Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 151910 October 15, 2007

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
LUDOLFO V. MUOZ, Respondent.

DECISION

AZCUNA, J.:

Before this Court is a Petition for Review on Certiorari, under Rule 45 of the 1997 Rules of Civil
Procedure, seeking to set aside the August 29, 2001 Decision1 of the Court of Appeals (CA) in CA-
G.R. CV No. 58170, as well as its January 29, 2002 Resolution, which affirmed the October 3, 1997
Decision2 of the Regional Trial Court (RTC) of Ligao, Albay, Branch 13, granting the application for
land registration of respondent Ludolfo V. Muoz.

The following facts prompted the present controversy.

On June 14, 1996, respondent filed an Application for Registration of Title of a parcel of residential
land before the RTC of Ligao, Albay containing an area of 1,986 square meters situated, bounded,
and described as follows:

A PARCEL OF LAND (Lot No. 2276 of the Cadastral Survey of Ligao) with the building and
improvements thereon, situated in the Barrio of Bagonbayan, Municipality of Ligao, Province of Albay.
Bounded on the S., along line 1-2, by Lot No. 2277, Ligao Cadastre; on the W., along Line 2-3, by
Mabini Street; on the N., and E., along lines 3-4-5-6-4-7, by Lot 2284; and on the S., along line 7-8, by
Lot 2281; and along line 8-1, by Lot 2278 all of Ligao Cadastre, containing an area of ONE
THOUSAND NINE HUNDRED EIGHTY SIX (1,986) square meters.3

In his application for registration, respondent averred that no mortgage or encumbrance of any kind
affects his property and that no other person has an interest, legal or equitable, on the subject lot.
Respondent further declared that the property was acquired by donation inter vivos, executed by the
spouses Apolonio R. Muoz and Anastacia Vitero on November 18, 1956, and that the spouses and
their predecessors-in-interest have been in possession thereof since time immemorial for more than
70 years.

On November 7, 1996, petitioner Republic of the Philippines, through the Office of the Solicitor General
(OSG), opposed the application on the following grounds:

(1) That neither the applicant nor his predecessors-in-interest have been in open, continuous,
exclusive and notorious possession and occupation of the land in question since June 12,
1945 or prior thereto (Sec. 48[b], C.A. 141 as amended by P.D. 1073).

(2) That the muniment/s of title and/or the tax payment/s receipt/s of application/s, if any,
attached to or alleged in the application, do not constitute competent and sufficient evidence
 of a bona fide acquisition of the lands acquired for or his open, continuous, exclusive and
notorious possession and occupation thereof in the concept of owner since June 12, 1945 or
prior thereto. Said muniment/s of title as well as the title do not appear to be genuine and that
the tax declaration/s and/or tax payment receipt/s indicate the pretended possession of
application to be of recent vintage.

(3) That the claim of ownership in fee simple on the basis of Spanish title or grant can no longer
be availed of by the applicant who has failed to file an appropriate application for registration
within the period of six (6) months from February 16, 1976 as required by P.D. No. 892. From
the records, it appears that the instant application was recently filed.

(4) That the parcel applied for is part of the public domain belonging to the Republic of the
Philippines not subject to private appropriation.

(5) That this application was filed beyond December 31, 1987, the period set forth under Sec.
2, P.D. No. 1073 and therefore, is filed out of time.4

In respondents Answer to Opposition, he professed that the land in question is a residential lot
originally owned and possessed by Paulino Pulvinar and Geronimo Lozada. Sometime in April 1917,
Pulvinar sold his share of the unregistered land to the spouses Muoz and Vitero, respondents
parents. In June 1920, Lozada likewise sold his remaining part to the parents of respondent.
Thereafter, the ownership and possession of the property were consolidated by the spouses and
declared for taxation purposes in the name of Muoz in 1920. Furthermore, it was stated that during
the cadastral survey conducted in Ligao, Albay in 1928, the land was designated as Lot No. 2276, as
per Survey Notification Card issued to Muoz dated October 2, 1928. Finally, respondent contended
that from 1920 up to 1996, the time of application, the land taxes for the property had been fully paid.

On February 6, 1997, an Order of General Default5 was entered by the trial court against the whole
world except for the government and a certain Alex Vasquez, who appeared during the scheduled
initial hearing stating that he would file an opposition to the application.

In the Opposition6 filed by Vasquez dated February 19, 1997, he declared that he owns parcels of
land, Lot Nos. 2284-A-2 and 2275, adjoining that of the subject matter of the application. He added
that certain portions of his lands are included in the application as respondents concrete fence is
found within the area of his lots.

Respondent, in his answer to the opposition,7 alleged that his property, Lot No. 2276, is covered by a
technical description, duly certified correct by the Bureau of Lands and approved for registration by
the Land Registration Authority (LRA), which specified the exact areas and boundaries of Lot No.
2276. Granting that there is an encroachment to the oppositors adjoining land, respondent reasoned
that it is not for the court a quo, sitting as a Land Registration Court, to entertain the opposition because
the case should be ventilated in a separate proceeding as an ordinary civil case.

During the trial, respondent was presented as the sole witness. Respondent, who was 81 years old at
that time, testified that he acquired the property in 1956 when his parents donated the same to
him.8 He presented as Exhibit "H"9 Tax Declaration No. 048-0267, evidencing the payment of realty
taxes for Lot No. 2276 in 1997. A Certification from the Office of the Municipal Treasurer10 was likewise
introduced by the respondent showing the payment of real estate taxes from 1956 up to the year 1997.
He further declared that the property is a residential land with improvements such as a house made
of solid materials and fruit-bearing trees. In 1957, respondent told the court that he constructed a
concrete wall surrounding the entire property. Respondent also narrated that he grew up on the subject
lot and spent his childhood days in the area.11
On cross-examination, respondent claimed that he has six brothers and sisters, none of whom are
claiming any interest over the property.12

On June 16, 1997, the trial court noted13 a Report14 submitted by the Director of Lands, which informed
the court that as per records of the Land Management Bureau in Manila, Lot No. 2276, CAD-239 is
covered by Free Patent Application No. 10-2-664 of Anastacia Vitero.

The RTC rendered a Decision dated October 3, 1997 granting the application for registration. The
dispositive portion of the decision reads:

WHEREFORE, decision is hereby rendered finding the petitioner entitled to registration. Accordingly,
after the finality of this decision, let a decree and, thereafter the corresponding certificate of title over
Lot No. 2276 of the Ligao Cadastre as delimited by the Technical Description, Annex A-2 of the
application, together with the improvements thereon, issue in the name of LUDOLFO Y. MUOZ, of
legal age, Filipino citizen, married to JOSEFINA PALENCIA, of Mabini Street, Barangay Tinago,
Municipality of Ligao, Province of Albay.

Conformably with the above findings, as prayed for by the Director, Department of Registration, Land
Registration Authority in his Report dated March 6, 1997, the application, if any, in Cad. Case No. 53,
Cadastral Record No. 1404 is hereby ordered dismissed.

The opposition of Alex Vasquez for lack of merit is hereby ordered dismissed.1wphi1

Let copy of this Decision be furnished the Office of the Solicitor General, Provincial Prosecutor of
Albay, Oppositor Alez Vasquez and Petitioner.

SO ORDERED.15

On appeal, petitioner argued that the trial court did not acquire jurisdiction over the subject lot because:
(1) the notice of initial hearing was not timely filed; (2) the applicant failed to present the original tracing
cloth plan of the property sought to be registered during the trial; and (3) the applicant failed to present
evidence that the land is alienable and disposable.

Subsequently, the CA affirmed the decision of the court a quo. The appellate court explained that there
was conclusive proof that the jurisdictional requirement of due notice had been complied with as
mandated under Section 24 of Presidential Decree No. 1529. Furthermore, the failure to present in
evidence the tracing cloth plan of the subject property did not deprive the lower court of its jurisdiction
to act on the application in question. Lastly, the CA ruled that respondent need not adduce
documentary proof that the disputed property had been declared alienable and disposable for the
simple reason that the lot had once been covered by free patent application; hence, this alone is
conclusive evidence that the property was already declared by the government as open for public
disposition.

The petitioner, through the OSG, raises the following grounds for the petition:

I.

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE TRIAL COURT HAS NOT
ACQUIRED JURISDICTION OVER THE CASE.

II.
 PRIVATE RESPONDENT HAS NOT PROVEN BY COMPETENT EVIDENCE THAT THE
PROPERTY IS ALIENABLE AND DISPOSABLE PROPERTY OF THE PUBLIC DOMAIN.16

Anent the first issue, petitioner maintains that the failure to present the original tracing cloth plan is a
fatal omission which necessarily affected the trial courts jurisdiction to proceed with the case.

It bears stressing that the "constructive seizure of land accomplished by posting of notices and
processes upon all persons mentioned in notices by means of publication and sending copies to said
persons by registered mail in effect gives the court jurisdiction over the lands sought to be
registered."17

While petitioner correctly contends that the submission in evidence of the original tracing cloth plan is
a mandatory and even a jurisdictional requirement, this Court has recognized instances of substantial
compliance with this rule.18It is true that the best evidence to identify a piece of land for registration
purposes is the original tracing cloth plan from the Bureau of Lands, but blueprint copies and other
evidence could also provide sufficient identification.19 In the present application for registration,
respondent submitted, among other things, the following supporting documents: (1) a blueprint copy
of the survey plan20 approved by the Bureau of Lands; and (2) the technical descriptions21 duly verified
and approved by the Director of Lands.

The Court held in Recto v. Republic22 that the blueprint copy of the cloth plan together with the lots
technical description duly certified as to their correctness by the Bureau of Lands are adequate to
identify the land applied for registration, thus

On the first challenge, the petitioner invokes the case of Director of Lands v. Reyes, where it was held
that "the original tracing cloth plan of the land applied for which must be approved by the Director of
Lands was "a statutory requirement of mandatory character" for the identification of the land sought to
be registered. As what was submitted was not the tracing cloth plan but only the blueprint copy of the
survey plan, the respondent court should have rejected the same as insufficient.

We disagree with this contention. The Court of Appeals was correct when it observed that in that case
the applicant in effect "had not submitted anything at all to identify the subject property" because the
blueprint presented lacked the approval of the Director of Lands. By contrast

In the present case, there was considerable compliance with the requirement of the law as the subject
property was sufficiently identified with the presentation of blueprint copy of Plan AS-06-000002 (San
Pedro v. Director of Lands, CA-G.R. No. 65332-R, May 28, 1981). It should be noted in this connection
that the Bureau of Lands has certified to the correctness of the blueprint copy of the plan including the
technical description that go with it. Hence, we cannot ignore the fact, absent in the Reyes case, that
applicant has provided ample evidence to establish the identity of the subject property. (Emphasis
supplied)

x x x.23

Moreover, if the survey plan is approved by the Director of Lands and its correctness has not been
overcome by clear, strong and convincing evidence, the presentation of the tracing cloth plan may be
dispensed with.24 All the evidence on record sufficiently identified the property as the one applied for
by respondent, and containing the corresponding metes and bounds as well as area. Consequently,
the original tracing cloth plan need not be presented in evidence.25
Anent the second issue, petitioner stresses that in proving the alienable and disposable nature of the
property, there has to be a certification from the Department of Environment and Natural Resources
and Community Environment and Natural Resources Office (CENRO).

The CA is of the opinion that respondent need not adduce documentary proofs that the disputed
property has been declared alienable and disposable because of the fact that it had once been covered
by Free Patent Application No. 10-2-664 in the name of respondents mother, which was unfortunately
not acted upon by the proper authorities. The CA declares that this is proof enough that the property
was declared by the government as open for public disposition. This contention was adopted by the
respondent both in his Comment and Memorandum filed before the Court.

Notwithstanding all the foregoing, the Court cannot sustain the argument of respondent that the subject
property was already declared alienable and disposable land.

Petitioner is correct when it remarked that it was erroneous for the appellate court to assume that the
property in question is alienable and disposable based only on the Report dated May 21, 1997 of the
Director of Lands indicating that the "land involved in said case described as Lot 2276, CAD-239 is
covered by Free Patent Application No. 10-2-664 of Anastacia Vitero."

It must be pointed out that in its Report26 dated March 6, 1997, the LRA stated that:

3. This Authority is not in a position to verify whether or not the parcel of land subject of
registration is already covered by land patent, previously approved isolated survey and is within
forest zone.

WHEREFORE, to avoid duplication in the issuance of titles covering the same parcel of land and the
issuance of titles for lands within the forest zone which have not been released and classified as
alienable, the foregoing is respectfully submitted to the Honorable Court with the recommendation
that the Lands Management Bureau, Manila, Community Environment and Natural Resources
Office, Lands Management Sector and Forest Management Bureau, all in Legazpi City, be
ordered to submit a report to the Court on the status of the land applied for, to determine whether
or not said land or any portion thereof, is already covered by land patent, previously approved
isolated survey and is within the forest zone and that should the instant application be given due
course, the application in Cad. Case No. 53, Cadastral Record No. 1404 with respect to Lot 2276 be
dismissed.27

Noteworthy is the fact that neither the Director of Lands nor the LRA attested that the land subject of
this proceeding is alienable or disposable.

For clarity, applications for confirmation of imperfect title must be able to prove the following: (1) that
the land forms part of the alienable and disposable agricultural lands of the public domain; and (2) that
they have been in open, continuous, exclusive and notorious possession and occupation of the same
under a bona fide claim of ownership either since time immemorial or since June 12, 1945.28

Commonwealth Act No. 141, also known as the Public Land Act, remains to this day the existing
general lawgoverning the classification and disposition of lands of the public domain, other than timber
and mineral lands.29Section 6 of CA No. 141 empowers the President to classify lands of the public
domain into "alienable and disposable" lands of the public domain, which prior to such classification
are inalienable and outside the commerce of man. Section 7 of CA No. 141 authorizes the President
to "declare what lands are open to disposition or concession." Section 8 of CA No. 141 states that the
government can declare open for disposition or concession only lands that are "officially delimited and
classified."
Under the Regalian doctrine embodied in our Constitution, all lands of the public domain belong to the
State, which is the source of any asserted right to ownership of land. Therefore, all lands not appearing
to be clearly within private ownership are presumed to belong to the State. Accordingly, public
lands not shown to have been reclassified or released as alienable agricultural land or alienated
to a private person by the State remain part of the alienable public domain.30

As already well-settled in jurisprudence, no public land can be acquired by private persons without
any grant, express or implied, from the government; and it is indispensable that the person claiming
title to public land should show that his title was acquired from the State or any other mode of
acquisition recognized by law.31 To prove that the land subject of an application for registration is
alienable, the applicant must establish the existence of a positive act of the government such as a
presidential proclamation or an executive order; an administrative action; investigation reports of
Bureau of Lands investigators; and a legislative act or a statute.32 The applicant may also secure a
certification from the Government that the land applied for is alienable and disposable.33

In the present case, respondent failed to submit a certification from the proper government agency to
prove that the land subject for registration is indeed alienable and disposable. A CENRO certificate,
which respondent failed to secure, could have evidenced the alienability of the land involved.

Considering that respondent has failed to convince this Court of the alienable and disposable character
of the land applied for, the Court cannot approve the application for registration.

WHEREFORE, the instant petition is GRANTED. Accordingly, the decision dated August 29, 2001 of
the Court of Appeals in CA-G.R. CV No. 58170, as reiterated in its resolution of January 29, 2002,
is REVERSED and SET ASIDE, and the application for registration filed by respondent Ludolfo V.
Muoz is DENIED.

No costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 101949 December 1, 1994

THE HOLY SEE, petitioner,

vs.

THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial Court of Makati,
Branch 61 and STARBRIGHT SALES ENTERPRISES, INC., respondents.

Padilla Law Office for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and set aside
the Orders dated June 20, 1991 and September 19, 1991 of the Regional Trial Court, Branch 61,
Makati, Metro Manila in Civil Case No. 90-183.

The Order dated June 20, 1991 denied the motion of petitioner to dismiss the complaint in Civil Case
No. 90-183, while the Order dated September 19, 1991 denied the motion for reconsideration of the
June 20,1991 Order.

Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy, and is
represented in the Philippines by the Papal Nuncio.

Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in the real
estate business.

This petition arose from a controversy over a parcel of land consisting of 6,000 square meters (Lot 5-
A, Transfer Certificate of Title No. 390440) located in the Municipality of Paraaque, Metro Manila and
registered in the name of petitioner.

Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer Certificates of Title Nos.
271108 and 265388 respectively and registered in the name of the Philippine Realty Corporation
(PRC).

The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as agent to the
sellers. Later, Licup assigned his rights to the sale to private respondent.

In view of the refusal of the squatters to vacate the lots sold to private respondent, a dispute arose as
to who of the parties has the responsibility of evicting and clearing the land of squatters. Complicating
the relations of the parties was the sale by petitioner of Lot 5-A to Tropicana Properties and
Development Corporation (Tropicana).
I

On January 23, 1990, private respondent filed a complaint with the Regional Trial Court, Branch 61,
Makati, Metro Manila for annulment of the sale of the three parcels of land, and specific performance
and damages against petitioner, represented by the Papal Nuncio, and three other defendants:
namely, Msgr. Domingo A. Cirilos, Jr., the PRC and Tropicana (Civil Case No.
90-183).

The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of petitioner and the
PRC, agreed to sell to Ramon Licup Lots 5-A, 5-B and 5-D at the price of P1,240.00 per square meters;
(2) the agreement to sell was made on the condition that earnest money of P100,000.00 be paid by
Licup to the sellers, and that the sellers clear the said lots of squatters who were then occupying the
same; (3) Licup paid the earnest money to Msgr. Cirilos; (4) in the same month, Licup assigned his
rights over the property to private respondent and informed the sellers of the said assignment; (5)
thereafter, private respondent demanded from Msgr. Cirilos that the sellers fulfill their undertaking and
clear the property of squatters; however, Msgr. Cirilos informed private respondent of the squatters'
refusal to vacate the lots, proposing instead either that private respondent undertake the eviction or
that the earnest money be returned to the latter; (6) private respondent counterproposed that if it would
undertake the eviction of the squatters, the purchase price of the lots should be reduced from
P1,240.00 to P1,150.00 per square meter; (7) Msgr. Cirilos returned the earnest money of
P100,000.00 and wrote private respondent giving it seven days from receipt of the letter to pay the
original purchase price in cash; (8) private respondent sent the earnest money back to the sellers, but
later discovered that on March 30, 1989, petitioner and the PRC, without notice to private respondent,
sold the lots to Tropicana, as evidenced by two separate Deeds of Sale, one over Lot 5-A, and another
over Lots 5-B and 5-D; and that the sellers' transfer certificate of title over the lots were cancelled,
transferred and registered in the name of Tropicana; (9) Tropicana induced petitioner and the PRC to
sell the lots to it and thus enriched itself at the expense of private respondent; (10) private respondent
demanded the rescission of the sale to Tropicana and the reconveyance of the lots, to no avail; and
(11) private respondent is willing and able to comply with the terms of the contract to sell and has
actually made plans to develop the lots into a townhouse project, but in view of the sellers' breach, it
lost profits of not less than P30,000.000.00.

Private respondent thus prayed for: (1) the annulment of the Deeds of Sale between petitioner and the
PRC on the one hand, and Tropicana on the other; (2) the reconveyance of the lots in question; (3)
specific performance of the agreement to sell between it and the owners of the lots; and (4) damages.

On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint petitioner
for lack of jurisdiction based on sovereign immunity from suit, and Msgr. Cirilos for being an improper
party. An opposition to the motion was filed by private respondent.

On June 20, 1991, the trial court issued an order denying, among others, petitioner's motion to dismiss
after finding that petitioner "shed off [its] sovereign immunity by entering into the business contract in
question" (Rollo, pp. 20-21).
On July 12, 1991, petitioner moved for reconsideration of the order. On August 30, 1991, petitioner
filed a "Motion for a Hearing for the Sole Purpose of Establishing Factual Allegation for claim of
Immunity as a Jurisdictional Defense." So as to facilitate the determination of its defense of sovereign
immunity, petitioner prayed that a hearing be conducted to allow it to establish certain facts upon which
the said defense is based. Private respondent opposed this motion as well as the motion for
reconsideration.

On October 1, 1991, the trial court issued an order deferring the resolution on the motion for
reconsideration until after trial on the merits and directing petitioner to file its answer (Rollo, p. 22).

Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the privilege of sovereign
immunity only on its own behalf and on behalf of its official representative, the Papal Nuncio.

On December 9, 1991, a Motion for Intervention was filed before us by the Department of Foreign
Affairs, claiming that it has a legal interest in the outcome of the case as regards the diplomatic
immunity of petitioner, and that it "adopts by reference, the allegations contained in the petition of the
Holy See insofar as they refer to arguments relative to its claim of sovereign immunity from suit" (Rollo,
p. 87).

Private respondent opposed the intervention of the Department of Foreign Affairs. In compliance with
the resolution of this Court, both parties and the Department of Foreign Affairs submitted their
respective memoranda.

II

A preliminary matter to be threshed out is the procedural issue of whether the petition for certiorari
under Rule 65 of the Revised Rules of Court can be availed of to question the order denying petitioner's
motion to dismiss. The general rule is that an order denying a motion to dismiss is not reviewable by
the appellate courts, the remedy of the movant being to file his answer and to proceed with the hearing
before the trial court. But the general rule admits of exceptions, and one of these is when it is very
clear in the records that the trial court has no alternative but to dismiss the complaint (Philippine
National Bank v. Florendo, 206 SCRA 582 [1992]; Zagada v. Civil Service Commission, 216 SCRA
114 [1992]. In such a case, it would be a sheer waste of time and energy to require the parties to
undergo the rigors of a trial.

The other procedural question raised by private respondent is the personality or legal interest of the
Department of Foreign Affairs to intervene in the case in behalf of the Holy See (Rollo, pp. 186-190).
In Public International Law, when a state or international agency wishes to plead sovereign or
diplomatic immunity in a foreign court, it requests the Foreign Office of the state where it is sued to
convey to the court that said defendant is entitled to immunity.

In the United States, the procedure followed is the process of "suggestion," where the foreign state or
the international organization sued in an American court requests the Secretary of State to make a
determination as to whether it is entitled to immunity. If the Secretary of State finds that the defendant
is immune from suit, he, in turn, asks the Attorney General to submit to the court a "suggestion" that
the defendant is entitled to immunity. In England, a similar procedure is followed, only the Foreign
Office issues a certification to that effect instead of submitting a "suggestion" (O'Connell, I International
Law 130 [1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities and Obligations, 50
Yale Law Journal 1088 [1941]).

In the Philippines, the practice is for the foreign government or the international organization to first
secure an executive endorsement of its claim of sovereign or diplomatic immunity. But how the
Philippine Foreign Office conveys its endorsement to the courts varies. In International Catholic
Migration Commission v. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a
letter directly to the Secretary of Labor and Employment, informing the latter that the respondent-
employer could not be sued because it enjoyed diplomatic immunity. In World Health Organization v.
Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial court a telegram to that
effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs
to request the Solicitor General to make, in behalf of the Commander of the United States Naval Base
at Olongapo City, Zambales, a "suggestion" to respondent Judge. The Solicitor General embodied the
"suggestion" in a Manifestation and Memorandum as amicus curiae.

In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs moved with
this Court to be allowed to intervene on the side of petitioner. The Court allowed the said Department
to file its memorandum in support of petitioner's claim of sovereign immunity.

In some cases, the defense of sovereign immunity was submitted directly to the local courts by the
respondents through their private counsels (Raquiza v. Bradford, 75 Phil. 50 [1945]; Miquiabas v.
Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of America v. Guinto, 182 SCRA
644 [1990] and companion cases). In cases where the foreign states bypass the Foreign Office, the
courts can inquire into the facts and make their own determination as to the nature of the acts and
transactions involved.

