INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER V. RAMIREZ (GR 18700, 26 September 1922)
FACTS:
The half-interest in the business (Antigua Botica Ramirez) was mortgaged with Fidelity & Surety Co. on 10 March 1919, and registered in due
time in the registry of property, while another mortgage was made with Ildefonso Ramirez on 22 September 1919 and registered also in the
registry. Raised in the lower court, the trial court declared the mortgage of Fidelity & Surety Co. entitled to preference over that of Ildefonso
Ramirez and another mortgage by Concepcion Ayala. Ayala did not appeal, but Ramirez did.
ISSUE:
Whether or not half-interest over a business is a movable property
RULING: Yes.
1. Interest in business may be subject of mortgage With regard to the nature of the property mortgaged which is one-half interest in the business,
such interest is a personal property capable of appropriation and not included in the enumeration of real properties in articles 335 of the Civil
Code, and may be the subject of mortgage. All personal property may be mortgaged. (Sec. 7, Act 1508.)
2. Description of mortgage property sufficient The description contained in the document is sufficient. The law (sec. 7, Act 1508) requires only a
description of the mortgaged property shall be such as to enable the parties to the mortgage, or any other person, after reasonable inquiry and
investigation, to identify the same. In the case at bar, his half interest in the drug business known as Antigua Botica Ramirez, located at Calle
Real Nos. 123 and 125, District of Intramuros, Manila Philippine Islands" is sufficient.
3. Article 1922 (1-3) of the Civil Code applicable only to mortgage property in possession Numbers 1, 2, and 3 of the article 1922 of the Civil
Code are not applicable as neither the debtor, nor himself, is in possession of the property mortgaged, which is, and since the registration of the
mortgage has been, legally in possession of the surety company
4. Stipulation about personal property not a mortgage upon property - In no way can the mortgage executed be given effect as of the date of the
sale of the store in question; as there was a mere stipulation about personal security during said date, but not a mortgage upon property, and
much less upon the property in question.
Maneclang v. Intermediate Appellate Court
Facts:
Adriano Maneclang in this case filed a complaint for
quieting of titleover a certain fishpond located within the 4 parcels of land belonging to them
situated in Pangasinan but the trial courtdismissed it by saying that the body of water is a
creek constitutinga tributary to Agno River
therefore public in nature and notsubject to private appropriation.
They appealed it to the IAC which affirmed theaforementioned decision. Hence, this review on certiorari. However, after having been asked to
comment to the case thereon,they manifested their lack of interest and the parties to the case (thecomplainant and the awardee in the public
bidding Maza) decided toamicably settle the case saying that judgment be rendered and that thecourt
recognize the ownership of the petitioners over the landthe body of water found within their titled properties. They say that there would be no
benefit since the NIA already constructed a dike and no water now gets in and out of theland.
Issue:
Whether or not the fishpond is public in nature.
Ratio: Yes.
A creek is defined as a recess or arm extending from a river andparticipating in the ebb and flow of the sea.
It is a property belonging to the public domain and isnot susceptible to private appropriation andacquisitive prescription.
The mere construction of the dikes by NIA nor its conversionto a fishpond altered or changed the nature of the creek asproperty of the public
domain.
Usero v CA Digest
G.R. No. 152115, 26 January 2005
Property Law
Facts: This is a consolidated petition assailing the decision of the Court of Appeals (CA). Petitioners and the private respondent are registered
owners of neighboring parcels of land wherein between the lots is a low-level strip of land with stagnant body of water. Whenever there is a
storm or heavy rain, the water therein would flood thereby causing damage to houses of the Polinars prompting them to build a concrete wall on
the bank of the strip of land about 3meters from their house and riprapped the soil in that portion.
The Useros claimed ownership of the strip, demanded the halt of the construction but the Polinars never heeded believing that the strip is part
of a creek. However, the Polinars offered to pay for the land. As the parties still failed to settle, both filed separate complaints for forcible entry.
The Municipal Trial Court ruled in favor of the petitioner, while the regional trial court reversed and ordered the dismissal of the complaint and
confirmed the existence of the creek between the lots.
Issue: Whether or not the disputed strip of land is part of the creek hence part of public domain
Held: YES. Art. 420 of the Philippine New Civil Code (NCC) provides for properties which are part of public domain. A creek is included in the
phrase "and others of similar character". A creek, which refers to a recess or arm of a river is a property belonging to the public domain, therefore
not susceptible of private ownership. Being a public water, it cannot be registered under the Torrens system under the name of any individual.
The compromise agreement is null and void and of no legal effect because it is contrary to law and public policy
OFFICE OF THE CITY MAYOR OF PARAAQUE, et. al, vs. MARIO EBIO, et. al.
(G.R. No. 178411, June 23, 2010 )
FACTS:
Respondents claim that they are the absolute owners of a parcel of land whichwas an accretion of Cut-cut creek, and that the original occupant
and possessor of the said parcelof land was their great grandfather, Jose Vitalez. Sometime in 1930, Jose gave the land to hisson, Pedro Vitalez.
From then on, Pedro continuously and exclusively occupied and possessedthe said lot. In 1966, after executing an affidavit declaring possession
and occupancy, Pedro wasable to obtain a tax declaration over the said property in his name. Since then, respondents have been religiously
paying real property taxes for the said property. Meanwhile, in 1961, respondent
Mario Ebio married Pedros daughter, Zenaida. On
April 21, 1987, Pedro executed a notarizedTransfer of Rights ceding his claim over the entire parcel of land in favor of Mario Ebio.Subsequently,
the tax declarations under Ped
ros name were cancelled and new ones were issuedin Mario Ebios name.
On March 30, 1999, the Office of the
Sangguniang Barangay development projects are part of the indemnification to the Filipino people for their losses in life and property and their suffering during World
War II. The Reparations Agreement provides that reparations valued at $550 million would be payable in twenty years in accordancewith annual
of Vitalez passed Resolution No. 08, series of 1999 seeking assistance from the City Government of Paraaque for theconstruction of an schedules of procurements to be fixed by the Philippine and Japanese governments(Article 2, Reparations Agreement). Rep. Act No. 1789, the
access road along Cut-cut Creek located in the said barangay and would be Reparations Law, prescribes thenational policy on procurement and utilization of reparations and development loans. The procurements are
traversing the lot occupied by the respondents. When the city government advised all theaffected residents to vacate the said area, divided into those for use by the government sector and those for private parties in projects as the then National Economic Council shall
respondents immediately registered their oppositionthereto. Threatened of being evicted, respondents applied for a writ of preliminary determine. Those intended for the private sector shall be made available by sale to Filipino citizens or to one hundred percentFilipino-owned
injunctionagainst petitioners. The RTC denied the petition for lack of merit. Aggrieved, respondentselevated the matter to the Court of Appeals entities in national development projects.Amidst opposition by various sectors, the Executive branch of the government has
who issued its Decision in favor of the respondent. been pushing, with great vigor, its decision to sell the reparations properties starting with theRoppongi lot. The property has twice been set for
bidding at a minimum floor price of $225million. The first bidding was a failure since only one bidder qualified. The second one,
ISSUE after postponements, has not yet materialized. The last scheduled bidding on February 21, 1990 wasrestrained by the Court. Later, the rules
on bidding were changed such that the $225 million floor price became merely a suggested floor price.The petitioner in G.R. No. 92013 objects
: Whether or not
to the alienation of the Roppongi property to
the character of respondents possession and occupation of the subject

property entitles them to avail of the relief of prohibitory injunction.

