G. R. No. 127882 - January 27, 2004
LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC.,
represented by its Chairman F'LONG MIGUEL M.
LUMAYONG, WIGBERTO E. TAÑADA, PONCIANO
BENNAGEN, JAIME TADEO, RENATO R. CONSTANTINO, JR.,
F'LONG AGUSTIN M. DABIE, ROBERTO P. AMLOY, RAQIM
L. DABIE, SIMEON H. DOLOJO, IMELDA M. GANDON, LENY
B. GUSANAN, MARCELO L. GUSANAN, QUINTOL A.
LABUAYAN, LOMINGGES D. LAWAY, BENITA P.
TACUAYAN, minors JOLY L. BUGOY, represented by his
father UNDERO D. BUGOY, ROGER M. DADING,
represented by his father ANTONIO L. DADING, ROMY M.
LAGARO, represented by his father TOTING A. LAGARO,
MIKENY JONG B. LUMAYONG, represented by his father
MIGUEL M. LUMAYONG, RENE T. MIGUEL, represented by
his mother EDITHA T. MIGUEL, ALDEMAR L. SAL,
represented by his father DANNY M. SAL, DAISY RECARSE,
represented by her mother LYDIA S. SANTOS, EDWARD M.
EMUY, ALAN P. MAMPARAIR, MARIO L. MANGCAL, ALDEN
S. TUSAN, AMPARO S. YAP, VIRGILIO CULAR, MARVIC
M.V.F. LEONEN, JULIA REGINA CULAR, GIAN CARLO
CULAR, VIRGILIO CULAR, JR., represented by their father
VIRGILIO CULAR, PAUL ANTONIO P. VILLAMOR,
represented by his parents JOSE VILLAMOR and
ELIZABETH PUA-VILLAMOR, ANA GININA R. TALJA,
represented by her father MARIO JOSE B. TALJA,
SHARMAINE R. CUNANAN, represented by her father
ALFREDO M. CUNANAN, ANTONIO JOSE A. VITUG III,
represented by his mother ANNALIZA A. VITUG, LEAN D.
NARVADEZ, represented by his father MANUEL E.
NARVADEZ, JR., ROSERIO MARALAG LINGATING,
represented by her father RIO OLIMPIO A. LINGATING,
MARIO JOSE B. TALJA, DAVID E. DE VERA, MARIA
MILAGROS L. SAN JOSE, SR., SUSAN O. BOLANIO, OND,
LOLITA G. DEMONTEVERDE, BENJIE L. NEQUINTO,1ROSE
LILIA S. ROMANO, ROBERTO S. VERZOLA, EDUARDO
AURELIO C. REYES, LEAN LOUEL A. PERIA, represented by
his father ELPIDIO V. PERIA,2 GREEN FORUM PHILIPPINES,
GREEN FORUM WESTERN VISAYAS, (GF-WV),
ENVIRONMETAL LEGAL ASSISTANCE CENTER (ELAC),
PHILIPPINE KAISAHAN TUNGO SA KAUNLARAN NG
KANAYUNAN AT REPORMANG PANSAKAHAN
(KAISAHAN),3 KAISAHAN TUNGO SA KAUNLARAN NG
KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN),
PARTNERSHIP FOR AGRARIAN REFORM and RURAL
DEVELOPMENT SERVICES, INC. (PARRDS), PHILIPPINE
PART`NERSHIP FOR THE DEVELOPMENT OF HUMAN
RESOURCES IN THE RURAL AREAS, INC. (PHILDHRRA),
WOMEN'S LEGAL BUREAU (WLB), CENTER FOR
ALTERNATIVE DEVELOPMENT INITIATIVES, INC. (CADI),
UPLAND DEVELOPMENT INSTITUTE (UDI), KINAIYAHAN
FOUNDATION, INC., SENTRO NG ALTERNATIBONG LINGAP
PANLIGAL (SALIGAN), LEGAL RIGHTS AND NATURAL
RESOURCES CENTER, INC. (LRC), Petitioners, vs. VICTOR O.
RAMOS, SECRETARY, DEPARTMENT OF ENVIRONMENT
AND NATURAL RESOURCES (DENR), HORACIO RAMOS,
DIRECTOR, MINES AND GEOSCIENCES BUREAU (MGB-
DENR), RUBEN TORRES, EXECUTIVE SECRETARY, and WMC
(PHILIPPINES), INC.4 respondents.
DECISION
CARPIO-MORALES, J.
The present petition for mandamus and prohibition assails
the constitutionality of Republic Act No. 7942,5 otherwise
known as the PHILIPPINE MINING ACT OF 1995, along with
the Implementing Rules and Regulations issued pursuant
thereto, Department of Environment and Natural
Resources (DENR) Administrative Order 96-40, and of the
Financial and Technical Assistance Agreement (FTAA)
entered into on March 30, 1995 by the Republic of the
Philippines and WMC (Philippines), Inc. (WMCP), a
corporation organized under Philippine laws.
On July 25, 1987, then President Corazon C. Aquino issued
Executive Order (E.O.) No. 2796 authorizing the DENR
Secretary to accept, consider and evaluate proposals from
foreign-owned corporations or foreign investors for
contracts or agreements involving either technical or
financial assistance for large-scale exploration,
development, and utilization of minerals, which, upon
appropriate recommendation of the Secretary, the
President may execute with the foreign proponent. In
entering into such proposals, the President shall consider
the real contributions to the economic growth and general
welfare of the country that will be realized, as well as the
development and use of local scientific and technical
resources that will be promoted by the proposed contract
or agreement. Until Congress shall determine otherwise,
large-scale mining, for purpose of this Section, shall mean
those proposals for contracts or agreements for mineral
resources exploration, development, and utilization
involving a committed capital investment in a single mining
unit project of at least Fifty Million Dollars in United States
Currency (US $50,000,000.00).7
On March 3, 1995, then President Fidel V. Ramos approved
R.A. No. 7942 to "govern the exploration, development,
utilization and processing of all mineral resources."8 R.A.
No. 7942 defines the modes of mineral agreements for
mining operations,9 outlines the procedure for their filing
and approval,10assignment/transfer11 and withdrawal,12 and
fixes their terms.13 Similar provisions govern financial or
technical assistance agreements.14
The law prescribes the qualifications of contractors15 and
grants them certain rights, including timber,16 water17 and
easement18 rights, and the right to possess
explosives.19 Surface owners, occupants, or concessionaires
are forbidden from preventing holders of mining rights
from entering private lands and concession areas.20 A
procedure for the settlement of conflicts is likewise
provided for.21
The Act restricts the conditions for
exploration,22 quarry23 and other24 permits. It regulates the
transport, sale and processing of minerals,25 and promotes
the development of mining communities, science and
mining technology,26 and safety and environmental
protection.27
The government's share in the agreements is spelled out
and allocated,28 taxes and fees are imposed,29 incentives
granted.30 Aside from penalizing certain acts,31 the law
likewise specifies grounds for the cancellation, revocation
and termination of agreements and permits. 32
On April 9, 1995, 30 days following its publication on March
10, 1995 in Malaya and Manila Times, two newspapers of
general circulation, R.A. No. 7942 took effect. 33 Shortly
before the effectivity of R.A. No. 7942, however, or on
March 30, 1995, the President entered into an FTAA with
WMCP covering 99,387 hectares of land in South Cotabato,
Sultan Kudarat, Davao del Sur and North Cotabato.34
On August 15, 1995, then DENR Secretary Victor O. Ramos
issued DENR Administrative Order (DAO) No. 95-23, s.
1995, otherwise known as the Implementing Rules and
Regulations of R.A. No. 7942. This was later repealed by
DAO No. 96-40, s. 1996 which was adopted on December
20, 1996.
On January 10, 1997, counsels for petitioners sent a letter
to the DENR Secretary demanding that the DENR stop the
implementation of R.A. No. 7942 and DAO No. 96-
40,35 giving the DENR fifteen days from receipt36 to act
thereon. The DENR, however, has yet to respond or act on
petitioners' letter.37
Petitioners thus filed the present petition for prohibition
and mandamus, with a prayer for a temporary restraining
order. They allege that at the time of the filing of the
petition, 100 FTAA applications had already been filed,
covering an area of 8.4 million hectares, 38 64 of which
applications are by fully foreign-owned corporations
covering a total of 5.8 million hectares, and at least one by
a fully foreign-owned mining company over offshore
areas.39
Petitioners claim that the DENR Secretary acted without or
in excess of jurisdiction:
I
x x x in signing and promulgating DENR Administrative
Order No. 96-40 implementing Republic Act No. 7942, the
latter being unconstitutional in that it allows fully foreign
owned corporations to explore, develop, utilize and exploit
mineral resources in a manner contrary to Section 2,
paragraph 4, Article XII of the Constitution;
II
x x x in signing and promulgating DENR Administrative
Order No. 96-40 implementing Republic Act No. 7942, the
latter being unconstitutional in that it allows the taking of
private property without the determination of public use
and for just compensation;
III
x x x in signing and promulgating DENR Administrative
Order No. 96-40 implementing Republic Act No. 7942, the
latter being unconstitutional in that it violates Sec. 1, Art. III
of the Constitution;
IV
x x x in signing and promulgating DENR Administrative
Order No. 96-40 implementing Republic Act No. 7942, the
latter being unconstitutional in that it allows enjoyment by
foreign citizens as well as fully foreign owned corporations
of the nation's marine wealth contrary to Section 2,
paragraph 2 of Article XII of the Constitution;
V
x x x in signing and promulgating DENR Administrative
Order No. 96-40 implementing Republic Act No. 7942, the
latter being unconstitutional in that it allows priority to
foreign and fully foreign owned corporations in the
exploration, development and utilization of mineral
resources contrary to Article XII of the Constitution;
VI
x x x in signing and promulgating DENR Administrative
Order No. 96-40 implementing Republic Act No. 7942, the
latter being unconstitutional in that it allows the
inequitable sharing of wealth contrary to Sections [sic] 1,
paragraph 1, and Section 2, paragraph 4[,] [Article XII] of
the Constitution;
VII
x x x in recommending approval of and implementing the
Financial and Technical Assistance Agreement between the
President of the Republic of the Philippines and Western
Mining Corporation Philippines Inc. because the same is
illegal and unconstitutional.40
They pray that the Court issue an order:
(a) Permanently enjoining respondents from acting on any
application for Financial or Technical Assistance
Agreements;
(b) Declaring the Philippine Mining Act of 1995 or Republic
Act No. 7942 as unconstitutional and null and void;
(c) Declaring the Implementing Rules and Regulations of the
Philippine Mining Act contained in DENR Administrative
Order No. 96-40 and all other similar administrative
issuances as unconstitutional and null and void; and
(d) Cancelling the Financial and Technical Assistance
Agreement issued to Western Mining Philippines, Inc. as
unconstitutional, illegal and null and void.41
Impleaded as public respondents are Ruben Torres, the
then Executive Secretary, Victor O. Ramos, the then DENR
Secretary, and Horacio Ramos, Director of the Mines and
Geosciences Bureau of the DENR. Also impleaded is private
respondent WMCP, which entered into the assailed FTAA
with the Philippine Government. WMCP is owned by WMC
Resources International Pty., Ltd. (WMC), "a wholly owned
subsidiary of Western Mining Corporation Holdings Limited,
a publicly listed major Australian mining and exploration
company."42 By WMCP's information, "it is a 100% owned
subsidiary of WMC LIMITED."43
Respondents, aside from meeting petitioners' contentions,
argue that the requisites for judicial inquiry have not been
met and that the petition does not comply with the criteria
for prohibition and mandamus. Additionally, respondent
WMCP argues that there has been a violation of the rule on
hierarchy of courts.
After petitioners filed their reply, this Court granted due
course to the petition. The parties have since filed their
respective memoranda.
WMCP subsequently filed a Manifestation dated
September 25, 2002 alleging that on January 23, 2001,
WMC sold all its shares in WMCP to Sagittarius Mines, Inc.
(Sagittarius), a corporation organized under Philippine
laws.44 WMCP was subsequently renamed "Tampakan
Mineral Resources Corporation."45 WMCP claims that at
least 60% of the equity of Sagittarius is owned by Filipinos
and/or Filipino-owned corporations while about 40% is
owned by Indophil Resources NL, an Australian
company.46 It further claims that by such sale and transfer
of shares, "WMCP has ceased to be connected in any way
with WMC."47
By virtue of such sale and transfer, the DENR Secretary, by
Order of December 18, 2001,48 approved the transfer and
registration of the subject FTAA from WMCP to Sagittarius.
Said Order, however, was appealed by Lepanto
Consolidated Mining Co. (Lepanto) to the Office of the
President which upheld it by Decision of July 23, 2002.49 Its
motion for reconsideration having been denied by the
Office of the President by Resolution of November 12,
2002,50 Lepanto filed a petition for review51 before the
Court of Appeals. Incidentally, two other petitions for
review related to the approval of the transfer and
registration of the FTAA to Sagittarius were recently
resolved by this Court.52
It bears stressing that this case has not been rendered
moot either by the transfer and registration of the FTAA to
a Filipino-owned corporation or by the non-issuance of a
temporary restraining order or a preliminary injunction to
stay the above-said July 23, 2002 decision of the Office of
the President.53 The validity of the transfer remains in
dispute and awaits final judicial determination. This
assumes, of course, that such transfer cures the FTAA's
alleged unconstitutionality, on which question judgment is
reserved.
WMCP also points out that the original claimowners of the
major mineralized areas included in the WMCP FTAA,
namely, Sagittarius, Tampakan Mining Corporation, and
Southcot Mining Corporation, are all Filipino-owned
corporations,54 each of which was a holder of an approved
Mineral Production Sharing Agreement awarded in 1994,
albeit their respective mineral claims were subsumed in the
WMCP FTAA;55 and that these three companies are the
same companies that consolidated their interests in
Sagittarius to whom WMC sold its 100% equity in
WMCP.56 WMCP concludes that in the event that the FTAA
is invalidated, the MPSAs of the three corporations would
be revived and the mineral claims would revert to their
original claimants.57
These circumstances, while informative, are hardly
significant in the resolution of this case, it involving the
validity of the FTAA, not the possible consequences of its
invalidation.
Of the above-enumerated seven grounds cited by
petitioners, as will be shown later, only the first and the last
need be delved into; in the latter, the discussion shall dwell
only insofar as it questions the effectivity of E. O. No. 279
by virtue of which order the questioned FTAA was forged.
I
Before going into the substantive issues, the procedural
questions posed by respondents shall first be tackled.
REQUISITES FOR JUDICIAL REVIEW
When an issue of constitutionality is raised, this Court can
exercise its power of judicial review only if the following
requisites are present:
(1) The existence of an actual and appropriate case;
(2) A personal and substantial interest of the party raising
the constitutional question;
(3) The exercise of judicial review is pleaded at the earliest
opportunity; and
(4) The constitutional question is the lis mota of the case. 58
Respondents claim that the first three requisites are not
present.
Section 1, Article VIII of the Constitution states that
"(j)udicial power includes the duty of the courts of justice
to settle actual controversies involving rights which are
legally demandable and enforceable." The power of judicial
review, therefore, is limited to the determination of actual
cases and controversies.59
An actual case or controversy means an existing case or
controversy that is appropriate or ripe for determination,
not conjectural or anticipatory,60 lest the decision of the
court would amount to an advisory opinion.61 The power
does not extend to hypothetical questions62 since any
attempt at abstraction could only lead to dialectics and
barren legal questions and to sterile conclusions unrelated
to actualities.63
"Legal standing" or locus standi has been defined as a
personal and substantial interest in the case such that the
party has sustained or will sustain direct injury as a result of
the governmental act that is being challenged,64 alleging
more than a generalized grievance.65 The gist of the
question of standing is whether a party alleges "such
personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the
presentation of issues upon which the court depends for
illumination of difficult constitutional questions."66 Unless a
person is injuriously affected in any of his constitutional
rights by the operation of statute or ordinance, he has no
standing.67
Petitioners traverse a wide range of sectors. Among them
are La Bugal B'laan Tribal Association, Inc., a farmers and
indigenous people's cooperative organized under Philippine
laws representing a community actually affected by the
mining activities of WMCP, members of said
cooperative,68 as well as other residents of areas also
affected by the mining activities of WMCP.69 These
petitioners have standing to raise the constitutionality of
the questioned FTAA as they allege a personal and
substantial injury. They claim that they would suffer
"irremediable displacement"70 as a result of the
implementation of the FTAA allowing WMCP to conduct
mining activities in their area of residence. They thus meet
the appropriate case requirement as they assert an interest
adverse to that of respondents who, on the other hand,
insist on the FTAA's validity.
In view of the alleged impending injury, petitioners also
have standing to assail the validity of E.O. No. 279, by
authority of which the FTAA was executed.
Public respondents maintain that petitioners, being
strangers to the FTAA, cannot sue either or both
contracting parties to annul it.71 In other words, they
contend that petitioners are not real parties in interest in
an action for the annulment of contract.
Standing is a special concern in constitutional law because
in some cases suits are brought not by parties who have
been personally injured by the operation of a law or by
official action taken, but by concerned citizens, taxpayers or
voters who actually sue in the public interest. Hence, the
question in standing is whether such parties have "alleged
such a personal stake in the outcome of the controversy as
to assure that concrete adverseness which sharpens the
presentation of issues upon which the court so largely
depends for illumination of difficult constitutional
questions." (Baker v. Carr, 369 U.S. 186, 7 L.Ed.2d 633
[1962].)
As earlier stated, petitioners meet this requirement.
The challenge against the constitutionality of R.A. No. 7942
and DAO No. 96-40 likewise fulfills the requisites of
justiciability. Although these laws were not in force when
the subject FTAA was entered into, the question as to their
validity is ripe for adjudication.
The WMCP FTAA provides:
14.3 Future Legislation
Any term and condition more favourable to Financial
&Technical Assistance Agreement contractors resulting
from repeal or amendment of any existing law or regulation
or from the enactment of a law, regulation or
administrative order shall be considered a part of this
Agreement.
It is undisputed that R.A. No. 7942 and DAO No. 96-40
contain provisions that are more favorable to WMCP,
hence, these laws, to the extent that they are favorable to
WMCP, govern the FTAA.
In addition, R.A. No. 7942 explicitly makes certain
provisions apply to pre-existing agreements.

SEC. 112. Non-impairment of Existing Mining/Quarrying

Public respondents' contention fails. The present action is
Rights. x x x That the provisions of Chapter XIV on
not merely one for annulment of contract but for
government share in mineral production-sharing
prohibition and mandamus. Petitioners allege that public
agreement and of Chapter XVI on incentives of this Act shall
respondents acted without or in excess of jurisdiction in
immediately govern and apply to a mining lessee or
implementing the FTAA, which they submit is
contractor unless the mining lessee or contractor indicates
unconstitutional. As the case involves constitutional
his intention to the secretary, in writing, not to avail of said
questions, this Court is not concerned with whether
provisions x x x Provided, finally, That such leases,
petitioners are real parties in interest, but with whether
production-sharing agreements, financial or technical
they have legal standing. As held in Kilosbayan v. Morato:72
assistance agreements shall comply with the applicable
provisions of this Act and its implementing rules and
x x x. "It is important to note . . . that standing because of
regulations.
its constitutional and public policy underpinnings, is very
different from questions relating to whether a particular
As there is no suggestion that WMCP has indicated its
plaintiff is the real party in interest or has capacity to sue.
intention not to avail of the provisions of Chapter XVI of
Although all three requirements are directed towards
R.A. No. 7942, it can safely be presumed that they apply to
ensuring that only certain parties can maintain an action,
the WMCP FTAA.
standing restrictions require a partial consideration of the
merits, as well as broader policy concerns relating to the
proper role of the judiciary in certain areas.["] Misconstruing the application of the third requisite for
(FRIEDENTHAL, KANE AND MILLER, CIVIL PROCEDURE 328 judicial review that the exercise of the review is pleaded at
[1985]) the earliest opportunity WMCP points out that the petition
was filed only almost two years after the execution of the
FTAA, hence, not raised at the earliest opportunity.
The third requisite should not be taken to mean that the
question of constitutionality must be raised immediately
after the execution of the state action complained of. That
the question of constitutionality has not been raised before
is not a valid reason for refusing to allow it to be raised
later.73 A contrary rule would mean that a law, otherwise
unconstitutional, would lapse into constitutionality by the
mere failure of the proper party to promptly file a case to
challenge the same.
PROPRIETY OF PROHIBITION AND MANDAMUS
Before the effectivity in July 1997 of the Revised Rules of
Civil Procedure, Section 2 of Rule 65 read:
SEC. 2. Petition for prohibition. When the proceedings of
any tribunal, corporation, board, or person, whether
exercising functions judicial or ministerial, are without or in
excess of its or his jurisdiction, or with grave abuse of
discretion, and there is no appeal or any other plain,
speedy, and adequate remedy in the ordinary course of
law, a person aggrieved thereby may file a verified petition
in the proper court alleging the facts with certainty and
praying that judgment be rendered commanding the
defendant to desist from further proceeding in the action
or matter specified therein.
Prohibition is a preventive remedy.74 It seeks a judgment
ordering the defendant to desist from continuing with the
commission of an act perceived to be illegal. 75
The petition for prohibition at bar is thus an appropriate
remedy. While the execution of the contract itself may be
fait accompli, its implementation is not. Public respondents,
in behalf of the Government, have obligations to fulfill
under said contract. Petitioners seek to prevent them from
fulfilling such obligations on the theory that the contract is
unconstitutional and, therefore, void.
The propriety of a petition for prohibition being upheld,
discussion of the propriety of the mandamus aspect of the
petition is rendered unnecessary.
HIERARCHY OF COURTS
The contention that the filing of this petition violated the
rule on hierarchy of courts does not likewise lie. The rule
has been explained thus:
Between two courts of concurrent original jurisdiction, it is
the lower court that should initially pass upon the issues of
a case. That way, as a particular case goes through the
hierarchy of courts, it is shorn of all but the important legal
issues or those of first impression, which are the proper
subject of attention of the appellate court. This is a
procedural rule borne of experience and adopted to
improve the administration of justice.
This Court has consistently enjoined litigants to respect the
hierarchy of courts. Although this Court has concurrent
jurisdiction with the Regional Trial Courts and the Court of
Appeals to issue writs of certiorari, prohibition, mandamus,
quo warranto, habeas corpus and injunction, such
concurrence does not give a party unrestricted freedom of
choice of court forum. The resort to this Court's primary
jurisdiction to issue said writs shall be allowed only where
the redress desired cannot be obtained in the appropriate
courts or where exceptional and compelling circumstances
justify such invocation. We held in People v. Cuaresma that:
A becoming regard for judicial hierarchy most certainly
indicates that petitions for the issuance of extraordinary
writs against first level ("inferior") courts should be filed
with the Regional Trial Court, and those against the latter,
with the Court of Appeals. A direct invocation of the
Supreme Court's original jurisdiction to issue these writs
should be allowed only where there are special and
important reasons therefor, clearly and specifically set out
in the petition. This is established policy. It is a policy
necessary to prevent inordinate demands upon the Court's
time and attention which are better devoted to those
matters within its exclusive jurisdiction, and to prevent
further over-crowding of the Court's docket x x
x.76 [Emphasis supplied.]
The repercussions of the issues in this case on the
Philippine mining industry, if not the national economy, as
well as the novelty thereof, constitute exceptional and
compelling circumstances to justify resort to this Court in
the first instance.
In all events, this Court has the discretion to take
cognizance of a suit which does not satisfy the
requirements of an actual case or legal standing when
paramount public interest is involved.77 When the issues
raised are of paramount importance to the public, this
Court may brush aside technicalities of procedure. 78
II
Petitioners contend that E.O. No. 279 did not take effect
because its supposed date of effectivity came after
President Aquino had already lost her legislative powers
under the Provisional Constitution.
And they likewise claim that the WMC FTAA, which was
entered into pursuant to E.O. No. 279, violates Section 2,
Article XII of the Constitution because, among other
reasons:
(1) It allows foreign-owned companies to extend more than
mere financial or technical assistance to the State in the
exploitation, development, and utilization of minerals,
petroleum, and other mineral oils, and even permits foreign
owned companies to "operate and manage mining
activities."
(2) It allows foreign-owned companies to extend both
technical and financial assistance, instead of "either
technical or financial assistance."
To appreciate the import of these issues, a visit to the
history of the pertinent constitutional provision, the
concepts contained therein, and the laws enacted pursuant
thereto, is in order.
Section 2, Article XII reads in full:
Sec. 2. All lands of the public domain, waters, minerals,
coal, petroleum, and other mineral oils, all forces of
potential energy, fisheries, forests or timber, wildlife, flora
and fauna, and other natural resources are owned by the
State. With the exception of agricultural lands, all other
natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be
under the full control and supervision of the State. The
State may directly undertake such activities or it may enter
into co-production, joint venture, or production-sharing
agreements with Filipino citizens, or corporations or
associations at least sixty per centum of whose capital is
owned by such citizens. Such agreements may be for a
period not exceeding twenty-five years, renewable for not
more than twenty-five years, and under such terms and
conditions as may be provided by law. In cases of water
rights for irrigation, water supply, fisheries, or industrial
uses other than the development of water power,
beneficial use may be the measure and limit of the grant.
The State shall protect the nation's marine wealth in its
archipelagic waters, territorial sea, and exclusive economic
zone, and reserve its use and enjoyment exclusively to
Filipino citizens.
The Congress may, by law, allow small-scale utilization of
natural resources by Filipino citizens, as well as cooperative
fish farming, with priority to subsistence fishermen and
fish-workers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign-
owned corporations involving either technical or financial
assistance for large-scale exploration, development, and
utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by
law, based on real contributions to the economic growth
and general welfare of the country. In such agreements, the
State shall promote the development and use of local
scientific and technical resources.
The President shall notify the Congress of every contract
entered into in accordance with this provision, within thirty
days from its execution.
THE SPANISH REGIME AND THE REGALIAN DOCTRINE
The first sentence of Section 2 embodies the Regalian
doctrine or jura regalia. Introduced by Spain into these
Islands, this feudal concept is based on the State's power of
dominium, which is the capacity of the State to own or
acquire property.79
In its broad sense, the term "jura regalia" refers to royal
rights, or those rights which the King has by virtue of his
prerogatives. In Spanish law, it refers to a right which the
sovereign has over anything in which a subject has a right
of property or propriedad. These were rights enjoyed
during feudal times by the king as the sovereign.
The theory of the feudal system was that title to all lands
was originally held by the King, and while the use of lands
was granted out to others who were permitted to hold
them under certain conditions, the King theoretically
retained the title. By fiction of law, the King was regarded
as the original proprietor of all lands, and the true and only
source of title, and from him all lands were held. The theory
of jura regalia was therefore nothing more than a natural
fruit of conquest.80
The Philippines having passed to Spain by virtue of
discovery and conquest,81 earlier Spanish decrees declared
that "all lands were held from the Crown."82
The Regalian doctrine extends not only to land but also to
"all natural wealth that may be found in the bowels of the
earth."83 Spain, in particular, recognized the unique value of
natural resources, viewing them, especially minerals, as an
abundant source of revenue to finance its wars against
other nations.84Mining laws during the Spanish regime
reflected this perspective.85
THE AMERICAN OCCUPATION AND THE CONCESSION
REGIME
By the Treaty of Paris of December 10, 1898, Spain ceded
"the archipelago known as the Philippine Islands" to the
United States. The Philippines was hence governed by
means of organic acts that were in the nature of charters
serving as a Constitution of the occupied territory from
1900 to 1935.86 Among the principal organic acts of the
Philippines was the Act of Congress of July 1, 1902, more
commonly known as the Philippine Bill of 1902, through
which the United States Congress assumed the
administration of the Philippine Islands.87 Section 20 of said
Bill reserved the disposition of mineral lands of the public
domain from sale. Section 21 thereof allowed the free and
open exploration, occupation and purchase of mineral
deposits not only to citizens of the Philippine Islands but to
those of the United States as well:
Sec. 21. That all valuable mineral deposits in public lands in
the Philippine Islands, both surveyed and unsurveyed, are
hereby declared to be free and open to exploration,
occupation and purchase, and the land in which they are
found, to occupation and purchase, by citizens of the
United States or of said Islands: Provided, That when on any
lands in said Islands entered and occupied as agricultural
lands under the provisions of this Act, but not patented,
mineral deposits have been found, the working of such
mineral deposits is forbidden until the person, association,
or corporation who or which has entered and is occupying
such lands shall have paid to the Government of said
Islands such additional sum or sums as will make the total
amount paid for the mineral claim or claims in which said
deposits are located equal to the amount charged by the
Government for the same as mineral claims.
Unlike Spain, the United States considered natural
resources as a source of wealth for its nationals and saw fit
to allow both Filipino and American citizens to explore and
exploit minerals in public lands, and to grant patents to
private mineral lands.88 A person who acquired ownership
over a parcel of private mineral land pursuant to the laws
then prevailing could exclude other persons, even the
State, from exploiting minerals within his property.89 Thus,
earlier jurisprudence90 held that:
A valid and subsisting location of mineral land, made and
kept up in accordance with the provisions of the statutes of
the United States, has the effect of a grant by the United
States of the present and exclusive possession of the lands
located, and this exclusive right of possession and
enjoyment continues during the entire life of the location. x
x x.
x x x.
The discovery of minerals in the ground by one who has a
valid mineral location perfects his claim and his location not
only against third persons, but also against the
Government. x x x. [Italics in the original.]
The Regalian doctrine and the American system, therefore,
differ in one essential respect. Under the Regalian theory,
mineral rights are not included in a grant of land by the
state; under the American doctrine, mineral rights are
included in a grant of land by the government.91
Section 21 also made possible the concession (frequently
styled "permit", license" or "lease")92 system.93 This was the
traditional regime imposed by the colonial administrators
for the exploitation of natural resources in the extractive
sector (petroleum, hard minerals, timber, etc.).94
Under the concession system, the concessionaire makes a
direct equity investment for the purpose of exploiting a
particular natural resource within a given area.95 Thus, the
concession amounts to complete control by the
concessionaire over the country's natural resource, for it is
given exclusive and plenary rights to exploit a particular
resource at the point of extraction.96 In consideration for
the right to exploit a natural resource, the concessionaire
either pays rent or royalty, which is a fixed percentage of
the gross proceeds.97
Later statutory enactments by the legislative bodies set up
in the Philippines adopted the contractual framework of
the concession.98 For instance, Act No. 2932,99 approved on
August 31, 1920, which provided for the exploration,
location, and lease of lands containing petroleum and other
mineral oils and gas in the Philippines, and Act No.
2719,100 approved on May 14, 1917, which provided for the
leasing and development of coal lands in the Philippines,
both utilized the concession system.101
THE 1935 CONSTITUTION AND THE NATIONALIZATION OF
NATURAL RESOURCES
By the Act of United States Congress of March 24, 1934,
popularly known as the Tydings-McDuffie Law, the People
of the Philippine Islands were authorized to adopt a
constitution.102 On July 30, 1934, the Constitutional
Convention met for the purpose of drafting a constitution,
and the Constitution subsequently drafted was approved by
the Convention on February 8, 1935.103 The Constitution
was submitted to the President of the United States on
March 18, 1935.104 On March 23, 1935, the President of the
United States certified that the Constitution conformed
substantially with the provisions of the Act of Congress
approved on March 24, 1934.105 On May 14, 1935, the
Constitution was ratified by the Filipino people.106
The 1935 Constitution adopted the Regalian doctrine,
declaring all natural resources of the Philippines, including
mineral lands and minerals, to be property belonging to the
State.107 As adopted in a republican system, the medieval
concept of jura regalia is stripped of royal overtones and
ownership of the land is vested in the State.108
Section 1, Article XIII, on Conservation and Utilization of
Natural Resources, of the 1935 Constitution provided:
SECTION 1. All agricultural, timber, and mineral lands of the
public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, and other
natural resources of the Philippines belong to the State,
and their disposition, exploitation, development, or
utilization shall be limited to citizens of the Philippines, or
to corporations or associations at least sixty per centum of
the capital of which is owned by such citizens, subject to
any existing right, grant, lease, or concession at the time of
the inauguration of the Government established under this
Constitution. Natural resources, with the exception of
public agricultural land, shall not be alienated, and no
license, concession, or lease for the exploitation,
development, or utilization of any of the natural resources
shall be granted for a period exceeding twenty-five years,
except as to water rights for irrigation, water supply,
fisheries, or industrial uses other than the development of
water power, in which cases beneficial use may be the
measure and the limit of the grant.
The nationalization and conservation of the natural
resources of the country was one of the fixed and
dominating objectives of the 1935 Constitutional
Convention.109 One delegate relates:
There was an overwhelming sentiment in the Convention in
favor of the principle of state ownership of natural
resources and the adoption of the Regalian doctrine. State
ownership of natural resources was seen as a necessary
starting point to secure recognition of the state's power to
control their disposition, exploitation, development, or
utilization. The delegates of the Constitutional Convention
very well knew that the concept of State ownership of land upon, citizens of the Philippines or corporations or
and natural resources was introduced by the Spaniards, associations owned or controlled by citizens of the
however, they were not certain whether it was continued Philippines.
and applied by the Americans. To remove all doubts, the
Convention approved the provision in the Constitution The Parity Amendment was subsequently modified by the
affirming the Regalian doctrine. 1954 Revised Trade Agreement, also known as the Laurel-
Langley Agreement, embodied in Republic Act No. 1355.114
The adoption of the principle of state ownership of the
natural resources and of the Regalian doctrine was THE PETROLEUM ACT OF 1949 AND THE CONCESSION
considered to be a necessary starting point for the plan of SYSTEM
nationalizing and conserving the natural resources of the
country. For with the establishment of the principle of state In the meantime, Republic Act No. 387,115 also known as
ownership of the natural resources, it would not be hard to the Petroleum Act of 1949, was approved on June 18, 1949.
secure the recognition of the power of the State to control
their disposition, exploitation, development or
The Petroleum Act of 1949 employed the concession
utilization.110
system for the exploitation of the nation's petroleum
resources. Among the kinds of concessions it sanctioned
The nationalization of the natural resources was intended were exploration and exploitation concessions, which
(1) to insure their conservation for Filipino posterity; (2) to respectively granted to the concessionaire the exclusive
serve as an instrument of national defense, helping prevent right to explore for116 or develop117petroleum within
the extension to the country of foreign control through specified areas.
peaceful economic penetration; and (3) to avoid making the
Philippines a source of international conflicts with the
Concessions may be granted only to duly qualified
consequent danger to its internal security and
persons118 who have sufficient finances, organization,
independence.111
resources, technical competence, and skills necessary to
conduct the operations to be undertaken.119
The same Section 1, Article XIII also adopted the concession
system, expressly permitting the State to grant licenses,
Nevertheless, the Government reserved the right to
concessions, or leases for the exploitation, development, or
undertake such work itself.120 This proceeded from the
utilization of any of the natural resources. Grants, however,
theory that all natural deposits or occurrences of petroleum
were limited to Filipinos or entities at least 60% of the
or natural gas in public and/or private lands in the
capital of which is owned by Filipinos.
Philippines belong to the State.121 Exploration and
exploitation concessions did not confer upon the
The swell of nationalism that suffused the 1935 concessionaire ownership over the petroleum lands and
Constitution was radically diluted when on November 1946, petroleum deposits.122 However, they did grant
the Parity Amendment, which came in the form of an concessionaires the right to explore, develop, exploit, and
"Ordinance Appended to the Constitution," was ratified in a utilize them for the period and under the conditions
plebiscite.112 The Amendment extended, from July 4, 1946 determined by the law.123
to July 3, 1974, the right to utilize and exploit our natural
resources to citizens of the United States and business
Concessions were granted at the complete risk of the
enterprises owned or controlled, directly or indirectly, by
concessionaire; the Government did not guarantee the
citizens of the United States:113
existence of petroleum or undertake, in any case, title
warranty.124
Notwithstanding the provision of section one, Article
Thirteen, and section eight, Article Fourteen, of the
Concessionaires were required to submit information as
foregoing Constitution, during the effectivity of the
maybe required by the Secretary of Agriculture and Natural
Executive Agreement entered into by the President of the
Resources, including reports of geological and geophysical
Philippines with the President of the United States on the
examinations, as well as production
fourth of July, nineteen hundred and forty-six, pursuant to
reports.125 Exploration126 and
the provisions of Commonwealth Act Numbered Seven
exploitation127 concessionaires were also required to
hundred and thirty-three, but in no case to extend beyond
submit work programs.
the third of July, nineteen hundred and seventy-four, the
disposition, exploitation, development, and utilization of all
Exploitation concessionaires, in particular, were obliged to
agricultural, timber, and mineral lands of the public
pay an annual exploitation tax,128 the object of which is to
domain, waters, minerals, coals, petroleum, and other
induce the concessionaire to actually produce petroleum,
mineral oils, all forces and sources of potential energy, and
and not simply to sit on the concession without developing
other natural resources of the Philippines, and the
or exploiting it.129 These concessionaires were also bound
operation of public utilities, shall, if open to any person, be
to pay the Government royalty, which was not less than
open to citizens of the United States and to all forms of
business enterprise owned or controlled, directly or 12% of the petroleum produced and saved, less that
consumed in the operations of the concessionaire.130Under
indirectly, by citizens of the United States in the same
Article 66, R.A. No. 387, the exploitation tax may be
manner as to, and under the same conditions imposed
credited against the royalties so that if the concessionaire
shall be actually producing enough oil, it would not actually
be paying the exploitation tax.131
Failure to pay the annual exploitation tax for two
consecutive years,132 or the royalty due to the Government
within one year from the date it becomes
due,133 constituted grounds for the cancellation of the
concession. In case of delay in the payment of the taxes or
royalty imposed by the law or by the concession, a
surcharge of 1% per month is exacted until the same are
paid.134
As a rule, title rights to all equipment and structures that
the concessionaire placed on the land belong to the
exploration or exploitation concessionaire. 135Upon
termination of such concession, the concessionaire had a
right to remove the same.136
The Secretary of Agriculture and Natural Resources was
tasked with carrying out the provisions of the law, through
the Director of Mines, who acted under the Secretary's
immediate supervision and control.137 The Act granted the
Secretary the authority to inspect any operation of the
concessionaire and to examine all the books and accounts
pertaining to operations or conditions related to payment
of taxes and royalties.138
The same law authorized the Secretary to create an
Administration Unit and a Technical Board.139 The
Administration Unit was charged, inter alia, with the
enforcement of the provisions of the law. 140 The Technical
Board had, among other functions, the duty to check on the
performance of concessionaires and to determine whether
the obligations imposed by the Act and its implementing
regulations were being complied with.141
Victorio Mario A. Dimagiba, Chief Legal Officer of the
Bureau of Energy Development, analyzed the benefits and
drawbacks of the concession system insofar as it applied to
the petroleum industry:
Advantages of Concession. Whether it emphasizes income
tax or royalty, the most positive aspect of the concession
system is that the State's financial involvement is virtually
risk free and administration is simple and comparatively
low in cost. Furthermore, if there is a competitive allocation
of the resource leading to substantial bonuses and/or
greater royalty coupled with a relatively high level of
taxation, revenue accruing to the State under the
concession system may compare favorably with other
financial arrangements.
Disadvantages of Concession. There are, however, major
negative aspects to this system. Because the Government's
role in the traditional concession is passive, it is at a distinct
disadvantage in managing and developing policy for the
nation's petroleum resource. This is true for several
reasons. First, even though most concession agreements
contain covenants requiring diligence in operations and
production, this establishes only an indirect and passive
control of the host country in resource development.
Second, and more importantly, the fact that the host
country does not directly participate in resource
management decisions inhibits its ability to train and
employ its nationals in petroleum development. This factor
could delay or prevent the country from effectively
engaging in the development of its resources. Lastly, a
direct role in management is usually necessary in order to
obtain a knowledge of the international petroleum industry
which is important to an appreciation of the host country's
resources in relation to those of other countries. 142
Other liabilities of the system have also been noted:
x x x there are functional implications which give the
concessionaire great economic power arising from its
exclusive equity holding. This includes, first, appropriation
of the returns of the undertaking, subject to a modest
royalty; second, exclusive management of the project;
third, control of production of the natural resource, such as
volume of production, expansion, research and
development; and fourth, exclusive responsibility for
downstream operations, like processing, marketing, and
distribution. In short, even if nominally, the state is the
sovereign and owner of the natural resource being
exploited, it has been shorn of all elements of control over
such natural resource because of the exclusive nature of
the contractual regime of the concession. The concession
system, investing as it does ownership of natural resources,
constitutes a consistent inconsistency with the principle
embodied in our Constitution that natural resources belong
to the state and shall not be alienated, not to mention the
fact that the concession was the bedrock of the colonial
system in the exploitation of natural resources.143
Eventually, the concession system failed for reasons
explained by Dimagiba:
Notwithstanding the good intentions of the Petroleum Act
of 1949, the concession system could not have properly
spurred sustained oil exploration activities in the country,
since it assumed that such a capital-intensive, high risk
venture could be successfully undertaken by a single
individual or a small company. In effect, concessionaires'
funds were easily exhausted. Moreover, since the
concession system practically closed its doors to interested
foreign investors, local capital was stretched to the limits.
The old system also failed to consider the highly
sophisticated technology and expertise required, which
would be available only to multinational companies.144
A shift to a new regime for the development of natural
resources thus seemed imminent.
PRESIDENTIAL DECREE NO. 87, THE 1973 CONSTITUTION
AND THE SERVICE CONTRACT SYSTEM
The promulgation on December 31, 1972 of Presidential
Decree No. 87,145 otherwise known as The Oil Exploration
and Development Act of 1972 signaled such a
transformation. P.D. No. 87 permitted the government to
explore for and produce indigenous petroleum through
"service contracts."146
"Service contracts" is a term that assumes varying
meanings to different people, and it has carried many
names in different countries, like "work contracts" in
Indonesia, "concession agreements" in Africa, "production-
sharing agreements" in the Middle East, and "participation
agreements" in Latin America.147 A functional definition of
"service contracts" in the Philippines is provided as follows:
A service contract is a contractual arrangement for
engaging in the exploitation and development of
petroleum, mineral, energy, land and other natural
resources by which a government or its agency, or a private
person granted a right or privilege by the government
authorizes the other party (service contractor) to engage or
participate in the exercise of such right or the enjoyment of
the privilege, in that the latter provides financial or
technical resources, undertakes the exploitation or
production of a given resource, or directly manages the
productive enterprise, operations of the exploration and
exploitation of the resources or the disposition of
marketing or resources.148
In a service contract under P.D. No. 87, service and
technology are furnished by the service contractor for
which it shall be entitled to the stipulated service
fee.149 The contractor must be technically competent and
financially capable to undertake the operations required in
the contract.150
Financing is supposed to be provided by the Government to
which all petroleum produced belongs.151 In case the
Government is unable to finance petroleum exploration
operations, the contractor may furnish services, technology
and financing, and the proceeds of sale of the petroleum
produced under the contract shall be the source of funds
for payment of the service fee and the operating expenses
due the contractor.152 The contractor shall undertake,
manage and execute petroleum operations, subject to the
government overseeing the management of the
operations.153 The contractor provides all necessary
services and technology and the requisite financing,
performs the exploration work obligations, and assumes all
exploration risks such that if no petroleum is produced, it
will not be entitled to reimbursement.154 Once petroleum in
commercial quantity is discovered, the contractor shall
operate the field on behalf of the government.155
P.D. No. 87 prescribed minimum terms and conditions for
every service contract.156 It also granted the contractor
certain privileges, including exemption from taxes and
payment of tariff duties,157 and permitted the repatriation
of capital and retention of profits abroad.158
Ostensibly, the service contract system had certain
advantages over the concession regime.159 It has been
opined, though, that, in the Philippines, our concept of a
service contract, at least in the petroleum industry, was
basically a concession regime with a production-sharing
element.160
On January 17, 1973, then President Ferdinand E. Marcos
proclaimed the ratification of a new Constitution.161 Article
XIV on the National Economy and Patrimony contained
provisions similar to the 1935 Constitution with regard to
Filipino participation in the nation's natural resources.
Section 8, Article XIV thereof provides:
Sec. 8. All lands of the public domain, waters, minerals,
coal, petroleum and other mineral oils, all forces of
potential energy, fisheries, wildlife, and other natural
resources of the Philippines belong to the State. With the
exception of agricultural, industrial or commercial,
residential and resettlement lands of the public domain,
natural resources shall not be alienated, and no license,
concession, or lease for the exploration, development,
exploitation, or utilization of any of the natural resources
shall be granted for a period exceeding twenty-five years,
renewable for not more than twenty-five years, except as
to water rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water power,
in which cases beneficial use may be the measure and the
limit of the grant.
While Section 9 of the same Article maintained the Filipino-
only policy in the enjoyment of natural resources, it also
allowed Filipinos, upon authority of the Batasang
Pambansa, to enter into service contracts with any person
or entity for the exploration or utilization of natural
resources.
Sec. 9. The disposition, exploration, development,
exploitation, or utilization of any of the natural resources of
the Philippines shall be limited to citizens, or to
corporations or associations at least sixty per centum of
which is owned by such citizens. The Batasang Pambansa,
in the national interest, may allow such citizens,
corporations or associations to enter into service contracts
for financial, technical, management, or other forms of
assistance with any person or entity for the exploration, or
utilization of any of the natural resources. Existing valid and
binding service contracts for financial, technical,
management, or other forms of assistance are hereby
recognized as such. [Emphasis supplied.]
The concept of service contracts, according to one
delegate, was borrowed from the methods followed by
India, Pakistan and especially Indonesia in the exploration
of petroleum and mineral oils.162 The provision allowing
such contracts, according to another, was intended to
"enhance the proper development of our natural resources
since Filipino citizens lack the needed capital and technical
know-how which are essential in the proper exploration,
development and exploitation of the natural resources of
the country."163
The original idea was to authorize the government, not
private entities, to enter into service contracts with foreign
entities.164 As finally approved, however, a citizen or private
entity could be allowed by the National Assembly to enter
into such service contract.165 The prior approval of the
National Assembly was deemed sufficient to protect the
national interest.166 Notably, none of the laws allowing
service contracts were passed by the Batasang Pambansa.
Indeed, all of them were enacted by presidential decree.
On March 13, 1973, shortly after the ratification of the new
Constitution, the President promulgated Presidential
Decree No. 151.167 The law allowed Filipino citizens or
entities which have acquired lands of the public domain or
which own, hold or control such lands to enter into service
contracts for financial, technical, management or other
forms of assistance with any foreign persons or entity for
the exploration, development, exploitation or utilization of
said lands.168
Presidential Decree No. 463,169 also known as The Mineral
Resources Development Decree of 1974, was enacted on
May 17, 1974. Section 44 of the decree, as amended,
provided that a lessee of a mining claim may enter into a
service contract with a qualified domestic or foreign
contractor for the exploration, development and
exploitation of his claims and the processing and marketing
of the product thereof.
Presidential Decree No. 704170 (The Fisheries Decree of
1975), approved on May 16, 1975, allowed Filipinos
engaged in commercial fishing to enter into contracts for
financial, technical or other forms of assistance with any
foreign person, corporation or entity for the production,
storage, marketing and processing of fish and
fishery/aquatic products.171
Presidential Decree No. 705172 (The Revised Forestry Code
of the Philippines), approved on May 19, 1975, allowed
"forest products licensees, lessees, or permitees to enter
into service contracts for financial, technical, management,
or other forms of assistance . . . with any foreign person or
entity for the exploration, development, exploitation or
utilization of the forest resources."173
Yet another law allowing service contracts, this time for
geothermal resources, was Presidential Decree No.
1442,174 which was signed into law on June 11, 1978.
Section 1 thereof authorized the Government to enter into
service contracts for the exploration, exploitation and
development of geothermal resources with a foreign
contractor who must be technically and financially capable
of undertaking the operations required in the service
contract.
Thus, virtually the entire range of the country's natural
resources from petroleum and minerals to geothermal
energy, from public lands and forest resources to fishery
products was well covered by apparent legal authority to
engage in the direct participation or involvement of foreign
persons or corporations (otherwise disqualified) in the
exploration and utilization of natural resources through
service contracts.175
THE 1987 CONSTITUTION AND TECHNICAL OR FINANCIAL
ASSISTANCE AGREEMENTS
After the February 1986 Edsa Revolution, Corazon C.
Aquino took the reins of power under a revolutionary
government. On March 25, 1986, President Aquino issued
Proclamation No. 3,176 promulgating the Provisional
Constitution, more popularly referred to as the Freedom
Constitution. By authority of the same Proclamation, the
President created a Constitutional Commission (CONCOM)
to draft a new constitution, which took effect on the date
of its ratification on February 2, 1987.177
The 1987 Constitution retained the Regalian doctrine. The
first sentence of Section 2, Article XII states: "All lands of
the public domain, waters, minerals, coal, petroleum, and
other mineral oils, all forces of potential energy, fisheries,
forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State."
Like the 1935 and 1973 Constitutions before it, the 1987
Constitution, in the second sentence of the same provision,
prohibits the alienation of natural resources, except
agricultural lands.
The third sentence of the same paragraph is new: "The
exploration, development and utilization of natural
resources shall be under the full control and supervision of
the State." The constitutional policy of the State's "full
control and supervision" over natural resources proceeds
from the concept of jura regalia, as well as the recognition
of the importance of the country's natural resources, not
only for national economic development, but also for its
security and national defense.178 Under this provision, the
State assumes "a more dynamic role" in the exploration,
development and utilization of natural resources.179
Conspicuously absent in Section 2 is the provision in the
1935 and 1973 Constitutions authorizing the State to grant
licenses, concessions, or leases for the exploration,
exploitation, development, or utilization of natural
resources. By such omission, the utilization of inalienable
lands of public domain through "license, concession or
lease" is no longer allowed under the 1987 Constitution.180
Having omitted the provision on the concession system,
Section 2 proceeded to introduce "unfamiliar language":181
The State may directly undertake such activities or it may
enter into co-production, joint venture, or production-
sharing agreements with Filipino citizens, or corporations or
associations at least sixty per centum of whose capital is
owned by such citizens.
Consonant with the State's "full supervision and control"
over natural resources, Section 2 offers the State two
"options."182 One, the State may directly undertake these
activities itself; or two, it may enter into co-production,
joint venture, or production-sharing agreements with
Filipino citizens, or entities at least 60% of whose capital is
owned by such citizens.
A third option is found in the third paragraph of the same
section:
The Congress may, by law, allow small-scale utilization of
natural resources by Filipino citizens, as well as cooperative
fish farming, with priority to subsistence fishermen and
fish-workers in rivers, lakes, bays, and lagoons.
While the second and third options are limited only to
Filipino citizens or, in the case of the former, to
corporations or associations at least 60% of the capital of
which is owned by Filipinos, a fourth allows the
participation of foreign-owned corporations. The fourth
and fifth paragraphs of Section 2 provide:
The President may enter into agreements with foreign-
owned corporations involving either technical or financial
assistance for large-scale exploration, development, and
utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by
law, based on real contributions to the economic growth
and general welfare of the country. In such agreements, the
State shall promote the development and use of local
scientific and technical resources.
The President shall notify the Congress of every contract
entered into in accordance with this provision, within thirty
days from its execution.
Although Section 2 sanctions the participation of foreign-
owned corporations in the exploration, development, and
utilization of natural resources, it imposes certain
limitations or conditions to agreements with such
corporations.
First, the parties to FTAAs. Only the President, in behalf of
the State, may enter into these agreements, and only with
corporations. By contrast, under the 1973 Constitution, a
Filipino citizen, corporation or association may enter into a
service contract with a "foreign person or entity."
Second, the size of the activities: only large-scale
exploration, development, and utilization is allowed. The
term "large-scale usually refers to very capital-intensive
activities."183
Third, the natural resources subject of the activities is
restricted to minerals, petroleum and other mineral oils,
the intent being to limit service contracts to those areas
where Filipino capital may not be sufficient.184
Fourth, consistency with the provisions of statute. The
agreements must be in accordance with the terms and
conditions provided by law.
Fifth, Section 2 prescribes certain standards for entering
into such agreements. The agreements must be based on
real contributions to economic growth and general welfare
of the country.
Sixth, the agreements must contain rudimentary
stipulations for the promotion of the development and use
of local scientific and technical resources.
Seventh, the notification requirement. The President shall
notify Congress of every financial or technical assistance
agreement entered into within thirty days from its
execution.
Finally, the scope of the agreements. While the 1973
Constitution referred to "service contracts for financial,
technical, management, or other forms of assistance" the
1987 Constitution provides for "agreements. . . involving
either financial or technical assistance." It bears noting that
the phrases "service contracts" and "management or other
forms of assistance" in the earlier constitution have been
omitted.
By virtue of her legislative powers under the Provisional
Constitution,185 President Aquino, on July 10, 1987, signed
into law E.O. No. 211 prescribing the interim procedures in
the processing and approval of applications for the
exploration, development and utilization of minerals. The
omission in the 1987 Constitution of the term "service
contracts" notwithstanding, the said E.O. still referred to
them in Section 2 thereof:
Sec. 2. Applications for the exploration, development and
utilization of mineral resources, including renewal
applications and applications for approval of operating
agreements and mining service contracts, shall be accepted
and processed and may be approved x x x. [Emphasis
supplied.]
The same law provided in its Section 3 that the "processing,
evaluation and approval of all mining applications . . .
operating agreements and service contracts . . . shall be
governed by Presidential Decree No. 463, as amended,
other existing mining laws, and their implementing rules
and regulations. . . ."
As earlier stated, on the 25th also of July 1987, the
President issued E.O. No. 279 by authority of which the
subject WMCP FTAA was executed on March 30, 1995.
On March 3, 1995, President Ramos signed into law R.A.
No. 7942. Section 15 thereof declares that the Act "shall
govern the exploration, development, utilization, and
processing of all mineral resources." Such declaration
notwithstanding, R.A. No. 7942 does not actually cover all
the modes through which the State may undertake the
exploration, development, and utilization of natural
resources.
The State, being the owner of the natural resources, is
accorded the primary power and responsibility in the
exploration, development and utilization thereof. As such,
it may undertake these activities through four modes:
The State may directly undertake such activities.
(2) The State may enter into co-production, joint venture or
production-sharing agreements with Filipino citizens or
qualified corporations.
(3) Congress may, by law, allow small-scale utilization of
natural resources by Filipino citizens.
(4) For the large-scale exploration, development and
utilization of minerals, petroleum and other mineral oils,
the President may enter into agreements with foreign-
owned corporations involving technical or financial
assistance.186
Except to charge the Mines and Geosciences Bureau of the
DENR with performing researches and surveys,187 and a
passing mention of government-owned or controlled
corporations,188 R.A. No. 7942 does not specify how the
State should go about the first mode. The third mode, on
the other hand, is governed by Republic Act No.
7076189 (the People's Small-Scale Mining Act of 1991) and
other pertinent laws.190 R.A. No. 7942 primarily concerns
itself with the second and fourth modes.
Mineral production sharing, co-production and joint
venture agreements are collectively classified by R.A. No.
7942 as "mineral agreements."191 The Government
participates the least in a mineral production sharing
agreement (MPSA). In an MPSA, the Government grants the
contractor192 the exclusive right to conduct mining
operations within a contract area193 and shares in the gross
output.194 The MPSA contractor provides the financing,
technology, management and personnel necessary for the
agreement's implementation.195 The total government
share in an MPSA is the excise tax on mineral products
under Republic Act No. 7729,196 amending Section 151(a) of
the National Internal Revenue Code, as amended. 197
In a co-production agreement (CA),198 the Government
provides inputs to the mining operations other than the
mineral resource,199 while in a joint venture agreement
(JVA), where the Government enjoys the greatest
participation, the Government and the JVA contractor
organize a company with both parties having equity
shares.200 Aside from earnings in equity, the Government in
a JVA is also entitled to a share in the gross output.201 The
Government may enter into a CA202 or JVA203 with one or
more contractors. The Government's share in a CA or JVA is
set out in Section 81 of the law:
The share of the Government in co-production and joint
venture agreements shall be negotiated by the Government
and the contractor taking into consideration the: (a) capital
investment of the project, (b) the risks involved, (c)
contribution of the project to the economy, and (d) other
factors that will provide for a fair and equitable sharing
between the Government and the contractor. The
Government shall also be entitled to compensations for its
other contributions which shall be agreed upon by the
parties, and shall consist, among other things, the
contractor's income tax, excise tax, special allowance,
withholding tax due from the contractor's foreign
stockholders arising from dividend or interest payments to
the said foreign stockholders, in case of a foreign national
and all such other taxes, duties and fees as provided for
under existing laws.
All mineral agreements grant the respective contractors the
exclusive right to conduct mining operations and to extract
all mineral resources found in the contract area.204 A
"qualified person" may enter into any of the mineral
agreements with the Government.205 A "qualified person" is
any citizen of the Philippines with capacity to contract, or a
corporation, partnership, association, or cooperative
organized or authorized for the purpose of engaging in
mining, with technical and financial capability to undertake
mineral resources development and duly registered in
accordance with law at least sixty per centum (60%) of the
capital of which is owned by citizens of the Philippines x x
x.206
The fourth mode involves "financial or technical assistance
agreements." An FTAA is defined as "a contract involving
financial or technical assistance for large-scale exploration,
development, and utilization of natural resources."207 Any
qualified person with technical and financial capability to
undertake large-scale exploration, development, and
utilization of natural resources in the Philippines may enter
into such agreement directly with the Government through
the DENR.208 For the purpose of granting an FTAA, a legally
organized foreign-owned corporation (any corporation,
partnership, association, or cooperative duly registered in
accordance with law in which less than 50% of the capital is
owned by Filipino citizens)209 is deemed a "qualified
person."210
Other than the difference in contractors' qualifications, the
principal distinction between mineral agreements and
FTAAs is the maximum contract area to which a qualified
person may hold or be granted.211 "Large-scale" under R.A.
No. 7942 is determined by the size of the contract area, as
opposed to the amount invested (US $50,000,000.00),
which was the standard under E.O. 279.
Like a CA or a JVA, an FTAA is subject to negotiation.212 The
Government's contributions, in the form of taxes, in an
FTAA is identical to its contributions in the two mineral
agreements, save that in an FTAA:
The collection of Government share in financial or technical
assistance agreement shall commence after the financial or
technical assistance agreement contractor has fully
recovered its pre-operating expenses, exploration, and
development expenditures, inclusive.213
III
Having examined the history of the constitutional provision
and statutes enacted pursuant thereto, a consideration of
the substantive issues presented by the petition is now in
order.
THE EFFECTIVITY OF EXECUTIVE ORDER NO. 279
Petitioners argue that E.O. No. 279, the law in force when
the WMC FTAA was executed, did not come into effect.
E.O. No. 279 was signed into law by then President Aquino
on July 25, 1987, two days before the opening of Congress
on July 27, 1987.214 Section 8 of the E.O. states that the
same "shall take effect immediately." This provision,
according to petitioners, runs counter to Section 1 of E.O.
No. 200,215 which provides:
SECTION 1. Laws shall take effect after fifteen days
following the completion of their publication either in the
Official Gazette or in a newspaper of general circulation in
the Philippines, unless it is otherwise
provided.216 [Emphasis supplied.]
On that premise, petitioners contend that E.O. No. 279
could have only taken effect fifteen days after its
publication at which time Congress had already convened
and the President's power to legislate had ceased.
Respondents, on the other hand, counter that the validity
of E.O. No. 279 was settled in Miners Association of the
Philippines v. Factoran, supra. This is of course incorrect for
the issue in Miners Association was not the validity of E.O.
No. 279 but that of DAO Nos. 57 and 82 which were issued
pursuant thereto.
Nevertheless, petitioners' contentions have no merit.
It bears noting that there is nothing in E.O. No. 200 that
prevents a law from taking effect on a date other than even
before the 15-day period after its publication. Where a law
provides for its own date of effectivity, such date prevails
over that prescribed by E.O. No. 200. Indeed, this is the
very essence of the phrase "unless it is otherwise provided"
in Section 1 thereof. Section 1, E.O. No. 200, therefore,
applies only when a statute does not provide for its own
date of effectivity.
What is mandatory under E.O. No. 200, and what due
process requires, as this Court held in Tañada v.
Tuvera,217 is the publication of the law for without such
notice and publication, there would be no basis for the
application of the maxim "ignorantia legis n[eminem]
excusat." It would be the height of injustice to punish or
otherwise burden a citizen for the transgression of a law of
which he had no notice whatsoever, not even a
constructive one.
While the effectivity clause of E.O. No. 279 does not require
its publication, it is not a ground for its invalidation since
the Constitution, being "the fundamental, paramount and
supreme law of the nation," is deemed written in the
law.218 Hence, the due process clause,219 which, so Tañada
held, mandates the publication of statutes, is read into
Section 8 of E.O. No. 279. Additionally, Section 1 of E.O. No.
200 which provides for publication "either in the Official
Gazette or in a newspaper of general circulation in the
Philippines," finds suppletory application. It is significant to
note that E.O. No. 279 was actually published in the Official
Gazette220 on August 3, 1987.
From a reading then of Section 8 of E.O. No. 279, Section 1
of E.O. No. 200, and Tañada v. Tuvera, this Court holds that
E.O. No. 279 became effective immediately upon its
publication in the Official Gazette on August 3, 1987.
That such effectivity took place after the convening of the
first Congress is irrelevant. At the time President Aquino
issued E.O. No. 279 on July 25, 1987, she was still validly
exercising legislative powers under the Provisional
Constitution.221 Article XVIII (Transitory Provisions) of the
1987 Constitution explicitly states:
Sec. 6. The incumbent President shall continue to exercise
legislative powers until the first Congress is convened.
The convening of the first Congress merely precluded the
exercise of legislative powers by President Aquino; it did
not prevent the effectivity of laws she had previously
enacted.
There can be no question, therefore, that E.O. No. 279 is an
effective, and a validly enacted, statute.
THE CONSTITUTIONALITY OF THE WMCP FTAA
Petitioners submit that, in accordance with the text of
Section 2, Article XII of the Constitution, FTAAs should be
limited to "technical or financial assistance" only. They
observe, however, that, contrary to the language of the
Constitution, the WMCP FTAA allows WMCP, a fully
foreign-owned mining corporation, to extend more than
mere financial or technical assistance to the State, for it
permits WMCP to manage and operate every aspect of the
mining activity. 222
Petitioners' submission is well-taken. It is a cardinal rule in
the interpretation of constitutions that the instrument
must be so construed as to give effect to the intention of
the people who adopted it.223 This intention is to be sought
in the constitution itself, and the apparent meaning of the
words is to be taken as expressing it, except in cases where
that assumption would lead to absurdity, ambiguity, or
contradiction.224 What the Constitution says according to
the text of the provision, therefore, compels acceptance
and negates the power of the courts to alter it, based on
the postulate that the framers and the people mean what
they say.225 Accordingly, following the literal text of the
Constitution, assistance accorded by foreign-owned
corporations in the large-scale exploration, development,
and utilization of petroleum, minerals and mineral oils
should be limited to "technical" or "financial" assistance
only.
WMCP nevertheless submits that the word "technical" in
the fourth paragraph of Section 2 of E.O. No. 279
encompasses a "broad number of possible services,"
perhaps, "scientific and/or technological in basis." 226 It thus
posits that it may also well include "the area of
management or operations . . . so long as such assistance
requires specialized knowledge or skills, and are related to
the exploration, development and utilization of mineral
resources."227
This Court is not persuaded. As priorly pointed out, the
phrase "management or other forms of assistance" in the
1973 Constitution was deleted in the 1987 Constitution,
which allows only "technical or financial assistance." Casus
omisus pro omisso habendus est. A person, object or thing
omitted from an enumeration must be held to have been
omitted intentionally.228 As will be shown later, the
management or operation of mining activities by foreign
contractors, which is the primary feature of service
contracts, was precisely the evil that the drafters of the
1987 Constitution sought to eradicate.
Respondents insist that "agreements involving technical or
financial assistance" is just another term for service
contracts. They contend that the proceedings of the
CONCOM indicate "that although the terminology 'service
contract' was avoided [by the Constitution], the concept it
represented was not." They add that "[t]he concept is
embodied in the phrase 'agreements involving financial or
technical assistance.'"229 And point out how members of
the CONCOM referred to these agreements as "service
contracts." For instance:
SR. TAN. Am I correct in thinking that the only difference
between these future service contracts and the past service
contracts under Mr. Marcos is the general law to be
enacted by the legislature and the notification of Congress
by the President? That is the only difference, is it not?
MR. VILLEGAS. That is right.
SR. TAN. So those are the safeguards[?]
MR. VILLEGAS. Yes. There was no law at all governing
service contracts before.
SR. TAN. Thank you, Madam President. 230 [Emphasis
supplied.]
WMCP also cites the following statements of
Commissioners Gascon, Garcia, Nolledo and Tadeo who
alluded to service contracts as they explained their
respective votes in the approval of the draft Article:
MR. GASCON. Mr. Presiding Officer, I vote no primarily
because of two reasons: One, the provision on service
contracts. I felt that if we would constitutionalize any
provision on service contracts, this should always be with
the concurrence of Congress and not guided only by a
general law to be promulgated by Congress. x x
x.231 [Emphasis supplied.]
x x x.
MR. GARCIA. Thank you.
I vote no. x x x.
Service contracts are given constitutional legitimization in
Section 3, even when they have been proven to be inimical
to the interests of the nation, providing as they do the legal
loophole for the exploitation of our natural resources for
the benefit of foreign interests. They constitute a serious
negation of Filipino control on the use and disposition of
the nation's natural resources, especially with regard to
those which are nonrenewable.232 [Emphasis supplied.]
xxx
MR. NOLLEDO. While there are objectionable provisions in
the Article on National Economy and Patrimony, going over
said provisions meticulously, setting aside prejudice and
personalities will reveal that the article contains a balanced
set of provisions. I hope the forthcoming Congress will
implement such provisions taking into account that
Filipinos should have real control over our economy and
patrimony, and if foreign equity is permitted, the same
must be subordinated to the imperative demands of the
national interest.
x x x.
It is also my understanding that service contracts involving
foreign corporations or entities are resorted to only when
no Filipino enterprise or Filipino-controlled enterprise could
possibly undertake the exploration or exploitation of our
natural resources and that compensation under such
contracts cannot and should not equal what should pertain
to ownership of capital. In other words, the service contract
should not be an instrument to circumvent the basic
provision, that the exploration and exploitation of natural
resources should be truly for the benefit of Filipinos.
Thank you, and I vote yes.233 [Emphasis supplied.]
x x x.
MR. TADEO. Nais ko lamang ipaliwanag ang aking boto.
Matapos suriin ang kalagayan ng Pilipinas, ang saligang
suliranin, pangunahin ang salitang "imperyalismo." Ang ibig
sabihin nito ay ang sistema ng lipunang pinaghaharian ng
iilang monopolyong kapitalista at ang salitang
"imperyalismo" ay buhay na buhay sa National Economy
and Patrimony na nating ginawa. Sa pamamagitan ng
salitang "based on," naroroon na ang free trade sapagkat
tayo ay mananatiling tagapagluwas ng hilaw na sangkap at
tagaangkat ng yaring produkto. Pangalawa, naroroon pa rin
ang parity rights, ang service contract, ang 60-40 equity sa
natural resources. Habang naghihirap ang sambayanang
Pilipino, ginagalugad naman ng mga dayuhan ang ating likas
na yaman. Kailan man ang Article on National Economy and
Patrimony ay hindi nagpaalis sa pagkaalipin ng ating
ekonomiya sa kamay ng mga dayuhan. Ang solusyon sa
suliranin ng bansa ay dalawa lamang: ang pagpapatupad ng
tunay na reporma sa lupa at ang national industrialization.
Ito ang tinatawag naming pagsikat ng araw sa Silangan.
Ngunit ang mga landlords and big businessmen at ang mga
komprador ay nagsasabi na ang free trade na ito, ang
kahulugan para sa amin, ay ipinipilit sa ating sambayanan
na ang araw ay sisikat sa Kanluran. Kailan man hindi
puwedeng sumikat ang araw sa Kanluran. I vote
no.234 [Emphasis supplied.]
This Court is likewise not persuaded.
As earlier noted, the phrase "service contracts" has been
deleted in the 1987 Constitution's Article on National
Economy and Patrimony. If the CONCOM intended to retain
the concept of service contracts under the 1973
Constitution, it could have simply adopted the old
terminology ("service contracts") instead of employing new
and unfamiliar terms ("agreements . . . involving either
technical or financial assistance"). Such a difference
between the language of a provision in a revised
constitution and that of a similar provision in the preceding
constitution is viewed as indicative of a difference in
purpose.235 If, as respondents suggest, the concept of
"technical or financial assistance" agreements is identical to
that of "service contracts," the CONCOM would not have
bothered to fit the same dog with a new collar. To uphold
respondents' theory would reduce the first to a mere
euphemism for the second and render the change in
phraseology meaningless.
control and supervision of the State." In the 1973
Constitution, this was limited to citizens of the Philippines;
but it was removed and substituted by "shall be under the
full control and supervision of the State." Was the concept
changed so that these particular resources would be limited
to citizens of the Philippines? Or would these resources
only be under the full control and supervision of the State;
meaning, noncitizens would have access to these natural
resources? Is that the understanding?
MR. VILLEGAS. No, Mr. Vice-President, if the Commissioner
reads the next sentence, it states:
Such activities may be directly undertaken by the State, or
it may enter into co-production, joint venture, production-
sharing agreements with Filipino citizens.