III

The burden of the petition is that respondent trial court has no jurisdiction over petitioner, being a
foreign state enjoying sovereign immunity. On the other hand, private respondent insists that the
doctrine of non-suability is not anymore absolute and that petitioner has divested itself of such a cloak
when, of its own free will, it entered into a commercial transaction for the sale of a parcel of land
located in the Philippines.

A. The Holy See

Before we determine the issue of petitioner's non-suability, a brief look into its status as a sovereign
state is in order.

Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch and he, as the
Holy See, was considered a subject of International Law. With the loss of the Papal States and the
limitation of the territory under the Holy See to an area of 108.7 acres, the position of the Holy See in
International Law became controversial (Salonga and Yap, Public International Law 36-37 [1992]).

In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized the exclusive
dominion and sovereign jurisdiction of the Holy See over the Vatican City. It also recognized the right
of the Holy See to receive foreign diplomats, to send its own diplomats to foreign countries, and to
enter into treaties according to International Law (Garcia, Questions and Problems In International
Law, Public and Private 81 [1948]).

The Lateran Treaty established the statehood of the Vatican City "for the purpose of assuring to the
Holy See absolute and visible independence and of guaranteeing to it indisputable sovereignty also in
the field of international relations" (O'Connell, I International Law 311 [1965]).

In view of the wordings of the Lateran Treaty, it is difficult to determine whether the statehood is vested
in the Holy See or in the Vatican City. Some writers even suggested that the treaty created two
international persons the Holy See and Vatican City (Salonga and Yap, supra, 37).

The Vatican City fits into none of the established categories of states, and the attribution to it of
"sovereignty" must be made in a sense different from that in which it is applied to other states (Fenwick,
International Law 124-125 [1948]; Cruz, International Law 37 [1991]). In a community of national
states, the Vatican City represents an entity organized not for political but for ecclesiastical purposes
and international objects. Despite its size and object, the Vatican City has an independent government
of its own, with the Pope, who is also head of the Roman Catholic Church, as the Holy See or Head
of State, in conformity with its traditions, and the demands of its mission in the world. Indeed, the
world-wide interests and activities of the Vatican City are such as to make it in a sense an "international
state" (Fenwick, supra., 125; Kelsen, Principles of International Law 160 [1956]).

One authority wrote that the recognition of the Vatican City as a state has significant implication
that it is possible for any entity pursuing objects essentially different from those pursued by states to
be invested with international personality (Kunz, The Status of the Holy See in International Law, 46
The American Journal of International Law 308 [1952]).

Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as the Holy See
and not in the name of the Vatican City, one can conclude that in the Pope's own view, it is the Holy
See that is the international person.

The Republic of the Philippines has accorded the Holy See the status of a foreign sovereign. The Holy
See, through its Ambassador, the Papal Nuncio, has had diplomatic representations with the Philippine
government since 1957 (Rollo, p. 87). This appears to be the universal practice in international
relations.

B. Sovereign Immunity

As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the generally
accepted principles of International Law. Even without this affirmation, such principles of International
Law are deemed incorporated as part of the law of the land as a condition and consequence of our
admission in the society of nations (United States of America v. Guinto, 182 SCRA 644 [1990]).

There are two conflicting concepts of sovereign immunity, each widely held and firmly established.
According to the classical or absolute theory, a sovereign cannot, without its consent, be made a
respondent in the courts of another sovereign. According to the newer or restrictive theory, the
immunity of the sovereign is recognized only with regard to public acts or acts jure imperii of a state,
but not with regard to private acts or acts jure gestionis
(United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago, Public
International Law 194 [1984]).

Some states passed legislation to serve as guidelines for the executive or judicial determination when
an act may be considered as jure gestionis. The United States passed the Foreign Sovereign
Immunities Act of 1976, which defines a commercial activity as "either a regular course of commercial
conduct or a particular commercial transaction or act." Furthermore, the law declared that the
"commercial character of the activity shall be determined by reference to the nature of the course of
conduct or particular transaction or act, rather than by reference to its purpose." The Canadian
Parliament enacted in 1982 an Act to Provide For State Immunity in Canadian Courts. The Act defines
a "commercial activity" as any particular transaction, act or conduct or any regular course of conduct
that by reason of its nature, is of a "commercial character."

The restrictive theory, which is intended to be a solution to the host of problems involving the issue of
sovereign immunity, has created problems of its own. Legal treatises and the decisions in countries
which follow the restrictive theory have difficulty in characterizing whether a contract of a sovereign
state with a private party is an act jure gestionis or an act jure imperii.

The restrictive theory came about because of the entry of sovereign states into purely commercial
activities remotely connected with the discharge of governmental functions. This is particularly true
with respect to the Communist states which took control of nationalized business activities and
international trading.

This Court has considered the following transactions by a foreign state with private parties as acts jure
imperii: (1) the lease by a foreign government of apartment buildings for use of its military officers
(Syquia v. Lopez, 84 Phil. 312 [1949]; (2) the conduct of public bidding for the repair of a wharf at a
United States Naval Station (United States of America v. Ruiz, supra.); and (3) the change of
employment status of base employees (Sanders v. Veridiano, 162 SCRA 88 [1988]).

On the other hand, this Court has considered the following transactions by a foreign state with private
parties as acts jure gestionis: (1) the hiring of a cook in the recreation center, consisting of three
restaurants, a cafeteria, a bakery, a store, and a coffee and pastry shop at the John Hay Air Station in
Baguio City, to cater to American servicemen and the general public (United States of America v.
Rodrigo, 182 SCRA 644 [1990]); and (2) the bidding for the operation of barber shops in Clark Air
Base in Angeles City (United States of America v. Guinto, 182 SCRA 644 [1990]). The operation of
the restaurants and other facilities open to the general public is undoubtedly for profit as a commercial
and not a governmental activity. By entering into the employment contract with the cook in the
discharge of its proprietary function, the United States government impliedly divested itself of its
sovereign immunity from suit.

In the absence of legislation defining what activities and transactions shall be considered "commercial"
and as constituting acts jure gestionis, we have to come out with our own guidelines, tentative they
may be.

Certainly, the mere entering into a contract by a foreign state with a private party cannot be the ultimate
test. Such an act can only be the start of the inquiry. The logical question is whether the foreign state
is engaged in the activity in the regular course of business. If the foreign state is not engaged regularly
in a business or trade, the particular act or transaction must then be tested by its nature. If the act is
in pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii, especially when it
is not undertaken for gain or profit.

As held in United States of America v. Guinto, (supra):

There is no question that the United States of America, like any other state, will be deemed to have
impliedly waived its non-suability if it has entered into a contract in its proprietary or private capacity.
It is only when the contract involves its sovereign or governmental capacity that no such waiver may
be implied.

In the case at bench, if petitioner has bought and sold lands in the ordinary course of a real estate
business, surely the said transaction can be categorized as an act jure gestionis. However, petitioner
has denied that the acquisition and subsequent disposal of Lot 5-A were made for profit but claimed
that it acquired said property for the site of its mission or the Apostolic Nunciature in the Philippines.
Private respondent failed to dispute said claim.

Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The donation was
made not for commercial purpose, but for the use of petitioner to construct thereon the official place
of residence of the Papal Nuncio. The right of a foreign sovereign to acquire property, real or personal,
in a receiving state, necessary for the creation and maintenance of its diplomatic mission, is
recognized in the 1961 Vienna Convention on Diplomatic Relations (Arts. 20-22). This treaty was
concurred in by the Philippine Senate and entered into force in the Philippines on November 15, 1965.

In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil and
administrative jurisdiction of the receiving state over any real action relating to private immovable
property situated in the territory of the receiving state which the envoy holds on behalf of the sending
state for the purposes of the mission. If this immunity is provided for a diplomatic envoy, with all the
more reason should immunity be recognized as regards the sovereign itself, which in this case is the
Holy See.

The decision to transfer the property and the subsequent disposal thereof are likewise clothed with a
governmental character. Petitioner did not sell Lot

5-A for profit or gain. It merely wanted to dispose off the same because the squatters living thereon
made it almost impossible for petitioner to use it for the purpose of the donation. The fact that squatters
have occupied and are still occupying the lot, and that they stubbornly refuse to leave the premises,
has been admitted by private respondent in its complaint (Rollo, pp. 26, 27).

The issue of petitioner's non-suability can be determined by the trial court without going to trial in the
light of the pleadings, particularly the admission of private respondent. Besides, the privilege of
sovereign immunity in this case was sufficiently established by the Memorandum and Certification of
the Department of Foreign Affairs. As the department tasked with the conduct of the Philippines'
foreign relations (Administrative Code of 1987, Book IV, Title I, Sec. 3), the Department of Foreign
Affairs has formally intervened in this case and officially certified that the Embassy of the Holy See is
a duly accredited diplomatic mission to the Republic of the Philippines exempt from local jurisdiction
and entitled to all the rights, privileges and immunities of a diplomatic mission or embassy in this
country (Rollo, pp. 156-157). The determination of the executive arm of government that a state or
instrumentality is entitled to sovereign or diplomatic immunity is a political question that is conclusive
upon the courts (International Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]).
Where the plea of immunity is recognized and affirmed by the executive branch, it is the duty of the
courts to accept this claim so as not to embarrass the executive arm of the government in conducting
the country's foreign relations (World Health Organization v. Aquino, 48 SCRA 242 [1972]). As in
International Catholic Migration Commission and in World Health Organization, we abide by the
certification of the Department of Foreign Affairs.

Ordinarily, the procedure would be to remand the case and order the trial court to conduct a hearing
to establish the facts alleged by petitioner in its motion. In view of said certification, such procedure
would however be pointless and unduly circuitous (Ortigas & Co. Ltd. Partnership v. Judge Tirso
Velasco, G.R. No. 109645, July 25, 1994).

IV

Private respondent is not left without any legal remedy for the redress of its grievances. Under both
Public International Law and Transnational Law, a person who feels aggrieved by the acts of a foreign
sovereign can ask his own government to espouse his cause through diplomatic channels.

Private respondent can ask the Philippine government, through the Foreign Office, to espouse its
claims against the Holy See. Its first task is to persuade the Philippine government to take up with the
Holy See the validity of its claims. Of course, the Foreign Office shall first make a determination of the
impact of its espousal on the relations between the Philippine government and the Holy See (Young,
Remedies of Private Claimants Against Foreign States, Selected Readings on Protection by Law of
Private Foreign Investments 905, 919 [1964]). Once the Philippine government decides to espouse
the claim, the latter ceases to be a private cause.

According to the Permanent Court of International Justice, the forerunner of the International Court of
Justice:

By taking up the case of one of its subjects and by reporting to diplomatic action or international judicial
proceedings on his behalf, a State is in reality asserting its own rights its right to ensure, in the
person of its subjects, respect for the rules of international law (The Mavrommatis Palestine
Concessions, 1 Hudson, World Court Reports 293, 302 [1924]).

WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case No. 90-183
against petitioner is DISMISSED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 156364 September 3, 2007

JACOBUS BERNHARD HULST, petitioner,

vs.
PR BUILDERS, INC., respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
assailing the Decision1 dated October 30, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 60981.

The facts:

Jacobus Bernhard Hulst (petitioner) and his spouse Ida Johanna Hulst-Van Ijzeren (Ida), Dutch
nationals, entered into a Contract to Sell with PR Builders, Inc. (respondent), for the purchase of a
210-sq m residential unit in respondent's townhouse project in Barangay Niyugan, Laurel, Batangas.

When respondent failed to comply with its verbal promise to complete the project by June 1995, the
spouses Hulst filed before the Housing and Land Use Regulatory Board (HLURB) a complaint for
rescission of contract with interest, damages and attorney's fees, docketed as HLRB Case No. IV6-
071196-0618.

On April 22, 1997, HLURB Arbiter Ma. Perpetua Y. Aquino (HLURB Arbiter) rendered a Decision 2 in
favor of spouses Hulst, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant,

rescinding the Contract to Sell and ordering respondent to:

1) Reimburse complainant the sum of P3,187,500.00, representing the purchase price paid by
the complainants to P.R. Builders, plus interest thereon at the rate of twelve percent (12%) per
annum from the time complaint was filed;

2) Pay complainant the sum of P297,000.00 as actual damages;

3) Pay complainant the sum of P100,000.00 by way of moral damages;

4) Pay complainant the sum of P150,000.00 as exemplary damages;

5) P50,000.00 as attorney's fees and for other litigation expenses; and

6) Cost of suit.

SO ORDERED.3

Meanwhile, spouses Hulst divorced. Ida assigned her rights over the purchased property to
petitioner.4 From then on, petitioner alone pursued the case.
On August 21, 1997, the HLURB Arbiter issued a Writ of Execution addressed to the Ex-Officio Sheriff
of the Regional Trial Court of Tanauan, Batangas directing the latter to execute its judgment.5

On April 13, 1998, the Ex-Officio Sheriff proceeded to implement the Writ of Execution. However, upon
complaint of respondent with the CA on a Petition for Certiorari and Prohibition, the levy made by the
Sheriff was set aside, requiring the Sheriff to levy first on respondent's personal properties.6 Sheriff
Jaime B. Ozaeta (Sheriff) tried to implement the writ as directed but the writ was returned unsatisfied.7

On January 26, 1999, upon petitioner's motion, the HLURB Arbiter issued an Alias Writ of Execution.8

On March 23, 1999, the Sheriff levied on respondent's 15 parcels of land covered by 13 Transfer
Certificates of Title (TCT)9 in Barangay Niyugan, Laurel, Batangas.10

In a Notice of Sale dated March 27, 2000, the Sheriff set the public auction of the levied properties on
April 28, 2000 at 10:00 a.m..11

Two days before the scheduled public auction or on April 26, 2000, respondent filed an Urgent Motion
to Quash Writ of Levy with the HLURB on the ground that the Sheriff made an overlevy since the
aggregate appraised value of the levied properties at P6,500.00 per sq m is P83,616,000.00, based
on the Appraisal Report12 of Henry Hunter Bayne Co., Inc. dated December 11, 1996, which is over
and above the judgment award.13

At 10:15 a.m. of the scheduled auction date of April 28, 2000, respondent's counsel objected to the
conduct of the public auction on the ground that respondent's Urgent Motion to Quash Writ of Levy
was pending resolution. Absent any restraining order from the HLURB, the Sheriff proceeded to sell
the 15 parcels of land. Holly Properties Realty Corporation was the winning bidder for all 15 parcels
of land for the total amount of P5,450,653.33. The sum of P5,313,040.00 was turned over to the
petitioner in satisfaction of the judgment award after deducting the legal fees.14

At 4:15 p.m. of the same day, while the Sheriff was at the HLURB office to remit the legal fees relative
to the auction sale and to submit the Certificates of Sale15 for the signature of HLURB Director Belen
G. Ceniza (HLURB Director), he received the Order dated April 28, 2000 issued by the HLURB Arbiter
to suspend the proceedings on the matter.16

Four months later, or on August 28, 2000, the HLURB Arbiter and HLURB Director issued an Order
setting aside the sheriff's levy on respondent's real properties,17 reasoning as follows:

While we are not making a ruling that the fair market value of the levied properties is
PhP6,500.00 per square meter (or an aggregate value of PhP83,616,000.00) as indicated in
the Hunter Baynes Appraisal Report, we definitely cannot agree with the position of the
Complainants and the Sheriff that the aggregate value of the 12,864.00-square meter levied
properties is only around PhP6,000,000.00. The disparity between the two valuations are [sic]
so egregious that the Sheriff should have looked into the matter first before proceeding with
the execution sale of the said properties, especially when the auction sale proceedings was
seasonably objected by Respondent's counsel, Atty. Noel Mingoa. However, instead of
resolving first the objection timely posed by Atty. Mingoa, Sheriff Ozaete totally disregarded
the objection raised and, posthaste, issued the corresponding Certificate of Sale even prior to
the payment of the legal fees (pars. 7 & 8, Sheriff's Return).

While we agree with the Complainants that what is material in an execution sale proceeding
is the amount for which the properties were bidded and sold during the public auction and that,
mere inadequacy of the price is not a sufficient ground to annul the sale, the court is justified
 to intervene where the inadequacy of the price shocks the conscience (Barrozo vs. Macaraeg,
83 Phil. 378). The difference between PhP83,616,000.00 and Php6,000,000.00 is
PhP77,616,000.00 and it definitely invites our attention to look into the proceedings had
especially so when there was only one bidder, the HOLLY PROPERTIES REALTY
CORPORATION represented by Ma, Chandra Cacho (par. 7, Sheriff's Return) and the auction
sale proceedings was timely objected by Respondent's counsel (par. 6, Sheriff's Return) due
to the pendency of the Urgent Motion to Quash the Writ of Levy which was filed prior to the
execution sale.

Besides, what is at issue is not the value of the subject properties as determined during
the auction sale, but the determination of the value of the properties levied upon by the
Sheriff taking into consideration Section 9(b) of the 1997 Rules of Civil Procedure x x x.

xxxx

It is very clear from the foregoing that, even during levy, the Sheriff has to consider the fair
market value of the properties levied upon to determine whether they are sufficient to satisfy
the judgment, and any levy in excess of the judgment award is void (Buan v. Court of Appeals,
235 SCRA 424).

x x x x18 (Emphasis supplied).

The dispositive portion of the Order reads:

WHEREFORE, the levy on the subject properties made by the Ex-Officio Sheriff of the RTC of
Tanauan, Batangas, is hereby SET ASIDE and the said Sheriff is hereby directed to levy
instead Respondent's real properties that are reasonably sufficient to enforce its final and
executory judgment, this time, taking into consideration not only the value of the properties as
indicated in their respective tax declarations, but also all the other determinants at arriving at
a fair market value, namely: the cost of acquisition, the current value of like properties, its
actual or potential uses, and in the particular case of lands, their size, shape or location, and
the tax declarations thereon.

SO ORDERED.19

A motion for reconsideration being a prohibited pleading under Section 1(h), Rule IV of the 1996
HLURB Rules and Procedure, petitioner filed a Petition for Certiorari and Prohibition with the CA on
September 27, 2000.

On October 30, 2002, the CA rendered herein assailed Decision20 dismissing the petition. The CA held
that petitioner's insistence that Barrozo v. Macaraeg21 does not apply since said case stated that
"when there is a right to redeem inadequacy of price should not be material" holds no water as what
is obtaining in this case is not "mere inadequacy," but an inadequacy that shocks the senses; that Buan
v. Court of Appeals22 properly applies since the questioned levy covered 15 parcels of land posited to
have an aggregate value of P83,616,000.00 which shockingly exceeded the judgment debt of only
around P6,000,000.00.

Without filing a motion for reconsideration,23 petitioner took the present recourse on the sole ground
that:
 THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
ARBITER'S ORDER SETTING ASIDE THE LEVY MADE BY THE SHERIFF ON THE
SUBJECT PROPERTIES.24

Before resolving the question whether the CA erred in affirming the Order of the HLURB setting aside
the levy made by the sheriff, it behooves this Court to address a matter of public and national
importance which completely escaped the attention of the HLURB Arbiter and the CA: petitioner and
his wife are foreign nationals who are disqualified under the Constitution from owning real property in
their names.

Section 7 of Article XII of the 1987 Constitution provides:

Sec. 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. (Emphasis supplied).

The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of
the public domain. Private land may be transferred or conveyed only to individuals or entities "qualified
to acquire lands of the public domain." The 1987 Constitution reserved the right to participate in the
disposition, exploitation, development and utilization of lands of the public domain for Filipino
citizens25 or corporations at least 60 percent of the capital of which is owned by Filipinos.26 Aliens,
whether individuals or corporations, have been disqualified from acquiring public lands; hence, they
have also been disqualified from acquiring private lands.27

Since petitioner and his wife, being Dutch nationals, are proscribed under the Constitution from
acquiring and owning real property, it is unequivocal that the Contract to Sell entered into by petitioner
together with his wife and respondent is void. Under Article 1409 (1) and (7) of the Civil Code, all
contracts whose cause, object or purpose is contrary to law or public policy and those expressly
prohibited or declared void by law are inexistent and void from the beginning. Article 1410 of the same
Code provides that the action or defense for the declaration of the inexistence of a contract does not
prescribe. A void contract is equivalent to nothing; it produces no civil effect.28 It does not create,
modify or extinguish a juridical relation.29

Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they
are, because they are deemed in pari delicto or "in equal fault."30 In pari delicto is "a universal doctrine
which holds that no action arises, in equity or at law, from an illegal contract; no suit can be maintained
for its specific performance, or to recover the property agreed to be sold or delivered, or the money
agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative
relief of any kind will be given to one against the other."31

This rule, however, is subject to exceptions32 that permit the return of that which may have been given
under a void contract to: (a) the innocent party (Arts. 1411-1412, Civil Code);33 (b) the debtor who
pays usurious interest (Art. 1413, Civil Code);34 (c) the party repudiating the void contract before
the illegal purpose is accomplished or before damage is caused to a third person and if public
interest is subserved by allowing recovery (Art. 1414, Civil Code);35 (d) the incapacitated party if
the interest of justice so demands (Art. 1415, Civil Code);36 (e) the party for whose protection the
prohibition by law is intended if the agreement is not illegal per se but merely prohibited and if public
policy would be enhanced by permitting recovery (Art. 1416, Civil Code);37 and (f) the party for whose
benefit the law has been intended such as in price ceiling laws (Art. 1417, Civil Code)38 and labor laws
(Arts. 1418-1419, Civil Code).39
It is significant to note that the agreement executed by the parties in this case is a Contract to Sell and
not a contract of sale. A distinction between the two is material in the determination of when ownership
is deemed to have been transferred to the buyer or vendee and, ultimately, the resolution of the
question on whether the constitutional proscription has been breached.

In a contract of sale, the title passes to the buyer upon the delivery of the thing sold. The vendor has
lost and cannot recover the ownership of the property until and unless the contract of sale is itself
resolved and set aside.40 On the other hand, a contract to sell is akin to a conditional sale where the
efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening
of a future and uncertain event, so that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed.41 In other words, in a contract to sell,
the prospective seller agrees to transfer ownership of the property to the buyer upon the happening of
an event, which normally is the full payment of the purchase price. But even upon the fulfillment of the
suspensive condition, ownership does not automatically transfer to the buyer. The prospective seller
still has to convey title to the prospective buyer by executing a contract of absolute sale.42

Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the petitioner
when he filed the suit for rescission. While the intent to circumvent the constitutional proscription on
aliens owning real property was evident by virtue of the execution of the Contract to Sell, such violation
of the law did not materialize because petitioner caused the rescission of the contract before the
execution of the final deed transferring ownership.

Thus, exception (c) finds application in this case. Under Article 1414, one who repudiates the
agreement and demands his money before the illegal act has taken place is entitled to recover.
Petitioner is therefore entitled to recover what he has paid, although the basis of his claim for
rescission, which was granted by the HLURB, was not the fact that he is not allowed to acquire private
land under the Philippine Constitution. But petitioner is entitled to the recovery only of the amount
of P3,187,500.00, representing the purchase price paid to respondent. No damages may be recovered
on the basis of a void contract; being nonexistent, the agreement produces no juridical tie between
the parties involved.43 Further, petitioner is not entitled to actual as well as interests thereon,44 moral
and exemplary damages and attorney's fees.

