MATTHEWS vs.

TAYLOR

PHILIP MATTHEWS vs. BENJAMIN A. TAYLOR and JOSELYN C. TAYLOR

G.R. No. 164584 June 22, 2009

Facts:

1. On June 30, 1988, respondent Benjamin, a British subject, married Joselyn, a 17-year old Filipina.

2. On June 9, 1989, while their marriage was subsisting, Joselyn bought from Diosa M. Martin a lot
(Boracay property).

3. The sale was allegedly financed by Benjamin.

4. Joselyn and Benjamin, also using the latter’s funds, constructed improvements thereon and eventually
converted the property to a vacation and tourist resort known as the Admiral Ben Bow Inn.

5. All required permits and licenses for the operation of the resort were obtained in the name of Ginna
Celestino, Joselyn’s sister.

6. However, Benjamin and Joselyn had a falling out, and Joselyn ran away with Kim Philippsen.

7. On June 8, 1992, Joselyn executed a SPA in favor of Benjamin, authorizing the latter to maintain, sell,
lease, and sub-lease and otherwise enter into contract with third parties with respect to their Boracay
property.

8. On July 20, 1992, Joselyn as lessor and petitioner Philip Matthews as lessee, entered into an
Agreement of Lease involving the Boracay property for a period of 25 years, with an annual rental of
P12,000.00.

9. Petitioner thereafter took possession of the property and renamed the resort as Music Garden Resort.

10. Claiming that the Agreement was null and void since it was entered into by Joselyn without
Benjamin’s consent, Benjamin instituted an action for Declaration of Nullity of Agreement of Lease with
Damages against Joselyn and the petitioner.

11. Benjamin claimed that his funds were used in the acquisition and improvement of the Boracay
property, and coupled with the fact that he was Joselyn’s husband, any transaction involving said
property required his consent.

Issue:
1. Whether or not the Agreement of Lease of a parcel of land entered into by a Filipino wife without the
consent of her British husband is valid

2. Whether or not Benjamin is the actual owner of the property since he provided the funds used in
purchasing the same

Ruling:

Section 7, Article XII of the 1987 Constitution states:

Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed
except to individuals, corporations, or associations qualified to acquire or hold lands of the public
domain.

Aliens, whether individuals or corporations, have been disqualified from acquiring lands of the public
domain. Hence, by virtue of the aforecited constitutional provision, they are also disqualified from
acquiring private lands. The primary purpose of this constitutional provision is the conservation of the
national patrimony. Our fundamental law cannot be any clearer. The right to acquire lands of the public
domain is reserved only to Filipino citizens or corporations at least sixty percent of the capital of which is
owned by Filipinos.

The rule is clear and inflexible: aliens are absolutely not allowed to acquire public or private lands in the
Philippines, save only in constitutionally recognized exceptions. There is no rule more settled than this
constitutional prohibition, as more and more aliens attempt to circumvent the provision by trying to own
lands through another.

Benjamin has no right to nullify the Agreement of Lease between Joselyn and petitioner. Benjamin, being
an alien, is absolutely prohibited from acquiring private and public lands in the Philippines. Considering
that Joselyn appeared to be the designated "vendee" in the Deed of Sale of said property, she acquired
sole ownership thereto. This is true even if we sustain Benjamin’s claim that he provided the funds for
such acquisition. By entering into such contract knowing that it was illegal, no implied trust was created
in his favor; no reimbursement for his expenses can be allowed; and no declaration can be made that the
subject property was part of the conjugal/community property of the spouses. In any event, he had and
has no capacity or personality to question the subsequent lease of the Boracay property by his wife on
the theory that in so doing, he was merely exercising the prerogative of a husband in respect of conjugal
property. To sustain such a theory would countenance indirect controversion of the constitutional
prohibition. If the property were to be declared conjugal, this would accord the alien husband a
substantial interest and right over the land, as he would then have a decisive vote as to its transfer or
disposition. This is a right that the Constitution does not permit him to have.
G.R. No. 108998 August 24, 1994

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.

THE COURT OF APPEALS AND SPOUSES MARIO B. LAPIÑA AND FLOR DE VEGA, respondents.

Byron V. Belarmino and Juan B. Belarmino for private respondents.

BIDIN, J.:

Can a foreign national apply for registration of title over a parcel of land which he acquired by purchase
while still a citizen of the Philippines, from a vendor who has complied with the requirements for
registration under the Public Land Act (CA 141)?

The Republic would have us rule on the negative and asks this Court to nullify the decision of the
appellate court which affirmed the judgment of the court a quo in granting the application of respondent
spouses for registration over the lots in question.

On June 17, 1978, respondent spouses bought Lots 347 and 348, Cad. s38-D, as their residence with a
total area of 91.77 sq. m. situated in San Pablo City, from one Cristeta Dazo Belen (Rollo, p. 41). At the
time of the purchase, respondent spouses where then natural-born Filipino citizens.

On February 5, 1987, the spouses filed an application for registration of title of the two (2) parcels of
land before the Regional Trial Court of San Pablo City, Branch XXXI. This time, however, they were no
longer Filipino citizens and have opted to embrace Canadian citizenship through naturalization.
An opposition was filed by the Republic and after the parties have presented their respective evidence,
the court a quo rendered a decision confirming private respondents' title to the lots in question, the
dispositive portion of which reads as follows:

WHEREFORE, in view of the foregoing, this Court hereby approves the said application and confirms the
title and possession of herein applicants over Lots 347 and 348, Ap-04-003755 in the names of spouses
Mario B. Lapiña and Flor de Vega, all of legal age, Filipino citizens by birth but now Canadian citizens by
naturalization and residing at 14 A. Mabini Street, San Pablo City and/or 201-1170-124 Street,
Edmonton, Alberta T5M-OK9, Canada.

Once this Decision becomes final, let the corresponding decree of registration be issued. In the
certificate of title to be issued, there shall be annotated an easement of .265 meters road right-of-way.

SO ORDERED. (Rollo, p. 25)

On appeal, respondent court affirmed the decision of the trial court based on the following ratiocination:

In the present case, it is undisputed that both applicants were still Filipino citizens when they bought the
land in controversy from its former owner. For this reason, the prohibition against the acquisition of
private lands by aliens could not apply. In justice and equity, they are the rightful owners of the subject
realty considering also that they had paid for it quite a large sum of money. Their purpose in initiating
the instant action is merely to confirm their title over the land, for, as has been passed upon, they had
been the owners of the same since 1978. It ought to be pointed out that registration is not a mode of
acquiring ownership. The Torrens System was not established as a means for the acquisition of title to
private land. It is intended merely to confirm and register the title which one may already have
(Municipality of Victorias vs. Court of Appeals, G.R. No. L-31189, March 31, 1987). With particular
reference to the main issue at bar, the High Court has ruled that title and ownership over lands within
the meaning and for the purposes of the constitutional prohibition dates back to the time of their
purchase, not later. The fact that the applicants-appellees are not Filipino citizens now cannot be taken
against them for they were not disqualified from acquiring the land in question (Bollozos vs. Yu Tieng Su,
G.R. No. L-29442, November 11, 1987). (Rollo, pp. 27-28)

Expectedly, respondent court's disposition did not merit petitioner's approval, hence this present
recourse, which was belatedly filed.
Ordinarily, this petition would have been denied outright for having been filed out of time had it not
been for the constitutional issue presented therein.

At the outset, petitioner submits that private respondents have not acquired proprietary rights over the
subject properties before they acquired Canadian citizenship through naturalization to justify the
registration thereof in their favor. It maintains that even privately owned unregistered lands are
presumed to be public lands under the principle that lands of whatever classification belong to the State
under the Regalian doctrine. Thus, before the issuance of the certificate of title, the occupant is not in
the jurisdical sense the true owner of the land since it still pertains to the State. Petitioner further
argued that it is only when the court adjudicates the land to the applicant for confirmation of title would
the land become privately owned land, for in the same proceeding, the court may declare it public land,
depending on the evidence.

