.
From the foregoing considerations, we find that the NHA has ample implied authority to
undertake reclamation projects.
Even without an implied power to reclaim lands under NHAs charter, we rule that the
authority granted to NHA, a national government agency, by the President under PD 3-A
reinforced by EO 525 is more than sufficient statutory basis for the reclamation of lands
under the SMDRP.
PD 3-A is a law issued by then President Ferdinand E. Marcos under his martial law
powers on September 23, 1972. It provided that [t]he provisions of any law to the
contrary notwithstanding, the reclamation of areas, underwater, whether foreshore or
inland, shall be limited to the National Government or any person authorized by it under
the proper contract. It repealed, in effect, RA 1899 which previously delegated the right
to reclaim lands to municipalities and chartered cities and revested it to the National
Government.[68] Under PD 3-A, national government can only mean the Executive
Branch headed by the President. It cannot refer to Congress as it was dissolved and
abolished at the time of the issuance of PD 3-A on September 23, 1972. Moreover, the
Executive Branch is the only implementing arm in the government with the equipment,
manpower, expertise, and capability by the very nature of its assigned powers and
functions to undertake reclamation projects. Thus, under PD 3-A, the Executive Branch
through the President can implement reclamation of lands through any of its
departments, agencies, or offices.
Subsequently, on February 4, 1977, President Marcos issued PD 1084 creating the PEA,
which was granted, among others, the power to reclaim land, including foreshore and
submerged areas by dredging, filling or other means or to acquire reclaimed lands. The
PEAs power to reclaim is not however exclusive as can be gleaned from its charter, as the
President retained his power under PD 3-A to designate another agency to reclaim lands.
On February 14, 1979, EO 525 was issued. It granted PEA primary responsibility for
integrating, directing, and coordinating reclamation projects for and on behalf of the
National Government although other national government agencies can be designated
by the President to reclaim lands in coordination with the PEA. Despite the issuance of
EO 525, PD 3-A remained valid and subsisting. Thus, the National Government through
the President still retained the power and control over all reclamation projects in the
country.
The power of the National Government through the President over reclamation of areas,
that is, underwater whether foreshore or inland, was made clear in EO 543[69] which
took effect on June 24, 2006. Under EO 543, PEA was renamed the Philippine
Reclamation Authority (PRA) and was granted the authority to approve reclamation
projects, a power previously reposed in the President under EO 525. EO 543 reads:
Section 1. The power of the President to approve reclamation projects is hereby
delegated to the Philippine Reclamation Authority [formerly PEA], through its governing
board, subject to compliance with existing laws and rules and subject to the condition
that reclamation contracts to be executed with any person or entity go through public
bidding.
Section 2. Nothing in the Order shall be construed as diminishing the Presidents
authority to modify, amend or nullify PRAs action.
Section 3. All executive issuances inconsistent with this Executive Order are hereby
repealed or amended accordingly. (Emphasis supplied.)
Sec. 2 of EO 543 strengthened the power of control and supervision of the President
over reclamation of lands as s/he can modify, amend, or nullify the action of PEA (now
PRA).
From the foregoing issuances, we conclude that the Presidents delegation to NHA, a
national government agency, to reclaim lands under the SMDRP, is legal and valid, firmly
anchored on PD 3-A buttressed by EO 525 notwithstanding the absence of any specific
grant of power under its charter, PD 757.
Second Issue: Whether respondents NHA and RBI were given the
power and authority by DENR to reclaim foreshore and submerged
lands
Petitioner Chavez puts forth the view that even if the NHA and RBI were granted the
authority to reclaim, they were not authorized to do so by the DENR.
Again, reliance is made on our ruling in PEA where it was held that the DENRs authority
is necessary in order for the government to validly reclaim foreshore and submerged
lands. In PEA, we expounded in this manner:
As manager, conservator and overseer of the natural resources of the State, DENR
exercises supervision and control over alienable and disposable public lands. DENR also
exercises exclusive jurisdiction on the management and disposition of all lands of the
public domain. Thus, DENR decides whether areas under water, like foreshore or
submerged areas of Manila Bay, should be reclaimed or not. This means that PEA needs
authorization from DENR before PEA can undertake reclamation projects in Manila Bay,
or in any part of the country.
DENR also exercises exclusive jurisdiction over the disposition of all lands of the public
domain. Hence, DENR decides whether reclaimed lands of PEA should be classified as
alienable under Sections 6 and 7 of CA No. 141. Once DENR decides that the reclaimed
lands should be so classified, it then recommends to the President the issuance of a
proclamation classifying the lands as alienable or disposable lands of the public domain
open to disposition. We note that then DENR Secretary Fulgencio S. Factoran, Jr.
countersigned Special Patent No. 3517 in compliance with the Revised Administrative
Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under
water, while PEA is vested with the power to undertake the physical reclamation of areas
under water, whether directly or through private contractors. DENR is also empowered
to classify lands of the public domain into alienable or disposable lands subject to the
approval of the President. On the other hand, PEA is tasked to develop, sell or lease the
reclaimed alienable lands of the public domain.[70]
Despite our finding that PEA is not a precedent to the case at bar, we find after all that
under existing laws, the NHA is still required to procure DENRs authorization before a
reclamation project in Manila Bay or in any part of the Philippines can be undertaken.
The requirement applies to PEA, NHA, or any other government agency or office granted
with such power under the law.
Notwithstanding the need for DENR permission, we nevertheless find petitioners
position bereft of merit.
The DENR is deemed to have granted the authority to reclaim in the Smokey Mountain
Project for the following reasons:
1. Sec. 17, Art. VII of the Constitution provides that the President shall have control of all
executive departments, bureaus and offices. The President is assigned the task of seeing
to it that all laws are faithfully executed. Control, in administrative law, means the power
of an officer to alter, modify, nullify or set aside what a subordinate officer has done in
the performance of his duties and to substitute the judgment of the former for that of
the latter.[71]
As such, the President can exercise executive power motu proprio and can supplant the
act or decision of a subordinate with the Presidents own. The DENR is a department in
the executive branch under the President, and it is only an alter ego of the latter.
Ordinarily the proposed action and the staff work are initially done by a department like
the DENR and then submitted to the President for approval. However, there is nothing
infirm or unconstitutional if the President decides on the implementation of a certain
project or activity and requires said department to implement it. Such is a presidential
prerogative as long as it involves the department or office authorized by law to supervise
or execute the Project. Thus, as in this case, when the President approved and ordered
the development of a housing project with the corresponding reclamation work, making

DENR a member of the committee tasked to implement the project, the required
authorization from the DENR to reclaim land can be deemed satisfied. It cannot be
disputed that the ultimate power over alienable and disposable public lands is reposed
in the President of the Philippines and not the DENR Secretary. To still require a DENR
authorization on the Smokey Mountain when the President has already authorized and
ordered the implementation of the Project would be a derogation of the powers of the
President as the head of the executive branch. Otherwise, any department head can
defy or oppose the implementation of a project approved by the head of the executive
branch, which is patently illegal and unconstitutional.
In Chavez v. Romulo, we stated that when a statute imposes a specific duty on the
executive department, the President may act directly or order the said department to
undertake an activity, thus:
[A]t the apex of the entire executive officialdom is the President. Section 17, Article VII
of the Constitution specifies [her] power as Chief executive departments, bureaus and
offices. [She] shall ensure that the laws be faithfully executed. As Chief Executive,
President Arroyo holds the steering wheel that controls the course of her government.
She lays down policies in the execution of her plans and programs. Whatever policy she
chooses, she has her subordinates to implement them. In short, she has the power of
control. Whenever a specific function is entrusted by law or regulation to her
subordinate, she may act directly or merely direct the performance of a duty x x x. Such
act is well within the prerogative of her office (emphasis supplied).[72]
Moreover, the power to order the reclamation of lands of public domain is reposed first
in the Philippine President. The Revised Administrative Code of 1987 grants authority to
the President to reserve lands of public domain for settlement for any specific purpose,
thus:
Section 14. Power to Reserve Lands of the Public and Private Domain of the
Government.(1) The President shall have the power to reserve for settlement or public
use, and for specific public purposes, any of the lands of the public domain, the use of
which is not otherwise directed by law. The reserved land shall thereafter remain subject
to the specific public purpose indicated until otherwise provided by law or proclamation.