The Court takes into consideration the fact that the HLURB Decision dated April 22, 1997 has long
been final and executory. Nothing is more settled in the law than that a decision that has acquired
finality becomes immutable and unalterable and may no longer be modified in any respect even if the
modification is meant to correct erroneous conclusions of fact or law and whether it was made by the
court that rendered it or by the highest court of the land.45The only recognized exceptions to the
general rule are the correction of clerical errors, the so-called nunc pro tunc entries which cause no
prejudice to any party, void judgments, and whenever circumstances transpire after the finality of the
decision rendering its execution unjust and inequitable.46 None of the exceptions is present in this
case. The HLURB decision cannot be considered a void judgment, as it was rendered by a tribunal
with jurisdiction over the subject matter of the complaint.47

Ineluctably, the HLURB Decision resulted in the unjust enrichment of petitioner at the expense of
respondent. Petitioner received more than what he is entitled to recover under the circumstances.

Article 22 of the Civil Code which embodies the maxim, nemo ex alterius incommode debet
lecupletari (no man ought to be made rich out of another's injury), states:

Art. 22. Every person who through an act of performance by another, or any other means,
acquires or comes into possession of something at the expense of the latter without just or
legal ground, shall return the same to him.
The above-quoted article is part of the chapter of the Civil Code on Human Relations, the provisions
of which were formulated as basic principles to be observed for the rightful relationship between
human beings and for the stability of the social order; designed to indicate certain norms that spring
from the fountain of good conscience; guides for human conduct that should run as golden threads
through society to the end that law may approach its supreme ideal which is the sway and dominance
of justice.48 There is unjust enrichment when a person unjustly retains a benefit at the loss of another,
or when a person retains money or property of another against the fundamental principles of justice,
equity and good conscience.49

A sense of justice and fairness demands that petitioner should not be allowed to benefit from his act
of entering into a contract to sell that violates the constitutional proscription.

This is not a case of equity overruling or supplanting a positive provision of law or judicial rule. Rather,
equity is exercised in this case "as the complement of legal jurisdiction [that] seeks to reach and to
complete justice where courts of law, through the inflexibility of their rules and want of power to adapt
their judgments to the special circumstances of cases, are incompetent to do so."50

The purpose of the exercise of equity jurisdiction in this case is to prevent unjust enrichment and to
ensure restitution. Equity jurisdiction aims to do complete justice in cases where a court of law is
unable to adapt its judgments to the special circumstances of a case because of the inflexibility of its
statutory or legal jurisdiction.51

The sheriff delivered to petitioner the amount of P5,313,040.00 representing the net proceeds (bidded
amount is P5,450,653.33) of the auction sale after deducting the legal fees in the amount
of P137,613.33.52 Petitioner is only entitled to P3,187,500.00, the amount of the purchase price of the
real property paid by petitioner to respondent under the Contract to Sell. Thus, the Court in the exercise
of its equity jurisdiction may validly order petitioner to return the excess amount of P2,125,540.00.

The Court shall now proceed to resolve the single issue raised in the present petition: whether the CA
seriously erred in affirming the HLURB Order setting aside the levy made by the Sheriff on the subject
properties.

Petitioner avers that the HLURB Arbiter and Director had no factual basis for pegging the fair market
value of the levied properties at P6,500.00 per sq m or P83,616,000.00; that reliance on the appraisal
report was misplaced since the appraisal was based on the value of land in neighboring developed
subdivisions and on the assumption that the residential unit appraised had already been built; that the
Sheriff need not determine the fair market value of the subject properties before levying on the same
since what is material is the amount for which the properties were bidded and sold during the public
auction; that the pendency of any motion is not a valid ground for the Sheriff to suspend the execution
proceedings and, by itself, does not have the effect of restraining the Sheriff from proceeding with the
execution.

Respondent, on the other hand, contends that while it is true that the HLURB Arbiter and Director did
not categorically state the exact value of the levied properties, said properties cannot just amount
to P6,000,000.00; that the HLURB Arbiter and Director correctly held that the value indicated in the
tax declaration is not the sole determinant of the value of the property.

The petition is impressed with merit.

If the judgment is for money, the sheriff or other authorized officer must execute the same pursuant to
the provisions of Section 9, Rule 39 of the Revised Rules of Court, viz:
 Sec. 9. Execution of judgments for money, how enforced.

(a) Immediate payment on demand. - The officer shall enforce an execution of a judgment for
money by demanding from the judgment obligor the immediate payment of the full amount
stated in the writ of execution and all lawful fees. x x x

(b) Satisfaction by levy. - If the judgment obligor cannot pay all or part of the obligation in cash,
certified bank check or other mode of payment acceptable to the judgment obligee, the officer
shall levy upon the properties of the judgment obligor of every kind and nature
whatsoever which may be disposed of for value and not otherwise exempt from
execution, giving the latter the option to immediately choose which property or part thereof
may be levied upon, sufficient to satisfy the judgment. If the judgment obligor does not exercise
the option, the officer shall first levy on the personal properties, if any, and then on the real
properties if the personal properties are insufficient to answer for the judgment.

The sheriff shall sell only a sufficient portion of the personal or real property of the
judgment obligor which has been levied upon.

When there is more property of the judgment obligor than is sufficient to satisfy the
judgment and lawful fees, he must sell only so much of the personal or real property as
is sufficient to satisfy the judgment and lawful fees.

Real property, stocks, shares, debts, credits, and other personal property, or any interest in
either real or personal property, may be levied upon in like manner and with like effect as
under a writ of attachment(Emphasis supplied).53

Thus, under Rule 39, in executing a money judgment against the property of the judgment debtor, the
sheriff shall levy on all property belonging to the judgment debtor as is amply sufficient to satisfy the
judgment and costs, and sell the same paying to the judgment creditor so much of the proceeds as
will satisfy the amount of the judgment debt and costs. Any excess in the proceeds shall be delivered
to the judgment debtor unless otherwise directed by the judgment or order of the court.54

Clearly, there are two stages in the execution of money judgments. First, the levy and then the
execution sale.

Levy has been defined as the act or acts by which an officer sets apart or appropriates a part or the
whole of a judgment debtor's property for the purpose of satisfying the command of the writ of
execution.55 The object of a levy is to take property into the custody of the law, and thereby render it
liable to the lien of the execution, and put it out of the power of the judgment debtor to divert it to any
other use or purpose.56

On the other hand, an execution sale is a sale by a sheriff or other ministerial officer under the authority
of a writ of execution of the levied property of the debtor.57

In the present case, the HLURB Arbiter and Director gravely abused their discretion in setting aside
the levy conducted by the Sheriff for the reason that the auction sale conducted by the sheriff rendered
moot and academic the motion to quash the levy. The HLURB Arbiter lost jurisdiction to act on the
motion to quash the levy by virtue of the consummation of the auction sale. Absent any order from the
HLURB suspending the auction sale, the sheriff rightfully proceeded with the auction sale. The winning
bidder had already paid the winning bid. The legal fees had already been remitted to the HLURB. The
judgment award had already been turned over to the judgment creditor. What was left to be done was
only the issuance of the corresponding certificates of sale to the winning bidder. In fact, only the
signature of the HLURB Director for that purpose was needed58 a purely ministerial act.

A purely ministerial act or duty is one which an officer or tribunal performs in a given state of facts, in
a prescribed manner, in obedience to the mandate of a legal authority, without regard for or the
exercise of his own judgment upon the propriety or impropriety of the act done. If the law imposes a
duty upon a public officer and gives him the right to decide how or when the duty shall be performed,
such duty is discretionary and not ministerial. The duty is ministerial only when the discharge of the
same requires neither the exercise of official discretion nor judgment.59 In the present case, all the
requirements of auction sale under the Rules have been fully complied with to warrant the issuance
of the corresponding certificates of sale.

And even if the Court should go into the merits of the assailed Order, the petition is meritorious on the
following grounds:

Firstly, the reliance of the HLURB Arbiter and Director, as well as the CA, on Barrozo v.
Macaraeg60 and Buan v. Court of Appeals61 is misplaced.

The HLURB and the CA misconstrued the Court's pronouncements in Barrozo. Barrozo involved a
judgment debtor who wanted to repurchase properties sold at execution beyond the one-year
redemption period. The statement of the Court in Barrozo, that "only where such inadequacy shocks
the conscience the courts will intervene," is at best a mere obiter dictum. This declaration should be
taken in the context of the other declarations of the Court in Barrozo,to wit:

Another point raised by appellant is that the price paid at the auction sale was so inadequate
as to shock the conscience of the court. Supposing that this issue is open even after the one-
year period has expired and after the properties have passed into the hands of third persons
who may have paid a price higher than the auction sale money, the first thing to consider is
that the stipulation contains no statement of the reasonable value of the properties; and
although defendant' answer avers that the assessed value was P3,960 it also avers that their
real market value was P2,000 only. Anyway, mere inadequacy of price which was the
complaint' allegation is not sufficient ground to annul the sale. It is only where such
inadequacy shocks the conscience that the courts will intervene. x x x Another
consideration is that the assessed value being P3,960 and the purchase price being in
effect P1,864 (P464 sale price plus P1,400 mortgage lien which had to be discharged) the
conscience is not shocked upon examining the prices paid in the sales in National Bank v.
Gonzales, 45 Phil., 693 and Guerrero v. Guerrero, 57 Phil., 445, sales which were left
undisturbed by this Court.

Furthermore, where there is the right to redeem as in this case inadequacy of price
should not be material because the judgment debtor may re-acquire the property or else
sell his right to redeem and thus recover any loss he claims to have suffered by reason
of the price obtained at the execution sale.

x x x x (Emphasis supplied).62

In other words, gross inadequacy of price does not nullify an execution sale. In an ordinary sale, for
reason of equity, a transaction may be invalidated on the ground of inadequacy of price, or when such
inadequacy shocks one's conscience as to justify the courts to interfere; such does not follow when
the law gives the owner the right to redeem as when a sale is made at public auction,63 upon the theory
that the lesser the price, the easier it is for the owner to effect redemption.64 When there is a right to
redeem, inadequacy of price should not be material because the judgment debtor may re-acquire the
property or else sell his right to redeem and thus recover any loss he claims to have suffered by reason
of the price obtained at the execution sale.65 Thus, respondent stood to gain rather than be harmed
by the low sale value of the auctioned properties because it possesses the right of redemption. More
importantly, the subject matter in Barrozo is the auction sale, not the levy made by the Sheriff.

The Court does not sanction the piecemeal interpretation of a decision. To get the true intent and
meaning of a decision, no specific portion thereof should be isolated and resorted to, but the decision
must be considered in its entirety.66

As regards Buan, it is cast under an entirely different factual milieu. It involved the levy on two parcels
of land owned by the judgment debtor; and the sale at public auction of one was sufficient to fully
satisfy the judgment, such that the levy and attempted execution of the second parcel of land was
declared void for being in excess of and beyond the original judgment award granted in favor of the
judgment creditor.

In the present case, the Sheriff complied with the mandate of Section 9, Rule 39 of the Revised Rules
of Court, to "sell only a sufficient portion" of the levied properties "as is sufficient to satisfy the judgment
and the lawful fees." Each of the 15 levied properties was successively bidded upon and sold, one
after the other until the judgment debt and the lawful fees were fully satisfied. Holly Properties Realty
Corporation successively bidded upon and bought each of the levied properties for the total amount
of P5,450,653.33 in full satisfaction of the judgment award and legal fees.67

Secondly, the Rules of Court do not require that the value of the property levied be exactly the same
as the judgment debt; it can be less or more than the amount of debt. This is the contingency
addressed by Section 9, Rule 39 of the Rules of Court. In the levy of property, the Sheriff does not
determine the exact valuation of the levied property. Under Section 9, Rule 39, in conjunction with
Section 7, Rule 57 of the Rules of Court, the sheriff is required to do only two specific things to effect
a levy upon a realty: (a) file with the register of deeds a copy of the order of execution, together with
the description of the levied property and notice of execution; and (b) leave with the occupant of the
property copy of the same order, description and notice.68 Records do not show that respondent
alleged non-compliance by the Sheriff of said requisites.

Thirdly, in determining what amount of property is sufficient out of which to secure satisfaction of the
execution, the Sheriff is left to his own judgment. He may exercise a reasonable discretion, and must
exercise the care which a reasonably prudent person would exercise under like conditions and
circumstances, endeavoring on the one hand to obtain sufficient property to satisfy the purposes of
the writ, and on the other hand not to make an unreasonable and unnecessary levy.69 Because it is
impossible to know the precise quantity of land or other property necessary to satisfy an execution,
the Sheriff should be allowed a reasonable margin between the value of the property levied upon and
the amount of the execution; the fact that the Sheriff levies upon a little more than is necessary to
satisfy the execution does not render his actions improper.70 Section 9, Rule 39, provides adequate
safeguards against excessive levying. The Sheriff is mandated to sell so much only of such real
property as is sufficient to satisfy the judgment and lawful fees.

In the absence of a restraining order, no error, much less abuse of discretion, can be imputed to the
Sheriff in proceeding with the auction sale despite the pending motion to quash the levy filed by the
respondents with the HLURB. It is elementary that sheriffs, as officers charged with the delicate task
of the enforcement and/or implementation of judgments, must, in the absence of a restraining order,
act with considerable dispatch so as not to unduly delay the administration of justice; otherwise, the
decisions, orders, or other processes of the courts of justice and the like would be futile.71 It is not
within the jurisdiction of the Sheriff to consider, much less resolve, respondent's objection to the
continuation of the conduct of the auction sale. The Sheriff has no authority, on his own, to suspend
the auction sale. His duty being ministerial, he has no discretion to postpone the conduct of the auction
sale.

Finally, one who attacks a levy on the ground of excessiveness carries the burden of sustaining that
contention.72 In the determination of whether a levy of execution is excessive, it is proper to take into
consideration encumbrances upon the property, as well as the fact that a forced sale usually results
in a sacrifice; that is, the price demanded for the property upon a private sale is not the standard for
determining the excessiveness of the levy.73

Here, the HLURB Arbiter and Director had no sufficient factual basis to determine the value of the
levied property. Respondent only submitted an Appraisal Report, based merely on surmises. The
Report was based on the projected value of the townhouse project after it shall have been fully
developed, that is, on the assumption that the residential units appraised had already been built. The
Appraiser in fact made this qualification in its Appraisal Report: "[t]he property subject of this appraisal
has not been constructed. The basis of the appraiser is on the existing model units." 74 Since it is
undisputed that the townhouse project did not push through, the projected value did not become a
reality. Thus, the appraisal value cannot be equated with the fair market value. The Appraisal Report
is not the best proof to accurately show the value of the levied properties as it is clearly self-serving.

Therefore, the Order dated August 28, 2000 of HLURB Arbiter Aquino and Director Ceniza in HLRB
Case No. IV6-071196-0618 which set aside the sheriff's levy on respondent's real properties, was
clearly issued with grave abuse of discretion. The CA erred in affirming said Order.

WHEREFORE, the instant petition is GRANTED. The Decision dated October 30, 2002 of the Court
of Appeals in CA-G.R. SP No. 60981 is REVERSED and SET ASIDE. The Order dated August 28,
2000 of HLURB Arbiter Ma. Perpetua Y. Aquino and Director Belen G. Ceniza in HLRB Case No. IV6-
071196-0618 is declared NULL and VOID.HLURB Arbiter Aquino and Director Ceniza are directed to
issue the corresponding certificates of sale in favor of the winning bidder, Holly Properties Realty
Corporation. Petitioner is ordered to return to respondent the amount of P2,125,540.00, without
interest, in excess of the proceeds of the auction sale delivered to petitioner. After the finality of herein
judgment, the amount of P2,125,540.00 shall earn 6% interest until fully paid.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

JACOBUS BERNHARD HULST, G.R. No. 156364

Petitioner,
Present:

YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
 NACHURA, and
REYES, JJ.

PR BUILDERS, INC., Promulgated:

Respondent. September 25, 2008

x--------------------------------------------------------
--x

RESOLUTION

AUSTRIA-MARTINEZ, J.:

This resolves petitioner's Motion for Partial Reconsideration.

On September 3, 2007, the Court rendered a Decision1 in the present case, the
dispositive portion of which reads:

WHEREFORE, the instant petition is GRANTED. The Decision dated October

30, 2002 of the Court of Appeals in CA-G.R. SP No. 60981 is REVERSED and
SET ASIDE. The Order dated August 28, 2000 of HLURB Arbiter Ma. Perpetua
Y. Aquino and Director Belen G. Ceniza in HLRB Case No. IV6-071196-0618
is declared NULL and VOID. HLURB Arbiter Aquino and Director Ceniza are
directed to issue the corresponding certificates of sale in favor of the winning
bidder, Holly Properties Realty Corporation. Petitioner is ordered to return to
respondent the amount of P2,125,540.00, without interest, in excess of the
proceeds of the auction sale delivered to petitioner. After the finality of
herein judgment, the amount of P2,125,540.00 shall earn 6% interest until fully
paid.

SO ORDERED.2 (Emphasis supplied)

Petitioner filed the present Motion for Partial Reconsideration3 insofar as he

was ordered to return to respondent the amount of P2,125,540.00 in excess of
the proceeds of the auction sale delivered to petitioner. Petitioner contends that
the Contract to Sell between petitioner and respondent involved a condominium
unit and did not violate the Constitutional proscription against ownership of land
by aliens. He argues that the contract to sell will not transfer to the buyer
ownership of the land on which the unit is situated; thus, the buyer will not get
a transfer certificate of title but merely a Condominium Certificate of Title as
evidence of ownership; a perusal of the contract will show that what the buyer
acquires is the seller's title and rights to and interests in the unit and the
common areas.

Despite receipt of this Courts Resolution dated February 6, 2008, respondent

failed to file a comment on the subject motion.

The Motion for Partial Reconsideration is impressed with merit.

The Contract to Sell between petitioner and respondent provides as follows:

Section 3. TITLE AND OWNERSHIP OF UNIT

a. Upon full payment by the BUYER of the purchase price stipulated in

Section 2 hereof, x x x, the SELLER shall deliver to the BUYER the Deed
of Absolute Sale conveying its rights, interests and title to the UNIT
and to the common areas appurtenant to such UNIT, and the
corresponding Condominium Certificate of Title in the SELLER's
name; x x x

b. The Seller shall register with the proper Registry of Deeds, the Master
Deed with the Declaration of Restrictions and other documents and shall
immediately comply with all requirements of Republic Act No. 4726 (The
Condominium Act) and Presidential Decree No. 957 (Regulating the
Sale of Subdivision Lots and Condominiums, Providing Penalties for
Violations Thereof). It is hereby understood that all title, rights and
interest so conveyed shall be subject to the provisions of the
Condominium Act, the Master Deed with Declaration of Restrictions, the
Articles of Incorporation and By-Laws and the Rules and Regulations of
the Condominium Corporation, zoning regulations and such other
restrictions on the use of the property as annotated on the title or may be
imposed by any government agency or instrumentality having jurisdiction
thereon.4 (Emphasis supplied)

Under Republic Act (R.A.) No. 4726, otherwise known as the Condominium Act,
foreign nationals can own Philippine real estate through the purchase of
condominium units or townhouses constituted under the Condominium principle
with Condominium Certificates of Title. Section 5 of R.A. No. 4726 states:

SECTION 5. Any transfer or conveyance of a unit or an apartment, office or

store or other space therein, shall include the transfer or conveyance of the
undivided interest in the common areas or, in a proper case, the membership
or shareholdings in the condominium corporation; Provided, however, That
where the common areas in the condominium project are held by the owners of
separate units as co-owners thereof, no condominium unit therein shall be
conveyed or transferred to persons other than Filipino citizens or corporations
at least 60% of the capital stock of which belong to Filipino citizens, except in
cases of hereditary succession. Where the common areas in a condominium
project are held by a corporation, no transfer or conveyance of a unit shall
be valid if the concomitant transfer of the appurtenant membership or
stockholding in the corporation will cause the alien interest in such
corporation to exceed the limits imposed by existing laws. (Emphasis
supplied)

The law provides that no condominium unit can be sold without at the same
time selling the corresponding amount of rights, shares or other interests in the
condominium management body, the Condominium Corporation; and no one
can buy shares in a Condominium Corporation without at the same time buying
a condominium unit. It expressly allows foreigners to acquire condominium units
and shares in condominium corporations up to not more than 40% of the total
and outstanding capital stock of a Filipino-owned or controlled corporation.
Under this set up, the ownership of the land is legally separated from the unit
itself. The land is owned by a Condominium Corporation and the unit owner is
simply a member in this Condominium Corporation.5 As long as 60% of the
members of this Condominium Corporation are Filipino, the remaining
members can be foreigners.

Considering that the rights and liabilities of the parties under the Contract to
Sell is covered by the Condominium Act wherein petitioner as unit owner was
simply a member of the Condominium Corporation and the land remained
owned by respondent, then the constitutional proscription against aliens owning
real property does not apply to the present case. There being no circumvention
of the constitutional prohibition, the Court's pronouncements on the invalidity of
the Contract of Sale should be set aside.

WHEREFORE, the Motion for Partial Reconsideration is GRANTED.

Accordingly, the Decision dated September 3, 2007 of the Court
is MODIFIED by deleting the order to petitioner to return to respondent the
amount of P2,125,540.00 in excess of the proceeds of the auction sale
delivered to petitioner.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-36731 January 27, 1983

VICENTE GODINEZ, ET AL., plaintiffs-appellants,

vs.
FONG PAK LUEN ET AL., defendants, TRINIDAD S. NAVATA, defendant-appellee.

Dominador Sobrevinas for plaintiffs-appellants.

Muss S. Inquerto for defendant-appellee

GUTIERREZ, JR., J.:

The plaintiffs filed this case to recover a parcel of land sold by their father, now deceased, to Fong
Pak Luen, an alien, on the ground that the sale was null and void ab initio since it violates applicable
provisions of the Constitution and the Civil Code.

The order of the Court of First Instance of Sulu dismissing the complaint was appealed to the Court of
Appeals but the latter court certified the appeal to us since only pure questions of law were raised by
the appellants.

The facts of the case were summarized by the Court of Appeals as follows:

On September 30, 1966, the plaintiffs filed a complaint in the Court of First Instance of
Sulu alleging among others that they are the heirs of Jose Godinez who was married
to Martina Alvarez Godinez sometime in 1910; that during the marriage of their parents
the said parents acquired a parcel of land lot No. 94 of Jolo townsite with an area of
3,665 square meters as evidenced by Original Certificate of Title No. 179 (D -155) in
the name of Jose Godinez; that their mother died sometime in 1938 leaving the
plaintiffs as their sole surviving heirs; that on November 27, 1941, without the
knowledge of the plaintiffs, the said Jose Godinez, for valuable consideration, sold the
aforesaid parcel of land to the defendant Fong Pak Luen, a Chinese citizen, which
transaction is contrary to law and in violation of the Civil Code because the latter being
an alien who is inhibited by law to purchase real property; that Transfer Certificate Title
No. 884 was then issued by the Register of Deeds to the said defendant, which is null
and void ab initio since the transaction constituted a non-existent contract; that on
January 11, 1963, said defendant Fong Pak Luen executed a power of attorney in
favor of his co-defendant Kwan Pun Ming, also an alien, who conveyed and sold the
above described parcel of land to co-defendant Trinidad S. Navata, who is aware of
and with full knowledge that Fong Pak Luen is a Chinese citizen as well as Kwan Pun
Ming, who under the law are prohibited and disqualified to acquire real property in this
jurisdiction; that defendant Fong Pak Luen has not acquired any title or interest in said
parcel of land as the purported contract of sale executed by Jose Godinez alone was
contrary to law and considered non- existent, so much so that the alleged attorney-in-
fact, defendant Kwan Pun Ming had not conveyed any title or interest over said
property and defendant Navata had not acquired anything from said grantor and as a
consequence Transfer Certificate of Title No. 1322, which was issued by the Register
of Deeds in favor of the latter is null and void ab initio,- that since one-half of the said
property is conjugal property inherited by the plaintiffs from their mother, Jose Godinez
could -not have legally conveyed the entire property; that notwithstanding repeated
demands on said defendant to surrender to plaintiffs the said property she refused and
still refuses to do so to the great damage and prejudice of the plaintiffs; and that they
were constrained to engage the services of counsel in the sum of P2,000.00. The 1w ph1.t

plaintiffs thus pray that they be adjudged as the owners of the parcel of land in question
and that Transfer Certificate of Title RT-90 (T-884) issued in the name of defendant
Fong Pak Luen be declared null and void ab initio; and that the power of attorney
issued in the name of Kwan Pun Ming, as well as Transfer Certificate of Title No. 'L322
issued in the name of defendant Navata be likewise declared null and void, with costs
against defendants.

