Chavez v PEA and AMARI

G.R. No. 133250. July 9, 2002.

Facts: On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree No.
1084 creating PEA. PD No. 1084 tasked PEA "to reclaim land, including foreshore and submerged
areas," and "to develop, improve, acquire, lease and sell any and all kinds of lands." On the same date,
then President Marcos issued Presidential Decree No. 1085 transferring to PEA the "lands reclaimed in
the foreshore and offshore of the Manila Bay" under the Manila-Cavite Coastal Road and Reclamation
Project (MCCRRP).

On January 19, 1988, then President Corazon C. Aquino issued Special Patent No. 3517, granting and
transferring to PEA "the parcels of land so reclaimed under the Manila-Cavite Coastal Road and
Reclamation Project (MCCRRP) containing a total area of one million nine hundred fifteen thousand eight
hundred ninety four (1,915,894) square meters." Subsequently, on April 9, 1988, the Register of Deeds of
the Municipality of Parañaque issued Transfer Certificates of Title Nos. 7309, 7311, and 7312, in the
name of PEA, covering the three reclaimed islands known as the "Freedom Islands" located at the
southern portion of the Manila-Cavite Coastal Road, Parañaque City.

PEA and AMARI entered into the JVA through negotiation without public bidding. On April 28, 1995, the
Board of Directors of PEA, in its Resolution No. 1245, confirmed the JVA. On June 8, 1995, then
President Fidel V. Ramos, through then Executive Secretary Ruben Torres, approved the JVA.

The Senate Committees reported the results of their investigation in Senate Committee Report No.
560 dated September 16, 1997. Among the conclusions of their report are: (1) the reclaimed lands PEA
seeks to transfer to AMARI under the JVA are lands of the public domain which the government has not
classified as alienable lands and therefore PEA cannot alienate these lands; (2) the certificates of title
covering the Freedom Islands are thus void, and (3) the JVA itself is illegal.

On December 5, 1997, then President Fidel V. Ramos issued Presidential Administrative Order No.
365 creating a Legal Task Force to conduct a study on the legality of the JVA in view of Senate
Committee Report No. 560. The members of the Legal Task Force were the Secretary of Justice, the
Chief Presidential Legal Counsel, and the Government Corporate Counsel. The Legal Task Force upheld
the legality of the JVA, contrary to the conclusions reached by the Senate Committees.

On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a taxpayer, filed the instant
Petition for Mandamus with Prayer for the Issuance of a Writ of Preliminary Injunction and Temporary
Restraining Order. Petitioner contends the government stands to lose billions of pesos in the sale by PEA
of the reclaimed lands to AMARI. Petitioner prays that PEA publicly disclose the terms of any
renegotiation of the JVA, invoking Section 28, Article II, and Section 7, Article III, of the 1987 Constitution
on the right of the people to information on matters of public concern.

Due to the approval of the Amended JVA by the Office of the President, petitioner now prays that on
"constitutional and statutory grounds the renegotiated contract be declared null and void."
Issue: The issues raised by petitioner, PEA and AMARI are as follows:
1. Whether the reliefs prayed for are moot and academic because of subsequent events;
2. Whether the petition should be dismissed for failing to observe the principle of governing the
heirarchy of courts;
3. Whether the petition should be dismissed for non-exhaustion of administrative remedies;
4. Whether petitioner has locus standi;
5. Whether the constitutional right to information includes information on on-going neogtiations
BEFORE a final agreement;
6. Whether the stipulations in the amended joint venture agreement for the transfer to AMARI of
certain lands, reclaimed and still to be reclaimed violate the 1987 Constitution; and
7. Whether the Court has jurisdiction over the issue whether the amended JVA is grossly
disadvantageous to the government

Held: 1. We rule that the signing and of the Amended JVA by PEA and AMARI and its approval by the
President cannot operate to moot the petition and divest the Court of its jurisdiction.

PEA and AMARI have still to implement the Amended JVA. The prayer to enjoin the signing of the
Amended JVA on constitutional grounds necessarily includes preventing its implementation if in the
meantime PEA and AMARI have signed one in violation of the Constitution. Petitioner's principal basis in
assailing the renegotiation of the JVA is its violation of the Section 3, Article XII of the Constitution, which
prohibits the government from alienating lands of the public domain to private corporations. The Amended
JVA is not an ordinary commercial contract but one which seeks to transfer title and ownership to 367.5
hectares of reclaimed lands and submerged areas of Manila Bay to a single private corporation.

Also, the instant petition is a case of first impression being a wholly government owned corporation
performing public as well as proprietary functions. All previous decisions of the Court involving Section 3,
Article XII of the 1987 Constitution, or its counterpart provision in the 1973 Constitution, covered
agricultural lands sold to private corporations which acquired the lands from private parties.

Lastly, there is a need to resolve immediately the constitutional issue raised in this petition because of
the possible transfer at any time by PEA to AMARI of title and ownership to portions of the reclaimed
lands. Under the Amended JVA, PEA is obligated to transfer to AMARI the latter's seventy percent
proportionate share in the reclaimed areas as the reclamation progresses, The Amended JVA even allows
AMARI to mortgage at any time the entire reclaimed area to raise financing for the reclamation project.