As found by the trial court:

The evidence thus presented established that applicants, by themselves and their predecessors-in-
interest, had been in open, public, peaceful, continuous, exclusive and notorious possession and
occupation of the two adjacent parcels of land applied for registration of title under a bona-fide claim of
ownership long before June 12, 1945. Such being the case, it is conclusively presumed that all the
conditions essential to the confirmation of their title over the two adjacent parcels of land are sought to
be registered have been complied with thereby entitling them to the issuance of the corresponding
certificate of title pursuant to the provisions of Presidential Decree No. 1529, otherwise known as the
Property Registration Decree. (Rollo, p. 26)

Respondent court echoed the court a quo's observation, thus:

The land sought to be registered has been declared to be within the alienable and disposable zone
established by the Bureau of Forest Development (Exhibit "P"). The investigation conducted by the
Bureau of Lands, Natural Resources District (IV-2) reveals that the disputed realty had been occupied by
the applicants "whose house of strong materials stands thereon"; that it had been declared for taxation
purposes in the name of applicants-spouses since 1979; that they acquired the same by means of a
public instrument entitled "Kasulatan ng Bilihang Tuluyan" duly executed by the vendor, Cristeta Dazo
Belen, on June 17, 1978 (Exhibits "I" and "J"); and that applicants and their predecessors in interest had
been in possession of the land for more than 30 years prior to the filing of the application for
registration. But what is of great significance in the instant case is the circumstance that at the time the
applicants purchased the subject lot in 1978, both of them were Filipino citizens such that when they
filed their application for registration in 1987, ownership over the land in dispute had already passed to
them. (Rollo, p., 27)

The Republic disagrees with the appellate court's concept of possession and argues:

17. The Court of Appeals found that the land was declared for taxation purposes in the name of
respondent spouses only since 1979. However, tax declarations or reality tax payments of property are
not conclusive evidence of ownership. (citing cases)

18. Then again, the appellate court found that "applicants (respondents) and their predecessors-in-
interest had been in possession of the land for more than 30 years prior to the filing of the application
for registration." This is not, however, the same as saying that respondents have been in possession
"since June 12, 1945." (PD No. 1073, amending Sec. 48 [b], CA NO. 141; sec. also Sec. 14, PD No. 1529).
So there is a void in respondents' possession. They fall short of the required possession since June 12,
1945 or prior thereto. And, even if they needed only to prove thirty (30) years possession prior to the
filing of their application (on February 5, 1987), they would still be short of the required possession if the
starting point is 1979 when, according to the Court of Appeals, the land was declared for taxation
purposes in their name. (Rollo, pp. 14-15)

The argument is myopic, to say the least. Following the logic of petitioner, any transferee is thus
foreclosed to apply for registration of title over a parcel of land notwithstanding the fact that the
transferor, or his predecessor-in-interest has been in open, notorious and exclusive possession thereof
for thirty (30) years or more. This is not, however, what the law provides.

As petitioner itself argues, Section 48 of the Public Land Act (CA 141) reads:

Sec. 48. The following-described citizens of the Philippines, occupying lands of the public domain
or claiming interest therein, but whose titles have not been perfected or completed, may apply to the
Court of First Instance (now Regional Trial Court) of the province where the land is located for
confirmation of their claims and the issuance of a certificate of title therefor under the Land Registration
Act, to wit:
xxx xxx xxx

(b) Those who by themselves or through their predecessors-in-interest have been in open,
continuous, exclusive, and notorious possession and occupation of agricultural lands of the public
domain, under a bona fide claim of acquisition or ownership, for at least thirty years immediately
preceding the filing of the application for confirmation of title except when prevented by wars or force
majeure. These shall be conclusively presumed to have performed all the conditions essential to a
Government grant and shall be entitled to a certificate of title under the provisions of this chapter.
(Emphasis supplied)

As amended by PD 1073:

Sec. 4. The provisions of Section 48(b) and Section 48(c), Chapter VIII, of the Public Land Act are
hereby amended in the sense that these provisions shall apply only to alienable and disposable lands of
the public domain which have been in open, continuous, exclusive and notorious possession and
occupation by the applicant himself or thru his predecessor-in-interest, under a bona fide claim of
acquisition or ownership, since June 12, 1945.

It must be noted that with respect to possession and occupation of the alienable and disposable lands of
the public domain, the law employs the terms "by themselves", "the applicant himself or through his
predecessor-in-interest". Thus, it matters not whether the vendee/applicant has been in possession of
the subject property for only a day so long as the period and/or legal requirements for confirmation of
title has been complied with by his predecessor-in-interest, the said period is tacked to his possession. In
the case at bar, respondents' predecessors-in-interest have been in open, continuous, exclusive and
notorious possession of the disputed land not only since June 12, 1945, but even as early as 1937.
Petitioner does not deny this except that respondent spouses, in its perception, were in possession of
the land sought to be registered only in 1978 and therefore short of the required length of time. As
aforesaid, the disputed parcels of land were acquired by private respondents through their
predecessors-in-interest, who, in turn, have been in open and continued possession thereof since 1937.
Private respondents stepped into the shoes of their predecessors-in-interest and by virtue thereof,
acquired all the legal rights necessary to confirm what could otherwise be deemed as an imperfect title.
At this juncture, petitioner's reliance in Republic v. Villanueva (114 SCRA 875 [1982]) deserves scant
consideration. There, it was held that before the issuance of the certificate of title, the occupant is not in
the juridical sense the true owner of the land since it still pertains to the State.

Suffice it to state that the ruling in Republic v. Villanueva (supra), has already been abandoned in the
1986 case of Director of Lands v. Intermediate Appellate Court (146 SCRA 509; and reiterated in Director
of Lands v. Iglesia ni Cristo, 200 SCRA 606 [1991]) where the Court, through then Associate Justice, now
Chief Justice Narvasa, declared that:

(The weight of authority is) that open, exclusive and undisputed possession of alienable public land for
the period prescribed by law creates the legal fiction whereby the land, upon completion of the requisite
period ipso jure and without the need of judicial or other sanction, ceases to be public land and
becomes private property. . . .

Herico in particular, appears to be squarely affirmative:

. . . Secondly, under the provisions of Republic Act

No. 1942, which the respondent Court held to be inapplicable to the petitioner's case, with the latter's
proven occupation and cultivation for more than 30 years since 1914, by himself and by his
predecessors-in-interest, title over the land has vested on petitioner so as to segregate the land from the
mass of public land. Thereafter, it is no longer disposable under the Public Land Act as by free patent . . .

xxx xxx xxx

As interpreted in several cases, when the conditions as specified in the foregoing provision are complied
with, the possessor is deemed to have acquired, by operation of law, a right to a grant, a government
grant, without the necessity of a certificate of title being issued. The land, therefore, ceases to be of the
public domain and beyond the authority of the Director of Lands to dispose of. The application for
confirmation is mere formality, the lack of which does not affect the legal sufficiency of the title as would
be evidenced by the patent and the Torrens title to be issued upon the strength of said patent.
Nothing can more clearly demonstrate the logical inevitability of considering possession of public land
which is of the character and duration prescribed by the statute as the equivalent of an express grant
from the State than the dictum of the statute itself (Section 48 [b]) that the possessor(s) ". . . shall be
conclusively presumed to have performed all the conditions essential to a Government grant and shall
be entitled to a certificate of title ..." No proof being admissible to overcome a conclusive presumption,
confirmation proceedings would, in truth be little more than a formality, at the most limited to
ascertaining whether the possession claims is of the required character and length of time; and
registration thereunder would not confer title, but simply recognize a title already vested. The
proceedings would not originally convert the land from public to private land, but only confirm such a
conversion already affected by operation of law from the moment the required period of possession
became complete. As was so well put in Cariño, ". . .(There are indications that registration was expected
from all, but none sufficient to show that, for want of it, ownership actually gained would be lost. The
effect of the proof, wherever made, was not to confer title, but simply to establish it, as already
conferred by the decree, if not by earlier law. (Emphasis supplied)

Subsequent cases have hewed to the above pronouncement such that open, continuous and exclusive
possession for at least 30 years of alienable public land ipso jure converts the same to private property
(Director of Lands v. IAC, 214 SCRA 604 [1992]; Pineda v. CA, 183 SCRA 602 [1990]). This means that
occupation and cultivation for more than 30 years by an applicant and his predecessors-in-interest, vest
title on such applicant so as to segregate the land from the mass of public and (National Power
Corporation v. CA, 218 SCRA 41 [1993]).

The Public Land Act requires that the applicant must prove that (a) the land is alienable public land and
(b) his possession, in the concept above stated, must be either since time immemorial or for the period
prescribed in the Public Land Act (Director of Lands v. Buyco, 216 SCRA 78 [1992]). When the conditions
set by law are complied with, the possessor of the land, by operation of law, acquires a right to a grant, a
government grant, without the necessity of a certificate of title being issued (National Power
Corporation v. CA, supra). As such, the land ceases to be a part of the public domain and goes beyond
the authority of the Director of Lands to dispose of.

In other words, the Torrens system was not established as a means for the acquisition of title to private
land (Municipality of Victorias v. CA, 149 SCRA 32 [1987]). It merely confirms, but does not confer
ownership. As could be gleaned from the evidence adduced, private respondents were able to establish
the nature of possession of their predecessors-in-interest. Evidence was offered to prove that their
predecessors-in-interest had paid taxes on the subject land and introduced improvements thereon
(Exhibits "F" to "F9"). A certified true copy of the affidavit executed by Cristeta Dazo and her sister
Simplicia was also formally offered to prove that the subject parcels of land were inherited by vendor
Cristeta Dazo from her father Pedro Dazo with the conformity of her only sister Simplicia (Exhibit "G").
Likewise, a report from the Bureau of Lands was presented in evidence together with a letter from the
Bureau of Forest Development, to prove that the questioned lots were part of the alienable and
disposable zone of the government and that no forestry interest was affected (CA GR No. 28953,
Records, p. 33).

In the main, petitioner seeks to defeat respondents' application for registration of title on the ground of
foreign nationality. Accordingly, the ruling in Director of Lands v. Buyco (supra) supports petitioner's
thesis.

We disagree.

In Buyco, the applicants therein were likewise foreign nationals but were natural-born Filipino citizens at
the time of their supposed acquisition of the property. But this is where the similarity ends. The
applicants in Buyco sought to register a large tract of land under the provisions of the Land Registration
Act, and in the alternative, under the provisions of the Public Land Act. The land registration court
decided in favor of the applicants and was affirmed by the appellate court on appeal. The Director of
Lands brought the matter before us on review and we reversed.