On August 18, 1966, the defendant Register of Deeds filed an answer claiming that he
was not yet the register of deeds then; that it was only the ministerial duty of his office
to issue the title in favor of the defendant Navata once he was determined the
registerability of the documents presented to his office.

On October 20, 1966, the defendant Navata filed her answer with the affirmative
defenses and counterclaim alleging among others that the complaint does not state a
cause of action since it appears from the allegation that the property is registered in
the name of Jose Godinez so that as his sole property he may dispose of the same;
that the cause of action has been barred by the statute of limitations as the alleged
document of sale executed by Jose Godinez on November 27, 1941, conveyed the
property to defendant Fong Pak Luen as a result of which a title was issued to said
defendant; that under Article 1144 (1) of the Civil Code, an action based upon a written
contract must be brought within 10 years from the time the right of action accrues; that
the right of action accrued on November 27, 1941 but the complaint was filed only on
September 30, 1966, beyond the 10 year period provided for by law; that the torrens
title in the name of defendant Navata is indefeasible who acquired the property from
defendant Fong Pak Luen who had been in possession of the property since 1941 and
thereafter defendant Navata had possessed the same for the last 25 years including
the possession of Fong Pak Luen; that the complaint is intended to harass the
defendant as a civic leader and respectable member of the community as a result of
which she suffered moral damages of P100,000.00, P2,500.00 for attorney's fees and
P500.00 expenses of litigation, hence, said defendant prays that the complaint be
dismissed and that her counterclaim be granted, with costs against the plaintiffs. On
November 24, 1967, the plaintiffs filed an answer to the affirmative defenses and
counter-claim. As the defendants Fong Pak Luen and Kwan Pun Ming are residing
outside the Philippines, the trial court upon motion issued an order of April 17, 1967,
for the service of summons on said defendants by publication. No answer has been
filed by said defendants.

On December 2, 196 7, the court issued an order as follows:

Both parties having agreed to the suggestion of the Court that they
submit their supplemental pleadings to support both motion and
opposition and after submittal of the same the said motion to dismiss
which is an affirmative defense alleged in the complaint is deemed
submitted. Failure of both parties or either party to submit their
 supplemental pleadings on or about December 9, the Court will resolve
the case.

On November 29, 1968, the trial court issued an order missing the complaint without
pronouncement as to costs. (Record on Appeal, pp. 31- 37). A motion for
reconsideration of this order was filed by the plaintiffs on December 12, 196F, which
was denied by the trial court in an order of July 11, 1969, (Rec. on Appeal, pp. 38, 43,
45, 47). The plaintiffs now interpose this appeal with the following assignments of
errors:

I. The trial court erred in dismissing plaintiffs-appellants' complaint on

the ground of prescription of action, applying Art. 1144 (1) New Civil
Code on the basis of defendant Trinidad S. Navata's affirmative
defense of prescription in her answer treated as a motion to dismiss.

II. The trial court erred in denying plaintiffs-appellants' motion for

reconsideration of the order of dismissal.

III. The trial court erred in not ordering this case to be tried on the
merits."

The appellants contend that the lower court erred in dismissing the complaint on the ground that their
cause of action has prescribed. While the issue raised appears to be only the applicability of the law
governing prescription, the real question before us is whether or not the heirs of a person who sold a
parcel of land to an alien in violation of a constitutional prohibition may recover the property if it had,
in the meantime, been conveyed to a Filipino citizen qualified to own and possess it.

The question is not a novel one. Judicial precedents indicate fairly clearly how the question should be
resolved.

There can be no dispute that the sale in 1941 by Jose Godinez of his residential lot acquired from the
Bureau of Lands as part of the Jolo townsite to Fong Pak Luen, a Chinese citizen residing in Hongkong,
was violative of Section 5, Article XIII of the 1935 Constitution which provided:

Sec. 5. Save in cases of hereditary succession, no private agricultural land will be

transferred or assigned except to individuals, corporations, or associations qualified to
acquire or hold lands of the public domain in the Philippines.

The meaning of the above provision was fully discussed in Krivenko v. Register of Deeds of Manila (79
Phil. 461) which also detailed the evolution of the provision in the public land laws, Act No. 2874 and
Commonwealth Act No. 141. The Krivenko ruling that "under the Constitution aliens may not acquire
private or agricultural lands, including residential lands" is a declaration of an imperative constitutional
policy. Consequently, prescription may never be invoked to defend that which the Constitution
prohibits. However, we see no necessity from the facts of this case to pass upon the nature of the
contract of sale executed by Jose Godinez and Fong Pak Luen whether void ab initio, illegal per se or
merely pro-exhibited.** It is enough to stress that insofar as the vendee is concerned, prescription is unavailing. But neither can the
vendor or his heirs rely on an argument based on imprescriptibility because the land sold in 1941 is now in the hands of a Filipino citizen against
whom the constitutional prescription was never intended to apply. The lower court erred in treating the case as one involving simply the
application of the statute of limitations.

From the fact that prescription may not be used to defend a contract which the Constitution prohibits,
it does not necessarily follow that the appellants may be allowed to recover the property sold to an
alien. As earlier mentioned, Fong Pak Luen, the disqualified alien vendee later sold the same property
to Trinidad S. Navata, a Filipino citizen qualified to acquire real property.

In Vasquez v. Li Seng Giap and Li Seng Giap & Sons (96 Phil. 447), where the alien vendee later sold
the property to a Filipino corporation, this Court, in affirming a judgment dismissing the complaint to
rescind the sale of real property to the defendant Li Seng Giap on January 22, 1940, on the ground
that the vendee was an alien and under the Constitution incapable to own and hold title to lands, held:

In Caoile vs. Yu Chiao 49 Qff Gaz., 4321; Talento vs. Makiki 49 Off. Gaz.,
4331; Bautista vs. Uy 49 Off. Gaz., 4336; Rellosa vs. Gaw Chee 49 Off. Gaz., 4345
and Mercado vs. Go Bio, 49 Off. Gaz., 5360, the majority of this Court has ruled that
in sales of real estate to aliens incapable of holding title thereto by virtue of the
provisions of the Constitution (Section 5, Article XIII Krivenko vs. Register of Deeds, 44
Off. Gaz., 471) both the vendor and the vendee are deemed to have committed the
constitutional violation and being thus in pari delicto the courts will not afford protection
to either party. (Article 1305, old Civil Code; Article 1411, new Civil Code) From this
ruling three Justices dissented. (Mr. Justice Pablo, Mr. Justice Alex. Reyes and the
writer. See Caoile vs. Yu Chiao Talento vs. Makiki Bautista us. Uy, Rellosa vs. Gaw
Chee and Mercado vs. Go Bio). supra.

The action is not of rescission because it is not postulated upon any of the grounds
provided for in Article 1291 of the old Civil Code and because the action of rescission
involves lesion or damage and seeks to repair it. It is an action for annulment under
Chapter VI, Title II, Book 11, on nullity of contracts, based on a defect in the contract
which invalidates it independently of such lesion or damages. (Manresa,
Commentarios al Codigo Civil Espanol Vol. VIII, p. 698, 4th ed.) It is very likely that the
majority of this Court proceeded upon that theory when it applied the in pari delicto rule
referred to above.

In the United States the rule is that in a sale of real estate to an alien disqualified to
hold title thereto the vendor divests himself of the title to such real estate and has no
recourse against the vendee despite the latter's disability on account of alienage to
hold title to such real estate and the vendee may hold it against the whole world except
as against the State. It is only the State that is entitled by proceedings in the nature
of office found to have a forfeiture or escheat declared against the vendee who is
incapable of holding title to the real estate sold and conveyed to him. Abrams vs. State,
88 Pac. 327; Craig vs. Leslie et al., 4 Law, Ed. 460; 3 Wheat, 563, 589590; Cross vs.
Del Valle, 1 Wall, [U.S.] 513; 17 Law. Ed., 515; Governeur vs. Robertson, 11 Wheat,
332, 6 Law. Ed., 488.)

However, if the State does not commence such proceedings and in the meantime the
alien becomes naturalized citizen, the State is deemed to have waived its right to
escheat the real property and the title of the alien thereto becomes lawful and valid as
of the date of its conveyance or transfer to him. (Osterman vs. Baldwin, 6 Wall, 116,
18 Law. ed. 730; Manuel vs. Wulff, 152 U.S. 505, 38 Law. ed. 532; Pembroke vs.
Houston, 79, SW 470; Fioerella vs. Jones, 259 SW 782. The rule in the United States
that in a sale of real estate to an alien disqualified to hold title thereto, the vendor
divests himself of the title to such real estate and is not permitted to sue for the
annulment Of his Contract, is also the rule under the Civil Code. ... Article 1302 of the
old Civil Code provides: ... Persons sui juris cannot, however, avail themselves of the
incapacity of those with whom they contracted; ...
 xxx xxx xxx

. . . (I)f the ban on aliens from acquiring not only agricultural but, also urban lands, as
construed by this Court in the Krivenko case, is to preserve the nation's land for future
generations of Filipinos, that aim or purpose would not be thwarted but achieved by
making lawful the acquisition of real estate by aliens who became Filipino citizens by
naturalization. The title to the parcel of land of the vendee, a naturalized Filipino citizen,
being valid that of the domestic corporation to which the parcel of land has been
transferred, must also be valid, 96.67 per cent of its capital stock being owned by
Filipinos.

Herrera v. Luy Kim Guan (SCRA 406) reiterated the above ruling by declaring that where land is sold
to a Chinese citizen, who later sold it to a Filipino, the sale to the latter cannot be impugned.

The appellants cannot find solace from Philippine Banking Corporation v. Lui She (21 SCRA 52) which
relaxed the pari delicto doctrine to allow the heirs or successors-in-interest, in appropriate cases, to
recover that which their predecessors sold to aliens.

Only recently, in Sarsosa vda. de Barsobia v. Cuenco (113 SCRA 547) we had occasion to pass upon
a factual situation substantially similar to the one in the instant case. We ruled:

But the factual set-up has changed. The litigated property is now in the hands of a
naturalized Filipino. It is no longer owned by a disqualified vendee. Respondent, as a
naturalized citizen, was constitutionally qualified to own the subject property. There
would be no more public policy to be served in allowing petitioner Epifania to recover
the land as it is already in the hands of a qualified person. Applying by analogy the
ruling of this Court in Vasquez vs. Giap & Sons: (.96 Phil. 447 [1955])

... if the ban on aliens from acquiring not only agricultural but also urban lands, as
construed by this Court in the Krivenko case, is to preserve the nation's lands for future
generations of Filipinos, that aim or purpose would not be thwarted but achieved by
making lawful the acquisition of real estate by aliens who became Filipino citizens by
naturalization.

While, strictly speaking, Ong King Po, private respondent's vendor, had no rights of
ownership to transmit, it is likewise in escapable that petitioner Epifania had slept on
her rights for 26 years from 1936 to 1962. By her long inaction or inexcusable neglect,
she should be held barred from asserting her claim to the litigated property (Sotto vs.
Teves, 86 SCRA 157 [1978])

Laches has been defined as the failure or neglect, for an unreasonable and
unexplained length of time, to do that which by exercising due diligence could or should
have been done earlier; it is negligence or ommission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. (Tijam, et al. vs. Sibonghanoy, et al., No. L-21450,
April 15, 1968, 23 SCRA 29, 35).' (Cited in Sotto vs. Teves, 86 SCRA 154 [1978]).

Respondent, therefore, must be declared to be the rightful owner of the property.

In the light of the above considerations, we find the second and third assignments of errors without
merit. Respondent Navata, the titled owner of the property is declared the rightful owner.
WHEREFORE, the instant appeal is hereby denied. The orders dismissing the complaint and denying
the motion for reconsideration are affirmed.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-34672 March 30,1988

UNITED CHURCH BOARD FOR WORLD MINISTRIES, as owner of BROKENSHIRE MEMORIAL

HOSPITAL, petitioner,
vs.
HON. JUDGE ALEJANDRO E. SEBASTIAN, as Presiding Judge of the CFI of Davao del Norte,
and MELENCIO B. DELENA and MAURO GEMENTIZA as Co-Executors of the Testate Estate of
DAVID, Jacobson, respondents.

CRUZ, J.:

This case is unusual because it arose not out of greed but of generosity. The only question to be resolved is the Identity and eligibility of the
beneficiary in the light of the pertinent constitutional provisions and the evidence of record.

David Jacobson was an American citizen who had been a resident of the Philippines for more than
thirty years and up to the time of his death in 1970. 1 He left a will in which he "devised and bequeathed"
to the Brokenshire Memorial Hospital 60% of his shares of stocks in the Tagdangua Plantation Co.,
inc. which was incorporated under Philippine law in 1948. 2 This corporation was the registered owner
of a tract of land in Pantuhan Davao del Norte, with a total area of about 445 hectares acquired by
virtue of a sales patent issued to it in 11953 . 3

In Special Proceeding No. 1695 of the Court of First Instance of Davao del Norte, Judge Alejandro E.
Sebastian disallowed the above-described legacy on the ground that it was in effect an alienation of
private agricultural land in favor of a transferee which was not qualified under the Constitution of
1935. 4 The finding was that the Brokenshire Memorial Hospital was owned by the United Church
Board for World Ministries (UCBWM) ,the herein petitioner, which was a non-stock corporation
organized in the United States by virtue of a charter granted by the state legislature of Massachussets
.5

The basis of this ruling was Article XII, Sections I and 5 of the 1935 Constitution, which barred
foreigners, including Americans, from acquiring agricultural lands in this country except only by
hereditary succession. The court directed that a copy of its order be sent to the Solicitor General so
he could take the proper action, in view of the invalidity of the transfer, for the escheat of the subject
property to the State. 6

Its motion for reconsideration having been denied, the petitioner came to this Court, contending that
the above-cited constitutional provisions were not applicable because the object of the legacy was not
land but shares of stocks. Moreover, even assuming that what was really involved was a transfer of
land, the petitioner was nonetheless qualified to acquire it under the provisions of the Parity
Amendment and the Laurel-Langley Agreement.

The Solicitor General disagreed at first, insisting that the legacy was prohibited by the 1935
Constitution and did not come under any of the allowed exceptions. During the protracted exchange
of pleadings among the parties, however, certain events transpired to considerably change the original
situation and, consequently, also the position of government.

It now appears from the voluminous documents submitted in this case that at the time the will was
executed in 1966, the land on which the Brokenshire Memorial Hospital was situated was already
registered in the name of the Mindanao District Conference, an affiliate of the United Church of Christ
in the Philippines (PUCC).7 It was this non-stock corporation, organized in 1949 under Philippine law
with a 100% Filipino membership, that owned and was operating the Hospital at the time of Jacobson's
death. 8 Later, the Brokenshire Memorial Hospital was itself incorporated as a charitable institution,
with Filipinos constituting the majority of its membership, 9 and on December 16,1970, became the
successor-in-interest of the UCCP to the devised parcel of land.10

In proof of these circumstances, the new counsel for Brokenshire presented, among many other
documents, the articles of incorporation of the UCCP and the Hospital and their corresponding
certificates of registration issued by the Securities and Exchange Commission, the licenses issued by
the Board of Medical Sciences for the operation of the Hospital to the UCCP from 1968 to 1972 and
to the Brokenshire Memorial Hospital, Inc. from 1973 to 1974, and the certificate of title over the subject
land in the name of the "Mindanao District Conference, commonly known as the Brokenshire Memorial
Hospital."11

These facts were not brought earlier to the attention of the probate court by the former counsel of the
Hospital, Atty. Juan V. Faune for reasons that do not appear in the record. It was for such omission
(the new counsel would call it "misrepresentation") that Atty. Faune was replaced by Atty. Rodolfo D.
de la Cruz, who disavowed his predecessor's representations. At any rate, the above-stated
documents have now made it clear that the United Church for Christ in the Philippines and not the
United Church Board for World Ministries was the owner of the Hospital at the time of the execution
of the win in 1966 and of the testator's death in 1970. It is also not disputed that such ownership
passed to the Brokenshire Memorial Hospital itself upon its incorporation in 1970 when it thus became
the proper party-in-interest to claim the property directly devised by Jacobson to it.

That the United Church Board for World Ministries no longer claims the subject property (if indeed it
really did claim it before), is manifest in its sur rejoinder to the rejoinder of the movant Brokenshire
Memorial Hospital, Inc., which had asked to be substituted for the former as petitioner in this case.
The body of this pleading is reproduced in full as follows:

PETITIONER, by the Undersigned Counsel, to this Honorable Court most respectfully

states:

l. That upon its organization in 1948 the United Church of Christ in the Philippines
succeeded to the religious work, service and mission of the United Church Board for
World Ministries and other religion boards in the United States of America;

2. It was the intention, following the independence of the Philippines from the U.S.A.
the constitution of an independent and autonomous United Church of Christ in the
Philippines, to eventually transfer all properties, schools, and hospitals established by
said mission boards, to the United Church of Christ in the Philippines;
3. That the United Church Board for World Ministries had, in fact, transferred the
ownership of most of its properties in the Philippines to the United Church of Christ in
the Philippines, its religious organizations and/or instrumentalities;

4. That when the Brokenshire Memorial Hospital was destroyed by fire in 1964,
reconstruction efforts and responsibilities was assumed by the United Church of Christ
in the Philippines, it was the intention of the United Church Board for World Ministries
to relinquish the rights, interests and ownership to the Brokenshire Memorial Hospital,
now Brokenshire Memorial Hospital, Inc. and considered it so relinquished, with
continuing funding assistance from the United Church Board for World Ministries and
other mission boards overseas;

5. The United Church Board for World Ministries continues to this date, with its fraternal
and cooperative relationship with the United Church of Christ in the Philippines;

6. That as has already been stated, the United Church Board for World Ministries does
not intend to take, possess, or enjoy the legacy of David Jacobson and has manifested
and mandated that all properties that may be derived therefrom shall be used entirely
and exclusively for the work of the Brokenshire Memorial Hospital and its School of
Nursing in accordance with the wishes of David Jacobson;

7. Considering the clear intention of David Jacobson to support the life and work of
Brokenshire Memorial Hospital and its School of Nursing, and further considering that
what was bequeathed are shares of stocks in a corporation,, there exists no legal and
moral impediment for the legacy to be delivered to the Brokenshire Memorial Hospital,
Inc., an instrumentality of the United Church of Christ in the Philippines, that has
succeeded to the ownership of and the humanitarian, and charitable service of said
Hospital.

Respectfully submitted.

September 3, 1983, Davao City, Philippines.

(Sgd.)
JUAN
V.
FAUNE

Couns
el for
Petition
er

United
Church
Board
for

World
Ministri
es
 185-B
Anda
Street,
Davao
City

WITH OUR CONCURRENCE:

UNITED CHURCH BOARD FOR

WORLD MINISTRIES

by:

(Sgd.) BYRON W. CLARK

Treasurer

NO OBJECTION TO THE DELIVERY

OF THE LEGACY TO BROKENSHIRE

MEMORIAL HOSPITAL, INC.

(Sgd.) MELENCIO B. DELENA (Sgd.) DARIO C. RAMA

Executor-Respondent Counsel for the Estate

and Respondents

Melencio Delena and

the late Mauro

Gementiza

(deceased-Executor)

Security Bank Bldg.

Magsaysay Ave.,
Davao City

(Sgd.) DEAN CLAIR (Sgd.) ROSALINO D. ISIDRO

Executor Counsel for the Estate

and Executor Dean

Clair
 205 Aldavinco Bldg.,

C.M. Recto Ave.,

Davao City 12

Parenthetically, it should be observed, in fairness to Judge Sebastian, that he was unaware of these
circumstances when he declared the legacy invalid to enforce the nationalistic provisions of Article XIII
of the 1935 Constitution. For his vigilance in the protection of the national patrimony, he should be, as
he is hereby, commenced.

Even on the assumption that the UCBWN was really the owner of the Hospital at the time of the
effectivity of the will and that the devise was for that reason unenforceable, the defect in the will should
be deemed rectified by the subsequent transfer of the property to the Brokenshire Memorial Hospital,
Inc. Our consistent ruling on this matter is that if land is invalidly transferred to an alien who
subsequently becomes a citizen or transfers it to a ctitizen, the flaw in the original transaction is
considered cured and the title of the transferee is rendered valid.

Thus, in Sarsosa vda. de Barsobia v. Cuenco, 13 where a Filipino citizen sold her land to an alien who
later sold it to a Filipino, we held that the invalidity of the initial transfer to the alien was corrected by
the subsequent transfer of the property to a citizen. A similar ruling was made in Godinez v. Fong Pak
Luen,14 involving a similar set of facts, where we also cited Vasquez v. Li Seng Giap, 15 and Herrera v.
Luy King Guan.16 In Yap v. Maravillas,17we validated the sale of agricultural land to an alien who, after
the purchase, was naturalized as a Filipino and so became qualified to acquire it. The facts were
slightly different in De Castro v. Teng, 18 where, upon the death of an alien who had purchased a
residential lot, his heirs entered into an extrajudicial partition of his estate and transferred the land to
one of his sons who was a naturalized Filipino. We also sustained the sale.

This action has been pending for quite some time now because of the confusion regarding the status
of the Brokenshire Memorial Hospital as the ultimate beneficiary of the challenged legacy. The curious
thing is that this case was mired in factual and legal complications caused by needless
misunderstanding among the parties which, it now appears, were never in any substantial
disagreement over the ownership of the Hospital. Their common concern for its welfare, in line with
the charitable spirit and purposes of the testator, should have avoided all this tedious and acrimonious
dispute.

WHEREFORE, the Brokenshire Memorial Hospital, Inc. is hereby substituted for the United Church
Board for World Ministries as petitioner in this case and DECLARED to be qualified to accept the
legacy of the late David Jacobson. The petition as thus modified is GRANTED. The order of the
respondent judge dated December 9, 1971, and his Resolution dated December 9, 1971, are SET
ASIDE. This decision is immediately executory. No costs.

SO ORDERED.

EN BANC
[G.R. No. 122156. February 3, 1997]

MANILA PRINCE HOTEL, petitioner, vs. GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA
HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT
CORPORATE COUNSEL, respondents.
DECISION
BELLOSILLO, J.:

The Filipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of rights, privileges, and
concessions covering the national economy and patrimony, the State shall give preference to qualified
Filipinos,[1] is invoked by petitioner in its bid to acquire 51% of the shares of the Manila Hotel
Corporation (MHC) which owns the historic Manila Hotel. Opposing, respondents maintain that the
provision is not self-executing but requires an implementing legislation for its enforcement. Corollarily,
they ask whether the 51% shares form part of the national economy and patrimony covered by the
protective mantle of the Constitution.