An examination of the reason behind the change confirms So we are still limiting it only to Filipino citizens.
that technical or financial assistance agreements are not
synonymous to service contracts.
x x x.

[T]he Court in construing a Constitution should bear in

MS. QUESADA. Going back to Section 3, the section
mind the object sought to be accomplished by its adoption,
suggests that:
and the evils, if any, sought to be prevented or remedied. A
doubtful provision will be examined in light of the history of
The exploration, development, and utilization of natural
the times, and the condition and circumstances under
resources may be directly undertaken by the State, or it
which the Constitution was framed. The object is to
ascertain the reason which induced the framers of the may enter into co-production, joint venture or production-
sharing agreement with . . . corporations or associations at
Constitution to enact the particular provision and the
least sixty per cent of whose voting stock or controlling
purpose sought to be accomplished thereby, in order to
interest is owned by such citizens.
construe the whole as to make the words consonant to that
reason and calculated to effect that purpose.236
Lines 25 to 30, on the other hand, suggest that in the large-
scale exploration, development and utilization of natural
As the following question of Commissioner Quesada and
Commissioner Villegas' answer shows the drafters intended resources, the President with the concurrence of Congress
may enter into agreements with foreign-owned
to do away with service contracts which were used to
corporations even for technical or financial assistance.
circumvent the capitalization (60%-40%) requirement:

I wonder if this part of Section 3 contradicts the second

MS. QUESADA. The 1973 Constitution used the words
part. I am raising this point for fear that foreign investors
"service contracts." In this particular Section 3, is there a
will use their enormous capital resources to facilitate the
safeguard against the possible control of foreign interests if
actual exploitation or exploration, development and
the Filipinos go into coproduction with them?
effective disposition of our natural resources to the
detriment of Filipino investors. I am not saying that we
MR. VILLEGAS. Yes. In fact, the deletion of the phrase
should not consider borrowing money from foreign
"service contracts" was our first attempt to avoid some of
sources. What I refer to is that foreign interest should be
the abuses in the past regime in the use of service contracts
allowed to participate only to the extent that they lend us
to go around the 60-40 arrangement. The safeguard that
money and give us technical assistance with the
has been introduced and this, of course can be refined is
appropriate government permit. In this way, we can insure
found in Section 3, lines 25 to 30, where Congress will have
the enjoyment of our natural resources by our own people.
to concur with the President on any agreement entered
into between a foreign-owned corporation and the
MR. VILLEGAS. Actually, the second provision about the
government involving technical or financial assistance for
President does not permit foreign investors to participate.
large-scale exploration, development and utilization of
It is only technical or financial assistance they do not own
natural resources.237 [Emphasis supplied.]
anything but on conditions that have to be determined by
law with the concurrence of Congress. So, it is very
In a subsequent discussion, Commissioner Villegas allayed
restrictive.
the fears of Commissioner Quesada regarding the
participation of foreign interests in Philippine natural
If the Commissioner will remember, this removes the
resources, which was supposed to be restricted to Filipinos.
possibility for service contracts which we said yesterday
were avenues used in the previous regime to go around the
MS. QUESADA. Another point of clarification is the phrase
60-40 requirement.238 [Emphasis supplied.]
"and utilization of natural resources shall be under the full
The present Chief Justice, then a member of the CONCOM,
also referred to this limitation in scope in proposing an
amendment to the 60-40 requirement:
MR. DAVIDE : May I be allowed to explain the proposal?
MR. MAAMBONG. Subject to the three-minute rule,
Madam President.
MR. DAVIDE. It will not take three minutes.
The Commission had just approved the Preamble. In the
Preamble we clearly stated that the Filipino people are
sovereign and that one of the objectives for the creation or
establishment of a government is to conserve and develop
the national patrimony. The implication is that the national
patrimony or our natural resources are exclusively reserved
for the Filipino people. No alien must be allowed to enjoy,
exploit and develop our natural resources. As a matter of
fact, that principle proceeds from the fact that our natural
resources are gifts from God to the Filipino people and it
would be a breach of that special blessing from God if we
will allow aliens to exploit our natural resources.
I voted in favor of the Jamir proposal because it is not really
exploitation that we granted to the alien corporations but
only for them to render financial or technical assistance. It
is not for them to enjoy our natural resources. Madam
President, our natural resources are depleting; our
population is increasing by leaps and bounds. Fifty years
from now, if we will allow these aliens to exploit our natural
resources, there will be no more natural resources for the
next generations of Filipinos. It may last long if we will
begin now. Since 1935 the aliens have been allowed to
enjoy to a certain extent the exploitation of our natural
resources, and we became victims of foreign dominance
and control. The aliens are interested in coming to the
Philippines because they would like to enjoy the bounty of
nature exclusively intended for Filipinos by God.
This provision balances the need for foreign capital and
technology with the need to maintain the national
sovereignty. It recognizes the fact that as long as Filipinos
can formulate their own terms in their own territory, there
is no danger of relinquishing sovereignty to foreign
interests.
Are service contracts allowed under the new Constitution?
No. Under the new Constitution, foreign investors (fully
alien-owned) can NOT participate in Filipino enterprises
except to provide: (1) Technical Assistance for highly
technical enterprises; and (2) Financial Assistance for large-
scale enterprises.
The intent of this provision, as well as other provisions on
foreign investments, is to prevent the practice (prevalent in
the Marcos government) of skirting the 60/40 equation
using the cover of service contracts.241 [Emphasis supplied.]
Furthermore, it appears that Proposed Resolution No.
496,242 which was the draft Article on National Economy
and Patrimony, adopted the concept of "agreements . . .
involving either technical or financial assistance" contained
in the "Draft of the 1986 U.P. Law Constitution Project"
(U.P. Law draft) which was taken into consideration during
the deliberation of the CONCOM.243 The former, as well as
Article XII, as adopted, employed the same terminology, as
the comparative table below shows:
DRAFT OF PROPOSED ARTICLE XII
THE UP LAW RESOLUTION OF THE
CONSTITUTI NO. 496 OF 1987
ON PROJECT THE CONSTITUTI
CONSTITUTIO ON
NAL
COMMISSION

And so I appeal to all, for the sake of the future

generations, that if we have to pray in the Preamble "to Sec. 1. All Sec. 3. All Sec. 2. All
preserve and develop the national patrimony for the lands of the lands of the lands of the
sovereign Filipino people and for the generations to come," public public public
we must at this time decide once and for all that our domain, domain, domain,
natural resources must be reserved only to Filipino citizens. waters, waters, waters,
minerals, minerals, coal, minerals,
coal, petroleum coal,
Thank you.239 [Emphasis supplied.]
petroleum and other petroleum,
and other mineral oils, and other
The opinion of another member of the CONCOM is mineral oils, all forces of mineral oils,
persuasive240 and leaves no doubt as to the intention of the all forces of potential all forces of
framers to eliminate service contracts altogether. He potential energy, potential
writes: energy, fisheries, energy,
fisheries, forests, flora fisheries,
Paragraph 4 of Section 2 specifies large-scale, capital- flora and and fauna, forests or
intensive, highly technological undertakings for which the fauna and and other timber,
President may enter into contracts with foreign-owned other natural wildlife,
corporations, and enunciates strict conditions that should natural resources are flora and
govern such contracts. x x x. resources of owned by the fauna, and
the State. With other years, water supply, renewable
Philippines the exception natural renewable fisheries or for not
are owned of agricultural resources for not industrial uses more than
by the State. lands, all are owned more than other than the twenty-five
With the other natural by the State. twenty-five development years, and
exception of resources With the years and for water under such
agricultural shall not be exception of under such power, terms and
lands, all alienated. The agricultural terms and beneficial use conditions
other exploration, lands, all conditions may be the as may be
natural development, other as may be measure and provided by
resources and utilization natural provided by limit of the law. In case
shall not be of natural resources law. In case grant. of water
alienated. resources shall not be as to water rights for
The shall be under alienated. rights for The Congress irrigation,
exploration, the full The irrigation, may by law water
developmen control and exploration, water allow small- supply,
t and supervision of developmen supply, scale fisheries, or
utilization of the State. t, and fisheries, or utilization of industrial
natural Such activities utilization of industrial natural uses other
resources may be natural uses other resources by than the
shall be directly resources than the Filipino developmen
under the undertaken by shall be developmen citizens, as t of water
full control the State, or it under the t of water well as power,
and may enter into full control power, cooperative beneficial
supervision co-production, and beneficial fish farming in use may be
of the State. joint venture, supervision use may be rivers, lakes, the measure
Such production- of the State. the measure bays, and and limit of
activities sharing The State and limit of lagoons. the grant.
may be agreements may directly the grant.
directly with Filipino undertake The President The State
undertaken citizens or such The with the shall protect
by the state, corporations activities or National concurrence the nation's
or it may or it may enter Assembly of Congress, marine
enter into associations at into co- may by law by special law, wealth in its
co- least sixty per production, allow small shall provide archipelagic
production, cent of whose joint scale the terms and waters,
joint voting stock or venture, or utilization of conditions territorial
venture, controlling production- natural under which a sea, and
production interest is sharing resources by foreign-owned exclusive
sharing owned by agreements Filipino corporation economic
agreements such citizens. with Filipino citizens. may enter into zone, and
with Filipino Such citizens, or agreements reserve its
citizens or agreements corporation The with the use and
corporation shall be for a s or National government enjoyment
s or period of associations Assembly, involvingeithe exclusively
associations twenty-five at least sixty may, by r technical or to Filipino
sixty per years, per centum two-thirds financial citizens.
cent of renewable for of whose vote of all assistancefor
whose not more than capital is its members large-scale The
voting stock twenty-five owned by by special exploration, Congress
or years, and such law provide development, may, by law,
controlling under such citizens. the terms and utilization allow small-
interest is term and Such and of natural scale
owned by conditions as agreements conditions resources. utilization of
such citizens may be may be for a under which [Emphasis natural
for a period provided by period not a foreign- supplied.] resources by
of not more law. In cases exceeding owned Filipino
than of water rights twenty-five corporation citizens, as
twenty-five for irrigation, years, may enter well as
into cooperative and
agreements fish farming, technical
with the with priority resources.
government to [Emphasis
involvingeit subsistence supplied.]
her fishermen
technical or and fish- The
financial workers in President
assistancefo rivers, lakes, shall notify
r large-scale bays, and the
exploration, lagoons. Congress of
developmen every
t, or The contract
utilization of President entered into
natural may enter in
resources. into accordance
[Emphasis agreements with this
supplied.] with provision,
foreign- within thirty
owned days from
corporation its
s execution.
involvingeit
her
technical or
financial The insights of the proponents of the U.P. Law draft are,
assistancefo therefore, instructive in interpreting the phrase "technical
r large-scale or financial assistance."
exploration,
developmen In his position paper entitled Service Contracts: Old Wine in
t, and New Bottles?, Professor Pacifico A. Agabin, who was a
utilization of member of the working group that prepared the U.P. Law
minerals, draft, criticized service contracts for they "lodge exclusive
petroleum, management and control of the enterprise to the service
and other contractor, which is reminiscent of the old concession
mineral oils regime. Thus, notwithstanding the provision of the
according to Constitution that natural resources belong to the State, and
the general that these shall not be alienated, the service contract
terms and system renders nugatory the constitutional provisions
conditions cited."244 He elaborates:
provided by
law, based Looking at the Philippine model, we can discern the
on real following vestiges of the concession regime, thus:
contribution
s to the 1. Bidding of a selected area, or leasing the choice of the
economic area to the interested party and then negotiating the terms
growth and and conditions of the contract; (Sec. 5, P.D. 87)
general
welfare of 2. Management of the enterprise vested on the contractor,
the country. including operation of the field if petroleum is discovered;
In such (Sec. 8, P.D. 87)
agreements,
the State
3. Control of production and other matters such as
shall
expansion and development; (Sec. 8)
promote the
developmen
t and use of 4. Responsibility for downstream operations marketing,
local distribution, and processing may be with the contractor
scientific (Sec. 8);
5. Ownership of equipment, machinery, fixed assets, and
other properties remain with contractor (Sec. 12, P.D. 87);
6. Repatriation of capital and retention of profits abroad
guaranteed to the contractor (Sec. 13, P.D. 87); and
7. While title to the petroleum discovered may nominally
be in the name of the government, the contractor has
almost unfettered control over its disposition and sale, and
even the domestic requirements of the country is relegated
to a pro rata basis (Sec. 8).
In short, our version of the service contract is just a rehash
of the old concession regime x x x. Some people have
pulled an old rabbit out of a magician's hat, and foisted it
upon us as a new and different animal.
The service contract as we know it here is antithetical to
the principle of sovereignty over our natural resources
restated in the same article of the [1973] Constitution
containing the provision for service contracts. If the service
contractor happens to be a foreign corporation, the
contract would also run counter to the constitutional
provision on nationalization or Filipinization, of the
exploitation of our natural resources. 245 [Emphasis
supplied. Underscoring in the original.]
Professor Merlin M. Magallona, also a member of the
working group, was harsher in his reproach of the system:
x x x the nationalistic phraseology of the 1935
[Constitution] was retained by the [1973] Charter, but the
essence of nationalism was reduced to hollow rhetoric. The
1973 Charter still provided that the exploitation or
development of the country's natural resources be limited
to Filipino citizens or corporations owned or controlled by
them. However, the martial-law Constitution allowed them,
once these resources are in their name, to enter into
service contracts with foreign investors for financial,
technical, management, or other forms of assistance. Since
foreign investors have the capital resources, the actual
exploitation and development, as well as the effective
disposition, of the country's natural resources, would be
under their direction, and control, relegating the Filipino
investors to the role of second-rate partners in joint
ventures.
Through the instrumentality of the service contract, the
1973 Constitution had legitimized at the highest level of
state policy that which was prohibited under the 1973
Constitution, namely: the exploitation of the country's
natural resources by foreign nationals. The drastic impact
of [this] constitutional change becomes more pronounced
when it is considered that the active party to any service
contract may be a corporation wholly owned by foreign
interests. In such a case, the citizenship requirement is
completely set aside, permitting foreign corporations to
obtain actual possession, control, and [enjoyment] of the
country's natural resources.246 [Emphasis supplied.]
Accordingly, Professor Agabin recommends that:
Recognizing the service contract for what it is, we have to
expunge it from the Constitution and reaffirm ownership
over our natural resources. That is the only way we can
exercise effective control over our natural resources.
This should not mean complete isolation of the country's
natural resources from foreign investment. Other contract
forms which are less derogatory to our sovereignty and
control over natural resources like technical assistance
agreements, financial assistance [agreements], co-
production agreements, joint ventures, production-sharing
could still be utilized and adopted without violating
constitutional provisions. In other words, we can adopt
contract forms which recognize and assert our sovereignty
and ownership over natural resources, and where the
foreign entity is just a pure contractor instead of the
beneficial owner of our economic resources.247 [Emphasis
supplied.]
Still another member of the working group, Professor
Eduardo Labitag, proposed that:
2. Service contracts as practiced under the 1973
Constitution should be discouraged, instead the
government may be allowed, subject to authorization by
special law passed by an extraordinary majority to enter
into either technical or financial assistance. This is justified
by the fact that as presently worded in the 1973
Constitution, a service contract gives full control over the
contract area to the service contractor, for him to work,
manage and dispose of the proceeds or production. It was a
subterfuge to get around the nationality requirement of the
constitution.248 [Emphasis supplied.]
In the annotations on the proposed Article on National
Economy and Patrimony, the U.P. Law draft summarized
the rationale therefor, thus:
5. The last paragraph is a modification of the service
contract provision found in Section 9, Article XIV of the
1973 Constitution as amended. This 1973 provision
shattered the framework of nationalism in our fundamental
law (see Magallona, "Nationalism and its Subversion in the
Constitution"). Through the service contract, the 1973
Constitution had legitimized that which was prohibited
under the 1935 constitutionthe exploitation of the
country's natural resources by foreign nationals. Through
the service contract, acts prohibited by the Anti-Dummy
Law were recognized as legitimate arrangements. Service
contracts lodge exclusive management and control of the
enterprise to the service contractor, not unlike the old
concession regime where the concessionaire had complete
control over the country's natural resources, having been
given exclusive and plenary rights to exploit a particular
resource and, in effect, having been assured of ownership
of that resource at the point of extraction (see Agabin,
"Service Contracts: Old Wine in New Bottles"). Service
contracts, hence, are antithetical to the principle of
sovereignty over our natural resources, as well as the
constitutional provision on nationalization or Filipinization
of the exploitation of our natural resources.
Under the proposed provision, only technical assistance or
financial assistance agreements may be entered into, and
only for large-scale activities. These are contract forms
which recognize and assert our sovereignty and ownership
over natural resources since the foreign entity is just a pure
contractor and not a beneficial owner of our economic
resources. The proposal recognizes the need for capital and
technology to develop our natural resources without
sacrificing our sovereignty and control over such resources
by the safeguard of a special law which requires two-thirds
vote of all the members of the Legislature. This will ensure
that such agreements will be debated upon exhaustively
and thoroughly in the National Assembly to avert prejudice
to the nation.249 [Emphasis supplied.]
The U.P. Law draft proponents viewed service contracts
under the 1973 Constitution as grants of beneficial
ownership of the country's natural resources to foreign
owned corporations. While, in theory, the State owns these
natural resources and Filipino citizens, their beneficiaries
service contracts actually vested foreigners with the right to
dispose, explore for, develop, exploit, and utilize the same.
Foreigners, not Filipinos, became the beneficiaries of
Philippine natural resources. This arrangement is clearly
incompatible with the constitutional ideal of nationalization
of natural resources, with the Regalian doctrine, and on a
broader perspective, with Philippine sovereignty.
The proponents nevertheless acknowledged the need for
capital and technical know-how in the large-scale
exploitation, development and utilization of natural
resources the second paragraph of the proposed draft itself
being an admission of such scarcity. Hence, they
recommended a compromise to reconcile the nationalistic
provisions dating back to the 1935 Constitution, which
reserved all natural resources exclusively to Filipinos, and
the more liberal 1973 Constitution, which allowed
foreigners to participate in these resources through service
contracts. Such a compromise called for the adoption of a
new system in the exploration, development, and
utilization of natural resources in the form of technical
agreements or financial agreements which, necessarily, are
distinct concepts from service contracts.
The replacement of "service contracts" with "agreements
involving either technical or financial assistance," as well as
the deletion of the phrase "management or other forms of
assistance," assumes greater significance when note is
taken that the U.P. Law draft proposed other equally crucial
changes that were obviously heeded by the CONCOM.
These include the abrogation of the concession system and
the adoption of new "options" for the State in the
exploration, development, and utilization of natural
resources. The proponents deemed these changes to be
more consistent with the State's ownership of, and its "full
control and supervision" (a phrase also employed by the
framers) over, such resources. The Project explained:
3. In line with the State ownership of natural resources, the
State should take a more active role in the exploration,
development, and utilization of natural resources, than the
present practice of granting licenses, concessions, or leases
hence the provision that said activities shall be under the
full control and supervision of the State. There are three
major schemes by which the State could undertake these
activities: first, directly by itself; second, by virtue of co-
production, joint venture, production sharing agreements
with Filipino citizens or corporations or associations sixty
per cent (60%) of the voting stock or controlling interests of
which are owned by such citizens; or third, with a foreign-
owned corporation, in cases of large-scale exploration,
development, or utilization of natural resources through
agreements involving either technical or financial
assistance only. x x x.
At present, under the licensing concession or lease
schemes, the government benefits from such benefits only
through fees, charges, ad valorem taxes and income taxes
of the exploiters of our natural resources. Such benefits are
very minimal compared with the enormous profits reaped
by theses licensees, grantees, concessionaires. Moreover,
some of them disregard the conservation of natural
resources and do not protect the environment from
degradation. The proposed role of the State will enable it to
a greater share in the profits it can also actively husband its
natural resources and engage in developmental programs
that will be beneficial to them.
4. Aside from the three major schemes for the exploration,
development, and utilization of our natural resources, the
State may, by law, allow Filipino citizens to explore,
develop, utilize natural resources in small-scale. This is in
recognition of the plight of marginal fishermen, forest
dwellers, gold panners, and others similarly situated who
exploit our natural resources for their daily sustenance and
survival.250
Professor Agabin, in particular, after taking pains to
illustrate the similarities between the two systems,
concluded that the service contract regime was but a
"rehash" of the concession system. "Old wine in new
bottles," as he put it. The rejection of the service contract
regime, therefore, is in consonance with the abolition of
the concession system.
In light of the deliberations of the CONCOM, the text of the
Constitution, and the adoption of other proposed changes,
there is no doubt that the framers considered and shared
the intent of the U.P. Law proponents in employing the
phrase "agreements . . . involving either technical or
financial assistance."
While certain commissioners may have mentioned the term
"service contracts" during the CONCOM deliberations, they
may not have been necessarily referring to the concept of
service contracts under the 1973 Constitution. As noted
earlier, "service contracts" is a term that assumes different
meanings to different people. 251 The commissioners may
have been using the term loosely, and not in its technical
and legal sense, to refer, in general, to agreements
concerning natural resources entered into by the
Government with foreign corporations. These loose
statements do not necessarily translate to the adoption of
the 1973 Constitution provision allowing service contracts.
It is true that, as shown in the earlier quoted portions of
the proceedings in CONCOM, in response to Sr. Tan's
question, Commissioner Villegas commented that, other
than congressional notification, the only difference
between "future" and "past" "service contracts" is the
requirement of a general law as there were no laws
previously authorizing the same.252 However, such remark
is far outweighed by his more categorical statement in his
exchange with Commissioner Quesada that the draft article
"does not permit foreign investors to participate" in the
nation's natural resources which was exactly what service
contracts did except to provide "technical or financial
assistance."253
In the case of the other commissioners, Commissioner
Nolledo himself clarified in his work that the present
charter prohibits service contracts.254Commissioner Gascon
was not totally averse to foreign participation, but favored
stricter restrictions in the form of majority congressional
concurrence.255On the other hand, Commissioners Garcia
and Tadeo may have veered to the extreme side of the
spectrum and their objections may be interpreted as votes
against any foreign participation in our natural resources
whatsoever.
WMCP cites Opinion No. 75, s. 1987,256 and Opinion No.
175, s. 1990257 of the Secretary of Justice, expressing the
view that a financial or technical assistance agreement "is
no different in concept" from the service contract allowed
under the 1973 Constitution. This Court is not, however,
bound by this interpretation. When an administrative or
executive agency renders an opinion or issues a statement
of policy, it merely interprets a pre-existing law; and the
administrative interpretation of the law is at best advisory,
for it is the courts that finally determine what the law
means.258
In any case, the constitutional provision allowing the
President to enter into FTAAs with foreign-owned
corporations is an exception to the rule that participation in
the nation's natural resources is reserved exclusively to
Filipinos. Accordingly, such provision must be construed
strictly against their enjoyment by non-Filipinos. As
Commissioner Villegas emphasized, the provision is "very
restrictive."259 Commissioner Nolledo also remarked that
"entering into service contracts is an exception to the rule
on protection of natural resources for the interest of the
nation and, therefore, being an exception, it should be
subject, whenever possible, to stringent rules."260 Indeed,
exceptions should be strictly but reasonably construed;
they extend only so far as their language fairly warrants and
all doubts should be resolved in favor of the general
provision rather than the exception.261
With the foregoing discussion in mind, this Court finds that
R.A. No. 7942 is invalid insofar as said Act authorizes service
contracts. Although the statute employs the phrase
"financial and technical agreements" in accordance with
the 1987 Constitution, it actually treats these agreements
as service contracts that grant beneficial ownership to
foreign contractors contrary to the fundamental law.
Section 33, which is found under Chapter VI (Financial or
Technical Assistance Agreement) of R.A. No. 7942 states:
SEC. 33. Eligibility.Any qualified person with technical and
financial capability to undertake large-scale exploration,
development, and utilization of mineral resources in the
Philippines may enter into a financial or technical assistance
agreement directly with the Government through the
Department. [Emphasis supplied.]
"Exploration," as defined by R.A. No. 7942,
means the searching or prospecting for mineral resources
by geological, geochemical or geophysical surveys, remote
sensing, test pitting, trending, drilling, shaft sinking,
tunneling or any other means for the purpose of
determining the existence, extent, quantity and quality
thereof and the feasibility of mining them for profit.262
A legally organized foreign-owned corporation may be
granted an exploration permit,263 which vests it with the
right to conduct exploration for all minerals in specified
areas,264 i.e., to enter, occupy and explore the
same.265 Eventually, the foreign-owned corporation, as such
permittee, may apply for a financial and technical
assistance agreement.266
"Development" is the work undertaken to explore and
prepare an ore body or a mineral deposit for mining,
including the construction of necessary infrastructure and
related facilities.267
"Utilization" "means the extraction or disposition of
minerals."268 A stipulation that the proponent shall dispose
of the minerals and byproducts produced at the highest
price and more advantageous terms and conditions as
provided for under the implementing rules and regulations
is required to be incorporated in every FTAA. 269
A foreign-owned/-controlled corporation may likewise be
granted a mineral processing permit.270 "Mineral
processing" is the milling, beneficiation or upgrading of
ores or minerals and rocks or by similar means to convert
the same into marketable products.271
An FTAA contractor makes a warranty that the mining
operations shall be conducted in accordance with the
provisions of R.A. No. 7942 and its implementing
rules272 and for work programs and minimum expenditures
and commitments.273 And it obliges itself to furnish the
Government records of geologic, accounting, and other
relevant data for its mining operation.274
"Mining operation," as the law defines it, means mining
activities involving exploration, feasibility, development,
utilization, and processing.275
The underlying assumption in all these provisions is that the
foreign contractor manages the mineral resources, just like
the foreign contractor in a service contract.
Furthermore, Chapter XII of the Act grants foreign
contractors in FTAAs the same auxiliary mining rights that it
grants contractors in mineral agreements (MPSA, CA and
JV).276 Parenthetically, Sections 72 to 75 use the term
"contractor," without distinguishing between FTAA and
mineral agreement contractors. And so does "holders of
mining rights" in Section 76. A foreign contractor may even
convert its FTAA into a mineral agreement if the economic
viability of the contract area is found to be inadequate to
justify large-scale mining operations,277 provided that it
reduces its equity in the corporation, partnership,
association or cooperative to forty percent (40%). 278
Finally, under the Act, an FTAA contractor warrants that it
"has or has access to all the financing, managerial, and
technical expertise. . . ."279 This suggests that an FTAA
contractor is bound to provide some management
assistance a form of assistance that has been eliminated
and, therefore, proscribed by the present Charter.
By allowing foreign contractors to manage or operate all
the aspects of the mining operation, the above-cited
provisions of R.A. No. 7942 have in effect conveyed
beneficial ownership over the nation's mineral resources to
these contractors, leaving the State with nothing but bare
title thereto.
Moreover, the same provisions, whether by design or
inadvertence, permit a circumvention of the
constitutionally ordained 60%-40% capitalization
requirement for corporations or associations engaged in
the exploitation, development and utilization of Philippine
natural resources.
In sum, the Court finds the following provisions of R.A. No.
7942 to be violative of Section 2, Article XII of the
Constitution:
(1) The proviso in Section 3 (aq), which defines "qualified
person," to wit:
Provided, That a legally organized foreign-owned
corporation shall be deemed a qualified person for
purposes of granting an exploration permit, financial or
technical assistance agreement or mineral processing
permit.
(2) Section 23,280 which specifies the rights and obligations
of an exploration permittee, insofar as said section applies
to a financial or technical assistance agreement,
(3) Section 33, which prescribes the eligibility of a
contractor in a financial or technical assistance agreement;
(4) Section 35,281 which enumerates the terms and
conditions for every financial or technical assistance
agreement;
(5) Section 39,282 which allows the contractor in a financial
and technical assistance agreement to convert the same
into a mineral production-sharing agreement;
(6) Section 56,283 which authorizes the issuance of a mineral
processing permit to a contractor in a financial and
technical assistance agreement;
The following provisions of the same Act are likewise void
as they are dependent on the foregoing provisions and
cannot stand on their own:
(1) Section 3 (g),284 which defines the term "contractor,"
insofar as it applies to a financial or technical assistance
agreement.
Section 34,285 which prescribes the maximum contract area
in a financial or technical assistance agreements;
Section 36,286 which allows negotiations for financial or
technical assistance agreements;
Section 37,287 which prescribes the procedure for filing and
evaluation of financial or technical assistance agreement
proposals;
Section 38,288 which limits the term of financial or technical
assistance agreements;
Section 40,289 which allows the assignment or transfer of
financial or technical assistance agreements;
Section 41,290 which allows the withdrawal of the
contractor in an FTAA;
The second and third paragraphs of Section 81, 291 which
provide for the Government's share in a financial and
technical assistance agreement; and
Section 90,292 which provides for incentives to contractors
in FTAAs insofar as it applies to said contractors;
When the parts of the statute are so mutually dependent
and connected as conditions, considerations, inducements,
or compensations for each other, as to warrant a belief that
the legislature intended them as a whole, and that if all
could not be carried into effect, the legislature would not
pass the residue independently, then, if some parts are
unconstitutional, all the provisions which are thus
dependent, conditional, or connected, must fall with
them.293
There can be little doubt that the WMCP FTAA itself is a
service contract.
Section 1.3 of the WMCP FTAA grants WMCP "the exclusive
right to explore, exploit, utilise[,] process and dispose of all
Minerals products and by-products thereof that may be
produced from the Contract Area."294 The FTAA also imbues
WMCP with the following rights:
(b) to extract and carry away any Mineral samples from the
Contract area for the purpose of conducting tests and
studies in respect thereof;
(c) to determine the mining and treatment processes to be
utilised during the Development/Operating Period and the
project facilities to be constructed during the Development
and Construction Period;
(d) have the right of possession of the Contract Area, with
full right of ingress and egress and the right to occupy the
same, subject to the provisions of Presidential Decree No.
512 (if applicable) and not be prevented from entry into
private ands by surface owners and/or occupants thereof
when prospecting, exploring and exploiting for minerals
therein;
xxx
(f) to construct roadways, mining, drainage, power
generation and transmission facilities and all other types of
works on the Contract Area;
(g) to erect, install or place any type of improvements,
supplies, machinery and other equipment relating to the
Mining Operations and to use, sell or otherwise dispose of,
modify, remove or diminish any and all parts thereof;
(h) enjoy, subject to pertinent laws, rules and regulations
and the rights of third Parties, easement rights and the use
of timber, sand, clay, stone, water and other natural
resources in the Contract Area without cost for the
purposes of the Mining Operations;
xxx
(i) have the right to mortgage, charge or encumber all or
part of its interest and obligations under this Agreement,
the plant, equipment and infrastructure and the Minerals
produced from the Mining Operations;
x x x. 295
All materials, equipment, plant and other installations
erected or placed on the Contract Area remain the property
of WMCP, which has the right to deal with and remove such
items within twelve months from the termination of the
FTAA.296
Pursuant to Section 1.2 of the FTAA, WMCP shall provide
"[all] financing, technology, management and personnel
necessary for the Mining Operations." The mining company
binds itself to "perform all Mining Operations . . . providing
all necessary services, technology and financing in
connection therewith,"297 and to "furnish all materials,
labour, equipment and other installations that may be
required for carrying on all Mining Operations."298> WMCP
may make expansions, improvements and replacements of
the mining facilities and may add such new facilities as it
considers necessary for the mining operations.299
These contractual stipulations, taken together, grant
WMCP beneficial ownership over natural resources that
properly belong to the State and are intended for the
benefit of its citizens. These stipulations are abhorrent to
the 1987 Constitution. They are precisely the vices that the
fundamental law seeks to avoid, the evils that it aims to
suppress. Consequently, the contract from which they
spring must be struck down.
In arguing against the annulment of the FTAA, WMCP
invokes the Agreement on the Promotion and Protection of
Investments between the Philippine and Australian
Governments, which was signed in Manila on January 25,
1995 and which entered into force on December 8, 1995.
x x x. Article 2 (1) of said treaty states that it applies to
investments whenever made and thus the fact that
[WMCP's] FTAA was entered into prior to the entry into
force of the treaty does not preclude the Philippine
Government from protecting [WMCP's] investment in [that]
FTAA. Likewise, Article 3 (1) of the treaty provides that
"Each Party shall encourage and promote investments in its
area by investors of the other Party and shall [admit] such
investments in accordance with its Constitution, Laws,
regulations and investment policies" and in Article 3 (2), it
states that "Each Party shall ensure that investments are
accorded fair and equitable treatment." The latter
stipulation indicates that it was intended to impose an
obligation upon a Party to afford fair and equitable
treatment to the investments of the other Party and that a
failure to provide such treatment by or under the laws of
the Party may constitute a breach of the treaty. Simply
stated, the Philippines could not, under said treaty, rely
upon the inadequacies of its own laws to deprive an
Australian investor (like [WMCP]) of fair and equitable
treatment by invalidating [WMCP's] FTAA without likewise
nullifying the service contracts entered into before the
enactment of RA 7942 such as those mentioned in PD 87 or
EO 279.
This becomes more significant in the light of the fact that
[WMCP's] FTAA was executed not by a mere Filipino citizen,
but by the Philippine Government itself, through its
President no less, which, in entering into said treaty is
assumed to be aware of the existing Philippine laws on
service contracts over the exploration, development and
utilization of natural resources. The execution of the FTAA
by the Philippine Government assures the Australian
Government that the FTAA is in accordance with existing
Philippine laws.300 [Emphasis and italics by private
respondents.]
The invalidation of the subject FTAA, it is argued, would
constitute a breach of said treaty which, in turn, would
amount to a violation of Section 3, Article II of the
Constitution adopting the generally accepted principles of
international law as part of the law of the land. One of
these generally accepted principles is pacta sunt servanda,
which requires the performance in good faith of treaty
obligations.
Even assuming arguendo that WMCP is correct in its
interpretation of the treaty and its assertion that "the
Philippines could not . . . deprive an Australian investor (like
[WMCP]) of fair and equitable treatment by invalidating
[WMCP's] FTAA without likewise nullifying the service
contracts entered into before the enactment of RA 7942 . . (e) The second and third paragraphs of Section 81, and
.," the annulment of the FTAA would not constitute a
breach of the treaty invoked. For this decision herein (f) Section 90.
invalidating the subject FTAA forms part of the legal system
of the Philippines.301 The equal protection (2) All provisions of Department of Environment and
clause302 guarantees that such decision shall apply to all Natural Resources Administrative Order 96-40, s. 1996
contracts belonging to the same class, hence, upholding which are not in conformity with this Decision, and
rather than violating, the "fair and equitable treatment"
stipulation in said treaty.
(3) The Financial and Technical Assistance Agreement
between the Government of the Republic of the Philippines
One other matter requires clarification. Petitioners contend and WMC Philippines, Inc.
that, consistent with the provisions of Section 2, Article XII
of the Constitution, the President may enter into
SO ORDERED.
agreements involving "either technical or financial
assistance" only. The agreement in question, however, is a
technical and financial assistance agreement.