This Court, speaking through Justice Davide, Jr., stated:

As could be gleaned from the evidence adduced, the private respondents do not rely on fee simple
ownership based on a Spanish grant or possessory information title under Section 19 of the Land
Registration Act; the private respondents did not present any proof that they or their predecessors-in-
interest derived title from an old Spanish grant such as (a) the "titulo real" or royal grant (b) the
"concession especial" or especial grant; (c) the "composicion con el estado" title or adjustment title; (d)
the "titulo de compra" or title by purchase; and (e) the "informacion posesoria" or possessory
information title, which could become a "titulo gratuito" or a gratuitous title (Director of Forestry v.
Muñoz, 23 SCRA 1183 [1968]). The primary basis of their claim is possession, by themselves and their
predecessors-in-interest, since time immemorial.

If indeed private respondents and their predecessors have been in possession since time immemorial,
the rulings of both courts could be upheld for, as this Court stated in Oh Cho v. Director of Lands (75 Phil.
890 [1946]):
. . . All lands that were not acquired from the Government, either by purchase or by grant, belong to the
public domain. An exception to the rule would be any land that should have been in the possession of an
occupant and of his predecessors in interest since time immemorial, for such possession would justify
the presumption that the land had never been part of the public domain or that if had been a private
property even before the Spanish conquest (Cariño v. Insular Government, 41 Phil 935 [1909]; 212 U.S.
449; 53 Law. Ed., 594) The applicant does not come under the exception, for the earliest possession of
the lot by his first predecessor in interest began in 1880.

. . . alienable public land held by a possessor, personally or through his predecessors-in-interest, openly,
continuously and exclusively for the prescribed statutory period (30 years under the Public Land Act, as
amended) is converted to private property by the mere lapse or completion of said period, ipso jure.
(Director of Lands v. Intermediate Appellate Court, supra)

It is obvious from the foregoing rule that the applicant must prove that (a) the land is alienable public
land and (b) his possession, in the concept above stated, must be either since time immemorial, as ruled
in both Cariño and Susi, or for the period prescribed in the Public Land Act. As to the latter, this Court, in
Gutierrez Hermanos v. Court of Appeals (178 SCRA 37 [1989]), adopted the rule enunciated by the Court
of Appeals, per then Associate Justice Hugo R. Gutierrez, Jr., . . ., that an applicant for registration under
Section 48 of the Public Land Act must secure a certification from the Government that the lands which
he claims to have possessed as owner for more than thirty (30) years are alienable and disposable. It is
the burden of the applicant to prove its positive averments.

In the instant case, private respondents offered no evidence at all to prove that the property subject of
the application is an alienable and disposable land. On the contrary, the entire property . . . was pasture
land (and therefore inalienable under the then 1973 Constitution).

. . . (P)rivate respondents' evidence miserably failed to establish their imperfect title to the property in
question. Their allegation of possession since time immemorial, . . ., is patently baseless. . . . When
referring to possession, specifically "immemorial possession," it means possession of which no man
living has seen the beginning, and the existence of which he has learned from his elders (Susi v. Razon,
supra). Such possession was never present in the case of private respondents. . . .
. . ., there does not even exist a reasonable basis for the finding that the private respondents and their
predecessors-in-interest possessed the land for more than eighty (80) years, . . .

xxx xxx xxx

To this Court's mind, private respondents failed to prove that (their predecessor-in-interest) had
possessed the property allegedly covered by Tax Declaration No. 15853 and made the subject of both his
last will and testament and the project of partition of his estate among his heirs — in such manner as to
remove the same from the public domain under the Cariño and Susi doctrines. Thus, (when the
predecessor-in-interest) died on 31 May 1937, he transmitted no right whatsoever, with respect to the
said property, to his heirs. This being the case, his possession cannot be tacked to that of the private
respondents for the latter's benefit pursuant to Section 48(b) of the Public Land Act, the alternative
ground relied upon in their application . . .

xxx xxx xxx

Considering that the private respondents became American citizens before such filing, it goes without
saying that they had acquired no vested right, consisting of an imperfect title, over the property before
they lost their Philippine citizenship. (Emphasis supplied)

Clearly, the application in Buyco were denied registration of title not merely because they were
American citizens at the time of their application therefor. Respondents therein failed to prove
possession of their predecessor-in-interest since time immemorial or possession in such a manner that
the property has been segregated from public domain; such that at the time of their application, as
American citizens, they have acquired no vested rights over the parcel of land.

In the case at bar, private respondents were undoubtedly natural-born Filipino citizens at the time of the
acquisition of the properties and by virtue thereof, acquired vested rights thereon, tacking in the
process, the possession in the concept of owner and the prescribed period of time held by their
predecessors-in-interest under the Public Land Act. In addition, private respondents have constructed a
house of strong materials on the contested property, now occupied by respondent Lapiñas mother.
But what should not be missed in the disposition of this case is the fact that the Constitution itself allows
private respondents to register the contested parcels of land in their favor. Sections 7 and 8 of Article XII
of the Constitution contain the following pertinent provisions, to wit:

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.

Sec. 8. Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the
Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to
limitations provided by law. (Emphasis supplied)

Section 8, Article XII of the 1987 Constitution above quoted is similar to Section 15, Article XIV of the
then 1973 Constitution which reads:

Sec. 15. Notwithstanding the provisions of Section 14 of this Article, a natural-born citizen of the
Philippines who has lost his citizenship may be a transferee of private land, for use by him as his
residence, as the Batasang Pambansa may provide.

Pursuant thereto, Batas Pambansa Blg. 185 was passed into law, the relevant provision of which
provides:

Sec. 2. Any natural-born citizen of the Philippines who has lost his Philippine citizenship and
who has the legal capacity to enter into a contract under Philippine laws may be a transferee of a private
land up to a maximum area of one thousand square meters, in the case of urban land, or one hectare in
the case of rural land, to be used by him as his residence. In the case of married couples, one of them
may avail of the privilege herein granted; Provided, That if both shall avail of the same, the total area
acquired shall not exceed the maximum herein fixed.

In case the transferee already owns urban or rural lands for residential purposes, he shall still be entitled
to be a transferee of an additional urban or rural lands for residential purposes which, when added to
those already owned by him, shall not exceed the maximum areas herein authorized.
From the adoption of the 1987 Constitution up to the present, no other law has been passed by the
legislature on the same subject. Thus, what governs the disposition of private lands in favor of a natural-
born Filipino citizen who has lost his Philippine citizenship remains to be BP 185.

Even if private respondents were already Canadian citizens at the time they applied for registration of
the properties in question, said properties as discussed above were already private lands; consequently,
there could be no legal impediment for the registration thereof by respondents in view of what the
Constitution ordains. The parcels of land sought to be registered no longer form part of the public
domain. They are already private in character since private respondents' predecessors-in-interest have
been in open, continuous and exclusive possession and occupation thereof under claim of ownership
prior to June 12, 1945 or since 1937. The law provides that a natural-born citizen of the Philippines who
has lost his Philippine citizenship may be a transferee of a private land up to a maximum area of 1,000
sq.m., if urban, or one (1) hectare in case of rural land, to be used by him as his residence (BP 185).

It is undisputed that private respondents, as vendees of a private land, were natural-born citizens of the
Philippines. For the purpose of transfer and/or acquisition of a parcel of residential land, it is not
significant whether private respondents are no longer Filipino citizens at the time they purchased or
registered the parcels of land in question. What is important is that private respondents were formerly
natural-born citizens of the Philippines, and as transferees of a private land, they could apply for
registration in accordance with the mandate of Section 8, Article XII of the Constitution. Considering that
private respondents were able to prove the requisite period and character of possession of their
predecessors-in-interest over the subject lots, their application for registration of title must perforce be
approved.

The dissenting opinion, however, states that the requirements in BP 185, must also be complied with by
private respondents. Specifically, it refers to Section 6, which provides:

Sec. 6. In addition to the requirements provided for in other laws for the registration of titles to
lands, no private land shall be transferred under this Act, unless the transferee shall submit to the
register of deeds of the province or city where the property is located a sworn statement showing the
date and place of his birth; the names and addresses of his parents, of his spouse and children, if any;
the area, the location and the mode of acquisition of his landholdings in the Philippines, if any; his
intention to reside permanently in the Philippines; the date he lost his Philippine citizenship and the
country of which he is presently a citizen; and such other information as may be required under Section
8 of this Act.
The Court is of the view that the requirements in Sec. 6 of BP 185 do not apply in the instant case since
said requirements are primarily directed to the register of deeds before whom compliance therewith is
to be submitted. Nowhere in the provision is it stated, much less implied, that the requirements must
likewise be submitted before the land registration court prior to the approval of an application for
registration of title. An application for registration of title before a land registration court should not be
confused with the issuance of a certificate of title by the register of deeds. It is only when the judgment
of the land registration court approving the application for registration has become final that a decree of
registration is issued. And that is the time when the requirements of Sec. 6, BP 185, before the register
of deeds should be complied with by the applicants. This decree of registration is the one that is
submitted to the office of the register of deeds for issuance of the certificate of title in favor of the
applicant. Prior to the issuance of the decree of registration, the register of deeds has no participation in
the approval of the application for registration of title as the decree of registration is yet to be issued.