The controversy arose when respondent Government Service Insurance System (GSIS), pursuant to
the privatization program of the Philippine Government under Proclamation No. 50 dated 8 December
1986, decided to sell through public bidding 30% to 51% of the issued and outstanding shares of
respondent MHC. The winning bidder, or the eventual strategic partner, is to provide management
expertise and/or an international marketing/reservation system, and financial support to strengthen
the profitability and performance of the Manila Hotel.[2] In a close bidding held on 18 September 1995
only two (2) bidders participated: petitioner Manila Prince Hotel Corporation, a Filipino corporation,
which offered to buy 51% of the MHC or 15,300,000 shares at P41.58 per share, and Renong Berhad,
a Malaysian firm, with ITT-Sheraton as its hotel operator, which bid for the same number of shares at
P44.00 per share, or P2.42 more than the bid of petitioner.

Pertinent provisions of the bidding rules prepared by respondent GSIS state -

I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC -

1. The Highest Bidder must comply with the conditions set forth below by October 23, 1995 (reset to
November 3, 1995) or the Highest Bidder will lose the right to purchase the Block of Shares and GSIS
will instead offer the Block of Shares to the other Qualified Bidders:

a. The Highest Bidder must negotiate and execute with the GSIS/MHC the Management Contract,
International Marketing/Reservation System Contract or other type of contract specified by the Highest
Bidder in its strategic plan for the Manila Hotel x x x x

b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with GSIS x x x x

K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER -

The Highest Bidder will be declared the Winning Bidder/Strategic Partner after the following conditions
are met:

a. Execution of the necessary contracts with GSIS/MHC not later than October 23, 1995 (reset to
November 3, 1995); and

b. Requisite approvals from the GSIS/MHC and COP (Committee on Privatization)/ OGCC (Office of
the Government Corporate Counsel) are obtained.[3]

Pending the declaration of Renong Berhard as the winning bidder/strategic partner and the execution
of the necessary contracts, petitioner in a letter to respondent GSIS dated 28 September 1995
matched the bid price of P44.00 per share tendered by Renong Berhad.[4] In a subsequent letter dated
10 October 1995 petitioner sent a managers check issued by Philtrust Bank for Thirty-three Million
Pesos (P33,000,000.00) as Bid Security to match the bid of the Malaysian Group, Messrs. Renong
Berhad x x x x[5] which respondent GSIS refused to accept.

On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded the tender of the
matching bid and that the sale of 51% of the MHC may be hastened by respondent GSIS and
consummated with Renong Berhad, petitioner came to this Court on prohibition and mandamus. On
18 October 1995 the Court issued a temporary restraining order enjoining respondents from perfecting
and consummating the sale to the Malaysian firm.

On 10 September 1996 the instant case was accepted by the Court En Banc after it was referred to it
by the First Division. The case was then set for oral arguments with former Chief Justice Enrique M.
Fernando and Fr. Joaquin G. Bernas, S.J., as amici curiae.

In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and submits that
the Manila Hotel has been identified with the Filipino nation and has practically become a historical
monument which reflects the vibrancy of Philippine heritage and culture. It is a proud legacy of an
earlier generation of Filipinos who believed in the nobility and sacredness of independence and its
power and capacity to release the full potential of the Filipino people. To all intents and purposes, it
has become a part of the national patrimony.[6] Petitioner also argues that since 51% of the shares of
the MHC carries with it the ownership of the business of the hotel which is owned by respondent GSIS,
a government-owned and controlled corporation, the hotel business of respondent GSIS being a part
of the tourism industry is unquestionably a part of the national economy. Thus, any transaction
involving 51% of the shares of stock of the MHC is clearly covered by the term national economy, to
which Sec. 10, second par., Art. XII, 1987 Constitution, applies.[7]

It is also the thesis of petitioner that since Manila Hotel is part of the national patrimony and its business
also unquestionably part of the national economy petitioner should be preferred after it has matched
the bid offer of the Malaysian firm. For the bidding rules mandate that if for any reason, the Highest
Bidder cannot be awarded the Block of Shares, GSIS may offer this to the other Qualified Bidders that
have validly submitted bids provided that these Qualified Bidders are willing to match the highest bid
in terms of price per share.[8]

Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of the 1987 Constitution
is merely a statement of principle and policy since it is not a self-executing provision and requires
implementing legislation(s) x x x x Thus, for the said provision to operate, there must be existing laws
to lay down conditions under which business may be done.[9]

Second, granting that this provision is self-executing, Manila Hotel does not fall under the term national
patrimony which only refers to 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 all
marine wealth in its territorial sea, and exclusive marine zone as cited in the first and second
paragraphs of Sec. 2, Art. XII, 1987 Constitution. According to respondents, while petitioner speaks of
the guests who have slept in the hotel and the events that have transpired therein which make the
hotel historic, these alone do not make the hotel fall under the patrimony of the nation. What is more,
the mandate of the Constitution is addressed to the State, not to respondent GSIS which possesses
a personality of its own separate and distinct from the Philippines as a State.

Third, granting that the Manila Hotel forms part of the national patrimony, the constitutional provision
invoked is still inapplicable since what is being sold is only 51% of the outstanding shares of the
corporation, not the hotel building nor the land upon which the building stands. Certainly, 51% of the
equity of the MHC cannot be considered part of the national patrimony. Moreover, if the disposition of
the shares of the MHC is really contrary to the Constitution, petitioner should have questioned it right
from the beginning and not after it had lost in the bidding.

Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules which provides that if
for any reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to the
other Qualified Bidders that have validly submitted bids provided that these Qualified Bidders are
willing to match the highest bid in terms of price per share, is misplaced. Respondents postulate that
the privilege of submitting a matching bid has not yet arisen since it only takes place if for any reason,
the Highest Bidder cannot be awarded the Block of Shares. Thus the submission by petitioner of a
matching bid is premature since Renong Berhad could still very well be awarded the block of shares
and the condition giving rise to the exercise of the privilege to submit a matching bid had not yet taken
place.

Finally, the prayer for prohibition grounded on grave abuse of discretion should fail since respondent
GSIS did not exercise its discretion in a capricious, whimsical manner, and if ever it did abuse its
discretion it was not so patent and gross as to amount to an evasion of a positive duty or a virtual
refusal to perform a duty enjoined by law. Similarly, the petition for mandamus should fail as petitioner
has no clear legal right to what it demands and respondents do not have an imperative duty to perform
the act required of them by petitioner.
We now resolve. A constitution is a system of fundamental laws for the governance and administration
of a nation. It is supreme, imperious, absolute and unalterable except by the authority from which it
emanates. It has been defined as the fundamental and paramount law of the nation.[10] It prescribes
the permanent framework of a system of government, assigns to the different departments their
respective powers and duties, and establishes certain fixed principles on which government is
founded. The fundamental conception in other words is that it is a supreme law to which all other laws
must conform and in accordance with which all private rights must be determined and all public
authority administered.[11] Under the doctrine of constitutional supremacy, if a law or contract violates
any norm of the constitution that law or contract whether promulgated by the legislative or by the
executive branch or entered into by private persons for private purposes is null and void and without
any force and effect. Thus, since the Constitution is the fundamental, paramount and supreme law of
the nation, it is deemed written in every statute and contract.

Admittedly, some constitutions are merely declarations of policies and principles. Their provisions
command the legislature to enact laws and carry out the purposes of the framers who merely establish
an outline of government providing for the different departments of the governmental machinery and
securing certain fundamental and inalienable rights of citizens.[12] A provision which lays down a
general principle, such as those found in Art. II of the 1987 Constitution, is usually not self-executing.
But a provision which is complete in itself and becomes operative without the aid of supplementary or
enabling legislation, or that which supplies sufficient rule by means of which the right it grants may be
enjoyed or protected, is self-executing. Thus a constitutional provision is self-executing if the nature
and extent of the right conferred and the liability imposed are fixed by the constitution itself, so that
they can be determined by an examination and construction of its terms, and there is no language
indicating that the subject is referred to the legislature for action.[13]

As against constitutions of the past, modern constitutions have been generally drafted upon a different
principle and have often become in effect extensive codes of laws intended to operate directly upon
the people in a manner similar to that of statutory enactments, and the function of constitutional
conventions has evolved into one more like that of a legislative body. Hence, unless it is expressly
provided that a legislative act is necessary to enforce a constitutional mandate, the presumption now
is that all provisions of the constitution are self-executing. If the constitutional provisions are treated
as requiring legislation instead of self-executing, the legislature would have the power to ignore and
practically nullify the mandate of the fundamental law.[14] This can be cataclysmic. That is why the
prevailing view is, as it has always been, that -

x x x x in case of doubt, the Constitution should be considered self-executing rather than non-self-
executing x x x x Unless the contrary is clearly intended, the provisions of the Constitution should be
considered self-executing, as a contrary rule would give the legislature discretion to determine when,
or whether, they shall be effective. These provisions would be subordinated to the will of the lawmaking
body, which could make them entirely meaningless by simply refusing to pass the needed
implementing statute.[15]

Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is clearly not self-
executing, as they quote from discussions on the floor of the 1986 Constitutional Commission -
MR. RODRIGO. Madam President, I am asking this question as the Chairman of the Committee on
Style. If the wording of PREFERENCE is given to QUALIFIED FILIPINOS, can it be understood as a
preference to qualified Filipinos vis-a-vis Filipinos who are not qualified. So, why do we not make it
clear? To qualified Filipinos as against aliens?

THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it to remove the word
QUALIFIED?

MR. RODRIGO. No, no, but say definitely TO QUALIFIED FILIPINOS as against whom? As against
aliens or over aliens ?

MR. NOLLEDO. Madam President, I think that is understood. We use the word QUALIFIED because
the existing laws or prospective laws will always lay down conditions under which business may be
done. For example, qualifications on capital, qualifications on the setting up of other financial
structures, et cetera (underscoring supplied by respondents).

MR. RODRIGO. It is just a matter of style.

MR. NOLLEDO. Yes.[16]

Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not to make it appear
that it is non-self-executing but simply for purposes of style. But, certainly, the legislature is not
precluded from enacting further laws to enforce the constitutional provision so long as the
contemplated statute squares with the Constitution. Minor details may be left to the legislature without
impairing the self-executing nature of constitutional provisions.

In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the
exercise of powers directly granted by the constitution, further the operation of such a provision,
prescribe a practice to be used for its enforcement, provide a convenient remedy for the protection of
the rights secured or the determination thereof, or place reasonable safeguards around the exercise
of the right. The mere fact that legislation may supplement and add to or prescribe a penalty for the
violation of a self-executing constitutional provision does not render such a provision ineffective in the
absence of such legislation. The omission from a constitution of any express provision for a remedy
for enforcing a right or liability is not necessarily an indication that it was not intended to be self-
executing. The rule is that a self-executing provision of the constitution does not necessarily exhaust
legislative power on the subject, but any legislation must be in harmony with the constitution, further
the exercise of constitutional right and make it more available.[17] Subsequent legislation however
does not necessarily mean that the subject constitutional provision is not, by itself, fully enforceable.
Respondents also argue that the non-self-executing nature of Sec. 10, second par., of Art. XII is
implied from the tenor of the first and third paragraphs of the same section which undoubtedly are not
self-executing.[18] The argument is flawed. If the first and third paragraphs are not self-executing
because Congress is still to enact measures to encourage the formation and operation of enterprises
fully owned by Filipinos, as in the first paragraph, and the State still needs legislation to regulate and
exercise authority over foreign investments within its national jurisdiction, as in the third paragraph,
then a fortiori, by the same logic, the second paragraph can only be self-executing as it does not by
its language require any legislation in order to give preference to qualified Filipinos in the grant of
rights, privileges and concessions covering the national economy and patrimony. A constitutional
provision may be self-executing in one part and non-self-executing in another.[19]

Even the cases cited by respondents holding that certain constitutional provisions are merely
statements of principles and policies, which are basically not self-executing and only placed in the
Constitution as moral incentives to legislation, not as judicially enforceable rights - are simply not in
point. Basco v. Philippine Amusements and Gaming Corporation[20] speaks of constitutional
provisions on personal dignity,[21] the sanctity of family life,[22] the vital role of the youth in nation-
building,[23] the promotion of social justice,[24] and the values of education.[25] Tolentino v. Secretary
of Finance[26] refers to constitutional provisions on social justice and human rights[27] and on
education.[28] Lastly, Kilosbayan, Inc. v. Morato[29] cites provisions on the promotion of general
welfare,[30] the sanctity of family life,[31] the vital role of the youth in nation-building[32] and the
promotion of total human liberation and development.[33] A reading of these provisions indeed clearly
shows that they are not judicially enforceable constitutional rights but merely guidelines for legislation.
The very terms of the provisions manifest that they are only principles upon which legislations must
be based. Res ipsa loquitur.

On the other hand, Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive
command which is complete in itself and which needs no further guidelines or implementing laws or
rules for its enforcement. From its very words the provision does not require any legislation to put it in
operation. It is per se judicially enforceable. When our Constitution mandates that [i]n the grant of
rights, privileges, and concessions covering national economy and patrimony, the State shall give
preference to qualified Filipinos, it means just that - qualified Filipinos shall be preferred. And when
our Constitution declares that a right exists in certain specified circumstances an action may be
maintained to enforce such right notwithstanding the absence of any legislation on the subject;
consequently, if there is no statute especially enacted to enforce such constitutional right, such right
enforces itself by its own inherent potency and puissance, and from which all legislations must take
their bearings. Where there is a right there is a remedy. Ubi jus ibi remedium.

As regards our national patrimony, a member of the 1986 Constitutional Commission[34] explains -

The patrimony of the Nation that should be conserved and developed refers not only to our rich natural
resources but also to the cultural heritage of our race. It also refers to our intelligence in arts, sciences
and letters. Therefore, we should develop not only our lands, forests, mines and other natural
resources but also the mental ability or faculty of our people.
We agree. In its plain and ordinary meaning, the term patrimony pertains to heritage.[35] When the
Constitution speaks of national patrimony, it refers not only to the natural resources of the Philippines,
as the Constitution could have very well used the term natural resources, but also to the cultural
heritage of the Filipinos.

Manila Hotel has become a landmark - a living testimonial of Philippine heritage. While it was
restrictively an American hotel when it first opened in 1912, it immediately evolved to be truly Filipino.
Formerly a concourse for the elite, it has since then become the venue of various significant events
which have shaped Philippine history. It was called the Cultural Center of the 1930s. It was the site of
the festivities during the inauguration of the Philippine Commonwealth. Dubbed as the Official Guest
House of the Philippine Government it plays host to dignitaries and official visitors who are accorded
the traditional Philippine hospitality.[36]

The history of the hotel has been chronicled in the book The Manila Hotel: The Heart and Memory of
a City.[37] During World War II the hotel was converted by the Japanese Military Administration into a
military headquarters. When the American forces returned to recapture Manila the hotel was selected
by the Japanese together with Intramuros as the two (2) places for their final stand. Thereafter, in the
1950s and 1960s, the hotel became the center of political activities, playing host to almost every
political convention. In 1970 the hotel reopened after a renovation and reaped numerous international
recognitions, an acknowledgment of the Filipino talent and ingenuity. In 1986 the hotel was the site of
a failed coup d etat where an aspirant for vice-president was proclaimed President of the Philippine
Republic.

For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and failures,
loves and frustrations of the Filipinos; its existence is impressed with public interest; its own historicity
associated with our struggle for sovereignty, independence and nationhood. Verily, Manila Hotel has
become part of our national economy and patrimony. For sure, 51% of the equity of the MHC comes
within the purview of the constitutional shelter for it comprises the majority and controlling stock, so
that anyone who acquires or owns the 51% will have actual control and management of the hotel. In
this instance, 51% of the MHC cannot be disassociated from the hotel and the land on which the hotel
edifice stands. Consequently, we cannot sustain respondents claim that the Filipino First Policy
provision is not applicable since what is being sold is only 51% of the outstanding shares of the
corporation, not the Hotel building nor the land upon which the building stands.[38]

The argument is pure sophistry. The term qualified Filipinos as used in our Constitution also includes
corporations at least 60% of which is owned by Filipinos. This is very clear from the proceedings of
the 1986 Constitutional Commission -

THE PRESIDENT. Commissioner Davide is recognized.

MR. DAVIDE. I would like to introduce an amendment to the Nolledo amendment. And the amendment
would consist in substituting the words QUALIFIED FILIPINOS with the following: CITIZENS OF THE
PHILIPPINES OR CORPORATIONS OR ASSOCIATIONS WHOSE CAPITAL OR CONTROLLING
STOCK IS WHOLLY OWNED BY SUCH CITIZENS.

xxxx

MR. MONSOD. Madam President, apparently the proponent is agreeable, but we have to raise a
question. Suppose it is a corporation that is 80-percent Filipino, do we not give it preference?

MR. DAVIDE. The Nolledo amendment would refer to an individual Filipino. What about a corporation
wholly owned by Filipino citizens?

MR. MONSOD. At least 60 percent, Madam President.

MR. DAVIDE. Is that the intention?

MR. MONSOD. Yes, because, in fact, we would be limiting it if we say that the preference should only
be 100-percent Filipino.

MR. DAVIDE. I want to get that meaning clear because QUALIFIED FILIPINOS may refer only to
individuals and not to juridical personalities or entities.

MR. MONSOD. We agree, Madam President.[39]

xxxx

MR. RODRIGO. Before we vote, may I request that the amendment be read again.

MR. NOLLEDO. The amendment will read: IN THE GRANT OF RIGHTS, PRIVILEGES AND
CONCESSIONS COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL
GIVE PREFERENCE TO QUALIFIED FILIPINOS. And the word Filipinos here, as intended by the
proponents, will include not only individual Filipinos but also Filipino-controlled entities or entities fully-
controlled by Filipinos.[40]
The phrase preference to qualified Filipinos was explained thus -

MR. FOZ. Madam President, I would like to request Commissioner Nolledo to please restate his
amendment so that I can ask a question.

MR. NOLLEDO. IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS COVERING THE
NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO
QUALIFIED FILIPINOS.

MR. FOZ. In connection with that amendment, if a foreign enterprise is qualified and a Filipino
enterprise is also qualified, will the Filipino enterprise still be given a preference?

MR. NOLLEDO. Obviously.

MR. FOZ. If the foreigner is more qualified in some aspects than the Filipino enterprise, will the Filipino
still be preferred?

MR. NOLLEDO. The answer is yes.

MR. FOZ. Thank you.[41]

Expounding further on the Filipino First Policy provision Commissioner Nolledo continues

MR. NOLLEDO. Yes, Madam President. Instead of MUST, it will be SHALL - THE STATE SHALL
GIVE PREFERENCE TO QUALIFIED FILIPINOS. This embodies the so-called Filipino First policy.
That means that Filipinos should be given preference in the grant of concessions, privileges and rights
covering the national patrimony.[42]

The exchange of views in the sessions of the Constitutional Commission regarding the subject
provision was still further clarified by Commissioner Nolledo[43] -

Paragraph 2 of Section 10 explicitly mandates the Pro-Filipino bias in all economic concerns. It is
better known as the FILIPINO FIRST Policy x x x x This provision was never found in previous
Constitutions x x x x
The term qualified Filipinos simply means that preference shall be given to those citizens who can
make a viable contribution to the common good, because of credible competence and efficiency. It
certainly does NOT mandate the pampering and preferential treatment to Filipino citizens or
organizations that are incompetent or inefficient, since such an indiscriminate preference would be
counterproductive and inimical to the common good.

In the granting of economic rights, privileges, and concessions, when a choice has to be made
between a qualified foreigner and a qualified Filipino, the latter shall be chosen over the former.

Lastly, the word qualified is also determinable. Petitioner was so considered by respondent GSIS and
selected as one of the qualified bidders. It was pre-qualified by respondent GSIS in accordance with
its own guidelines so that the sole inference here is that petitioner has been found to be possessed of
proven management expertise in the hotel industry, or it has significant equity ownership in another
hotel company, or it has an overall management and marketing proficiency to successfully operate the
Manila Hotel.[44]

The penchant to try to whittle away the mandate of the Constitution by arguing that the subject
provision is not self-executory and requires implementing legislation is quite disturbing. The attempt
to violate a clear constitutional provision - by the government itself - is only too distressing. To adopt
such a line of reasoning is to renounce the duty to ensure faithfulness to the Constitution. For, even
some of the provisions of the Constitution which evidently need implementing legislation have juridical
life of their own and can be the source of a judicial remedy. We cannot simply afford the government
a defense that arises out of the failure to enact further enabling, implementing or guiding legislation.
In fine, the discourse of Fr. Joaquin G. Bernas, S.J., on constitutional government is apt -

The executive department has a constitutional duty to implement laws, including the Constitution, even
before Congress acts - provided that there are discoverable legal standards for executive action. When
the executive acts, it must be guided by its own understanding of the constitutional command and of
applicable laws. The responsibility for reading and understanding the Constitution and the laws is not
the sole prerogative of Congress. If it were, the executive would have to ask Congress, or perhaps the
Court, for an interpretation every time the executive is confronted by a constitutional command. That
is not how constitutional government operates.[45]

Respondents further argue that the constitutional provision is addressed to the State, not to
respondent GSIS which by itself possesses a separate and distinct personality. This argument again
is at best specious. It is undisputed that the sale of 51% of the MHC could only be carried out with the
prior approval of the State acting through respondent Committee on Privatization. As correctly pointed
out by Fr. Joaquin G. Bernas, S.J., this fact alone makes the sale of the assets of respondents GSIS
and MHC a state action. In constitutional jurisprudence, the acts of persons distinct from the
government are considered state action covered by the Constitution (1) when the activity it engages
in is a public function; (2) when the government is so significantly involved with the private actor as to
make the government responsible for his action; and, (3) when the government has approved or
authorized the action. It is evident that the act of respondent GSIS in selling 51% of its share in
respondent MHC comes under the second and third categories of state action. Without doubt therefore
the transaction, although entered into by respondent GSIS, is in fact a transaction of the State and
therefore subject to the constitutional command.[46]

When the Constitution addresses the State it refers not only to the people but also to the government
as elements of the State. After all, government is composed of three (3) divisions of power - legislative,
executive and judicial. Accordingly, a constitutional mandate directed to the State is correspondingly
directed to the three (3) branches of government. It is undeniable that in this case the subject
constitutional injunction is addressed among others to the Executive Department and respondent
GSIS, a government instrumentality deriving its authority from the State.

It should be stressed that while the Malaysian firm offered the higher bid it is not yet the winning bidder.
The bidding rules expressly provide that the highest bidder shall only be declared the winning bidder
after it has negotiated and executed the necessary contracts, and secured the requisite approvals.
Since the Filipino First Policy provision of the Constitution bestows preference on qualified Filipinos
the mere tending of the highest bid is not an assurance that the highest bidder will be declared the
winning bidder. Resultantly, respondents are not bound to make the award yet, nor are they under
obligation to enter into one with the highest bidder. For in choosing the awardee respondents are
mandated to abide by the dictates of the 1987 Constitution the provisions of which are presumed to
be known to all the bidders and other interested parties.

Adhering to the doctrine of constitutional supremacy, the subject constitutional provision is, as it should
be, impliedly written in the bidding rules issued by respondent GSIS, lest the bidding rules be nullified
for being violative of the Constitution. It is a basic principle in constitutional law that all laws and
contracts must conform with the fundamental law of the land. Those which violate the Constitution lose
their reason for being.

Paragraph V. J. 1 of the bidding rules provides that [i]f for any reason the Highest Bidder cannot be
awarded the Block of Shares, GSIS may offer this to other Qualified Bidders that have validly submitted
bids provided that these Qualified Bidders are willing to match the highest bid in terms of price per
share.[47] Certainly, the constitutional mandate itself is reason enough not to award the block of
shares immediately to the foreign bidder notwithstanding its submission of a higher, or even the
highest, bid. In fact, we cannot conceive of a stronger reason than the constitutional injunction itself.