HELD:
The petition is without merit.In the case at bar, respondents filed an action for injunction to prevent the localgovernment of Paraaque City from
proceeding with the construction of an access road that willtraverse through a parcel of land which they claim is owned by them by virtue of
acquisitive prescription. Petitioners, however, argue that since the creek, being a tributary of the river, isclassified as part of the public domain,
any land that may have formed along its banks throughtime should also be considered as part of the public domain. Such contention is
untenable.It is an uncontested fact that the subject land was formed from the alluvial deposits thathave gradually settled along the banks of Cut-
cut creek. This being the case, the law that governsownership over the accreted portion is Article 84 of the Spanish Law of Waters of 1866
(Accretions deposited gradually upon lands contiguous to creeks, streams, rivers, and lakes, byaccessions or sediments from the waters thereof,
belong to the owners of such lands), whichremains in effect, in relation to Article 457 of the Civil Code (To the owners of lands adjoiningthe
banks of rivers belong the accretion which they gradually receive from the effects of thecurrent of the waters)
.It is therefore explicit from the foregoing provisions that alluvial deposits along the banksof a creek do not form part of the public domain as the
alluvial property automatically belongs to the owner of the estate to which it may have been added. The only restriction provided for bylaw is that
the owner of the adjoining property must register the same under the Torrens system;otherwise, the alluvial property may be subject to acquisition
through prescription by third persons.In contrast,
properties of public dominion cannot be acquired by prescription
. Nomatter how long the possession of the properties has been, there can be no prescription againstthe State regarding property of public
domain. Hence, while it is true that a creek is a property of public dominion,
the land which is formed by the gradual and imperceptible accumulation ofsediments along its banks does not form part of the public domain by
clear provision of law.It was also held that the character of possession and ownership by the respondents overthe contested land entitles them
to the avails of the action.In the case at bar, only one conclusion can be made: that for more than thirty (30) years,neither Guaranteed Homes,
Inc. nor the local government of Paraaque in its corporate or privatecapacity sought to register the accreted portion. Undoubtedly, respondents
are deemed to haveacquired ownership over the subject property through prescription. Respondents can assert suchright despite the fact that
they have yet to register their title over the said lot. It must beremembered that the purpose of land registration is not the acquisition of lands,
but only theregistration of title which the applicant already possessed over the land. Registration was neverintended as a means of acquiring
ownership. A decree of registration merely confirms, but doesnot confer, ownership.
SALVADOR H. LAUREL, petitioner, vs. RAMON GARCIA, as head of the AssetPrivatization Trust, RAUL MANGLAPUS, as Secretary of Foreign
Affairs, andCATALINO MACARAIG, as Executive Secretary, respondents.[G.R. No. 92047 July 25, 1990]DIONISIO S. OJEDA, petitioner,
vs. EXECUTIVE SECRETARY MACARAIG, JR.,ASSETS PRIVATIZATION TRUST CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON
DEL ROSARIO, et al., as members of the PRINCIPAL AND BIDDINGCOMMITTEES ON THE UTILIZATION/DISPOSITION PETITION OF
PHILIPPINEGOVERNMENT PROPERTIES IN JAPAN, respondents.
FACTS:
The subject property in this case is one of the four properties in Japan acquired by thePhilippine government under the Reparations Agreement
entered into with Japan on May 9,1956. The properties and the capital goods and services procured from the Japanese governmentfor national
anyone while the petitioner in G.R. No. 92047 adds as a principal objection the allegedunjustified bias of the Philippine government in favor of
selling the property to non-Filipinocitizens and entities. These petitions have been consolidated and are resolved at the same timefor the objective
is the same - to stop the sale of the Roppongi property.
ISSUE:
Whether or not the Roppongi property and others of its kind can be alienated by thePhilippine Government.
HELD
:The Supreme Court ruled in the negative. ART. 420 of the New Civil Code provides thatthe following things are property of public dominion:(1)
Those intended for public use, such as roads, canals, rivers, torrents, ports and bridgesconstructed by the State, banks shores roadsteads, and
others of similar character;(2) Those which belong to the State, without being for public use, and are intended for some public service or for the
development of the national wealth.ART. 421. All other property of the State, which is not of the character stated in the preceding article, is
patrimonial property.The Roppongi property is correctly classified under paragraph 2 of Article 420 of theCivil Code as property belonging to the
State and intended for some public service. The fact thatthe Roppongi site has not been used for a long time for actual Embassy service does
notautomatically 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 SCRA481 [1975]). A property continues to be part of the public domain, not available for
privateappropriation or ownership until there is a formal declaration on the part of the government towithdraw it from being such (Ignacio v.
Director of Lands, 108 Phil. 335 [1960])
A meretransfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the Roppongi property's original purpose. Even the fail
ure by the government to repair the building inRoppongi is not abandonment since as earlier stated, there simply was a shortage of
governmentfunds. The recent Administrative Orders authorizing a study of the status and conditions of government properties in Japan were
merely directives for investigation but did not in any waysignify a clear intention to dispose of the properties.Having declared a need for a law or
formal declaration to withdraw the Roppongi property from public domain to make it alienable and a need for legislative authority to allow
thesale of the property, we see no compelling reason to tackle the constitutional issues. TheRoppongi property is not just like any piece of
property. It was given to the Filipino people inreparation for the lives and blood of Filipinos who died and suffered during the Japanese
militaryoccupation, for the suffering of widows and orphans who lost their loved ones and kindred, for the homes and other properties lost by
countless Filipinos during the war. The Tokyo propertiesare a monument to the bravery and sacrifice of the Filipino people in the face of an
invader; likethe monuments of Rizal, Quezon, and other Filipino heroes, we do not expect economic or financial benefits from them. But who
would think of selling these monuments? Filipino honor and national dignity dictate that we keep our properties in Japan as memorials to the
countlessFilipinos who died and suffered. Even if we should become paupers we should not think of selling them. For it would be as if we sold
the lives and blood and tears of our countrymen.Roppongi is no ordinary property. It is one ceded by the Japanese government inatonement for
its past belligerence for the valiant sacrifice of life and limb and for deaths, physical dislocation and economic devastation the whole Filipino
people endured in World War II. It is for what it stands for, and for what it could never bring back to life, that its significancetoday remains
undimmed, inspire of the lapse of 45 years since the war ended, inspire of the passage of 32 years since the property passed on to the Philippine
government. It is indeed truethat the Roppongi property is valuable not so much because of the inflated prices fetched by real property in Tokyo
but more so because of its symbolic value to all Filipinos veterans andcivilians alike. Whether or not the Roppongi and related properties will
eventually be sold is a policy determination where both the President and Congress must concur. Considering the properties' importance and
value, the laws on conversion and disposition of property of publicdominion must be faithfully followed
CHAVEZ V. PUBLIC ESTATE AUTHORITY
FACTS:
From the time of Marcos until Estrada, portions of Manila Bay were being reclaimed. A law was passed creating the Public Estate Authority
which was granted with the power to transfer reclaimed lands. Now in this case, PEA entered into a Joint Venture Agreement with AMARI, a
private corporation. Under the Joint Venture Agreement between AMARI and PEA, several hectares of reclaimed lands comprising the Freedom
Islands and several portions of submerged areas of Manila Bay were going to be transferred to AMARI .