WHEREFORE, the petition is DISMISSED and the decision appealed from is hereby AFFIRMED.

SO ORDERED.

SECOND DIVISION

LUZ R. YAMANE, in her G.R. No. 154993

capacity as the CITY

TREASURER OF MAKATI Present:

CITY,

Petitioner, PUNO, J.,

Chairman,

AUSTRIA-MARTINEZ,

CALLEJO, SR.,

- versus - TINGA, and

CHICO-NAZARIO, JJ.

BA LEPANTO CONDOMINUM Promulgated:

CORPORATION,

Respondent. October 25, 2005

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

DECISION

TINGA, J.:

Petitioner City Treasurer of Makati, Luz Yamane (City Treasurer), presents for resolution of this Court two
novel questions: one procedural, the other substantive, yet both of obvious significance. The first
pertains to the proper mode of judicial review undertaken from decisions of the regional trial courts
resolving the denial of tax protests made by local government treasurers, pursuant to the Local
Government Code. The second is whether a local government unit can, under the Local Government
Code, impel a condominium corporation to pay business taxes.[1]

While we agree with the City Treasurers position on the first issue, there ultimately is sufficient
justification for the Court to overlook what is essentially a procedural error. We uphold respondents on
the second issue. Indeed, there are disturbing aspects in both procedure and substance that attend the
attempts by the City of Makati to flex its taxing muscle. Considering that the tax imposition now in
question has utterly no basis in law, judicial relief is imperative. There are fewer indisputable causes for
the exercise of judicial review over the exercise of the taxing power than when the tax is based on whim,
and not on law.

The facts, as culled from the record, follow.

Respondent BA-Lepanto Condominium Corporation (the Corporation) is a duly organized condominium

corporation constituted in accordance with the Condominium Act,[2] which owns and holds title to the
common and limited common areas of the BA-Lepanto Condominium (the Condominium), situated in
Paseo de Roxas, Makati City. Its membership comprises the various unit owners of the Condominium.
The Corporation is authorized, under Article V of its Amended By-Laws, to collect regular assessments
from its members for operating expenses, capital expenditures on the common areas, and other special
assessments as provided for in the Master Deed with Declaration of Restrictions of the Condominium.

On 15 December 1998, the Corporation received a Notice of Assessment dated 14 December 1998
signed by the City Treasurer. The Notice of Assessment stated that the Corporation is liable to pay the
correct city business taxes, fees and charges, computed as totaling P1,601,013.77 for the years 1995 to
1997.[3] The Notice of Assessment was silent as to the statutory basis of the business taxes assessed.

Through counsel, the Corporation responded with a written tax protest dated 12 February 1999,
addressed to the City Treasurer. It was evident in the protest that the Corporation was perplexed on the
statutory basis of the tax assessment.

With due respect, we submit that the Assessment has no basis as the Corporation is not liable for
business taxes and surcharges and interest thereon, under the Makati [Revenue] Code or even under the
[Local Government] Code.

The Makati [Revenue] Code and the [Local Government] Code do not contain any provisions on which
the Assessment could be based. One might argue that Sec. 3A.02(m) of the Makati [Revenue] Code
imposes business tax on owners or operators of any business not specified in the said code. We submit,
however, that this is not applicable to the Corporation as the Corporation is not an owner or operator of
any business in the contemplation of the Makati [Revenue] Code and even the [Local Government] Code.
[4]

Proceeding from the premise that its tax liability arose from Section 3A.02(m) of the Makati Revenue
Code, the Corporation proceeded to argue that under both the Makati Code and the Local Government
Code, business is defined as trade or commercial activity regularly engaged in as a means of livelihood or
with a view to profit. It was submitted that the Corporation, as a condominium corporation, was
organized not for profit, but to hold title over the common areas of the Condominium, to manage the
Condominium for the unit owners, and to hold title to the parcels of land on which the Condominium
was located. Neither was the Corporation authorized, under its articles of incorporation or by-laws to
engage in profit-making activities. The assessments it did collect from the unit owners were for capital
expenditures and operating expenses.[5]

The protest was rejected by the City Treasurer in a letter dated 4 March 1999. She insisted that the
collection of dues from the unit owners was effected primarily to sustain and maintain the expenses of
the common areas, with the end in view [sic] of getting full appreciative living values [sic] for the
individual condominium occupants and to command better marketable [sic] prices for those occupants
who would in the future sell their respective units.[6] Thus, she concluded since the chances of getting
higher prices for well-managed common areas of any condominium are better and more effective that
condominiums with poor [sic] managed common areas, the corporation activity is a profit venture
making [sic].[7]

From the denial of the protest, the Corporation filed an Appeal with the Regional Trial Court (RTC) of
Makati.[8] On 1 March 2000, the Makati RTC Branch 57 rendered a Decision[9] dismissing the appeal for
lack of merit. Accepting the premise laid by the City Treasurer, the RTC acknowledged, in sadly risible
language:

Herein appellant, to defray the improvements and beautification of the common areas, collect [sic]
assessments from its members. Its end view is to get appreciate living rules for the unit owners [sic], to
give an impression to outsides [sic] of the quality of service the condominium offers, so as to allow
present owners to command better prices in the event of sale.[10]

With this, the RTC concluded that the activities of the Corporation fell squarely under the definition of
business under Section 13(b) of the Local Government Code, and thus subject to local business taxation.
[11]

From this Decision of the RTC, the Corporation filed a Petition for Review under Rule 42 of the Rules of
Civil Procedure with the Court of Appeals. Initially, the petition was dismissed outright[12] on the ground
that only decisions of the RTC brought on appeal from a first level court could be elevated for review
under the mode of review prescribed under Rule 42.[13] However, the Corporation pointed out in its
Motion for Reconsideration that under Section 195 of the Local Government Code, the remedy of the
taxpayer on the denial of the protest filed with the local treasurer is to appeal the denial with the court
of competent jurisdiction.[14] Persuaded by this contention, the Court of Appeals reinstated the
petition.[15]

On 7 June 2002, the Court of Appeals Special Sixteenth Division rendered the Decision[16] now assailed
before this Court. The appellate court reversed the RTC and declared that the Corporation was not liable
to pay business taxes to the City of Makati.[17] In doing so, the Court of Appeals delved into
jurisprudential definitions of profit,[18] and concluded that the Corporation was not engaged in profit.
For one, it was held that the very statutory concept of a condominium corporation showed that it was
not a juridical entity intended to make profit, as its sole purpose was to hold title to the common areas
in the condominium and to maintain the condominium.[19]

The Court of Appeals likewise cited provisions from the Corporations Amended Articles of Incorporation
and Amended By-Laws that, to its estimation, established that the Corporation was not engaged in
business and the assessment collected from unit owners limited to those necessary to defray the
expenses in the maintenance of the common areas and management the condominium.[20]

Upon denial of her Motion for Reconsideration,[21] the City Treasurer elevated the present Petition for
Review under Rule 45. It is argued that the Corporation is engaged in business, for the dues collected
from the different unit owners is utilized towards the beautification and maintenance of the
Condominium, resulting in full appreciative living values for the condominium units which would
command better market prices should they be sold in the future. The City Treasurer likewise avers that
the rationale for business taxes is not on the income received or profit earned by the business, but the
privilege to engage in business. The fact that the

Corporation is empowered to acquire, own, hold, enjoy, lease, operate and maintain, and to convey sell,
transfer or otherwise dispose of real or personal property allegedly qualifies as incident to the fact of
[the Corporations] act of engaging in business.[22]
The City Treasurer also claims that the Corporation had filed the wrong mode of appeal before the Court
of Appeals when the latter filed its Petition for Review under Rule 42. It is reasoned that the decision of
the Makati RTC was rendered in the exercise of original jurisdiction, it being the first court which took
cognizance of the case. Accordingly, with the Corporation having pursued an erroneous mode of appeal,
the RTC Decision is deemed to have become final and executory.

First, we dispose of the procedural issue, which essentially boils down to whether the RTC, in deciding an
appeal taken from a denial of a protest by a local treasurer under Section 195 of the Local Government
Code, exercises original jurisdiction or appellate jurisdiction. The question assumes a measure of
importance to this petition, for the adoption of the position of the City Treasurer that the mode of
review of the decision taken by the RTC is governed by Rule 41 of the Rules of Civil Procedure means that
the decision of the RTC would have long become final and executory by reason of the failure of the
Corporation to file a notice of appeal.[23]

There are discernible conflicting views on the issue. The first, as expressed by the Court of Appeals, holds
that the RTC, in reviewing denials of protests by local treasurers, exercises appellate jurisdiction. This
position is anchored on the language of Section 195 of the Local Government Code which states that the
remedy of the taxpayer whose protest is denied by the local treasurer is to appeal with the court of
competent jurisdiction.[24] Apparently though, the Local Government Code does not elaborate on how
such appeal should be undertaken.