(Emphasis supplied.)
President Aquino reserved the area of the Smokey Mountain dumpsite for settlement
and issued MO 415 authorizing the implementation of the Smokey Mountain
Development Project plus the reclamation of the area across R-10. Then President
Ramos issued Proclamation No. 39 covering the 21-hectare dumpsite and the 40-hectare
commercial/industrial area, and Proclamation No. 465 and MO 415 increasing the area
of foreshore and submerged lands of Manila Bay to be reclaimed from 40 to 79 hectares.
Having supervision and control over the DENR, both Presidents directly assumed and
exercised the power granted by the Revised Administrative Code to the DENR Secretary
to authorize the NHA to reclaim said lands. What can be done indirectly by the DENR can
be done directly by the President. It would be absurd if the power of the President
cannot be exercised simply because the head of a department in the executive branch
has not acted favorably on a project already approved by the President. If such
arrangement is allowed then the department head will become more powerful than the
President.
2. Under Sec. 2 of MO 415, the DENR is one of the members of the EXECOM chaired by
the NCR-CORD to oversee the implementation of the Project. The EXECOM was the one
which recommended approval of the project plan and the joint venture agreements.
Clearly, the DENR retained its power of supervision and control over the laws affected by
the Project since it was tasked to facilitate the titling of the Smokey Mountain and of the
area to be reclaimed, which shows that it had tacitly given its authority to the NHA to
undertake the reclamation.
3. Former DENR Secretary Angel C. Alcala issued Special Patents Nos. 3591 and 3592
while then Secretary Victor O. Ramos issued Special Patent No. 3598 that embraced the
areas covered by the reclamation. These patents conveyed the lands to be reclaimed to
the NHA and granted to said agency the administration and disposition of said lands for
LAND TITLES Forms&Contents (7)
subdivision and disposition to qualified beneficiaries and for development for mix land
use (commercial/industrial) to provide employment opportunities to on-site families and
additional areas for port related activities. Such grant of authority to administer and
dispose of lands of public domain under the SMDRP is of course subject to the powers of
the EXECOM of SMDRP, of which the DENR is a member.
4. The issuance of ECCs by the DENR for SMDRP is but an exercise of its power of
supervision and control over the lands of public domain covered by the Project.
Based on these reasons, it is clear that the DENR, through its acts and issuances, has
ratified and confirmed the reclamation of the subject lands for the purposes laid down in
Proclamations Nos. 39 and 465.
Third Issue: Whether respondent RBI can acquire reclaimed
foreshore and submerged lands considered as inalienable and
outside the commerce of man
Petitioner postulates that respondent RBI cannot acquire the reclaimed foreshore and
submerged areas as these are inalienable public lands beyond the commerce of man
based on Art. 1409 of the Civil Code which provides:
Article 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs,
public order or public policy;
xxxx
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of
illegality be waived.
Secs. 2 and 3, Art. XII of the Constitution declare that all natural resources are owned by
the State and they cannot be alienated except for alienable agricultural lands of the
public domain. One of the States natural resources are lands of public domain which
include reclaimed lands.
Petitioner contends that for these reclaimed lands to be alienable, there must be a law
or presidential proclamation officially classifying these reclaimed lands as alienable and
disposable and open to disposition or concession. Absent such law or proclamation, the
reclaimed lands cannot be the enabling component or consideration to be paid to RBI as
these are beyond the commerce of man.
We are not convinced of petitioners postulation.
The reclaimed lands across R-10 were classified alienable and disposable lands of public
domain of the State for the following reasons, viz:
First, there were three (3) presidential proclamations classifying the reclaimed lands
across R-10 as alienable or disposable hence open to disposition or concession, to wit:
(1) MO 415 issued by President Aquino, of which Sec. 4 states that [t]he land covered by
the Smokey Mountain Dumpsite is hereby conveyed to the National Housing Authority
as well as the area to be reclaimed across R-10.
The directive to transfer the lands once reclaimed to the NHA implicitly carries with it
the declaration that said lands are alienable and disposable. Otherwise, the NHA cannot
effectively use them in its housing and resettlement project.
(2) Proclamation No. 39 issued by then President Ramos by which the reclaimed lands
were conveyed to NHA for subdivision and disposition to qualified beneficiaries and for
development into a mixed land use (commercial/industrial) to provide employment
opportunities to on-site families and additional areas for port-related activities. Said
directive carries with it the pronouncement that said lands have been transformed to
alienable and disposable lands. Otherwise, there is no legal way to convey it to the
beneficiaries.
(3) Proclamation No. 465 likewise issued by President Ramos enlarged the reclaimed
area to 79 hectares to be developed and disposed of in the implementation of the
SMDRP. The authority put into the hands of the NHA to dispose of the reclaimed lands
tacitly sustains the conversion to alienable and disposable lands.
Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR anchored on
Proclamations Nos. 39 and 465 issued by President Ramos, without doubt, classified the
reclaimed areas as alienable and disposable.
Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465 are explicit
declarations that the lands to be reclaimed are classified as alienable and disposable. We
find however that such conclusion is derived and implicit from the authority given to the
NHA to transfer the reclaimed lands to qualified beneficiaries.
The query is, when did the declaration take effect? It did so only after the special patents
covering the reclaimed areas were issued. It is only on such date that the reclaimed
lands became alienable and disposable lands of the public domain. This is in line with
the ruling in PEA where said issue was clarified and stressed:
PD No. 1085, coupled with President Aquinos actual issuance of a special patent
covering the Freedom Islands, is equivalent to an official proclamation classifying the
Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085 and
President Aquinos issuance of a land patent also constitute a declaration that the
Freedom Islands are no longer needed for public service. The Freedom Islands are thus
alienable or disposable lands of the public domain, open to disposition or concession to
qualified parties.[73] (Emphasis supplied.)
Thus, MO 415 and Proclamations Nos. 39 and 465 cumulatively and jointly taken
together with Special Patent Nos. 3591, 3592, and 3598 more than satisfy the
requirement in PEA that [t]here must be a law or presidential proclamation officially
classifying these reclaimed lands as alienable or disposable and open to disposition or
concession (emphasis supplied).[74]
Apropos the requisite law categorizing reclaimed land as alienable or disposable, we find
that RA 6957 as amended by RA 7718 provides ample authority for the classification of
reclaimed land in the SMDRP for the repayment scheme of the BOT project as alienable
and disposable lands of public domain. Sec. 6 of RA 6957 as amended by RA 7718
provides:
For the financing, construction, operation and maintenance of any infrastructure
projects undertaken through the build-operate-and transfer arrangement or any of its
variations pursuant to the provisions of this Act, the project proponent x x x may likewise
be repaid in the form of a share in the revenue of the project or other non-monetary
payments, such as, but not limited to, the grant of a portion or percentage of the
reclaimed land, subject to the constitutional requirements with respect to the
ownership of the land. (Emphasis supplied.)
While RA 6957 as modified by RA 7718 does not expressly declare that the reclaimed
lands that shall serve as payment to the project proponent have become alienable and
disposable lands and opened for disposition; nonetheless, this conclusion is necessarily
implied, for how else can the land be used as the enabling component for the Project if
such classification is not deemed made?
It may be argued that the grant of authority to sell public lands, pursuant to PEA, does
not convert alienable lands of public domain into private or patrimonial lands. We ruled
in PEA that alienable lands of public domain must be transferred to qualified private
parties, or to government entities not tasked to dispose of public lands, before these

lands can become private or patrimonial lands (emphasis supplied).[75] To lands
reclaimed by PEA or through a contract with a private person or entity, such reclaimed
lands still remain alienable lands of public domain which can be transferred only to
Filipino citizens but not to a private corporation. This is because PEA under PD 1084 and
EO 525 is tasked to hold and dispose of alienable lands of public domain and it is only
when it is transferred to Filipino citizens that it becomes patrimonial property. On the
other hand, the NHA is a government agency not tasked to dispose of public lands under
its charterThe Revised Administrative Code of 1987. The NHA is an end-user agency
authorized by law to administer and dispose of reclaimed lands. The moment titles over
reclaimed lands based on the special patents are transferred to the NHA by the Register
of Deeds, they are automatically converted to patrimonial properties of the State which
can be sold to Filipino citizens and private corporations, 60% of which are owned by
Filipinos. The reason is obvious: if the reclaimed land is not converted to patrimonial
land once transferred to NHA, then it would be useless to transfer it to the NHA since it
cannot legally transfer or alienate lands of public domain. More importantly, it cannot
attain its avowed purposes and goals since it can only transfer patrimonial lands to
qualified beneficiaries and prospective buyers to raise funds for the SMDRP.