ISSUE:
Whether or not the stipulations in the Amended JVA for the transfer to AMARI of lands, reclaimed or to be reclaimed, violate the Constitution
RULING: YES!
Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as alienable and disposable lands of the public domain Section
3 of the Constitution: 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 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. Clearly, the Amended JVA violates glaringly Sections 2
and 3, Article XII of the 1987 Constitution. Under Article 1409 of the Civil Code, contracts whose object or purpose is contrary to law, or whose
object is outside the commerce of men, are inexistent and void from the beginning. The Court must perform its duty to defend and uphold the
Constitution, and therefore declares the Amended JVA null and void ab initio.
REPUBLIC v. COURT OF APPEALS
GR Nos. 103882, 105276 November 25, 1998
FACTS:
On June 22, 1957, RA 1899 was approved granting authority to all municipalities and chartered cities to undertake and carry out at
their own expense the reclamation by dredging, filling, or other means, of any foreshore lands bordering them, and to establish, provide,
construct, maintain and repair proper and adequate docking and harbor facilities as such municipalities and chartered cities may determine in
consultation with the Secretary of Finance and the Secretary of Public Works and Communications.
Pursuant to the said law, Ordinance No. 121 was passed by the city of Pasay for the reclamation of foreshore lands within their jurisdiction and
entered into an agreement with Republic Real Estate Corporation for the said project.
Republic questioned the agreement. It contended, among others, that the agreement between RREC and the City of Pasay was void for the
object of the contract is outside the commerce of man, it being a foreshore land.
Pasay City and RREC countered that the object in question is within the commerce of man because RA 1899 gives a broader meaning on the
term foreshore land than that in the definition provided by the dictionary.
RTC rendered judgment in favour of Pasay City and RREC, and the decision was affirmed by the CA with modifications.
ISSUE:
I. Whether or not the term foreshore land includes the submerged area.
II. Whether or not foreshore land and the reclaimed area is within the commerce of man.
HELD:
The Court ruled that it is erroneous and unsustainable to uphold the opinion of the respondent court that the term foreshore land includes the
submerged areas. To repeat, the term "foreshore lands" refers to:
The strip of land that lies between the high and low water marks and that is alternately wet and dry according to the flow of the tide.
A strip of land margining a body of water (as a lake or stream); the part of a seashore between the low-water line usually at the seaward margin
of a low-tide terrace and the upper limit of wave wash at high tide usually marked by a beach scarp or berm.(Webster's Third New International
Dictionary)
The duty of the court is to interpret the enabling Act, RA 1899. In so doing, we cannot broaden its meaning; much less widen the coverage
thereof. If the intention of Congress were to include submerged areas, it should have provided expressly. That Congress did not so provide could
only signify the exclusion of submerged areas from the term foreshore lands.
It bears stressing that the subject matter of Pasay City Ordinance No. 121, as amended by Ordinance No. 158, and the Agreement under attack,
have been found to be outside the intendment and scope of RA 1899, and therefore ultra vires and null and void.
MANILA INTERNATIONAL AIRPORT AUTHORITY vs. COURT OF APPEALS G.R. No. 155650. July 20, 2006. Carpio, J.
FACTS: Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Paranaque
City. As operator, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA
approximately 600 hectares of land, including the runways and buildings. Pursuant to the opinion of the Office of the Government Corporate
Counsel (OGCC) that the LGC of 1991 withdrew the exemption from the real estate tax granted to MIAA, the local government of Paranaque
demanded MIAA to pay its real estate tax delinquencies. MIAA failed to pay. Thereupon, the city of Paranaque arranged for the public sale of
the airport lands and buildings of MIAA. The latter filed an urgent ex-parte and motion for TRO before the Court questioning the validity of the
demand of the city of Paranaque for it to pay real estate tax.
ISSUE: Whether MIAA is a government-owned and controlled corporation with a special charter.
HELD: NO. There is no dispute that a government-owned or controlled corporation (GOCC) is not exempt from real estate tax. However, the
Court ruled that MIAA is NOT a GOCC. Firstly, under the Administrative Code, a GOCC is defined as any agency organized as a stock or
nonstock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the
Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at
least 51% of its capital stock. MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no
capital stock divided into shares. MIAA has no stockholders or voting shares. While MIAA has capital, it is not divided into shares of stock and
hence it is not a stock corporation. MIAA is also NOT a non-stock corporation because it has no members. The Court opined that even if we
assume that the government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations
cannot distribute any part of their income to their members. Moreover, it was said that MIAA is not organized for any of the purposes that a non-
stock corporation is established under the Corporation Code, namely charitable, religious, educational, professional, cultural, recreational,
fraternal, literary, scientific, social, civil service or similar purposes. Rather, it is organized to operate an international and domestic airport for
public use. Hence, the Court noted that MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental
functions. Pursuant to this ruling, it was noted that MIAA does not need to meet the two conditions set forth by the Constitution for GOCCs with
special charters, to wit: (1) that it must be established for common good; and (2) that it must meet the test of economic viability. The second test
is further elucidated as one that applies to GOCCs that perform economic or commercial activities and need to compete in the market place.
Economic viability refers to more than financial viability but also includes capability to make profit and generate benefits not quantifiable in
financial terms. MIAA, a government instrumentality vested with corporate powers and performing governmental or public functions, need NOT
meet the test of economic viability. These instrumentalities need not be economically viable since the government may even subsidize their
entire operations for they perform essential public services for the common good. Comment [c1]: Requisites or elements of a stock corporation:
(1) it must have a capital stock; (2) the capital stock must be divided into shares: (3) it is distributed to its stockholders. Comment [c2]: Requisites
of a non-stock corporation: (1) it must have members; (2) it cannot distribute its income to its members: (3) it is organized for charitable, religious,
educational, professional, etc. purposes.