The other view, as maintained by the City Treasurer, is that the jurisdiction exercised by the RTC is
original in character. This is the first time that the position has been presented to the court for
adjudication. Still, this argument does find jurisprudential mooring in our ruling in Garcia v. De Jesus,[25]
where the Court proffered the following distinction between original jurisdiction and appellate
jurisdiction: Original jurisdiction is the power of the Court to take judicial cognizance of a case instituted
for judicial action for the first time under conditions provided by law. Appellate jurisdiction is the
authority of a Court higher in rank to re-examine the final order or judgment of a lower Court which
tried the case now elevated for judicial review.[26]

The quoted definitions were taken from the commentaries of the esteemed Justice Florenz Regalado.
With the definitions as beacon, the review taken by the RTC over the denial of the protest by the local
treasurer would fall within that courts original jurisdiction. In short, the review is the initial judicial
cognizance of the matter. Moreover, labeling the said review as an exercise of appellate jurisdiction is
inappropriate, since the denial of the protest is not the judgment or order of a lower court, but of a local
government official.
The stringent concept of original jurisdiction may seemingly be neutered by Rule 43 of the 1997 Rules of
Civil Procedure, Section 1 of which lists a slew of administrative agencies and quasi-judicial tribunals or
their officers whose decisions may be reviewed by the Court of Appeals in the exercise of its appellate
jurisdiction. However, the basic law of jurisdiction, Batas Pambansa Blg. 129 (B.P. 129),[27] ineluctably
confers appellate jurisdiction on the Court of Appeals over final rulings of quasi-judicial agencies,
instrumentalities, boards or commission, by explicitly using the phrase appellate jurisdiction.[28] The
power to create or characterize jurisdiction of courts belongs to the legislature. While the traditional
notion of appellate jurisdiction connotes judicial review over lower court decisions, it has to yield to
statutory redefinitions that clearly expand its breadth to encompass even review of decisions of officers
in the executive branches of government.

Yet significantly, the Local Government Code, or any other statute for that matter, does not expressly
confer appellate jurisdiction on the part of regional trial courts from the denial of a tax protest by a local
treasurer. On the other hand, Section 22 of B.P. 129 expressly delineates the appellate jurisdiction of the
Regional Trial Courts, confining as it does said appellate jurisdiction to cases decided by Metropolitan,
Municipal, and Municipal Circuit Trial Courts. Unlike in the case of the Court of Appeals, B.P. 129 does
not confer appellate jurisdiction on Regional Trial Courts over rulings made by non-judicial entities.

From these premises, it is evident that the stance of the City Treasurer is correct as a matter of law, and
that the proper remedy of the Corporation from the RTC judgment is an ordinary appeal under Rule 41
to the Court of Appeals. However, we make this pronouncement subject to two important qualifications.
First, in this particular case there are nonetheless significant reasons for the Court to overlook the
procedural error and ultimately uphold the adjudication of the jurisdiction exercised by the Court of
Appeals in this case. Second, the doctrinal weight of the pronouncement is confined to cases and
controversies that emerged prior to the enactment of Republic Act No. 9282, the law which expanded
the jurisdiction of the Court of Tax Appeals (CTA).

Republic Act No. 9282 definitively proves in its Section 7(a)(3) that the CTA exercises exclusive appellate
jurisdiction to review on appeal decisions, orders or resolutions of the Regional Trial Courts in local tax
cases original decided or resolved by them in the exercise of their originally or appellate jurisdiction.
Moreover, the provision also states that the review is triggered by filing a petition for review under a
procedure analogous to that provided for under Rule 42 of the 1997 Rules of Civil Procedure.[29]

Republic Act No. 9282, however, would not apply to this case simply because it arose prior to the
effectivity of that law. To declare otherwise would be to institute a jurisdictional rule derived not from
express statutory grant, but from implication. The jurisdiction of a court to take cognizance of a case
should be clearly conferred and should not be deemed to exist on mere implications,[30] and this settled
rule would be needlessly emasculated should we declare that the Corporations position is correct in law.

Be that as it may, characteristic of all procedural rules is adherence to the precept that they should not
be enforced blindly, especially if mechanical application would defeat the higher ends that animates our
civil procedurethe just, speedy and inexpensive disposition of every action and proceeding.[31] Indeed,
we have repeatedly upheldand utilized ourselvesthe discretion of courts to nonetheless take cognizance
of petitions raised on an erroneous mode of appeal and instead treat these petitions in the manner as
they should have appropriately been filed.[32] The Court of Appeals could very well have treated the
Corporations petition for review as an ordinary appeal.

Moreover, we recognize that the Corporations error in elevating the RTC decision for review via Rule 42
actually worked to the benefit of the City Treasurer. There is wider latitude on the part of the Court of
Appeals to refuse cognizance over a petition for review under Rule 42 than it would have over an
ordinary appeal under Rule 41. Under Section 13, Rule 41, the stated grounds for the dismissal of an
ordinary appeal prior to the transmission of the case records are when the appeal was taken out of time
or when the docket fees were not paid.[33] On the other hand, Section 6, Rule 42 provides that in order
that the Court of Appeals may allow due course to the petition for review, it must first make a prima
facie finding that the lower court has committed an error that would warrant the reversal or
modification of the decision under review.[34] There is no similar requirement of a prima facie
determination of error in the case of ordinary appeal, which is perfected upon the filing of the notice of
appeal in due time.[35]

Evidently, by employing the Rule 42 mode of review, the Corporation faced a greater risk of having its
petition rejected by the Court of Appeals as compared to having filed an ordinary appeal under Rule 41.
This was not an error that worked to the prejudice of the City Treasurer.

We now proceed to the substantive issue, on whether the City of Makati may collect business taxes on
condominium corporations.

We begin with an overview of the power of a local government unit to impose business taxes.
The power of local government units to impose taxes within its territorial jurisdiction derives from the
Constitution itself, which recognizes the power of these units to create its own sources of revenue and to
levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy.[36] These guidelines and limitations as provided by
Congress are in main contained in the Local Government Code of 1991 (the Code), which provides for
comprehensive instances when and how local government units may impose taxes. The significant
limitations are enumerated primarily in Section 133 of the Code, which include among others, a
prohibition on the imposition of income taxes except when levied on banks and other financial
institutions.[37] None of the other general limitations under Section 133 find application to the case at
bar.

The most well-known mode of local government taxation is perhaps the real property tax, which is
governed by Title II, Book II of the Code, and which bears no application in this case. A different set of
provisions, found under Title I of Book II, governs other taxes imposable by local government units,
including business taxes. Under Section 151 of the Code, cities such as Makati are authorized to levy the
same taxes fees and charges as provinces and municipalities. It is in Article II, Title II, Book II of the Code,
governing municipal taxes, where the provisions on business taxation relevant to this petition may be
found.[38]

Section 143 of the Code specifically enumerates several types of business on which municipalities and
cities may impose taxes. These include manufacturers, wholesalers, distributors, dealers of any article of
commerce of whatever nature; those engaged in the export or commerce of essential commodities;
contractors and other independent contractors; banks and financial institutions; and peddlers engaged in
the sale of any merchandise or article of commerce. Moreover, the local sanggunian is also authorized to
impose taxes on any other businesses not otherwise specified under Section 143 which the sanggunian
concerned may deem proper to tax.

The coverage of business taxation particular to the City of Makati is provided by the Makati Revenue
Code (Revenue Code), enacted through Municipal Ordinance No. 92-072. The Revenue Code remains in
effect as of this

writing. Article A, Chapter III of the Revenue Code governs business taxes in Makati, and it is quite
specific as to the particular businesses which are covered by business taxes. To give a sample of the
specified businesses under the Revenue Code which are not enumerated under the Local Government
Code, we cite Section 3A.02(f) of the Code, which levies a gross receipt tax :
(f) On contractors and other independent contractors defined in Sec. 3A.01(q) of Chapter III of this Code,
and on owners or operators of business establishments rendering or offering services such as:
advertising agencies; animal hospitals; assaying laboratories; belt and buckle shops; blacksmith shops;
bookbinders; booking officers for film exchange; booking offices for transportation on commission basis;
breeding of game cocks and other sporting animals belonging to others; business management services;
collecting agencies; escort services; feasibility studies; consultancy services; garages; garbage disposal
contractors; gold and silversmith shops; inspection services for incoming and outgoing cargoes; interior
decorating services; janitorial services; job placement or recruitment agencies; landscaping contractors;
lathe machine shops; management consultants not subject to professional tax; medical and dental
laboratories; mercantile agencies; messsengerial services; operators of shoe shine stands; painting
shops; perma press establishments; rent-a-plant services; polo players; school for and/or horse-back
riding academy; real estate appraisers; real estate brokerages; photostatic, white/blue printing, Xerox,
typing, and mimeographing services; rental of bicycles and/or tricycles, furniture, shoes, watches,
household appliances, boats, typewriters, etc.; roasting of pigs, fowls, etc.; shipping agencies; shipyard
for repairing ships for others; shops for shearing animals; silkscreen or T-shirt printing shops; stables;
travel agencies; vaciador shops; veterinary clinics; video rentals and/or coverage services; dancing
schools/speed reading/EDP; nursery, vocational and other schools not regulated by the Department of
Education, Culture and Sports, (DECS), day care centers; etc.[39]

Other provisions of the Revenue Code likewise subject hotel and restaurant owners and operators[40],
real estate dealers, and lessors of real estate[41] to business taxes.