Petitioners' contention does not lie. To adhere to the literal

language of the Constitution would lead to absurd
consequences.303 As WMCP correctly put it:

x x x such a theory of petitioners would compel the

government (through the President) to enter into contract
with two (2) foreign-owned corporations, one for financial
assistance agreement and with the other, for technical
assistance over one and the same mining area or land; or to
execute two (2) contracts with only one foreign-owned
corporation which has the capability to provide both
financial and technical assistance, one for financial
assistance and another for technical assistance, over the
same mining area. Such an absurd result is definitely not
sanctioned under the canons of constitutional
construction.304[Underscoring in the original.]

Surely, the framers of the 1987 Charter did not

contemplate such an absurd result from their use of
"either/or." A constitution is not to be interpreted as
demanding the impossible or the impracticable; and
unreasonable or absurd consequences, if possible, should
be avoided.305 Courts are not to give words a meaning that
would lead to absurd or unreasonable consequences and a
literal interpretation is to be rejected if it would be unjust
or lead to absurd results.306 That is a strong argument
against its adoption.307 Accordingly, petitioners'
interpretation must be rejected.

The foregoing discussion has rendered unnecessary the

resolution of the other issues raised by the petition.

WHEREFORE, the petition is GRANTED. The Court hereby

declares unconstitutional and void:

(1) The following provisions of Republic Act No. 7942:

(a) The proviso in Section 3 (aq),

(b) Section 23,

(c) Section 33 to 41,

(d) Section 56,

 JG SUMMIT HOLDINGS, INC., Petitioner, v. COURT OF
APPEALS, COMMITTEE ON PRIVATIZATION, its Chairman
and Members, ASSET PRIVATIZATION TRUST and
PHILYARDS HOLDINGS, INC., Respondents.
DECISION
YNARES-SANTIAGO, J.:
On January 27, 1977, the National Investment and
Development Corporation (NIDC), a government
corporation, entered into a Joint Venture Agreement (JVA)
with Kawasaki Heavy Industries, Ltd. of Kobe, Japan
(Kawasaki) for the construction, operation, and
management of the Subic National Shipyard, Inc. (SNS),
which subsequently became the Philippine Shipyard and
Engineering Corporation (PHILSECO). Under the JVA, NIDC
and Kawasaki would maintain a shareholding proportion of
60% - 40%, respectively. One of the provisions of the JVA
accorded the parties the right of first refusal should either
party sell, assign or transfer its interest in the joint venture.
Thus, paragraph 1.4 of the JVA
states:jgc:chanrobles.com.ph
"Neither party shall sell, transfer or assign all or any part of
its interest in SNS to any third party without giving the
other under the same terms the right of first refusal. This
provision shall not apply if the transferee is a corporation
owned or controlled by the GOVERNMENT or by a
KAWASAKI affiliate." (Emphasis supplied.)chanrob1es
virtua1 1aw 1ibrary
On November 25, 1986, NIDC transferred all its rights, title
and interest in PHILSECO to the Philippine National Bank
(PNB). More than two months later or on February 3, 1987,
by virtue of Administrative Order No. 14, PNB’s interest in
PHILSECO was transferred to the National Government.
Meanwhile, on December 8, 1986, President Corazon C.
Aquino issued Proclamation No. 50 establishing the
Committee on Privatization (COP) and the Asset
Privatization Trust (APT) to take title to and possession of,
conserve, manage and dispose of non-performing assets of
the National Government. On February 27, 1987, a trust
agreement was entered into between the National
Government and the APT by virtue of which the latter was
named the trustee of the National Government’s share in
PHILSECO. In 1989, as a result of a quasi-reorganization of
PHILSECO to settle its huge obligations to PNB, the National
Government’s shareholdings in PHILSECO increased to
97.41% thereby reducing Kawasaki’s shareholdings to
2.59%.
Exercising their discretion, the COP and the APT deemed it
in the best interest of the national economy and the
government to privatize PHILSECO by selling 87.67% of its
total outstanding capital stock to private entities. After a
series of negotiations between the APT and Kasawaki, they
agreed that the latter’s right of first refusal under the JVA
be "exchanged" for the right to top by five percent (5%) the
highest bid for said shares. They further agreed that
Kawasaki would be entitled to name a company in which it
was a stockholder, which could exercise the right to top. On
September 7, 1990, Kawasaki informed APT that Philyards
Holdings, Inc. (PHI) would exercise its right to top by 5%.
At the pre-bidding conference held on September 28, 1993,
interested bidders were given copies of the JVA between
NIDC and Kawasaki, and of the Asset Specific Bidding Rules
(ASBR) drafted for the 87.67% equity (sic) 1 in PHILSECO of
the National Government. Salient provisions of the ASBR
state:jgc:chanrobles.com.ph
"1.0. The subject of this Asset Privatization Trust (APT) sale
through public bidding is the National Government’s equity
in PHILSECO consisting of 896,869,942 shares of stock
(representing 87.67% of PHILSECO’s outstanding capital
stock), which will be sold as a whole block in accordance
with the rules herein enumerated.
x x x
3.0. This public bidding shall be on an Indicative Price
Bidding basis. The Indicative price set for the National
Government’s 87.67% equity in PHILSECO is PESOS: ONE
BILLION THREE HUNDRED MILLION (P1,300,000,000.00).
x x x
12.0. The bidder shall be solely responsible for examining
with appropriate care these rules, the official bid forms,
including any addenda or amendments thereto issued
during the bidding period. The bidder shall likewise be
responsible for informing itself with respect to any and all
conditions concerning the PHILSECO Shares which may, in
any manner, affect the bidder’s proposal. Failure on the
part of the bidder to so examine and inform itself shall be
its sole risk and no relief for error or omission will be given
by APT or COP. . . ."cralaw virtua1aw library
The provisions of the ASBR were explained to the
interested bidders who were notified that bidding would be
held on December 2, 1993.
At the public bidding on said date, the consortium
composed of petitioner JG Summit Holdings, Inc.,
Sembawang Shipyard Ltd. of Singapore (Sembawang), and
Jurong Shipyard Limited of Malaysia (Jurong), was declared
the highest bidder at P2.03 billion. The following day,
December 3, 1993, the COP approved the sale of 87.67%
National Government shares of stock in PHILSECO to said
consortium. It notified petitioner of said approval "subject
to the right of Kawasaki Heavy Industries, Inc./Philyards
Holdings, Inc. to top JGSMI’s (petitioner’s) bid by 5% as
specified in the bidding rules."cralaw virtua1aw library
On December 29, 1993, petitioner informed the APT that it
was protesting the offer of PHI to top its bid on the grounds
that: (a) the Kawasaki/PHI consortium composed of
Kawasaki, Philyards, Mitsui, Keppel, SM Group, ICTSI and
Insular Life violated the ASBR because the last four (4)
companies were the losing bidders (for P1.528 billion)
thereby circumventing the law and prejudicing the weak
winning bidder; (b) only Kawasaki could exercise the right
to top; (c) giving the same option to top to PHI constituted
unwarranted benefit to a third party; (d) no right of first
refusal can be exercised in a public bidding or auction sale,
and (e) the JG Summit Consortium was not estopped from
questioning the proceedings.chanrob1es virtua1 1aw
1ibrary
On February 2, 1994, petitioner was notified that PHI had
fully paid the balance of the purchase price of the subject
bidding. On February 7, 1994, the APT notified petitioner
that PHI had exercised its option to top the highest bid and
that the COP had approved the same on January 6, 1994.
On February 24, 1994, the APT and PHI executed a Stock
Purchase Agreement.
Consequently, petitioner filed with this Court a petition for
mandamus under G.R. No. 114057. On May 11, 1994, said
petition was referred to the Court of Appeals —
". . . for proper determination and disposition, pursuant to
Section 9, paragraph 1 of B.P. 129, granting the Court of
Appeals ‘original jurisdiction to issue writs of mandamus . . .
and auxiliary writs or processes, whether or not in aid of its
appellate jurisdiction,’ which jurisdiction is concurrent with
this Court, there being no special and important reason for
this Court to assume jurisdiction over the case in the first
instance." 2
On July 18, 1995, the Court of Appeals "denied" for lack of
merit the petition for mandamus. Citing Guanio v.
Fernandez, 3 it held that mandamus is not the proper
remedy to "compel the undoing of an act already done or
the correction of a wrong already perpetuated, even
though the action taken was clearly illegal." It was further
ruled that it was not the proper forum for a "mere petition
for mandamus" that aimed to question the constitutionality
or legality of the right of first refusal and the right to top
that was exercised by Kawasaki/PHI and that the matter
must be brought "by the proper party in the proper forum
at the proper time and threshed out in a full blown
trial."cralaw virtua1aw library
After ruling that the right of first refusal and the right to top
are prima facie legal, the Court of Appeals found petitioner
to be in estoppel for the following
reasons:jgc:chanrobles.com.ph
"5. If petitioner found the right to top to be illegal, it should
not have participated in the public bidding; or it should
have questioned the legality of the rules before the courts
or filed a petition for declaratory relief (Rule 64, Rules of
Court) before the public bidding could have taken place.
By participating in the public bidding, with full knowledge
of the right to top granted to Kawasaki/Philyards, petitioner
is estopped from questioning the validity of the award
given to Philyards after the latter exercised the right to top
and had paid in full the purchase price of the subject
shares, pursuant to the ASBR.
6. The fact that the losing bidder, Keppel Consortium
(composed of Keppel, SM Group, Insular Life Assurance,
Mitsui and ICTSI) appears to have joined Philyards in the
latter’s effort to raise P2.131 billion necessary in exercising
the right to top by 5% is a valid activity in free enterprise
that is not contrary to law, public policy or public morals. It
should not be a cause of grievance for petitioner as it is the
very essence of free competition in the business world.
Astute businessmen involved in the public bidding in
question knew what they were up against. And when they
participated in the public bidding with prior knowledge of
the right to top, they did so, with full knowledge of the
eventuality that the highest bidder may still be topped by
Kawasaki/Philyards by 5%. It is admitted by petitioner that
it likewise represents a consortium composed of JG
Summit, Sembawang Singapore and Jurong of Malaysia.
Why should petitioner then expect Philyards to limit itself
to its own resources when the latter can enter into
agreements with other entities to help it raise the money it
needed to pay the full purchase price as in fact it had
already paid the National Government in the amount of
P2.131 billion as required under the ASBR?" 4
Petitioner filed a motion for the reconsideration of said
Decision which was denied on March 15, 1996. Petitioner
thus filed the instant petition for review on certiorari,
raising the following arguments:chanrob1es virtual 1aw
library
I.
THE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING
THAT PETITIONER JG SUMMIT IS LEGALLY ESTOPPED FROM
CHALLENGING THE LEGALITY OF THE RIGHT TO TOP,
INSERTED IN THE BIDDING RULES, AS WELL AS THE RIGHT
OF FIRST REFUSAL FROM WHICH THE RIGHT TO TOP WAS
ADMITTEDLY SOURCED, BY SIMPLY STATING THAT THOSE
RIGHTS ARE VALID AND ENFORCEABLE WITHOUT RULING
ON ANY OF THE IMPORTANT LEGAL AND CONSTITUTIONAL
GROUNDS RAISED BY THE PETITIONER AS
FOLLOWS:chanrob1es virtual 1aw library
(A) THE RIGHT OF FIRST REFUSAL, GRANTED TO A JAPANESE
CORPORATION AT A TIME WHEN IT HELD 40% EQUITY IN
PHILSECO, A LANDHOLDING CORPORATION, IS NULL AND
VOID FOR BEING CONTRARY TO THE
CONSTITUTION.chanrob1es virtua1 1aw 1ibrary
(B) THE RIGHT TO TOP WAS GRANTED TO THE JAPANESE
CORPORATION AT A TIME WHEN IT MERELY HELD 2.6%
EQUITY IN PHILSECO.
(C) THE RIGHT OF FIRST REFUSAL GRANTED TO THE
JAPANESE CORPORATION OVER SHARES OF STOCK IS
CONTRARY TO THE CORPORATION CODE.
(D) THE RIGHT TO TOP IS CONTRARY TO PUBLIC POLICY AS
IT IS ANATHEMA TO COMPETITIVE PUBLIC BIDDING FOR
BEING UNDULY RESTRICTIVE THEREOF, AND, MOREOVER, IS
CONTRARY TO DUE PROCESS OF LAW AS IT IS AGAINST THE
BASIC RUDIMENTS OF FAIR PLAY.
(E) THE GRANT OF THE RIGHT TO TOP IS A CRIMINAL
VIOLATION OF THE ANTI-GRAFT LAW AS IT GIVES A CLEARLY
UNWARRANTED BENEFIT IN FAVOR OF PHILYARDS AS
SHOWN BY CLEAR AND UNDISPUTED DOCUMENTARY
EVIDENCE.
II.
THE COURT OF APPEALS GRIEVOUSLY ERRED IN HOLDING
THAT MANDAMUS IS NOT A PROPER REMEDY IN THIS CASE.
III.
FOLLOWING ITS OWN FINDINGS, THE COURT OF APPEALS
GRIEVOUSLY ERRED (A) IN NOT DIRECTING THAT TRIAL BE
HELD ON ALLEGED ISSUES OF FACT AND (B) IN NOT
APPOINTING AN AMICUS CURIAE FROM AMONG THE
LAWYERS IN THE COMMISSION ON AUDIT TO DETERMINE
THE APPLICABILITY OF ITS REQUIREMENTS TO THE
TRANSACTIONS IN THIS CASE. 5
In their comment on the petition, private respondent PHI
contends that the real party in interest which should have
filed the petition for mandamus is the JG Summit
Consortium and not solely petitioner JG Summit Holdings,
Inc. which is just a part of that consortium. Since
Sembawang and Jurong, the other members of the
consortium, are indispensable parties to the petition, 6
petitioner’s failure to implead them as co-petitioners
warranted the dismissal of the petition.
Public respondents’ contention must fail. While it is true
that Rule 3, Section 2 of the Rules of Court provides that"
(a)ll persons having an interest in the subject of the action
and in obtaining the relief demanded shall be joined as
plaintiffs," petitioner may file the petition alone. In the first
place, Sembawang and Jurong are not indispensable
parties, such that their non-joinder as petitioners will not
necessarily result in a failure to arrive at a final
determination of the case. 7 They may be necessary parties
as they were members of the consortium that won the
public bidding prior to the exercise of the right to top by
private respondent, but the petition may be resolved even
without their active participation. Secondly, there is a
doubt as to whether or not said foreign corporations are
"subject to the jurisdiction of the court as to both service of
process and venue." 8 Thirdly, petitioner may be deemed
to represent Sembawang and Jurong. The admission of
petitioner’s counsel that said foreign corporations are
underwriting his and the other counsel’s fees reflects this
fact. 9 By the nexus that binds the members of the
consortium, in the event that petitioner succeeds in
pursuing this case, it is bound to respect the existence of
the consortium and the corresponding responsibilities
arising therefrom.
Public respondents also contend that petitioner has no
standing to question the legality of a provision of the JVA in
which it is not a party. 10 However, as this Court held in
Kilosbayan v. Morato, 11 there is a difference between the
rule on real-party-in-interest and the rule on standing, as
the latter has constitutional underpinnings. In the case at
bar, petitioner has sufficiently alleged constitutional
ramifications in the questioned public bidding of the
PHILSECO that merit the attention of the Court. Moreover,
the prospect of financial gains arising from the award of the
sale of PHILSECO is enough personal stake in the outcome
of the controversy to vest upon petitioner the locus standi
to file the petition for mandamus. Besides, without
Kawasaki-PHI’s right to top the highest bid, petitioner
would have been awarded the sale as the highest bidder. A
winning bidder has personality to initiate proceedings to
prevent setting at naught his right; otherwise, his right to
due process would be violated. 12 As such winning bidder,
petitioner has "a present substantial interest," or such
interest in the subject matter of action as will entitle it,
under substantive law, to recover if the evidence is
sufficient. 13
With respect to the propriety of the remedy availed by
petitioner, the Court of Appeals correctly held that the
special civil action of mandamus is not the proper remedy
to question the legality of the exercise of the right to top by
private Respondent. It does not lie to compel the award of a
contract subject of bidding to an unsuccessful bidder. 14
Mandamus applies as a remedy only where petitioner’s
right is founded clearly in law and not when it is doubtful.
15 Thus:chanrob1es virtua1 1aw 1ibrary
"In order that a writ of mandamus may issue, it is essential
that the person petitioning for the same has a clear legal
right to the thing demanded and that it is the imperative
duty of the respondent to perform the act required. It
neither confers powers nor imposes duties and is never
issued in doubtful cases. It is simply a command to exercise
a power already possessed and to perform a duty already
imposed." 16
The Court of Appeals cannot declare petitioner as the
winning bidder in this case and direct the COP/APT to
award the sale to it without first determining the validity of
the right to top stipulated in the ASBR. Moreover, the sale
of government share in PHILSECO is a fait accompli, in view
of the execution of the Stock Purchase Agreement between
APT and PHI. Mandamus may not be availed to direct the
exercise of judgment or discretion in a particular way or to
retract or reverse an action already taken in the exercise of
either. 17
Be that as it may, the Court of Appeals erred when it
dismissed the petition on the sole ground of the
impropriety of the special civil action of mandamus. It must
be stressed that the petition was also one forcertiorari,
seeking to nullify the award of the sale to private
respondent of the PHILSECO shares. Verily, the petition
alleges that "respondents COP and APT have committed
such a grave abuse of discretion tantamount to lack or
excess of their jurisdiction in insisting on awarding the bid
to Philyards, for the various reasons stated herein,
particularly since the right of first refusal and the right to
top the bid are unconstitutional, contrary to law and public
policy." 18 Petitioner’s failure to include certiorari in its
caption should not negate the fact that the petition
charged public respondent with grave abuse of discretion in
awarding the sale to private Respondent. Well-settled is the
rule that it is not the caption of the pleading but the
allegations therein that determine the nature of the action
and the Court shall grant relief warranted by the allegations
and the proof even if no such relief is prayed for. 19
Petitioner’s main contention is that PHILSECO, as a
shipyard, is a public utility and, hence, could be operated
only by a corporation at least 60% of whose capital is
owned by Filipino citizens, in accordance with Article XII,
Section 10 of the Constitution. Petitioner asserts that a
shipyard is a public utility pursuant to Section 13 (b) of
Commonwealth Act No. 146. 20 Respondents, on the other
hand, contend that shipyards are no longer public utilities
by express provision of Presidential Decree No. 666, which
provided incentives to the shipbuilding and ship repair
industry.
Indeed, P.D. No. 666 dated March 5, 1975 explicitly stated
that a "shipyard" was not a "public utility." Section 1
thereof provide as follows:jgc:chanrobles.com.ph
"d) Registration required but not as Public Utility. — The
business of constructing and repairing vessels or parts
thereof shall not be considered a public utility and no
Certificate of Public Convenience shall be required therefor.
However, no shipyard, graving dock, marine railway or
marine repair shop and no person or enterprise shall
engage in the construction and/or repair of any vessel, or
any phase or part thereof, without a valid Certificate of
Registration and license for this purpose from the Maritime
Industry Authority, except those owned or operated by the
Armed Forces of the Philippines or by foreign governments
pursuant to a treaty or agreement." (Emphasis supplied.)
However, Section 1 of P.D. No. 666 was expressly repealed
by Section 20 of Batas Pambansa Blg. 391, the Investment
Incentive Policy Act of 1983. 21 Subsequently, Executive
Order No. 226, the Omnibus Investments Code of 1987,
was issued and Section 85 thereof expressly repealed B.P.
Blg. 391. 22
The express repeal of B.P. Blg. 391 by E.O. No. 226 did not
revive Section 1 of P.D. No. 666, declassifying the
shipbuilding and ship repair industry as a public utility, as
said executive order did not provide otherwise. When a law
which expressly repeals a prior law is itself repealed, the
law first repealed shall not be thereby revived unless
expressly so provided. 23 Consequently, when the APT
drafted the ASBR sometime in 1993, P.D. No. 666 no longer
existed in our statute books. While it is true that the repeal
of a statute does not operate to impair rights that have
become vested or accrued while the statute was in force,
there are no vested rights of the parties that should be
protected in the case at bar. The reason is simple: said
decree was already inexistent when the ASBR was
issued.chanrob1es virtua1 1aw 1ibrary
A shipyard such as PHILSECO being a public utility as
provided by law, the following provision of the Article XII of
the Constitution applies:jgc:chanrobles.com.ph
"SECTION 11. No franchise, certificate, or any other form of
authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to
corporations or associations organized under the laws of
the Philippines at least sixty per centum of whose capital is
owned by such citizens, nor shall such franchise, certificate,
or authorization be exclusive in character or for a longer
period than fifty years. Neither shall any such franchise or
right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the
Congress when the common good so requires. The State
shall encourage equity participation in public utilities by the
general public. The participation of foreign investors in the
governing body of any public utility enterprise shall be
limited to their proportionate share in its capital, and all the
executive and managing officers of such corporation or
association shall be citizens of the Philippines." (Emphasis
supplied.)
The progenitor of this constitutional provision, Article XIV,
Section 5 of the 1973 Constitution, required the same
proportion of 60% - 40% capitalization. The JVA between
NIDC and Kawasaki entered into on January 27, 1977
manifests the intention of the parties to abide by the
constitutional mandate on capitalization of public utilities.
24 Paragraph 1.3 of the JVA, as amended by Addendum No.
2 dated December 28, 1983, 25
provides:jgc:chanrobles.com.ph
"The authorized capital stock of PHILSECO shall be P330
million. The parties shall thereafter increase their
subscription in PHILSECO as may be necessary and as called
by the Board of Directors, maintaining a proportion of 60%
- 40% for NIDC and KAWASAKI, respectively, up to a total
subscribed and paid-up capital stock of P312 million."
(Emphasis supplied.)
A joint venture is an association of persons or companies
jointly undertaking some commercial enterprise with all of
them generally contributing assets and sharing risks. It
requires a community of interest in the performance of the
subject matter, a right to direct and govern the policy in
connection therewith, and duty, which may be altered by
agreement to share both in profit and losses. 26 Persons
and business enterprises usually enter into a joint venture
because it is exempt from corporate income tax. 27
Considered more of a partnership, 28 a joint venture is
governed by the laws on contracts and on partnership. The
joint venture created between NIDC and Kawasaki falls
within the purview of an "association" pursuant to Section
5 of Article XIV of the 1973 Constitution and Section 11 of
Article XII of the 1987 Constitution. Consequently, a joint
venture that would engage in the business of operating a
public utility, such as a shipyard, must observe the
proportion of 60%-40% Filipino-foreign capitalization.
Notably, paragraph 1.4 of the JVA accorded the parties the
right of first refusal "under the same terms." This phrase
implies that when either party exercises the right of first
refusal under paragraph 1.4, they can only do so to the
extent allowed them by paragraphs 1.2 and 1.3 of the JVA
or under the proportion of 60%-40% of the shares of stock.
Thus, should the NIDC opt to sell its shares of stock to a
third party, Kawasaki could only exercise its right of first
refusal to the extent that its total shares of stock would not
exceed 40% of the entire shares of stock of SNS or
PHILSECO. The NIDC, on the other hand, may purchase
even beyond 60% of the total shares. As a government
corporation and necessarily a 100% Filipino-owned
corporation, there is nothing to prevent its purchase of
stocks even beyond 60% of the capitalization as the
Constitution clearly limits only foreign capitalization.
Parenthetically, the Maritime Industry Authority (MARINA)
which has been tasked to regulate the operation of
shipbuilding and ship repair yards, 29 abides by the Filipino
capitalization requirement as far as corporations and
partnerships are concerned. However, Section 2.3.1 (a) of
its Memorandum Circular No. 95, Series of 1994, 30 setting
out the Revised Implementing Guidelines on the Licensing
of Shipbuilders, Ship Repairers, Afloat Repairers,
Boatbuilders and Shipbreakers, seems to exempt joint
ventures registered with the SEC, the BOI and the EPZA
from the 60% requirement of Filipino ownership. 31 The
said provision states:jgc:chanrobles.com.ph
"The applicant must be a Filipino citizen or a
corporation/partnership at least 60% of the authorized
capital stock of which is owned by Filipino citizens except
for joint ventures which are registered with the Securities
and Exchange Commission, the Board of Investments
and/or Export Processing Zone Authorities." 32
The constitutionality of said MARINA guideline, however, is
not in issue here. Kawasaki was bound by its contractual
obligation under the JVA that limits its right of first refusal
to 40% of the total capitalization of PHILSECO. Thus,
Kawasaki cannot purchase beyond 40% of the capitalization
of the joint venture on account of both constitutional and
contractual proscriptions.chanrob1es virtua1 1aw 1ibrary
From the facts on record, it appears that at the outset, the
APT and Kawasaki respected the 60%-40% capitalization
proportion in PHILSECO. However, APT subsequently
encouraged Kawasaki to participate in the public bidding of
the National Government’s shareholdings of 87.67% of the
total PHILSECO shares, definitely over and above the 40%
limit of its shareholdings. In so doing, the APT went beyond
the ambit of its authority.
It is well settled that the role of courts is to ascertain
whether a branch or instrumentality of Government has
transgressed its constitutional or statutory boundaries. The
courts, must examine those boundaries in the light of
provisions of the law. Otherwise, it would stray into the
realm of policy decision-making. 33
Proclamation No. 50, creating the COP and the APT, was
issued by President Corazon C. Aquino pursuant to her
legislative powers under the Provisional Constitution of
1986. Section 12 of said Proclamation vested the APT with
the following powers:chanrob1es virtual 1aw library
(1) To formulate and, after approval by the Committee,
implement a program for the disposition of assets
transferred to it under this Proclamation, such program to
be completed within a period of five years from the date of
the issuance of this Proclamation;
(2) Subject to its having received the prior written approval
of the Committee to sell such asset at a price and on terms
of payment and to a party disclosed to the Committee, to
sell each asset referred to it by the Committee to such
party and on such terms as in its discretion are in the best
interest of the National Government, and for such purpose
to execute and deliver, on behalf and in the name of the
National Government, such deeds of sale, contracts and
other instruments as may be necessary or appropriate to
convey title to such assets;
x x x
(7) To adopt its internal rules and regulations, to adopt,
alter and use a seal which shall be judicially noticed; to
enter into contracts; to sue and be sued;
x x x
Pursuant to these provisions, the APT drafted the ASBR.
Since the APT’s rule-making authority is merely delegated,
the ASBR should be measured by the standard set by said
proclamation. 34 Notably, the discretion granted by the
proclamation to the APT for the sale of government
property is circumscribed only by the "best interest of the
National Government."cralaw virtua1aw library
Implicitly written in any delegated legislative authority,
such as that provided for in Proclamation No. 50, is the
requisite that the rules and regulations which an
administrative body adopts must respect pertinent
provisions of the Constitution and the law. 35 Article XII,
Section 11 of the Constitution providing for a 60% Filipino
capitalization in order that public utilities may be granted a
franchise should thus be deemed a paramount
consideration in drafting the ASBR. In this regard, worth
noting is paragraph 15.0 of the ASBR, which provides
that:jgc:chanrobles.com.ph
"In the event that the winning bidder is a 100% foreign-
owned corporation, it may name its nominee corporation
to whom the NG shares shall be conveyed, provided it owns
40% equity in the nominee corporation, so as not to affect
PHILSECO’s qualification to own real estate properties in
the Philippines."cralaw virtua1aw library
This rule is fraught with dangerous implications. It allows a
completely foreign corporation to participate in the public
bidding of more than 60% of the total shares of a public
utility corporation without setting a period within which
the foreign bidder should name its nominee. As it is, the
rule allows a totally foreign investor to engage in the
business of operating a public utility for an unlimited period
of time in total disregard of the constitutional proscription
on the percentage of Filipino ownership of corporations
engaged therein. Paragraph 15.0 of the ASBR is thus
directly and openly repugnant to the Constitution
considering that it allows foreign corporations to operate a
public utility for an unlimited period of time.
In carrying out its objective of disposing of government
property, the APT should take into account the pertinent
laws. Since the method of disposing the PHILSECO that the
APT had adopted was through public bidding, it was duty-
bound to follow the rules and regulations on competitive
public bidding, in order to uphold the elementary rule on
fairness in such disposition. As this Court once
said:chanrob1es virtua1 1aw 1ibrary
". . . . A competitive public bidding aims to protect the
public interest by giving the public the best possible
advantages through open competition. It is a mechanism
that enables the government agency to avoid or preclude
anomalies in the execution of public contracts." 36
The word "bidding" in its comprehensive sense means
making an offer 37 or an invitation to prospective
contractors whereby the government manifests its
intention to make proposals 38 for the purchase of
supplies, materials and equipment for official business or
public use, 39 or for public works or repair. The three
principles in public bidding are: the offer to the public; an
opportunity for competition; and a basis for exact
comparison of bids. The distinctive character of the system
is destroyed and the purpose of its adoption is thwarted
when a regulation thereon excludes any of these principles.
40 Public bidding of government contracts and for the
disposition of government assets should have the same
principles and objectives. Their only difference, if at all, is
that in the public bidding for public contracts, the award is
generally given to the lowest bidder while in the disposition
of government assets, the award is to the highest bidder.
41 The term "public bidding" imports a sale to the highest
bidder with absolute freedom for competitive bidding. 42
Under Section 504 of the Government Auditing Rules and
Regulations, a public auction, which is the mode of
divestment or disposal of government property, shall
adhere to established mechanics and procedures in public
bidding. 43 In such public auction sales, the presence of a
Commission on Audit (COA) representative who shall see to
the proper observance of auditing rules is imperative. 44 In
this case, there is no record that a COA representative
witnessed the public auction on December 2, 1993. Neither
is there a showing that the APT observed the requirement
of COA Circular No. 89-296, to the effect that a government
entity that is disposing of government property shall furnish
the COA with the disposal procedure adopted. Likewise,
nowhere in the record is it stated that the APT heeded the
suggestion of Secretary of Finance and COP Chairman
Jayme that its decision to grant Kawasaki the right to top
the highest bid be made "known to the Commission on
Audit." What appears on record is that the COA did not
approve the ASBR, specifically the provision on the right to
top the highest bidder. Thus, then COA Chairman Pascasio
S. Banaria, replying to the query of petitioner’s counsel on
whether or not the COA had approved the right to top the
highest bid by 5%, stated:jgc:chanrobles.com.ph
"Per information received from our Auditor at APT, no prior
approval was issued by their Office regarding said
preferential option. We have instructed our Auditor thereat
to advise this Office of the result of the review of the
Corporation’s procedures for the sale of the assets
including the review of the bidding documents pertaining
to the subject public bidding pursuant to the provisions of
the Commission on Audit Circular No. 89-296 dated January
27, 1989. 45
In according the KHI/PHI the right to top, the APT violated
the rule on competitive public bidding, under which the
highest bidder is declared the winner entitled to the award
of the subject of the auction sale. In effect, the grant to
KHI/PHI of the right to top can be likened to a second
bidding, which, however, is allowed only if there is a failure
of bidding, such as when there is only one bidder or none at
all. 46 By placing KHI/PHI in the advantageous position of
topping the highest bidder, the APT set aside the basic rule
in public bidding that there be an opportunity for
competition.
While it may be argued that the right to top was aimed at
giving the best financial advantage to the government, the
manner by which that right was conceived and arrived at in
this case manifested bias in favor of KHI, thereby clearly
brushing aside the rule on fair competition. More
importantly, the ASBR provision on the right to top the
highest bidder completely disregarded the stipulation in the
JVA between NIDC and KHI to comply with the 60%-40%
capitalization arrangement whereby KHI, the foreign
investor, would be able to exercise its right of first refusal
to the extent of only 40% of the total capitalization of the
PHILSECO. Thus, KHI, whose investment exposure was
already diminished to only 2.59% of the total PHILSECO
shares, was given the privilege, through its nominee PHI, of
exercising the right to top the highest bid to 87.67% of
those shares or definitely over and above its 40%
contractual right to PHILSECO shares under the JVA.
Consequently, the APT rendered nugatory the
constitutional and contractual proscriptions clearly to favor
a foreign investor.
Furthermore, while the right of first refusal entitled KHI to
priority in the award of the contract, that right cannot bar
another bidder from submitting a bid because, precisely,
the law requires public bidding in government contracts. 47
Thus, by engrafting in the provisions of the ASBR the right
to top, which was only an offshoot of the right of first
refusal, the APT effectively did away with public bidding
insofar as KHI/PHI was concerned. To be sure, the right to
top is different from the right to match. In the latter, a
qualified bidder is given the privilege of offering the same
bid as that of the highest bidder. 48 In the former, as
provided for by the ASBR, a non-bidder is accorded the
right to top the highest bid. There is reason, therefore, for
the petitioner to complain that the APT made a show of a
public bidding in order to elicit the highest bid, only to
award the sale to a non-bidder. The unfair manner by
which the purported public bidding was conducted by the
APT is even made more blatant by the fact that after the
"public bidding," KHI exercised the right to top through its
nominee, private respondent PHI, which has among its
stockholders some losing bidders.chanrob1es virtua1 1aw
1ibrary
In drafting the ASBR, the APT should have noted the fact
that foreign investors were competing in the bidding. While
it is true that foreign investment should be encouraged in
this country, however, the ASBR provision on the right to
top is unfair to all competitors, be they foreign or local, in
the public auction of 87.67% of PHILSECO shares as it
provided for a method that would set at naught the entire
public bidding.

It was thus error for the Court of Appeals to conclude that

petitioner was estopped from contesting the validity of the
ASBR and the bidding procedure conducted pursuant to it.
It is clear from the provisions of the ASBR itself that the
basic rules on fair competition in public biddings have been
disregarded. Although petitioner had the opportunity to
examine the ASBR before it participated in the bidding, it
cannot be estopped from questioning the unconstitutional,
illegal and inequitable provisions thereof. Estoppel is
unavailing in this case; otherwise, it would stamp validity to
an act that is prohibited by law or against public policy. 49

WHEREFORE, the instant petition for review on certiorari is

GRANTED. The assailed Decision and Resolution of the
Court of Appeals are REVERSED and SET ASIDE. Petitioner is
ordered to pay to APT its bid price of Two Billion Thirty
Million Pesos (P2,030,000,000.00), less its bid deposit plus
interests upon the finality of this Decision. In turn, APT is
ordered to:chanrob1es virtual 1aw library

(a) accept said amount of P2,030,000,000.00 less bid

deposit and interests from petitioner;

(b) execute a Stock Purchase Agreement with petitioner;

(c) cause the issuance in favor of petitioner of the

certificates of stocks representing 87.67% of PHILSECO’s
total capitalization;

(d) return to private respondent PHI the amount of Two

Billion One Hundred Thirty One Million Five Hundred
Thousand Pesos (P2,131,500,000.00); and

(e) cause the cancellation of the stock certificates issued to

PHI.