From the foregoing considerations, we find that the 79-hectare reclaimed land has been
declared alienable and disposable land of the public domain; and in the hands of NHA, it
has been reclassified as patrimonial property.
Petitioner, however, contends that the reclaimed lands were inexistent prior to the three
(3) Presidential Acts (MO 415 and Proclamations Nos. 39 and 465) and hence, the
declaration that such areas are alienable and disposable land of the public domain,
citing PEA, has no legal basis.
Petitioners contention is not well-taken.
Petitioners sole reliance on Proclamations Nos. 39 and 465 without taking into
consideration the special patents issued by the DENR demonstrates the inherent
weakness of his proposition. As was ruled in PEA cited by petitioner himself, PD No.
1085, coupled with President Aquinos actual issuance of a special patent covering the
Freedom Islands is equivalent to an official proclamation classifying the Freedom islands
as alienable or disposable lands of public domain. In a similar vein, the combined and
collective effect of Proclamations Nos. 39 and 465 with Special Patents Nos. 3592 and
3598 is tantamount to and can be considered to be an official declaration that the
reclaimed lots are alienable or disposable lands of the public domain.
The reclaimed lands covered by Special Patents Nos. 3591, 3592, and 3598, which
evidence transfer of ownership of reclaimed lands to the NHA, are official acts of the
DENR Secretary in the exercise of his power of supervision and control over alienable
and disposable public lands and his exclusive jurisdiction over the management and
disposition of all lands of public domain under the Revised Administrative Code of 1987.
Special Patent No. 3592 speaks of the transfer of Lots 1 and 2, and RI-003901-000012-D
with an area of 401,485 square meters based on the survey and technical description
approved by the Bureau of Lands. Lastly, Special Patent No. 3598 was issued in favor of
the NHA transferring to said agency a tract of land described in Plan RL-00-000013 with
an area of 390,000 square meters based on the survey and technical descriptions
approved by the Bureau of Lands.
The conduct of the survey, the preparation of the survey plan, the computation of the
technical description, and the processing and preparation of the special patent are
matters within the technical area of expertise of administrative agencies like the DENR
and the Land Management Bureau and are generally accorded not only respect but at
times even finality.[76] Preparation of special patents calls for technical examination and
a specialized review of calculations and specific details which the courts are ill-equipped
to undertake; hence, the latter defer to the administrative agency which is trained and
knowledgeable on such matters.[77]
LAND TITLES Forms&Contents (7)
Subsequently, the special patents in the name of the NHA were submitted to the
Register of Deeds of the City of Manila for registration, and corresponding certificates of
titles over the reclaimed lots were issued based on said special patents. The issuance of
certificates of titles in NHAs name automatically converts the reclaimed lands to
patrimonial properties of the NHA. Otherwise, the lots would not be of use to the NHAs
housing projects or as payment to the BOT contractor as the enabling component of the
BOT contract. The laws of the land have to be applied and interpreted depending on the
changing conditions and times. Tempora mutantur et legis mutantur in illis (time
changes and laws change with it). One such law that should be treated differently is the
BOT Law (RA 6957) which brought about a novel way of implementing government
contracts by allowing reclaimed land as part or full payment to the contractor of a
government project to satisfy the huge financial requirements of the undertaking. The
NHA holds the lands covered by Special Patents Nos. 3592 and 3598 solely for the
purpose of the SMDRP undertaken by authority of the BOT Law and for disposition in
accordance with said special law. The lands become alienable and disposable lands of
public domain upon issuance of the special patents and become patrimonial properties
of the Government from the time the titles are issued to the NHA.
As early as 1999, this Court in Baguio v. Republic laid down the jurisprudence that:
It is true that, once a patent is registered and the corresponding certificate of title is
issued, the land covered by them ceases to be part of the public domain and becomes
private property, and the Torrens Title issued pursuant to the patent becomes
indefeasible upon the expiration of one year from the date of issuance of such patent.
[78]
The doctrine was reiterated in Republic v. Heirs of Felipe Alijaga, Sr.,[79] Heirs of Carlos
Alcaraz v. Republic,[80] and the more recent case of Doris Chiongbian-Oliva v. Republic
of the Philippines.[81] Thus, the 79-hectare reclaimed land became patrimonial property
after the issuance of certificates of titles to the NHA based on Special Patents Nos. 3592
and 3598.
One last point. The ruling in PEA cannot even be applied retroactively to the lots covered
by Special Patents Nos. 3592 (40 hectare reclaimed land) and 3598 (39-hectare
reclaimed land). The reclamation of the land under SMDRP was completed in August
1996 while the PEA decision was rendered on July 9, 2002. In the meantime, subdivided
lots forming parts of the reclaimed land were already sold to private corporations for
value and separate titles issued to the buyers. The Project was terminated through a
Memorandum of Agreement signed on August 27, 2003. The PEA decision became final
through the November 11, 2003 Resolution. It is a settled precept that decisions of the
Supreme Court can only be applied prospectively as they may prejudice vested rights if
applied retroactively.
In Benzonan v. Court of Appeals, the Court trenchantly elucidated the prospective
application of its decisions based on considerations of equity and fair play, thus:
At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as
amended was that enunciated in Monge and Tupas cited above. The petitioners
Benzonan and respondent Pe and the DBP are bound by these decisions for pursuant to
Article 8 of the Civil Code judicial decisions applying or interpreting the laws of the
Constitution shall form a part of the legal system of the Philippines. But while our
decisions form part of the law of the land, they are also subject to Article 4 of the Civil
Code which provides that laws shall have no retroactive effect unless the contrary is
provided. This is expressed in the familiar legal maxim lex prospicit, non respicit, the law
looks forward not backward. The rationale against retroactivity is easy to perceive. The
retroactive application of a law usually divests rights that have already become vested or
impairs the obligations of contract and hence, is unconstitutional.
The same consideration underlies our rulings giving only prospective effect to decisions
enunciating new doctrines. Thus, we emphasized in People v. Jabinal, 55 SCRA 607
[1974] x x x when a doctrine of this Court is overruled and a different view is adopted,
the new doctrine should be applied prospectively and should not apply to parties who
had relied on the old doctrine and acted on the faith thereof.[82]
Fourth Issue: Whether respondent RBI can acquire reclaimed
lands when there was no declaration that said lands are no
longer needed for public use
Petitioner Chavez avers that despite the declaration that the reclaimed areas are
alienable lands of the public domain, still, the reclamation is flawed for there was never
any declaration that said lands are no longer needed for public use.
We are not moved by petitioners submission.
Even if it is conceded that there was no explicit declaration that the lands are no longer
needed for public use or public service, there was however an implicit executive
declaration that the reclaimed areas R-10 are not necessary anymore for public use or
public service when President Aquino through MO 415 conveyed the same to the NHA
partly for housing project and related commercial/industrial development intended for
disposition to and enjoyment of certain beneficiaries and not the public in general and
partly as enabling component to finance the project.
President Ramos, in issuing Proclamation No. 39, declared, though indirectly, that the
reclaimed lands of the Smokey Mountain project are no longer required for public use or
service, thus:
These parcels of land of public domain are hereby placed under the administration and
disposition of the National Housing Authority to develop, subdivide and dispose to
qualified beneficiaries, as well as its development for mix land use
(commercial/industrial) to provide employment opportunities to on-site families and
additional areas for port related activities. (Emphasis supplied.)