Should the comprehensive listing not prove encompassing enough, there is also a catch-all provision
similar to that under the Local Government Code. This is found in Section 3A.02(m) of the Revenue Code,
which provides:

(m) On owners or operators of any business not specified above shall pay the tax at the rate of two
percent (2%) for 1993, two and one-half percent (2 %) for 1994 and 1995, and three percent (3%) for
1996 and the years thereafter of the gross receipts during the preceding year.[42]

The initial inquiry is what provision of the Makati Revenue Code does the City Treasurer rely on to make
the Corporation liable for business taxes. Even at this point, there already stands a problem with the City
Treasurers cause of action.
Our careful examination of the record reveals a highly disconcerting fact. At no point has the City
Treasurer been candid enough to inform the Corporation, the RTC, the Court of Appeals, or this Court for
that matter, as to what exactly is the precise statutory basis under the Makati Revenue Code for the
levying of the business tax on petitioner. We have examined all of the pleadings submitted by the City
Treasurer in all the antecedent judicial proceedings, as well as in this present petition, and also the
communications by the City Treasurer to the Corporation which form part of the record. Nowhere
therein is there any citation made by the City Treasurer of any provision of the Revenue Code which
would serve as the legal authority for the collection of business taxes from condominiums in Makati.

Ostensibly, the notice of assessment, which stands as the first instance the taxpayer is officially made
aware of the pending tax liability, should be sufficiently informative to apprise the taxpayer the legal
basis of the tax. Section 195 of the Local Government Code does not go as far as to expressly require that
the notice of assessment specifically cite the provision of the ordinance involved but it does require that
it state the nature of the tax, fee or charge, the amount of deficiency, surcharges, interests and penalties.
In this case, the notice of assessment sent to the Corporation did state that the assessment was for
business taxes, as well as the amount of the assessment. There may have been prima facie compliance
with the requirement under Section 195. However in this case, the Revenue Code provides multiple
provisions on business taxes, and at varying rates. Hence, we could appreciate the Corporations
confusion, as expressed in its protest, as to the exact legal basis for the tax.[43] Reference to the local tax
ordinance is vital, for the power of local government units to impose local taxes is exercised through the
appropriate ordinance enacted by the sanggunian, and not by the Local Government Code alone.[44]
What determines tax liability is the tax ordinance, the Local Government Code being the enabling law for
the local legislative body.

Moreover, a careful examination of the Revenue Code shows that while Section 3A.02(m) seems
designed as a catch-all provision, Section 3A.02(f), which provides for a different tax rate from that of the
former provision, may be construed to be of similar import. While Section 3A.02(f) is quite exhaustive in
enumerating the class of businesses taxed under the provision, the listing, while it does not include
condominium-related enterprises, ends with the abbreviation etc., or et cetera.

We do note our discomfort with the unlimited breadth and the dangerous uncertainty which are the
twin hallmarks of the words et cetera. Certainly, we cannot be disposed to uphold any tax imposition
that derives its authority from enigmatic and uncertain words such as et cetera. Yet we cannot even say
with definiteness whether the tax imposed on the Corporation in this case is based on et cetera, or on
Section 3A.02(m), or on any other provision of the Revenue Code. Assuming that the assessment made
on the Corporation is on a provision other than Section 3A.02(m), the main legal issue takes on a
different complexion. For example, if it is based on et cetera under Section 3A.02(f), we would have to
examine whether the Corporation faces analogous comparison with the other businesses listed under
that provision.

Certainly, the City Treasurer has not been helpful in that regard, as she has been silent all through out as
to the exact basis for the tax imposition which she wishes that this Court uphold. Indeed, there is only
one thing that prevents this Court from ruling that there has been a due process violation on account of
the City Treasurers failure to disclose on paper the statutory basis of the taxthat the Corporation itself
does not allege injury arising from such failure on the part of the City Treasurer.

We do not know why the Corporation chose not to put this issue into litigation, though we can ultimately
presume that no injury was sustained because the City Treasurer failed to cite the specific statutory basis
of the tax. What is essential though is that the local treasurer be required to explain to the taxpayer with
sufficient particularity the basis of the tax, so as to leave no doubt in the mind of the taxpayer as to the
specific tax involved.

In this case, the Corporation seems confident enough in litigating despite the failure of the City Treasurer
to admit on what exact provision of the Revenue Code the tax liability ensued. This is perhaps because
the Corporation has anchored its central argument on the position that the Local Government Code itself
does not sanction the imposition of business taxes against it. This position was sustained by the Court of
Appeals, and now merits our analysis.

As stated earlier, local tax on businesses is authorized under Section 143 of the Local Government Code.
The word business itself is defined under Section 131(d) of the Code as trade or commercial activity
regularly engaged in as a means of livelihood or with a view to profit.[45] This definition of business
takes on importance, since Section 143 allows local government units to impose local taxes on
businesses other than those specified under the provision. Moreover, even those business activities
specifically named in Section 143 are themselves susceptible to broad interpretation. For example,
Section 143(b) authorizes the imposition of business taxes on wholesalers, distributors, or dealers in any
article of commerce of whatever kind or nature.

It is thus imperative that in order that the Corporation may be subjected to business taxes, its activities
must fall within the definition of business as provided in the Local Government Code. And to hold that
they do is to ignore the very statutory nature of a condominium corporation.
The creation of the condominium corporation is sanctioned by Republic Act No. 4726, otherwise known
as the Condominium Act. Under the law, a condominium is an interest in real property consisting of a
separate interest in a unit in a residential, industrial or commercial building and an undivided interest in
common, directly or indirectly, in the land on which it is located and in other common areas of the
building.[46] To enable the orderly administration over these common areas which are jointly owned by
the various unit owners, the Condominium Act permits the creation of a condominium corporation,
which is specially formed for the purpose of holding title to the common area, in which the holders of
separate interests shall automatically be members or shareholders, to the exclusion of others, in
proportion to the appurtenant interest of their respective

units.[47] The necessity of a condominium corporation has not gained widespread acceptance[48], and
even is merely permissible under the Condominium Act.[49] Nonetheless, the condominium corporation
has been resorted to by many condominium projects, such as the Corporation in this case.

In line with the authority of the condominium corporation to manage the condominium project, it may
be authorized, in the deed of restrictions, to make reasonable assessments to meet authorized
expenditures, each condominium unit to be assessed separately for its share of such expenses in
proportion (unless otherwise provided) to its owners fractional interest in any common areas.[50] It is
the collection of these assessments from unit owners that form the basis of the City Treasurers claim
that the Corporation is doing business.

The Condominium Act imposes several limitations on the condominium corporation that prove crucial to
the disposition of this case. Under Section 10 of the law, the

corporate purposes of a condominium corporation are limited to the holding of the common areas,
either in ownership or any other interest in real property recognized by law; to the management of the
project; and to such other purposes as may be necessary, incidental or convenient to the
accomplishment of such purpose.[51] Further, the same provision prohibits the articles of incorporation
or by-laws of the condominium corporation from containing any provisions which are contrary to the
provisions of the Condominium Act, the enabling or master deed, or the declaration of restrictions of the
condominium project.[52]

We can elicit from the Condominium Act that a condominium corporation is precluded by statute from
engaging in corporate activities other than the holding of the common areas, the administration of the
condominium project, and other acts necessary, incidental or convenient to the accomplishment of such
purposes. Neither the maintenance of livelihood, nor the procurement of profit, fall within the scope of
permissible corporate purposes of a condominium corporation under the Condominium Act.
The Court has examined the particular Articles of Incorporation and By-Laws of the Corporation, and
these documents unmistakably hew to the limitations contained in the Condominium Act. Per the
Articles of Incorporation, the Corporations corporate purposes are limited to: (a) owning and holding
title to the common and limited common areas in the Condominium Project; (b) adopting such
necessary measures for the protection and safeguard of the unit owners and their property, including
the power to contract for security services and for insurance coverage on the entire project; (c) making
and adopting needful rules and regulations concerning the use, enjoyment and occupancy of the units
and common areas, including the power to fix penalties and assessments for violation of such rules; (d)
to provide for the maintenance, repair, sanitation, and cleanliness of the common and limited common
areas; (e) to provide and contract for public utilities and other services to the common areas; (f) to
contract for the services of persons or firms to assist in the management and operation of the
Condominium Project; (g) to discharge any lien or encumbrances upon the Condominium Project; (h) to
enforce the terms contained in the Master Deed with Declaration of Restrictions of the Project; (i) to levy
and

collect those assessments as provided in the Master Deed, in order to defray the costs, expenses and
losses of the condominium; (j) to acquire, own, hold, enjoy, lease operate and maintain, and to convey,
sell transfer, mortgage or otherwise dispose of real or personal property in connection with the purposes
and activities of the corporation; and (k) to exercise and perform such other powers reasonably
necessary, incidental or convenient to accomplish the foregoing purposes.[53]