SO ORDERED.
 [G.R. No. 110249. August 21, 1997.]
ALFREDO TANO, BALDOMERO TANO, DANILO TANO,
ROMUALDO TANO, TEOCENES MIDELLO, ANGEL DE MESA,
EULOGIO TREMOCHA, FELIPE ONGONION, JR., ANDRES
LINIJAN, ROBERT LIM, VIRGINIA LIM, FELIMON DE MESA,
GENEROSO ARAGON, TEODORICO ANDRE, ROMULO DEL
ROSARIO, CHOLITO ANDRE, ERICK MONTANO, ANDRES
OLIVA, VITTORIO SALVADOR, LEOPOLDO ARAGON,
RAFAEL RIBA, ALEJANDRO LEONILA, JOSE DAMACINTO,
RAMIRO MANAEG, RUBEN MARGATE, ROBERTO REYES,
DANILO PANGARUTAN, NOE GOLPAN, ESTANISLAO
ROMERO, NICANOR DOMINGO, ROLDAN TABANG,
ADRIANO TABANG, FREDDIE SACAMAY, MIGUEL
TRIMOCHA, PACENCIO LABABIT, PABLO H. OMPAD,
CELESTINO A. ABANO, ALLAN ALMODAL, BILLY D.
BARTOLAY, ALBINO D. LIQUE, MELCHOR J. LAYSON,
MELANIE AMANTE, CLARO E. YATOC, MERGELDO B.
BALDEO, EDGAR M. ALMASETA, JOSELITO MANAEG,
LIBERATO ANDRADA, JR., ROBERTO BERRY, RONALD
VILLANUEVA, EDUARDO VALMORIA, WILFREDO
MENDOZA, NAPOLEON BABANGGA, ROBERTO TADEPA,
RUBEN ASINGUA, SILVERIO GABO, JERRY ROMERO, DAVID
PANGGARUTAN, DANIEL PANGGARUTAN, ROMEO
AGAWIN, FERNANDO EQUIZ, DITO LEQUIZ, RONILO
MODERABLE, BENEDICTO TORRES, ROSITO A. VALDEZ,
CRESENCIO A. SAYANG, NICOMEDES S. ACOSTA, ERENEO
A. SEGARINO, JR., WILFREDO A. RAUTO, DIOSDADO A.
ACOSTA, BONIFACIO G. SISMO, TACIO ALUBA, DANIEL B.
BATERZAL, ELISEO YBAÑEZ, DIOSDADO E. HANCHIC, EDDIE
ESCALICAS, ELEAZAR B. BATERZAL, DOMINADOR
HALICHIC, ROOSEVELT RISMO-AN, ROBERT C. MERCADER,
TIRSO ARESGADO, DANIEL CHAVEZ, DANILO CHAVEZ,
VICTOR VILLAROEL, ERNESTO C. YBAÑEZ, ARMANDO T.
SANTILLAN, RUDY S. SANTILLAN, JODJEN ILUSTRISIMO,
NESTOR SALANGRON, ALBERTO SALANGRON, ROGER L.
ROXAS, FRANCISCO T. ANTICANO, PASTOR SALANGRON,
BIENVENIDO SANTILLAN, GILBUENA LADDY, FIDEL
BENJAMIN, JOVELITO BELGANO, HONEY PARIOL,
ANTONIO SALANGRON, NICASIO SALANGRON, & AIRLINE
SHIPPERS ASSOCIATION OF PALAWAN, Petitioners, v.
HON. GOV. SALVADOR P. SOCRATES, MEMBERS OF
SANGGUNIANG PANLALAWIGAN OF PALAWAN, namely,
VICE-GOVERNOR JOEL T. REYES, JOSE D. ZABALA,
ROSALINO R. ACOSTA, JOSELITO A. CADLAON, ANDRES R.
BAACO, NELSON P. PENEYRA, CIPRI-ANO C. BARROMA,
CLARO E. ORDINARIO, ERNESTO A. LLACUNA, RODOLFO C.
FLOR-DELIZA, GILBERT S. BAACO, WINSTON G. ARZAGA,
NAPOLEON F. ORDOÑEZ and GIL P. ACOSTA, CITY MAYOR
EDWARD HAGEDORN, MEMBERS OF SANGGUNIANG
PANLUNGSOD NG PUERTO PRINCESA, ALL MEMBERS OF
BANTAY DAGAT, MEMBERS OF PHILIPPINE NATIONAL
POLICE OF PALAWAN, PROVINCIAL AND CITY
PROSECUTORS OF PALAWAN and PUERTO PRINCESA CITY,
and ALL JUDGES OF PALAWAN, REGIONAL, MUNICIPAL
AND METROPOLITAN,Respondents.
DECISION
DAVIDE, JR., J.:
Petitioners caption their petition as one for" Certiorari,
Injunction With Preliminary and Mandatory Injunction, with
Prayer for Temporary Restraining Order" and pray that this
Court: (1) declare as unconstitutional: (a) Ordinance No. 15-
92, dated 15 December 1992, of the Sangguniang
Panlungsod of Puerto Princesa; (b) Office Order No. 23,
Series of 1993, dated 22 January 1993, issued by Acting City
Mayor Amado L. Lucero of Puerto Princesa City; and (c)
Resolution No. 33, Ordinance No. 2, Series of 1993, dated
19 February 1993, of the Sangguniang Panlalawigan of
Palawan; (2) enjoin the enforcement thereof; and (3)
restrain respondents Provincial and City Prosecutors of
Palawan and Puerto Princesa City and Judges of the
Regional Trial Courts, Metropolitan Trial Courts 1 and
Municipal Circuit Trial Courts in Palawan from assuming
jurisdiction over and hearing cases concerning the violation
of the Ordinances and of the Office Order.chanrobles.com :
virtual law library
More appropriately, the petition is, and shall be treated as,
a special civil action for certiorari and prohibition.
The following is petitioners’ summary of the factual
antecedents giving rise to the petition:chanrob1es virtual
1aw library
1. On December 15, 1992, the Sangguniang Panlungsod ng
Puerto Princesa City enacted Ordinance No. 15-92 which
took effect on January 1, 1993 entitled "AN ORDINANCE
BANNING THE SHIPMENT OF ALL LIVE FISH AND LOBSTER
OUTSIDE PUERTO PRINCESA CITY FROM JANUARY 1, 1993
TO JANUARY 1, 1998 AND PROVIDING EXEMPTIONS;
PENALTIES AND FOR OTHER PURPOSES THEREOF", the full
text of which reads as follows:chanrob1es virtual 1aw
library
Section 1. Title of the Ordinance. — This Ordinance is
entitled: AN ORDINANCE BANNING THE SHIPMENT OF ALL
LIVE FISH AND LOBSTER OUTSIDE PUERTO PRINCESA CITY
FROM JANUARY 1, 1993 TO JANUARY 1, 1998 AND
PROVIDING EXEMPTIONS, PENALTIES AND FOR OTHER
PURPOSES THEREOF
Section 2. Purpose, Scope and Coverage. — To effectively
free our City Sea Waters from Cyanide and other Obnoxious
substance[s], and shall cover all persons and/or entities
operating within and outside the City of Puerto Princesa
who is are (sic) directly or indirectly in the business or
shipment of live fish and lobster outside the City.
Section 3. Definition of terms. — For purpose of this
Ordinance the following are hereby defined:chanrob1es
virtual 1aw library
A. SEA BASS — A kind of fish under the family of
Centropomidae, better known as APAHAP;
B. CATFISH — A kind of fish under the family of Plotosidae,
better known as HITO-HITO;
C. MUDFISH — A kind of fish under the family of
Orphicaphalisae better known as DALAG;
D. ALL LIVE FISH — All alive, breathing not necessarily
moving of all specie[s] use[d] for food and for aquarium
purposes.
E. LIVE LOBSTER — Several relatively, large marine
crusteceans [sic] of the genus Homarus that are alive and
breathing not necessarily moving.
Section 4. It shall unlawful [for] any person or any business
enterprise or company to ship out from Puerto Princesa
City to any point of destination either via aircraft or
seacraft of any live fish and lobster except SEA BASS,
CATFISH, MUDFISH, AND MILKFISH FRIES.
Section 5. Penalty Clause. — Any person/s and or business
entity violating this Ordinance shall be penalized with a fine
of not more than P5,000.00 or imprisonment of not more
than twelve (12) months, cancellation of their permit to do
business in the City of Puerto Princesa or all of the herein
stated penalties, upon the discretion of the court.
Section 6. If the owner and/or operator of the
establishment found violating the provisions of this
ordinance is a corporation or a partnership, the penalty
prescribed in Section 5 hereof shall be imposed upon its
president and/or General Manager or Managing Partner
and/or Manager, as the case maybe [sic].
Section 7. Any existing ordinance or any provision of any
ordinance inconsistent to [sic] this ordinance is deemed
repealed.
Section 8. This Ordinance shall take effect on January 1,
1993.
SO ORDAINED."cralaw virtua1aw library
x x x text of which reads as follows:jgc:chanrobles.com.ph
2. To implement said city ordinance, then Acting City Mayor
Amado L. Lucero issued Office Order No. 23, Series of 1993
dated January 22, 1993 which reads as
follows:jgc:chanrobles.com.ph
"In the interest of public service and for purposes of City
Ordinance No. PD426-14-74, otherwise known as ‘AN
ORDINANCE REQUIRING ANY PERSON ENGAGED OR
INTENDING TO ENGAGE IN ANY BUSINESS, TRADE,
OCCUPATION, CALLING OR PROFESSION OR HAVING IN HIS
POSSESSION ANY OF THE ARTICLES FOR WHICH A PERMIT IS
REQUIRED TO BE HAD, TO OBTAIN FIRST A MAYOR’S
PERMIT’ and City Ordinance No. 15-92, AN ORDINANCE
BANNING THE SHIPMENT OF ALL LIVE FISH AND LOBSTER
OUTSIDE PUERTO PRINCESA CITY FROM JANUARY 1, 1993
TO JANUARY 1, 1998, you are hereby authorized and
directed to check or conduct necessary inspections on
cargoes containing live fish and lobster being shipped out
from the Puerto Princesa Airport, Puerto Princesa Wharf or
at any port within the jurisdiction of the City to any point of
destinations [sic] either via aircraft or seacraft.
The purpose of the inspection is to ascertain whether the
shipper possessed the required Mayor’s Permit issued by
this Office and the shipment is covered by invoice or
clearance issued by the local office of the Bureau of
Fisheries and Aquatic Resources and as to compliance with
all other existing rules and regulations on the matter.
Any cargo containing live fish and lobster without the
required documents as stated herein must be held for
proper disposition.
In the pursuit of this Order, you are hereby authorized to
coordinate with the PAL Manager, the PPA Manager, the
local PNP Station and other offices concerned for the
needed support and cooperation. Further, that the usual
courtesy and diplomacy must be observed at all times in
the conduct of the inspection.
Please be guided accordingly."cralaw virtua1aw library
x x x
3. On February 19, 1993, the Sangguniang Panlalawigan,
Provincial Government of Palawan enacted Resolution No.
33 entitled: "A RESOLUTION PROHIBITING THE CATCHING,
GATHERING, POSSESSING, BUYING, SELLING AND
SHIPMENT OF LIVE MARINE CORAL DWELLING AQUATIC
ORGANISMS, TO WIT: FAMILY: SCARIDAE (MAMENG),
EPINE PHELUS FASCIATUS (SUNO), CROMILEPTES ALTIVELIS
(PANTHER OR SEÑORITA), LOBSTER BELOW 200 GRAMS
AND SPAWNING, TRIDACNA GIGAS (TAKLOBO), PINCTADA
MARGARITEFERA (MOTHER PEARL, OYSTERS, GIANT CLAMS
AND OTHER SPECIES), PENAEUS MONODON (TIGER
PRAWN-BREEDER SIZE OR MOTHER), EPINEPHELUS SUILLUS
(LOBA OR GREEN GROUPER) AND FAMILY: BALISTIDAE
(TROPICAL AQUARIUM FISHES) FOR A PERIOD FIVE (5)
YEARS IN AND COMING FROM PALAWAN WATERS", the full
"WHEREAS, scientific and factual researches [sic], and
studies disclose that only five (5) percent of the corals of
our province remain to be in excellent condition as [a]
habitat of marine coral dwelling aquatic organisms;
WHEREAS, it cannot be gainsaid that the destruction and
devastation of the corals of our province were principally
due to illegal fishing activities like dynamite fishing, sodium
cyanide fishing, use of other obnoxious substances and
other related activities;
WHEREAS, there is an imperative and urgent need to
protect and preserve the existence of the remaining
excellent corals and allow the devastated ones to
reinvigorate and regenerate themselves into vitality within
the span of five (5) years;chanrobles virtuallawlibrary
WHEREAS, Sec. 468, Par. 1, Sub-Par. VI of the [sic] R.A. 7160
otherwise known as the Local Government Code of 1991
empowers the Sangguniang Panlalawigan to protect the
environment and impose appropriate penalties [upon] acts
which endanger the environment such as dynamite fishing
and other forms of destructive fishing, among others.
NOW, THEREFORE, on motion by Kagawad Nelson P.
Peneyra and upon unanimous decision of all the members
present;
Be it resolved as it is hereby resolved, to approve
Resolution No. 33, Series of 1993 of the Sangguniang
Panlalawigan and to enact Ordinance No. 2 for the purpose,
to wit:chanrob1es virtual 1aw library
ORDINANCE NO. 2
Series of 1993
BE IT ORDAINED BY THE SANGGUNIANG PANLALAWIGAN IN
SESSION ASSEMBLED:chanrob1es virtual 1aw library
Section I. TITLE. — This Ordinance shall be known as an
"Ordinance Prohibiting the catching, gathering, possessing,
buying, selling and shipment of live marine coral dwelling,
aquatic organisms, to wit: 1. Family: Scaridae (Mameng), 2.
Ephinephelus Fasciatus (Suno), 3. Cromileptes altivelis
(Panther or Señorita), lobster below 200 grams and
spawning), 4. Tridacna Gigas (Taklobo), 5. Pinctada
Margaretefera (Mother Pearl, Oysters, Giant Clams and
other species), 6. Penaeus Monodon (Tiger Prawn-breeder
size or mother), 7. Epinephelus Suillus (Loba or Green
Grouper) and 8. Family: Balistidae (T[r]opical Aquarium
Fishes) for a period of five (5) years in and coming from
Palawan Waters.
Section II. PRELIMINARY CONSIDERATIONS . —
1. Sec. 2-A (Rep. Act 7160). It is hereby declared, the policy
of the state that the territorial and political subdivisions of
the State shall enjoy genuine and meaningful local
autonomy to enable them to attain their fullest
development as self-reliant communities and make them
more effective partners in the attainment of national goals.
Toward this end, the State shall provide for [a] more
responsive and accountable local government structure
instituted through a system of decentralization whereby
local government units shall be given more powers,
authority, responsibilities and resources.
2. Sec. 5-A (R.A. 7160). Any provision on a power of [a] local
Government Unit shall be liberally interpreted in its favor,
and in case of doubt, any question thereon shall be
resolved in favor of devolution of powers and of the lower
government units. "Any fair and reasonable doubts as to
the existence of the power shall be interpreted in favor of
all the Local Government Unit concerned."cralaw virtua1aw
library
3. Sec. 5-C (R.A. 7160). The general welfare provisions in
this Code shall be liberally interpreted to give more powers
to local government units in accelerating economic
development and upgrading the quality of life for the
people in the community.
4. Sec. 16 (R.A. 7160). General Welfare. — Every local
government unit shall exercise the powers expressly
granted, those necessarily implied therefrom, as well as
powers necessary, appropriate, or incidental for its efficient
and effective governance; and those which are essential to
the promotion of the general welfare.
Section III. DECLARATION OF POLICY . — It is hereby
declared to be the policy of the Province of Palawan to
protect and conserve the marine resources of Palawan not
only for the greatest good of the majority of the present
generation but with [the] proper perspective and
consideration of [sic] their prosperity, and to attain this
end, the Sangguniang Panlalawigan henceforth declares
that is (sic) shall be unlawful for any person or any business
entity to engage in catching, gathering, possessing, buying,
selling and shipment of live marine coral dwelling aquatic
organisms as enumerated in Section 1 hereof in and coming
out of Palawan Waters for a period of five (5) years;
Section IV. PENALTY CLAUSE. — Any person and/or
business entity violating this Ordinance shall be penalized
with a fine of not more than Five Thousand Pesos
(P5,000.00), Philippine Currency, and/or imprisonment of
six (6) months to twelve (12) months and confiscation and
forfeiture of paraphernalias [sic] and equipment in favor of
the government at the discretion of the Court;
Section V. SEPARABILITY CLAUSE. — If for any reason, a
Section or provision of this Ordinance shall be held as
unconditional [sic] or invalid, it shall not affect the other
provisions hereof.
Section VI. REPEALING CLAUSE. — Any existing Ordinance
or a provision of any ordinance inconsistent herewith is
deemed modified, amended or repealed.
Section VII. EFFECTIVITY . — This Ordinance shall take effect
ten (10) days after its publication.
SO ORDAINED."cralaw virtua1aw library
x x x
4. The respondents implemented the said ordinances,
Annexes "A" and "C" hereof thereby depriving all the
fishermen of the whole province of Palawan and the City of
Puerto Princesa of their only means of livelihood and the
petitioners Airline Shippers Association of Palawan and
other marine merchants from performing their lawful
occupation and trade;
5. Petitioners Alfredo Tano, Baldomero Tano, Teocenes
Midello, Angel de Mesa, Eulogio Tremocha, and Felipe
Ongonion, Jr. were even charged criminally under criminal
case no. 93-05-C in the 1st Municipal Circuit Trial Court of
Cuyo-Agutaya-Magsaysay, an original carbon copy of the
criminal complaint dated April 12, 1993 is hereto attached
as Annex "D" ; while xerox copies are attached as Annex
"D" to the copies of the petition;
6. Petitioners Robert Lim and Virginia Lim, on the other
hand, were charged by the respondent PNP with the
respondent City Prosecutor of Puerto Princesa City, a xerox
copy of the complaint is hereto attached as Annex "E" ;
Without seeking redress from the concerned local
government units, prosecutor’s office and courts,
petitioners directly invoked our original jurisdiction by filing
this petition on 4 June 1993. In sum, petitioners contend
that:chanrob1es virtual 1aw library
First, the Ordinances deprived them of due process of law,
their livelihood, and unduly restricted them from the
practice of their trade, in violation of Section 2, Article XII
and Sections 2 and 7 of Article XIII of the 1987 Constitution.
Second, Office Order No. 23 contained no regulation nor
condition under which the Mayor’s permit could be granted
or denied; in other words, the Mayor had the absolute
authority to determine whether or not to issue the permit.
Third, as Ordinance No. 2 of the Province of Palawan
"altogether prohibited the catching, gathering, possession,
buying, selling and shipping of live marine coral dwelling
organisms, without any distinction whether it was caught or
gathered through lawful fishing method," the Ordinance
took away the right of petitioners-fishermen to earn their
livelihood in lawful ways; and insofar as petitioners-
members of Airline Shippers Association are concerned,
they were unduly prevented from pursuing their vocation
and entering "into contracts which are proper, necessary,
and essential to carry out their business endeavors to a
successful conclusion."cralaw virtua1aw library
Finally, as Ordinance No. 2 of the Sangguniang
Panlalawigan is null and void, the criminal cases based
thereon against petitioners Tano and the others have to be
dismissed.
In the Resolution of 15 June 1993 we required respondents
to comment on the petition, and furnished the Office of the
Solicitor General with a copy thereof.
In their comment filed on 13 August 1993, public
respondents Governor Socrates and Members of the
Sangguniang Panlalawigan of Palawan defended the validity
of Ordinance No. 2, Series of 1993, as a valid exercise of the
Provincial Government’s power under the general welfare
clause (Section 16 of the Local Government Code of 1991
[hereafter, LGC]), and its specific power to protect the
environment and impose appropriate penalties for acts
which endanger the environment, such as dynamite fishing
and other forms of destructive fishing under Section
447(a)(1)(vi), Section 458(a)(1)(vi), and Section
468(a)(1)(vi), of the LGC. They claimed that in the exercise
of such powers, the Province of Palawan had "the right and
responsibility . . . to insure that the remaining coral reefs,
where fish dwells [sic], within its territory remain healthy
for the future generation." The Ordinance, they further
asserted, covered only live marine coral dwelling aquatic
organisms which were enumerated in the ordinance and
excluded other kinds of live marine aquatic organisms not
dwelling in coral reefs; besides the prohibition was for only
five (5) years to protect and preserve the pristine coral and
allow those damaged to regenerate.
Aforementioned respondents likewise maintained that
there was no violation of the due process and equal
protection clauses of the Constitution. As to the former,
public hearings were conducted before the enactment of
the Ordinance which, undoubtedly, had a lawful purpose
and employed reasonable means, while as to the latter, a
substantial distinction existed "between a fisherman who
catches live fish with the intention of selling it live, and a
fisherman who catches live fish with no intention at all of
selling it live," i.e., "the former uses sodium cyanide while
the latter does not." Further, the Ordinance applied equally
to all those belonging to one class.
On 25 October 1993 petitioners filed an Urgent Plea for the
Immediate Issuance of a Temporary Restraining Order,
claiming that despite the pendency of this case, Branch 50
of the Regional Trial Court of Palawan was bent on
proceeding with Criminal Case No. 11223 against
petitioners Danilo Tano, Alfredo Tano, Eulogio Tremocha,
Romualdo Tano, Baldomero Tano, Andres Linijan and Angel
de Mesa for violation of Ordinance No. 2 of the
Sangguniang Panlalawigan of Palawan. Acting on said plea,
we issued on 11 November 1993 a temporary restraining
order directing Judge Angel Miclat of said court to cease
and desist from proceeding with the arraignment and pre-
trial of Criminal Case No. 11223.
On 12 July 1994, we excused the Office of the Solicitor
General from filing a comment, considering that as claimed
by said office in its Manifestation of 28 June 1994,
respondents were already represented by counsel.
The rest of the respondents did not file any comment on
the petition.
In the resolution of 15 September 1994, we resolved to
consider the comment on the petition as the Answer, gave
due course to the petition and required the parties to
submit their respective memoranda. 2
On 22 April 1997 we ordered impleaded as party
respondents the Department of Agriculture and the Bureau
of Fisheries and Aquatic Resources and required the Office
of the Solicitor General to comment on their behalf. But in
light of the latter’s motion of 9 July 1997 for an extension of
time to file the comment which would only result in further
delay, we dispensed with said comment.
After due deliberation on the pleadings filed, we resolved
to dismiss this petition for want of merit, and on 22 July
1997, assigned it to the ponente to write the opinion of the
Court.
I
There are actually two sets of petitioners in this case. The
first is composed of Alfredo Tano, Baldomero Tano, Danilo
Tano, Romualdo Tano, Teocenes Midello, Angel de Mesa,
Eulogio Tremocha, Felipe Ongonion, Jr., Andres Linijan, and
Felimon de Mesa, who were criminally charged with
violating Sangguniang Panlalawigan Resolution No. 33 and
Ordinance No. 2, Series of 1993, of the Province of
Palawan, in Criminal Case No. 93-05-C of the 1st Municipal
Circuit Trial Court (MCTC) of Palawan; 3 and Robert Lim and
Virginia Lim who were charged with violating City
Ordinance No. 15-92 of Puerto Princesa City and Ordinance
No. 2, Series of 1993, of the Province of Palawan before the
Office of the City Prosecutor of Puerto Princesa. 4 All of
them, with the exception of Teocenes Midello, Felipe
Ongonion, Jr., Felimon de Mesa, Robert Lim and Virginia
Lim, are likewise the accused in Criminal Case No. 11223 for
the violation of Ordinance No. 2 of the Sangguniang
Panlalawigan of Palawan, pending before Branch 50 of the
Regional Trial Court of Palawan. 5
The second set of petitioners is composed of the rest of the
petitioners numbering seventy-seven (77), all of whom,
except the Airline Shippers Association of Palawan — an
alleged private association of several marine merchants —
are natural persons who claim to be fishermen.
The primary interest of the first set of petitioners is, of
course, to prevent the prosecution, trial and determination
of the criminal cases until the constitutionality or legality of
the Ordinances they allegedly violated shall have been
resolved. The second set of petitioners merely claim that
being fishermen or marine merchants, they would be
adversely affected by the ordinances.
As to the first set of petitioners, this special civil
for certiorari must fail on the ground of prematurity
amounting to a lack of cause of action. There is no showing
that said petitioners, as the accused in the criminal cases,
have filed motions to quash the informations therein and
that the same were denied. The ground available for such
motions is that the facts charged therein do not constitute
an offense because the ordinances in question are
unconstitutional. 6 It cannot then be said that the lower
courts acted without or in excess of jurisdiction or with
grave abuse of discretion to justify recourse to the
extraordinary remedy of certiorari or prohibition. It must
further be stressed that even if petitioners did file motions
to quash, the denial thereof would not forthwith give rise
to a cause of action under Rule 65 of the Rules of Court.
The general rule is that where a motion to quash is denied,
the remedy therefrom is not certiorari, but for the party
aggrieved thereby to go to trial prejudice to reiterating
special defenses involved in said motion, and if, after trial
on the merits an adverse decision is rendered, to appeal
therefrom in the manner authorized by law. 7 And, even
where in an exceptional circumstance such denial may be
the subject of a special civil action for certiorari, a motion
for reconsideration must have to be filed to allow the court
concerned an opportunity to correct its errors, unless such
motion may be dispensed with because of existing
exceptional circumstances. 8 Finally, even if a motion for
reconsideration has been filed and denied, the remedy
under Rule 65 is still unavailable absent any showing of the
grounds provided for in Section 1 thereof. 9 For obvious
reasons, the petition at bar does not, and could not have,
alleged any of such grounds.
As to the second set of petitioners, the instant petition is
obviously one for DECLARATORY RELIEF, i.e., for a
declaration that the Ordinances in question are a "nullity . .
. for being unconstitutional." 10 As such, their petition must
likewise fail, as this Court is not possessed of original
jurisdiction over petitions for declaratory relief even if only
questions of law are involved, 11 it being settled that the
Court merely exercises appellate jurisdiction over such
petitions. 12
II
Even granting arguendo that the first set of petitioners have
a cause of action ripe for the extraordinary writ
of certiorari, there is here a clear disregard of the hierarchy
of courts, and no special and important reason or
exceptional and compelling circumstance has been
adduced why direct recourse to us should be allowed.
While we have concurrent jurisdiction with Regional Trial
Courts and with the Court of Appeals to issue writs
of certiorari, prohibition, mandamus, quo warranto, habeas
corpus and injunction, such concurrence gives petitioners
no unrestricted freedom of choice of court forum, so we
held in People v. Cuaresma: 13
This concurrence of jurisdiction is not . . . to be taken as
according to parties seeking any of the writs an absolute
unrestrained freedom of choice of the court to which
application therefor will be directed. There is after all
hierarchy of courts. That hierarchy is determinative of the
venue of appeals, and should also serve as a general
determinant of the appropriate forum for petitions for the
extraordinary writs. A becoming regard for that judicial
hierarchy most certainly indicates that petitions for the
issuance of extraordinary writs against first level ("inferior")
courts should be filed with the Regional Trial Court, and
those against the latter, with the Court of Appeals. A direct
invocation of the Supreme Court’s original jurisdiction to
issue these writs should be allowed only when there are
special and important reasons therefor, clearly and
specifically set out in the petition. This is established policy.
It is a policy necessary to prevent inordinate demands upon
the Court’s time and attention which are better devoted to
those matters within its exclusive jurisdiction, and to
prevent further over-crowding of the Court’s docket. . . .
cdti
The Court feels the need to reaffirm that policy at this time,
and to enjoin strict adherence thereto in the light of what it
perceives to be a growing tendency on the part of litigants
and lawyers to have their applications for the so-called
extraordinary writs, and sometimes even their appeals,
passed upon and adjudicated directly and immediately by
the highest tribunal of the land . . . .
In Santiago v. Vasquez, 14 this Court forcefully expressed
that the propensity of litigants and lawyers to disregard the
hierarchy of courts must be put to a halt, not only because
of the imposition upon the precious time of this Court, but
also because of the inevitable and resultant delay, intended
or otherwise, in the adjudication of the case which often
has to be remanded or referred to the lower court, the
proper forum under the rules of procedure, or as better
equipped to resolve the issues since this Court is not a trier
of facts. We reiterated "the judicial policy that this Court
will not entertain direct resort to it unless the redress
desired cannot be obtained in the appropriate courts or
where exceptional and compelling circumstances justify
availment of a remedy within and calling for the exercise of
[its] primary jurisdiction."cralaw virtua1aw library
III
Notwithstanding the foregoing procedural obstacles against
the first set of petitioners, we opt to resolve this case on its
merits considering that the life-time of the challenged
Ordinances is about to end. Ordinance No. 15-92 of the City
of Puerto Princesa is effective only up to 1 January 1998,
while Ordinance No. 2 of the Province of Palawan, enacted
on 19 February 1993, is effective for only five (5) years.
Besides, these Ordinances were undoubtedly enacted in
the exercise of powers under the new LGC relative to the
protection and preservation of the environment and are
thus novel and of paramount importance. No further delay
then may be allowed in the resolution of the issues raised.
It is of course settled that laws (including ordinances
enacted by local government units) enjoy the presumption
of constitutionality. 15 To overthrow this presumption,
there must be a clear and unequivocal breach of the
Constitution, not merely a doubtful or argumentative
contradiction. In short, the conflict with the Constitution
must be shown beyond reasonable doubt. 16 Where doubt
exists, even if well-founded, there can be no finding of
unconstitutionality. To doubt is to sustain. 17
After a scrutiny of the challenged Ordinances and the
provisions of the Constitution petitioners claim to have
been violated, we find petitioners’ contentions baseless
and so hold that the former do not suffer from any
infirmity, both under the Constitution and applicable laws.
Petitioners specifically point to Section 2, Article XII and
Sections 2 and 7, Article XIII of the Constitution as having
been transgressed by the Ordinances.
The pertinent portion of Section 2 of Article XII
reads:chanrob1es virtual 1aw library
SEC. 2. . . .
The State shall protect the nation’s marine wealth in its
archipelagic waters, territorial sea, and exclusive economic
zone, and reserve its use and enjoyment exclusively to
Filipino citizens.
The Congress may, by law, allow small-scale utilization of
natural resources by Filipino citizens, as well as cooperative
fish farming, with priority to subsistence fishermen and
fishworkers in rivers, lakes, bays, and lagoons.
Sections 2 and 7 of Article XIII provide:chanrob1es virtual
1aw library
SEC. 2. The promotion of social justice shall include the
commitment to create economic opportunities based on
freedom of initiative and self-reliance.
x x x
SEC. 7. The State shall protect the rights of subsistence
fishermen, especially of local communities, to the
preferential use of the communal marine and fishing
resources, both inland and offshore. It shall provide support
to such fishermen through appropriate technology and
research, adequate financial, production, and marketing
assistance, and other services. The State shall also protect,
develop, and conserve such resources. The protection shall
extend to offshore fishing grounds of subsistence fishermen
against foreign intrusion. Fisherworkers shall receive a just
share from their labor in the utilization of marine and
fishing resources.
There is absolutely no showing that any of the petitioners
qualifies as a subsistence or marginal fisherman. In their
petition, petitioner Airline Shippers Association of Palawan
is self-described as "a private association composed of
Marine Merchants;" petitioners Robert Lim and Virginia
Lim, as "merchants;" while the rest of the petitioners claim
to be "fishermen," without any qualification, however, as to
their status.
Since the Constitution does not specifically provide a
definition of the terms "subsistence" or "marginal"
fishermen, 18 they should be construed in their general and
ordinary sense. A marginal fisherman is an individual
engaged in fishing whose margin of return or reward in his
harvest of fish as measured by existing price levels is barely
sufficient to yield a profit or cover the cost of gathering the
fish, 19 while a subsistence fisherman is one whose catch
yields but the irreducible minimum for his livelihood. 20
Section 131(p) of the LGC (R.A. No. 7160) defines a
marginal farmer or fisherman as "an individual engaged in
subsistence farming or fishing which shall be limited to the
sale, barter or exchange of agricultural or marine products
produced by himself and his immediate family." It bears
repeating that nothing in the record supports a finding that
any petitioner falls within these definitions.
Besides, Section 2 of Article XII aims primarily not to bestow
any right to subsistence fishermen, but to lay stress on the
duty of the State to protect the nation’s marine wealth.
What the provision merely recognizes is that the State may
allow, by law, cooperative fish farming, with priority to
subsistence fishermen and fishworkers in rivers, lakes, bays
and lagoons. Our survey of the statute books reveals that
the only provision of law which speaks of a preferential
right of marginal fishermen is Section 149 of the LGC, which
pertinently provides:chanrob1es virtual 1aw library
SEC. 149. Fishery Rentals, Fees and Charges. — . . .
(b) The sangguniang bayan may:chanrob1es virtual 1aw
library
(1) Grant fishery privileges to erect fish corrals, oyster,
mussels or other aquatic beds or bangus fry areas, within a
definite zone of the municipal waters, as determined by it:
Provided, however, That duly registered organizations and
cooperatives of marginal fishermen shall have the
preferential right to such fishery privileges . . .
In a Joint Administrative Order No. 3 dated 25 April 1996,
the Secretary of the Department of Agriculture and the
Secretary of the Department of Interior and Local
Government prescribed guidelines concerning the
preferential treatment of small fisherfolk relative to the
fishery right mentioned in Section 149. This case, however,
does not involve such fishery right.
Anent Section 7 of Article XIII, it speaks not only of the use
of communal marine and fishing resources, but of their
protection, development and conservation. As hereafter
shown, the ordinances in question are meant precisely to
protect and conserve our marine resources to the end that
their enjoyment may be guaranteed not only for the
present generation, but also for the generations to come.
The so-called "preferential right" of subsistence or marginal
fishermen to the use of marine resources is not at all
absolute. In accordance with the Regalian Doctrine, marine
resources belong to the State, and, pursuant to the first
paragraph of Section 2, Article XII of the Constitution, their
"exploration, development and utilization . . . shall be
under the full control and supervision of the State."
Moreover, their mandated protection, development and
conservation as necessarily recognized by the framers of
the Constitution, imply certain restrictions on whatever
right of enjoyment there may be in favor of anyone. Thus,
as to the curtailment of the preferential treatment of
marginal fishermen, the following exchange between
Commissioner Francisco Rodrigo and Commissioner Jose
F.S. Bengzon, Jr., took place as the plenary session of the
Constitutional Commission:chanrobles.com : virtual law
library
MR. RODRIGO:chanrob1es virtual 1aw library
Let us discuss the implementation of this because I would
not raise the hopes of our people, and afterwards fail in the
implementation. How will this be implemented? Will there
be a licensing or giving of permits so that government
officials will know that one is really a marginal fisherman?
Or if policeman say that a person is not a marginal
fisherman, he can show his permit, to prove that indeed he
is one.
MR. BENGZON:chanrob1es virtual 1aw library
Certainly, there will be some mode of licensing insofar as
this is concerned and this particular question could be
tackled when we discuss the Article on Local Governments
— whether we will leave to the local governments or to
Congress on how these things will be implemented. But
certainly, I think our congressmen and our local officials will
not be bereft of ideas on how to implement this mandate.
x x x and support, among other things, the preservation and
MR. RODRIGO:chanrob1es virtual 1aw library
So, once one is licensed as a marginal fisherman, he can go
anywhere in the Philippines and fish in any fishing grounds.
MR. BENGZON:chanrob1es virtual 1aw library
Subject to whatever rules and regulations and local laws
that may be passed, may be existing or will be passed. 21
(Emphasis supplied)
What must likewise be borne in mind is the state policy
enshrined in the Constitution regarding the duty of the
State to protect and advance the right of the people to a
balanced and healthful ecology in accord with the rhythm
and harmony of nature. 22 On this score, in Oposa v.
Factoran, 23 this Court declared:chanrob1es virtual 1aw
library
While the right to a balanced and healthful ecology is to be
found under the Declaration of Principles the State Policies
and not under the Bill of Rights, it does not follow that it is
less important than any of the civil and political rights
enumerated in the latter. Such a right belongs to a different
category of rights altogether for it concerns nothing less
than self-preservation and self-perpetuation — aptly and
fittingly stressed by the petitioners — the advancement of
which may even be said to prodate all governments and
constitutions. As a matter of fact, these basic rights need
not even be written in the Constitution for they assumed to
exist from the inception of humankind. If they are now
explicitly mentioned in the fundamental charter, it is
because of the well-founded fear of its framers that unless
the rights to a balanced and healthful ecology and to health
are mandated as state policies by the Constitution itself,
thereby highlighting their continuing importance and
imposing upon the state a solemn obligation to preserve
the first and protect and advance the second, the day
would not be too far when all else would be lost not only
for the present generation, but also for those to come —
generations which stand to inherit nothing but parched
earth incapable of sustaining life.
The right to a balanced and healthful ecology carries with it
a correlative duty to refrain from impairing the
environment . . .
The LGC provisions invoked by private respondents merely
seek to give flesh and blood to the right of the people to a
balanced and healthful ecology. In fact, the General
Welfare Clause, expressly mentions this right:chanrob1es
virtual 1aw library
SEC. 16. General Welfare. — Every local government unit
shall exercise the powers expressly granted, those
necessarily implied therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and effective
governance, and those which are essential to the
promotion of the general welfare. Within their respective
territorial jurisdictions, local government units shall ensure
enrichment of culture, promote health and safety, enhance
the right of the people to a balanced ecology, encourage
and support the development of appropriate and self-
reliant scientific and technological capabilities, improve
public morals, enhance economic prosperity and social
justice, promote full employment among their residents,
maintain peace and order, and preserve the comfort and
convenience of their inhabitants. (Emphasis supplied).
Moreover, Section 5(c) of the LGC explicitly mandates that
the general welfare provisions of the LGC "shall be liberally
interpreted to give more powers to the local government
units in accelerating economic development and upgrading
the quality of life for the people of the community."cralaw
virtua1aw library
The LGC vests municipalities with the power to grant
fishery privileges in municipal waters and impose rentals,
fees or charges therefor; to penalize, by appropriate
ordinances, the use of explosives, noxious or poisonous
substances, electricity, muro-ami, and other deleterious
methods of fishing; and to prosecute any violation of the
provisions of applicable fishery laws. 24 Further, the
sangguniang bayan, the sangguniang panlungsod and the
sangguniang panlalawigan are directed to enact ordinances
for the general welfare of the municipality and its
inhabitants, which shall include, inter alia, ordinances that"
[p]rotect the environment and impose appropriate
penalties for acts which endanger the environment such as
dynamite fishing and other forms of destructive fishing . . .
and such other activities which result in pollution,
acceleration of eutrophication of rivers and lakes, or of
ecological imbalance."25cralaw:red
Finally, the centerpiece of LGC is the system of
decentralization 26 as expressly mandated by the
Constitution. 27 Indispensable to decentralization is
devolution and the LGC expressly provides that" [a]ny
provision on a power of a local government unit shall be
liberally interpreted in its favor, and in case of doubt, any
question thereon shall be resolved in favor of devolution of
powers and of the lower local government unit. Any fair
and reasonable doubt as to the existence of the power shall
be interpreted in favor of the local government unit
concerned." 28 Devolution refers to the act by which the
National Government confers power and authority upon
the various local government units to perform specific
functions and responsibilities. 29
One of the devolved powers enumerated in the section of
the LGC on devolution is the enforcement of fishery laws in
municipal waters including the conservation of mangroves.
30 This necessarily includes the enactment of ordinances to
effectively carry out such fishery laws within the municipal
waters.
The term "municipal waters," in turn, includes not only
streams, lakes, and tidal waters within the municipality, not
being the subject of private ownership and not comprised
within the national parks, public forest, timber lands, forest
reserves, or fishery reserves, but also marine waters
included between two lines drawn perpendicularly to the
general coastline from points where the boundary lines of
the municipality or city touch the sea at low tide and a third
line parallel with the general coastline and fifteen
kilometers from it. 31 Under P.D. No. 704, the marine
waters included in municipal waters is limited to three
nautical miles from the general coastline using the above
perpendicular lines and a third parallel line.
These "fishery laws" which local government units may
enforce under Section 17(b) (2) (i) in municipal waters
include: (1) P.D. No. 704; (2) P.D. No. 1015 which, inter alia,
authorizes the establishment of a "closed season" in any
Philippine water if necessary for conservation or ecological
purposes; (3) P.D. No. 1219 which provides for the
exploration, exploitation, utilization and conservation of
coral resources; (4) R.A. No. 5474, as amended by B.P. Blg.
58, which makes it unlawful for any person, association or
corporation to catch or cause to be caught, sell, offer to
sell, purchase, or have in possession any of the fish specie
called gobiidae or "ipon" during closed season; and (5) R.A.
No. 6451 which prohibits and punishes electrofishing, as
well as various issuances of the BFAR.
To those specifically devolved insofar as the control and
regulation of fishing in municipal waters and the protection
of its marine environment are concerned, must be added
the following:chanrob1es virtual 1aw library
1. Issuance of permits to construct fish cages within
municipal waters;
2. Issuance of permits to gather aquarium fishes within
municipal waters;
3. Issuance of permits to gather kapis shells within
municipal waters;
4. Issuance of permits to gather/culture shelled mollusks
within municipal waters;
5. Issuance of licenses to establish seaweed farms within
municipal waters;
6. Issuance of licenses to establish culture pearls within
municipal waters;
7. Issuance of auxiliary invoice to transport fish and fishery
products; and
8. Establishment of "closed season" in municipal waters.
These functions are covered in the Memorandum of
Agreement of 5 April 1994 between the Department of
Agriculture and the Department of Interior and Local
Government.chanrobles law library : red
In light then of the principles of decentralization and
devolution enshrined in the LGC and the powers granted
therein to local government units under Section 16 (the
General Welfare Clause), and under Sections 149, 447(a) (1)
(vi), 458(a)(1)(vi) and 468(a)(1)(vi), which unquestionably
involve the exercise of police power, the validity of the
questioned Ordinances cannot be doubted.
Parenthetically, we wish to add that these Ordinances find
full support under R.A. No. 7611, otherwise known as the
Strategic Environmental Plan (SEP) for Palawan Act,
approved on 19 June 1992. This statute adopts a
"comprehensive framework for the sustainable
development of Palawan compatible with protecting and
enhancing the natural resources and endangered
environment of the province," which "shall serve to guide
the local government of Palawan and the government
agencies concerned in the formulation and implementation
of plans, programs and projects affecting said province." 32
At this time then, it would be appropriate to determine the
relation between the assailed Ordinances and the aforesaid
powers of the Sangguniang Panlungsod of the City of
Puerto Princesa and the Sangguniang Panlalawigan of the
Province of Palawan to protect the environment. To begin,
we ascertain the purpose of the Ordinances as set forth in
the statement of purposes or declaration of policies quoted
earlier.
It is clear to the Court that both Ordinances have two
principal objectives or purposes: (1) to establish a "closed
season" for the species of fish or aquatic animals covered
therein for a period of five years; and (2) to protect the
coral in the marine waters of the City of Puerto Princesa
and the Province of Palawan from further destruction due
to illegal fishing activities.
The accomplishment of the first objective is well within the
devolved power to enforce fishery laws in municipal
waters, such as P.D. No. 1015, which allows the
establishment of "closed seasons." The devolution of such
power has been expressly confirmed in the Memorandum
of Agreement of 5 April 1994 between the Department of
Agriculture and the Department of Interior and Local
Government.
The realization of the second objective clearly falls within
both the general welfare clause of the LGC and the express
mandate thereunder to cities and provinces to protect the
environment and impose appropriate penalties for acts
which endanger the environment. 33
The destruction of coral reefs results in serious, if not
irreparable, ecological imbalance, for coral reefs are among
nature’s life-support systems. 34 They collect, retain and
recycle nutrients for adjacent nearshore areas such as
mangroves, seagrass beds, and reef flats; provide food for
marine plants and animals; and serve as a protective
shelter for aquatic organisms. 35 It is said that"
[e]cologically, the reefs are to the oceans what forests are
to continents: they are shelter and breeding grounds for
fish and plant species that will disappear without them. 36
The prohibition against catching live fish stems, in part,
from the modern phenomenon of live-fish trade which
entails the catching of so-called exotic species of tropical
fish, not only for aquarium use in the West, but also for
"the market for live banquet fish [which] is virtually
insatiable in ever more affluent Asia. 37 These exotic
species are coral-dwellers, and fishermen catch them by
"diving in shallow water with corraline habitats and
squirting sodium cyanide poison at passing fish directly or
onto coral crevices; once affected the fish are immobilized
[merely stunned] and then scooped by hand." 38 The diver
then surfaces and dumps his catch into a submerged net
attached to the skiff. Twenty minutes later, the fish can
swim normally. Back on shore, they are placed in holding
pens, and within a few weeks, they expel the cyanide from
their system and are ready to be hauled. They are then
placed in saltwater tanks or packaged in plastic bags filled
with seawater for shipment by air freight to major markets
for live food fish. 39 While the fish are meant to survive,
the opposite holds true for their former home as" [a]fter
the fisherman squirts the cyanide, the first thing to perish is
the reef algae, on which fish feed. Days later, the living
coral starts to expire. Soon the reef loses its function as
habitat for the fish, which eat both the algae and
invertebrates that cling to the coral. The reef becomes an
underwater graveyard, its skeletal remains brittle, bleached
of all color and vulnerable to erosion from the pounding of
the waves." 40 It has been found that cyanide fishing kills
most hard and soft corals within three months of repeated
application. 41
The nexus then between the activities barred by Ordinance
No. 15-92 of the City of Puerto Princesa and the prohibited
acts provided in Ordinance No. 2, Series of 1993 of the
Province of Palawan, on one hand, and the use of sodium
cyanide, on the other, is painfully obvious. In sum, the
public purpose and reasonableness of the Ordinances may
not then be controverted.
As to Office Order No. 23, Series of 1993, issued by Acting
City Mayor Amado L. Lucero of the City of Puerto Princesa,
we find nothing therein violative of any constitutional or
statutory provision. The Order refers to the implementation
of the challenged ordinance and is not the Mayor’s Permit.
The dissenting opinion of Mr. Justice Josue N. Bellosillo
relies upon the lack of authority on the part of the
Sangguniang Panlungsod of Puerto Princesa to enact
Ordinance No. 15, Series of 1992, on the theory that the
subject thereof is within the jurisdiction and responsibility
of the Bureau of Fisheries and Aquatic Resources (BFAR)
under P.D. No. 704, otherwise known as the Fisheries
Decree of 1975; and that, in any event, the Ordinance is
unenforceable for lack of approval by the Secretary of the
Department of Natural Resources (DNR), likewise in
accordance with P.D. No. 704.
The majority is unable to accommodate this view. The
jurisdiction and responsibility of the BFAR under P.D. No.
704, over the management, conservation, development,
protection, utilization and disposition of all fishery and
aquatic resources of the country is not all encompassing.
First, Section 4 thereof excludes from such jurisdiction and
responsibility municipal waters, which shall be under the
municipal or city government concerned, except insofar as
fishpens and seaweed culture in municipal centers are
concerned. This section provides, however, that all
municipal or city ordinances and resolutions affecting
fishing and fisheries and any disposition thereunder shall be
submitted to the Secretary of the Department of Natural
Resources for appropriate action and shall have full force
and effect only upon his approval. 42
Second, it must at once be pointed out that the BFAR is no
longer under the Department of Natural Resources (now
Department of Environment and Natural Resources).
Executive Order No. 967 of 30 June 1984 transferred the merit and the temporary restraining order issued on 11
BFAR from the control and supervision of the Minister November 1993 is LIFTED.
(formerly Secretary) of Natural Resources to the Ministry of
Agriculture and Food (MAF) and converted it into a mere No pronouncement as to costs:chanrob1es virtual 1aw
staff agency thereof, integrating its functions with the library
regional offices of the MAF.
SO ORDERED.
In Executive Order No. 116 of 30 January 1987, which
reorganized the MAF, the BFAR was retained as an attached
agency of the MAF. And under the Administrative Code of
1987, 43 the BFAR is placed under the Title concerning the
Department of Agriculture. 44

Therefore, it is incorrect to say that the challenged

Ordinance of the City of Puerto Princesa is invalid or
unenforceable because it was not approved by the
Secretary of the DENR. If at all, the approval that should be
sought would be that of the Secretary of the Department of
Agriculture. However, the requirement of approval by the
Secretary of the Department of Agriculture (not DENR) of
municipal ordinances affecting fishing and fisheries in
municipal waters has been dispensed with in view of the
following reasons:chanrob1es virtual 1aw library

(1) Section 534 (Repealing Clause) of the LGC expressly

repeals or amends Section 16 and 29 of P.D. No. 704 45 45a
insofar as they are inconsistent with the provisions of the
LGC.