2. The instant case, however, raises constitutional issues of transcendental importance to the public.
The Court can resolve this case without determining any factual issue related to the case. Also, the
instant case is a petition for mandamus which falls under the original jurisdiction of the Court under
Section 5, Article VIII of the Constitution. We resolve to exercise primary jurisdiction over the instant case.

3. PEA was under a positive legal duty to disclose to the public the terms and conditions for the sale of
its lands. The law obligated PEA make this public disclosure even without demand from petitioner or from
anyone. PEA failed to make this public disclosure because the original JVA, like the Amended JVA, was
the result of a negotiated contract, not of a public bidding. Considering that PEA had an affirmative
statutory duty to make the public disclosure, and was even in breach of this legal duty, petitioner had the
right to seek direct judicial intervention.

The principle of exhaustion of administrative remedies does not apply when the issue involved is a
purely legal or constitutional question. The principal issue in the instant case is the capacity of AMARI to
acquire lands held by PEA in view of the constitutional ban prohibiting the alienation of lands of the public
domain to private corporations. We rule that the principle of exhaustion of administrative remedies does
not apply in the instant case.

The petitioner has standing to bring this taxpayer's suit because the petition seeks to compel PEA to
comply with its constitutional duties. There are two constitutional issues involved here. First is the right of
citizens to information on matters of public concern. Second is the application of a constitutional provision
intended to insure the equitable distribution of alienable lands of the public domain among Filipino
Citizens.
The thrust of the second issue is to prevent PEA from alienating hundreds of hectares of alienable lands
of the public domain in violation of the Constitution, compelling PEA to comply with a constitutional duty to
the nation.

4. Ordinary taxpayers have a right to initiate and prosecute actions questioning the validity of acts or
orders of government agencies or instrumentalities, if the issues raised are of 'paramount public interest,'
and if they 'immediately affect the social, economic and moral well being of the people.'

We rule that since the instant petition, brought by a citizen, involves the enforcement of constitutional
rights — to information and to the equitable diffusion of natural resources — matters of transcendental
public importance, the petitioner has the requisite locus standi.

5. The State policy of full transparency in all transactions involving public interest reinforces the
people's right to information on matters of public concern. This State policy is expressed in Section 28,
Article II of the Constitution, thus: “Subject to reasonable conditions prescribed by law, the State adopts
and implements a policy of full public disclosure of all its transactions involving public interest."

Contrary to AMARI's contention, the commissioners of the 1986 Constitutional Commission

understood that the right to information "contemplates inclusion of negotiations leading to the
consummation of the transaction." Certainly, a consummated contract is not a requirement for the
exercise of the right to information. Otherwise, the people can never exercise the right if no contract is
consummated, and if one is consummated, it may be too late for the public to expose its defects.

Requiring a consummated contract will keep the public in the dark until the contract, which may be
grossly disadvantageous to the government or even illegal, becomes a fait accompli.

However, the right to information does not compel PEA to prepare lists, abstracts, summaries and the
like relating to the renegotiation of the JVA. 34 The right only affords access to records, documents and
papers, which means the opportunity to inspect and copy them. One who exercises the right must copy
the records, documents and papers at his expense. The exercise of the right is also subject to reasonable
regulations to protect the integrity of the public records and to minimize disruption to government
operations, like rules specifying when and how to conduct the inspection and copying.

6. Article 339 of the Civil Code of 1889 defined property of public dominion as follows:
"Art. 339. Property of public dominion is —
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed
by the State, riverbanks, shores, roadsteads, and that of a similar character;
2. That belonging exclusively to the State which, without being of general public use, is employed in
some public service, or in the development of the national wealth, such as walls, fortresses, and other
works for the defense of the territory, and mines, until granted to private individuals.

Property devoted to public use referred to property open for use by the public. In contrast, property
devoted to public service referred to property used for some specific public service and open only to those
authorized to use the property.Property of public dominion referred not only to property devoted to public
use, but also to property not so used but employed to develop the national wealth. This class of property
constituted property of public dominion although employed for some economic or commercial activity to
increase the national wealth.

"Art. 341. Property of public dominion, when no longer devoted to public use or to the defense of the
territory, shall become a part of the private property of the State." This provision, however, was not self-
executing. The legislature, or the executive department pursuant to law, must declare the property no
longer needed for public use or territorial defense before the government could lease or alienate the
property to private parties.

Act No. 2874 of the Philippine Legislature

Sec. 55. Any tract of land of the public domain which, being neither timber nor mineral land, shall be
classified as suitable for residential purposes or for commercial, industrial, or other productive purposes
other than agricultural purposes, and shall be open to disposition or concession, shall be disposed of
under the provisions of this chapter, and not otherwise.

The rationale behind this State policy is obvious. Government reclaimed, foreshore and marshy public
lands for non-agricultural purposes retain their inherent potential as areas for public service. This is the
reason the government prohibited the sale, and only allowed the lease, of these lands to private parties.
The State always reserved these lands for some future public service.