In the instant case, where a foreign firm submits the highest bid in a public bidding concerning the
grant of rights, privileges and concessions covering the national economy and patrimony, thereby
exceeding the bid of a Filipino, there is no question that the Filipino will have to be allowed to match
the bid of the foreign entity. And if the Filipino matches the bid of a foreign firm the award should go
to the Filipino. It must be so if we are to give life and meaning to the Filipino First Policy provision of
the 1987 Constitution. For, while this may neither be expressly stated nor contemplated in the bidding
rules, the constitutional fiat is omnipresent to be simply disregarded. To ignore it would be to sanction
a perilous skirting of the basic law.
This Court does not discount the apprehension that this policy may discourage foreign investors. But
the Constitution and laws of the Philippines are understood to be always open to public scrutiny. These
are given factors which investors must consider when venturing into business in a foreign jurisdiction.
Any person therefore desiring to do business in the Philippines or with any of its agencies or
instrumentalities is presumed to know his rights and obligations under the Constitution and the laws
of the forum.

The argument of respondents that petitioner is now estopped from questioning the sale to Renong
Berhad since petitioner was well aware from the beginning that a foreigner could participate in the
bidding is meritless. Undoubtedly, Filipinos and foreigners alike were invited to the bidding. But
foreigners may be awarded the sale only if no Filipino qualifies, or if the qualified Filipino fails to match
the highest bid tendered by the foreign entity. In the case before us, while petitioner was already
preferred at the inception of the bidding because of the constitutional mandate, petitioner had not yet
matched the bid offered by Renong Berhad. Thus it did not have the right or personality then to compel
respondent GSIS to accept its earlier bid. Rightly, only after it had matched the bid of the foreign firm
and the apparent disregard by respondent GSIS of petitioners matching bid did the latter have a cause
of action.

Besides, there is no time frame for invoking the constitutional safeguard unless perhaps the award
has been finally made. To insist on selling the Manila Hotel to foreigners when there is a Filipino group
willing to match the bid of the foreign group is to insist that government be treated as any other ordinary
market player, and bound by its mistakes or gross errors of judgment, regardless of the consequences
to the Filipino people. The miscomprehension of the Constitution is regrettable. Thus we would rather
remedy the indiscretion while there is still an opportunity to do so than let the government develop the
habit of forgetting that the Constitution lays down the basic conditions and parameters for its actions.

Since petitioner has already matched the bid price tendered by Renong Berhad pursuant to the bidding
rules, respondent GSIS is left with no alternative but to award to petitioner the block of shares of MHC
and to execute the necessary agreements and documents to effect the sale in accordance not only
with the bidding guidelines and procedures but with the Constitution as well. The refusal of respondent
GSIS to execute the corresponding documents with petitioner as provided in the bidding rules after
the latter has matched the bid of the Malaysian firm clearly constitutes grave abuse of discretion.

The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987 Constitution
not merely to be used as a guideline for future legislation but primarily to be enforced; so must it be
enforced. This Court as the ultimate guardian of the Constitution will never shun, under any reasonable
circumstance, the duty of upholding the majesty of the Constitution which it is tasked to defend. It is
worth emphasizing that it is not the intention of this Court to impede and diminish, much less
undermine, the influx of foreign investments. Far from it, the Court encourages and welcomes more
business opportunities but avowedly sanctions the preference for Filipinos whenever such preference
is ordained by the Constitution. The position of the Court on this matter could have not been more
appropriately articulated by Chief Justice Narvasa -
As scrupulously as it has tried to observe that it is not its function to substitute its judgment for that of
the legislature or the executive about the wisdom and feasibility of legislation economic in nature, the
Supreme Court has not been spared criticism for decisions perceived as obstacles to economic
progress and development x x x x in connection with a temporary injunction issued by the Courts First
Division against the sale of the Manila Hotel to a Malaysian Firm and its partner, certain statements
were published in a major daily to the effect that that injunction again demonstrates that the Philippine
legal system can be a major obstacle to doing business here.

Let it be stated for the record once again that while it is no business of the Court to intervene in
contracts of the kind referred to or set itself up as the judge of whether they are viable or attainable, it
is its bounden duty to make sure that they do not violate the Constitution or the laws, or are not adopted
or implemented with grave abuse of discretion amounting to lack or excess of jurisdiction. It will never
shirk that duty, no matter how buffeted by winds of unfair and ill-informed criticism.[48]

Privatization of a business asset for purposes of enhancing its business viability and preventing further
losses, regardless of the character of the asset, should not take precedence over non-material values.
A commercial, nay even a budgetary, objective should not be pursued at the expense of national pride
and dignity. For the Constitution enshrines higher and nobler non-material values. Indeed, the Court
will always defer to the Constitution in the proper governance of a free society; after all, there is nothing
so sacrosanct in any economic policy as to draw itself beyond judicial review when the Constitution is
involved.[49]

Nationalism is inherent in the very concept of the Philippines being a democratic and republican state,
with sovereignty residing in the Filipino people and from whom all government authority emanates. In
nationalism, the happiness and welfare of the people must be the goal. The nation-state can have no
higher purpose. Any interpretation of any constitutional provision must adhere to such basic concept.
Protection of foreign investments, while laudible, is merely a policy. It cannot override the demands of
nationalism.[50]

The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be sold to the
highest bidder solely for the sake of privatization. We are not talking about an ordinary piece of property
in a commercial district. We are talking about a historic relic that has hosted many of the most important
events in the short history of the Philippines as a nation. We are talking about a hotel where heads of
states would prefer to be housed as a strong manifestation of their desire to cloak the dignity of the
highest state function to their official visits to the Philippines. Thus the Manila Hotel has played and
continues to play a significant role as an authentic repository of twentieth century Philippine history
and culture. In this sense, it has become truly a reflection of the Filipino soul - a place with a history of
grandeur; a most historical setting that has played a part in the shaping of a country.[51]

This Court cannot extract rhyme nor reason from the determined efforts of respondents to sell the
historical landmark - this Grand Old Dame of hotels in Asia - to a total stranger. For, indeed, the
conveyance of this epic exponent of the Filipino psyche to alien hands cannot be less than
mephistophelian for it is, in whatever manner viewed, a veritable alienation of a nations soul for some
pieces of foreign silver. And so we ask: What advantage, which cannot be equally drawn from a
qualified Filipino, can be gained by the Filipinos if Manila Hotel - and all that it stands for - is sold to a
non-Filipino? How much of national pride will vanish if the nations cultural heritage is entrusted to a
foreign entity? On the other hand, how much dignity will be preserved and realized if the national
patrimony is safekept in the hands of a qualified, zealous and well-meaning Filipino? This is the plain
and simple meaning of the Filipino First Policy provision of the Philippine Constitution. And this Court,
heeding the clarion call of the Constitution and accepting the duty of being the elderly watchman of
the nation, will continue to respect and protect the sanctity of the Constitution.

WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL

CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT
CORPORATE COUNSEL are directed to CEASE and DESIST from selling 51% of the shares of the
Manila Hotel Corporation to RENONG BERHAD, and to ACCEPT the matching bid of petitioner
MANILA PRINCE HOTEL CORPORATION to purchase the subject 51% of the shares of the Manila
Hotel Corporation at P44.00 per share and thereafter to execute the necessary agreements and
documents to effect the sale, to issue the necessary clearances and to do such other acts and deeds
as may be necessary for the purpose.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 78742 July 14, 1989

ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC., JUANITO D. GOMEZ,

GERARDO B. ALARCIO, FELIPE A. GUICO, JR., BERNARDO M. ALMONTE, CANUTO RAMIR B.
CABRITO, ISIDRO T. GUICO, FELISA I. LLAMIDO, FAUSTO J. SALVA, REYNALDO G. ESTRADA,
FELISA C. BAUTISTA, ESMENIA J. CABE, TEODORO B. MADRIAGA, AUREA J. PRESTOSA,
EMERENCIANA J. ISLA, FELICISIMA C. ARRESTO, CONSUELO M. MORALES, BENJAMIN R.
SEGISMUNDO, CIRILA A. JOSE & NAPOLEON S. FERRER, petitioners,
vs.
HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.

G.R. No. 79310 July 14, 1989

ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS, DENNIS JEREZA,

HERMINIGILDO GUSTILO, PAULINO D. TOLENTINO and PLANTERS' COMMITTEE, INC.,
Victorias Mill District, Victorias, Negros Occidental, petitioners,
vs.
JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN REFORM
COUNCIL, respondents.

G.R. No. 79744 July 14, 1989

INOCENTES PABICO, petitioner,
vs.
HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF AGRARIAN REFORM, HON.
JOKER ARROYO, EXECUTIVE SECRETARY OF THE OFFICE OF THE PRESIDENT, and Messrs.
SALVADOR TALENTO, JAIME ABOGADO, CONRADO AVANCENA and ROBERTO
TAAY, respondents.

G.R. No. 79777 July 14, 1989

NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners,

vs.
HON. PHILIP ELLA JUICO, as Secretary of Agrarian Reform, and LAND BANK OF THE
PHILIPPINES, respondents.

CRUZ, J.:

In ancient mythology, Antaeus was a terrible giant who blocked and challenged Hercules for his life
on his way to Mycenae after performing his eleventh labor. The two wrestled mightily and Hercules
flung his adversary to the ground thinking him dead, but Antaeus rose even stronger to resume their
struggle. This happened several times to Hercules' increasing amazement. Finally, as they continued
grappling, it dawned on Hercules that Antaeus was the son of Gaea and could never die as long as
any part of his body was touching his Mother Earth. Thus forewarned, Hercules then held Antaeus up
in the air, beyond the reach of the sustaining soil, and crushed him to death.

Mother Earth. The sustaining soil. The giver of life, without whose invigorating touch even the powerful
Antaeus weakened and died.

The cases before us are not as fanciful as the foregoing tale. But they also tell of the elemental forces
of life and death, of men and women who, like Antaeus need the sustaining strength of the precious
earth to stay alive.

"Land for the Landless" is a slogan that underscores the acute imbalance in the distribution of this
precious resource among our people. But it is more than a slogan. Through the brooding centuries, it
has become a battle-cry dramatizing the increasingly urgent demand of the dispossessed among us
for a plot of earth as their place in the sun.

Recognizing this need, the Constitution in 1935 mandated the policy of social justice to "insure the
well-being and economic security of all the people," 1 especially the less privileged. In 1973, the new
Constitution affirmed this goal adding specifically that "the State shall regulate the acquisition,
ownership, use, enjoyment and disposition of private property and equitably diffuse property
ownership and profits." 2 Significantly, there was also the specific injunction to "formulate and
implement an agrarian reform program aimed at emancipating the tenant from the bondage of the
soil." 3

The Constitution of 1987 was not to be outdone. Besides echoing these sentiments, it also adopted
one whole and separate Article XIII on Social Justice and Human Rights, containing grandiose but
undoubtedly sincere provisions for the uplift of the common people. These include a call in the
following words for the adoption by the State of an agrarian reform program:
 SEC. 4. The State shall, by law, undertake an agrarian reform program founded on the
right of farmers and regular farmworkers, who are landless, to own directly or
collectively the lands they till or, in the case of other farmworkers, to receive a just
share of the fruits thereof. To this end, the State shall encourage and undertake the
just distribution of all agricultural lands, subject to such priorities and reasonable
retention limits as the Congress may prescribe, taking into account ecological,
developmental, or equity considerations and subject to the payment of just
compensation. In determining retention limits, the State shall respect the right of small
landowners. The State shall further provide incentives for voluntary land-sharing.

Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land Reform Code, had already
been enacted by the Congress of the Philippines on August 8, 1963, in line with the above-stated
principles. This was substantially superseded almost a decade later by P.D. No. 27, which was
promulgated on October 21, 1972, along with martial law, to provide for the compulsory acquisition of
private lands for distribution among tenant-farmers and to specify maximum retention limits for
landowners.

The people power revolution of 1986 did not change and indeed even energized the thrust for agrarian
reform. Thus, on July 17, 1987, President Corazon C. Aquino issued E.O. No. 228, declaring full land
ownership in favor of the beneficiaries of P.D. No. 27 and providing for the valuation of still unvalued
lands covered by the decree as well as the manner of their payment. This was followed on July 22,
1987 by Presidential Proclamation No. 131, instituting a comprehensive agrarian reform program
(CARP), and E.O. No. 229, providing the mechanics for its implementation.

Subsequently, with its formal organization, the revived Congress of the Philippines took over legislative
power from the President and started its own deliberations, including extensive public hearings, on the
improvement of the interests of farmers. The result, after almost a year of spirited debate, was the
enactment of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988,
which President Aquino signed on June 10, 1988. This law, while considerably changing the earlier
mentioned enactments, nevertheless gives them suppletory effect insofar as they are not inconsistent
with its provisions. 4

The above-captioned cases have been consolidated because they involve common legal questions,
including serious challenges to the constitutionality of the several measures mentioned above. They
will be the subject of one common discussion and resolution, The different antecedents of each case
will require separate treatment, however, and will first be explained hereunder.

G.R. No. 79777

Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos. 228 and 229, and R.A.
No. 6657.

The subjects of this petition are a 9-hectare riceland worked by four tenants and owned by petitioner
Nicolas Manaay and his wife and a 5-hectare riceland worked by four tenants and owned by petitioner
Augustin Hermano, Jr. The tenants were declared full owners of these lands by E.O. No. 228 as
qualified farmers under P.D. No. 27.

The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on grounds inter alia of
separation of powers, due process, equal protection and the constitutional limitation that no private
property shall be taken for public use without just compensation.
They contend that President Aquino usurped legislative power when she promulgated E.O. No. 228.
The said measure is invalid also for violation of Article XIII, Section 4, of the Constitution, for failure to
provide for retention limits for small landowners. Moreover, it does not conform to Article VI, Section
25(4) and the other requisites of a valid appropriation.

In connection with the determination of just compensation, the petitioners argue that the same may be
made only by a court of justice and not by the President of the Philippines. They invoke the recent
cases of EPZA v. Dulay 5 andManotok v. National Food Authority. 6 Moreover, the just compensation
contemplated by the Bill of Rights is payable in money or in cash and not in the form of bonds or other
things of value.

In considering the rentals as advance payment on the land, the executive order also deprives the
petitioners of their property rights as protected by due process. The equal protection clause is also
violated because the order places the burden of solving the agrarian problems on the owners only of
agricultural lands. No similar obligation is imposed on the owners of other properties.

The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27 to be the owners of
the lands occupied by them, E.O. No. 228 ignored judicial prerogatives and so violated due process.
Worse, the measure would not solve the agrarian problem because even the small farmers are
deprived of their lands and the retention rights guaranteed by the Constitution.

In his Comment, the Solicitor General stresses that P.D. No. 27 has already been upheld in the earlier
cases ofChavez v. Zobel, 7 Gonzales v. Estrella, 8 and Association of Rice and Corn Producers of the
Philippines, Inc. v. The National Land Reform Council. 9 The determination of just compensation by
the executive authorities conformably to the formula prescribed under the questioned order is at best
initial or preliminary only. It does not foreclose judicial intervention whenever sought or warranted. At
any rate, the challenge to the order is premature because no valuation of their property has as yet
been made by the Department of Agrarian Reform. The petitioners are also not proper parties because
the lands owned by them do not exceed the maximum retention limit of 7 hectares.

Replying, the petitioners insist they are proper parties because P.D. No. 27 does not provide for
retention limits on tenanted lands and that in any event their petition is a class suit brought in behalf
of landowners with landholdings below 24 hectares. They maintain that the determination of just
compensation by the administrative authorities is a final ascertainment. As for the cases invoked by
the public respondent, the constitutionality of P.D. No. 27 was merely assumed in Chavez, while what
was decided in Gonzales was the validity of the imposition of martial law.

In the amended petition dated November 22, 1588, it is contended that P.D. No. 27, E.O. Nos. 228
and 229 (except Sections 20 and 21) have been impliedly repealed by R.A. No. 6657. Nevertheless,
this statute should itself also be declared unconstitutional because it suffers from substantially the
same infirmities as the earlier measures.

A petition for intervention was filed with leave of court on June 1, 1988 by Vicente Cruz, owner of a 1.
83- hectare land, who complained that the DAR was insisting on the implementation of P.D. No. 27
and E.O. No. 228 despite a compromise agreement he had reached with his tenant on the payment
of rentals. In a subsequent motion dated April 10, 1989, he adopted the allegations in the basic
amended petition that the above- mentioned enactments have been impliedly repealed by R.A. No.
6657.

G.R. No. 79310

The petitioners herein are landowners and sugar planters in the Victorias Mill District, Victorias, Negros
Occidental. Co-petitioner Planters' Committee, Inc. is an organization composed of 1,400 planter-
members. This petition seeks to prohibit the implementation of Proc. No. 131 and E.O. No. 229.

The petitioners claim that the power to provide for a Comprehensive Agrarian Reform Program as
decreed by the Constitution belongs to Congress and not the President. Although they agree that the
President could exercise legislative power until the Congress was convened, she could do so only to
enact emergency measures during the transition period. At that, even assuming that the interim
legislative power of the President was properly exercised, Proc. No. 131 and E.O. No. 229 would still
have to be annulled for violating the constitutional provisions on just compensation, due process, and
equal protection.

They also argue that under Section 2 of Proc. No. 131 which provides:

Agrarian Reform Fund.-There is hereby created a special fund, to be known as the Agrarian Reform
Fund, an initial amount of FIFTY BILLION PESOS (P50,000,000,000.00) to cover the estimated cost
of the Comprehensive Agrarian Reform Program from 1987 to 1992 which shall be sourced from the
receipts of the sale of the assets of the Asset Privatization Trust and Receipts of sale of ill-gotten
wealth received through the Presidential Commission on Good Government and such other sources
as government may deem appropriate. The amounts collected and accruing to this special fund shall
be considered automatically appropriated for the purpose authorized in this Proclamation the amount
appropriated is in futuro, not in esse. The money needed to cover the cost of the contemplated
expropriation has yet to be raised and cannot be appropriated at this time.

Furthermore, they contend that taking must be simultaneous with payment of just compensation as it
is traditionally understood, i.e., with money and in full, but no such payment is contemplated in Section
5 of the E.O. No. 229. On the contrary, Section 6, thereof provides that the Land Bank of the Philippines
"shall compensate the landowner in an amount to be established by the government, which shall be
based on the owner's declaration of current fair market value as provided in Section 4 hereof, but
subject to certain controls to be defined and promulgated by the Presidential Agrarian Reform
Council." This compensation may not be paid fully in money but in any of several modes that may
consist of part cash and part bond, with interest, maturing periodically, or direct payment in cash or
bond as may be mutually agreed upon by the beneficiary and the landowner or as may be prescribed
or approved by the PARC.

The petitioners also argue that in the issuance of the two measures, no effort was made to make a
careful study of the sugar planters' situation. There is no tenancy problem in the sugar areas that can
justify the application of the CARP to them. To the extent that the sugar planters have been lumped in
the same legislation with other farmers, although they are a separate group with problems exclusively
their own, their right to equal protection has been violated.

A motion for intervention was filed on August 27,1987 by the National Federation of Sugarcane
Planters (NASP) which claims a membership of at least 20,000 individual sugar planters all over the
country. On September 10, 1987, another motion for intervention was filed, this time by Manuel
Barcelona, et al., representing coconut and riceland owners. Both motions were granted by the Court.

NASP alleges that President Aquino had no authority to fund the Agrarian Reform Program and that,
in any event, the appropriation is invalid because of uncertainty in the amount appropriated. Section 2
of Proc. No. 131 and Sections 20 and 21 of E.O. No. 229 provide for an initial appropriation of fifty
billion pesos and thus specifies the minimum rather than the maximum authorized amount. This is not
allowed. Furthermore, the stated initial amount has not been certified to by the National Treasurer as
actually available.
Two additional arguments are made by Barcelona, to wit, the failure to establish by clear and
convincing evidence the necessity for the exercise of the powers of eminent domain, and the violation
of the fundamental right to own property.

The petitioners also decry the penalty for non-registration of the lands, which is the expropriation of
the said land for an amount equal to the government assessor's valuation of the land for tax purposes.
On the other hand, if the landowner declares his own valuation he is unjustly required to immediately
pay the corresponding taxes on the land, in violation of the uniformity rule.

In his consolidated Comment, the Solicitor General first invokes the presumption of constitutionality in
favor of Proc. No. 131 and E.O. No. 229. He also justifies the necessity for the expropriation as
explained in the "whereas" clauses of the Proclamation and submits that, contrary to the petitioner's
contention, a pilot project to determine the feasibility of CARP and a general survey on the people's
opinion thereon are not indispensable prerequisites to its promulgation.

On the alleged violation of the equal protection clause, the sugar planters have failed to show that they
belong to a different class and should be differently treated. The Comment also suggests the possibility
of Congress first distributing public agricultural lands and scheduling the expropriation of private
agricultural lands later. From this viewpoint, the petition for prohibition would be premature.

The public respondent also points out that the constitutional prohibition is against the payment of public
money without the corresponding appropriation. There is no rule that only money already in existence
can be the subject of an appropriation law. Finally, the earmarking of fifty billion pesos as Agrarian
Reform Fund, although denominated as an initial amount, is actually the maximum sum appropriated.
The word "initial" simply means that additional amounts may be appropriated later when necessary.

On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his own behalf, assailing
the constitutionality of E.O. No. 229. In addition to the arguments already raised, Serrano contends
that the measure is unconstitutional because:

(1) Only public lands should be included in the CARP;

(2) E.O. No. 229 embraces more than one subject which is not expressed in the title;

(3) The power of the President to legislate was terminated on July 2, 1987; and

(4) The appropriation of a P50 billion special fund from the National Treasury did not
originate from the House of Representatives.

G.R. No. 79744

The petitioner alleges that the then Secretary of Department of Agrarian Reform, in violation of due
process and the requirement for just compensation, placed his landholding under the coverage of
Operation Land Transfer. Certificates of Land Transfer were subsequently issued to the private
respondents, who then refused payment of lease rentals to him.

On September 3, 1986, the petitioner protested the erroneous inclusion of his small landholding under
Operation Land transfer and asked for the recall and cancellation of the Certificates of Land Transfer
in the name of the private respondents. He claims that on December 24, 1986, his petition was denied
without hearing. On February 17, 1987, he filed a motion for reconsideration, which had not been
acted upon when E.O. Nos. 228 and 229 were issued. These orders rendered his motion moot and
academic because they directly effected the transfer of his land to the private respondents.

The petitioner now argues that:

(1) E.O. Nos. 228 and 229 were invalidly issued by the President of the Philippines.

(2) The said executive orders are violative of the constitutional provision that no private
property shall be taken without due process or just compensation.

(3) The petitioner is denied the right of maximum retention provided for under the 1987
Constitution.

The petitioner contends that the issuance of E.0. Nos. 228 and 229 shortly before Congress convened
is anomalous and arbitrary, besides violating the doctrine of separation of powers. The legislative
power granted to the President under the Transitory Provisions refers only to emergency measures
that may be promulgated in the proper exercise of the police power.

The petitioner also invokes his rights not to be deprived of his property without due process of law and
to the retention of his small parcels of riceholding as guaranteed under Article XIII, Section 4 of the
Constitution. He likewise argues that, besides denying him just compensation for his land, the
provisions of E.O. No. 228 declaring that:

Lease rentals paid to the landowner by the farmer-beneficiary after October 21, 1972
shall be considered as advance payment for the land.

is an unconstitutional taking of a vested property right. It is also his contention that the inclusion of
even small landowners in the program along with other landowners with lands consisting of seven
hectares or more is undemocratic.