(2) As discussed earlier, under the general welfare clause of

the LGC, local government units have the power, inter alia,
to enact ordinances to enhance the right of the people to a
balanced ecology. It likewise specifically vests
municipalities with the power to grant fishery privileges in
municipal waters, and impose rentals, fees or charges
therefor; the penalize, by appropriate ordinances, the use
of explosives, noxious or poisonous substances, electricity,
muro-ami, and other deleterious methods of fishing; and to
prosecute any violation of the provisions of applicable
fishery laws. 46 Finally, it imposes upon the sangguniang
bayan, the sangguniang panlungsod, and the sangguniang
panlalawigan the duty to enact ordinances to" [p]rotect the
environment and impose appropriate penalties for acts
which endanger the environment such as dynamite fishing
and other forms of destructive fishing . . . and such other
activities which result in pollution, acceleration of
eutrophication of rivers and lakes or of ecological
imbalance." 47

In closing, we commend the Sangguniang Panlungsod of the

City of Puerto Princesa and Sangguniang Panlalawigan of
the Province of Palawan for exercising the requisite political
will to enact urgently needed legislation to protect and
enhance the marine environment, thereby sharing in the
herculean task of arresting the tide of ecological
destruction. We hope that other local government units
shall now be roused from their lethargy and adopt a more
vigilant stand in the battle against the decimation of our
legacy to future generations. At this time, the repercussions
of any further delay in their response may prove disastrous,
if not, irreversible.chanroblesvirtualawlibrary

WHEREFORE, the instant petition is DISMISSED for lack of

 G.R. No. 179918 : September 8, 2010
SHELL PHILIPPINES EXPLORATION B.V., represented by its
Managing Director, Jeremy Cliff, Petitioner, v. EFREN
JALOS, JOVEN CAMPANG, ARNALDO MIJARES, CARLITO
TRIVINO, LUCIANO ASERON, CHARLITO ALDOVINO,
ROBERTO FADERA, RENATO MANTALA, GERTRUDES
MENESES, NORBERTO HERNANDEZ, JOSE CABASE, DANILO
VITTO, EDWIN MARIN, SAMUEL MARIN, ARMANDO
MADERA, EDGARDO MARINO, HERMINO RELOX,
ROLANDO TARROBACO, ERNESTO RELOX, ROSALITO
RUGAS, ELDIE DIMALIBOT, PLARIDEL MUJE, REYMUNDO
CARMONA, RONILO RIOFLORIDO, LEONIDES MANCIA,
JONAR GERANCE, RODEL CASAPAO, CARMENCITA
MENDOZA, SEVERINO MEDRANO, EDWIN MENDOZA,
DOMINEZ SANTIAGO, ROGER MUJE, REYNALDO MORALES,
WILLIAM MENDOZA, NELSON SOLIS, ALBERTO MATRE,
MARGARITO GADO, BONIFACIO LEOTERIO, NEMESIO
PEREZ, JR., ARIEL MENDOZA, PEPITO MENDOZA,
SALVADOR FALCULAN, JR., CEASAR ROBLEDO, SUZIMO
CERNA, VIRGILIO VATAL, JIMMY ALBAO, CRISANTO
SABIDA, LAUDRINO MIRANDA, LEOPOLDO MISANA,
JIMMY DELACION, FREJEDO MAGPILI, ROLANDO
DIMALIBOT, PEDRO MAPALAD, FAUSTINO BALITOSTOS,
LEONARDO DIMALIBOT, MARIANO MAGYAYA, RAUL
MIRANO, ERNESTO MATRE, ROMEO ROBLEDO, GILBERT
SADICON, ROMEO SIENA, NESTOR SADICON, NOEL SIENA,
REDENTER CAMPANG, ARNEL HERNENDEZ, RESTITUTO
BAUTISTA, JOSE MUJE, DANILO BILARMINO, ADRIAN
MAGANGO, VALERIANO SIGUE, BERNIE MORALES, JOSEPH
SALAZAR, PABLITO MENDOZA, JR., ERWIN BAUTISTA,
RUBEN BAUTISTA, ALEXANDER ROVERO, EDUARDO
QUARTO, RUBEN RIOFLORIDO, NESTOR DELACION,
SEVERINO MEDRANO, JOEY FAJECULAY, NICOLAS
MEDRANO, FELIX MEDRANO, RODELIO CASAPAO, FELIPE
LOLONG, MARCELINO LOLONG, ELDY DIMALIBOT,
ROBERTO CASAPAO, SIMEON CASAPAO, HENRY
DIMALIBOT, RONALDO MORALES, PEPING CASAPAO, JOEL
GERANCE, JAYREE DIMALIBOT, MARIO DIMALIBOT, SANTO
DIMALIBOT, ZERAPIN DIMALIBOT, FLORENCIO
ROVERO, Respondents.
DECISION
ABAD, J.:
This case is about a question of jurisdiction over an action
against a petroleum contractor, whose pipeline operation
has allegedly driven the fish away from coastal areas,
inflicting loss of earnings among fishermen.
The Facts and the Case
On December 11, 1990 petitioner Shell Philippines
Exploration B.V. (Shell) and the Republic of the Philippines
entered into Service Contract 38 for the exploration and
extraction of petroleum in northwestern Palawan. Two
years later, Shell discovered natural gas in the Camago-
Malampaya area and pursued its development of the well
under the Malampaya Natural Gas Project. This entailed the
construction and installation of a pipeline from Shell's
production platform to its gas processing plant in Batangas.
The pipeline spanned 504 kilometers and crossed the
Oriental Mindoro Sea.
On May 19, 2003, respondents Efren Jalos, Joven Campang,
Arnaldo Mijares, and 75 other individuals (Jalos, et al) filed
a complaint for damages1cralaw against Shell before the
Regional Trial Court (RTC), Branch 41, Pinamalayan,
Oriental Mindoro. Jalos, et al claimed that they were all
subsistence fishermen from the coastal barangay of
Bansud, Oriental Mindoro whose livelihood was adversely
affected by the construction and operation of Shell's
natural gas pipeline.
Jalos, et al claimed that their fish catch became few after
the construction of the pipeline. As a result, their average
net income per month fell from a high ofP4,848.00 to
only P573.00. They said that "the pipeline greatly affected
biogenically hard-structured communities such as coral
reefs and led [to] stress to the marine life in the Mindoro
Sea." They now have to stay longer and farther out at sea
to catch fish, as the pipeline's operation has driven the fish
population out of coastal waters.2cralaw
Instead of filing an answer, Shell moved for dismissal of the
complaint. It alleged that the trial court had no jurisdiction
over the action, as it is a "pollution case" under Republic
Act (R.A.) 3931, as amended by Presidential Decree (P.D.)
984 or the Pollution Control Law. Under these statutes, the
Pollution Adjudication Board (PAB) has primary jurisdiction
over pollution cases and actions for related
damages.3cralaw
Shell also claimed that it could not be sued pursuant to the
doctrine of state immunity without the State's consent.
Shell said that under Service Contract 38, it served merely
as an agent of the Philippine government in the
development of the Malampaya gas reserves.
Moreover, said Shell, the complaint failed to state a cause
of action since it did not specify any actionable wrong or
particular act or omission on Shell's part that could have
caused the alleged injury to Jalos, et al. The complaint
likewise failed to comply with requirements of a valid class
suit, verification and certification against forum shopping,
and the requisites for a suit brought by pauper
litigants.4cralaw
On March 24, 2004 the RTC dismissed the complaint. It
ruled that the action was actually pollution-related,
although denominated as one for damages. The complaint
should thus be brought first before the PAB, the
government agency vested with jurisdiction over pollution-
related cases.5cralaw
Jalos, et al assailed the RTC's order through a petition
for certiorari 6cralaw before the Court of Appeals
(CA).nad In due course, the latter court reversed such order
and upheld the jurisdiction of the RTC over the action. It
said that Shell was not being sued for committing pollution,
but for constructing and operating a natural gas pipeline
that caused fish decline and considerable reduction in the
fishermen's income. The claim for damages was thus based
on a quasi-delict over which the regular courts have
jurisdiction.
The CA also rejected Shell's assertion that the suit was
actually against the State. It observed that the government
was not even impleaded as party defendant. It gave short
shrift to Shell's insistence that, under the service contract,
the government was solidarily liable with Shell for damages
caused to third persons. Besides, the State should be
deemed to have given its consent to be sued when it
entered into the contract with Shell.
The CA also held that the complaint sufficiently alleged an
actionable wrong. Jalos, et al invoked their right to fish the
sea and earn a living, which Shell had the correlative
obligation to respect. Failure to observe such obligation
resulted in a violation of the fishermen's rights and thus
gave rise to a cause of action for damages. 7cralaw
Finally, the CA held that Jalos, et al substantially complied
with the technical requirements for filing the action. But
since they failed to prove the requisites of a class suit, only
those who have verified the complaint should be deemed
party plaintiffs.8cralaw
Shell moved for reconsideration of the CA's decision but the
same was denied.9cralaw Hence, it filed this petition for
review under Rule 45.
The Issues Presented
The case presents the following
issues:chanroblesvirtuallawlibrar
1. Whether or not the complaint is a pollution case that
falls within the primary jurisdiction of the PAB;
2. Whether or not the complaint sufficiently alleges a cause
of action against Shell; and
3. Whether or not the suit is actually against the State and
is barred under the doctrine of state immunity.
The Court's Rulings
First. Although the complaint of Jalos, et al does not use the
word "pollution" in describing the cause of the alleged fish
decline in the Mindoro Sea, it is unmistakable based on
their allegations that Shell's pipeline produced some kind of
poison or emission that drove the fish away from the
coastal areas. While the complaint did not specifically
attribute to Shell any specific act of "pollution," it alleged
that "the pipeline greatly affected biogenically hard-
structured communities such as coral reefs and led [to]
stress to the marine life in the Mindoro Sea."10cralaw This
constitutes "pollution" as defined by law.
Section 2(a) of P.D. 984 defines "pollution" as "any
alteration of the physical, chemical and biological
properties of any water x x x as will or is likely to create or
render such water x x x harmful, detrimental or injurious to
public health, safety or welfare or which will adversely
affect their utilization for domestic, commercial, industrial,
agricultural, recreational or other legitimate purposes."
It is clear from this definition that the stress to marine life
claimed by Jalos, et al is caused by some kind of pollution
emanating from Shell's natural gas pipeline. The pipeline,
they said, "greatly affected" or altered the natural habitat
of fish and affected the coastal waters' natural function as
fishing grounds. Inevitably, in resolving Jalos, et al's claim
for damages, the proper tribunal must determine whether
or not the operation of the pipeline adversely altered the
coastal waters' properties and negatively affected its life
sustaining function. The power and expertise needed to
determine such issue lies with the PAB.
Executive Order 192 (1987) transferred to the PAB the
powers and functions of the National Pollution and Control
Commission provided in R.A. 3931, as amended by P.D.
984.11cralaw These empowered the PAB to "[d]etermine
the location, magnitude, extent, severity, causes and
effects" of water pollution.12cralawAmong its functions is to
"[s]erve as arbitrator for the determination of reparation,
or restitution of the damages and losses resulting from
pollution." In this regard, the PAB has the power to conduct
hearings,13cralaw impose penalties for violation of P.D.
984,14cralaw and issue writs of execution to enforce its
orders and decisions.15cralaw The PAB's final decisions may
be reviewed by the CA under Rule 43 of the Rules of
Court.16cralaw
Jalos, et al had, therefore, an administrative recourse
before filing their complaint with the regular
courts.17cralaw The laws creating the PAB and vesting it
with powers are wise. The definition of the term "pollution"
itself connotes the need for specialized knowledge and
skills, technical and scientific, in determining the presence,
the cause, and the effects of pollution. These knowledge
and skills are not within the competence of ordinary
courts.18cralaw Consequently, resort must first be made to
the PAB, which is the agency possessed of expertise in
determining pollution-related matters.
To this extent, the failure of Jalos, et al to allege in their
complaint that they had first taken resort to PAB before
going to court means that they failed to state a cause of
action that the RTC could act on. This warranted the
dismissal of their action.19cralaw
Second. Still, Shell points out that the complaint also states
no cause of action because it failed to specify any
actionable wrong or particular act or omission on Shell's
part. The Court cannot agree.
As mentioned above, the complaint said that the natural
gas pipeline's construction and operation "greatly affected"
the marine environment, drove away the fish, and resulted
in reduced income for Jalos, et al. True, the complaint did
not contain some scientific explanation regarding how the
construction and operation of the pipeline disturbed the
waters and drove away the fish from their usual habitat as
the fishermen claimed. But lack of particulars is not a
ground for dismissing the complaint.
A cause of action is the wrongful act or omission committed
by the defendant in violation of the primary rights of the
plaintiff.20cralaw Its elements consist of: (1) a right existing
in favor of the plaintiff, (2) a duty on the part of the
defendant to respect the plaintiff's right, and (3) an act or
omission of the defendant in violation of such
right.21cralaw To sustain a motion to dismiss for lack of
cause of action, however, the complaint must show that
the claim for relief does not exist and not only that the
claim was defectively stated or is ambiguous, indefinite or
uncertain.22cralaw
Here, all the elements of a cause of action are
present. First, Jalos, et al undoubtedly had the right to the
preferential use of marine and fishing resources which is
guaranteed by no less than the
Constitution.23cralaw Second, Shell had the correlative duty
to refrain from acts or omissions that could impair Jalos, et
al's use and enjoyment of the bounties of the seas. Lastly,
Shell's construction and operation of the pipeline, which is
an act of physical intrusion into the marine environment, is
said to have disrupted and impaired the natural habitat of
fish and resulted in considerable reduction of fish catch and
income for Jalos, et al.
Thus, the construction and operation of the pipeline may,
in itself, be a wrongful act that could be the basis of Jalos,
et al's cause of action. The rules do not require that the
complaint establish in detail the causal link between the
construction and operation of the pipeline, on the one
hand, and the fish decline and loss of income, on the other
hand, it being sufficient that the complaint states the
ultimate facts on which it bases its claim for relief. The test
for determining the sufficiency of a cause of action rests on
whether the complaint alleges facts which, if true, would
justify the relief demanded.24cralaw In this case, a valid
judgment for damages can be made in favor of Jalos, et al,
if the construction and operation of the pipeline indeed
caused fish decline and eventually led to the fishermen's
loss of income, as alleged in the complaint.
Third. Shell claims that it cannot be sued without the
State's consent under the doctrine of state immunity from
suit. But, to begin with, Shell is not an agent of the Republic
of the Philippines. It is but a service contractor for the
exploration and development of one of the country's
natural gas reserves. While the Republic appointed Shell as
the exclusive party to conduct petroleum operations in the
Camago-Malampayo area under the State's full control and
supervision,25cralaw it does not follow that Shell has
become the State's "agent" within the meaning of the law.
An agent is a person who binds himself to render some
service or to do something in representation or on behalf of
another, with the consent or authority of the
latter.26cralaw The essence of an agency is the agent's
ability to represent his principal and bring about business
relations between the latter and third persons.27cralaw An
agent's ultimate undertaking is to execute juridical acts that
would create, modify or extinguish relations between his
principal and third persons.28cralaw It is this power to affect
the principal's contractual relations with third persons that
differentiates the agent from a service contractor.
Shell's main undertaking under Service Contract 38 is to
"[p]erform all petroleum operations and provide all
necessary technology and finance" as well as other
connected services29cralaw to the Philippine government.
As defined under the contract, petroleum operation means
the "searching for and obtaining Petroleum within the
Philippines", including the "transportation, storage,
handling and sale" of petroleum whether for export or
domestic consumption.30cralawShell's primary obligation
under the contract is not to represent the Philippine
government for the purpose of transacting business with
third persons. Rather, its contractual commitment is to
develop and manage petroleum operations on behalf of the
State.
Consequently, Shell is not an agent of the Philippine
government, but a provider of services, technology and
financing31cralaw for the Malampaya Natural Gas Project. It
is not immune from suit and may be sued for claims even
without the State's consent. Notably, the Philippine
government itself recognized that Shell could be sued in
relation to the project. This is evident in the stipulations
agreed upon by the parties under Service Contract 38.
Article II, paragraph 8, Annex "B" of Service Contract
3832cralaw states that legal expenses, including "judgments
obtained against the Parties or any of them on account of
the Petroleum Operations", can be recovered by Shell as
part of operating expenses to be deducted from gross
proceeds. Article II, paragraph 9B of the same document
allows a similar recovery for "[a]ll actual expenditures
incurred and paid by CONTRACTOR [Shell] in settlement of
any and all losses, claims, damages, judgments, and any
other expenses not covered by insurance, including legal
services." This signifies that the State itself acknowledged
the suability of Shell. Since payment of claims and damages
pursuant to a judgment against Shell can be deducted from
gross proceeds, the State will not be required to perform
any additional affirmative act to satisfy such a judgment.
In sum, while the complaint in this case sufficiently alleges a
cause of action, the same must be filed with the PAB, which
is the government agency tasked to adjudicate pollution-
related cases. Shell is not an agent of the State and may
thus be sued before that body for any damages caused by
its operations. The parties may appeal the PAB's decision to
the CA. But pending prior determination by the PAB, courts
cannot take cognizance of the complaint.
WHEREFORE, the Court GRANTS the petition and REVERSES
the decision of the Court of Appeals in CA-G.R. CV 82404
dated November 20, 2006. Respondent Efren Jalos, et al's
complaint for damages against Shell Philippines Exploration
B.V. in Civil Case P-1818-03 of the Regional Trial Court,
Branch 41, Pinamalayan, Oriental Mindoro is ordered
DISMISSED without prejudice to its refiling with the
Pollution Adjudication Board or PAB
[G.R. No. 122156. February 3, 1997.]
MANILA PRINCE HOTEL, Petitioner, v. GOVERNMENT
SERVICE INSURANCE SYSTEM, MANILA HOTEL
CORPORATION, COMMITTEE ON PRIVATIZATION and
OFFICE OF THE GOVERNMENT CORPORATE
COUNSEL, Respondents.
SYLLABUS
1. POLITICAL LAW; CONSTITUTION; DEFINED. — A
constitution is a system of fundamental laws for the
governance and administration of a nation. It is supreme,
imperious, absolute and unalterable except by the
authority from which it emanates. It has been defined as
the fundamental and paramount law of the nation. It
prescribes the permanent framework of a system of
government, assigns to the different departments their
respective powers and duties, and establishes certain fixed
principles on which government is founded. The
fundamental conception in other words is that it is a
supreme law to which all other laws must conform and in
accordance with which all private rights must be
determined and all public authority administered.
2. ID.; ID.; DEEMED WRITTEN IN EVERY STATUTE AND
CONTRACT. — Under the doctrine of constitutional
supremacy, if a law or contract violates any norm of the
constitution that law or contract whether promulgated by
the legislative or by the executive branch or entered into by
private persons for private purposes is null and void and
without any force and effect. Thus, since the Constitution is
the fundamental, paramount and supreme law of the
nation, it is deemed written in every statute and contract.
Adhering to the doctrine of constitutional supremacy, the
subject constitutional provision is, as it should be, impliedly
written in the bidding rules issued by respondent GSIS, lest
the bidding rules be nullified for being violative of the
Constitution. It is a basic principle in constitutional law that
all laws and contracts must conform with the fundamental
law of the land. Those which violate the Constitution lose
their reason for being.
3. ID.; ID.; CONSIDERED SELF-EXECUTING RATHER THAN
NON-SELF-EXECUTING. — In case of doubt, the Constitution
should be considered self-executing rather than non-self-
executing . . . Unless the contrary is clearly intended, the
provisions of the Constitution should be considered self-
executing, as a contrary rule would give the legislature
discretion to determine when, or whether, they shall be
effective. These provisions would be subordinated to the
will of the lawmaking body, which could make them
entirely meaningless by simply refusing to pass the needed
implementing statute. (Cruz, Isagani A., Constitutional Law,
1993 ed., pp. 8-10)
4. ID.; ID.; SELF-EXECUTING PROVISIONS; LEGISLATURE NOT
PRECLUDED FROM ENACTING LAWS ENFORCING
PROVISIONS. — Quite apparently, Sec. 10, second par., of
Art. XII is couched in such a way as not to make it appear
that it is non-self-executing but simply for purposes of style.
But, certainly, the legislature is not precluded from
enacting further laws to enforce the constitutional
provision so long as the contemplated statute squares with
the Constitution. Minor details may be left to the
legislature without the self-executing nature of
constitutional provisions. The omission from a constitution
of any express provision for a remedy for enforcing a right
or liability is not necessarily an indication that it was not
intended to be self-executing. The rule is that a self-
executing provision of the constitution does not necessarily
exhaust legislative power on the subject, but any legislation
must be in harmony with the constitution, further the
exercise of constitutional right and make it more available.
Subsequent legislation however does not necessarily mean
that the subject constitutional provision is not, by itself,
fully enforceable.
5. ID.; ID.; ID.; A PROVISION MAY BE SELF-EXECUTING IN
ONE PART AND NON-SELF-EXECUTING IN ANOTHER. —
Respondents also argue that the non-self-executing nature
of Sec. 10, second par., of Art. XII is implied from the tenor
of the first and third paragraphs of the same section which
undoubtedly are not self-executing. The argument is
flawed. If the first and third paragraphs are not self-
executing because Congress is still to enact measures to
encourage the formation and operation of enterprises fully
owned by Filipinos, as in the first paragraph, and the State
still needs legislation to regulate and exercise authority
over foreign investments within its national jurisdiction, as
in the third paragraph, then a fortiori, by the same logic,
the second paragraph can only be self-executing as it does
not by its language require any legislation in order to give
preference to qualified Filipinos in the grant of rights,
privileges and concessions covering the national economy
and patrimony. A constitutional provision may be self-
executing in one part and non-self-executing in another.
6. ID.; ID.; NATIONAL PATRIMONY; PROVISION ON
PREFERENCE TO QUALIFIED FILIPINOS, SELF-EXECUTING. —
Sec. 10, second par., Art. XII of the 1987 Constitution is a
mandatory, positive command which is complete in itself
and which needs no further guidelines or implementing
laws or rules for its enforcement. From its very words the
provision does not require any legislation to put it in
operation. It is per se judicially enforceable. When our
Constitution mandates that [i]n the grant of rights,
privileges, and concessions covering national economy and
patrimony, the State shall give preference to qualified
Filipinos, it means just that — qualified Filipinos shall be
preferred. And when our Constitution declares that a right
exists in certain specified circumstances an action may be
maintained to enforce such right notwithstanding the
absence of any legislation on the subject; consequently, if
there is no statute especially enacted to enforce such
constitutional right, such right enforces itself by its own
inherent potency and puissance and from which all
legislations must take their bearings. Where there is a right
there is a remedy. Ubi jus ibi remedium.
7. ID.; ID.; ID.; INCLUDES THE NATIONAL, RESOURCES AND
CULTURAL, HERITAGE. — When the Constitution speaks of
national patrimony, it refers not only to the natural
resources of the Philippines, as the Constitution could have
very well used the term natural resources, but also to the
cultural heritage of the Filipinos.
8. ID.; ID.; ID.; MANILA HOTEL CORPORATION, EMBRACED
THEREIN; FILIPINO FIRST POLICY PROVISION, APPLICABLE IN
SALES OF HOTEL STOCKS. — For more than eight (8)
decades Manila Hotel has bore mute witness to the
triumphs and failures, loves and frustrations of the
Filipinos; its existence is impressed with public interest; its
own historicity associated with our struggle for sovereignty,
independence and nationhood. Verily, Manila Hotel has
become part of our national economy and patrimony. For
sure, 51% of the equity of the MHC comes within the
purview of the constitutional shelter for it comprises the
majority and controlling stock, so that anyone who acquires
or owns the 51% will have actual control and management
of the hotel. In this instance, 51% of the MHC cannot be
disassociated from the hotel and the land on which the
hotel edifice stands. Consequently, we cannot sustain
respondents’ claim that the Filipino First Policy provision is
not applicable since what is being sold is only 51% of the
outstanding shares of the corporation, not the Hotel
building nor the land upon which the building stands.
9. ID.; STATE; SALE BY THE GSIS OF 51% OF ITS SHARE IN
MANILA HOTEL CORP., A STATE ACTION, SUBJECT TO
CONSTITUTIONAL COMMAND. — In constitutional
jurisprudence, the acts of persons distinct from the
government are considered "state action" covered by the
Constitution (1) when the activity it engages in is a" public
function", (2) when the government is so-significantly
involved with the private actor as to make the government
responsible for his action; and. (3) when the government
has approved or authorized the action. It is evident that the
act of respondent GSIS in selling 51% of its share in
respondent MHC comes under the second and third
categories of "state action." Without doubt therefore the
transaction, although entered into by respondent GSIS, is in
fact a transaction of the State and therefore subject to the
constitutional command.
10. ID.; CONSTITUTION; WHEN THE CONSTITUTION
ADDRESSES THE STATE, IT REFERS TO BOTH PEOPLE AND
GOVERNMENT. — When the Constitution addresses the
State it refers not only to the people but also to the
government as elements of the State. After all, government
is composed of three (3) divisions of power — legislative,
executive and judicial. Accordingly, a constitutional
mandate directed to the State is correspondingly directed
to the three (3) branches of government. It is undeniable
that in this case the subject constitutional injunction is
addressed among others to the Executive Department and
respondent GSIS, a government instrumentality deriving its
authority from the State.
11. ID.; ID.; NATIONAL PATRIMONY; PREFERENCE TO
QUALIFIED FILIPINOS; SALE OF STOCKS OF MANILA HOTEL
CORPORATION BY THE GSIS; FILIPINOS ALLOWED TO
MATCH THE BID OF FOREIGN ENTITY. — In the instant case,
where a foreign firm submits the highest bid in a public
bidding concerning the grant of rights, privileges and
concessions covering the national economy and patrimony,
thereby exceeding the bid of a Filipino, there is no question
that the Filipino will have to be allowed to match the bid of
the foreign entity. And if the Filipino matches the bid of a
foreign firm the award should go to the Filipino. It must be
so if we are to give life and meaning to the Filipino First
Policy provision of the 1987 Constitution. For, while this
may neither be expressly stated nor contemplated in the
bidding rules, the constitutional fiat is omnipresent to be
simply disregarded. To ignore it would be to sanction a
perilous skirting of the basic law.
12. REMEDIAL LAW; ACTIONS; FOREIGN BIDDERS WITHOUT
CAUSE OF ACTION AGAINST GSIS BEFORE ACCEPTANCE OF
BID. — The argument of respondents that petitioner is now
estopped from questioning the sale to Renong Berhad since
petitioner was well aware from the beginning that a
foreigner could participate in the bidding is meritless.
Undoubtedly, Filipinos and foreigners alike were invited to
the bidding. But foreigners may be awarded the sale only if
no Filipino qualifies, or if the qualified Filipino fails to match
the highest bid tendered by the foreign entity. In the case
before us, while petitioner was already preferred at the
inception of the bidding because of the constitutional
mandate, petitioner had not yet matched the bid offered
by Renong Berhad. Thus it did not have the right or
personality then to compel respondent GSIS to accept its
earlier bid. Rightly, only after it had matched the bid of the
foreign firm and the apparent disregard by respondent GSIS
of petitioner’s matching bid did the latter have a cause of
action.
13. ID.; SPECIAL CIVIL ACTION, CERTIORARI; FAILURE OF
THE GSIS TO EXECUTE CORRESPONDING DOCUMENTS
WHERE PETITIONER HAD MATCHED THE BID PRICE BY
FOREIGN BIDDER, A GRAVE ABUSE OF DISCRETION. — Since
petitioner has already matched the bid price tendered by
Renong Berhad pursuant to the bidding rules, respondent
GSIS is left with no alternative but to award to petitioner
the block of shares of MHC and to execute the necessary
agreements and documents to effect the sale in accordance
not only with the bidding guidelines and procedures but
with the Constitution as well. The refusal of respondent
GSIS to execute the corresponding documents with
petitioner as provided in the bidding rules after the latter
has matched the bid of the Malaysian firm clearly
constitutes grave abuse of discretion.
14. ID.; SUPREME COURT; DUTY BOUND TO MAKE SURE
THAT CONTRACTS DO NOT VIOLATE THE CONSTITUTION OR
THE LAWS. — While it is no business of the Court to
intervene in contracts of the kind referred to or set itself up
as the judge of whether they are viable or attainable, it is
its bounden duty to make sure that they do not violate the
Constitution or the laws, or are not adopted or
implemented with grave abuse of discretion amounting to
lack or excess of jurisdiction. It will never shirk that duty, no
matter how buffeted by winds of unfair and ill-informed
criticism. Indeed, the Court will always defer to the
Constitution in the proper governance of a free society;
after all, there is nothing so sacrosanct in any economic
policy as to draw itself beyond judicial review when the
Constitution is involved.