While numerical count of the persons to be benefited is not the determinant whether
the property is to be devoted to public use, the declaration in Proclamation No. 39
undeniably identifies only particular individuals as beneficiaries to whom the reclaimed
lands can be sold, namelythe Smokey Mountain dwellers. The rest of the Filipinos are
not qualified; hence, said lands are no longer essential for the use of the public in
general.
In addition, President Ramos issued on August 31, 1994 Proclamation No. 465 increasing
the area to be reclaimed from forty (40) hectares to seventy-nine (79) hectares,
elucidating that said lands are undoubtedly set aside for the beneficiaries of SMDRP and
not the publicdeclaring the power of NHA to dispose of land to be reclaimed, thus: The
authority to administer, develop, or dispose lands identified and reserved by this
Proclamation and Proclamation No. 39 (s.1992), in accordance with the SMDRP, as
enhance, is vested with the NHA, subject to the provisions of existing laws.
MO 415 and Proclamations Nos. 39 and 465 are declarations that proclaimed the non-
use of the reclaimed areas for public use or service as the Project cannot be successfully
implemented without the withdrawal of said lands from public use or service. Certainly,
the devotion of the reclaimed land to public use or service conflicts with the intended
use of the Smokey Mountain areas for housing and employment of the Smokey
Mountain scavengers and for financing the Project because the latter cannot be
accomplished without abandoning the public use of the subject land. Without doubt,
the presidential proclamations on SMDRP together with the issuance of the special
patents had effectively removed the reclaimed lands from public use.
More decisive and not in so many words is the ruling in PEA which we earlier cited, that
PD No. 1085 and President Aquinos issuance of a land patent also constitute a
declaration that the Freedom Islands are no longer needed for public service.
Consequently, we ruled in that case that the reclaimed lands are open to disposition or
concession to qualified parties.[83]
In a similar vein, presidential Proclamations Nos. 39 and 465 jointly with the special
patents have classified the reclaimed lands as alienable and disposable and open to
disposition or concession as they would be devoted to units for Smokey Mountain
beneficiaries. Hence, said lands are no longer intended for public use or service and shall
form part of the patrimonial properties of the State under Art. 422 of the Civil Code.[84]
As discussed a priori, the lands were classified as patrimonial properties of the NHA
ready for disposition when the titles were registered in its name by the Register of
Deeds.

Moreover, reclaimed lands that are made the enabling components of a BOT
infrastructure project are necessarily reclassified as alienable and disposable lands
under the BOT Law; otherwise, absurd and illogical consequences would naturally result.
Undoubtedly, the BOT contract will not be accepted by the BOT contractor since there
will be no consideration for its contractual obligations. Since reclaimed land will be
conveyed to the contractor pursuant to the BOT Law, then there is an implied
declaration that such land is no longer intended for public use or public service and,
hence, considered patrimonial property of the State.
Fifth Issue: Whether there is a law authorizing sale of
reclaimed lands
Petitioner next claims that RBI cannot acquire the reclaimed lands because there was no
law authorizing their sale. He argues that unlike PEA, no legislative authority was
granted to the NHA to sell reclaimed land.
This position is misplaced.
Petitioner relies on Sec. 60 of Commonwealth Act (CA) 141 to support his view that the
NHA is not empowered by any law to sell reclaimed land, thus:
Section 60. Any tract of land comprised under this title may be leased or sold, as the
case may be, to any person, corporation or association authorized to purchase or lease
public lands for agricultural purposes. The area of the land so leased or sold shall be
such as shall, in the judgment of the Secretary of Agriculture and Natural Resources, be
reasonably necessary for the purposes for which such sale or lease if requested and shall
in no case exceed one hundred and forty-four hectares: Provided, however, That this
limitation shall not apply to grants, donations, transfers, made to a province,
municipality or branch or subdivision of the Government for the purposes deemed by
said entities conducive to the public interest; but the land so granted donated or
transferred to a province, municipality, or branch or subdivision of the Government shall
not be alienated, encumbered, or otherwise disposed of in a manner affecting its title,
except when authorized by Congress; Provided, further, That any person, corporation,
association or partnership disqualified from purchasing public land for agricultural
purposes under the provisions of this Act, may lease land included under this title
suitable for industrial or residential purposes, but the lease granted shall only be valid
while such land is used for the purposes referred to. (Emphasis supplied.)
Reliance on said provision is incorrect as the same applies only to a province,
municipality or branch or subdivision of the Government. The NHA is not a government
unit but a government corporation performing governmental and proprietary functions.
In addition, PD 757 is clear that the NHA is empowered by law to transfer properties
acquired by it under the law to other parties, thus:
Section 6. Powers and functions of the Authority. The Authority shall have the following
powers and functions to be exercised by the Boards in accordance with the established
national human settlements plan prepared by the Human Settlements Commission:
xxxx
(k) Enter into contracts whenever necessary under such terms and conditions as it may
deem proper and reasonable;
(l) Acquire property rights and interests, and encumber or otherwise dispose the same
as it may deem appropriate (Emphasis supplied.)
Letter (l) is emphatic that the NHA can acquire property rights and interests and
encumber or otherwise dispose of them as it may deem appropriate. The transfer of the
reclaimed lands by the National Government to the NHA for housing, commercial, and
industrial purposes transformed them into patrimonial lands which are of course owned
by the State in its private or proprietary capacity. Perforce, the NHA can sell the
reclaimed lands to any Filipino citizen or qualified corporation.
LAND TITLES Forms&Contents (7)
Sixth Issue: Whether the transfer of reclaimed lands to RBI
was done by public bidding
Petitioner also contends that there was no public bidding but an awarding of ownership
of said reclaimed lands to RBI. Public bidding, he says, is required under Secs. 63 and 67
of CA 141 which read:
Section 63. Whenever it is decided that lands covered by this chapter are not needed for
public purposes, the Director of Lands shall ask the Secretary of Agriculture and
Commerce for authority to dispose of the same. Upon receipt of such authority, the
Director of Lands shall give notice by public advertisement in the same manner as in the
case of leases or sales of agricultural public land, that the Government will lease or sell,
as the case may be, the lots or blocks specified in the advertisement, for the purpose
stated in the notice and subject to the conditions specified in this chapter.
xxxx
Section 67. The lease or sale shall be made through oral bidding; and adjudication shall
be made to the highest bidder. However, where an applicant has made improvements on
the land by virtue of a permit issued to him by competent authority, the sale or lease
shall be made by sealed bidding as prescribed in section twenty-six of this Act, the
provisions of which shall be applied whenever applicable. If all or part of the lots remain
unleased or unsold, the Director of Lands shall from time to time announce in the
Official Gazette or in any other newspapers of general circulation, the lease of sale of
those lots, if necessary.
He finds that the NHA and RBI violated Secs. 63 and 67 of CA 141, as the reclaimed lands
were conveyed to RBI by negotiated contract and not by public bidding as required by
law.
This stand is devoid of merit.
There is no doubt that respondent NHA conducted a public bidding of the right to
become its joint venture partner in the Smokey Mountain Project. Notices or Invitations
to Bid were published in the national dailies on January 23 and 26, 1992 and February 1,
14, 16, and 23, 1992. The bidding proper was done by the Bids and Awards Committee
(BAC) on May 18, 1992. On August 31, 1992, the Inter-Agency Techcom made up of the
NHA, PEA, DPWH, PPA, DBP, and DENR opened the bids and evaluated them, resulting in
the award of the contract to respondent RBI on October 7, 1992.
On March 19, 1993, respondents NHA and RBI signed the JVA. On February 23, 1994,
said JVA was amended and restated into the ARJVA. On August 11, 1994, the ARJVA was
again amended. On September 7, 1994, the OP approved the ARJVA and the
amendments to the ARJVA. From these factual settings, it cannot be gainsaid that there
was full compliance with the laws and regulations governing public biddings involving a
right, concession, or property of the government.
Petitioner concedes that he does not question the public bidding on the right to be a
joint venture partner of the NHA, but the absence of bidding in the sale of alienable and
disposable lands of public domain pursuant to CA 141 as amended.
Petitioners theory is incorrect.