Obviously, none of these stated corporate purposes are geared towards maintaining a livelihood or the
obtention of profit. Even though the Corporation is empowered to levy assessments or dues from the
unit owners, these amounts collected are not intended for the incurrence of profit by the Corporation or
its members, but to shoulder the multitude of necessary expenses that arise from the maintenance of
the Condominium Project. Just as much is confirmed by Section 1, Article V of the Amended By-Laws,
which enumerate the particular expenses to be defrayed by the regular assessments collected from the
unit owners. These would include the salaries of the employees of the Corporation, and the cost of
maintenance and ordinary repairs of the common areas.[54]

The City Treasurer nonetheless contends that the collection of these assessments and dues are with the
end view of getting full appreciative living values for the condominium units, and as a result, profit is
obtained once these units are sold at higher prices. The Court cites with approval the two counterpoints
raised by the Court of Appeals in rejecting this contention. First, if any profit is obtained by the sale of
the units, it accrues not to the corporation but to the unit owner. Second, if the unit owner does obtain
profit from the sale of the corporation, the owner is already required to pay capital gains tax on the
appreciated value of the condominium unit.[55]
Moreover, the logic on this point of the City Treasurer is baffling. By this rationale, every Makati City car
owner may be considered as being engaged in business, since the repairs or improvements on the car
may be deemed oriented towards appreciating the value of the car upon resale. There is an evident
distinction between persons who spend on repairs and improvements on their personal and real
property for the purpose of increasing its resale value, and those who defray such expenses for the
purpose of preserving the property. The vast majority of persons fall under the second category, and it
would be highly specious to subject these persons to local business taxes. The profit motive in such cases
is hardly the driving factor behind such improvements, if it were contemplated at all. Any profit that
would be derived under such circumstances would merely be incidental, if not accidental.

Besides, we shudder at the thought of upholding tax liability on the basis of the standard of full
appreciative living values, a phrase that defies statutory explication, commonsensical meaning, the
English language, or even definition from Google. The exercise of the power of taxation constitutes a
deprivation of property under the

due process clause,[56] and the taxpayers right to due process is violated when arbitrary or oppressive
methods are used in assessing and collecting taxes.[57] The fact that the Corporation did not fall within
the enumerated classes of taxable businesses under either the Local Government Code or the Makati
Revenue Code already forewarns that a clear demonstration is essential on the part of the City Treasurer
on why the Corporation should be taxed anyway. Full appreciative living values is nothing but blather in
search of meaning, and to impose a tax hinged on that standard is both arbitrary and oppressive.

The City Treasurer also contends that the fact that the Corporation is engaged in business is evinced by
the Articles of Incorporation, which specifically empowers the Corporation to acquire, own, hold, enjoy,
lease, operate and maintain, and to convey, sell, transfer mortgage or otherwise dispose of real or
personal property.[58] What the City Treasurer fails to add is that every corporation
organized under the Corporation Code[59] is so specifically empowered. Section 36(7) of the Corporation
Code states that every corporation incorporated under the Code has the power and capacity to
purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such
real and personal property . . . as the transaction of the lawful business of the corporation may
reasonably and necessarily require . . . .[60] Without this power, corporations, as juridical persons, would
be deprived of the capacity to engage in most meaningful legal relations.

Again, whatever capacity the Corporation may have pursuant to its power to exercise acts of ownership
over personal and real property is limited by its stated corporate purposes, which are by themselves
further limited by the Condominium Act. A condominium corporation, while enjoying such powers of
ownership, is prohibited by law from transacting its properties for the purpose of gainful profit.

Accordingly, and with a significant degree of comfort, we hold that condominium corporations are
generally exempt from local business taxation under the Local Government Code, irrespective of any
local ordinance that seeks to declare otherwise.

Still, we can note a possible exception to the rule. It is not unthinkable that the unit owners of a
condominium would band together to engage in activities for profit under the shelter of the
condominium corporation.[61] Such activity would be prohibited under the Condominium Act, but if the
fact is established, we see no reason why the condominium corporation may be made liable by the local
government unit for business taxes. Even though such activities would be considered as ultra vires, since
they are engaged in beyond the legal capacity of the condominium corporation[62], the principle of
estoppel would preclude the corporation or its officers and members from invoking the void nature of its
undertakings for profit as a means of acquitting itself of tax liability.

Still, the City Treasurer has not posited the claim that the Corporation is engaged in business activities
beyond the statutory purposes of a condominium corporation. The assessment appears to be based
solely on the Corporations collection of assessments from unit owners, such assessments being utilized
to defray the necessary expenses for the Condominium Project and the common areas. There is no
contemplation of business, no orientation towards profit in this case. Hence, the assailed tax assessment
has no basis under the Local Government Code or the Makati Revenue Code, and the insistence of the
city in its collection of the void tax constitutes an attempt at deprivation of property without due process
of law.
WHEREFORE, the petition is DENIED. No costs.

SO ORDERED

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 Decision[1] 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 Reconsideration[3] 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

G.R. No. L-1334 August 29, 1947

MARTA ESPINOSA, ET AL., petitioners,

vs.

QUERUBE C. MAKALINTAL, ET AL., respondents.

Fulgencio Vega, Felix Evidente and Alfonso M. Delicana for petitioners.

Felipe Ysmael and Constantino G. Gulmatico for respondent Juan Paranpan.

PERFECTO, J.:

Petitioners pray that the Court of First Instance of Iloilo be ordered to dismiss civil case No. 200 for lack
of jurisdiction.

The complaint in said case prays that defendant be ordered to return to the plaintiff the material
possession of the parcel of public forest land described in the complaint and to pay plaintiff as damages
P12,000, plus P4,000 for each year of illegal possession of the land in question. The land is located in the
municipality of Barotac Nuevo, Iloilo; is the object of lease agreement No. 123, executed on February 12,
1941, between plaintiff and the Commonwealth of the Philippines, represented by the Secretary of
Agriculture and Commerce; is now a fishpond; and is described as follows:

The land covers lots Nos. 1096 and 1081 of Barotac Nuevo Cadastre, B. L. Case No. 4, bounded on the
north by lot No. 1211, on the east by lot No. 1086, on the south by cultivated land, and on the west by
cultivated land and lot No. 1210; containing an area of approximately 23.60 hectares.

On December 27, 1945, defendants moved for the dismissal of the complaint upon the theory that the
lower court has no jurisdiction over the subject matter of the case. Their theory is that the litigation
properly belongs to the jurisdiction and competency of the Department of Agriculture and Commerce,
who had absolute and discretionary authority to decide cases of conflicting claims regarding the
disposition of public lands for fishpond purposes.

After the parties were given full opportunity to argue the motion, the lower court denied it on January
15, 1946. On January 18, defendants filed their answer. On January 29, plaintiff filed an amended
complaint, including Tereso Sason as defendant, who filed his answer on January 27. On March 11,
plaintiff filed his reply to the answers.

No

On February 8, 1947, defendants moved for reconsideration of the order of January 15, 1946, insisting
that the amended complaint be dismissed for lack of jurisdiction. The motion was denied on February
11, 1947. In his complaint, plaintiff alleged that since the date of the execution of the lease agreement
entered into by him with the Commonwealth on February 12, 1941, he was in peaceful, continuous and
open possession of the land in question, enjoying the exclusive use of its products, and complying with
his duties and enjoying all rights granted him under said lease agreement; that in the month of February,
1944, through force, intimidation, and strategy, and availing themselves of the aid and services of
government officials, employees and soldiers, and taking advantage of the chaotic conditions incident to
the war, defendants entered upon the land, claiming ownership thereto, and since February, 1944, they
have been removing and taking all the products of the land, consisting mainly of milkfish, and selling the
same and using the proceeds for their personal benefit; and that by reason of said illegal acts of
defendants, plaintiff suffered damages in the sum of P8,000 and will suffer damages at the rate of P4,000
a year for each year of illegal possession.

The two original defendants alleged in their answer that the fishpond in question was formally granted in
lease to Tereso Sason who, on April 24, 1936, mortgaged his rights to plaintiff in the form of sale with
right to repurchase within eight years from said date; that on February 4, 1941, Sason sold for the sum of
P6,000 his right to repurchase to defendants who delivered to Sason the sum of P3,864, which Sason
paid to plaintiff on February 14, 1944; that plaintiff has never been in the possession of the fishpond and
that, in violation of his agreement with Sason, through false representations, obtained lease agreement
No. 123. Sason alleged in his answer that the fishpond was adjudicated to him in 1927; that on February
27, 1930, he mortgaged it to plaintiff to guarantee a debt of P2,000, the document having been executed
in the form of a pacto de retro sale; that on April 24, 1936, Sason and plaintiff executed another contract
increasing the mortgage indebtedness to P3,864 payable within eight years, the document having been
made also in the form of sale with right to repurchase; that plaintiff, taking advantage of the instrument,
secured a fishpond permit over the area in litigation and subsequently converted the said permit into
fishpond lease agreement No. 123; that on February 4, 1941, Sason sold his rights to defendant Marta
Espinosa who took immediate possession of the fishpond, while Sason offered to pay the plaintiff his
mortgage indebtedness of P3,864, but plaintiff refused to accept the same, and Marta Espinosa then
assumed the payment of the yearly interest of P600 and had paid the same to plaintiff for the three
years; that on February 14, 1944, Sason redeemed his mortgaged indebtedness by paying P3,864 to
plaintiff, the amount having been supplied by Marta Espinosa. Sason counterclaimed from plaintiff
P2,241, an amount in excess of the alleged usurious interest paid by him to plaintiff.