PADILLA, J., concurring opinion:chanrob1es virtual 1aw
library
1. POLITICAL LAW; CONSTITUTION; PATRIMONY OF THE
NATION, CONSTRUED. — A study of the 1935 Constitution,
where the concept of "national patrimony" originated,
would show that its framers decided to adopt the even
more comprehensive expression "Patrimony of the Nation"
in the belief that the phrase encircles a concept embracing
not only the natural resources of the country but practically
everything that belongs to the Filipino people, the tangible
and the material as well as the intangible and the spiritual
assets and possessions of the people. It is to be noted that
the framers did not stop with conservation. They knew that
conservation alone does not spell progress; and that this
may be achieved only through development as a correlative
factor to assure to the people not only the exclusive
ownership, but also the exclusive benefits of their national
patrimony. Moreover, the concept of national patrimony
has been viewed as referring not only to our rich natural
resources but also to the cultural heritage of our race.
There is no doubt in my mind that the Manila Hotel is very
much a part of our national patrimony and, as such
deserves constitutional protection as to who shall own it
and benefit from its operation. This institution has played
an important role in our nation’s history, having been the
venue of many a historical event, and serving as it did, and
as it does, as the Philippine Guest House for visiting foreign
heads of state, dignitaries, celebrities, and others.
2. ID.; ID.; MANILA HOTEL, PART OF OUR NATIONAL
PATRIMONY. — There is no doubt in my mind that the
Manila Hotel is very much a part of our national patrimony
and, as such, deserves constitutional protection as to who
shall own it and benefit from its operation. This institution
has played an important role in our nation’s history, having
been the venue of many a historical event, and serving as it
did, and as it does, as the Philippine Guest House for
visiting foreign heads of state, dignitaries. celebrities, and
others.
3. ID.; ID.; PREFERENCE TO QUALIFIED FILIPINOS; APPLIED
TO SALES OF SHARE OF STOCKS OF MANILA HOTEL. —
"Preference to qualified Filipinos," to be meaningful, must
refer not only to things that are peripheral, collateral, or
tangential. It must touch and affect the very "heart of the
existing order." In the field of public bidding in the
acquisition of things that pertain to the national patrimony,
preference to qualified Filipinos must allow a qualified
Filipino to match or equal the higher bid of a non-Filipino,
the preference shall not operate only when the bids of the
qualified Filipino and the non-Filipino are equal in which
case, the award should undisputedly be made to the
qualified Filipino. The Constitutional preference should give
the qualified Filipino an opportunity to match or equal the
higher bid of the non-Filipino bidder if the preference of the
qualified Filipino bidder is to be significant at all. While
government agencies, including the courts should re-
condition their thinking to such a trend, and make it easy
and even attractive for foreign investors to come to our
shores, yet we should not preclude ourselves from
reserving to us Filipinos certain areas where our national
identity, culture and heritage are involved. In the hotel
industry, for instance, foreign investors have established
themselves creditably, such as in the Shangri-La, the Nikko,
the Peninsula, and Mandarin Hotels. This should not stop us
from retaining 51% of the capital stock of the Manila Hotel
Corporation in the hands of Filipinos. This would be in
keeping with the intent of the Filipino people to preserve
our national patrimony, including our historical and cultural
heritage in the hands of Filipinos.
VITUG, J., separate opinion:chanrob1es virtual 1aw library
1. POLITICAL LAW; CONSTITUTION; NATIONAL PATRIMONY;
PROVISION GIVING PREFERENCE TO QUALIFIED FILIPINOS,
SELF-EXECUTORY. — The provision in our fundamental law
which provides that" (i)n the grant of rights, privileges, and
concessions covering the national economy and patrimony,
the State shall give preference to qualified Filipinos" is self-
executory. The provision verily does not need, although it
can obviously be amplified or regulated by, an enabling law
or a set of rules.
2. ID.; ID.; ID.; PATRIMONY INCLUDES CULTURAL HERITAGE
OF THE COUNTRY; MANILA HOTEL, EMBRACED THEREIN. —
The term "patrimony" does not merely refer to the
country’s natural resources but also to its cultural heritage.
A "historical landmark," to use the words of Mr. Justice
Justo P. Torres, Jr., Manila Hotel has now indeed become
part of Philippine heritage.
3. ADMINISTRATIVE LAW; GOVERNMENT SERVICE
INSURANCE SYSTEM; SALE OF ITS SHARE IN MANILA HOTEL
CORPORATION, AN ACT OF THE STATE; CONSTITUTIONAL
REQUIREMENT SHOULD BE COMPLIED WITH. — The act of
the Government Service Insurance System ("GSIS"), a
government entity which derives its authority from the
State, in selling 51% of its share in MHC should be
considered an act of the State subject to the Constitutional
mandate.
4. POLITICAL LAW; CONSTITUTION; NATIONAL PATRIMONY;
PREFERENCE TO QUALIFIED FILIPINOS; DOES NOT REFER TO
ALLOWING QUALIFIED FILIPINOS TO MATCH FOREIGN BID.
— On the pivotal issue of the degree of "preference to
qualified Filipinos" I find it somewhat difficult to take the
same path traversed by the forceful reasoning of Justice
Puno. In the particular case before us, the only meaningful
preference, it seems, would really be to allow the qualified
Filipino to match the foreign bid for, as a practical matter, I
cannot see any bid that literally calls for millions of dollars
to be at par (to the last cent) with another. The magnitude
of the bids is such that it becomes hardly possible for the
competing bids to stand exactly "equal" which alone, under
the dissenting view, could trigger the right of preference.
MENDOZA, J., separate opinion:chanrob1es virtual 1aw
library
POLITICAL LAW; CONSTITUTION; NATIONAL PATRIMONY;
PREFERENCE TO QUALIFIED FILIPINOS; FILIPINO BIDDERS
SHOULD BE ALLOWED TO EQUAL BID OF FOREIGN FIRM IN
SALE OF STOCKS OF MANILA HOTEL CORPORATION. — I
take the view that in the context of the present controversy
the only way to enforce the constitutional mandate that"
[i]n the grant of rights, privileges and concessions covering
the national patrimony the State shall give preference to
qualified Filipinos" is to allow petitioner Philippine
corporation to equal the bid of the Malaysian firm Renong
Berhad for the purchase of the controlling shares of stocks
in the Manila Hotel Corporation. Indeed, it is the only way a
qualified Filipino or Philippine corporation can be given
preference in the enjoyment of a right, privilege or
concession given by the State, by favoring it over a foreign
national or corporation. Under the rules on public bidding
of the Government Service and Insurance System, if
petitioner and the Malaysian firm had offered the same
price per share, "priority [would be given] to the bidder
seeking the larger ownership interest in MHC," so that if
petitioner bid for more shares, it would be preferred to the
Malaysian corporation for that reason and not because it is
a Philippine corporation. Consequently, it is only in cases
like the present one, where an alien corporation is the
highest bidder, that preferential treatment of the Philippine
corporation is mandated not by declaring it winner but by
allowing it "to match the highest bid in terms of price per
share" before it is awarded the shares of stocks. That, to
me, is what "preference to qualified Filipinos" means in the
context of this case — by favoring Filipinos whenever they
are at a disadvantage vis-a-vis foreigners.
TORRES, JR., J., separate opinion:chanrob1es virtual 1aw
library
POLITICAL LAW; CONSTITUTION; PATRIMONY OF THE
NATION; MANILA HOTEL, EMBRACED WITHIN THE
MEANING THEREOF; SALE OF ITS STOCKS SHOULD BE
LIMITED TO QUALIFIED FILIPINOS. — Section 10, Article XII
of the 1987 Constitution should be read in conjunction with
Article II of the same Constitution pertaining to
"Declaration of Principles and State Policies" which ordain
— "The State shall develop a self-reliant and independent
national economy, effectively controlled by Filipinos." (Sec.
19), Interestingly, the matter of giving preference to
"qualified Filipinos" was one of the highlights in the 1987
Constitution Commission proceedings. The nationalistic
provisions of the 1987 Constitution reflect the history and
spirit of the Malolos Constitution of 1898, the 1935
Constitution and the 1973 Constitution. I subscribe to the
view that history, culture, heritage, and tradition are not
legislated and is the product of events, customs, usages and
practices. It is actually a product of growth and acceptance
by the collective mores of a race. It is the spirit and soul of a
people. The Manila Hotel is part of our history, culture and
heritage. Every inch of the Manila Hotel is witness to
historic events (too numerous to mention) which shaped
our history for almost 84 years. The history of the Manila
Hotel should not be placed in the auction block of a purely
business transaction, where profit subverts the cherished
historical values of our people. The Filipino should be first
under his Constitution and in his own land.
PUNO, J., dissenting opinion:chanrob1es virtual 1aw library
1. POLITICAL LAW; CONSTITUTION; AS A RULE PROVISIONS
THEREOF ARE SELF-EXECUTING. — A Constitution provides
the guiding policies and principles upon which is built the
substantial foundation and general framework of the law
and government. As a rule, its provisions are deemed self-
executing and can be enforced without further legislative
action. Some of its provisions, however, can be
implemented only through appropriate laws enacted by the
Legislature, hence not self-executing. Courts as a rule
consider the provisions of the Constitution as self-
executing, rather than as requiring future legislation for
their enforcement. The reason is not difficult to discern For
if they are not treated as self-executing, the mandate of the
fundamental law ratified by the sovereign people can be
easily ignored and nullified by Congress. Suffused with
wisdom of the ages is the unyielding rule that legislative
actions may give breath to constitutional rights but
congressional inaction should not suffocate them.
2. ID.; ID.; PROVISIONS ARE NOT SELF-EXECUTING WHERE IT
MERELY ANNOUNCES A POLICY AND EMPOWERS THE
LEGISLATURE TO ENACT LAWS TO CARRY THE POLICY INTO
EFFECT. — Contrariwise, case law lays down the rule that a
constitutional provision is not self-executing where it
merely announces a policy and its language empowers the
Legislature to prescribe the means by which the policy shall
be carried into effect.
3. ID.; ID.; FIRST PARAGRAPH OF SECTION 10, ARTICLE 12
NOT SELF-EXECUTING. — The first paragraph directs
Congress to reserve certain areas of investments in the
country to Filipino citizens or to corporations sixty per cent
of whose capital stock is owned by Filipinos. It further
commands Congress to enact laws that will encourage the
formation and operation of one hundred percent Filipino-
owned enterprises. In checkered contrast, the second
paragraph orders the entire State to give preference to
qualified Filipinos in the grant of rights and privileges
covering the national economy and patrimony. The third
paragraph also directs the State to regulate foreign
investments in line with our national goals and well-set
priorities. The first paragraph of Section 10 is not self-
executing. By its express text, there is a categorical
command for Congress to enact laws restricting foreign
ownership in certain areas of investments in the country
and to encourage the formation and operation of wholly-
owned Filipino enterprises.
4. ID.; ID.; NATIONAL PATRIMONY; PREFERENCE TO
QUALIFIED FILIPINOS UNDER PARAGRAPHS 2 AND 3 OF
SECTION 10, ARTICLE 12, SELF-EXECUTING. — The second
and third paragraphs of Section 10 are different. They are
directed to the State and not to Congress alone which is but
one of the three great branches of our government. Their
coverage is also broader for they cover "the national
economy and patrimony" and "foreign investments within
[the] national jurisdiction" and not merely "certain areas of
investments." Beyond debate, they cannot be read as
granting Congress the exclusive power to implement by law
the policy of giving preference to qualified Filipinos in the
conferral of rights and privileges covering our national
economy and patrimony. Their language does not suggest
that any of the State agency or instrumentality has the
privilege to hedge or to refuse its implementation for any
reason whatsoever. Their duty to implement is
unconditional and it is now. The second and the third
paragraphs of Section 10, Article XII are thus self-executing.
5. ID.; ID.; ID.; MANILA HOTEL CORPORATION, PART OF THE
NATIONAL PATRIMONY. — The second issue is whether the
sale of a majority of the stocks of the Manila Hotel
Corporation involves the disposition of part of our national
patrimony. The records of the Constitutional Commission
show that the Commissioners entertained the same view as
to its meaning. According to Commissioner Nolledo,
"patrimony" refers not only to our rich natural resources
but also to the cultural heritage of our race. By this
yardstick, the sale of Manila Hotel falls within the coverage
of the constitutional provision giving preferential treatment
to qualified Filipinos in the grant of rights involving our
national patrimony.
6. ID.; STATE; GSIS, EMBRACED WITHIN THE MEANING
THEREOF. — The third issue is whether the constitutional
command to the State includes the respondent GSIS. A look
at its charter will reveal that GSIS is a government-owned
and controlled corporation that administers funds that
come from the monthly contributions of government
employees and the government. The funds are held in trust
for a distinct purpose which cannot be disposed of
indifferently. They are to be used to finance the retirement,
disability and life insurance benefits of the employees and
the administrative and operational expenses of the GSIS.
Excess funds, however, are allowed to be invested in
business and other ventures for the benefit of the
employees. The GSIS is not a pure private corporation. It is
essentially a public corporation created by Congress and
granted an original charter to serve a public purpose. It is
subject to the jurisdictions of the Civil Service Commission
and the Commission on Audit. As a state-owned and
controlled corporation, it is skin-bound to adhere to the
policies spelled out in the Constitution especially those
designed to promote the general welfare of the people.
One of these policies is the Filipino First policy which the
people elevated as a constitutional command.
7. ID.; CONSTITUTION; PROVISIONS THEREOF DEEMED
INCLUDED IN ALL LEGISLATIONS AND ALL STATE ACTIONS.
— The constitutional command to enforce the Filipino First
policy is addressed to the State and not to Congress alone.
Hence, the word "laws" should not be understood as
limited to legislations but all state actions which include
applicable rules and regulations adopted by agencies and
instrumentalities of the State in the exercise of their rule-
making power.
8. ID.; ID.; NATIONAL PATRIMONY; PREFERENCE TO
QUALIFIED FILIPINOS; STATE NOT PROHIBITED FROM
GRANTING RIGHTS TO FOREIGN FIRM IN THE ABSENCE OF
QUALIFIED FILIPINOS. — In the absence of qualified
Filipinos, the State is not prohibited from granting these
rights, privileges and concessions to foreigners if the act will
promote the weal of the nation.
9. ID.; ID.; ID.; ID.; CASE AT BAR. — The right of preference
of petitioner arises only if it tied the bid of Renong Berhad.
In that instance, all things stand equal, and petitioner, as a
qualified Filipino bidder, should be preferred. It is with
deep regret that I cannot subscribe to the view that
petitioner has a right to match the bid of Renong Berhad.
Petitioner’s submission must be supported by the rules but
even if we examine the rules inside-out a thousand times,
they can not justify the claimed right. Under the rules, the
right to match the highest bid arises only "if for any reason,
the highest bidder cannot be awarded the block of shares . .
." No reason has arisen that will prevent the award to
Renong Berhad. It deserves the award as a matter of right
for the rules clearly did not give to the petitioner as a
qualified Filipino the privilege to match the higher bid of a
foreigner. What the rules did not grant, petitioner cannot
demand. Our sympathies may be with petitioner but the
court has no power to extend the latitude and longtitude of
the right of preference as defined by the rules. We are
duty-bound to respect that determination even if we differ
with the wisdom of their judgment. The right they grant
may be little but we must uphold the grant for as long as
the right of preference is not denied. It is only when a State
action amounts to a denial of the right that the Court can
come in and strike down the denial as unconstitutional.
10. REMEDIAL LAW; ACTIONS; ESTOPPEL; PARTY ESTOPPED
FROM ASSAILING THE WINNING BID OF FOREIGN FIRM
FROM BEING AWARE OF THE RULES AND REGULATIONS OF
THE BIDDINGS IT AGREED TO RESPECT. — I submit that
petitioner is estopped from assailing the winning bid of
Renong Berhad. Petitioner was aware of the rules and
regulations of the bidding. It knew that the rules and
regulations do not provide that a qualified Filipino bidder
can match the winning bid after submitting an inferior bid.
It knew that the bid was open to foreigners and that
foreigners qualified even during the first bidding. Petitioner
cannot be allowed to repudiate the rules which it agreed to
respect. It cannot be allowed to obey the rules when it wins
and disregard them when it loses. If sustained, petitioners’
stance will wreak havoc on the essence of bidding.
PANGANIBAN, J., separate dissenting opinion:chanrob1es
virtual 1aw library
POLITICAL LAW; CONSTITUTION; PATRIMONY OF THE
NATION; PREFERENCE TO QUALIFIED FILIPINOS; LOSING
FILIPINO NOT GIVEN RIGHT TO EQUAL THE HIGHEST
FOREIGN BID. — The majority contends the Constitution
should be interpreted to mean that, after a bidding process
is concluded, the losing Filipino bidder should be given the
right to equal the highest foreign bid, and thus to win.
However, the Constitution [Sec. 10 (2), Art. XII] simply
states that "in the grant of rights . . . covering the national
economy and patrimony, the State shall give preference to
qualified Filipinos." The majority concedes that there is no
law defining the extent or degree of such preference.
Specifically, no statute empowers a losing Filipino bidder to
increase his bid and equal that of the winning foreigner. In
the absence of such empowering law, the majority’s
strained interpretation, I respectfully submit, constitutes
unadulterated judicial legislation, which makes bidding a
ridiculous sham where no Filipino can lose and where no
foreigner can win. Only in the Philippines! Aside from being
prohibited by the Constitution, such judicial legislation is
short-sighted and, viewed properly, gravely prejudicial to
long-term Filipino interests. In the absence of a law
specifying the degree or extent of the "Filipino First" policy
of the Constitution, the constitutional preference for the
"qualified Filipinos" may be allowed only where all the bids
are equal. In this manner, we put the Filipino ahead
without self-destructing him and without being unfair to
the foreigner. In short, the Constitution mandates a victory
for the qualified Filipino only when the scores are tied. But
not when the ballgame is over and the foreigner clearly
posted the highest score.
DECISION
BELLOSILLO, J.:
The Filipino First Policy enshrined in the 1987 Constitution,
i.e., in the grant of rights, privileges, and concessions
covering the national economy and patrimony, the State
shall give preference to qualified Filipinos, 1 is invoked by
petitioner in its bid to acquire 51% of the shares of the
Manila Hotel Corporation (MHC) which owns the historic
Manila Hotel. Opposing, respondents maintain that the
provision is not self-executing but requires an
implementing legislation for its enforcement. Corollarily,
they ask whether the 51% shares form part of the national
economy and patrimony covered by the protective mantle
of the Constitution.
The controversy arose when respondent Government
Service Insurance System (GSIS), pursuant to the
privatization program of the Philippine Government under
Proclamation No. 50 dated 8 December 1986, decided to
sell through public bidding 30% to 51% of the issued and
outstanding shares of respondent MHC. The winning
bidder, or the eventual "strategic partner," is to provide
management expertise and/or an international marketing/
reservation system, and financial support to strengthen the
profitability and performance of the Manila Hotel. 2 In a
close bidding held on 18 September 1995 only two (2)
bidders participated: petitioner Manila Prince Hotel
Corporation, a Filipino corporation, which offered to buy
51% of the MHC or 15,300,000 shares at P41.58 per share,
and Renong Berhad, a Malaysian firm, with ITT-Sheraton as
its hotel operator, which bid for the same number of shares
at P44.00 per share, or P2.42 more than the bid of
petitioner.
Pertinent provisions of the bidding rules prepared by
respondent GSIS state —
I. EXECUTION OF THE NECESSARY CONTRACTS WITH
GSIS/MHC —
1. The Highest Bidder must comply with the conditions set
forth below by October 23, 1995 (reset to November 3,
1995) or the Highest Bidder will lose the right to purchase
the Block of Shares and GSIS will instead offer the Block of
Shares to the other Qualified Bidders:chanrob1es virtual
1aw library
a. The Highest Bidder must negotiate and execute with the
GSIS/MHC the Management Contract, International
Marketing/Reservation System Contract or other type of
contract specified by the Highest Bidder in its strategic plan
for the Manila Hotel . . . .
b. The Highest Bidder must execute the Stock Purchase and
Sale Agreement with GSIS . . . .
K. DECLARATION OF THE WINNING BIDDER/STRATEGIC
PARTNER —
The Highest Bidder will be declared the Winning
Bidder/Strategic Partner after the following conditions are
met
a. Execution of the necessary contracts with GSIS/MHC not
later than October 23, 1995 (reset to November 3, 1995);
and
b. Requisite approvals from the GSIS/MHC and COP
(Committee on Privatization)/ OGCC (Office of the
Government Corporate Counsel) are obtained." 3
Pending the declaration of Renong Berhard as the winning
bidder/strategic partner and the execution of the necessary
contracts, petitioner in a letter to respondent GSIS dated 28
September 1995 matched the bid price of P44.00 per share
tendered by Renong Berhad. 4 In a subsequent letter dated
10 October 1995 petitioner sent a manager’s check issued
by Philtrust Bank for Thirty-three Million Pesos
(P33,000,000.00) as Bid Security to match the bid of the
Malaysian Group, Messrs. Renong Berhad . . . . 5 which
respondent GSIS refused to accept.
On 17 October 1995, perhaps apprehensive that
respondent GSIS has disregarded the tender of the
matching bid and that the sale of 51% of the MHC may be
hastened by respondent GSIS and consummated with
Renong Berhad, petitioner came to this Court on
prohibition and mandamus. On 18 October 1995 the Court
issued a temporary restraining order enjoining respondents
from perfecting and consummating the sale to the
Malaysian firm.
On 10 September 1996 the instant case was accepted by
the Court En Banc after it was referred to it by the First
Division. The case was then set for oral arguments with
former Chief Justice Enrique M. Fernando and Fr. Joaquin
G. Bernas, S.J., as amici curiae.
In the main, petitioner invokes Sec. 10, second par., Art. XII,
of the 1987 Constitution and submits that the Manila Hotel
has been identified with the Filipino nation and has
practically become a historical monument which reflects
the vibrancy of Philippine heritage and culture. It is a proud
legacy of an earlier generation of Filipinos who believed in
the nobility and sacredness of independence and its power
and capacity to release the full potential of the Filipino
people. To all intents and purposes, it has become a part of
the national patrimony. 6 Petitioner also argues that since
51% of the shares of the MHC carries with it the ownership
of the business of the hotel which is owned by respondent
GSIS, a government-owned and controlled corporation, the
hotel business of respondent GSIS being a part of the
tourism industry is unquestionably a part of the national
economy. Thus, any transaction involving 51% of the shares
of stock of the MHC is clearly covered by the term national
economy, to which Sec. 10, second par., Art. XII, 1987
Constitution, applies. 7
It is also the thesis of petitioner that since Manila Hotel is
part of the national patrimony and its business also
unquestionably part of the national economy petitioner
should be preferred after it has matched the bid offer of
the Malaysian firm. For the bidding rules mandate that if
for any reason, the Highest Bidder cannot be awarded the
Block of Shares, GSIS may offer this to the other Qualified
Bidders that have validly submitted bids provided that
these Qualified Bidders are willing to match the highest bid
in terms of price per share. 8
Respondents except. They maintain that: First, Sec. 10,
second par., Art. XII, of the 1987 Constitution is merely a
statement of principle and policy since it is not a self-
executing provision and requires implementing
legislation(s). . . . Thus, for the said provision to operate,
there must be existing laws "to lay down conditions under
which business may be done." 9
Second, granting that this provision is self-executing,
Manila Hotel does not fall under the term national
patrimony which only refers to lands of the public domain,
waters, minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna and all marine wealth in its
territorial sea, and exclusive marine zone as cited in the
first and second paragraphs of Sec. 2, Art. XII, 1987
Constitution. According to respondents, while petitioner
speaks of the guests who have slept in the hotel and the
events that have transpired therein which make the hotel
historic, these alone do not make the hotel fall under the
patrimony of the nation. What is more, the mandate of the
Constitution is addressed to the State, not to respondent
GSIS which possesses a personality of its own separate and
distinct from the Philippines as a State.chanrobles
Third, granting that the Manila Hotel forms part of the
national patrimony, the constitutional provision invoked is
still inapplicable since what is being sold is only 51% of the
outstanding shares of the corporation, not the hotel
building nor the land upon which the building stands.
Certainly, 51% of the equity of the MHC cannot be
considered part of the national patrimony. Moreover, if the
disposition of the shares of the MHC is really contrary to
the Constitution, petitioner should have questioned it right
from the beginning and not after it had lost in the bidding.
Fourth, the reliance by petitioner on par. V., subpar. J. 1, of
the bidding rules which provides that if for any reason, the
Highest Bidder cannot be awarded the Block of Shares, GSIS
may offer this to the other Qualified Bidders that have
validly submitted bids provided that these Qualified Bidders
are willing to match the highest bid in terms of price per
share, is misplaced. Respondents postulate that the
privilege of submitting a matching bid has not yet arisen
since it only takes place if for any reason, the Highest
Bidder cannot be awarded the Block of Shares. Thus the
submission by petitioner of a matching bid is premature
since Renong Berhad could still very well be awarded the
block of shares and the condition giving rise to the exercise
of the privilege to submit a matching bid had not yet taken
place.
Finally, the prayer for prohibition grounded on grave abuse
of discretion should fail since respondent GSIS did not
exercise its discretion in a capricious, whimsical manner,
and if ever it did abuse its discretion it was not so patent
and gross as to amount to an evasion of a positive duty or a
virtual refusal to perform a duty enjoined by law. Similarly,
the petition for mandamus should fail as petitioner has no
clear legal right to what it demands and respondents do not
have an imperative duty to perform the act required of
them by petitioner.
We now resolve. A constitution is a system of fundamental
laws for the governance and administration of a nation. It is
supreme, imperious, absolute and unalterable except by
the authority from which it emanates. It has been defined
as the fundamental and paramount law of the nation. 10 It
prescribes the permanent framework of a system of
government, assigns to the different departments their
respective powers and duties, and establishes certain fixed
principles on which government is founded. The
fundamental conception in other words is that it is a
supreme law to which all other laws must conform and in
accordance with which all private rights must be
determined and all public authority administered. 11 Under
the doctrine of constitutional supremacy, if a law or
contract violates any norm of the constitution that law or
contract whether promulgated by the legislative or by the
executive branch or entered into by private persons for
private purposes is null and void and without any force and
effect. Thus, since the Constitution is the fundamental
paramount and supreme law of the nation, it is deemed
written in every statute and contract.
Admittedly, some constitutions are merely declarations of
policies and principles. Their provisions command the
legislature to enact laws and carry out the purposes of the
framers who merely establish an outline of government
providing for the different departments of the
governmental machinery and securing certain fundamental
and inalienable rights of citizens. 12 A provision which lays
down a general principle, such as those found in Art. II of
the 1987 Constitution, is usually not self-executing. But a
provision which is complete in itself and becomes operative
without the aid of supplementary or enabling legislation, or
that which supplies sufficient rule by means of which the
right it grants may be enjoyed or protected, is self-
executing. Thus a constitutional provision is self-executing if
the nature and extent of the right conferred and the
liability imposed are fixed by the constitution itself, so that
they can be determined by an examination and
construction of its terms, and there is no language
indicating that the subject is referred to the legislature for
action. 13
As against constitutions of the past, modern constitutions
have been generally drafted upon a different principle and
have often become in effect extensive codes of laws
intended to operate directly upon the people in a manner
similar to that of statutory enactments, and the function of
constitutional conventions has evolved into one more like
that of a legislative body. Hence, unless it is expressly
provided that a legislative act is necessary to enforce a
constitutional mandate, the presumption now is that all
provisions of the constitution are self-executing. If the
constitutional provisions are treated as requiring legislation
instead of self-executing, the legislature would have the
power to ignore and practically nullify the mandate of the
fundamental law. 14 This can be cataclysmic. That is why
the prevailing view is, as it has always been, that —
. . . in case of doubt, the Constitution should be considered
self-executing rather than non-self-executing. . . . Unless
the contrary is clearly intended, the provisions of the
Constitution should be considered self-executing, as a
contrary rule would give the legislature discretion to
determine when, or whether, they shall be effective. These
provisions would be subordinated to the will of the
lawmaking body, which could make them entirely
meaningless by simply refusing to pass the needed
implementing statute. 15
Respondents argue that Sec. 10, second par., Art. XII, of the
1987 Constitution is clearly not self-executing, as they
quote from discussions on the floor of the 1986
Constitutional Commission —
MR. RODRIGO. Madam President, I am asking this question
as the Chairman of the Committee on Style. If the wording
of "PREFERENCE" is given to "QUALIFIED FILIPINOS," can it
be understood as a preference to qualified Filipinos vis-a-vis
Filipinos who are not qualified. So, why do we not make it
clear? To qualified Filipinos as against aliens?
THE PRESIDENT. What is the question of Commissioner
Rodrigo? Is it to remove the word "QUALIFIED?"
MR. RODRIGO. No, no, but say definitely "TO QUALIFIED
FILIPINOS" as against whom? As against aliens or over
aliens?
MR. NOLLEDO. Madam President, I think that is
understood. We use the word "QUALIFIED" because the
existing laws or prospective laws will always lay down
conditions under which business may be done. For
example, qualifications on capital, qualifications on the
setting up of other financial structures, et cetera (Emphasis
supplied by respondents).
MR RODRIGO. It is just a matter of style.
MR. NOLLEDO. Yes. 16
Quite apparently, Sec. 10, second par., of Art. XII is couched
in such a way as not to make it appear that it is non-self-
executing but simply for purposes of style. But, certainly,
the legislature is not precluded from enacting further laws
to enforce the constitutional provision so long as the
contemplated statute squares with the Constitution. Minor
details may be left to the legislature without the self-
executing nature of constitutional provisions.
In self-executing constitutional provisions, the legislature
may still enact legislation to facilitate the exercise of
powers directly granted by the constitution, further the
operation of such a provision, prescribe a practice to be
used for its enforcement, provide a convenient remedy for
the protection of the rights secured or the determination
thereof, or place reasonable safeguards around the
exercise of the right. The mere fact that legislation may
supplement and add to or prescribe a penalty for the
violation of a self-executing constitutional provision does
not render such a provision ineffective in the absence of
such legislation. The omission from a constitution of any
express provision for a remedy for enforcing a right or
liability is not necessarily an indication that it was not
intended to be self-executing. The rule is that a self-
executing provision of the constitution does not necessarily
exhaust legislative power on the subject, but any legislation
must be in harmony with the constitution, further the
exercise of constitutional right and make it more available.
17 Subsequent legislation however does not necessarily
mean that the subject constitutional provision is not, by
itself, fully enforceable.
Respondents also argue that the non-self-executing nature
of Sec. 10, second par., of Art. XII is implied from the tenor
of the first and third paragraphs of the same section which
undoubtedly are not self-executing. 18 The argument is
flawed. If the first and third paragraphs are not self-
executing because Congress is still to enact measures to
encourage the formation and operation of enterprises fully
owned by Filipinos, as in the first paragraph, and the State
still needs legislation to regulate and exercise authority
over foreign investments within its national jurisdiction, as
in the third paragraph, then a fortiori, by the same logic,
the second paragraph can only be self-executing as it does
not by its language require any legislation in order to give
preference to qualified Filipinos in the grant of rights,
privileges and concessions covering the national economy
and patrimony. A constitutional provision may be self-
executing in one part and non-self-executing in another. 19
Even the cases cited by respondents holding that certain
constitutional provisions are merely statements of
principles and policies, which are basically not self-
executing and only placed in the Constitution as moral
incentives to legislation, not as judicially enforceable rights
— are simply not in point. Basco v. Philippine Amusements
and Gaming Corporation 20 speaks of constitutional
provisions on personal dignity, 21 the sanctity of family life,
22 the vital role of the youth in nation-building, 23 the
promotion of social justice, 24 and the values of education.
25 Tolentino v. Secretary of Finance 26 refers to
constitutional provisions on social justice and human rights
27 and on education. 28 Lastly, Kilosbayan, Inc. v. Morato
29 cites provisions on the promotion of general welfare, 30
the sanctity of family life, 31 the vital role of the youth in
nation-building 32 and the promotion of total human
liberation and development. 33 A reading of these
provisions indeed clearly shows that they are not judicially
enforceable constitutional rights but merely guidelines for
legislation. The very terms of the provisions manifest that
they are only principles upon which legislations must be
based. Res ipsa loquitur.
On the other hand, Sec. 10, second par., Art. XII of the 1987
Constitution is a mandatory, positive command which is
complete in itself and which needs no further guidelines or
implementing laws or rules for its enforcement. From its
very words the provision does not require any legislation to
put it in operation. It is per se judicially enforceable. When
our Constitution mandates that [i]n the grant of rights,
privileges, and concessions covering national economy and
patrimony, the State shall give preference to qualified
Filipinos, it means just that — qualified Filipinos shall be
preferred. And when our Constitution declares that a right
exists in certain specified circumstances an action may be
maintained to enforce such right notwithstanding the
absence of any legislation on the subject; consequently, if
there is no statute especially enacted to enforce such
constitutional right, such right enforces itself by its own
inherent potency and puissance, and from which all
legislations must take their bearings. Where there is a right
there is a remedy. Ubi jus ibi remedium.
As regards our national patrimony, a member of the 1986
Constitutional Commission 34 explains —
The patrimony of the Nation that should be conserved and
developed refers not only to our rich natural resources but
also to the cultural heritage of our race. It also refers to our
intelligence in arts, sciences and letters. Therefore, we
should develop not only our lands, forests, mines and other
natural resources but also the mental ability or faculty of
our people.
We agree. In its plain and ordinary meaning, the term
patrimony pertains to heritage. 35 When the Constitution
speaks of national patrimony, it refers not only to the
natural resources of the Philippines, as the Constitution
could have very well used the term natural resources, but
also to the cultural heritage of the Filipinos.
Manila Hotel has become a landmark — a living testimonial
of Philippine heritage. While it was restrictively an
American hotel when it first opened in 1912, it immediately
evolved to be truly Filipino. Formerly a concourse for the
elite, it has since then become the venue of various
significant events which have shaped Philippine history. It
was called the Cultural Center of the 1930’s. It was the site
of the festivities during the inauguration of the Philippine
Commonwealth. Dubbed as the Official Guest House of the
Philippine Government it plays host to dignitaries and
official visitors who are accorded the traditional Philippine
hospitality. 36
The history of the hotel has been chronicled in the book
The Manila Hotel: The Heart and Memory of a City. 37
During World War II the hotel was converted by the
Japanese Military Administration into a military
headquarters. When the American forces returned to
recapture Manila the hotel was selected by the Japanese
together with Intramuros as the two (2) places for their
final stand. Thereafter, in the 1950’s and 1960’s, the hotel
became the center of political activities, playing host to
almost every political convention. In 1970 the hotel
reopened after a renovation and reaped numerous
international recognitions, an acknowledgment of the
Filipino talent and ingenuity. In 1986 the hotel was the site
of a failed coup d’etat where an aspirant for vice-president
was "proclaimed" President of the Philippine Republic.
For more than eight (8) decades Manila Hotel has bore
mute witness to the triumphs and failures, loves and
frustrations of the Filipinos; its existence is impressed with
public interest; its own historicity associated with our
struggle for sovereignty, independence and nationhood.
Verily, Manila Hotel has become part of our national
economy and patrimony. For sure, 51% of the equity of the
MHC comes within the purview of the constitutional shelter
for it comprises the majority and controlling stock, so that
anyone who acquires or owns the 51% will have actual
control and management of the hotel. In this instance, 51%
of the MHC cannot be disassociated from the hotel and the
land on which the hotel edifice stands. Consequently, we
cannot sustain respondents’ claim that the Filipino First
Policy provision is not applicable since what is being sold is
only 51% of the outstanding shares of the corporation, not
the Hotel building nor the land upon which the building
stands. 38
The argument is pure sophistry. The term qualified Filipinos
as used in our Constitution also includes corporations at
least 60% of which is owned by Filipinos. This is very clear
from the proceedings of the 1986 Constitutional
Commission —
THE PRESIDENT.
Commissioner Davide is recognized.
MR. DAVIDE.
I would like to introduce an amendment to the Nolledo
amendment. And the amendment would consist in
substituting the words "QUALIFIED FILIPINOS" with the
following: "CITIZENS OF THE PHILIPPINES OR
CORPORATIONS OR ASSOCIATIONS WHOSE CAPITAL OR
CONTROLLING STOCK IS WHOLLY OWNED BY SUCH
CITIZENS."cralaw virtua1aw library
x x x
MR. MONSOD.
Madam President, apparently the proponent is agreeable,
but we have to raise a question. Suppose it is a corporation
that is 80-percent Filipino, do we not give it preference?
MR. DAVIDE.
The Nolledo amendment would refer to an individual
Filipino. What about a corporation wholly owned by Filipino
citizens?
MR. MONSOD.
At least 60 percent, Madam President.
MR. DAVIDE.
Is that the intention?
MR MONSOD.
Yes, because, in fact, we would be limiting it if we say that
the preference should only be 100-percent Filipino.
MR. DAVIDE.
I want to get that meaning clear because "QUALIFIED
FILIPINOS" may refer only to individuals and not to juridical
personalities or entities.
MR. MONSOD.
We agree, Madam President. 39
x x x — THE STATE SHALL GIVE PREFERENCE TO QUALIFIED
MR. RODRIGO.
Before we vote, may I request that the amendment be read
again.
MR. NOLLEDO.
The amendment will read: "IN THE GRANT OF RIGHTS,
PRIVILEGES AND CONCESSIONS COVERING THE NATIONAL
ECONOMY AND PATRIMONY, THE STATE SHALL GIVE
PREFERENCE TO QUALIFIED FILIPINOS." And the word
"Filipinos" here, as intended by the proponents, will include
not only individual Filipinos but also Filipino-controlled
entities or entities fully-controlled by Filipinos. 40
The phrase preference to qualified Filipinos was explained
thus —
MR. FOZ.
Madam President, I would like to request Commissioner
Nolledo to please restate his amendment so that I can ask a
question.
MR. NOLLEDO.
"IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS
COVERING THE NATIONAL ECONOMY AND PATRIMONY,
THE STATE SHALL GIVE PREFERENCE TO QUALIFIED
FILIPINOS."cralaw virtua1aw library
MR. FOZ.
In connection with that amendment, if a foreign enterprise
is qualified and a Filipino enterprise is also qualified, will
the Filipino enterprise still be given a preference?
MR. NOLLEDO.
Obviously.
MR. FOZ.
If the foreigner is more qualified in some aspects than the
Filipino enterprise, will the Filipino still be preferred?
MR. NOLLEDO.
The answer is "yes."cralaw virtua1aw library
MR. FOZ.
Thank you. 41
Expounding further on the Filipino First Policy provision
Commissioner Nolledo continues —
MR NOLLEDO.
Yes, Madam President. Instead of "MUST," it will be "SHALL
FILIPINOS." This embodies the so-called "Filipino First"
policy. That means that Filipinos should be given preference
in the grant of concessions, privileges and rights covering
the national patrimony. 42
The exchange of views in the sessions of the Constitutional
Commission regarding the subject provision was still further
clarified by Commissioner Nolledo 43 —
"Paragraph 2 of Section 10 explicitly mandates the "Pro-
Filipino" bias in all economic concerns. It is better known as
the FILIPINO FIRST Policy. . . . This provision was never
found in previous Constitutions. . . .
The term "qualified Filipinos" simply means that preference
shall be given to those citizens who can make a viable
contribution to the common good, because of credible
competence and efficiency. It certainly does NOT mandate
the pampering and preferential treatment to Filipino
citizens or organizations that are incompetent or
inefficient, since such an indiscriminate preference would
be counterproductive and inimical to the common good.
In the granting of economic rights, privileges, and
concessions, when a choice has to be made between a
"qualified foreigner" and a "qualified Filipino," the latter
shall be chosen over the former."cralaw virtua1aw library
Lastly, the word qualified is also determinable. Petitioner
was so considered by respondent GSIS and selected as one
of the qualified bidders. It was pre-qualified by respondent
GSIS in accordance with its own guidelines so that the sole
inference here is that petitioner has been found to be
possessed of proven management expertise in the hotel
industry, or it has significant equity ownership in another
hotel company, or it has an overall management and
marketing proficiency to successfully operate the Manila
Hotel. 44
The penchant to try to whittle away the mandate of the
Constitution by arguing that the subject provision is not
self-executory and requires implementing legislation is
quite disturbing. The attempt to violate a clear
constitutional provision — by the government itself — is
only too distressing. To adopt such a line of reasoning is to
renounce the duty to ensure faithfulness to the
Constitution. For, even some of the provisions of the
Constitution which evidently need implementing legislation
have juridical life of their own and can be the source of a
judicial remedy. We cannot simply afford the government a
defense that arises out of the failure to enact further
enabling, implementing or guiding legislation. In fine, the
discourse of Fr. Joaquin G. Bernas, S.J., on constitutional
government is apt —
The executive department has a constitutional duty to
implement laws, including the Constitution, even before
Congress acts — provided that there are discoverable legal
standards for executive action. When the executive acts, it
must be guided by its own understanding of the
constitutional command and of applicable laws. The
responsibility for reading and understanding the
Constitution and the laws is not the sole prerogative of
Congress. If it were, the executive would have to ask
Congress, or perhaps the Court, for an interpretation every
time the executive is confronted by a constitutional
command. That is not how constitutional government
operates. 45
Respondents further argue that the constitutional provision
is addressed to the State, not to respondent GSIS which by
itself possesses a separate and distinct personality. This
argument again is at best specious. It is undisputed that the
sale of 51% of the MHC could only be carried out with the
prior approval of the State acting through respondent
Committee on Privatization. As correctly pointed out by Fr.
Joaquin G. Bernas, S.J., this fact alone makes the sale of the
assets of respondents GSIS and MHC a "state action." In
constitutional jurisprudence, the acts of persons distinct
from the government are considered "state action" covered
by the Constitution (1) when the activity it engages in is a
"public function;" (2) when the government is so-
significantly involved with the private actor as to make the
government responsible for his action; and, (3) when the
government has approved or authorized the action. It is
evident that the act of respondent GSIS in selling 51% of its
share in respondent MHC comes under the second and
third categories of "state action." Without doubt therefore
the transaction, although entered into by respondent GSIS,
is in fact a transaction of the State and therefore subject to
the constitutional command. 46
When the Constitution addresses the State it refers not
only to the people but also to the government as elements
of the State. After all, government is composed of three (3)
divisions of power — legislative, executive and judicial.
Accordingly, a constitutional mandate directed to the State
is correspondingly directed to the three (3) branches of
government. It is undeniable that in this case the subject
constitutional injunction is addressed among others to the
Executive Department and respondent GSIS, a government
instrumentality deriving its authority from the State.
It should be stressed that while the Malaysian firm offered
the higher bid it is not yet the winning bidder. The bidding
rules expressly provide that the highest bidder shall only be
declared the winning bidder after it has negotiated and
executed the necessary contracts, and secured the
requisite approvals. Since the Filipino First Policy provision
of the Constitution bestows preference on qualified
Filipinos the mere tending of the highest bid is not an
assurance that the highest bidder will be declared the
winning bidder. Resultantly, respondents are not bound to
make the award yet, nor are they under obligation to enter
into one with the highest bidder. For in choosing the
awardee respondents are mandated to abide by the
dictates of the 1987 Constitution the provisions of which
are presumed to be known to all the bidders and other
interested parties.
Adhering to the doctrine of constitutional supremacy, the
subject constitutional provision is, as it should be, impliedly
written in the bidding rules issued by respondent GSIS, lest
the bidding rules be nullified for being violative of the
Constitution. It is a basic principle in constitutional law that
all laws and contracts must conform with the fundamental
law of the land. Those which violate the Constitution lose
their reason for being.
Paragraph V. J. 1 of the bidding rules provides that [i]f for
any reason the Highest Bidder cannot be awarded the Block
of Shares, GSIS may offer this to other Qualified Bidders
that have validly submitted bids provided that these
Qualified Bidders are willing to match the highest bid in
terms of price per share. 47 Certainly, the constitutional
mandate itself is reason enough not to award the block of
shares immediately to the foreign bidder notwithstanding
its submission of a higher, or even the highest, bid. In fact,
we cannot conceive of a stronger reason than the
constitutional injunction itself.
In the instant case, where a foreign firm submits the
highest bid in a public bidding concerning the grant of
rights, privileges and concessions covering the national
economy and patrimony, thereby exceeding the bid of a
Filipino, there is no question that the Filipino will have to be
allowed to match the bid of the foreign entity. And if the
Filipino matches the bid of a foreign firm the award should
go to the Filipino. It must be so if we are to give life and
meaning to the Filipino First Policy provision of the 1987
Constitution. For, while this may neither be expressly
stated nor contemplated in the bidding rules, the
constitutional fiat is omnipresent to be simply disregarded.
To ignore it would be to sanction a perilous skirting of the
basic law.
This Court does not discount the apprehension that this
policy may discourage foreign investors. But the
Constitution and laws of the Philippines are understood to
be always open to public scrutiny. These are given factors
which investors must consider when venturing into
business in a foreign jurisdiction. Any person therefore
desiring to do business in the Philippines or with any of its
agencies or instrumentalities is presumed to know his rights
and obligations under the Constitution and the laws of the
forum
The argument of respondents that petitioner is now
estopped from questioning the sale to Renong Berhad since
petitioner was well aware from the beginning that a
foreigner could participate in the bidding is meritless.
Undoubtedly, Filipinos and foreigners alike were invited to
the bidding. But foreigners may be awarded the sale only if
no Filipino qualifies, or if the qualified Filipino fails to match
the highest bid tendered by the foreign entity. In the case
before us, while petitioner was already preferred at the
inception of the bidding because of the constitutional
mandate, petitioner had not yet matched the bid offered
by Renong Berhad. Thus it did not have the right or
personality then to compel respondent GSIS to accept its
earlier bid. Rightly, only after it had matched the bid of the
foreign firm and the apparent disregard by respondent GSIS
of petitioner’s matching bid did the latter have a cause of
action.
Besides, there is no time frame for invoking the
constitutional safeguard unless perhaps the award has
been finally made. To insist on selling the Manila Hotel to
foreigners when there is a Filipino group willing to match
the bid of the foreign group is to insist that government be
treated as any other ordinary market player, and bound by
its mistakes or gross errors of judgment, regardless of the
consequences to the Filipino people. The
miscomprehension of the Constitution is regrettable. Thus
we would rather remedy the indiscretion while there is still
an opportunity to do so than let the government develop
the habit of forgetting that the Constitution lays down the
basic conditions and parameters for its actions.
Since petitioner has already matched the bid price
tendered by Renong Berhad pursuant to the bidding rules,
respondent GSIS is left with no alternative but to award to
petitioner the block of shares of MHC and to execute the
necessary agreements and documents to effect the sale in
accordance not only with the bidding guidelines and
procedures but with the Constitution as well. The refusal of
respondent GSIS to execute the corresponding documents
with petitioner as provided in the bidding rules after the
latter has matched the bid of the Malaysian firm clearly
constitutes grave abuse of discretion.
The Filipino First Policy is a product of Philippine
nationalism. It is embodied in the 1987 Constitution not
merely to be used as a guideline for future legislation but
primarily to be enforced; so must it be enforced. This Court
as the ultimate guardian of the Constitution will never
shun, under any reasonable circumstance, the duty of
upholding the majesty of the Constitution which it is tasked
to defend. It is worth emphasizing that it is not the
intention of this Court to impede and diminish, much less
undermine, the influx of foreign investments. Far from it,
the Court encourages and welcomes more business
opportunities but avowedly sanctions the preference for
Filipinos whenever such preference is ordained by the
Constitution. The position of the Court on this matter could
have not been more appropriately articulated by Chief
Justice Narvasa —
As scrupulously as it has tried to observe that it is not its
function to substitute its judgment for that of the
legislature or the executive about the wisdom and
feasibility of legislation economic in nature, the Supreme
Court has not been spared criticism for decisions perceived
as obstacles to economic progress and development . . . in
connection with a temporary injunction issued by the
Court’s First Division against the sale of the Manila Hotel to
a Malaysian Firm and its partner, certain statements were
published in a major daily to the effect that that injunction
"again demonstrates that the Philippine legal system can be
a major obstacle to doing business here."cralaw virtua1aw
library
Let it be stated for the record once again that while it is no
business of the Court to intervene in contracts of the kind
referred to or set itself up as the judge of whether they are
viable or attainable, it is its bounden duty to make sure that
they do not violate the Constitution or the laws, or are not
adopted or implemented with grave abuse of discretion
amounting to lack or excess of jurisdiction. It will never
shirk that duty, no matter how buffeted by winds of unfair
and ill-informed criticism. 48
Privatization of a business asset for purposes of enhancing
its business viability and preventing further losses,
regardless of the character of the asset, should not take
precedence over non-material values. A commercial, nay
even a budgetary, objective should not be pursued at the
expense of national pride and dignity. For the Constitution
enshrines higher and nobler non-material values. Indeed,
the Court will always defer to the Constitution in the proper
governance of a free society; after all, there is nothing so
sacrosanct in any economic policy as to draw itself beyond
judicial review when the Constitution is involved. 49
Nationalism is inherent in the very concept of the
Philippines being a democratic and republican state, with
sovereignty residing in the Filipino people and from whom
all government authority emanates. In nationalism, the
happiness and welfare of the people must be the goal. The
nation-state can have no higher purpose. Any
interpretation of any constitutional provision must adhere
to such basic concept. Protection of foreign investments,
while laudable, is merely a policy. It cannot override the
demands of nationalism. 50
The Manila Hotel or, for that matter, 51% of the MHC, is
not just any commodity to be sold to the highest bidder
solely for the sake of privatization. We are not talking about
an ordinary piece of property in a commercial district. We
are talking about a historic relic that has hosted many of
the most important events in the short history of the
Philippines as a nation. We are talking about a hotel where
heads of states would prefer to be housed as a strong
manifestation of their desire to cloak the dignity of the
highest state function to their official visits to the
Philippines. Thus the Manila Hotel has played and
continues to play a significant role as an authentic
repository of twentieth century Philippine history and
culture. In this sense, it has become truly a reflection of the
Filipino soul — a place with a history of grandeur; a most
historical setting that has played a part in the shaping of a
country. 51chanroblesvirtuallawlibrary:red
This Court cannot extract rhyme nor reason from the
determined efforts of respondents to sell the historical
landmark — this Grand Old Dame of hotels in Asia — to a
total stranger. For, indeed, the conveyance of this epic
exponent of the Filipino psyche to alien hands cannot be
less than mephistophelian for it is, in whatever manner
viewed, a veritable alienation of a nation’s soul for some
pieces of foreign silver. And so we ask: What advantage,
which cannot be equally drawn from a qualified Filipino,
can be gained by the Filipinos if Manila Hotel — and all that
it stands for — is sold to a non-Filipino? How much of
national pride will vanish if the nation’s cultural heritage is
entrusted to a foreign entity? On the other hand, how
much dignity will be preserved and realized if the national
patrimony is safekept in the hands of a qualified, zealous
and well-meaning Filipino? This is the plain and simple
meaning of the Filipino First Policy provision of the
Philippine Constitution. And this Court, heeding the clarion
call of the Constitution and accepting the duty of being the
elderly watchman of the nation, will continue to respect
and protect the sanctity of the Constitution.

WHEREFORE, respondents GOVERNMENT SERVICE

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

SO ORDERED
 [G.R. No. L-46729. November 19, 1982.]
LAUSAN AYOG, BENITO AYOG, DAMASO AYOG, JULIO
AYOG, SEGUNDA AYOG, VICENTE ABAQUETA,
BERNANDINO ADORMEO, VIDAL ALBANO, FELICIANO
ARIAS, ANTONIO BALDOS, MAXIMO BALDOS ROMERO
BINGZON, EMILIO CADAYDAY, FRUCTUOSO CHUA, SR.,
HERACLEO CHUA, GUILLERMO DAGOY, ABDON DEIMOS,
NICASIO DE LEON, JULIANA VDA. DE DIANNA, DEMOCRITO
DEVERO, ALFREDO DIVINAGRACIA, ESTEBAN
DIVINAGRACIA, LEODEGARDIO DIVINAGRACIA, NELLO
DIVINAGRACIA, MERQUIADES EMBERADOR, JESUS
EMPERADO, PORFERIO ENOC, SOFRONIO ENOC, RAFAEL
GAETOS, NICOLAS GARLET, TRINIDAD GARLET,
FORTUNATA GEONZON, NICOLADA NAQUILA, TORIBIO
NAQUILA, EFREN OKAY, ELPIDIO OKAY, SR., DIEGO
ONGRIA, ERNESTO PEÑARES, VICENTE PATULOT, IGNACIA
RIBAO, JUANO RICO, JESUS ROSALITA, ARMANDO TANTE
and ANSELMO VALMORES, Petitioners, v. JUDGE VICENTE
N. CUSI, JR., Court of First Instance of Davao, Branch I,
PROVINCIAL SHERIFF OF DAVAO, and BIÑAN
DEVELOPMENT CO., INC., Respondents. MINISTER OF
NATURAL RESOURCES and DIRECTOR OF LANDS,
intervenors.
Marcelino C. Maximo, Enrique S. Empleo and Carlito H.
Vailoces for petitioners
Levi Damaso for respondent Biñan Dev’t. Co.
SYNOPSIS
During the effectivity of the 1935 Constitution which
expressly allowed private juridical entities to acquire
alienable lands of the public domain not exceeding 1,024
hectares, respondent private corporation purchased from
the Bureau of Lands a parcel of public agricultural land with
an area of 250 hectares and obtained favorable judgment
from a civil court to evict the occupants thereof. However,
it was only when the 1973 Constitution took effect that the
sales patent and the Torrens title of the subject land were
issued and the judgment of the lower court became final
and executory after its affirmance on appeal. This action for
prohibition was brought when respondent corporation
moved for execution of the judgment evicting the
defendants. Herein petitioners, some of whom were not
defendants in the ejectment case, contend that the
adoption of the new Constitution was a supervening fact
which rendered it legally impossible to execute the lower
court’s judgment. They invoked the constitutional
prohibition under Section 11, Article XIV that "no private
corporation or association may hold alienable lands of the
public domain except by lease not to exceed one thousand
hectares in area."cralaw virtua1aw library
On review, the Supreme Court was unanimous in dismissing
the petition holding that the prohibition under Section 11,
Article XIV of the 1973 Constitution has no retroactive
application to the sales application of respondent
corporation because the latter had already acquired a
vested right to the land applied for at the time the new
Constitution took effect; further holding that petitioners
who were not defendants in the ejectment case should be
excluded from the effect of the lower court’s judgment.
Seven of the thirteen justices, however, made the
clarification that only those petitioners who do not derive
their right of possession from any of the defendants in the
ejectment suit should be excluded from the effect of the
lower court’s judgment.
Petition dismissed.
SYLLABUS
1. CONSTITUTIONAL LAW; SECTION 11, ARTICLE XIV OF THE
1973 CONSTITUTION; PROVISION BARRING PRIVATE
CORPORATIONS FROM HOLDING ALIENABLE LANDS OF
PUBLIC DOMAIN EXCEPT BY LEASE CANNOT BE GIVEN
RETROACTIVE EFFECT SO AS TO ADVERSELY AFFECT RIGHTS
ALREADY VESTED PRIOR TO ITS EFFECTIVITY. — We hold
that Section 11, Article XIV of the 1973 Constitution which
provides that "no private corporation or association may
hold alienable lands of the public domain except by lease
not to exceed one thousand hectares in area" has no
retroactive application to the sales application of Biñan
Development Co., Inc. because it had already acquired a
vested right to the land applied for at the time the 1973
Constitution took effect. That vested right has to be
respected. It could not be abrogated by the new
Constitution. Section 2, Article XIII of the 1935 Constitution
allows private corporations to purchase public agricultural
lands not exceeding one thousand and twenty-four
hectares. Petitioners’ prohibition action is barred by the
doctrine of vested rights in constitutional law.
2. WORDS AND PHRASES; "VESTED RIGHT" DEFINED. — "A
right is vested when the right to enjoyment has become the
property of some particular person or persons as a present
interest" (16 C.J.S. 1173). It is "the privilege to enjoy
property legally vested, to enforce contracts, and enjoy the
rights of property conferred by the existing law" (12 C.J.S.
955, Note 46, No. 6) or "some right or interest in property
which has become fixed and established and is no longer
open to doubt or controversy" (Downs v. Blount, 170 Fed.
15,20, cited in Balboa v. Farrales, 51 Phil. 498, 502).
3. CONSTITUTIONAL LAW; SECTION 11, ARTICLE XIV OF THE
1973 CONSTITUTION; CONTEMPORANEOUS
CONSTRUCTION OF THE CONSTITUTIONAL PROHIBITION BY
A HIGH EXECUTIVE OFFICIAL CARRIES GREAT WEIGHT AND
ACCORDED MUCH RESPECT BY THE COURTS. — Secretary of
Justice Vicente Abad Santos in his 1973 opinion ruled that
where the applicant, before the Constitution took effect,
had fully complied with all his obligations under the Public
Land Act in order to entitle him to a sales patent, there
would seem to be no legal equitable justification for
refusing to issue or release the sales patent. In opinion No.
140, series of 1974, he held that as soon as the applicant
had fulfilled the construction or cultivation requirements
and has fully paid the purchase price, he should be deemed
to have acquired by purchase the particular tract of land
and to him the area limitation in the new Constitution
would not apply. In opinion No. 185, series of 1976,
Secretary Abad Santos held that where the cultivation
 requirements were fulfilled before the new Constitution
took effect but the full payment of the price was completed
after January 17, 1973, the applicant was, nevertheless,
entitled to a sales patent. Such a contemporaneous
construction of the constitutional prohibition by a high
executive official carries great weight and should be
accorded much respect. It is a correct interpretation of
Section II of Article XIV.
4. ID.; DOCTRINE OF VESTED RIGHTS; APPLIED IN CASE AT
BAR. — In the instant case, it is incontestable that prior to
the effectivity of the 1973 Constitution the right of the
corporation to purchase the land in question had become
fixed and established and was no longer open to doubt or
controversy. Its compliance with the requirements of the
Public Land Law for the issuance of a patent had the effect
of segregating the said land from the public domain. The
corporation’s right to obtain a patent for that land is
protected by law. It cannot be deprived of that right
without due process (Director of Lands v. CA, 123 Phil. 919).
5. ID.; SOCIAL JUSTICE; ADMINISTRATIVE AUTHORITIES
SHOULD FIND WAYS AND MEANS TO ACCOMMODATE
SOME OF THE PETITIONERS IF THEY ARE LANDLESS AND
ARE TILLERS OF THE SOIL. — In the interest of social justice,
to avoid agrarian unrest and to dispel the notion that the
law grinds the faces of the poor, the administrative
authorities should find ways and means of accommodating
some of the petitioners if they are landless and are really
tillers of the son who in the words of President Magsaysay
deserve a little more food in their stomachs, a little more
shelter over their heads and a tittle more clothing on their
backs. The State should endeavor to help the poor who find
it difficult to make both ends meet and who suffer
privations in the universal struggle for existence.
6. ID.; SECTION 11, ARTICLE XIV OF THE 1973
CONSTITUTION; PURPOSE OF THE PROHIBITION AGAINST
PURCHASES OF PUBLIC AGRICULTURAL LANDS BY PRIVATE
CORPORATIONS. — One purpose of the constitutional
prohibition against purchases of public agricultural lands by
private corporations is to equitably diffuse land ownership
or to encourage "owner-cultivatorship and the economic
family-size farm" and to prevent a recurrence of cases like
the instant case. Huge landholdings by corporations or
private persons had spawned social unrest.
7. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; CANNOT
BE ENFORCED AGAINST PERSONS WHO WERE NOT PARTIES
TO THE SUIT. — We hold that the judgment cannot be
enforced against the said petitioners who were not
defendants in that litigation or who were not summoned
and heard in that case. Generally, "it is an axiom of the law
that no man shall be affected by proceedings to which he is
a stranger’’ (Ed. A. Keller & Co. v. Ellerman & Bucknall
Steamship Co 38 Phil. 514, 520).
8. ID.; ID.; ID.; REASON. — To enforce the judgment against
those who were not parties to the case and who occupy
portions of the disputed land distinct and separate front
the portions occupied by the defendants in the ejectment
suit, would be violative of due process of law, the law
which, according to Daniel Webster in his argument in the
Dartmouth College case, is the law of the land, a law which
hears before it condemns, which proceeds upon inquiry
and renders judgment only after trial. "The meaning is, that
every citizen shall hold his life, liberty, property, and
immunities, under the protection of the general rules which
govern society." (Cited in Lopez v. Director of Lands. 47 Phil.
23, 32. See Gatchalian v. Arlegui, L-35615 and Tang Tee v.
Arlegui, L-41360, Feb. 17, 1977, 75 SCRA 234 and Berses v.
Villanueva, 25 Phil. 473).
9. ID.; ID.; SPECIAL CIVIL ACTIONS; CONTEMPT; NO
CONTEMPT OF COURT IS COMMITTED BY A PARTY WHO
PLOWED THE LAND AND DESTROYED THE STANDING CROPS
OF ONE OF PETITIONERS WHO IS NOT A PARTY-DEFENDANT
IN THE EJECTMENT CASE BELOW; PETITIONER’S REMEDY IS
NOT CONTEMPT BUT A CIVIL OR CRIMINAL ACTION. — We
hold that no contempt was committed. The temporary
restraining order was not directed to Biñan Development
Co Inc., its officers, agents or privies. Emberador was not
named specifically in the trial court’s judgment as one of
the occupants to be ejected. For the redress of whatever
wrong or delict was committed against Emberador by
reason of the destruction of his improvements, his remedy
is not in a contempt proceeding but in some appropriate
civil and criminal actions against the destroyer of the
improvements.
VASQUEZ, J., concurring:chanrob1es virtual 1aw library
REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; COURT’S
JUDGMENT SHOULD BE CLARIFIED TO EXCLUDE FROM THE
EFFECT OF THE EJECTMENT DECISION ONLY PETITIONERS
WHO DO NOT DERIVE THEIR RIGHT OF POSSESSION FROM
ANY OF THE DEFENDANTS IN THE LOWER COURT. — The
judgment in any ease is binding and enforcible not only
against the parties thereto but also against "their
successors in interest by title subsequent to the
commencement of the action" (Sec. 49[b], Rule 39, Rules of
Court). We have previously held that the judgment in an
ejectment ease may be enforced not only against the
defendants therein but also against the members of their
family, their relatives or privies who derive their right of
possession from the defendants (Ariem v. Delos Angeles, 49
SCRA 343). A further clarification of the dispositive portion
is apparently needed to exclude from the effect of the
judgment in the ejectment case only the petitioners who do
not derive their right of possession from any of the
defendants in the ejectment suit.
DECISION
AQUINO, J.:
This case is about the application of section 11, Article XIV
of the 1973 Constitution (disqualifying a private
corporation from purchasing public lands) to a 1953 sales
award made by the Bureau of Lands, for which a sales
patent and Torrens title were issued in 1975, and to the
1964 decision of the trial court, ejecting some of the
petitioners from the land purchased, which decision was
affirmed in 1975 by the Court of Appeals. That legal
question arises under the following facts:chanrob1es virtual
1aw library
On January 21, 1953, the Director of Lands, after a bidding,
awarded to Biñan Development Co., Inc. on the basis of its
1951 Sales Application No. V-6834 Cadastral Lot No. 281
located at Barrio Tamugan, Guianga (Baguio District), Davao
City with an area of about two hundred fifty hectares. Some
occupants of the lot protested against the sale. The
Director of Lands in his decision of August 30, 1957
dismissed the protests and ordered the occupants to vacate
the lot and remove their improvements. No appeal was
made from that decision.
The Director found that the protestants (defendants in the
1961 ejectment suit, some of whom are now petitioners
herein) entered the land only after it was awarded to the
corporation and, therefore, they could not be regarded as
bona fide occupants thereof. The Director characterized
them as squatters. He found that some claimants were
fictitious persons (p. 30, Rollo of L-43505, Okay v. CA). He
issued a writ of execution but the protestants defied the
writ and refused to vacate the land (p. 28, Rollo of L-43505,
Okay v. CA). **
Because the alleged occupants refused to vacate the land,
the corporation filed against them on February 27, 1961 in
the Court of First Instance of Davao, Civil Case No. 3711, an
ejectment suit (accion publiciana). The forty defendants
were identified as follows:chanrob1es virtual 1aw library
1. Vicente Abaqueta 21. Eniego Garlic
2. Candido Abella 22. Nicolas Garlic
3. Julio Ayog 23. Rufo Garlic
4. Arcadio Ayong 24. Alfonso Ibales
5. Generoso Bangonan 25. Julian Locacia
6. Lomayong Cabao 26. Filomeno Labantaban
7. Jose Catibring 27. Arcadio Lumantas
8. Teodolfo Chua 28. Santos Militante
9. Guillermo Dagoy 29. Toribio Naquila
10. Anastacia Vda. de Didal 30. Elpidio Okay
11. Alfredo Divinagracia 31. Guillermo Omac
12. Silverio Divinagracia 32. Emilio Padayday
13. Galina Edsa 33. Marcosa Vda. de Rejoy
14. Jesus Emperado 34. Lorenzo Rutsa
15. Porfirio Enoc 35. Ramon Samsa
16. Benito Ente 36. Rebecca Samsa
17. German Flores 37. Alfeao Sante
18. Ciriaco Fuentes 38. Meliton Sante
19. Pulong Gabao 39. Amil Sidaani
20. Constancio Garlic 40. Cosme Villegas.
That ejectment suit delayed the issuance of the patent. The
trial court found that the protests of twenty of the above-
named defendants were among those that were dismissed
by the Director of Lands in his 1957 decision already
mentioned.
On July 18, 1961 the purchase price of ten thousand pesos
was fully paid by Biñan Development Co., Inc. On
November 10, 1961, an official of the Bureau of Lands
submitted a final investigation report wherein it was stated
that the corporation had complied with the cultivation and
other requirements under the Public Land Law and had
paid the purchase price of the land (p. 248, Rollo).
It was only more than thirteen years later or on August 14,
1975 when Sales Patent No. 5681 was issued to the
corporation for that lot with a reduced area of 175.3
hectares. The patent was registered. Original Certificate of
Title No. P-5176 was issued to the patentee.
The Director of Lands in his memorandum dated June 29,
1974 for the Secretary of Natural Resources,
recommending approval of the sales patent, pointed out
that the purchaser-corporation had complied with the said
requirements long before the effectivity of the
Constitution, that the land in question was free from claims
and conflicts and that the issuance of the patent was in
conformity with the guidelines prescribed in Opinion No.
64, series of 1973, of Secretary of Justice Vicente Abad
Santos and was an exception to the prohibition in section
11, Article XIV of the Constitution (p. 258, Rollo).
Secretary of Natural Resources Jose J. Eeido, Jr., in
approving the patent on August 14, 1975, noted that the
applicant had acquired a vested right to its issuance (p. 259,
Rollo).chanrobles lawlibrary : rednad
Before that patent was issued, there was a trial in the
ejectment suit. Fifteen defendants (out of forty), namely,
Julio Ayog, Guillermo Bagoy, Generoso Bangonan, Jose
Catibring, Porfirio Enoc, Jose Emperado, Arcadio Lomanto,
Toribio Naquila, Elpidio Okay, Alfeo Sante, Meliton Sante,
Ramon Samsa, Rebecca Samsa, Arcadio Sarumines and Felix
Tahantahan, testified that they entered the disputed land
long before 1951 and that they planted it to coconuts,
coffee, jackfruit and other fruit trees (p. 28, Record on
Appeal).
The trial court did not give credence to their testimonies. It
believed the report of an official of the Bureau of Lands
that in 1953 the land was free from private claims and
conflicts and it gave much weight to the decision of the
Director of Lands dismissing the protests of the defendants
against the sales award (p. 30, Record on Appeal).