Secs. 63 and 67 of CA 141, as amended, are in point as they refer to government sale by
the Director of Lands of alienable and disposable lands of public domain. This is not
present in the case at bar. The lands reclaimed by and conveyed to the NHA are no
longer lands of public domain. These lands became proprietary lands or patrimonial
properties of the State upon transfer of the titles over the reclaimed lands to the NHA
and hence outside the ambit of CA 141. The NHA can therefore legally transfer
patrimonial land to RBI or to any other interested qualified buyer without any bidding
conducted by the Director of Lands because the NHA, unlike PEA, is a government
agency not tasked to sell lands of public domain. Hence, it can only hold patrimonial
lands and can dispose of such lands by sale without need of public bidding.
Petitioner likewise relies on Sec. 79 of PD 1445 which requires public bidding when
government property has become unserviceable for any cause or is no longer needed. It
appears from the Handbook on Property and Supply Management System, Chapter 6,
that reclaimed lands which have become patrimonial properties of the State, whose
titles are conveyed to government agencies like the NHA, which it will use for its projects
or programs, are not within the ambit of Sec. 79. We quote the determining factors in
the Disposal of Unserviceable Property, thus:
Determining Factors in the Disposal of Unserviceable Property
Property, which can no longer be repaired or reconditioned
Property whose maintenance costs of repair more than outweigh the benefits and
services that will be derived from its continued use;
Property that has become obsolete or outmoded because of changes in technology;
Serviceable property that has been rendered unnecessary due to change in the
agencys function or mandate;
Unused supplies, materials and spare parts that were procured in excess of
requirements; and
Unused supplies and materials that [have] become dangerous to use because of
long storage or use of which is determined to be hazardous.[85]
Reclaimed lands cannot be considered unserviceable properties. The reclaimed lands in
question are very much needed by the NHA for the Smokey Mountain Project because
without it, then the projects will not be successfully implemented. Since the reclaimed
lands are not unserviceable properties and are very much needed by NHA, then Sec. 79
of PD 1445 does not apply.
More importantly, Sec. 79 of PD 1445 cannot be applied to patrimonial properties like
reclaimed lands transferred to a government agency like the NHA which has entered into
a BOT contract with a private firm. The reason is obvious. If the patrimonial property will
be subject to public bidding as the only way of disposing of said property, then Sec. 6 of
RA 6957 on the repayment scheme is almost impossible or extremely difficult to
implement considering the uncertainty of a winning bid during public auction. Moreover,
the repayment scheme of a BOT contract may be in the form of non-monetary payment
like the grant of a portion or percentage of reclaimed land. Even if the BOT partner
participates in the public bidding, there is no assurance that he will win the bid and
therefore the payment in kind as agreed to by the parties cannot be performed or the
winning bid prize might be below the estimated valuation of the land. The only way to
harmonize Sec. 79 of PD 1445 with Sec. 6 of RA 6957 is to consider Sec. 79 of PD 1445 as
inapplicable to BOT contracts involving patrimonial lands. The law does not intend
anything impossible (lex non intendit aliquid impossibile).
Seventh Issue: Whether RBI, being a private corporation,
is barred by the Constitution to acquire lands of public domain
Petitioner maintains that RBI, being a private corporation, is expressly prohibited by the
1987 Constitution from acquiring lands of public domain.
Petitioners proposition has no legal mooring for the following reasons:
1. RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid a
portion as percentage of the reclaimed land subject to the constitutional requirement
that only Filipino citizens or corporations with at least 60% Filipino equity can acquire
the same. It cannot be denied that RBI is a private corporation, where Filipino citizens
own at least 60% of the stocks. Thus, the transfer to RBI is valid and constitutional.
2. When Proclamations Nos. 39 and 465 were issued, inalienable lands covered by said
proclamations were converted to alienable and disposable lands of public domain.
When the titles to the reclaimed lands were transferred to the NHA, said alienable and
disposable lands of public domain were automatically classified as lands of the private
domain or patrimonial properties of the State because the NHA is an agency NOT tasked
to dispose of alienable or disposable lands of public domain. The only way it can transfer
the reclaimed land in conjunction with its projects and to attain its goals is when it is
automatically converted to patrimonial properties of the State. Being patrimonial or
private properties of the State, then it has the power to sell the same to any qualified
personunder the Constitution, Filipino citizens as private corporations, 60% of which is
owned by Filipino citizens like RBI.

3. The NHA is an end-user entity such that when alienable lands of public domain are
transferred to said agency, they are automatically classified as patrimonial properties.
The NHA is similarly situated as BCDA which was granted the authority to dispose of
patrimonial lands of the government under RA 7227. The nature of the property
holdings conveyed to BCDA is elucidated and stressed in the May 6, 2003 Resolution in
Chavez v. PEA, thus:
BCDA is an entirely different government entity. BCDA is authorized by law to sell
specific government lands that have long been declared by presidential proclamations as
military reservations for use by the different services of the armed forces under the
Department of National Defense. BCDAs mandate is specific and limited in area, while
PEAs mandate is general and national. BCDA holds government lands that have been
granted to end-user government entitiesthe military services of the armed forces. In
contrast, under Executive Order No. 525, PEA holds the reclaimed public lands, not as an
end-user entity, but as the government agency primarily responsible for integrating,
directing, and coordinating all reclamation projects for and on behalf of the National
Government.
x x x Well-settled is the doctrine that public land granted to an end-user government
agency for a specific public use may subsequently be withdrawn by Congress from public
use and declared patrimonial property to be sold to private parties. R.A. No. 7227
creating the BCDA is a law that declares specific military reservations no longer needed
for defense or military purposes and reclassifies such lands as patrimonial property for
sale to private parties.
Government owned lands, as long as they are patrimonial property, can be sold to
private parties, whether Filipino citizens or qualified private corporations. Thus, the so-
called Friar Lands acquired by the government under Act No. 1120 are patrimonial
property which even private corporations can acquire by purchase. Likewise, reclaimed
alienable lands of the public domain if sold or transferred to a public or municipal
corporation for a monetary consideration become patrimonial property in the hands of
the public or municipal corporation. Once converted to patrimonial property, the land
may be sold by the public or municipal corporation to private parties, whether Filipino
citizens or qualified private corporations.[86] (Emphasis supplied.)
The foregoing Resolution makes it clear that the SMDRP was a program adopted by the
Government under Republic Act No. 6957 (An Act Authorizing the Financing,
Construction, Operation and Maintenance of Infrastructure Projects by the Private
Sector, and For Other Purposes), as amended by RA 7718, which is a special law similar
to RA 7227. Moreover, since the implementation was assigned to the NHA, an end-user
agency under PD 757 and RA 7279, the reclaimed lands registered under the NHA are
automatically classified as patrimonial lands ready for disposition to qualified
beneficiaries.
The foregoing reasons likewise apply to the contention of petitioner that HCPTI, being a
private corporation, is disqualified from being a transferee of public land. What was
transferred to HCPTI is a 10-hectare lot which is already classified as patrimonial
property in the hands of the NHA. HCPTI, being a qualified corporation under the 1987
Constitution, the transfer of the subject lot to it is valid and constitutional.
Eighth Issue: Whether respondents can be compelled to disclose
all information related to the SMDRP
Petitioner asserts his right to information on all documents such as contracts, reports,
memoranda, and the like relative to SMDRP.
Petitioner asserts that matters relative to the SMDRP have not been disclosed to the
public like the current stage of the Project, the present financial capacity of RBI, the
complete list of investors in the asset pool, the exact amount of investments in the asset
pool and other similar important information regarding the Project.
He prays that respondents be compelled to disclose all information regarding the SMDRP
and furnish him with originals or at least certified true copies of all relevant documents
LAND TITLES Forms&Contents (7)
relating to the said project including, but not limited to, the original JVA, ARJVA, AARJVA,
and the Asset Pool Agreement.
This relief must be granted.
The right of the Filipino people to information on matters of public concern is enshrined
in the 1987 Constitution, thus:
ARTICLE II
xxxx
SEC. 28. Subject to reasonable conditions prescribed by law, the State adopts and
implements a policy of full public disclosure of all its transactions involving public
interest.
ARTICLE III
SEC. 7. The right of the people to information on matters of public concern shall be
recognized. Access to official records, and to documents, and papers pertaining to
official acts, transactions, or decisions, as well as to government research data used as
basis for policy development, shall be afforded the citizen, subject to such limitations as
may be provided by law.