G.R. No. L-24440 March 28, 1968
THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee,
vs.
CITY OF ZAMBOANGA, SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE,defendants-appellants.
Facts:
Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the provincial capital of the then Zamboanga Province.
On October 12, 1936, Commonwealth Act 39 was approved converting the Municipality of Zamboanga into Zamboanga City. Sec. 50 of the Act
also provided that Buildings and properties which the province shall abandon upon the transfer of the capital to another place will be acquired
and paid for by the City of Zamboanga at a price to be fixed by the Auditor General.
Such properties include lots of capitol site, schools, hospitals, leprosarium, high school playgrounds, burleighs, and hydro-electric sites.
On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga into two (2): Zamboanga del Norte and Zamboanga del
Sur. As to how the assets and obligations of the old province were to be divided between the two new ones, Sec. 6 of that law provided Upon
the approval of this Act, the funds, assets and other properties and the obligations of the province of Zamboanga shall be divided equitably
between the Province of Zamboanga del Norte and the Province of Zamboanga del Sur by the President of the Philippines, upon the
recommendation of the Auditor General.
However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of Commonwealth Act 39 by providing that, All buildings,
properties and assets belonging to the former province of Zamboanga and located within the City of Zamboanga are hereby transferred, free of
charge, in favor of the said City of Zamboanga.
This constrained Zamboanga del Norte to file on March 5, 1962, a complaint against defendants-appellants Zamboanga City; that, among others,
Republic Act 3039 be declared unconstitutional for depriving Zamboanga del Norte of property without due process and just compensation.
Lower court declared RA 3039 unconstitutional as it deprives Zamboanga del Norte of its private properties.
Hence the appeal.
Issue:
Whether RA 3039 is unconstitutional on the grounds that it deprives Zamboanga del Norte of its private properties.
Held:
No. RA 3039 is valid. The properties petitioned by Zamboanga del Norte is a public property.
The validity of the law ultimately depends on the nature of the 50 lots and buildings thereon in question. For, the matter involved here is the
extent of legislative control over the properties of a municipal corporation, of which a province is one. The principle itself is simple: If the property
is owned by the municipality (meaning municipal corporation) in its public and governmental capacity, the property is public and Congress has
absolute control over it. But if the property is owned in its private or proprietary capacity, then it is patrimonial and Congress has no absolute
control. The municipality cannot be deprived of it without due process and payment of just compensation.
The capacity in which the property is held is, however, dependent on the use to which it is intended and devoted. Now, which of two norms, i.e.,
that of the Civil Code or that obtaining under the law of Municipal Corporations, must be used in classifying the properties in question?
Civil Code
The Civil provide: ART. 423. The property of provinces, cities, and municipalities is divided into property for public use and patrimonial property;
ART. 424. Property for public use, in the provinces, cities, and municipalities, consists of the provincial roads, city streets, municipal streets, the
squares, fountains, public waters, promenades, and public works for public service paid for by said provinces, cities, or municipalities. All other
property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to the provisions of special laws.
Applying the above cited norm, all the properties in question, except the two (2) lots used as High School playgrounds, could be considered as
patrimonial properties of the former Zamboanga province. Even the capital site, the hospital and leprosarium sites, and the school sites will be
considered patrimonial for they are not for public use. They would fall under the phrase public works for public service for it has been held that
under the ejusdem generis rule, such public works must be for free and indiscriminate use by anyone, just like the preceding enumerated
properties in the first paragraph of Art 424. The playgrounds, however, would fit into this category.
Law of Municipal Corporations
On the other hand, applying the norm obtaining under the principles constituting the law of Municipal Corporations, all those of the 50 properties
in question which are devoted to public service are deemed public; the rest remain patrimonial. Under this norm, to be considered public, it is
enough that the property be held and, devoted for governmental purposes like local administration, public education, public health, etc.
Final Ruling
The controversy here is more along the domains of the Law of Municipal Corporations State vs. Province than along that of Civil Law. If
municipal property held and devoted to public service is in the same category as ordinary private property, then that would mean they can be
levied upon and attached; they can even be acquired thru adverse possession all these to the detriment of the local community. It is wrong
to consider those properties as ordinary private property.
Lastly, the classification of properties other than those for public use in the municipalities as patrimonial under Art. 424 of the Civil Code is
without prejudice to the provisions of special laws. For purpose of this article, the principles, obtaining under the Law of Municipal
Corporations can be considered as special laws. Hence, the classification of municipal property devoted for distinctly governmental purposes
as public should prevail over the Civil Code classification in this particular case.
WHEREFORE, the decision appealed from is hereby set aside and another judgment is hereby entered as follows:.
(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del Norte in lump sum the amount of P43,030.11 which the
former took back from the latter out of the sum of P57,373.46 previously paid to the latter; and
(2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever balance remains of plaintiffs 54.39% share in the 26
patrimonial properties, after deducting therefrom the sum of P57,373.46, on the basis of Resolution No. 7 dated March 26, 1949 of the Appraisal
Committee formed by the Auditor General, by way of quarterly payments from the allotments of defendant City, in the manner originally adopted
by the Secretary of Finance and the Commissioner of Internal Revenue. No costs. So ordered.
Macasiano vs Diokno GR 97764 (August 10, 1992)
Posted on October 19, 2012
211 SCRA 464
G.R. No. 97764
August 10, 1992
Facts:
Respondent Municipality passed Ordinance No. 86 which authorized the closure of J.Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and
Opena Streets and the establishment of a flea market thereon. This was passed pursuant to MMC Ordinance No.2 and was approved by the
Metropolitan Manila Authority on July 20, 1990.
On August 8, 1990, respondent municipality and Palanyag entered into a contract agreement whereby the latter shall operate, maintain &
manage the flea markets and/or vending areas in the aforementioned streets with the obligation to remit dues to the treasury of the municipal
government of Paraaque.
On September 13, 1990 Brig. Gen. Macasiano ordered the destruction and confiscation of stalls along G.G. Cruz & Gabriel Street in Baclaran.
He also wrote a letter to Palanyag ordering the destruction of the flea market.
Hence, respondent filed a joint petition praying for preliminary injunction. The trial court upheld the assailed Ordinance and enjoined petitioner
from enforcing his letter-order against Palanyag.
Issues:
WON an ordinance/resolution issued by the municipal council of Paraaque authorizing the lease & use of public streets/thoroughfares as sites
for the flea market is valid.
Held:
No.