Furthermore, the trial court during its ocular inspection of
the land on November 8, 1964 found that the plantings on
the land could not be more than ten years old, meaning
that they were not existing in 1953 when the sales award
was made. Hence, the trial court ordered the defendants to
vacate the land and to restore the possession thereof to
the company. The Court of Appeals affirmed that judgment
on December 5, 1975 in its decision in Biñan Development
Co., Inc. v. Sante, CA-G.R. No. 37142-R. The review of the
decision was denied by this Court on May 17, 1976 in
Elpidio Okay v. Court of Appeals, L-43505.
After the record was remanded to the trial court, the
corporation filed a motion for execution. The defendants,
some of whom are now petitioners herein, opposed the
motion. They contended that the adoption of the
Constitution, which took effect on January 17, 1973, was a
supervening fact which rendered it legally impossible to
execute the lower court’s judgment. They invoked the
constitutional prohibition, already mentioned, that "no
private corporation or association may hold alienable lands
of the public domain except by lease not to exceed one
thousand hectares in area."cralaw virtua1aw library
The lower court suspended action on the motion for
execution because of the manifestation of the defendants
that they would file a petition for prohibition in this Court.
On August 24, 1977, the instant prohibition action was
filed. Some of the petitioners were not defendants in the
ejectment case.
We hold that the said constitutional prohibition has no
retroactive application to the sales application of Biñan
Development Co., Inc. because it had already acquired a
vested right to the land applied for at the time the 1973
Constitution took effect.chanrobles law library
That vested right has to be respected. It could not be
abrogated by the new Constitution. Section 2, Article XIII of
the 1935 Constitution allows private corporations to
purchase public agricultural lands not exceeding one
thousand and twenty-four hectares. Petitioners’ prohibition
action is barred by the doctrine of vested rights in
constitutional law.
"A right is vested when the right to enjoyment has become
the property of some particular person or persons as a
present interest" (16 C.J.S. 1173). It is "the privilege to
enjoy property legally vested, to enforce contracts, and
enjoy the rights of property conferred by the existing law"
(12 C.J. 955, Note 46, No. 6) or "some right or interest in
property which has become fixed and established and is no
longer open to doubt or controversy" (Downs v. Blount, 170
Fed. 15, 20, cited in Balboa v. Farrales, 51 Phil. 498, 502).
The due process clause prohibits the annihilation of vested
rights. "A state may not impair vested rights by legislative
enactment, by the enactment or by the subsequent repeal
of a municipal ordinance, or by a change in the constitution
of the State, except in a legitimate exercise of the police
power" (16 C.J.S. 1177-78).
It has been observed that, generally, the term "vested
right" expresses the concept of present fixed interest,
which in right reason and natural justice should be
protected against arbitrary State action, or an innately just
and imperative right which an enlightened free society,
sensitive to inherent and irrefragable individual rights,
cannot deny (16 C.J.S. 1174, Note 71, No. 5, citing
Pennsylvania Greyhound Lines, Inc. v. Rosenthal, 192 Atl.
2nd 587).
Secretary of Justice Abad Santos in his 1973 opinion ruled
that where the applicant, before the Constitution took
effect, had fully complied with all his obligations under the
Public Land Act in order to entitle him to a sales patent,
there would seem to be no legal or equitable justification
for refusing to issue or release the sales patent (p. 254,
Rollo).
In Opinion No. 140, series of 1974, he held that as soon as
the applicant had fulfilled the construction or cultivation
requirements and has fully paid the purchase price, he
should be deemed to have acquired by purchase the
particular tract of land and to him the area limitation in the
new Constitution would not apply.
In Opinion No. 185, series of 1976, Secretary Abad Santos
held that where the cultivation requirements were fulfilled
before the new Constitution took effect but the full
payment of the price was completed after January 17,
1973, the applicant was, nevertheless, entitled to a sales
patent (p. 256, Rollo).
Such a contemporaneous construction of the constitutional
prohibition by a high executive official carries great weight
and should be accorded much respect. It is a correct
interpretation of section 11 of Article XIV.
In the instant case, it is incontestable that prior to the
effectivity of the 1973 Constitution the right of the
corporation to purchase the land in question had become
fixed and established and was no longer open to doubt or
controversy.
Its compliance with the requirements of the Public Land
Law for the issuance of a patent had the effect of
segregating the said land from the public domain. The
corporation’s right to obtain a patent for that land is
protected by law. It cannot be deprived of that right
without due process (Director of Lands v. CA, 123 Phil.
919).chanrobles law library
As we cannot review the factual findings of the trial court
and the Court of Appeals, we cannot entertain petitioners’
contention that many of them by themselves and through
their predecessors-in-interest have possessed portions of
land even before the war. They should have filed
homestead or free patent applications.
Our jurisdiction is limited to the resolution of the legal issue
as to whether the 1973 Constitution is an obstacle to the
implementation of the trial court’s 1964 final and executory
judgment ejecting the petitioners. On that issue, we have
no choice but to sustain its enforceability.

Nevertheless, in the interest of social justice, to avoid
agrarian unrest and to dispel the notion that the law grinds
the faces of the poor, the administrative authorities should
find ways and means of accommodating some of the
petitioners if they are landless and are really tillers of the
soil who in the words of President Magsaysay deserve a
little more food in their stomachs, a little more shelter over
their heads and a little more clothing on their backs. The
State should endeavor to help the poor who find it difficult
to make both ends meet and who suffer privations in the
universal struggle for existence.
A tiller of the soil is entitled to enjoy basic human rights,
particularly freedom from want. The common man should
be assisted an possessing and cultivating a piece of land for
his sustenance, to give him social security and to enable
him to achieve a dignified existence and become an
independent, self-reliant and responsible citizen in our
democratic society.
To guarantee him that right is to discourage him from
becoming a subversive or from rebelling against a social
order where, as the architect of the French Revolution
observed, the rich are choking with the superfluities of life
but the famished multitude lack the barest necessities.
Indeed, one purpose of the constitutional prohibition
against purchases of public agricultural lands by private
corporations is to equitably diffuse land ownership or to
encourage "owner-cultivatorship and the economic family-
size farm" and to prevent a recurrence of cases like the
instant case. Huge landholdings by corporations or private
persons had spawned social unrest.
Petitioners’ counsel claims that Biñan Development Co.,
Inc. seeks to execute the judgment in Civil Case No. 3711,
the ejectment suit from which this prohibition case arose,
against some of the petitioners who were not defendants in
that suit (p. 126, Rollo).
Those petitioners are not successors-in-interest of the
defendants in the ejectment suit. Nor do they derive their
right of possession from the said defendants. Those
petitioners occupy portions of the disputed land distinct
and separate from the portions occupied by the said
defendants.chanrobles.com : virtual law library
We hold that judgment cannot be enforced against the said
petitioners who were not defendants in that litigation or
who were not summoned and heard in that case. Generally,
"it is an axiom of the law that no man shall be affected by
proceedings to which he is a stranger" (Ed. A. Keller & Co. v.
Ellerman & Bucknall Steamship Co., 38 Phil. 514, 520).
To enforce the judgment against those who were not
parties to the case and who occupy portions of the
disputed land distinct and separate from the portions
occupied by the defendants in the ejectment suit, would be
violative of due process of law, the law which, according to
Daniel Webster in his argument in the Dartmouth College
case, is the law of the land, a law which hears before it
condemns, which proceeds upon inquiry and renders
judgment only after trial. "The meaning is, that every
citizen shall hold his life, liberty, property, and immunities,
under the protection of the general rules which govern
society." (Cited in Lopez v. Director of Lands, 47 Phil. 23, 32.
See Gatchalian v. Arlegui, L-35615 and Tang Tee v. Arlegui,
L-41360, February 17, 1977, 75 SCRA 234 and Berses v.
Villanueva, 25 Phil. 473.)
Contempt incident. — During the pendency of this case, or
at about four o’clock in the morning of December 12, 1978,
Ciriaco Tebayan, Domingo Nevasca, Rogelio Duterte and
Sofronio Etac, employees of the Crown Fruits and Cannery
Corporation, plowed or bulldozed with their tractors a
portion of the disputed land which was occupied by
Melquiades Emberador, one of the petitioners herein. The
disputed land was leased by Biñan Development Co., Inc. to
the canning corporation.
The four tractor drivers destroyed the improvements
thereon worth about five thousand pesos consisting of
coffee, coconut and banana plants. Emberador was in the
hospital at the time the alleged destruction of the
improvements occurred. However, it should be noted that
Emberador was not expressly named as a defendant in the
ejectment suit. Apparently, he is not included in the trial
court’s decision although he was joined as a co-petitioner in
this prohibition case.
The petitioners in their motion of January 11, 1979 asked
that the four tractor drivers and Honesto Garcia, the
manager of Biñan Development Co., Inc., be declared in
contempt of court for having disregarded the restraining
order issued by this Court on August 29, 1977, enjoining
specifically Judge Vicente N. Cusi and the provincial sheriff
from enforcing the decision in the ejectment suit, Civil Case
No. 3711 (pp. 46-47, 138-141, Rollo).
Garcia and the four drivers answered the motion. The
incident was assigned for hearing to Judge Antonio M.
Martinez of the Court of First Instance of Davao. Judge
Martinez found that the plowing was made at the instance
of Garcia who told the barrio captain, petitioner Lausan
Ayog, a Bagobo, that he (Garcia) could not wait anymore
for the termination of this case.
The record shows that on April 30, 1979 or four months
after the said incident, Emberador, in consideration of
P3,500, as the value of the improvements on his land,
executed a quitclaim in favor of the Crown Fruits and
Cannery Corporation (Exh. 1, 2 and 3).
We hold that no contempt was committed. The temporary
restraining order was not directed to Biñan Development
Co., Inc. its officers, agents or privies. Emberador was not
named specifically in the trial court’s judgment as one of
the occupants to be ejected.
For the redress of whatever wrong or delict was committed
against Emberador by reason of the destruction of his
improvements, his remedy is not in a contempt proceeding
but in some appropriate civil and criminal actions against
the destroyer of the improvements.chanrobles law library
In resume, we find that there is no merit in the instant
prohibition action. The constitutional prohibition relied
upon by the petitioners as a ground to stop the execution
of the judgment in the ejectment suit has no retroactive
application to that case and does not divest the trial court
of jurisdiction to enforce that judgment.

WHEREFORE, the petition is dismissed for lack of merit but

with the clarification that the said judgment cannot be
enforced against those petitioners herein who were not
defendants in the ejectment case, Civil Case No. 3711, and
over whom the lower court did not acquire jurisdiction. The
contempt proceeding is also dismissed. No costs.

SO ORDERED.
 [G.R. No. 54952. March 5, 1984.]
REPUBLIC OF THE PHILIPPINES (represented by the
Director of Lands), Petitioner, v. IGLESIA NI CRISTO, with
its Executive Minister ERAÑO G. MANALO as
CORPORATION SOLE and HON. GABRIEL O. VALLE, JR. as
Presiding Judge, Court of First Instance of Ilocos Norte,
Branch II,Respondents.
The Solicitor General for Petitioner.
Tafalla, Cruz, Gagarin & Associates for Private
Respondents.
SYLLABUS
1. LAND REGISTRATION; PROPERTY REGISTRATION DECREE;
(P.D. 1529); REGISTRATION OF TITLE; APPLICATION
THEREFOR UNDER SECTION 14 OF PROPERTY
REGISTRATION DECREE DOES NOT REMOVE LAND FROM
OPERATION EFFECT OF SECTION 48(b) OF PUBLIC LAND
LAW. — Records reveal that no application for confirmation
of incomplete or imperfect title had been filed by
respondent’s predecessors-in-interest under Section 48 (b)
of the Public Land Law. Under the law, the questioned land
retains its public character. The application for registration
under Section 14 of the Property Registration Decree (P.D.
1529) which, among others, recognizes possession of
alienable lands of the public domain in the manner and for
the length of time therein required as basis for registration
of title to the land, did not remove the land from the
operational effect of Section 48 (b) of the Public Land Law.
It nevertheless strengthens the conclusion that the land
never ceased to be part of the public domain.
MAKASIAR, J., dissenting:chanrob1es virtual 1aw library
1. CIVIL LAW; LAND TITLES AND DEEDS; LAND
REGISTRATION; PURSUANT TO LAND REGISTRATION ACT
AND PRESIDENTIAL DECREE NO. 1529; PRESUPPOSES
SUBJECT LAND IS PRIVATE; CASE AT BAR. — As above
stated, private respondent Iglesia ni Kristo applied for a
voluntary registration of the same land under the Land
Registration Act and P.D. 1529, and not for a confirmation
of its title under Sec. 48 (b) of the Public Land Act. His
application to title a private land was under the Land
Registration Act (Act No. 496) and pars. 2 and 3 of Sec. 14,
of P.D. 1529, not under Sec. 1 thereof on disposable land of
the public domain. Par. 2 of Section 14 of P.D. No. 1529
provides that the applicant must "have acquired ownership
of private lands by prescription under the provisions of
existing laws" ; or under par. 3 must "have acquired
ownership of land in any manner provided by law." That
the application of private respondent Iglesia ni Kristo, is for
a private parcel of land acquired by prescription or in any
other manner recognized by law, and not a parcel of land of
the public domain, is emphasized by the fact that his
application is based on both the Land Registration Act,
otherwise known as Act 496, which relates to private lands
only and never to lands of the public domain. The
predecessors-in-interest of the Iglesia ni Kristo had
possession of the same openly, continuously, exclusively
and adversely against the whole world even before 1931.
The parcel of land in question therefore, being a private
land, is not governed by Section 11 of Article XIV of the
1973 Constitution.
DECISION
DE CASTRO, J.:
The issue raised in this case involves the question of
whether or not the Iglesia ni Cristo, as a corporation sole, is
qualified to apply for registration of a 614 sq. meter parcel
of land in its name in the light of the prohibition in Section
11, Article XIV of the 1973 1 Constitution the same issues
raised in the identical case of Republic v. Judge Candido P.
Villanueva and Iglesia ni Cristo, 114 SCRA 875 (June 29,
1982), 2 to which this Court has recently given a negative
answer.
We can nave no different answer in this instant case.
On August 7, 1979, respondent Iglesia ni Cristo (INC) filed
with the defunct Court of First Instance of Ilocos Norte an
application for registration of a 614 sq. meter parcel of land
situated in San Pedro, Vintar, Ilocos Norte allegedly
acquired by respondent by virtue of a deed of sale dated
April 10, 1978 from a certain Carmen Racimo whose
predecessors-in-interest, it was claimed, possessed the
same for more than thirty (30) years. 3 The application was
filed, as stated therein, under the provisions of the
Property Registration Decree (P.D. 1529, July 11,
1978).chanroblesvirtualawlibrary
The Republic of the Philippines, represented by the Director
of Lands, opposed the application, alleging, among others,
that neither the applicant nor its predecessors-in-interest
have been in open, continuous, exclusive and notorious
possession and occupation of the land in question since
June 12, 1945 or prior thereto (Section 48 (b),
Commonwealth Act No. 141, as amended by P.D. 1073);
that the claim of ownership in fee simple on the basis of
Spanish title or grant can no longer be availed of by the
applicant who had failed to file an appropriate application
for registration within the period of six (6) months from
February 16, 1976 as required under Presidential Decree
No. 892; 4 that the applicant is a private corporation
disqualified under the Constitution to hold alienable lands
of the public domain (Section 11 Article XIV); and that the
parcel of land applied for is a portion of the public domain
belonging to the Republic of the Philippines not subject to
private appropriation.
On July 23, 1980, the respondent court rendered its
decision adjudicating the land applied for registration in
favor of the Iglesia ni Cristo, but with a reservation for road
right of way purposes. Respondent stated, among others,
that the Iglesia ni Cristo with its Executive Minister Eraño
Manalo as a corporation sole is not within the
contemplation of Section 11, Article XIV of the new
Constitution but said corporation sole can qualify as
applicant pursuant to the provision of Section 14 of
Presidential Decree 1520.
From the decision, the Republic of the Philippines elevated
the case to this Court in this petition for review which We
gave due course.
Reiterating its stand in the lower court, petitioner stresses
private respondent’s disqualification to hold lands of the
public domain except by lease pursuant to Section 11
Article XIV of the 1973 Constitution.
Private respondent argues that Section 11, Article XIV of
the 1973 Constitution is inapplicable to the land involved
herein because the land sought to be registered is a private
property or has ceased to be part of the alienable public
domain by reason of acquisitive prescription for more than
thirty (30) years, and its adverse, continuous possession in
the concept of an owner; that private respondent is but a
mere administrator of the land titled in its name for the
benefit of its members, creating thus, a trust relationship in
its favor; that as trustee or authorized representative of its
members, private respondent can exercise their right to
have the questioned land titled in its name under the
Property Registration Decree (1529) by express mandate of
the law.
We agree with petitioner’s stand, following our decision in
Republic v. Judge Candido Villanueva, et. al., 114 SCRA 875
(June 29, 1982) to which We have made reference at the
threshold of this decision as well as the subsequent cases of
Republic v. Hon. Arsenio Gonong, et. al. G.R. No. L-56025
(Nov. 25, 1982); Republic v. Court of Appeals, et. al., G.R.
No. 59447, and its companion case of Republic v. Judge
Dominador Cendaña, et. al., G.R. No. 60188 (Dec. 27, 1982).
All that has been stated by this Court in the
aforementioned cases in interpreting Section 48 (b) of the
Public Land Law (C.A. 141, as amended by R.A. 1942)
applies with equal force in the instant case where the
application for registration of the herein parcel of land was,
in essence, sought on the basis of the alleged open,
continuous, exclusive and notorious possession and
occupation of the said land by respondent’s predecessors-
in-interest under a bona fide claim of acquisition or
ownership for at least thirty (30) years immediately
preceding the filing of the application for registration on
August 7, 1979.
Records reveal that no application for confirmation of
incomplete or imperfect title had been filed by
respondent’s predecessors-in-interest under Section 48 (b)
of the Public Land Law. Under the law, the questioned land
retains its public character. The application for registration
under Section 14 of the Property Registration Decree (P.D.
1529) which, among others, recognizes possession of
alienable lands of the public domain in the manner and for
the length of time therein required as basis for registration
of title to the land, did not remove the land from the
operational effect of Section 48 (b) of the Public Land Law.
It nevertheless strengthens the conclusion that the land
never ceased to be part of the public domain. Apparently,
the pertinent provisions of law relied upon by respondent
in invoking Section 14 of P.D. 1529
provide:jgc:chanrobles.com.ph
"Section 14. Who may apply. The following persons may file
in the proper Court of First Instance an application for
registration of title to land, whether personally or through
their duly authorized
representatives:red:chanrobles.com.ph
"1). Those who by themselves or through their
predecessors-in-interest have been in open, continuous,
exclusive and notorious possession and occupation of
alienable and disposable lands of the public domain under a
bona fide claim of ownership since June 12, 1945 or earlier.
x x x
"2). Those who have acquired ownership of private lands by
prescription under the provisions of existing laws.
x x x
"3). Those who have acquired ownership of land in any
other manner provided by law.
x x x
"A trustee on behalf of his principal may apply for original
registration of any land held in trust by him, unless
prohibited by the instrument creating the trust."cralaw
virtua1aw library
As indicated earlier, the issue raised is already a settled
matter. In Republic v. Judge Candido Villanueva, et. al.,
supra, this Court made the following categorical
pronouncement:jgc:chanrobles.com.ph
"As correctly contended by the Solicitor-General the Iglesia
ni Cristo, as a corporation sole or a juridical person is
disqualified to acquire or hold alienable lands of the public
domain, like the two lots in question, because of the
constitutional prohibition already mentioned and because
the said church is not entitled to avail itself of the benefits
of Section 48 (b) which applies only to Filipino citizens or
natural persons. A corporation sole (an "unhappy freak of
English law") has no nationality (Roman Catholic Apostolic
Adm. of Davao, Inc. v. Land Registration Commission, 102
Phil. 596. See Register of Deeds v. Ung Siu Si Temple, 97
Phil. 58 and Section 49 of the Public Land Law).
"The contention in the comments of the Iglesia ni Cristo (its
lawyer did not file any brief) that the two lots are private
lands, following the rule laid down in Susi v. Razon and
Director of Lands, 48 Phil. 424, is not correct. What was
considered private land possessed by a Filipino citizen since
time immemorial as in Cariño v. Insular Government, 212
U.S. 449, 531 L. ed. 594, 41 Phil. 935 and 7 Phil. 132. The
lots sought to be registered in this case do not fall within
that category. They are still public lands. A land registration
proceeding under Section 48 (b) `presupposes that the land
is public’ (Mindanao v. Director of Lands, L-19535, July 10,
1967, 20 SCRA 641, 644).
"As held in Oh Cho v. Director of Lands, 75 Phil. 890, "all
lands that were not acquired from the Government either
by purchase or by grant, belong to the public domain. As
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 it had been a
private property even before the Spanish conquest.
"In Uy Un v. Perez, 71 Phil. 508, it was noted that the right
of an occupant of public agricultural land to obtain a
confirmation of his title under Section 48 (b) of the Public
Land Law is a "derecho dominical incoative" and 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." (114 SCRA 881-882).
Moreover, it may be observed that respondent relies
strongly on the doctrine laid down in the 1925 case of Susi
v. Razon, 48 Phil. 424, reiterated in Balboa v. Farrales, 51
Phil. 498, Mesina v. Vda de Sonza, 108 Phil. 361, Manarpaac
v. Cabanatan, 21 SCRA 743, Miguel v. Court of Appeals, 29
SCRA 760, Herico v. Dar, 95 SCRA 437, to the effect that
lands of the public domain which, by reason of possession
and cultivation for such a length of time, a grant by the
State to the occupant is presumed, and the land thereby
ceases to form part of the public domain, but is segregated
therefrom as to be no longer subject to the authority of the
Director of Lands to dispose under the public land laws or
statutes. As pointed out in the separate opinion by the
herein ponente in the cases, of Meralco v. Hon. Floreliana
Castro-Bartolome, G.R. No. 49623 and Republic v. Hon.
Candido P. Villanueva, G.R. No. 55289 (June 29, 1982), to
wit:jgc:chanrobles.com.ph
grant under old Spanish laws and decrees, which certainly is
much larger than that set for free patents. .
"It is because of the divestiture of authority of the Director
of Lands to dispose of the land subject to judicial
confirmation of incomplete and imperfect title that some
statements are found in many cases, such as those cited to
the effect that such land has ceased to be public land. What
these statements, however, really mean is that the land
referred to no longer forms part of the mass of public
domain still disposable by the Director of Lands, under the
authority granted him by the public land statutes. It,
however, would not follow that the land covered by Section
48 of the Public Land Act has itself become private land.
The fact that its disposition is provided for in the aforecited
Act which deals with "public land" gives rise to the very
strong implication, if not a positive conclusion, that the land
referred to is still public land. 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."cralaw virtua1aw library
WHEREFORE, respondent Judge’s decision dated July 23,
1980, is hereby SET ASIDE and the application for
registration of the Iglesia ni Cristo is hereby dismissed. No
costs.
SO ORDERED

"I cannot subscribe to the view that the land as above

described had become private land, even before title
thereto, which is, as of this stage, said to be still "an
incomplete or imperfect title," has been fully vested on the
occupant, through the prescribed procedure known as
judicial confirmation of incomplete or imperfect title. This is
the only legal method by which full and absolute title to the
land may be granted, to convert the land into a truly private
land. To secure such judicial title, only the courts can be
resorted to. The Director of Lands has lost authority over
the land, insofar as its disposition is concerned. His
authority is limited to another form of disposition of public
land, referred to as administrative legalization, resulting in
the issuance of free patents, also based on possession, in
which case, as in the issuance of homestead and sales
patents, the land involved is undoubtedly public land. The
possessor of a piece of public land would have the option to
acquire title thereto through judicial confirmation or
administrative legalization. The difference is that in the
latter case, the area disposable to a citizen-applicant by the
Director of Lands is limited to 24 hectares. There is no limit
to the area subject to judicial confirmation of incomplete or
imperfect title, except possibly the limit fixed for a State
 [G.R. No. L-49623. June 29, 1982.]
MANILA ELECTRIC COMPANY, Petitioner-Appellant, v.
JUDGE FLORELIANA CASTRO-BARTOLOME of the Court of
First Instance of Rizal, Makati Branch XV, and REPUBLIC OF
THE PHILIPPINES, Respondents-Appellees.
Quiason, de Guzman, Makalintal, Veneracion & Barot for
petitioner-appellant.
Tajalla, Gagarin & Cruz for Private Respondent.
The Solicitor General for Respondent-Appellee.
SYNOPSIS
Petitioner Manila Electric Company, a domestic corporation
organized under Philippine Laws, more than sixty percent
of whose capital stock is owned by Filipino citizens, applied
in the Court of First Instance of Rizal for the confirmation of
its title to two residential lots Nos. 1164 and 1165
subdivided in the Cadastral Survey of the Bureau of Lands.
Petitioner acquired subject land which was declared for
realty tax purposes since 1945 with taxes paid up to 1977,
from its predecessors-in-interest whose possession
although dating back from 1941, did not apply for the
registration of said land. The application was opposed by
the Republic of the Philippines on the ground of petitioner’s
disqualification to make such application and by the
Province of Rizal and by the Municipality of Tanay claiming
that Lot 1165 would be needed for the improvement of the
streets of Tanay. The lower court dismissed the application.
On review by certiorari, the Supreme Court ruled that the
land in question is still public land. The Meralco, being a
juridical person, is disqualified to apply for its registration
under Section 48 (b) of she Public Land Law. Its
predecessors-in-interest, not having applied for its
registration, did not have any vested right or title which
was transmissible to the petitioner-applicant.
Judgment affirmed.
SYLLABUS
1. CIVIL LAW; PUBLIC LAND LAW; JUDICIAL CONFIRMATION
OF IMPERFECT OR INCOMPLETE TITLE; JURIDICAL PERSONS
ARE DISQUALIFIED TO APPLY. — A public land would cease
to be such only upon the issuance of the certificate of title
so any Filipino citizen claiming it under Section 48 (b) of the
Public Land Law. Because it is still public land and the
Meralco, as a juridical person, is disqualified to apply for its
registration under aforesaid law, Meralco’s application
cannot be given due course or has to be dismissed.
2. ID.; ID.; ID.; PERVASIVE PRINCIPLE ON LAND OWNERSHIP
UNDER BOTH PUBLIC LAND LAW AND LAND REGISTRATION
LAW; GENERAL RULE; EXCEPTION. — This conclusion is
supported by the rule announced in Oh Cho v. Director of
Lands, 75 Phil. 890, 892, which rule is a compendious or
quintessential precis of a pervasive principle of public land
law and land registration law, that "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 it had been a private property even
before the Spanish conquest." (Cariño v. Insular
Government, 212 U. S. 449, 53 L. ed. 594, 41 Phil. 935 and 7
Phil. 132).
3. ID.; ID.; ID.; ID.; CONCLUSIVE PRESUMPTION ON LONG
POSSESSION UNDER A BONA FIDE CLAIM OF OWNERSHIP;
ISSUANCE OF CERTIFICATE OF TITLE, AN ESSENTIAL
PREREQUISITE. — Petitioner relies on the ruling in Susi v.
Razon and Director of Lands, 48 Phil. 424, which is based on
the Cariño case where this Court applied Section 45 (b) of
Act No. 2874 which corresponds to what is now Section 48
(b) of the Public Land Law and held that the long possession
of the land under a bona fide claim of ownership since July
26, 1894 gave rise to the conclusive presumption that the
occupant had complied with all the conditions essential to a
Government grant and was thus entitled so a certificate of
title. But the land involved in the Susi case was possessed
before 1880 or since a period of time "beyond the reach of
memory." That is not she situation in the case at bar. The
Meralco does not pretend that the Piguing spouses and
their predecessors had been in possession of the land since
time immemorial. On the other hand, in Uy Un v. Perez, 71
Phil. 508, 510-11, it was held that until the certificate of
title is issued, a piece of land, over which an imperfect title
is sought to be confirmed, remains public land. For that
reason, lands over which an imperfect title sought to be
confirmed are governed by the Public Land Law. Such lands
would not be covered by the Public Land Law if they were
already private lands. The occupants’ right to the said lands
is characterized in the Uy Un case, not as ownership in fee
simple, but as a derecho dominical incoativo.
4. ID.; ID.; ID.; CONDITION PRECEDENT FOR GRANT OF
BENEFITS THEREUNDER; RIGHTS TRANSFERRABLE BY
PREDECESSORS-IN-INTEREST; CASE AT BAR. — "The
benefits provided in the Public Land Act (meaning the
confirmation of an imperfect title under section 48[b]) for
applicant’s immediate predecessors-in-interest are or
constitute a grant or concession by the State; and before
they could acquire any right under such benefits, the
applicant’s immediate predecessors-in-interest should
comply with the condition precedent for the grant of such
benefits. The condition precedent is to apply for the
registration of the land of which they had been in
possession at least since July 26, 1894. This the applicant’s
immediate predecessors-in-interest (meaning the Piguing
spouses in the instant case) failed to do. "They did not have
any vested right in the lot amounting to title which was
transmissible to the applicant. The only right, if it may thus
be called, is their possession of the lot which, tacked to that
of their predecessors-in-interest, may be availed of by a
qualified person to apply for its registration but not by a
person as the applicant who is disqualified." (Oh Cho v.
Director of Lands, 75 Phil. 890, 893.)

5. STATUTORY CONSTRUCTION; ART. XIV SECTION II OF THE
CONSTITUTION; PROHIBITION AGAINST PRIVATE
CORPORATIONS FROM HOLDING ALIENABLE PUBLIC LAND;
INTERPRETED TO INCLUDE ALIENABLE PUBLIC LANDS TO
WHICH A TORRENS TITLE MAY BE SECURED UNDER
SECTION 48 (b) OF THE PUBLIC LAND LAW. — Where
Section 11 of Article XIV of the Constitution makes no
distinction between (on one hand) alienable agricultural
public lands as to which no occupant has an imperfect title
and (on the other hand) alienable lands of the public
domain as to which an occupant has an imperfect title
subject to judicial confirmation, the Supreme Court will not
make any distinction or qualification. The prohibition
applies to alienable public lands as to which a Torrens title
may be secured under Section 48 (b). The proceeding under
Section 48 (b) "presupposes that the land is public"
(Mindanao v. Director of Lands, L-19535, July 30, 1967, 20
SCRA 641, 644).
FERNANDO, C.J., concurring and dissenting:chanrob1es
virtual 1aw library
1. CONSTITUTIONAL LAW; ALIENABLE LANDS OF THE
PUBLIC DOMAIN; SECTION 48 OF THE PUBLIC LAND (B)
CANNOT BE AVAILED OF BY JURIDICAL ENTITIES. — Chief
Justice Fernando concurs in the ruling of the Court that
Meralco "as a juridical person" is disqualified to apply for
the registration of the lands acquired by it under Section 48
(b) of the Public Land Act.
2. ID.; ID.; ID.; LEGAL QUESTION RAISED CAN BE DECIDED
DESPITE THE JURISDICTIONAL DEFECT. — Chief Justice
Fernando dissents insofar as the opinion of the Court would
characterize such jurisdictional defect, under the particular
circumstances of the case, as an insurmountable obstacle
to the relief sought. He would apply by analogy, although
the facts could be distinguished, the approach followed by
the Court in Francisco v. City of Davao, 120 Phil. 1417
(1964) where the legal question raised, instead of being
deferred and possibly taken up in another case, was
resolved. By legal fiction and in the exercise of the Court’s
equitable jurisdiction, the writer feels that the realistic
solution would be to decide the matter as if the application
under Section 48 (b) were filed by the Piguing spouses, who
suffer from no such disability.
ABAD SANTOS, J., concurring:chanrob1es virtual 1aw library
1. CIVIL LAW; LAND REGISTRATION; PUBLIC LAND ACT;
CORPORATION CANNOT ASK FOR CONFIRMATION OF ITS
TITLE OVER PRIVATE LAND UNDER SECTION 48 OF THE
STATUTE. — Concurring in the result, Justice Abad Santos is
of the opinion that the lots which are sought to be
registered have ceased to be lands of the public domain at
the time they were acquired by petitioner corporation.
They are already private lands because of acquisitive
prescription by the predecessors of the petitioner and all
that is needed is the confirmation of the title. Accordingly,
the constitutional provision that no private corporation or
association may hold alienable lands of the public domain is
inapplicable. However, the petitioner is relying on Sec. 48
of the Public Land Act for the confirmation of its title and
Mr. Justice Aquino is correct in holding that said provision
cannot be availed by juridical entities.
DE CASTRO, J., concurring opinion:chanrob1es virtual 1aw
library
1. CIVIL LAW; LAND REGISTRATION; PUBLIC LAND ACT; THE
LAND INVOLVED IN THE PRESENT CASE HAS NOT YET
BECOME PRIVATE LAND THERE BEING NO AWARD YET OF
TITLE BY THE COURTS. — I cannot subscribe to the view
that the land as above described has become private land
even before title thereto, which is, as of this stage, said to
be still "an incomplete or imperfect title," has been fully
vested on the occupant, through the prescribed procedure
known as judicial confirmation of incomplete or imperfect
title. This is the only legal method by which full and
absolute title to the land may be granted, to convert the
land into a truly private land. To secure such judicial title,
only the courts can be resorted to.
2. ID.; ID.; ID.; ID.; ONLY WHEN THE COURT ADJUDICATES
THE LAND TO THE APPLICANT FOR CONFIRMATION OF
TITLE WOULD THE LAND BECOME PRIVATELY OWNED. — It
is because of the divestiture of authority of the Bureau of
Lands to dispose of the land subject to judicial confirmation
of incomplete and imperfect title that some statements are
found in many cases, such as those cited by Justice
Teehankee, to the effect that such land has ceased to be
public land. What these statements, however, really mean
is that the land referred to no longer forms part of the mass
of public domain still disposable by the Director of Lands,
under the authority granted him by the public land
statutes. It, however, would not follow that the land
covered by Section 48 of the Public Land Act has itself
become private land. The fact that its disposition is
provided for in the aforecited Act which deals with "public
land" gives rise to the very strong implication, if not a
positive conclusion, that the land referred to is still public
land. 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.
3. CONSTITUTIONAL LAW; SECTIONS 11 AND 14, ARTICLE
XIV, 1973 CONSTITUTION; MERALCO AND IGLESIA NI
CRISTO, AS JURIDICAL PERSONS, CANNOT ACQUIRE
SUBJECT PARCELS OF LAND WHETHER THEY ARE STILL
PUBLIC OR ALREADY PRIVATE LAND. — The discussion of
the question of whether the land involved is still public or
already private land is, however, entirely pointless, or an
idle exercise, if We consider the provision of Section 14,
Article XIV of the Constitution which appears to have been
lost sight of, which provides that "save in cases of
hereditary succession, no private lands shall be transferred
or conveyed except to individuals, corporations, or
association qualified to acquire or hold land of the public
domain." As previously stated, by express provision of the
Constitution (Section II, Article XIV), no corporation or
association may hold alienable lands of the public domain
except by lease, not to exceed 1,000 hectares in area.
Hence, even if the land involved in the present case is
considered private land, the cited section prohibits its
acquisition by the Meralco or Iglesia Ni Cristo which
 admittedly are "corporations or association" within the
meaning of the aforecited provision of the New
Constitution. This observation should end all arguments on
the issue of whether the land in question is public or
private land.
TEEHANKEE, J., dissenting :chanrob1es virtual 1aw library
1. CIVIL LAW; LAND REGISTRATION; PUBLIC LAND ACT;
PROHIBITION AGAINST PRIVATE CORPORATIONS HOLDING
LANDS OF PUBLIC DOMAIN, NOT APPLICABLE WHERE
LANDS INVOLVED WERE ALREADY PRIVATE LANDS BY
OPERATION OF LAW, WHEN ACQUIRED BY PRIVATE
CORPORATIONS; CASE AT BAR. — This dissent is based on
the failure of the majority to adhere to established doctrine
in the 1909 case of Cariño and the 1925 case of Susi down
to the 1980 case of Herico, pursuant to the Public Land Act,
as amended, that where a possessor has held the open,
exclusive and unchallenged possession of alienable public
land for the statutory period provided by law (30 years now
under amendatory Rep. Act No. 1942 approved on June 22,
1957), the law itself mandates that the possessor "shall be
considered to have performed all the conditions essential
to a Government grant and shall be entitled to a certificate
of title" and "by legal fiction (the land) has already caused
to be of the public domain and has become private
property." Accordingly, the prohibition of the 1973
Constitution and of the Public Land Act against private
corporation holding lands of the public domain has no
applicability in the present cases. What Meralco and Iglesia
ni Cristo have acquired from their predecessors-in-interest
had already ceased to be of the public domain and had
become private property at the time of the sale to them
and therefore their application for confirmation of title by
virtue of their predecessor-in-interest vested right and title
may be duly granted I hold that both application for
registration should be granted and that accordingly the
judgment in the Meralco case should be reversed and a
new judgment entered granting Meralco’s application,
while the judgment in the Iglesia case should stand
affirmed.
2. ID.; ID.; ID.; ID.; MAJORITY OPINION THAT MERALCO AND
IGLESIA NI CRISTO AS JURIDICAL PERSONS ARE NOT
QUALIFIED TO APPLY FOR CONFIRMATION OF TITLE. — To
uphold respondent judge’s denial of Meralco’s application
on the technicality that the Public Land Act allows only
citizens of the Philippines who are natural persons to apply
for confirmation of their title would be impractical and
would just give rise to multiplicity of court action. Assuming
that there was a technical error in not having filed the
application for registration in the name of the Piguing
spouses as the original owners and vendors, still it is
conceded that there is no prohibition against the sale of the
land to the applicant Meralco and neither is there any
prohibition against the application being refiled with
retroactive effect in the name of the original owners and
vendors (as such natural persons) with the result of their
application being granted, because of their indisputable
acquisition of ownership by operation of law and the
conclusive presumption therein provided in their favor. It
should not be necessary to go through all the rituals at the
great cost of refiling of all such application in their names
and adding to the overcrowded court dockets when the
Court can after all these years dispose of it here and now
(See Francisco v. City of Davao, 12 SCRA 628, 634). The ends
of justice would best be served, therefore, by considering
the application for confirmation as amended to conform to
the evidence, i.e., as filed in the names of the original
persons who as natural persons are duly qualified to apply
for formal confirmation of the title that they had acquired
by conclusive presumption and mandate of the Public Land
Act and who thereafter duly sold to the herein corporations
(both admittedly Filipino corporations duly qualified to hold
and own private lands) and granting the applications for
confirmation of title to the private lands so acquired and
sold or exchanged. All that has been said applies of course
with equal force to the Iglesia ni Cristo case, save that as
already stated, the Iglesia application was granted because
the Republic presented no evidence in support of its
opposition and respondent judge held in effect that the
property had ceased to be land of the public domain and
had become private property, the title to which could be
duly issued in the name of the Iglesia ni Cristo as the
transferee of its predecessors-in-interest.
3. CONSTITUTIONAL LAW; SECTIONS 9 AND 14, ARTICLE
XIV, 1973 CONSTITUTION; MERALCO AS A FILIPINO
CORPORATION IS QUALIFIED TO OWN PRIVATE LAND. — It
only remains to point out, in order to avoid
misapprehension or confusion, that Mr. Justice de Castro’s
seemingly querulous statement that "the discussion of the
question of whether the land involved is still public or
already private land, is however, entirely pointless or an
idle exercise, if We consider the provision of Section 14,
Article XIV of the Constitution which appears to have been
lost sight of, which provides that "save in cases of
hereditary succession, no private lands shall be transferred
or conveyed except to individuals, corporations, or
association qualified to acquire or hold lands of the public
domain" hence, even if the land involved in the present
case is considered private land, the cited section prohibits
its acquisition by the Meralco or Iglesia which admittedly
are "corporations or associations" within the meaning of
the aforecited provision of the New Constitution. This
observation should end all arguments on the issue of
whether the land in question is public or private land"
(idem) might mislead one to the wrong conclusion that
corporations with 60% Filipino ownership may not own
private lands when the express provisions of Art. XIV,
section 9 and Section 14 as quoted by himself as well as the
counterpart provisions of the 1935 Constitution have
always expressly permitted Filipino-owned corporations to
own private lands, and the only change effected in the 1973
Constitution is Section 11 which now prohibits even such
Filipino corporations to own or hold land of the public
domain except by lease not to exceed 1,000 hectares in
area.
DECISION
AQUINO, J.:
This case involves the prohibition in section 11, Article XIV
of the Constitution that "no private corporation or
association may hold alienable lands of the public domain
except by lease not to exceed one thousand hectares in
area." * That prohibition is not found in the 1935
Constitution.
The Manila Electric Company, a domestic corporation
organized under Philippine laws, more than sixty percent of
whose capital stock is owned by Filipino citizens, in its
application filed on December 1, 1976 in the Makati branch
of the Court of First Instance of Rizal, prayed for the
confirmation of its title to two lots with a total area of one
hundred sixty-five square meters, located at Tanay, Rizal
with an assessed value of P3,270 (LRC Case No. N-9485, LRC
Record No. N-50801).
The Republic of the Philippines opposed the application on
the grounds that the applicant, as a private corporation, is
disqualified to hold alienable public lands and that the
applicant and its predecessors-in-interest have not been in
the open, continuous, exclusive and notorious possession
and occupation of the land for at least thirty years
immediately preceding the filing of the application (pp. 65-
66, Rollo).
After the trial had commenced, the Province of Rizal and
the Municipality of Tanay filed a joint opposition to the
application on the ground that one of the lots, Lot No. 1165
of the Tanay cadastre, would be needed for the widening
and improvement of Jose Abad Santos and E. Quirino
Streets in the town of Tanay.
The land was possessed by Olimpia Ramos before the
Pacific war which broke out in 1941. On July 3, 1947, Ramos
sold the land to the spouses Rafael Piguing and Minerva
Inocencio (Exh. K). The Piguing spouses constructed a house
thereon. Because the Meralco had installed the "anchor
guy" of its steel post on the land, the Piguing spouses sold
the lot to the Meralco on August 13, 1976.
The said land was included in the 1968 cadastral survey
made in Tanay by the Bureau of Lands, Plan AP-04-000902
(Exh. F and H) and was divided into two lots, Lots Nos. 1164
and 1165, so as to segregate Lot No. 1165 which would be
used to widen the two streets serving as the land’s eastern
and southern boundaries.
The land was declared for realty tax purposes since 1945
and taxes had been paid thereon up to 1977. It is
residential in character as distinguished from a strictly
agricultural land. It is not included in any military
reservation. Since 1927, it has formed part of the alienable
portion of the public domain.
After trial, the lower court rendered a decision dismissing
the application because in its opinion the Meralco is not
qualified to apply for the registration of the said land since
under section 48(b) of the Public Land Law only Filipino
citizens or natural persons can apply for judicial
confirmation of their imperfect titles to public land. The
Meralco is a juridical person. The trial court assumed that
the land which it seeks to register is public land.
From that decision, the Meralco appealed to this Court
under Republic Act No. 5440.
It contends that the said land, after having been possessed
in the concept of owner by Olimpia Ramos and the Piguing
spouses for more than thirty years, had become private
land in the hands of the latter, and, therefore, the
constitutional prohibition, banning a private corporation
from acquiring alienable public land, is not applicable to the
said land.
The Meralco further contends that it has invoke section
48(b) of the Public Land Law, not for itself, but for the
Piguing spouses who, as Filipino citizens, could secure a
judicial confirmation of their imperfect title to the land.
In reply to these contentions, the Solicitor General counters
that the said land is not private land because the Meralco
and its predecessors-in-interest have no composition title
from the Spanish government nor possessory information
title or any other means for the acquisition of public lands
such as grants or patents (Republic v. Court of Appeals and
De Jesus, L-40912, September 30, 1976, 73 SCRA 146, 157;
Director of Lands v. Reyes, L-27594, November 28, 1975,
and Alinsunurin v. Director of Lands, L-28144, November
28, 1975; 68 SCRA 177; 195; Lee Hong Hok v. David, L-
30389, December 27, 1972, 48 SCRA 372, 378-9; Director of
Lands v. Court of Appeals and Raymundo, L-29575, April 30,
1971, 38 SCRA 634, 639; Padilla v. Reyes and Director of
Lands, 60 Phil. 967, 969; Heirs of Datu Pendatun v. Director
of Lands, 59 Phil. 600, 603).
The Public Land Law provides:jgc:chanrobles.com.ph
"CHAPTER VIII. — Judicial confirmatin of imperfect or
incomplete titles.
x x x
"SEC. 48. The following described citizens of the Philippines,
occupying lands of the public domain or claiming to own
any such lands or an interest therein, but whose titles have
not been perfected or completed, may apply to the Court
of First Instance 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:chanrob1es virtual 1aw library
x x x
"(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 of ownership, for at least thirty years
immediately preceding the filing of the application for
confirmation of title except when prevented by war 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. (As amended by
Republic Act No. 1942, approved on June 22, 1957.)
x x x tenian el concepto juridico de ser los verdaderos dueños
"SEC. 49. No person claiming title to lands of the public
domain not in possession of the qualifications specified in
the last preceding section may apply for the benefits of this
chapter."cralaw virtua1aw library
We hold that, as between the State and the Meralco, the
said land is still public land. It would cease to be public land
only upon the issuance of the certificate of title to any
Filipino citizen claiming it under section 48(b). Because it is
still public land and the Meralco, as a juridical person, is
disqualified to apply for its registration under section 48(b),
Meralco’s application cannot be given due course or has to
be dismissed.
This conclusion is supported by the rule announced in Oh
Cho v. Director of Lands, 75 Phil. 890, 892, which rule is a
compendious or quintessential precis of a pervasive
principle of public land law and land registration law, that
"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 it
had been a private property even before the Spanish
conquest." (Cariño v. Insular Government, 212 U. S. 449, 53
L. ed. 594, 41 Phil. 935 and 7 Phil. 132).
The Meralco relies on the ruling in Susi v. Razon and
Director of Lands, 48 Phil. 424, that "an open, continuous,
adverse and public possession of a land of the public
domain from time immemorial by a private individual
personally and through his predecessors confers an
effective title on said possessor, whereby the land ceases to
be public" and becomes private property.
That ruling is based on the Cariño case which is about the
possession of land by an Igorot and his ancestors since time
immemorial or even before the Spanish conquest. The land
involved in the Susi case was possessed before 1880 or
since a period of time "beyond the reach of memory." That
is not the situation in this case. The Meralco does not
pretend that the Piguing spouses and their predecessor had
been in possession of the land since time immemorial.
In the Susi case, this Court applied section 45(b) of Act No.
2874 which corresponds to what is now section 48(b). It
was held that the long possession of the land under a bona
fide claim of ownership since July 26, 1894 gave rise to the
conclusive presumption that the occupant had complied
with all the conditions essential to a Government grant and
was thus entitled to a certificate of title.
On the other hand, in Uy Un v. Perez, 71 Phil. 508, 510-11,
it was held that while occupants of public land, who have
applied for the confirmation of their title, "teian asimismo a
su favor la presuncion juris et de jure de que habian
cumplido con todas las condiciones necesarias para la
concesion del titulo; pero hasta que el titulo se expida no
del terreno in ste dejo" de pertenecer a los terrenos
publicos del Estado susceptibles de enajenacion."cralaw
virtua1aw library
That means that until the certificate of title is issued, a
piece of land, over which an imperfect title is sought to be
confirmed, remains public land. For that reason in the Uy
Un case, it was held that if that land was attached by a
judgment creditor of the applicant, while his application for
confirmation of his imperfect title was pending in the
Bureau of Lands, the levy and execution sale of the land
were void.
For that same reason, lands over which an imperfect title is
sought to be confirmed are governed by the Public Land
Law. Such lands would not be covered by the Public Land
Law if they were already private lands. The occupants’ right
to the said lands is characterized in the Uy Un case, not as
ownership in fee simple, but as derecho dominical
incoativo.
The Meralco in its concluding argument contends that if the
Piguing spouses could ask for the confirmation of their
imperfect title to the said lands, then why should the
Meralco, as their transferee, be denied the same right to
register the said land in its name, there being no legal
prohibition for the Piguing spouses from selling the land to
the Meralco? This Court in disposing of that same
contention in the Oh Cho case said:chanrobles virtual
lawlibrary
"The benefits provided in the Public Land Act (meaning the
confirmation of an imperfect title under section 48[b]) for
applicant’s immediate predecessors-in-interest are or
constitute a grant or concession by the State; and before
they could acquire any right under such benefits, the
applicant’s immediate predecessors-in-interest should
comply with the condition precedent for the grant of such
benefits.
"The condition precedent is to apply for the registration of
the land of which they had been in possession at least since
July 26, 1894. This the applicant’s immediate predecessors-
in-interest (meaning the Piguing spouses in the instant
case) failed to do.
"They did not have any vested right in the lot amounting to
title which was transmissible to the applicant. The only
right, if it may thus be called, is their possession of the lot
which, tacked to that of their predecessors-in-interest, may
be availed of by a qualified person to apply for its
registration but not by a person as the applicant who is
disqualified." (75 Phil. 890, 893.)
Finally, it may be observed that the constitutional
prohibition makes no distinction between (on one hand)
alienable agricultural public lands as to which no occupant
has an imperfect title and (on the other hand) alienable
lands of the public domain as to which an occupant has an
imperfect title subject to judicial confirmation.