In Valmonte v. Belmonte, Jr., this Court explicated this way:
[A]n essential element of these freedoms is to keep open a continuing dialogue or
process of communication between the government and the people. It is in the interest
of the State that the channels for free political discussion be maintained to the end that
the government may perceive and be responsive to the peoples will. Yet, this open
dialogue can be effective only to the extent that the citizenry is informed and thus able
to formulate its will intelligently. Only when the participants in the discussion are aware
of the issues and have access to information relating thereto can such bear fruit.[87]
In PEA, this Court elucidated the rationale behind the right to information:
These twin provisions of the Constitution seek to promote transparency in policy-making
and in the operations of the government, as well as provide the people sufficient
information to exercise effectively other constitutional rights. These twin provisions are
essential to the exercise of freedom of expression. If the government does not disclose
its official acts, transactions and decisions to citizens, whatever citizens say, even if
expressed without any restraint, will be speculative and amount to nothing. These twin
provisions are also essential to hold public officials at all times x x x accountable to the
people, for unless citizens have the proper information, they cannot hold public officials
accountable for anything. Armed with the right information, citizens can participate in
public discussions leading to the formulation of government policies and their effective
implementation. An informed citizenry is essential to the existence and proper
functioning of any democracy.[88]
Sec. 28, Art. II compels the State and its agencies to fully disclose all of its transactions
involving public interest. Thus, the government agencies, without need of demand from
anyone, must bring into public view all the steps and negotiations leading to the
consummation of the transaction and the contents of the perfected contract.[89] Such
information must pertain to definite propositions of the government, meaning official
recommendations or final positions reached on the different matters subject of
negotiation. The government agency, however, need not disclose intra-agency or inter-
agency recommendations or communications during the stage when common assertions
are still in the process of being formulated or are in the exploratory stage. The limitation
also covers privileged communication like information on military and diplomatic
secrets; information affecting national security; information on investigations of crimes
by law enforcement agencies before the prosecution of the accused; information on
foreign relations, intelligence, and other classified information.
It is unfortunate, however, that after almost twenty (20) years from birth of the 1987
Constitution, there is still no enabling law that provides the mechanics for the
compulsory duty of government agencies to disclose information on government
transactions. Hopefully, the desired enabling law will finally see the light of day if and
when Congress decides to approve the proposed Freedom of Access to Information Act.
In the meantime, it would suffice that government agencies post on their bulletin boards
the documents incorporating the information on the steps and negotiations that
produced the agreements and the agreements themselves, and if finances permit, to
upload said information on their respective websites for easy access by interested
parties. Without any law or regulation governing the right to disclose information, the
NHA or any of the respondents cannot be faulted if they were not able to disclose
information relative to the SMDRP to the public in general.
The other aspect of the peoples right to know apart from the duty to disclose is the duty
to allow access to information on matters of public concern under Sec. 7, Art. III of the
Constitution. The gateway to information opens to the public the following: (1) official
records; (2) documents and papers pertaining to official acts, transactions, or decisions;
and (3) government research data used as a basis for policy development.
Thus, the duty to disclose information should be differentiated from the duty to permit
access to information. There is no need to demand from the government agency
disclosure of information as this is mandatory under the Constitution; failing that, legal
remedies are available. On the other hand, the interested party must first request or
even demand that he be allowed access to documents and papers in the particular
agency. A request or demand is required; otherwise, the government office or agency
will not know of the desire of the interested party to gain access to such papers and
what papers are needed. The duty to disclose covers only transactions involving public
interest, while the duty to allow access has a broader scope of information which
embraces not only transactions involving public interest, but any matter contained in
official communications and public documents of the government agency.
We find that although petitioner did not make any demand on the NHA to allow access
to information, we treat the petition as a written request or demand. We order the NHA
to allow petitioner access to its official records, documents, and papers relating to
official acts, transactions, and decisions that are relevant to the said JVA and subsequent
agreements relative to the SMDRP.
Ninth Issue: Whether the operative fact doctrine applies to the
instant petition
Petitioner postulates that the operative fact doctrine is inapplicable to the present case
because it is an equitable doctrine which could not be used to countenance an
inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of the
various agreements implementing the SMDRP is an operative fact that can no longer be
disturbed or simply ignored, citing Rieta v. People of the Philippines.[90]
The argument of the Solicitor General is meritorious.
The operative fact doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is
stated that a legislative or executive act, prior to its being declared as unconstitutional
by the courts, is valid and must be complied with, thus:
As the new Civil Code puts it: When the courts declare a law to be inconsistent with the
Constitution, the former shall be void and the latter shall govern. Administrative or
executive acts, orders and regulations shall be valid only when they are not contrary to
the laws of the Constitution. It is understandable why it should be so, the Constitution
being supreme and paramount. Any legislative or executive act contrary to its terms
cannot survive.
Such a view has support in logic and possesses the merit of simplicity. It may not
however be sufficiently realistic. It does not admit of doubt that prior to the declaration
of nullity such challenged legislative or executive act must have been in force and had to
be complied with. This is so as until after the judiciary, in an appropriate case, declares
its invalidity, it is entitled to obedience and respect. Parties may have acted under it and
may have changed their positions. What could be more fitting than that in a subsequent
litigation regard be had to what has been done while such legislative or executive act
was in operation and presumed to be valid in all respects. It is now accepted as a
doctrine that prior to its being nullified, its existence as a fact must be reckoned with.
This is merely to reflect awareness that precisely because the judiciary is the
governmental organ which has the final say on whether or not a legislative or executive
measure is valid, a period of time may have elapsed before it can exercise the power of

judicial review that may lead to a declaration of nullity. It would be to deprive the law of
its quality of fairness and justice then, if there be no recognition of what had transpired
prior to such adjudication.
In the language of an American Supreme Court decision: The actual existence of a
statute, prior to such a determination [of unconstitutionality], is an operative fact and
may have consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity
may have to be considered in various aspects, with respect to particular relations,
individual and corporate, and particular conduct, private and official. This language has
been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila
Motor Co., Inc. v. Flores. An even more recent instance is the opinion of Justice Zaldivar
speaking for the Court in Fernandez v. Cuerva and Co.[91] (Emphasis supplied.)
This doctrine was reiterated in the more recent case of City of Makati v. Civil Service
Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Governments order of suspension, as we
have no reason to do so, much less retroactively apply such nullification to deprive
private respondent of a compelling and valid reason for not filing the leave application.
For as we have held, a void act though in law a mere scrap of paper nonetheless confers
legitimacy upon past acts or omissions done in reliance thereof. Consequently, the
existence of a statute or executive order prior to its being adjudged void is an operative
fact to which legal consequences are attached. It would indeed be ghastly unfair to
prevent private respondent from relying upon the order of suspension in lieu of a formal
leave application.[92] (Emphasis supplied.)
The principle was further explicated in the case of Rieta v. People of the Philippines,
thus:
In similar situations in the past this Court had taken the pragmatic and realistic course
set forth in Chicot County Drainage District vs. Baxter Bank to wit:
The courts below have proceeded on the theory that the Act of Congress, having been
found to be unconstitutional, was not a law; that it was inoperative, conferring no rights
and imposing no duties, and hence affording no basis for the challenged decree. x x x It
is quite clear, however, that such broad statements as to the effect of a determination of
unconstitutionality must be taken with qualifications. The actual existence of a statute,
prior to [the determination of its invalidity], is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be erased by a
new judicial declaration. The effect of the subsequent ruling as to invalidity may have to
be considered in various aspects with respect to particular conduct, private and official.
Questions of rights claimed to have become vested, of status, of prior determinations
deemed to have finality and acted upon accordingly, of public policy in the light of the
nature both of the statute and of its previous application, demand examination. These
questions are among the most difficult of those which have engaged the attention of
courts, state and federal, and it is manifest from numerous decisions that an all-inclusive
statement of a principle of absolute retroactive invalidity cannot be justified.