In his Comment, the Solicitor General submits that the petition is premature because the motion for
reconsideration filed with the Minister of Agrarian Reform is still unresolved. As for the validity of the
issuance of E.O. Nos. 228 and 229, he argues that they were enacted pursuant to Section 6, Article
XVIII of the Transitory Provisions of the 1987 Constitution which reads:

The incumbent president shall continue to exercise legislative powers until the first Congress is
convened.

On the issue of just compensation, his position is that when P.D. No. 27 was promulgated on October
21. 1972, the tenant-farmer of agricultural land was deemed the owner of the land he was tilling. The
leasehold rentals paid after that date should therefore be considered amortization payments.

In his Reply to the public respondents, the petitioner maintains that the motion he filed was resolved
on December 14, 1987. An appeal to the Office of the President would be useless with the
promulgation of E.O. Nos. 228 and 229, which in effect sanctioned the validity of the public
respondent's acts.

G.R. No. 78742

The petitioners in this case invoke the right of retention granted by P.D. No. 27 to owners of rice and
corn lands not exceeding seven hectares as long as they are cultivating or intend to cultivate the same.
Their respective lands do not exceed the statutory limit but are occupied by tenants who are actually
cultivating such lands.

According to P.D. No. 316, which was promulgated in implementation of P.D. No. 27:

No tenant-farmer in agricultural lands primarily devoted to rice and corn shall be

ejected or removed from his farmholding until such time as the respective rights of the
tenant- farmers and the landowner shall have been determined in accordance with the
rules and regulations implementing P.D. No. 27.

The petitioners claim they cannot eject their tenants and so are unable to enjoy their right of retention
because the Department of Agrarian Reform has so far not issued the implementing rules required
under the above-quoted decree. They therefore ask the Court for a writ of mandamus to compel the
respondent to issue the said rules.

In his Comment, the public respondent argues that P.D. No. 27 has been amended by LOI 474
removing any right of retention from persons who own other agricultural lands of more than 7 hectares
in aggregate area or lands used for residential, commercial, industrial or other purposes from which
they derive adequate income for their family. And even assuming that the petitioners do not fall under
its terms, the regulations implementing P.D. No. 27 have already been issued, to wit, the Memorandum
dated July 10, 1975 (Interim Guidelines on Retention by Small Landowners, with an accompanying
Retention Guide Table), Memorandum Circular No. 11 dated April 21, 1978, (Implementation
Guidelines of LOI No. 474), Memorandum Circular No. 18-81 dated December 29,1981 (Clarificatory
Guidelines on Coverage of P.D. No. 27 and Retention by Small Landowners), and DAR Administrative
Order No. 1, series of 1985 (Providing for a Cut-off Date for Landowners to Apply for Retention and/or
to Protest the Coverage of their Landholdings under Operation Land Transfer pursuant to P.D. No.
27). For failure to file the corresponding applications for retention under these measures, the
petitioners are now barred from invoking this right.

The public respondent also stresses that the petitioners have prematurely initiated this case
notwithstanding the pendency of their appeal to the President of the Philippines. Moreover, the
issuance of the implementing rules, assuming this has not yet been done, involves the exercise of
discretion which cannot be controlled through the writ of mandamus. This is especially true if this
function is entrusted, as in this case, to a separate department of the government.

In their Reply, the petitioners insist that the above-cited measures are not applicable to them because
they do not own more than seven hectares of agricultural land. Moreover, assuming arguendo that the
rules were intended to cover them also, the said measures are nevertheless not in force because they
have not been published as required by law and the ruling of this Court in Tanada v. Tuvera.10 As for
LOI 474, the same is ineffective for the additional reason that a mere letter of instruction could not
have repealed the presidential decree.

Although holding neither purse nor sword and so regarded as the weakest of the three departments
of the government, the judiciary is nonetheless vested with the power to annul the acts of either the
legislative or the executive or of both when not conformable to the fundamental law. This is the reason
for what some quarters call the doctrine of judicial supremacy. Even so, this power is not lightly
assumed or readily exercised. The doctrine of separation of powers imposes upon the courts a proper
restraint, born of the nature of their functions and of their respect for the other departments, in striking
down the acts of the legislative and the executive as unconstitutional. The policy, indeed, is a blend of
courtesy and caution. To doubt is to sustain. The theory is that before the act was done or the law was
enacted, earnest studies were made by Congress or the President, or both, to insure that the
Constitution would not be breached.

In addition, the Constitution itself lays down stringent conditions for a declaration of unconstitutionality,
requiring therefor the concurrence of a majority of the members of the Supreme Court who took part
in the deliberations and voted on the issue during their session en banc.11 And as established by judge
made doctrine, the Court will assume jurisdiction over a constitutional question only if it is shown that
the essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be
an actual case or controversy involving a conflict of legal rights susceptible of judicial determination,
the constitutional question must have been opportunely raised by the proper party, and the resolution
of the question is unavoidably necessary to the decision of the case itself. 12

With particular regard to the requirement of proper party as applied in the cases before us, we hold
that the same is satisfied by the petitioners and intervenors because each of them has sustained or is
in danger of sustaining an immediate injury as a result of the acts or measures complained of. 13 And
even if, strictly speaking, they are not covered by the definition, it is still within the wide discretion of
the Court to waive the requirement and so remove the impediment to its addressing and resolving the
serious constitutional questions raised.

In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were allowed to question the
constitutionality of several executive orders issued by President Quirino although they were invoking
only an indirect and general interest shared in common with the public. The Court dismissed the
objection that they were not proper parties and ruled that "the transcendental importance to the public
of these cases demands that they be settled promptly and definitely, brushing aside, if we must,
technicalities of procedure." We have since then applied this exception in many other cases. 15

The other above-mentioned requisites have also been met in the present petitions.

In must be stressed that despite the inhibitions pressing upon the Court when confronted with
constitutional issues like the ones now before it, it will not hesitate to declare a law or act invalid when
it is convinced that this must be done. In arriving at this conclusion, its only criterion will be the
Constitution as God and its conscience give it the light to probe its meaning and discover its purpose.
Personal motives and political considerations are irrelevancies that cannot influence its decision.
Blandishment is as ineffectual as intimidation.

For all the awesome power of the Congress and the Executive, the Court will not hesitate to "make
the hammer fall, and heavily," to use Justice Laurel's pithy language, where the acts of these
departments, or of any public official, betray the people's will as expressed in the Constitution.

It need only be added, to borrow again the words of Justice Laurel, that

... when the judiciary mediates to allocate constitutional boundaries, it does not assert
any superiority over the other departments; it does not in reality nullify or invalidate an
act of the Legislature, but only asserts the solemn and sacred obligation assigned to it
by the Constitution to determine conflicting claims of authority under the Constitution
and to establish for the parties in an actual controversy the rights which that instrument
secures and guarantees to them. This is in truth all that is involved in what is termed
"judicial supremacy" which properly is the power of judicial review under the
Constitution. 16

The cases before us categorically raise constitutional questions that this Court must categorically
resolve. And so we shall.
II

We proceed first to the examination of the preliminary issues before resolving the more serious
challenges to the constitutionality of the several measures involved in these petitions.

The promulgation of P.D. No. 27 by President Marcos in the exercise of his powers under martial law
has already been sustained in Gonzales v. Estrella and we find no reason to modify or reverse it on
that issue. As for the power of President Aquino to promulgate Proc. No. 131 and E.O. Nos. 228 and
229, the same was authorized under Section 6 of the Transitory Provisions of the 1987 Constitution,
quoted above.

The said measures were issued by President Aquino before July 27, 1987, when the Congress of the
Philippines was formally convened and took over legislative power from her. They are not "midnight"
enactments intended to pre-empt the legislature because E.O. No. 228 was issued on July 17, 1987,
and the other measures, i.e., Proc. No. 131 and E.O. No. 229, were both issued on July 22, 1987.
Neither is it correct to say that these measures ceased to be valid when she lost her legislative power
for, like any statute, they continue to be in force unless modified or repealed by subsequent law or
declared invalid by the courts. A statute does not ipso facto become inoperative simply because of the
dissolution of the legislature that enacted it. By the same token, President Aquino's loss of legislative
power did not have the effect of invalidating all the measures enacted by her when and as long as she
possessed it.

Significantly, the Congress she is alleged to have undercut has not rejected but in fact substantially
affirmed the challenged measures and has specifically provided that they shall be suppletory to R.A.
No. 6657 whenever not inconsistent with its provisions. 17 Indeed, some portions of the said measures,
like the creation of the P50 billion fund in Section 2 of Proc. No. 131, and Sections 20 and 21 of E.O.
No. 229, have been incorporated by reference in the CARP Law. 18

That fund, as earlier noted, is itself being questioned on the ground that it does not conform to the
requirements of a valid appropriation as specified in the Constitution. Clearly, however, Proc. No. 131
is not an appropriation measure even if it does provide for the creation of said fund, for that is not its
principal purpose. An appropriation law is one the primary and specific purpose of which is to authorize
the release of public funds from the treasury. 19 The creation of the fund is only incidental to the main
objective of the proclamation, which is agrarian reform.

It should follow that the specific constitutional provisions invoked, to wit, Section 24 and Section 25(4)
of Article VI, are not applicable. With particular reference to Section 24, this obviously could not have
been complied with for the simple reason that the House of Representatives, which now has the
exclusive power to initiate appropriation measures, had not yet been convened when the proclamation
was issued. The legislative power was then solely vested in the President of the Philippines, who
embodied, as it were, both houses of Congress.

The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229 should be invalidated
because they do not provide for retention limits as required by Article XIII, Section 4 of the Constitution
is no longer tenable. R.A. No. 6657 does provide for such limits now in Section 6 of the law, which in
fact is one of its most controversial provisions. This section declares:

Retention Limits. Except as otherwise provided in this Act, no person may own or
retain, directly or indirectly, any public or private agricultural land, the size of which
shall vary according to factors governing a viable family-sized farm, such as
commodity produced, terrain, infrastructure, and soil fertility as determined by the
Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall
 retention by the landowner exceed five (5) hectares. Three (3) hectares may be
awarded to each child of the landowner, subject to the following qualifications: (1) that
he is at least fifteen (15) years of age; and (2) that he is actually tilling the land or
directly managing the farm; Provided, That landowners whose lands have been
covered by Presidential Decree No. 27 shall be allowed to keep the area originally
retained by them thereunder, further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at the time of the approval of
this Act shall retain the same areas as long as they continue to cultivate said
homestead.

The argument that E.O. No. 229 violates the constitutional requirement that a bill shall have only one
subject, to be expressed in its title, deserves only short attention. It is settled that the title of the bill
does not have to be a catalogue of its contents and will suffice if the matters embodied in the text are
relevant to each other and may be inferred from the title. 20

The Court wryly observes that during the past dictatorship, every presidential issuance, by whatever
name it was called, had the force and effect of law because it came from President Marcos. Such are
the ways of despots. Hence, it is futile to argue, as the petitioners do in G.R. No. 79744, that LOI 474
could not have repealed P.D. No. 27 because the former was only a letter of instruction. The important
thing is that it was issued by President Marcos, whose word was law during that time.

But for all their peremptoriness, these issuances from the President Marcos still had to comply with
the requirement for publication as this Court held in Tanada v. Tuvera. 21 Hence, unless published in
the Official Gazette in accordance with Article 2 of the Civil Code, they could not have any force and
effect if they were among those enactments successfully challenged in that case. LOI 474 was
published, though, in the Official Gazette dated November 29,1976.)

Finally, there is the contention of the public respondent in G.R. No. 78742 that the writ of mandamus
cannot issue to compel the performance of a discretionary act, especially by a specific department of
the government. That is true as a general proposition but is subject to one important qualification.
Correctly and categorically stated, the rule is that mandamus will lie to compel the discharge of the
discretionary duty itself but not to control the discretion to be exercised. In other words, mandamus
can issue to require action only but not specific action.

Whenever a duty is imposed upon a public official and an unnecessary and

unreasonable delay in the exercise of such duty occurs, if it is a clear duty imposed by
law, the courts will intervene by the extraordinary legal remedy of mandamus to compel
action. If the duty is purely ministerial, the courts will require specific action. If the duty
is purely discretionary, the courts by mandamus will require action only. For example,
if an inferior court, public official, or board should, for an unreasonable length of time,
fail to decide a particular question to the great detriment of all parties concerned, or a
court should refuse to take jurisdiction of a cause when the law clearly gave it
jurisdiction mandamus will issue, in the first case to require a decision, and in the
second to require that jurisdiction be taken of the cause. 22

And while it is true that as a rule the writ will not be proper as long as there is still a plain, speedy and
adequate remedy available from the administrative authorities, resort to the courts may still be
permitted if the issue raised is a question of law. 23

III
There are traditional distinctions between the police power and the power of eminent domain that
logically preclude the application of both powers at the same time on the same subject. In the case
of City of Baguio v. NAWASA, 24for example, where a law required the transfer of all municipal
waterworks systems to the NAWASA in exchange for its assets of equivalent value, the Court held
that the power being exercised was eminent domain because the property involved was wholesome
and intended for a public use. Property condemned under the police power is noxious or intended for
a noxious purpose, such as a building on the verge of collapse, which should be demolished for the
public safety, or obscene materials, which should be destroyed in the interest of public morals. The
confiscation of such property is not compensable, unlike the taking of property under the power of
expropriation, which requires the payment of just compensation to the owner.

In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down the limits of the police
power in a famous aphorism: "The general rule at least is that while property may be regulated to a
certain extent, if regulation goes too far it will be recognized as a taking." The regulation that went "too
far" was a law prohibiting mining which might cause the subsidence of structures for human habitation
constructed on the land surface. This was resisted by a coal company which had earlier granted a
deed to the land over its mine but reserved all mining rights thereunder, with the grantee assuming all
risks and waiving any damage claim. The Court held the law could not be sustained without
compensating the grantor. Justice Brandeis filed a lone dissent in which he argued that there was a
valid exercise of the police power. He said:

Every restriction upon the use of property imposed in the exercise of the police power
deprives the owner of some right theretofore enjoyed, and is, in that sense, an
abridgment by the State of rights in property without making compensation. But
restriction imposed to protect the public health, safety or morals from dangers
threatened is not a taking. The restriction here in question is merely the prohibition of
a noxious use. The property so restricted remains in the possession of its owner. The
state does not appropriate it or make any use of it. The state merely prevents the owner
from making a use which interferes with paramount rights of the public. Whenever the
use prohibited ceases to be noxious as it may because of further changes in local
or social conditions the restriction will have to be removed and the owner will again
be free to enjoy his property as heretofore.

Recent trends, however, would indicate not a polarization but a mingling of the police power and the
power of eminent domain, with the latter being used as an implement of the former like the power of
taxation. The employment of the taxing power to achieve a police purpose has long been
accepted. 26 As for the power of expropriation, Prof. John J. Costonis of the University of Illinois College
of Law (referring to the earlier case of Euclid v. Ambler Realty Co., 272 US 365, which sustained a
zoning law under the police power) makes the following significant remarks:

Euclid, moreover, was decided in an era when judges located the Police and eminent
domain powers on different planets. Generally speaking, they viewed eminent domain
as encompassing public acquisition of private property for improvements that would
be available for public use," literally construed. To the police power, on the other hand,
they assigned the less intrusive task of preventing harmful externalities a point
reflected in the Euclid opinion's reliance on an analogy to nuisance law to bolster its
support of zoning. So long as suppression of a privately authored harm bore a
plausible relation to some legitimate "public purpose," the pertinent measure need
have afforded no compensation whatever. With the progressive growth of
government's involvement in land use, the distance between the two powers has
contracted considerably. Today government often employs eminent domain
interchangeably with or as a useful complement to the police power-- a trend expressly
approved in the Supreme Court's 1954 decision in Berman v. Parker, which broadened
 the reach of eminent domain's "public use" test to match that of the police power's
standard of "public purpose." 27

The Berman case sustained a redevelopment project and the improvement of blighted areas in the
District of Columbia as a proper exercise of the police power. On the role of eminent domain in the
attainment of this purpose, Justice Douglas declared:

If those who govern the District of Columbia decide that the Nation's Capital should be
beautiful as well as sanitary, there is nothing in the Fifth Amendment that stands in the
way.

Once the object is within the authority of Congress, the right to realize it through the
exercise of eminent domain is clear.

For the power of eminent domain is merely the means to the end. 28

In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote in 1978, the U.S
Supreme Court sustained the respondent's Landmarks Preservation Law under which the owners of
the Grand Central Terminal had not been allowed to construct a multi-story office building over the
Terminal, which had been designated a historic landmark. Preservation of the landmark was held to
be a valid objective of the police power. The problem, however, was that the owners of the Terminal
would be deprived of the right to use the airspace above it although other landowners in the area could
do so over their respective properties. While insisting that there was here no taking, the Court
nonetheless recognized certain compensatory rights accruing to Grand Central Terminal which it said
would "undoubtedly mitigate" the loss caused by the regulation. This "fair compensation," as he called
it, was explained by Prof. Costonis in this wise:

In return for retaining the Terminal site in its pristine landmark status, Penn Central was authorized to
transfer to neighboring properties the authorized but unused rights accruing to the site prior to the
Terminal's designation as a landmark the rights which would have been exhausted by the 59-story
building that the city refused to countenance atop the Terminal. Prevailing bulk restrictions on
neighboring sites were proportionately relaxed, theoretically enabling Penn Central to recoup its losses
at the Terminal site by constructing or selling to others the right to construct larger, hence more
profitable buildings on the transferee sites. 30

The cases before us present no knotty complication insofar as the question of compensable taking is
concerned. To the extent that the measures under challenge merely prescribe retention limits for
landowners, there is an exercise of the police power for the regulation of private property in accordance
with the Constitution. But where, to carry out such regulation, it becomes necessary to deprive such
owners of whatever lands they may own in excess of the maximum area allowed, there is definitely a
taking under the power of eminent domain for which payment of just compensation is imperative. The
taking contemplated is not a mere limitation of the use of the land. What is required is the surrender
of the title to and the physical possession of the said excess and all beneficial rights accruing to the
owner in favor of the farmer-beneficiary. This is definitely an exercise not of the police power but of
the power of eminent domain.

Whether as an exercise of the police power or of the power of eminent domain, the several measures
before us are challenged as violative of the due process and equal protection clauses.

The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that no retention limits are
prescribed has already been discussed and dismissed. It is noted that although they excited many
bitter exchanges during the deliberation of the CARP Law in Congress, the retention limits finally
agreed upon are, curiously enough, not being questioned in these petitions. We therefore do not
discuss them here. The Court will come to the other claimed violations of due process in connection
with our examination of the adequacy of just compensation as required under the power of
expropriation.

The argument of the small farmers that they have been denied equal protection because of the
absence of retention limits has also become academic under Section 6 of R.A. No. 6657. Significantly,
they too have not questioned the area of such limits. There is also the complaint that they should not
be made to share the burden of agrarian reform, an objection also made by the sugar planters on the
ground that they belong to a particular class with particular interests of their own. However, no
evidence has been submitted to the Court that the requisites of a valid classification have been
violated.

Classification has been defined as the grouping of persons or things similar to each other in certain
particulars and different from each other in these same particulars. 31 To be valid, it must conform to
the following requirements: (1) it must be based on substantial distinctions; (2) it must be germane to
the purposes of the law; (3) it must not be limited to existing conditions only; and (4) it must apply
equally to all the members of the class. 32 The Court finds that all these requisites have been met by
the measures here challenged as arbitrary and discriminatory.

Equal protection simply means that all persons or things similarly situated must be treated alike both
as to the rights conferred and the liabilities imposed. 33 The petitioners have not shown that they belong
to a different class and entitled to a different treatment. The argument that not only landowners but
also owners of other properties must be made to share the burden of implementing land reform must
be rejected. There is a substantial distinction between these two classes of owners that is clearly
visible except to those who will not see. There is no need to elaborate on this matter. In any event, the
Congress is allowed a wide leeway in providing for a valid classification. Its decision is accorded
recognition and respect by the courts of justice except only where its discretion is abused to the
detriment of the Bill of Rights.

It is worth remarking at this juncture that a statute may be sustained under the police power only if
there is a concurrence of the lawful subject and the lawful method. Put otherwise, the interests of the
public generally as distinguished from those of a particular class require the interference of the State
and, no less important, the means employed are reasonably necessary for the attainment of the
purpose sought to be achieved and not unduly oppressive upon individuals. 34 As the subject and
purpose of agrarian reform have been laid down by the Constitution itself, we may say that the first
requirement has been satisfied. What remains to be examined is the validity of the method employed
to achieve the constitutional goal.

One of the basic principles of the democratic system is that where the rights of the individual are
concerned, the end does not justify the means. It is not enough that there be a valid objective; it is
also necessary that the means employed to pursue it be in keeping with the Constitution. Mere
expediency will not excuse constitutional shortcuts. There is no question that not even the strongest
moral conviction or the most urgent public need, subject only to a few notable exceptions, will excuse
the bypassing of an individual's rights. It is no exaggeration to say that a, person invoking a right
guaranteed under Article III of the Constitution is a majority of one even as against the rest of the
nation who would deny him that right.

That right covers the person's life, his liberty and his property under Section 1 of Article III of the
Constitution. With regard to his property, the owner enjoys the added protection of Section 9, which
reaffirms the familiar rule that private property shall not be taken for public use without just
compensation.
This brings us now to the power of eminent domain.

IV

Eminent domain is an inherent power of the State that enables it to forcibly acquire
private lands intended for public use upon payment of just compensation to the owner.
Obviously, there is no need to expropriate where the owner is willing to sell under
terms also acceptable to the purchaser, in which case an ordinary deed of sale may
be agreed upon by the parties. 35 It is only where the owner is unwilling to sell, or cannot
accept the price or other conditions offered by the vendee, that the power of eminent
domain will come into play to assert the paramount authority of the State over the
interests of the property owner. Private rights must then yield to the irresistible
demands of the public interest on the time-honored justification, as in the case of the
police power, that the welfare of the people is the supreme law.

But for all its primacy and urgency, the power of expropriation is by no means absolute (as indeed no
power is absolute). The limitation is found in the constitutional injunction that "private property shall
not be taken for public use without just compensation" and in the abundant jurisprudence that has
evolved from the interpretation of this principle. Basically, the requirements for a proper exercise of
the power are: (1) public use and (2) just compensation.

Let us dispose first of the argument raised by the petitioners in G.R. No. 79310 that the State should
first distribute public agricultural lands in the pursuit of agrarian reform instead of immediately
disturbing property rights by forcibly acquiring private agricultural lands. Parenthetically, it is not correct
to say that only public agricultural lands may be covered by the CARP as the Constitution calls for "the
just distribution of all agricultural lands." In any event, the decision to redistribute private agricultural
lands in the manner prescribed by the CARP was made by the legislative and executive departments
in the exercise of their discretion. We are not justified in reviewing that discretion in the absence of a
clear showing that it has been abused.

A becoming courtesy admonishes us to respect the decisions of the political departments when they
decide what is known as the political question. As explained by Chief Justice Concepcion in the case
of Taada v. Cuenco: 36

The term "political question" connotes what it means in ordinary parlance, namely, a
question of policy. It refers to "those questions which, under the Constitution, are to be
decided by the people in their sovereign capacity; or in regard to which full
discretionary authority has been delegated to the legislative or executive branch of the
government." It is concerned with issues dependent upon the wisdom, not legality, of
a particular measure.