In support of their stand, petitioners invoke sections 3, 4 and 63 of Act 4003, as amended by
Commonwealth Act 471, paragraph (o) of section 33 of Administrative Order No. 14 of the Department
of Agriculture and Commerce and sections 2, 3, and 4 of Commonwealth Act 141. Apparently, petitioners
are laboring under a misunderstanding of the provisions of law they themselves invoke, as nothing can
be found in them to the effect of granting the Secretary of Agriculture and Commerce the judicial power,
whether exclusive or concurrent, to decide the legal controversies as raised by the pleadings of both
parties, besides the fact that, even in the false hypothesis that such power has been granted by law, the
grant shall not have any effect, as all judicial powers have been lodge by the Constitution exclusively in
the Supreme Court and in such inferior tribunals as may have been established by law. (Section 1, Art.
VIII, of the Constitution.) The powers granted to the Secretary of Agriculture and Commerce by the
pertinent provisions of law invoked by petitioners are all of executive and administrative nature, such as
granting of licenses, permits, leases, and contracts, or approving, rejecting, reinstating, or cancelling
applications, or deciding conflicting applications. The controversies between the parties, as raised in the
pleadings in case No. 200 of the Court of First Instance of Iloilo appear to have arisen upon
disagreements in civil or contractual relations between the litigants to which the legal provisions invoked
by petitioner are not and cannot be applicable. It should be far-fetched to recognize in the Secretary of
Agriculture and Commerce the power of determining whether or not, as alleged by Paranpan, he has
been deprived by defendants of the possession of the fishpond in question and of the legal effects of
such alleged deprivation, or upon the nature of the two contracts of mortgage in the form of sale with
right to repurchase between Sason and Paranpan, as alleged by defendants, or whether Paranpan has
charged Sason with usurious interests. These are questions judicial in nature and only courts of justice
can decide them.

Petition denied with costs against petitioners.

G.R. No. L-39919 January 30, 1934

FORTUNATO ORTUA, petitioner-appellant,

vs.

VICENTE SINGSON ENCARNACION, Secretary of Agriculture and Commerce, ET AL., respondents-

appellees.

Villafuerte, Tible and Valer for appellant.

Office of the Solicitor-General Hilado for appellees.

MALCOLM, J.:

in this case the petitioner and appellant seeks the issuance of a writ of mandamus directed against the
Secretary of Agriculture and Commerce and the Director of Lands, for the purpose of compelling them to
give due course to his sale's application for a tract of public land. The demurrers interposed to the
complaint by the respondents and appellees were sustained in the trial court, and on the failure of the
petitioner further to amend his complaint, the action was dismissed, without costs.

The principal facts admitted by the pleadings may be stated as follows: In January, 1920, the petitioner
Fortunato Ortua filed an application with the Bureau of Lands for the purchase of a tract of public land
situated in the municipality of San Jose, Province of Camarines Sur. Following an investigation conducted
by the Bureau of Lands, Ortua's application was rejected, allowing him, however, to file a sale or lease
application for the portion of the land classified to be suitable for commercial purposes, within a period
of sixty days from the date of the decision and upon payment of P3,000 for accrued rents. Two motions
for reconsideration of the decision were filed and denied. On appeal to the then Secretary of Agriculture
and Natural Resources (Agriculture and Commerce), the decision was affirmed, except that the sum of
P3,000 was reduced to P400.

It should be explained that one condition for the purchase of a tract of public agricultural land, provided
by the Public Land Law, Act No. 2874, in its sections 23 and 88, is that the purchaser shall be a citizen of
lawful age of the Philippine Islands or of the United States. Fortunato Ortua in his application stated that
he was a Filipino citizen, but the Director of Lands held that on the contrary, Ortua was a Chinese citizen.
On this question, the Director of Lands found established the following facts: Fortunato Ortua was born
in 1885 in Lagonoy, Camarines Sur, Philippine Islands, being the natural son of Irene Demesa, a Filipina,
and Joaquin Ortua, a Chinese. In 1896 Fortunato was sent to China to study. While he was in China his
father and mother were legally married. Fortunato returned to the Philippines in 1906, that is, when he
was twenty-one years of age.

It was conceded by the Director of Lands that presumptively Fortunato Ortua was a Philippine citizen,
but certain acts of Ortua were pointed to as demonstrating that he had forfeited his Philippine
citizenship. Thus it was stated that Ortua voluntarily applied for a landing certificate of residence which
was issued by the Insular Collector of Customs and which is only given to Chinese persons. Also, when
Ortua applied for the registration of a boat, and it was denied by the Insular Collector of Customs on the
ground that the appellant was a Chinese citizen, Ortua submitted to the ruling.

The Director of Lands performs his functions pursuant to the provisions of the Public Land Law. In
accordance with this law, the Secretary of Agriculture and Commerce is made the executive officer
charged with carrying out the provisions of the Public Land Law, and he performs this duty through the
Director of Lands (sec. 3). Subject to the control of the executive head, the Director of Lands is by law
vested with direct executive control over land matters, "and his decisions as to questions of fact shall be
conclusive when approved by the Secretary of Agriculture and Commerce." (Sec. 4).

The foregoing analysis of the pertinent provisions of the Public Land Law will show why in the opening
paragraphs of this decision, we accepted the decision of the Director of Lands on questions of facts as
conclusive. We would even go farther and would hold that the Director of Lands has been made by law a
quasi-judicial officer. As such officer he makes findings of fact, even passes upon questions of mixed fact
and law, and considers and decides the qualifications of applicants for the purchase of public lands. A
discretion is lodged by law in the Director of Lands which should not be interfered with. The decisions of
the Director of Lands on the construction of the Public Land Law are entitled to great respect by the
courts.

Accordingly, to paraphrase the authorities and decisions coming principally from the United States
Supreme Court, we deduce the rule on the subject to be, that a decision rendered by the Director of
Lands and approved by the Secretary of Agriculture and Commerce, upon a question of fact is conclusive
and not subject to be reviewed by the courts, in the absence of a showing that such decision was
rendered in consequence of fraud, imposition, or mistake, other than error of judgment in estimating
the value or effect of evidence, regardless of whether or not it is consistent with the preponderance of
the evidence, so long as there is some evidence upon which the finding in question could be made.
(Vargas and Mañalac, The Philippine Land Registration Law, pp. 738-740; Julian vs. Apostol [1928], 52
Phil., 422; 50 C. J., 1089 et seq.; Johnson vs. Riddle [1916], 240 U.S., 467.)

There is, however, another side to the case. It certainly was not intended by the legislative body to
remove from the jurisdiction of courts all right to review decisions of the Bureau of Lands, for to do so
would be to attempt something which could not be done legally. Giving force to all possible intendments
regarding the facts as found by the Director of Lands, yet so much of the decision of the Director of
Lands as relates to a question of law is in no sense conclusive upon the courts, but is subject to review. In
other words, any action of the Director of Lands which is based upon a misconstruction of the law can be
corrected by the courts. (Shepley vs. Cowan [1876], 91 U.S., 330; Moore vs. Robbins [1878], 96 U.S., 530;
Marquez vs. Frisbie [1879], 101 U.S., 473; Black vs. Jackson [1900], 177 U.S., 349; Johnson vs. Riddle,
supra.)

Having adjusted this fundamental matter, it is now for the court to determine if the question of law
arising from the undisputed evidence was correctly decided by the Director of Lands. This question is, if
the petitioner Fortunato Ortua should be considered to be a Philippine citizen or a Chinese citizen.
Presumptively it is admitted that he is a Philippine citizen. More correctly stated, Fortunato Ortua had a
sort of a dual citizenship, and had it within his power either to elect to become a Philippine citizen or a
Chinese citizen. Predicated on these assumptions, we doubt very much if it could be found that Ortua
has by his own acts repudiated his Philippine citizenship and chosen Chinese citizenship. The Director of
Lands gave too much prominence, we think, to two minor facts, susceptible of explanation. When Ortua
returned from China at the age of twenty-one, it was the most natural thing in the world for him to land
as a Chinese, for this would facilitate entry and obviate complications. Again, when Ortua applied for the
registration of a boat, there may have been any number of reasons why he did not care to appeal from
the decision of the Insular Collector of Customs. On the other hand, some consideration should be given
to the intention of the petitioner, and he vigorously insists that it is his desire to be considered a
Philippine citizen. He has taken a Filipino name. He has gone into business and has improved the
property here in question to a great extent. There has been no implied renunciation of citizenship,
because the petitioner has been domiciled in these Islands except for a short period during his infancy
when he temporarily sojourned in China for study. On the contrary, he states that he has always
considered himself to be a Filipino, and that he has elected to remain as a Philippine citizen. Therefore,
on the facts found by the Director of Lands, we hold that clear error of law resulted in not considering
petitioner a Philippine citizen and so qualified under the Public Land Law to purchase public agricultural
lands.

Sustaining the assigned errors, the order of the trial court will be set aside, and the record will be
remanded to the court of origin for further proceedings in accordance with law. No pronouncement as
to costs in this instance.