In the May 6, 2003 Resolution in Chavez v. PEA,[93] we ruled that De Agbayani[94] is not
applicable to the case considering that the prevailing law did not authorize private
corporations from owning land. The prevailing law at the time was the 1935 Constitution
as no statute dealt with the same issue.
In the instant case, RA 6957 was the prevailing law at the time that the joint venture
agreement was signed. RA 6957, entitled An Act Authorizing The Financing,
Construction, Operation And Maintenance Of Infrastructure Projects By The Private
Sector And For Other Purposes, which was passed by Congress on July 24, 1989, allows
repayment to the private contractor of reclaimed lands.[95] Such law was relied upon by
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respondents, along with the above-mentioned executive issuances in pushing through
with the Project. The existence of such law and issuances is an operative fact to which
legal consequences have attached. This Court is constrained to give legal effect to the
acts done in consonance with such executive and legislative acts; to do otherwise would
work patent injustice on respondents.
Further, in the May 6, 2003 Resolution in Chavez v. PEA, we ruled that in certain cases,
the transfer of land, although illegal or unconstitutional, will not be invalidated on
considerations of equity and social justice. However, in that case, we did not apply the
same considering that PEA, respondent in said case, was not entitled to equity principles
there being bad faith on its part, thus:
There are, moreover, special circumstances that disqualify Amari from invoking equity
principles. Amari cannot claim good faith because even before Amari signed the
Amended JVA on March 30, 1999, petitioner had already filed the instant case on April
27, 1998 questioning precisely the qualification of Amari to acquire the Freedom Islands.
Even before the filing of this petition, two Senate Committees had already approved on
September 16, 1997 Senate Committee Report No. 560. This Report concluded, after a
well-publicized investigation into PEAs sale of the Freedom Islands to Amari, that the
Freedom Islands are inalienable lands of the public domain. Thus, Amari signed the
Amended JVA knowing and assuming all the attendant risks, including the annulment of
the Amended JVA.[96]
Such indicia of bad faith are not present in the instant case. When the ruling in PEA was
rendered by this Court on July 9, 2002, the JVAs were all executed. Furthermore, when
petitioner filed the instant case against respondents on August 5, 2004, the JVAs were
already terminated by virtue of the MOA between the NHA and RBI. The respondents
had no reason to think that their agreements were unconstitutional or even
questionable, as in fact, the concurrent acts of the executive department lent validity to
the implementation of the Project. The SMDRP agreements have produced vested rights
in favor of the slum dwellers, the buyers of reclaimed land who were issued titles over
said land, and the agencies and investors who made investments in the project or who
bought SMPPCs. These properties and rights cannot be disturbed or questioned after the
passage of around ten (10) years from the start of the SMDRP implementation.
Evidently, the operative fact principle has set in. The titles to the lands in the hands of
the buyers can no longer be invalidated.
The Courts Dispositions
Based on the issues raised in this petition, we find that the March 19, 1993 JVA between
NHA and RBI and the SMDRP embodied in the JVA, the subsequent amendments to the
JVA and all other agreements signed and executed in relation to it, including, but not
limited to, the September 26, 1994 Smokey Mountain Asset Pool Agreement and the
agreement on Phase I of the Project as well as all other transactions which emanated
from the Project, have been shown to be valid, legal, and constitutional. Phase II has
been struck down by the Clean Air Act.
With regard to the prayer for prohibition, enjoining respondents particularly respondent
NHA from further implementing and/or enforcing the said Project and other agreements
related to it, and from further deriving and/or enjoying any rights, privileges and interest
from the Project, we find the same prayer meritless.
Sec. 2 of Rule 65 of the 1997 Rules of Civil Procedure provides:
Sec. 2. Petition for prohibition.When the proceedings of any tribunal, corporation, board,
officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are
without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting
to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with certainty and praying that
judgment be rendered commanding the respondent to desist from further proceedings
in the action or matter specified therein, or otherwise granting such incidental reliefs as
law and justice may require.
It has not been shown that the NHA exercised judicial or quasi-judicial functions in
relation to the SMDRP and the agreements relative to it. Likewise, it has not been shown
what ministerial functions the NHA has with regard to the SMDRP.
A ministerial duty is one which is so clear and specific as to leave no room for the
exercise of discretion in its performance. It is a duty which an officer performs in a given
state of facts in a prescribed manner in obedience to the mandate of legal authority,
without regard to the exercise of his/her own judgment upon the propriety of the act
done.[97]
Whatever is left to be done in relation to the August 27, 2003 MOA, terminating the JVA
and other related agreements, certainly does not involve ministerial functions of the
NHA but instead requires exercise of judgment. In fact, Item No. 4 of the MOA
terminating the JVAs provides for validation of the developers (RBIs) claims arising from
the termination of the SMDRP through the various government agencies.[98] Such
validation requires the exercise of discretion.
In addition, prohibition does not lie against the NHA in view of petitioners failure to avail
and exhaust all administrative remedies. Clear is the rule that prohibition is only
available when there is no adequate remedy in the ordinary course of law.
More importantly, prohibition does not lie to restrain an act which is already a fait
accompli. The operative fact doctrine protecting vested rights bars the grant of the writ
of prohibition to the case at bar. It should be remembered that petitioner was the
Solicitor General at the time SMDRP was formulated and implemented. He had the
opportunity to question the SMDRP and the agreements on it, but he did not. The
moment to challenge the Project had passed.
On the prayer for a writ of mandamus, petitioner asks the Court to compel respondents
to disclose all documents and information relating to the project, including, but not
limited to, any subsequent agreements with respect to the different phases of the
Project, the revisions of the original plan, the additional works incurred on the Project,
the current financial condition of respondent RBI, and the transactions made with
respect to the project. We earlier ruled that petitioner will be allowed access to official
records relative to the SMDRP. That would be adequate relief to satisfy petitioners right
to the information gateway.
WHEREFORE, the petition is PARTIALLY GRANTED.
The prayer for a writ of prohibition is DENIED for lack of merit.
The prayer for a writ of mandamus is GRANTED. Respondent NHA is ordered to allow
access to petitioner to all public documents and official records relative to the
SMDRPincluding, but not limited to, the March 19, 1993 JVA between the NHA and RBI
and subsequent agreements related to the JVA, the revisions over the original plan, and
the additional works incurred on and the transactions made with respect to the Project.
No costs.
SO ORDERED.
DIGEST
Chavez v. National Housing Authority
G.R. No. 164527 15 August 2007
FACTS:
On August 5, 2004, former Solicitor General Francisco Chavez, filed an instant petition
raising constitutional issues on the JVA entered by National Housing Authority and R-II
Builders, Inc.
On March 1, 1988, then-President Cory Aquino issued Memorandum order No. (MO)
161 approving and directing implementation of the Comprehensive and Integrated
Metropolitan Manila Waste Management Plan. During this time, Smokey Mountain, a
wasteland in Tondo, Manila, are being made residence of many Filipinos living in a
subhuman state.
As presented in MO 161, NHA prepared feasibility studies to turn the dumpsite into low-
cost housing project, thus, Smokey Mountain Development and Reclamation Project
(SMDRP), came into place. RA 6957 (Build-Operate-Transfer Law) was passed on July
1990 declaring the importance of private sectors as contractors in government projects.
Thereafter, Aquino proclaimed MO 415 applying RA 6957 to SMDRP, among others. The

same MO also established EXECOM and TECHCOM in the execution and evaluation of
the plan, respectively, to be assisted by the Public Estates Authority (PEA).
Notices of public bidding to become NHAs venture partner for SMDRP were published in
newspapers in 1992, from which R-II Builders, Inc. (RBI) won the bidding process. Then-
President Ramos authorized NHA to enter into a Joint Venture Agreement with RBI.
Under the JVA, the project involves the clearing of Smokey Mountain for eventual
development into a low cost housing complex and industrial/commercial site. RBI is
expected to fully finance the development of Smokey Mountain and reclaim 40 hectares
of the land at the Manila Bay Area. The latter together with the commercial area to be
built on Smokey Mountain will be owned by RBI as enabling components. If the project
is revoked or terminated by the Government through no fault of RBI or by mutual
agreement, the Government shall compensate RBI for its actual expenses incurred in the
Project plus a reasonable rate of return not exceeding that stated in the feasibility study
and in the contract as of the date of such revocation, cancellation, or termination on a
schedule to be agreed upon by both parties.