J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena Streets are local roads used for public service and are therefore considered
public properties of respondent municipality. Properties of the local government devoted to public service are deemed public and are under the
absolute control of Congress. Hence, local governments have no authority to control/regulate the use of public properties unless specific authority
is vested upon them by Congress.
Sec. 10, Chapter II of the LGC should be read and interpreted in accordance with basic principles already established by law.
The closure should be for the sole purpose of withdrawing the road or other public property from public use when circumstances show that such
property is no longer intended/necessary for public use/service. Once withdrawn, the property then becomes patrimonial property of the LGU
concerned and only then can said LGU use the property as an object of an ordinary contract. Roads and streets available to the public and
ordinarily used for vehicular traffic are still considered public property devoted to public use. The LGU has no power to use it for another purpose
or to dispose of or lease it to private persons.
Also, the disputed ordinance cannot be validly implemented because it cant be considered approved by the Metropolitan Manila Authority due
to non-compliance with the conditions it imposed for the approval of said ordinance.
The powers of an LGU are not absolute, but subject to the limitations laid down by the Constitution and laws such as the Civil Code. Every LGU
has the sworn obligation to enact measures that will enhance the public health, safety & convenience, maintain peace & order and promiote the
general prosperity of the inhanbitants pf the local units.
As in the Dacanay case, the general public have the right to demand the demolition of the illegally constructed stalls in public roads & streets.
The officials of the respondent municipality have the corresponding duty arising from public office to clear the city streets and restore them to
their specific public purpose.
The ordinance is void and illegal for lack of basis in authority in laws applicable during its time.
Villanueva vs Castaneda GR No. L-61311 21 September 1987
Posted by Rachel Chan in Case Digests, Constitutional Law II
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Facts: On 7 November 1961, the municipal council of San Fernando (Pampanga) adopted Resolution 218 authorizing some 24 members of the
Fernandino United Merchants and Traders Association (FUMTA) to construct permanent stalls and sell along Mercado street, on a strip of land
measuring 12 by 77 meters (talipapa). The action was protested on 10 November 1961 by Felicidad Villanueva, et. al. (claiming that they were
granted previous authorization by the municipal government to conduct business therein), in Civil Case 2040, where the Court of First Instance
(CFI) Pampanga, Branch 2, issued a writ of preliminary injunction that prevented the FUMTA members from constructing the said stalls until
final resolution of the controversy.
On 18 January 1964, while the case was pending, the municipal council of San Fernando adopted Resolution 29, which declared the subject
area as the parking place and as the public plaza of the municipality, thereby impliedly revoking Resolution 218 (series of 1961).
On 2 November 1968, Judge Andres C. Aguilar decided the aforesaid case and held that the land occupied by Villanueva, et. al., being public
in nature, was beyond the commerce of man and therefore could not be the subject of private occupancy. The writ of preliminary injunction was
made permanent.
The decision was not enforced as the petitioners were not evicted from the place. The number of vendors in the area (talipapa) ballooned to
200. The area deteriorated increasingly to the great prejudice of the community in general, as the makeshift stalls render the area as virtual fire
trap. The problem festered for some more years under a presumably uneasy truce among the protagonists, none of whom made any move, for
some reason.
On 12 January 1982, the Association of Concerned Citizens and Consumers of San Fernando filed a petition for the immediate implementation
of Resolution 29, to restore the property to its original and customary use as a public plaza. Acting thereon after an investigation conducted by
the municipal attorney, OIC (Office of the Mayor) Vicente Macalino issued on 14 June 1982 a resolution requiring the municipal treasurer and
the municipal engineer to demolish the stalls beginning 1 July 1982.
The Villanueva, et. al. filed a petition for prohibition with the CFI Pampanga (Civil Case 6470) on 26 June 1982. The judge denied the petition
on 19 July 1982, and the motion for reconsideration on 5 August 1982, prompting Villanueva, et. al. to file a petition on certiorari with the Supreme
Court. Paterno Guevarra, who replaced Macalino as OIC of San Fernando, was impleaded.
Issue: Whether the Ordinance impairs the alleged lease contracts between the market stall vendors occupying the municipal plaza, and the
Government.
Decision: A public plaza is beyond the commerce of man and so cannot be the subject of lease or any other contractual undertaking. The lease
of a public plaza of a municipality in favor of a private person is null and void. A plaza cannot be used for the construction of market stalls,
specially of residences, and that such structures constitute a nuisance subject to abatement according to law.
Town plazas are properties of public dominion, to be devoted to public use and to be made available to the public in general. They are outside
the commerce of man and cannot be disposed of or even leased by the municipality to private parties. Also, a portion of a public sidewalk is
likewise beyond the commerce of man. Any contract entered into in connection with the sidewalk, is ipso facto null and ultra vires. The sidewalk
was intended for and was used by the public, in going from one place to another. The streets and public places of the city shall be kept free and
clear for the use of the public, and the sidewalks and crossings for the pedestrians, and the same shall only be used or occupied for other
purposes as provided by ordinance or regulation; stalls block the free passage of pedestrians resulting to clogged with vehicular traffic.
On the other hand, police power under the general welfare clause authorizes the municipal council to enact such ordinances and make such
regulations, not repugnant to law, as may be necessary to carry into effect and discharge the powers and duties conferred upon it by law and
such as shall seem necessary and proper to provide for the health and safety, promote the prosperity, improve the morals, peace, good order,
comfort, and convenience of the municipality and the inhabitants thereof, and for the protection of property therein. Thus, police power cannot
be surrendered or bargained away through the medium of a contract.
Every contract affecting the public interest suffers a congenital infirmity in that it contains an implied reservation of the police power as a postulate
of the existing legal order. This power can be activated at any time to change the provisions of the contract, or even abrogate it entirely, for the
promotion or protection of the general welfare. Such an act will not militate against the impairment clause, which is subject to and limited by the
paramount police power. Petition dismissed.
HEIRS OF MARIO MALABANAN
(Represented by Sally Malabanan) vs
REPUBLIC OF THEPHILIPPINES
PROMULGATED
: SEPTEMBER 3, 2013
PONENTE
: J. BERSAMIN This case is a resolution of the Motions for Reconsideration, filed by the parties who bothassail the decision of the Court
promulgated on April 29, 2009. In the decision, the Court upheldthe ruling of the Court of Appeals which denied the application of the petitioners
for theregistration of a parcel of land situated in Barangay Tibig, Silang, Cavite,
on the ground thatthey had not established by sufficient evidence their right to the registration inaccordance with either section 14 (1) or 14 (2)
of the Property Registration Decree (P.D.1529).