It is true that the concept of the political question has been constricted with the enlargement of judicial
power, which now includes the authority of the courts "to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government." 37 Even so, this should not be construed as a license for us to
reverse the other departments simply because their views may not coincide with ours.

The legislature and the executive have been seen fit, in their wisdom, to include in the CARP the
redistribution of private landholdings (even as the distribution of public agricultural lands is first
provided for, while also continuing apace under the Public Land Act and other cognate laws). The
Court sees no justification to interpose its authority, which we may assert only if we believe that the
political decision is not unwise, but illegal. We do not find it to be so.
In U.S. v. Chandler-Dunbar Water Power Company,38 it was held:

Congress having determined, as it did by the Act of March 3,1909 that the entire St.
Mary's river between the American bank and the international line, as well as all of the
upland north of the present ship canal, throughout its entire length, was "necessary for
the purpose of navigation of said waters, and the waters connected therewith," that
determination is conclusive in condemnation proceedings instituted by the United
States under that Act, and there is no room for judicial review of the judgment of
Congress ... .

As earlier observed, the requirement for public use has already been settled for us by the Constitution
itself No less than the 1987 Charter calls for agrarian reform, which is the reason why private
agricultural lands are to be taken from their owners, subject to the prescribed maximum retention
limits. The purposes specified in P.D. No. 27, Proc. No. 131 and R.A. No. 6657 are only an elaboration
of the constitutional injunction that the State adopt the necessary measures "to encourage and
undertake the just distribution of all agricultural lands to enable farmers who are landless to own
directly or collectively the lands they till." That public use, as pronounced by the fundamental law itself,
must be binding on us.

The second requirement, i.e., the payment of just compensation, needs a longer and more thoughtful
examination.

Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator. 39 It has been repeatedly stressed by this Court that the measure is not the taker's gain
but the owner's loss. 40 The word "just" is used to intensify the meaning of the word "compensation" to
convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial,
full, ample. 41

It bears repeating that the measures challenged in these petitions contemplate more than a mere
regulation of the use of private lands under the police power. We deal here with an actual taking of
private agricultural lands that has dispossessed the owners of their property and deprived them of all
its beneficial use and enjoyment, to entitle them to the just compensation mandated by the
Constitution.

As held in Republic of the Philippines v. Castellvi, 42 there is compensable taking when the following
conditions concur: (1) the expropriator must enter a private property; (2) the entry must be for more
than a momentary period; (3) the entry must be under warrant or color of legal authority; (4) the
property must be devoted to public use or otherwise informally appropriated or injuriously affected;
and (5) the utilization of the property for public use must be in such a way as to oust the owner and
deprive him of beneficial enjoyment of the property. All these requisites are envisioned in the measures
before us.

Where the State itself is the expropriator, it is not necessary for it to make a deposit upon its taking
possession of the condemned property, as "the compensation is a public charge, the good faith of the
public is pledged for its payment, and all the resources of taxation may be employed in raising the
amount." 43 Nevertheless, Section 16(e) of the CARP Law provides that:

Upon receipt by the landowner of the corresponding payment or, in case of rejection
or no response from the landowner, upon the deposit with an accessible bank
designated by the DAR of the compensation in cash or in LBP bonds in accordance
with this Act, the DAR shall take immediate possession of the land and shall request
the proper Register of Deeds to issue a Transfer Certificate of Title (TCT) in the name
 of the Republic of the Philippines. The DAR shall thereafter proceed with the
redistribution of the land to the qualified beneficiaries.

Objection is raised, however, to the manner of fixing the just compensation, which it is claimed is
entrusted to the administrative authorities in violation of judicial prerogatives. Specific reference is
made to Section 16(d), which provides that in case of the rejection or disregard by the owner of the
offer of the government to buy his land-

... the DAR shall conduct summary administrative proceedings to determine the
compensation for the land by requiring the landowner, the LBP and other interested
parties to submit evidence as to the just compensation for the land, within fifteen (15)
days from the receipt of the notice. After the expiration of the above period, the matter
is deemed submitted for decision. The DAR shall decide the case within thirty (30)
days after it is submitted for decision.

To be sure, the determination of just compensation is a function addressed to the courts of justice and
may not be usurped by any other branch or official of the government. EPZA v. Dulay 44 resolved a
challenge to several decrees promulgated by President Marcos providing that the just compensation
for property under expropriation should be either the assessment of the property by the government
or the sworn valuation thereof by the owner, whichever was lower. In declaring these decrees
unconstitutional, the Court held through Mr. Justice Hugo E. Gutierrez, Jr.:

The method of ascertaining just compensation under the aforecited decrees

constitutes impermissible encroachment on judicial prerogatives. It tends to render this
Court inutile in a matter which under this Constitution is reserved to it for final
determination.

Thus, although in an expropriation proceeding the court technically would still have the
power to determine the just compensation for the property, following the applicable
decrees, its task would be relegated to simply stating the lower value of the property
as declared either by the owner or the assessor. As a necessary consequence, it would
be useless for the court to appoint commissioners under Rule 67 of the Rules of Court.
Moreover, the need to satisfy the due process clause in the taking of private property
is seemingly fulfilled since it cannot be said that a judicial proceeding was not had
before the actual taking. However, the strict application of the decrees during the
proceedings would be nothing short of a mere formality or charade as the court has
only to choose between the valuation of the owner and that of the assessor, and its
choice is always limited to the lower of the two. The court cannot exercise its discretion
or independence in determining what is just or fair. Even a grade school pupil could
substitute for the judge insofar as the determination of constitutional just compensation
is concerned.

xxx

In the present petition, we are once again confronted with the same question of
whether the courts under P.D. No. 1533, which contains the same provision on just
compensation as its predecessor decrees, still have the power and authority to
determine just compensation, independent of what is stated by the decree and to this
effect, to appoint commissioners for such purpose.

This time, we answer in the affirmative.

xxx

It is violative of due process to deny the owner the opportunity to prove that the
valuation in the tax documents is unfair or wrong. And it is repulsive to the basic
concepts of justice and fairness to allow the haphazard work of a minor bureaucrat or
clerk to absolutely prevail over the judgment of a court promulgated only after expert
commissioners have actually viewed the property, after evidence and arguments pro
and con have been presented, and after all factors and considerations essential to a
fair and just determination have been judiciously evaluated.

A reading of the aforecited Section 16(d) will readily show that it does not suffer from the arbitrariness
that rendered the challenged decrees constitutionally objectionable. Although the proceedings are
described as summary, the landowner and other interested parties are nevertheless allowed an
opportunity to submit evidence on the real value of the property. But more importantly, the
determination of the just compensation by the DAR is not by any means final and conclusive upon the
landowner or any other interested party, for Section 16(f) clearly provides:

Any party who disagrees with the decision may bring the matter to the court of proper
jurisdiction for final determination of just compensation.

The determination made by the DAR is only preliminary unless accepted by all parties concerned.
Otherwise, the courts of justice will still have the right to review with finality the said determination in
the exercise of what is admittedly a judicial function.

The second and more serious objection to the provisions on just compensation is not as easily
resolved.

This refers to Section 18 of the CARP Law providing in full as follows:

SEC. 18. Valuation and Mode of Compensation. The LBP shall compensate the
landowner in such amount as may be agreed upon by the landowner and the DAR and
the LBP, in accordance with the criteria provided for in Sections 16 and 17, and other
pertinent provisions hereof, or as may be finally determined by the court, as the just
compensation for the land.

The compensation shall be paid in one of the following modes, at the option of the
landowner:

(1) Cash payment, under the following terms and conditions:

(a) For lands above fifty (50) hectares, insofar as the

excess hectarage is concerned Twenty-five percent
(25%) cash, the balance to be paid in government
financial instruments negotiable at any time.

(b) For lands above twenty-four (24) hectares and up

to fifty (50) hectares Thirty percent (30%) cash, the
balance to be paid in government financial instruments
negotiable at any time.
 (c) For lands twenty-four (24) hectares and below
Thirty-five percent (35%) cash, the balance to be paid
in government financial instruments negotiable at any
time.

(2) Shares of stock in government-owned or controlled corporations, LBP preferred

shares, physical assets or other qualified investments in accordance with guidelines
set by the PARC;

(3) Tax credits which can be used against any tax liability;

(4) LBP bonds, which shall have the following features:

(a) Market interest rates aligned with 91-day treasury

bill rates. Ten percent (10%) of the face value of the
bonds shall mature every year from the date of
issuance until the tenth (10th) year: Provided, That
should the landowner choose to forego the cash
portion, whether in full or in part, he shall be paid
correspondingly in LBP bonds;

(b) Transferability and negotiability. Such LBP bonds

may be used by the landowner, his successors-in-
interest or his assigns, up to the amount of their face
value, for any of the following:

(i) Acquisition of land or other real properties of the

government, including assets under the Asset
Privatization Program and other assets foreclosed by
government financial institutions in the same province
or region where the lands for which the bonds were
paid are situated;

(ii) Acquisition of shares of stock of government-owned

or controlled corporations or shares of stock owned by
the government in private corporations;

(iii) Substitution for surety or bail bonds for the

provisional release of accused persons, or for
performance bonds;

(iv) Security for loans with any government financial

institution, provided the proceeds of the loans shall be
invested in an economic enterprise, preferably in a
small and medium- scale industry, in the same
province or region as the land for which the bonds are
paid;

(v) Payment for various taxes and fees to government:

Provided, That the use of these bonds for these
purposes will be limited to a certain percentage of the
outstanding balance of the financial instruments;
 Provided, further, That the PARC shall determine the
percentages mentioned above;

(vi) Payment for tuition fees of the immediate family of

the original bondholder in government universities,
colleges, trade schools, and other institutions;

(vii) Payment for fees of the immediate family of the

original bondholder in government hospitals; and

(viii) Such other uses as the PARC may from time to

time allow.

The contention of the petitioners in G.R. No. 79777 is that the above provision is unconstitutional
insofar as it requires the owners of the expropriated properties to accept just compensation therefor
in less than money, which is the only medium of payment allowed. In support of this contention, they
cite jurisprudence holding that:

The fundamental rule in expropriation matters is that the owner of the property
expropriated is entitled to a just compensation, which should be neither more nor less,
whenever it is possible to make the assessment, than the money equivalent of said
property. Just compensation has always been understood to be the just and complete
equivalent of the loss which the owner of the thing expropriated has to suffer by reason
of the expropriation . 45 (Emphasis supplied.)

In J.M. Tuazon Co. v. Land Tenure Administration, 46 this Court held:

It is well-settled that just compensation means the equivalent for the value of the
property at the time of its taking. Anything beyond that is more, and anything short of
that is less, than just compensation. It means a fair and full equivalent for the loss
sustained, which is the measure of the indemnity, not whatever gain would accrue to
the expropriating entity. The market value of the land taken is the just compensation
to which the owner of condemned property is entitled, the market value being that sum
of money which a person desirous, but not compelled to buy, and an owner, willing,
but not compelled to sell, would agree on as a price to be given and received for such
property. (Emphasis supplied.)

In the United States, where much of our jurisprudence on the subject has been derived, the weight of
authority is also to the effect that just compensation for property expropriated is payable only in money
and not otherwise. Thus

The medium of payment of compensation is ready money or cash. The condemnor

cannot compel the owner to accept anything but money, nor can the owner compel or
require the condemnor to pay him on any other basis than the value of the property in
money at the time and in the manner prescribed by the Constitution and the statutes.
When the power of eminent domain is resorted to, there must be a standard medium
of payment, binding upon both parties, and the law has fixed that standard as money
in cash. 47 (Emphasis supplied.)

Part cash and deferred payments are not and cannot, in the nature of things, be
regarded as a reliable and constant standard of compensation. 48
 "Just compensation" for property taken by condemnation means a fair equivalent in
money, which must be paid at least within a reasonable time after the taking, and it is
not within the power of the Legislature to substitute for such payment future
obligations, bonds, or other valuable advantage. 49(Emphasis supplied.)

It cannot be denied from these cases that the traditional medium for the payment of just compensation
is money and no other. And so, conformably, has just compensation been paid in the past solely in
that medium. However, we do not deal here with the traditional excercise of the power of eminent
domain. This is not an ordinary expropriation where only a specific property of relatively limited area
is sought to be taken by the State from its owner for a specific and perhaps local purpose.

What we deal with here is a revolutionary kind of expropriation.

The expropriation before us affects all private agricultural lands whenever found and of whatever kind
as long as they are in excess of the maximum retention limits allowed their owners. This kind of
expropriation is intended for the benefit not only of a particular community or of a small segment of the
population but of the entire Filipino nation, from all levels of our society, from the impoverished farmer
to the land-glutted owner. Its purpose does not cover only the whole territory of this country but goes
beyond in time to the foreseeable future, which it hopes to secure and edify with the vision and the
sacrifice of the present generation of Filipinos. Generations yet to come are as involved in this program
as we are today, although hopefully only as beneficiaries of a richer and more fulfilling life we will
guarantee to them tomorrow through our thoughtfulness today. And, finally, let it not be forgotten that
it is no less than the Constitution itself that has ordained this revolution in the farms, calling for "a just
distribution" among the farmers of lands that have heretofore been the prison of their dreams but can
now become the key at least to their deliverance.

Such a program will involve not mere millions of pesos. The cost will be tremendous. Considering the
vast areas of land subject to expropriation under the laws before us, we estimate that hundreds of
billions of pesos will be needed, far more indeed than the amount of P50 billion initially appropriated,
which is already staggering as it is by our present standards. Such amount is in fact not even fully
available at this time.

We assume that the framers of the Constitution were aware of this difficulty when they called for
agrarian reform as a top priority project of the government. It is a part of this assumption that when
they envisioned the expropriation that would be needed, they also intended that the just compensation
would have to be paid not in the orthodox way but a less conventional if more practical method. There
can be no doubt that they were aware of the financial limitations of the government and had no illusions
that there would be enough money to pay in cash and in full for the lands they wanted to be distributed
among the farmers. We may therefore assume that their intention was to allow such manner of
payment as is now provided for by the CARP Law, particularly the payment of the balance (if the owner
cannot be paid fully with money), or indeed of the entire amount of the just compensation, with other
things of value. We may also suppose that what they had in mind was a similar scheme of payment
as that prescribed in P.D. No. 27, which was the law in force at the time they deliberated on the new
Charter and with which they presumably agreed in principle.

The Court has not found in the records of the Constitutional Commission any categorical agreement
among the members regarding the meaning to be given the concept of just compensation as applied
to the comprehensive agrarian reform program being contemplated. There was the suggestion to "fine
tune" the requirement to suit the demands of the project even as it was also felt that they should "leave
it to Congress" to determine how payment should be made to the landowner and reimbursement
required from the farmer-beneficiaries. Such innovations as "progressive compensation" and "State-
subsidized compensation" were also proposed. In the end, however, no special definition of the just
compensation for the lands to be expropriated was reached by the Commission. 50

On the other hand, there is nothing in the records either that militates against the assumptions we are
making of the general sentiments and intention of the members on the content and manner of the
payment to be made to the landowner in the light of the magnitude of the expenditure and the
limitations of the expropriator.

With these assumptions, the Court hereby declares that the content and manner of the just
compensation provided for in the afore- quoted Section 18 of the CARP Law is not violative of the
Constitution. We do not mind admitting that a certain degree of pragmatism has influenced our
decision on this issue, but after all this Court is not a cloistered institution removed from the realities
and demands of society or oblivious to the need for its enhancement. The Court is as acutely anxious
as the rest of our people to see the goal of agrarian reform achieved at last after the frustrations and
deprivations of our peasant masses during all these disappointing decades. We are aware that
invalidation of the said section will result in the nullification of the entire program, killing the farmer's
hopes even as they approach realization and resurrecting the spectre of discontent and dissent in the
restless countryside. That is not in our view the intention of the Constitution, and that is not what we
shall decree today.

Accepting the theory that payment of the just compensation is not always required to be made fully in
money, we find further that the proportion of cash payment to the other things of value constituting the
total payment, as determined on the basis of the areas of the lands expropriated, is not unduly
oppressive upon the landowner. It is noted that the smaller the land, the bigger the payment in money,
primarily because the small landowner will be needing it more than the big landowners, who can afford
a bigger balance in bonds and other things of value. No less importantly, the government financial
instruments making up the balance of the payment are "negotiable at any time." The other modes,
which are likewise available to the landowner at his option, are also not unreasonable because
payment is made in shares of stock, LBP bonds, other properties or assets, tax credits, and other
things of value equivalent to the amount of just compensation.

Admittedly, the compensation contemplated in the law will cause the landowners, big and small, not a
little inconvenience. As already remarked, this cannot be avoided. Nevertheless, it is devoutly hoped
that these countrymen of ours, conscious as we know they are of the need for their forebearance and
even sacrifice, will not begrudge us their indispensable share in the attainment of the ideal of agrarian
reform. Otherwise, our pursuit of this elusive goal will be like the quest for the Holy Grail.

The complaint against the effects of non-registration of the land under E.O. No. 229 does not seem to
be viable any more as it appears that Section 4 of the said Order has been superseded by Section 14
of the CARP Law. This repeats the requisites of registration as embodied in the earlier measure but
does not provide, as the latter did, that in case of failure or refusal to register the land, the valuation
thereof shall be that given by the provincial or city assessor for tax purposes. On the contrary, the
CARP Law says that the just compensation shall be ascertained on the basis of the factors mentioned
in its Section 17 and in the manner provided for in Section 16.

The last major challenge to CARP is that the landowner is divested of his property even before actual
payment to him in full of just compensation, in contravention of a well- accepted principle of eminent
domain.

The recognized rule, indeed, is that title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation. Jurisprudence on this settled principle
is consistent both here and in other democratic jurisdictions. Thus:
Title to property which is the subject of condemnation proceedings does not vest the condemnor until
the judgment fixing just compensation is entered and paid, but the condemnor's title relates back to
the date on which the petition under the Eminent Domain Act, or the commissioner's report under the
Local Improvement Act, is filed. 51

... although the right to appropriate and use land taken for a canal is complete at the time of entry, title
to the property taken remains in the owner until payment is actually made. 52 (Emphasis supplied.)

In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases holding that title to property
does not pass to the condemnor until just compensation had actually been made. In fact, the decisions
appear to be uniformly to this effect. As early as 1838, in Rubottom v. McLure, 54 it was held that "actual
payment to the owner of the condemned property was a condition precedent to the investment of the
title to the property in the State" albeit "not to the appropriation of it to public use." In Rexford v.
Knight, 55 the Court of Appeals of New York said that the construction upon the statutes was that the
fee did not vest in the State until the payment of the compensation although the authority to enter upon
and appropriate the land was complete prior to the payment. Kennedy further said that "both on
principle and authority the rule is ... that the right to enter on and use the property is complete, as soon
as the property is actually appropriated under the authority of law for a public use, but that the title
does not pass from the owner without his consent, until just compensation has been made to him."

Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, 56 that:

If the laws which we have exhibited or cited in the preceding discussion are attentively
examined it will be apparent that the method of expropriation adopted in this jurisdiction
is such as to afford absolute reassurance that no piece of land can be finally and
irrevocably taken from an unwilling owner until compensation is paid ... . (Emphasis
supplied.)

It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as October 21, 1972
and declared that he shall "be deemed the owner" of a portion of land consisting of a family-sized farm
except that "no title to the land owned by him was to be actually issued to him unless and until he had
become a full-fledged member of a duly recognized farmers' cooperative." It was understood, however,
that full payment of the just compensation also had to be made first, conformably to the constitutional
requirement.

When E.O. No. 228, categorically stated in its Section 1 that:

All qualified farmer-beneficiaries are now deemed full owners as of October 21, 1972
of the land they acquired by virtue of Presidential Decree No. 27. (Emphasis supplied.)

it was obviously referring to lands already validly acquired under the said decree, after proof of full-
fledged membership in the farmers' cooperatives and full payment of just compensation. Hence, it was
also perfectly proper for the Order to also provide in its Section 2 that the "lease rentals paid to the
landowner by the farmer- beneficiary after October 21, 1972 (pending transfer of ownership after full
payment of just compensation), shall be considered as advance payment for the land."

The CARP Law, for its part, conditions the transfer of possession and ownership of the land to the
government on receipt by the landowner of the corresponding payment or the deposit by the DAR of
the compensation in cash or LBP bonds with an accessible bank. Until then, title also remains with the
landowner. 57 No outright change of ownership is contemplated either.
Hence, the argument that the assailed measures violate due process by arbitrarily transferring title
before the land is fully paid for must also be rejected.

It is worth stressing at this point that all rights acquired by the tenant-farmer under P.D. No. 27, as
recognized under E.O. No. 228, are retained by him even now under R.A. No. 6657. This should
counter-balance the express provision in Section 6 of the said law that "the landowners whose lands
have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained
by them thereunder, further, That original homestead grantees or direct compulsory heirs who still own
the original homestead at the time of the approval of this Act shall retain the same areas as long as
they continue to cultivate said homestead."

In connection with these retained rights, it does not appear in G.R. No. 78742 that the appeal filed by
the petitioners with the Office of the President has already been resolved. Although we have said that
the doctrine of exhaustion of administrative remedies need not preclude immediate resort to judicial
action, there are factual issues that have yet to be examined on the administrative level, especially the
claim that the petitioners are not covered by LOI 474 because they do not own other agricultural lands
than the subjects of their petition.

Obviously, the Court cannot resolve these issues. In any event, assuming that the petitioners have not
yet exercised their retention rights, if any, under P.D. No. 27, the Court holds that they are entitled to
the new retention rights provided for by R.A. No. 6657, which in fact are on the whole more liberal than
those granted by the decree.

The CARP Law and the other enactments also involved in these cases have been the subject of bitter
attack from those who point to the shortcomings of these measures and ask that they be scrapped
entirely. To be sure, these enactments are less than perfect; indeed, they should be continuously re-
examined and rehoned, that they may be sharper instruments for the better protection of the farmer's
rights. But we have to start somewhere. In the pursuit of agrarian reform, we do not tread on familiar
ground but grope on terrain fraught with pitfalls and expected difficulties. This is inevitable. The CARP
Law is not a tried and tested project. On the contrary, to use Justice Holmes's words, "it is an
experiment, as all life is an experiment," and so we learn as we venture forward, and, if necessary, by
our own mistakes. We cannot expect perfection although we should strive for it by all means.
Meantime, we struggle as best we can in freeing the farmer from the iron shackles that have
unconscionably, and for so long, fettered his soul to the soil.

By the decision we reach today, all major legal obstacles to the comprehensive agrarian reform
program are removed, to clear the way for the true freedom of the farmer. We may now glimpse the
day he will be released not only from want but also from the exploitation and disdain of the past and
from his own feelings of inadequacy and helplessness. At last his servitude will be ended forever. At
last the farm on which he toils will be his farm. It will be his portion of the Mother Earth that will give
him not only the staff of life but also the joy of living. And where once it bred for him only deep despair,
now can he see in it the fruition of his hopes for a more fulfilling future. Now at last can he banish from
his small plot of earth his insecurities and dark resentments and "rebuild in it the music and the dream."

WHEREFORE, the Court holds as follows:

1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and 229 are
SUSTAINED against all the constitutional objections raised in the herein petitions.
 2. Title to all expropriated properties shall be transferred to the State only upon full
payment of compensation to their respective owners.

3. All rights previously acquired by the tenant- farmers under P.D. No. 27 are retained
and recognized.

4. Landowners who were unable to exercise their rights of retention under P.D. No. 27
shall enjoy the retention rights granted by R.A. No. 6657 under the conditions therein
prescribed.

5. Subject to the above-mentioned rulings all the petitions are DISMISSED, without
pronouncement as to costs.

SO ORDERED.