To summarize, the SMDRP shall consist of Phase I and Phase II. Phase I of the project
involves clearing, levelling-off the dumpsite, and construction of temporary housing
units for the current residents on the cleared and levelled site. Phase II involves the
construction of a fenced incineration area for the on-site disposal of the garbage at the
dumpsite.
Due to the recommendations done by the DENR after evaluations done, the JVA was
amended and restated (now ARJVA) to accommodate the design changes and additional
work to be done to successfully implement the project. The original 3,500 units of
temporary housing were decreased to 2,992. The reclaimed land as enabling
component was increased from 40 hectares to 79 hectares, which was supported by the
issuance of Proclamation No. 465 by President Ramos. The revision also provided for
the 119-hectare land as an enabling component for Phase II of the project.
Subsequently, the Clean Air Act was passed by the legislature which made the
establishment of an incinerator illegal, making the off-site dumpsite at Smokey Mountain
necessary. On August 1, 1998, the project was suspended, to be later reconstituted by
President Estrada in MO No. 33.
On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement whereby
both parties agreed to terminate the JVA and subsequent agreements. During this time,
NHA reported that 34 temporary housing structures and 21 permanent housing
structures had been turned over by RBI.
ISSUES:
Whether respondents NHA and RBI have been granted the power and authority to
reclaim lands of the public domain as this power is vested exclusively in PEA as claimed
by petitioner
Whether respondents NHA and RBI were given the power and authority by DENR to
reclaim foreshore and submerged lands
Whether respondent RBI can acquire reclaimed foreshore and submerged lands
considered as alienable and outside the commerce of man
Whether respondent RBI can acquire reclaimed lands when there was no declaration
that said lands are no longer needed for public use
Whether there is a law authorizing sale of reclaimed lands
Whether the transfer of reclaimed lands to RBI was done by public bidding
Whether RBI, being a private corporation, is barred by the Constitution to acquire lands
of public domain
Whether respondents can be compelled to disclose all information related to the SMDRP
Whether the operative fact doctrine applies to the instant position
HELD:
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Executive Order 525 reads that the PEA shall be primarily responsible for integrating,
directing, and coordinating all reclamation projects for and on behalf of the National
Government. This does not mean that it shall be responsible for all. The requisites for a
valid and legal reclamation project are approval by the President (which were provided
for by MOs), favourable recommendation of PEA (which were seen as a part of its
recommendations to the EXECOM), and undertaken either by PEA or entity under
contract of PEA or by the National Government Agency (NHA is a government agency
whose authority to reclaim lands under consultation with PEA is derived under PD 727
and RA 7279).
Notwithstanding the need for DENR permission, the DENR is deemed to have granted
the authority to reclaim in the Smokey Mountain Project for the DENR is one of the
members of the EXECOM which provides reviews for the project. ECCs and Special
Patent Orders were given by the DENR which are exercises of its power of supervision
over the project. Furthermore, it was the President via the abovementioned MOs that
originally authorized the reclamation. It must be noted that the reclamation of lands of
public domain is reposed first in the Philippine President.
The reclaimed lands were classified alienable and disposable via MO 415 issued by
President Aquino and Proclamation Nos. 39 and 465 by President Ramos.
Despite not having an explicit declaration, the lands have been deemed to be no longer
needed for public use as stated in Proclamation No. 39 that these are to be disposed to
qualified beneficiaries. Furthermore, these lands have already been necessarily
reclassified as alienable and disposable lands under the BOT law.
Letter I of Sec. 6 of PD 757 clearly states that the NHA can acquire property rights and
interests and encumber or otherwise dispose of them as it may deem appropriate.
There is no doubt that respondent NHA conducted a public bidding of the right to
become its joint venture partner in the Smokey Mountain Project. It was noted that
notices were published in national newspapers. The bidding proper was done by the
Bids and Awards Committee on May 18, 1992.
RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid a
portion as percentage of the reclaimed land subject to the constitutional requirement
that only Filipino citizens or corporation with at least 60% Filipino equity can acquire the
same. In addition, when the lands were transferred to the NHA, these were considered
Patrimonial lands of the state, by which it has the power to sell the same to any qualified
person.
This relief must be granted. It is the right of the Filipino people to information on
matters of public concerned as stated in Article II, Sec. 28, and Article III, Sec. 7 of the
1987 Constitution.
When the petitioner filed the case, the JVA had already been terminated by virtue of
MOA between RBI and NHA. The properties and rights in question after the passage of
around 10 years from the start of the projects implementation cannot be disturbed or
questioned. The petitioner, being the Solicitor General at the time SMDRP was
formulated, had ample opportunity to question the said project, but did not do so. The
moment to challenge has passed.
Chavez v. Pea and Amari
Fact:
In 1973, the Comissioner on Public Highways entered into a contract to reclaim areas of
Manila Bay with the Construction and Development Corportion of the Philippines
(CDCP).
PEA (Public Estates Authority) was created by President Marcos under P.D. 1084, tasked
with developing and leasing reclaimed lands. These lands were transferred to the care of
PEA under P.D. 1085 as part of the Manila Cavite Road and Reclamation Project
(MCRRP). CDCP and PEA entered into an agreement that all future projects under the
MCRRP would be funded and owned by PEA.
By 1988, President Aquino issued Special Patent No. 3517 transferring lands to PEA. It
was followed by the transfer of three Titles (7309, 7311 and 7312) by the Register of
Deeds of Paranaque to PEA covering the three reclaimed islands known as the FREEDOM
ISLANDS.
Subsquently, PEA entered into a joint venture agreement (JVA) with AMARI, a Thai-
Philippine corporation to develop the Freedom Islands. Along with another 250
hectares, PEA and AMARI entered the JVA which would later transfer said lands to
AMARI. This caused a stir especially when Sen. Maceda assailed the agreement, claiming
that such lands were part of public domain (famously known as the mother of all
scams).
Peitioner Frank J. Chavez filed case as a taxpayer praying for mandamus, a writ of
preliminary injunction and a TRO against the sale of reclaimed lands by PEA to AMARI
and from implementing the JVA. Following these events, under President Estradas
admin, PEA and AMARI entered into an Amended JVA and Mr. Chaves claim that the
contract is null and void.
Issue:
w/n: the transfer to AMARI lands reclaimed or to be reclaimed as part of the stipulations
in the (Amended) JVA between AMARI and PEA violate Sec. 3 Art. XII of the 1987
Constitution
w/n: the court is the proper forum for raising the issue of whether the amended joint
venture agreement is grossly disadvantageous to the government.
Held:
On the issue of Amended JVA as violating the constitution:
1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered
by certificates of title in the name of PEA, are alienable lands of the public domain. PEA
may lease these lands to private corporations but may not sell or transfer ownership of
these lands to private corporations. PEA may only sell these lands to Philippine citizens,
subject to the ownership limitations in the 1987 Constitution and existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural
resources of the public domain until classified as alienable or disposable lands open to
disposition and declared no longer needed for public service. The government can make
such classification and declaration only after PEA has reclaimed these submerged areas.
Only then can these lands qualify as agricultural lands of the public domain, which are
the only natural resources the government can alienate. In their present state, the
592.15 hectares of submerged areas are inalienable and outside the commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership
of 77.34 hectares110 of the Freedom Islands, such transfer is void for being contrary to
Section 3, Article XII of the 1987 Constitution which prohibits private corporations from
acquiring any kind of alienable land of the public domain.
4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156
hectares111 of still submerged areas of Manila Bay, such transfer is void for being
contrary to Section 2, Article XII of the 1987 Constitution which prohibits the alienation
of natural resources other than agricultural lands of the public domain.
PEA may reclaim these submerged areas. Thereafter, the government can classify the
reclaimed lands as alienable or disposable, and further declare them no longer needed
for public service. Still, the transfer of such reclaimed alienable lands of the public
domain to AMARI will be void in view of Section 3, Article XII of the 1987Constitution
which prohibits private corporations from acquiring any kind of alienable land of the
public domain.
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