On February 20, 1998, applicant Mario Malabanan, who had purchased the propertyfrom Eduardo Velazco, filed an application for land
registration covering the property in the RTCin Tagaytay City, Cavite, claiming that the property formed part of the alienable and disposableland
of the public domain, and that he and his predecessors-in-interest had been in open,continuous, uninterrupted, public and adverse possession
and occupation of the land for morethan 30 years, thereby entitling him to the judicial confirmation of his title. To prove such,Malabanan presented
during trial a certification issued by the Community Environment andNatural Resources Office (CENRO) of the DENR. The
RTC
rendered judgment granting
Malabanans application for land registration
. The Office of the Solicitor General (OSG) appealed the judgment to the CA, arguing that Malabanan had failed to prove that the property
belongedto the alienable and disposable land of the public domain, and that the RTC erred in finding thathe had been in possession of the
property in the manner and for the length of time required bylaw for confirmation of imperfect title. The
CA promulgated its decision reversing the RTC and dismissing the application for registration of Malabanan. Citing the ruling in
Sanchez vs mun. of asingan
Property owned by the State which is not intended for public use or public service is patrimonial.There is no reimbursement if lessee derived
substantial benefit from the use of said property.
Sanchez v. Mun. of Asingan
Petitioner occupied a parcel of land owned by the municipality, with the implied consent of the latter, and built buildings of light materials rent
was paid. When a new set of officials took over, the
council gave notice to petitioner to vacate the land within 5 months.
Petitioner refused and filed forprohibitionstating that the land belonged to the province and the municipality had no standing to seek their
ejectment and incase they should be ejected, prayed for reimbursement, citing the Rojas case.
ISSUE
: Whether the land is public or patrimonial.
HELD:
The land is patrimonial property of the municipality. It was not for public use not was it for public service.There is to be no reimbursement. Unlike
the Rojas case, the land here is not of public character. The implied leaseagreement is therefore valid and may be terminated upon notice.
Assuming that the property is public, there
can still be no reimbursement as petitioner derived substantial benefit from the use of saidproperty
MUN. OF CAVITE v ROJAS, G. R. No. L-9069, 31 March 1915
posted in Property Cases by katcobing
Facts: A parcel of land forming a part of the public plaza was leased to the defendants on which their house has been constructed and had been
occupying the same. The plaintiff ordered the defendants to vacate the said land as it formed integral part of the public plaza. The defendants
refused to vacate the said land because they had acquired the right of possession to it and further alleged that the lease agreement provided
that they can only be ordered to vacate the said property if the municipality needed it for decoration or public use.
The trial court held that the municipality had no legal claim to the property. This case was appealed through bill of exceptions.
Issue: WON the lease agreement between the parties was valid
Ruling: The lease was null and void.
Ratio Decidendi: The defendant has no right to continue to occupy the land for it is an integral part of the plaza which is for public use and is
reserved for the common benefit. Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets,
fountains, and public waters, the promenades, and public works of general service supported by said towns or provinces.
The said Plaza being a promenade for public use, the municipal council of Cavite could not in 1907 withdraw or exclude from public use a portion
thereof in order to lease it for the sole benefit of the defendant Hilaria Rojas. The plaintiff municipality exceeded its authority in the exercise of
its powers by executing a contract over a thing of which it could not dispose, nor is it empowered so to do. The Civil Code, articles 1271,
prescribes that everything which is not outside the commerce of man may be the object of a contract, and plazas and streets are outside of this
commerce. Therefore, it must be concluded that the said lease is null and void.
C. LEDESMA VS. MUN. OF ILOILO et al
G.R. No. L-26337
Dec. 17, 1926
FACTS:
-Lopez owns lot 228. In March 1915, Lopez sold to the City of Iloilo a PART of said lot, now numbered 537 and 703, payable in 10 years
a TCT was issued in favor of Lopez, including 537 and 703 (The inclusion of said lots in said TCT was evidently an error on the part of
someone connected with the office of the registrar of titles)
Lopez sold to Kalaw and wife said lot 228, including lots 537 and 703 evidently by mistake. It is said that the inclusion of said lots 537 and 703
was a mistake because Lopez as well as Kalaw and wife were ignorant of the fact that said lots were included in that TCT.
Lopez, representing. Kalaw, sold said lots (228, 537 and 703) to J. Ledesma, which sale was ratified by the couple. Later a TCT was issued
in favor of J. Ledesma. According to the admissions of J. Ledesma lots 537 and 703 were included by mistake
J. Ledesma sold a portion of the lot. Lot 228 was made into two lots, 228-A and 228-B. Lot 228-A remained the property of J. Ledesma. Said
lots 537 and 703, according to said TCT, remained the property of J. Ledesma.
J. Ledesma sold to the appellant herein lots Nos. 228-A, 537, and 703. Again, according to J. Ledesma, lots 537 and 703 were included in the
transfer of lot No. 228-A to C. Ledesma by mistake.
This action was commenced in CFI of Iloilo. Its purpose was to recover from defendant the municipality of Iloilo a sum as the value of the two
lots Nos. 537 and 703 which, the plaintiff claimed, the defendant municipality had illegally appropriated, together with damages and costs.
The recovery of said sums was opposed by the defendants upon the ground that the plaintiff and appellant was not and never had been the
owner of said lots Nos. 537 and 703. The other defendants answered the petition and supported the contention of the municipality.
After hearing the evidence upon the issue presented, the CFI absolved the defendants from all liability under the complaint. From that judgment
the plaintiff appealed
The theory of the appellant is that, by reason of the fact that said lots 537 and 703 had been included in the registered title of Lopez in 1915,
and Lopez included in each succeeding transfer of title to him said lots, that he was the indisputable owner thereof, and because the City of Iloilo
had appropriated said lots, that he was entitled to recover the value of said lots together with damages.
ISSUE: WON the inclusion of lots 537 and 703 in the TCT of C. Ledesma made him the owner of such properties
HELD: NO
An examination of the records shows that as early as April, 1915, said lots had been turned over by Lopez to the City of Iloilo under a contract
of sale for street purposes. That fact was well known. The said lots had been included as a part of the streets in the City of Iloilo. The same were
therefore illegally included, in accordance with the provisions of section 39 of Act No. 496, in the certificate of title issued to Lopez. That fact was
recognized by Lopez as well as by each of the subsequent purchasers of said lots.
The simple possession of a certificate of title, under the Torrens system, does not necessarily make the possessor a true owner of all the property
described therein. If a person obtains a title, under the Torrens system, which include by mistake or oversight land which cannot be registered
under the Torrens system, he does not, by virtue of said certificate alone, becomes the owner of the lands illegally included.
The inclusion of public highways in a certificate of title does not thereby necessarily give to the holder of such certificate said public highways.
The appellant, therefore, even though a part of said streets (lots 537 and 703) had been included in the original certificate of title and in the
subsequent transfer of title, did not become the owner of said lots and is not therefore entitled to recover their value from the City of Iloilo nor
the damages prayed for.