However, government reclaimed and marshy lands, although subject to classification as disposable
public agricultural lands, could only be leased and not sold to private parties because of Act No. 2874.

The 1987 Constitution continues the State policy in the 1973 Constitution banning private corporations
from acquiring any kind of alienable land of the public domain. Like the 1973 Constitution, the 1987
Constitution allows private corporations to hold alienable lands of the public domain only through lease.
As in the 1935 and 1973 Constitutions, the general law governing the lease to private corporations of
reclaimed, foreshore and marshy alienable lands of the public domain is still CA No. 141.

Without the constitutional ban, individuals who already acquired the maximum area of alienable lands
of the public domain could easily set up corporations to acquire more alienable public lands. An individual
could own as many corporations as his means would allow him. An individual could even hide his
ownership of a corporation by putting his nominees as stockholders of the corporation. The corporation is
a convenient vehicle to circumvent the constitutional limitation on acquisition by individuals of alienable
lands of the public domain.

PD No. 1085, coupled with President Aquino's actual issuance of a special patent covering the
Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as alienable or
disposable lands of the public domain. Being neither timber, mineral, nor national park lands, the
reclaimed Freedom Islands necessarily fall under the classification of agricultural lands of the public
domain. Under the 1987 Constitution, agricultural lands of the public domain are the only natural
resources that the State may alienate to qualified private parties. All other natural resources, such as the
seas or bays, are "waters . . . owned by the State" forming part of the public domain, and are inalienable
pursuant to Section 2, Article XII of the 1987 Constitution.

In short, DENR is vested with the power to authorize the reclamation of areas under water, while PEA
is vested with the power to undertake the physical reclamation of areas under water whether directly or
through private contractors. DENR is also empowered to classify lands of the public domain into alienable
or disposable lands subject to the approval of the President. On the other hand, PEA is tasked to develop,
sell or lease the reclaimed alienable lands of the public domain.

Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas does not make
the reclaimed lands alienable or disposable lands of the public domain, much less patrimonial lands of
PEA. Likewise, the mere transfer by the National Government of lands of the public domain to PEA does
not make the lands alienable or disposable lands of the public domain, much less patrimonial lands of
PEA.

There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its reclaimed
lands. PD No. 1085 merely transferred "ownership and administration" of lands reclaimed from Manila
Bay to PEA, while EO No. 525 declared that lands reclaimed by PEA "shall belong to or be owned by
PEA." PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer, deal in,
subdivide, dispose, lease and sell any and all kinds of lands . . . owned, managed, controlled and/or
operated by the government." 87 (Emphasis supplied) There is, therefore, legislative authority granted to
PEA to sell its lands, whether patrimonial or alienable lands of the public domain. PEA may sell to private
parties its patrimonial properties in accordance with the PEA charter free from constitutional limitations.
The constitutional ban on private corporations from acquiring alienable lands of the public domain does
not apply to the sale of PEA's patrimonial lands.

Moreover, under Section 79 of PD No. 1445, otherwise known as the Government Auditing Code, the
government is required to sell valuable government property through public bidding. Section 79 of PD No.
1445 mandates that:... "In the event that the public auction fails, the property may be sold at a private sale
at such price as may be fixed by the same committee or body concerned and approved by the
Commission."

However, the original JVA dated April 25, 1995 covered not only the Freedom Islands and the additional
250 hectares still to be reclaimed, it also granted an option to AMARI to reclaim another 350 hectares.
The original JVA, a negotiated contract, enlarged the reclamation area to 750 hectares. The failure of
public bidding on December 10, 1991, involving only 407.84 hectares, is not a valid justification for a
negotiated sale of 750 hectares, almost double the area publicly auctioned.

Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the
alienable land of the public domain automatically becomes private land cannot apply to government units
and entities like PEA.

The grant of legislative authority to sell public lands in accordance with Section 60 of CA No. 141 does
not automatically convert alienable lands of the public domain into private or patrimonial lands. The
alienable lands of the public domain must be transferred to qualified private parties, or to government
entities not tasked to dispose of public lands, before these lands can become private or patrimonial lands.
Otherwise, the constitutional ban will become illusory if Congress can declare lands of the public domain
as private or patrimonial lands in the hands of a government agency tasked to dispose of public lands.

To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands
will sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of
alienable land of the public domain. This scheme can even be applied to alienable agricultural lands of
the public domain since PEA can "acquire . . . any and all kinds of lands."

The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates
of title in the name of PEA, are alienable lands of the public domain. PEA may lease these lands to
private corporations but may not sell or transfer ownership of these lands to private corporations.

7. Considering that the Amended JVA is null and void ab initio, there is no necessity to rule on this last
issue. Besides, the Court is not the trier of facts, and this last issue involves a determination of factual
matters.

WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari Coastal Bay
Development Corporation are PERMANENTLY ENJOINED from implementing the Amended Joint
Venture Agreement which is hereby declared NULL and VOID ab initio.