JG Summit Holdings v. CA G.R. No. 124293 January 31, 2005 J. Puno Cadorna petitioner JG Summit Holdings, Inc. respondents Court of
Appeals; Committee on Privatization, its Chairman and Members; Asset Privatization Trust; and Philyards Holdings, Inc. summary JG Summit
is questioning the right of first refusal of a Japanese corporation, which owns shares in a Philippine Corporation. It submits that such right, which
was eventually converted into a right to top the bid in the bidding process that occurred to sell the government s shares in the said Philippine
corporation, would allow the Japanese corporation to acquire more than the allowable 40% equity allowed by law for corporations that own land.
Court ruled, among other things, that the right itself does not violate the constitutional limit and that in any case, if the Japanese corporation
shareholdings increase beyond 40%, it would only disqualify the corporation from owning land. This is because the shareholders and the
corporation have separate entities, and the right of first refusal refers to the shareholder independently of the capacity (or lack thereof) to own
land pertaining to the corporation 4 facts of the case (sorry mahaba, pero lam niyo naman madetalye si sir :p) Original JVA between NIDC and
Kawasaki The National Investment and Development Corporation (NIDC), a government corporation, entered into a Joint Venture Agreement
(JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (Kawasaki) for the construction, operation and management of the Subic National
Shipyard, Inc. (SNS) which subsequently became the Philippine Shipyard and Engineering Corporation (PHILSECO). Under the JVA, NIDC and
Kawasaki will contribute P330 million for the capitalization of PHILSECO in the proportion of 60%-40%, respectively. One of the salient features
in the JVA grants to NIDC and Kawasaki the right of first refusal should either of them decide to sell, assign or transfer its interest in the JVA,
unless the transferee is a GOCC or a Kawasaki affiliate. Transfer of NIDC shares in PHILSECO to the government NIDC transferred all its
interests in PHILSECO to the Philippine National Bank (PNB), and the latter transferred the same to the national government, pursuant to AO
No. 14. PCory issued Proclamation No. 50 establishing the Committee on Privatization (COP) and the Asset Privatization Trust (APT) to take
over the non-performing assets of the national government for purposes of conservation, managements and disposal. Pursuant to this, the
government and APT entered into a trust agreement where APT was named the trustee of the government s share in PHILSECO. Apparently,
PHILSECO, at the time, owed PNB huge amounts, so that a quasi-reorganization of PHILSECO occurred that raised the government
shareholdings in PHILSECO to 97.41%. Meanwhile, Kawasaki s shareholdings dropped to 2.59%. Sale of government equity in PHILSECO
to private entities COP and APT decided to sell the national government s share in PHILSECO to private entities. APT entered into an
agreement with Kawasaki in which the latter s right of first refusal under the JVA was converted into the latter
s right to top by 5%, whatever
would be the highest bid for the said shares. In addition, Kawasaki was entitled to name a company in which it was a stockholder, which could
exercise the right to top. Kawasaki informed APT that Philyards Holdings, Inc. (PHI) would be the one exercising Kawasaki s right to top. The
Asset Specific Bidding Rules (ASBR) contained the mechanics for the bidding process of the government s 87.6% equity share in PHILSECO.
Under the rules, the highest bid, as well as the buyer, shall be subject to the final approval of both the APT Board of Trustees and the COP. The
APT shall also advise Kawasaki and/or its nominee, PHI, that the highest bid is acceptable to the government, and thereafter, give Kawasaki
and/or PHI a period of 30 calendar days from the date of receipt of such advice within which to exercise their right to top. Should Kawasaki
and/or PHI exercise this right, they shall so notify the APT and make their deposit within the same 30-day period. Should they fail to exercise
this right within the period, APT will declare the highest bidder as the winning bidder. The conflict: JG Summit s protest of Kawasaki/PHI s
right to top JG Summit won the public bidding with a bid of P2,030,000,000.00. It acknowledged Kawasaki and/or PHI s right to top. COP
approved the sale of the shares to JG Summit, subject to Kawasaki and/or PHI s right to top. Subsequently, JG Summit informed APT that it
was protesting the offer of PHI to top its bid on the grounds that: a) Kawasaki/PHI consortium (composed of Kawasaki, PHI, Mitsui, Keppel, SM
Group, ICTSI and Insular Life) violated the bidding process because the last four companies were the losing bidders; b) Only Kawasaki could
exercise the right to top since giving the same option to top to PHI constituted unwarranted benefit to a third party; c) No right of first refusal can
be exercised in a public bidding or auction sale; d) JG Summit was not estopped from questioning the proceedings. APT notified JG Summit that
PHI had exercised its option to top the highest bid and that the COP had approved the same. Thus, APT and PHI executed a Stock Purchase
Agreement. The ensuing cases Consequently, JG Summit filed a case for mandamus, but this was denied by the CA for lack of merit. CA also
denied the MR. JG Summit then elevated the case to the SC, which reversed the CA and ruled that a shipyard like PHILSECO is a public utility
whose capitalization must be 60% Filipino-owned. Consequently, the right to top granted to Kawasaki for the sale of the 87.67% equity of the
government in PHILSECO is illegal both for violating the rules on competitive bidding and also for allowing foreign corporations to own more
than 40% equity in the shipyard. The SC also found that JG Summit was not estopped from questioning the unconstitutional, illegal and
inequitable provisions of the bidding rules. Thus, it upheld JG Summit s right as the highest bidder. However, upon separate MR s, the SC
issued a Resolution reversing its earlier ruling. It held PHILSECO is not a public utility, as by nature, a shipyard is not a public utility and that no
law declares a shipyard to be a public utility. Also, the SC found nothing in the JVA between NIDC and Kawasaki which prevented the latter from
acquiring more than 40% of PHILSECO s total capitalization. Finally, the right to top in exchange for the right of first refusal was held to not
have violated the principles of competitive bidding. The above developments led JG Summit to institute the instant MR with motion to elevate
the case to the SC en banc.
issue 1. WON there are sufficient bases to elevate the case at bar to the Court en banc NO. 2. WON the motion for reconsideration should
be granted
NO. (A/N: See specific issues raised in each number.) Ratio Motion to elevate the case to the SC en banc 1. JG Summit: The main issue WRT
the propriety of the bidding process was confused with the policy issue of the supposed fate of the shipping industry which has never been an
issue that is determinative of this case.
SC: The SC clearly and definitively ruled on the propriety of the bidding process by exhaustively discussing the rules and principles of public
bidding and determining whether Kawasaki right to top granted to it in exchange for its right of first refusal violates these principles. The
shipbuilding industry was merely mentioned in relation to the impact that it may receive as a result of the Court
s ruling that a shipyard is not
s a public utility which should maintain a 60%-40% Filipino-foreign equity ratio.
2. JG Summit: The present case involves a novel question of law. SC: There is no novel question of law.
In fact, the case was resolved based on basic principles of the right of first refusal in commercial law and estoppel in civil law. Contractual
obligations arising from rights of first refusal are not new in this jurisdiction and have been recognized in numerous cases. Estoppel is too known
a civil law concept to require an elongated discussion. Fundamental principles on public bidding were likewise used to resolve the issues. There
is also nothing new about the right to top, which was merely a condition or a reservation made in the bidding rules fully disclosed to all bidding
parties. 3. JG Summit: There was clear executive interference in the judicial functions of the SC when the Secretary of Finance forwarded to CJ
Davide a memorandum, attaching a copy of the Foreign Chambers Report, which matter was placed in the agenda of the Court and noted by it
in a formal resolution. SC: There was no executive interference in the functions of the SC by the mere filing of a memorandum by the Secretary
of Finance. Such memorandum was merely noted to acknowledge its filing. It had no further legal significance. The SC emphasized that the SC
en banc is not an appellate court to which decisions or resolutions of a division may be appealed. Motion for Reconsideration (I think the 3rd
item is the one that is most relevant to the topic of corporate entity) 1. JG Summit: The contracts do not authorize the right to top to be derived
from the right of first refusal. SC: Nothing in the JVA or in the bidding rules bars the conversion of the right of first refusal to the right to top. 2.
s
JG Summit: Neither the right of first refusal nor the right to top can be legally exercised by the consortium which is not the proper party granted
such right. SC: The fact that the losing bidder has joined PHI in the latter's effort to raise the P2.131 billion necessary in exercising the right to
top is not contrary to law, public policy or public morals. There is nothing in the bidding rules that bars the losing bidders from joining either the
winning bidder or Kawasaki/PHI to raise the purchase price. There was also no allegation or proof that the participation of the losing bidders in
the public bidding was done with fraudulent intent. Absent any proof of fraud, the formation by PHI of a consortium is legitimate in a free enterprise
system, unlike in a contract for the operation of or construction of a government infrastructure where the identity of the buyer/bidder or financier
constitutes an important consideration. In the latter case, the government would have to take utmost precaution to protect public interest by
ensuring that the parties with which it is contracting have the ability to satisfactorily construct or operate the infrastructure. 3. JG Summit: The
mutual right of first refusal (and the right to top derived from it) between NIDC and Kawasaki violates their contract and the Constitution, both of
which require them to maintain a 60%-40% capitalization ratio. This is because it would allow Kawasaki to own more than the allowable 40% of
PHILSECO, a landholding corporation, which is bound by the 60%-40% constitutional limitation. (A/N: Apparently, somewhere along the way,
JG Summit dropped its public utility argument, which the SC already debunked in the earlier cases and is not mentioned in the present one, and
focused on this landholding argument to insist on the 60%-40% capitalization ratio.) SC: PHI admitted that PHILSECO owned land until the time
of the bidding. However, PHI asserts that this would not affect the right of first refusal but only the exercise thereof, meaning: (1) if the land is
retained, the right of first refusal, being a property right, could be assigned to a qualified party; or (2) the land could be divested before the
exercise of the right of first refusal. However here, the right of first refusal was validly converted into a right to top, which was exercised not by
Kawasaki but by PHI, a Filipino corporation. As such, there is no violation of the Constitution. The SC upheld PHI s argument and declared
that the mutual right of first refusal of NIDC and Kawasaki in the JVA was valid. First, it held that said right consisted of NIDC and Kawasaki s
property right given to them by their contract. This agreement, by itself, does not constitute a violation of the provisions of the Constitution limiting
land ownership to Filipinos and Filipino corporations. The SC sustained the abovementioned alternative options given by PHI to avoid a violation
of the constitution. It further held that if Kawasaki, while PHILSECO still owns land, assigns its right to a qualified Filipino entity in order to
maintain the 60%-40% ratio, this transfer would not necessarily amount to a violation of the Anti-Dummy Laws, absent proof of any fraudulent
intent. Further, the SC said that even if Kawasaki s shareholdings in PHILSECO exceed 40%, it would not necessarily affect its standing as a
shareholder; it would most likely affect PHILSECO itself and disqualify it from owning land. This finds support under the basic corporate law
principle that the corporation and its stockholders are separate juridical entities. In this vein, the right of first refusal over shares pertains to the
shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot deprive
stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a landholding corporation even if the latter will
exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land. This is the clear import of the relevant provisions
under the constitution.[footnoteRef:1] [1: 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. The State may directly undertake such activities, or it may enter into co-
production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of
whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than
twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries,
or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant.Section 7. Save in cases
of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to
acquire or hold lands of the public domain. ] Finally, the court debunked JG Summit s argument that an option to buy land (by a foreigner/foreign
corporation) being void itself, the right of first refusal granted to Kawasaki, a Japanese corporation, and the right to top, which is sourced from
the right of first refusal, are also void. In arguing in this manner, JG Summit relied in the case of Philippine Banking Corporation v. Lui She. The
SC said that nothing in the above decision absolutely barred an alien from ever having the capacity to acquire land in the Philippines. He can be
given an option to buy real property, which he can exercise on condition that he is granted Philippine citizenship. What was barred by the above
ruling was a situation where an alien is given not only a lease of, but also an option to buy, a piece of land, by virtue of which the Filipino owner
cannot sell or otherwise dispose of his property, this to last for 50 years, because by then it becomes clear that the arrangement is a virtual
transfer of ownership whereby the owner divests himself in stages not only of the right to enjoy the land, but also of the right to dispose of it
rights the sum total of which make up ownership. Such a situation is not present in the case at bar. 4. JG Summit: There is a violation of the
rules on competitive bidding. SC: The discretion to accept or reject a bid and award contracts is vested in the government agencies entrusted
with that function. The discretion given to the authorities on this matter is of such wide latitude that the courts will not interfere therewith, unless
it is apparent that it is used as a shield to a fraudulent award. It is only upon a clear showing of grave abuse of discretion that the courts will set
aside the award of a contract made by a government entity. The facts in this case do not indicate any such grave abuse of discretion. The right
to top was a condition imposed by the government in the bidding rules which was made known to all parties. It was a condition imposed on all
bidders equally, based on the APT s exercise of its discretion in deciding on how best to privatize the government s shares in PHILSECO. It
was not a whimsical or arbitrary condition. The right to top had its history in the mutual right of first refusal in the JVA and was reached by
agreement of the government and KAWASAKI. 5. JG Summit: We are not estopped from questioning these issues although we participated in
the bidding process. SC: (A/N: It wasn t really discussed in the present case, but I guess because in entering its bid, JG Summit expressed
that it acknowledged Kawasaki/PHI s right to top.)