Since section 11 of Article XIV does not distinguish, we

should not make any distinction or qualification. The
prohibition applies to alienable public lands as to which a
Torrens title may be secured under section 48(b). The
proceeding under section 48(b) "presupposes that the land
is public" (Mindanao v. Director of Lands, L-19535, July 30,
1967, 20 SCRA 641, 644).

The lower court’s judgment dismissing Meralco’s

application is affirmed. Costs against the Petitioner-
Appellant.

SO ORDERED.
 G.R. No. 73002 : December 29, 1986
THE DIRECTOR OF LANDS, Petitioner, vs. INTERMEDIATE
APPELLATE COURT and ACME PLYWOOD & VENEER CO.
INC., ETC., Respondents.
NARVASA, J.:
The Director of Lands has brought this appeal
by certiorari from a judgment of the Intermediate Appellate
Court affirming a decision of the Court of First Instance of
Isabela, which ordered registration in favor of Acme
Plywood & Veneer Co., Inc. of five parcels of land
measuring 481, 390 square meters, more or less, acquired
by it from Mariano and Acer Infiel, members of the
Dumagat tribe.
The registration proceedings were for confirmation of title
under Section 48 of Commonwealth Act No. 141 (The Public
Land Act). as amended: and the appealed judgment sums
up the findings of the trial court in said proceedings in this
wise:
1. That Acme Plywood & Veneer Co. Inc., represented by
Mr. Rodolfo Nazario is a corporation duly organized in
accordance with the laws of the Republic of the Philippines
and registered with the Securities and Exchange
Commission on December 23, 1959;
2. That Acme Plywood & Veneer Co. Inc., represented by
Mr. Rodolfo Nazario can acquire real properties pursuant to
the provisions of the Articles of Incorporation particularly
on the provision of its secondary purposes (paragraph (9),
Exhibit 'M-l');
3. That the land subject of the Land Registration proceeding
was ancestrally acquired by Acme Plywood & Veneer Co.,
Inc., on October 29, 1962, from Mariano Infiel and Acer
Infiel, both members of the Dumagat tribe and as such are
cultural minorities;
4. That the constitution of the Republic of the Philippines of
1935 is applicable as the sale took place on October 29,
1962;
5. That the possession of the Infiels over the land
relinquished or sold to Acme Plywood & Veneer Co., Inc.,
dates back before the Philippines was discovered by
Magellan as the ancestors of the Infiels have possessed and
occupied the land from generation to generation until the
same came into the possession of Mariano Infiel and Acer
Infiel;
6. That the possession of the applicant Acme Plywood &
Veneer Co., Inc., is continuous, adverse and public from
1962 to the present and tacking the possession of the
Infiels who were granted from whom the applicant bought
said land on October 29, 1962, hence the possession is
already considered from time immemorial.
7. That the land sought to be registered is a private land
pursuant to the provisions of Republic Act No. 3872
granting absolute ownership to members of the non-
Christian Tribes on land occupied by them or their ancestral
lands, whether with the alienable or disposable public land
or within the public domain;
8. That applicant Acme Plywood & Veneer Co. Inc., has
introduced more than Forty-Five Million (P45,000,000.00)
Pesos worth of improvements, said improvements were
seen by the Court during its ocular investigation of the land
sought to be registered on September 18, 1982;
9. That the ownership and possession of the land sought to
be registered by the applicant was duly recognized by the
government when the Municipal Officials of Maconacon,
Isabela, have negotiated for the donation of the townsite
from Acme Plywood & Veneer Co., Inc., and this negotiation
came to reality when the Board of Directors of the Acme
Plywood & Veneer Co., Inc., had donated a part of the land
bought by the Company from the Infiels for the townsite of
Maconacon Isabela (Exh. 'N') on November 15, 1979, and
which donation was accepted by the Municipal
Government of Maconacon, Isabela (Exh. 'N-l'), during their
special session on November 22, 1979.
The Director of Lands takes no issue with any of these
findings except as to the applicability of the 1935
Constitution to the matter at hand. Concerning this, he
asserts that, the registration proceedings have been
commenced only on July 17, 1981, or long after the 1973
Constitution had gone into effect, the latter is the correctly
applicable law; and since section 11 of its Article XIV
prohibits private corporations or associations from holding
alienable lands of the public domain, except by lease not to
exceed 1,000 hectares (a prohibition not found in the 1935
Constitution which was in force in 1962 when Acme
purchased the lands in question from the Infiels), it was
reversible error to decree registration in favor of Acme
Section 48, paragraphs (b) and (c), of Commonwealth Act
No. 141, as amended, reads:
SEC. 48. The following described citizens of the Philippines,
occupying lands of the public domain or claiming to own
any such lands or an interest therein, but whose titles have
not been perfected or completed, may apply to the Court
of First Instance 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 war 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.
(c) Members of the National Cultural minorities who by
themselves or through their predecessors-in-interest have
been in open. continuous, exclusive and notorious
possession and occupation of lands of the public domain
suitable to agriculture, whether disposable or not, under a
bona fide claim of ownership for at least 30 years shall be
entitled to the rights granted in subsection (b) hereof.
The Petition for Review does not dispute-indeed, in view of
the quoted findings of the trial court which were cited and
affirmed by the Intermediate Appellate Court, it can no
longer controvert before this Court-the fact that Mariano
and Acer Infiel, from whom Acme purchased the lands in
question on October 29, 1962, are members of the national
cultural minorities who had, by themselves and through
their progenitors, possessed and occupied those lands since
time immemorial, or for more than the required 30-year
period and were, by reason thereof, entitled to exercise the
right granted in Section 48 of the Public Land Act to have
their title judicially confirmed. Nor is there any pretension
that Acme, as the successor-in-interest of the Infiels, is
disqualified to acquire and register ownership of said lands
under any provisions of the 1973 Constitution other than
Section 11 of its Article XIV already referred to.
Given the foregoing, the question before this Court is
whether or not the title that the Infiels had transferred to
Acme in 1962 could be confirmed in favor of the latter in
proceedings instituted by it in 1981 when the 1973
Constitution was already in effect, having in mind the
prohibition therein against private corporations holding
lands of the public domain except in lease not exceeding
1,000 hectares.
The question turns upon a determination of the character
of the lands at the time of institution of the registration
proceedings in 1981. If they were then still part of the
public domain, it must be answered in the negative. If, on
the other hand, they were then already private lands, the
constitutional prohibition against their acquisition by
private corporations or associations obviously does not
apply.
In this regard, attention has been invited to Manila Electric
Company vs. Castro-Bartolome, et al, 1 where a similar set
of facts prevailed. In that case, Manila Electric Company, a
domestic corporation more than 60% of the capital stock of
which is Filipino-owned, had purchased in 1947 two lots in
Tanay, Rizal from the Piguing spouses. The lots had been
possessed by the vendors and, before them, by their
predecessor-in-interest, Olimpia Ramos, since prior to the
outbreak of the Pacific War in 1941. On December 1, 1976,
Meralco applied to the Court of First Instance of Rizal,
Makati Branch, for confirmation of title to said lots. The
court, assuming that the lots were public land, dismissed
the application on the ground that Meralco, a juridical
person, was not qualified to apply for registration under
Section 48(b) of the Public Land Act which allows only
Filipino citizens or natural persons to apply for judicial
confirmation of imperfect titles to public land. Meralco
appealed, and a majority of this Court upheld the dismissal.
It was held that:
..., the said land is still public land. It would cease to be
public land only upon the issuance of the certificate of title
to any Filipino citizen claiming it under section 48(b).
Because it is still public land and the Meralco, as a juridical
person, is disqualified to apply for its registration under
section 48(b), Meralco's application cannot be given due
course or has to be dismissed.
Finally, it may be observed that the constitutional
prohibition makes no distinction between (on the one
hand) alienable agricultural public lands as to which no
occupant has an imperfect title and (on the other hand)
alienable lands of the public domain as to which an
occupant has on imperfect title subject to judicial
confirmation.
Since section 11 of Article XIV does not distinguish, we
should not make any distinction or qualification. The
prohibition applies to alienable public lands as to which a
Torrens title may be secured under section 48(b). The
proceeding under section 48(b) 'presupposes that the land
is public' (Mindanao vs. Director of Lands, L-19535, July 30,
1967, 20 SCRA 641, 644).
The present Chief Justice entered a vigorous dissent,
tracing the line of cases beginning with Carino in
1909 2 thru Susi in 1925 3 down to Herico in 1980, 4which
developed, affirmed and reaffirmed the doctrine 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. That said dissent expressed what is the better
and, indeed, the correct, view-becomes evident from a
consideration of some of the principal rulings cited therein,
The main theme was given birth, so to speak,
in Carino involving the Decree/Regulations of June 25, 1880
for adjustment of royal lands wrongfully occupied by
private individuals in the Philippine Islands. It was ruled
that:
It is true that the language of articles 4 and 5 5 attributes
title to those 'who may prove' possession for the necessary
time and we do not overlook the argument that this means
may prove in registration proceedings. It may be that an
English conveyancer would have recommended an
application under the foregoing decree, but certainly it was
not calculated to convey to the mind of an Igorot chief the
notion that ancient family possessions were in danger, if he
had read every word of it. The words 'may prove'
(acrediten) as well or better, in view of the other provisions,
might be taken to mean when called upon to do so in any
litigation. 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. ...
That ruling assumed a more doctrinal character because
expressed in more categorical language, in Susi:
.... In favor of Valentin Susi, there is, moreover, the
presumption juris et de jure established in paragraph (b) of
section 45 of Act No. 2874, amending Act No. 926, that all
the necessary requirements for a grant by the Government
were complied with, for he has been in actual and physical
possession, personally and through his predecessors, of an
agricultural land of the public domain openly, continuously,
exclusively and publicly since July 26, 1984, with a right to a
certificate of title to said land under the provisions of
Chapter VIII of said Act. So that when Angela Razon applied
for the grant in her favor, Valentin Susi had already
acquired, by operation of law not only a right to a grant,
but a grant of the Government, for it is not necessary that a
certificate of title should be issued in order that said grant
may be sanctioned by the courts, an application therefore is
sufficient, under the provisions of section 47 of Act No.
2874. If by a legal fiction, Valentin Susi had acquired the
land in question by a grant of the State, it had already
ceased to be of the public domain and had become private
property, at least by presumption, of Valentin Susi, beyond
the control of the Director of Lands. Consequently, in
selling the land in question of Angela Razon, the Director of
Lands disposed of a land over which he had no longer any
title or control, and the sale thus made was void and of no
effect, and Angela Razon did not thereby acquire any
right. 6
Succeeding cases, of which only some need be mentioned,
likeof Lacaste vs. Director of Lands, 7 Mesina vs. Vda. de
Sonza, 8 Manarpac vs. Cabanatuan, 9Miguel vs. Court of
Appeals 10 and Herico vs. Dar, supra, by invoking and
affirming the Susi doctrine have firmly rooted it in
jurisprudence.
Herico, in particular, appears to be squarely affirmative: 11
.... 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. 12
Nothing can more clearly demonstrate the logical
inevitability of considering possession of public land which
is of the character and duration prescribed by statute as the
equivalent of an express grant from the State than the
dictum of the statute itself 13 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 claimed 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 Carino, "... (T)here 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."
If it is accepted-as it must be-that the land was already
private land to which the Infiels had a legally sufficient and
transferable title on October 29, 1962 when Acme acquired
it from said owners, it must also be conceded that Acme
had a perfect right to make such acquisition, there being
nothing in the 1935 Constitution then in force (or, for that
matter, in the 1973 Constitution which came into effect
later) prohibiting corporations from acquiring and owning
private lands.
Even on the proposition that the land remained technically
"public" land, despite immemorial possession of the Infiels
and their ancestors, until title in their favor was actually
confirmed in appropriate proceedings under the Public
Land Act, there can be no serious question of Acmes right
to acquire the land at the time it did, there also being
nothing in the 1935 Constitution that might be construed to
prohibit corporations from purchasing or acquiring
interests in public land to which the vendor had already
acquired that type of so-called "incomplete" or "imperfect"
title. The only limitation then extant was that corporations
could not acquire, hold or lease public agricultural lands in
excess of 1,024 hectares. The purely accidental
circumstance that confirmation proceedings were brought
under the aegis of the 1973 Constitution which forbids
corporations from owning lands of the public domain
cannot defeat a right already vested before that law came
into effect, or invalidate transactions then perfectly valid
and proper. This Court has already held, in analogous
circumstances, that the Constitution cannot impair vested
rights.
We hold that the said constitutional prohibition 14 has no
retroactive application to the sales application of Binan
Development Co., Inc. because it had already acquired a
vested right to the land applied for at the time the 1973
Constitution took effect.
That vested right has to be respected. It could not be
abrogated by the new Constitution. Section 2, Article XIII of
the 1935 Constitution allows private corporations to
purchase public agricultural lands not exceeding one
thousand and twenty-four hectares. Petitioner' prohibition
action is barred by the doctrine of vested rights in
constitutional law.
xxx xxx xxx
The due process clause prohibits the annihilation of vested
rights. 'A state may not impair vested rights by legislative
enactment, by the enactment or by the subsequent repeal
of a municipal ordinance, or by a change in the constitution
of the State, except in a legitimate exercise of the police
power'(16 C.J.S. 1177-78).
xxx xxx xxx
In the instant case, it is incontestable that prior to the
effectivity of the 1973 Constitution the right of the
corporation to purchase the land in question had become
fixed and established and was no longer open to doubt or
controversy.
Its compliance with the requirements of the Public Land
Law for the issuance of a patent had the effect of
segregating the said land from the public domain. The
corporation's right to obtain a patent for the land is
protected by law. It cannot be deprived of that right
without due process (Director of Lands vs. CA, 123 Phil.
919). 15
The fact, therefore, that the confirmation proceedings were
instituted by Acme in its own name must be regarded as
simply another accidental circumstance, productive of a
defect hardly more than procedural and in nowise affecting
the substance and merits of the right of ownership sought
to be confirmed in said proceedings, there being no doubt
of Acme's entitlement to the land. As it is unquestionable
that in the light of the undisputed facts, the Infiels, under
either the 1935 or the 1973 Constitution, could have had
title in themselves confirmed and registered, only a rigid
subservience to the letter of the law would deny the same
benefit to their lawful successor-in-interest by valid
conveyance which violates no constitutional mandate.
The Court, in the light of the foregoing, is of the view, and
so holds, that the majority ruling in Meralco must be
reconsidered and no longer deemed to be binding
precedent. The correct rule, as enunciated in the line of
cases already referred to, is that 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.
Following that rule and on the basis of the undisputed
facts, the land subject of this appeal was already private
property at the time it was acquired from the Infiels by
Acme. Acme thereby acquired a registrable title, there
being at the time no prohibition against said corporation's
holding or owning private land. The objection that, as a
juridical person, Acme is not qualified to apply for judicial
confirmation of title under section 48(b) of the Public Land
Act is technical, rather than substantial and, again, finds its
answer in the dissent in Meralco:
6. To uphold respondent judge's denial of Meralco's
application on the technicality that the Public Land Act
allows only citizens of the Philippines who are natural
persons to apply for confirmation of their title would be
impractical and would just give rise to multiplicity of court
actions. Assuming that there was a technical error not
having filed the application for registration in the name of
the Piguing spouses as the original owners and vendors, still
it is conceded that there is no prohibition against their sale
of the land to the applicant Meralco and neither is there
any prohibition against the application being refiled with
retroactive effect in the name of the original owners and
vendors (as such natural persons) with the end result of
their application being granted, because of their
indisputable acquisition of ownership by operation of law
and the conclusive presumption therein provided in their
favor. It should not be necessary to go through all the
rituals at the great cost of refiling of all such applications in
their names and adding to the overcrowded court dockets
when the Court can after all these years dispose of it here
and now. (See Francisco vs. City of Davao)
The ends of justice would best be served, therefore, by
considering the applications for confirmation as amended
to conform to the evidence, i.e. as filed in the names of the
original persons who as natural persons are duly qualified
to apply for formal confirmation of the title that they had
acquired by conclusive presumption and mandate of the
Public Land Act and who thereafter duly sold to the herein
corporations (both admittedly Filipino corporations duly
qualified to hold and own private lands) and granting the
applications for confirmation of title to the private lands so
acquired and sold or exchanged.
There is also nothing to prevent Acme from reconveying
the lands to the Infiels and the latter from themselves
applying for confirmation of title and, after issuance of the
certificate/s of title in their names, deeding the lands back
to Acme. But this would be merely indulging in empty
charades, whereas the same result is more efficaciously and
speedily obtained, with no prejudice to anyone, by a liberal
application of the rule on amendment to conform to the
evidence suggested in the dissent in Meralco.
While this opinion seemingly reverses an earlier ruling of
comparatively recent vintage, in a real sense, it breaks no
precedent, but only reaffirms and re-established, as it were,
doctrines the soundness of which has passed the test of
searching examination and inquiry in many past cases.
Indeed, it is worth noting that the majority opinion, as well
as the concurring opinions of Chief Justice Fernando and
Justice Abad Santos, in Meralco rested chiefly on the
proposition that the petitioner therein, a juridical person,
was disqualified from applying for confirmation of an
imperfect title to public land under Section 48(b) of the
Public Land Act. Reference to the 1973 Constitution and its
Article XIV, Section 11, was only tangential limited to a brief
paragraph in the main opinion, and may, in that context, be
considered as essentially obiter. Meralco, in short, decided
no constitutional question.

WHEREFORE, there being no reversible error in the

appealed judgment of the Intermediate Appellate Court,
the same is hereby affirmed, without costs in this instance.

SO ORDERED.
 G.R. No. L-44237 February 28, 1989 WHEREFORE, the court renders judgment adjudicating
Cadastral Lot 1272, Iligan Cadastre, to the Religious of the
VICTORIA ONG DE OCSIO, Petitioner, vs. COURT OF Virgin Mary, a duly registered domestic religious
APPEALS and the RELIGIOUS OF THE VIRGIN MARY, corporation, the members of which are all Filipino citizens,
represented by M.O. Leoncia Pacquing, with main office in the City of Manila, but the building
R.V.M., Respondents. existing thereon is hereby declared to be the property of
claimant Victoria Ong de Ocsio who is hereby ordered to
Elpedio N. Cabasan for petitioner.chanrobles virtual law remove Said building out of the premises within 90 days
library from date hereof. The claim of Victoria Ong de Ocsio with
respect to said cadastral lot is dismiss. No pronouncement
is made as to costs.chanroblesvirtualawlibrary chanrobles
Padilla Law Office for private respondent.
virtual law library
NARVASA, J.:
Let the corresponding decree issue 30 days after this
decision shall have become final.
From the adverse judgment of the Court of
Appeals, 1 affirming in toto that of the Trial Court, 2 the
As aforestated, the Court of Appeals affirmed the cadastral
petitioner has come to this Court on an appeal by certiorari
court's decision in toto. So, too, will this
to plead for reversal of (1) the factual determination that
Court.chanroblesvirtualawlibrarychanrobles virtual law
she had sold the lot in controversy to private respondent,
library
and (2) the legal conclusion that neither the 1973 nor the
1987 Constitution disqualifies the corporation known as the
Religious of the Virgin Mary, from acquiring the land in Both the cadastral Court and the Court of Appeals came to
question and registering it in its name. In light of the time- the conclusion, after analysing and weighing the
honored rule that findings of fact of the Court of Appeals testimonial and documentary evidence adduced by the
are generally final, and the doctrine lately laid down by this parties, that Virginia Ong de Ocsio's version of the facts was
Court on the precise legal issue now raised by petitioner, not true-that it was another property, not Lot No. 1272,
her appeal must fail.chanroblesvirtualawlibrary chanrobles that she had conveyed to the religious corporation but that
virtual law library it was indeed Lot No. 1272 that was subject of the sale and
had indeed been transferred to the latter. Now, findings of
fact of this sort, contained in a decision of the Court of
The controversy at bar arose in connection with cadastral
Appeals are by long and uniformly observed rule conclusive
proceedings initiated by the Director of Lands, in behalf of
on the parties and on the Supreme Court, as well; 7 subject
the Republic, for the settlement and adjudication of title to
only to a few specified exceptions, 8 none of which obtains
a large tract of land measuring 261.5791 hectares, divided
here, said findings may not be reviewed on
into 1,419 lots, situated in the City of Iligan. 3 chanrobles
appeal.chanroblesvirtualawlibrary chanrobles virtual law
virtual law library
library
Victoria Ong de Ocsio (herein petitioner) seasonably
As regards the issue of law raised by her, petitioner fares no
presented an answer to the petition. She alleged that she
better. Citing Manila Electric Co. v. Castro-Bartolome,114
was the owner, by purchase, of two (2) parcels of land with
SCRA 799 (1982) and Republic v. Villanueva, 114 SCRA 875
specific boundaries comprehended in the cadastral
(1982), in relation to Section 11, Article XIV of the 1973
proceeding: Lot No. 1272, measuring 256 square meters,
Constitution, she asserts that as the private respondent is a
and Lot 1273 a road lot, measuring 21 square meters; and
religious corporation, it is disqualified to obtain judicial
that as owner, she had been in possession of both lots for
confirmation of an imperfect title under Section 48(b) of
fifteen (15) years, and her predecessors-in-interest, for
the Public Land Act which grants that right only to natural
sixty (60) years. 4 Title to the same parcels of land was
persons. The cited rulings no longer control. Current
however claimed by the Religious of the Virgin Mary. 5 In its
doctrine, first announced by the Court en banc in Director
answer, it averred that it had bought the lots from Victoria
of Lands v. I.A.C. 146 SCRA 509 (1986), is that open,
Ong de Ocsio and had been in possession as owner thereof
continuous and exclusive possession of alienable public
for over four years, and its possession and that of its
land for at least thirty (30) years in accordance with the
predecessors was
Public Land Act ipso jure converts the land to private
immemorial.chanroblesvirtualawlibrarychanrobles virtual
property, and a juridical person who thereafter acquires
law library
the same may have title thereto confirmed in its name.
Virtually the same state of facts obtained in said case that
Evidence was received on these conflicting assertions after
now obtain here. A private corporation had purchased the
which the Cadastral Court rendered judgment, declaring
land originally of the public domain from parties who had,
that the evidence satisfactorily established that Victoria
by themselves and through their predecessors-in-interest,
Ong de Ocsio had in truth sold Lot No. 1272 to the Religious
possessed and occupied it since time immemorial. It had
of the Virgin Mary in virtue of a deed of sale dated April 12,
thereafter instituted proceedings for confirmation of title
1956 (Exhibit 1), and Lot No. 1273 was a road right of way
under Section 48(b) of the Public Land Act. In upholding its
granted to the City of Iligan. The judgment contained the
right to do so, the court held that the fact that the
following dispositive portion, viz: 6
proceedings had been instituted by said purchaser in its
own name and not in the name of the transferors was "xx
simply xx (an) accidental circumstance, productive of a
defect hardly more than procedural and in nowise affecting
the substance and merits of the right of ownership sought
to be confirmed." The ruling was reaffirmed in two later
cases, Director of Lands v. Manila Electric Co., 153 SCRA 686
(September 11, 1987), and Republic v. C.A., 156 SCRA 344
(October 30, 1987) where the same question of law was
raised. In the latter it was expressly held that the
prohibitions in the 1973 and 1987 Constitutions against
acquisition or registration of lands by or in behalf of private
corporations do not apply to public lands already converted
to private ownership by natural persons under the
provisions of the Public Land Act. In the present case,
Virginia Ong de Ocsio and her predecessors-in-interest
having possessed Lot No. 1272 for the period and under the
conditions prescribed by law for acquisition of ownership of
disposable public land prior to the sale of the property to
the Religious of the Virgin Mary, confirmation of title
thereto in the latter's name is, under the precedents
referred to, entirely in
order.chanroblesvirtualawlibrarychanrobles virtual law
library

WHEREFORE, the judgment of the Court of Appeals subject

of the petition for review on certiorari is AFFIRMED in
toto.Costs against the petitioner.
 [G.R. No. 129682. March 21, 2002.]
NESTOR PAGKATIPUNAN and ROSALINA MAÑAGAS
PAGKATIPUNAN, Petitioners, v. THE COURT OF APPEALS
and REPUBLIC OF THE PHILIPPINES, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review of the decision 1 of the Court of
Appeals nullifying the decision of the Court of First Instance
of Gumaca, Quezon 2 which confirmed petitioners’ title
over the lots subject of the instant petition. Petitioners
further seek to annul and set aside the resolutions 3 of the
Court of Appeals denying their urgent motion to recall the
judgment entered 4 in the land registration
case.chanrob1es virtua1 1aw 1ibrary
The antecedent facts are as follows:chanrob1es virtual 1aw
library
Sometime in November 1960, petitioners’ predecessors-in-
interest, spouses Getulio Pagkatipunan and Lucrecia
Esquires, filed with the Court of First Instance of Gumaca,
Quezon an application for judicial confirmation and
registration of their title to Lots 1 and 2 of Plan Psu-174406
and Lots 1 and 2 of Plan Psu-112066, all located in San
Narciso, Quezon. 5
On May 4, 1961, the Court of First Instance entered an
order of default against the whole world, except spouses
Felicisimo Almace and Teodulo Medenilla who were given
ten (10) days to file their written opposition as regards Lot
No. 2 of Plan Psu-174406. Upon motion of petitioner’s
predecessors, Lot No. 2 of Plan Psu-174406 was removed
from the coverage of the application. The remaining parcel
of land covered by Lot No. 1 has an area of 3,804.261
square meters.
On June 15, 1967, the Court of First Instance promulgated a
decision confirming petitioners’ title to the property. On
October 23, 1967, OCT No. O-12665 was issued in the name
of petitioners.chanrob1es virtua1 1aw 1ibrary
Almost eighteen (18) years later, or on September 12, 1985,
the Republic of the Philippines filed with the Intermediate
Appellate Court an action to declare the proceedings in LRC
Case No. 91-G, LRC Record No. N-19930 before the Court of
First Instance of Gumaca, Quezon null and void, and to
cancel Original Certificate of Title No. 0-12665 and titles
derived therefrom as null and void, to direct the register of
deeds to annul said certificates of title, and to confirm the
subject land as part of the public domain. 6
The Republic claimed that at the time of filing of the land
registration case and of rendition of the decision on June
15, 1967, the subject land was classified as timberland
under LC Project No. 15-B of San Narciso, Quezon, as shown
in BF Map No. LC-1180; hence inalienable and not subject
to registration. Moreover, petitioners’ title thereto can not
be confirmed for lack of showing of possession and
occupation of the land in the manner and for the length of
time required by Section 48(b), Commonwealth Act No.
141, as amended. Neither did petitioners have any fee
simple title which may be registered under Act No. 496, as
amended. Consequently, the Court of First Instance did not
acquire jurisdiction over the res and any proceedings had
therein were null and void. 7
On the other hand, petitioners raised the special defenses
of indefeasibility of title and res judicata. They argued that
due to the lapse of a considerable length of time, the
judgment of the Court of First Instance of Quezon in the
land registration case has become final and conclusive
against the Republic. Moreover, the action for reversion of
the land to the public domain is barred by prior judgment.
8
In a decision promulgated on June 27, 1986, the
Intermediate Appellate Court held that the land in question
was forestral land; hence not registrable. There was no
evidence on record to show that the land was actually and
officially delimited and classified as alienable or disposable
land of the public domain. Therefore, the Court of First
Instance did not acquire jurisdiction to take cognizance of
the application for registration and to decide the same.
Consequently, the action to declare null and void the June
15, 1967 decision for lack of jurisdiction did not prescribe.
The dispositive portion of the appellate court’s decision
reads:chanrob1es virtual 1aw library
WHEREFORE, judgment is rendered in favor of petitioner
and against respondents, and as prayed for:chanrob1es
virtual 1aw library
(a) The Decision dated June 15, 1967 in LRC Case No. 91-G,
LRC Record No. N-19930 is hereby declared null and void,
and accordingly set aside;
(b) Original Certificate of Title No. 0-12665, and Transfer
Certificates of Title Nos. T-84439, T-93857 and T-117618
deriving therefrom, as well as any other derivative titles,
are declared null and void;
(c) The respondent Register of Deeds for Quezon Province
is ordered to cancel said titles; and
(d) The parcels of land covered thereby are ordered
reverted to the State.
Without pronouncement as to costs." 9
On July 16, 1986, petitioners moved for the reconsideration
of the afore-cited decision 10 reiterating that the land in
question was agricultural because it was possessed and
cultivated as such long before its classification as
timberland by the Bureau of Forestry, in 1955. Petitioners
and their predecessors-in-interest have been in open,
continuous, exclusive, notorious possession and occupation
of said land for agricultural and cattle raising purposes as
far back as the Spanish regime. Following the doctrine in
Oracoy v. Director of Lands, 11 private interest had
intervened and petitioners acquired vested rights which
can no longer be impaired by the subsequent classification
of the land as timberland by the Director of
Forestry.chanrob1es virtua1 1aw 1ibrary
On August 20, 1986, the appellate court denied the motion
for reconsideration for lack of merit. 12 On December 12,
1986, the decision of June 27, 1986 attained finality and
judgment was entered in the book of entries of judgments.
13
On April 2, 1987, petitioners filed an urgent motion to set
aside entry of judgment on the ground that Atty. Cirilo E.
Doronila, petitioners’ counsel of record, was not furnished
a copy of the resolution denying the motion for
reconsideration. 14 In the absence of such notice, the
decision of the appellate court did not become final and
executory.chanrob1es virtua1 1aw 1ibrary
On October 22, 1987, the Court of` Appeals set aside and
lifted the entry of judgment in CA-G.R. SP No. 07115 and
directed the clerk of court to furnish petitioners’ counsel a
copy of the August 20, 1986 resolution. 15
For petitioners’ inaction despite service of the August 20,
1986 resolution, the June 27, 1986 decision became final
and executory. On March 2, 1988, entry of judgment was
again made in the land registration case.
On September 4, 1995, Atty. Doronila withdrew his
appearance as counsel for petitioners. 16
On April 1, 1996, Petitioners, through their new counsel,
Atty. George I. Howard, filed with the Court of Appeals an
urgent motion to recall the entry of judgment, 17 which
was denied by the appellate court on December 16, 1996.
18
The motion for reconsideration was likewise denied on the
ground that it raised arguments already discussed and
resolved in the urgent motion to recall entry of judgment.
19
Hence, the instant petition for review. 20
Petitioners claim that their title to the land became
incontrovertible and indefeasible one (1) year after
issuance of the decree of registration. Hence, the Republic’s
cause of action was barred by prescription and res judicata,
proceedings having been initiated only after about 18 years
from the time the decree of registration was made.
Contrary to the appellate court’s findings, the land is
agricultural and the inclusion and classification thereof by
the Bureau of Forestry in 1955 as timberland can not impair
the vested rights acquired by petitioners’ predecessors-in-
interest who have been in open, continuous, adverse and
public possession of the land in question since time
immemorial and for more than thirty (30) years prior to the
filing of the application for registration in 1960. Hence, the
Court of Appeals committed grave error when it denied
their motion to set aside entry of judgment in the land
registration case.
The petition lacks merit.
Unless public land is shown to have been reclassified or
alienated to a private person by the State, it remains part of
the inalienable public domain. Occupation thereof in the
concept of owner, no matter how long, cannot ripen into
ownership and be registered as a title. 21
Evidence extant on record showed that at the time of filing
of the application for land registration and issuance of the
certificate of title over the disputed land in the name of
petitioners, the same was timberland and formed part of
the public domain, as per certification issued by the Bureau
of Forest Development on April 1, 1985, thus:chanrob1es
virtual 1aw library
TO WHOM IT MAY CONCERN:chanrob1es virtual 1aw
library
This is to certify that the tract of land situated in Vigo
Cantidang, San Narciso, Quezon, containing an area of 3,
804.261 square meters as described in Transfer Certificate
of Title No. T-117618 . . . registered in the name of Spouses
Nestor E. Pagkatipunan and Rosalina Mañgas is verified to
be within the Timberland Block-B, Project No. 15-B of San
Narciso, Quezon, certified and declared as such on August
25, 1955 per BFD Map LC-1880. The land is, therefore,
within the administrative jurisdiction and control of the
Bureau of Forest Development, and not subject to
disposition under the Public Land Law.
[Sgd.] ARMANDO CRUZ
Supervising Cartographer 22
This fact was even admitted by petitioners during the
proceedings before the court a quo on March 10, 1986,
when they confirmed that the land has been classified as
forming part of forest land, albeit only on August 25, 1955.
23 Since no imperfect title can be confirmed over lands not
yet classified as disposable or alienable, the title issued to
herein petitioners is considered void ab initio. 24
Under the Regalian doctrine, all lands of the public domain
belong to the State, and the State is the source of any
asserted right to ownership in land and charged with the
conservation of such patrimony. This same doctrine also
states that all lands not otherwise appearing to be clearly
within private ownership are presumed to belong to the
State. 25 To overcome such presumption, incontrovertible
evidence must be shown by the applicant that the land
subject of the application is alienable or disposable. 26
In the case at bar, there was no evidence showing that the
land has been reclassified as disposable or alienable. Before
any land may be declassified from the forest group and
converted into alienable or disposable land for agricultural
or other purposes, there must be a positive act from the
government. Even rules on the confirmation of imperfect
titles do not apply unless and until the land classified as
forest land is released in an official proclamation to that
effect so that it may form part of the disposable agricultural
lands of the public domain. 27 Declassification of forest
land is an express and positive act of Government. 28 It
cannot be presumed. Neither should it be ignored nor
deemed waived. 29 It calls for proof. 30
The court a quo found registrable title in favor of
petitioners based on the Republic’s failure to show that the
land is more valuable as forest land than for agricultural
purposes, a finding which is based on a wrong concept of
what is forest land.chanrob1es virtua1 1aw 1ibrary
There is a big difference between "forest" as defined in the
dictionary and "forest or timber land" as a classification of
land of the public domain in the Constitution. One is
descriptive of what appears on the land while the other is a
legal status, a classification for legal purposes. The "forest
land" started out as a "forest" or vast tracts of wooded land
with dense growths of trees and underbrush. However, the
cutting down of trees and the disappearance of virgin forest
do not automatically convert the land of the public domain
from forest or timber land to alienable agricultural land. 31
The classification of forest land, or any land for that matter,
is descriptive of its legal nature or status, and does not have
to be descriptive of what the land actually looks like. 32 A
person cannot enter into forest land and by the simple act
of cultivating a portion of that land, earn credits towards an
eventual confirmation of imperfect title. The Government
must first declare the forest land to be alienable and
disposable agricultural land before the year of entry,
cultivation, and exclusive and adverse possession can be
counted for purposes of an imperfect title. 33
As ruled in the case of Heirs of Jose Amunategui v. Director
of Forestry: 34
A forested area classified as forest land of the public
domain does not lose such classification simply because
loggers or settlers may have stripped it of its forest cover.
Parcels of land classified as forest land may actually be
covered with grass or planted to crops by kaingin
cultivators or other farmers. "Forest lands" do not have to
be on mountains or in out of the way places. Swampy areas
covered by mangrove trees, nipa palms, and other trees
growing in brackish or sea water may also be classified as
forest land. The classification is descriptive of its legal
nature or status and does not have to be descriptive of
what the land actually looks like. Unless and until the land
classified as "forest" is released in an official proclamation
to that effect so that it may form part of the disposable
agricultural lands of the public domain, the rules on
confirmation of imperfect title do not apply.
Moreover, the original text of Section 48 (b), Chapter VIII of
the Public Land Act, which took effect on December 1,
1936, expressly provided that only agricultural land of the
public domain are subject to acquisitive prescription, to
wit:chanrob1es virtual 1aw library
Section 48. . . .
(a) . . .
(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 of ownership, except as against the
Government, since July twenty-six, eighteen hundred and
ninety-four, except when prevented by war 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)
Thus, it is clear that the applicant must prove not only his
open, continuous, exclusive and notorious possession and
occupation of the land either since time immemorial or for
the period prescribed therein, but most importantly, he
must prove that the land is alienable public land. 35 In the
case at bar, petitioners failed to do so.
Petitioners’ contention that the Republic is now barred
from questioning the validity of the certificate of title
issued to them considering that it took the government
almost eighteen (18) years to assail the same is erroneous.
It is a basic precept that prescription does not run against
the State. 36 The lengthy occupation of the disputed land
by petitioners cannot be counted in their favor, as it
remained part of the patrimonial property of the State,
which property, as stated earlier, is inalienable and
indisposable. 37
In light of the foregoing, the Court of Appeals did not err
when it set aside the June 15, 1967 decision of the court a
quo and ordered that the subject lot be reverted back to
the public domain. Since the land in question is
unregistrable, the land registration court did not acquire
jurisdiction over the same. Any proceedings had or
judgment rendered therein is void and is not entitled to the
respect accorded to a valid judgment.
Consequently, the Court of Appeals rightfully denied
petitioners’ motion to set aside the judgment rendered on
December 12, 1986, in the land registration
case.chanrob1es virtua1 1aw 1ibrary
WHEREFORE, in view of the foregoing, the decision of the
Court of Appeals dated June 27, 1986 in AC-G.R. SP No.
07115, is hereby AFFIRMED in toto.
Without pronouncement as to costs.
SO ORDERED.
 [G.R. No. 129682. March 21, 2002.]
NESTOR PAGKATIPUNAN and ROSALINA MAÑAGAS
PAGKATIPUNAN, Petitioners, v. THE COURT OF APPEALS
and REPUBLIC OF THE PHILIPPINES, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review of the decision 1 of the Court of
Appeals nullifying the decision of the Court of First Instance
of Gumaca, Quezon 2 which confirmed petitioners’ title
over the lots subject of the instant petition. Petitioners
further seek to annul and set aside the resolutions 3 of the
Court of Appeals denying their urgent motion to recall the
judgment entered 4 in the land registration
case.chanrob1es virtua1 1aw 1ibrary
The antecedent facts are as follows:chanrob1es virtual 1aw
library
Sometime in November 1960, petitioners’ predecessors-in-
interest, spouses Getulio Pagkatipunan and Lucrecia
Esquires, filed with the Court of First Instance of Gumaca,
Quezon an application for judicial confirmation and
registration of their title to Lots 1 and 2 of Plan Psu-174406
and Lots 1 and 2 of Plan Psu-112066, all located in San
Narciso, Quezon. 5
On May 4, 1961, the Court of First Instance entered an
order of default against the whole world, except spouses
Felicisimo Almace and Teodulo Medenilla who were given
ten (10) days to file their written opposition as regards Lot
No. 2 of Plan Psu-174406. Upon motion of petitioner’s
predecessors, Lot No. 2 of Plan Psu-174406 was removed
from the coverage of the application. The remaining parcel
of land covered by Lot No. 1 has an area of 3,804.261
square meters.
On June 15, 1967, the Court of First Instance promulgated a
decision confirming petitioners’ title to the property. On
October 23, 1967, OCT No. O-12665 was issued in the name
of petitioners.chanrob1es virtua1 1aw 1ibrary
Almost eighteen (18) years later, or on September 12, 1985,
the Republic of the Philippines filed with the Intermediate
Appellate Court an action to declare the proceedings in LRC
Case No. 91-G, LRC Record No. N-19930 before the Court of
First Instance of Gumaca, Quezon null and void, and to
cancel Original Certificate of Title No. 0-12665 and titles
derived therefrom as null and void, to direct the register of
deeds to annul said certificates of title, and to confirm the
subject land as part of the public domain. 6
The Republic claimed that at the time of filing of the land
registration case and of rendition of the decision on June
15, 1967, the subject land was classified as timberland
under LC Project No. 15-B of San Narciso, Quezon, as shown
in BF Map No. LC-1180; hence inalienable and not subject
to registration. Moreover, petitioners’ title thereto can not
be confirmed for lack of showing of possession and
occupation of the land in the manner and for the length of
time required by Section 48(b), Commonwealth Act No.
141, as amended. Neither did petitioners have any fee
simple title which may be registered under Act No. 496, as
amended. Consequently, the Court of First Instance did not
acquire jurisdiction over the res and any proceedings had
therein were null and void. 7
On the other hand, petitioners raised the special defenses
of indefeasibility of title and res judicata. They argued that
due to the lapse of a considerable length of time, the
judgment of the Court of First Instance of Quezon in the
land registration case has become final and conclusive
against the Republic. Moreover, the action for reversion of
the land to the public domain is barred by prior judgment.
8
In a decision promulgated on June 27, 1986, the
Intermediate Appellate Court held that the land in question
was forestral land; hence not registrable. There was no
evidence on record to show that the land was actually and
officially delimited and classified as alienable or disposable
land of the public domain. Therefore, the Court of First
Instance did not acquire jurisdiction to take cognizance of
the application for registration and to decide the same.
Consequently, the action to declare null and void the June
15, 1967 decision for lack of jurisdiction did not prescribe.
The dispositive portion of the appellate court’s decision
reads:chanrob1es virtual 1aw library
WHEREFORE, judgment is rendered in favor of petitioner
and against respondents, and as prayed for:chanrob1es
virtual 1aw library
(a) The Decision dated June 15, 1967 in LRC Case No. 91-G,
LRC Record No. N-19930 is hereby declared null and void,
and accordingly set aside;
(b) Original Certificate of Title No. 0-12665, and Transfer
Certificates of Title Nos. T-84439, T-93857 and T-117618
deriving therefrom, as well as any other derivative titles,
are declared null and void;
(c) The respondent Register of Deeds for Quezon Province
is ordered to cancel said titles; and
(d) The parcels of land covered thereby are ordered
reverted to the State.
Without pronouncement as to costs." 9
On July 16, 1986, petitioners moved for the reconsideration
of the afore-cited decision 10 reiterating that the land in
question was agricultural because it was possessed and
cultivated as such long before its classification as
timberland by the Bureau of Forestry, in 1955. Petitioners
and their predecessors-in-interest have been in open,
continuous, exclusive, notorious possession and occupation
of said land for agricultural and cattle raising purposes as
far back as the Spanish regime. Following the doctrine in
Oracoy v. Director of Lands, 11 private interest had
intervened and petitioners acquired vested rights which
can no longer be impaired by the subsequent classification
of the land as timberland by the Director of
Forestry.chanrob1es virtua1 1aw 1ibrary
On August 20, 1986, the appellate court denied the motion
for reconsideration for lack of merit. 12 On December 12,
1986, the decision of June 27, 1986 attained finality and
judgment was entered in the book of entries of judgments.
13
On April 2, 1987, petitioners filed an urgent motion to set
aside entry of judgment on the ground that Atty. Cirilo E.
Doronila, petitioners’ counsel of record, was not furnished
a copy of the resolution denying the motion for
reconsideration. 14 In the absence of such notice, the
decision of the appellate court did not become final and
executory.chanrob1es virtua1 1aw 1ibrary
On October 22, 1987, the Court of` Appeals set aside and
lifted the entry of judgment in CA-G.R. SP No. 07115 and
directed the clerk of court to furnish petitioners’ counsel a
copy of the August 20, 1986 resolution. 15
For petitioners’ inaction despite service of the August 20,
1986 resolution, the June 27, 1986 decision became final
and executory. On March 2, 1988, entry of judgment was
again made in the land registration case.
On September 4, 1995, Atty. Doronila withdrew his
appearance as counsel for petitioners. 16
On April 1, 1996, Petitioners, through their new counsel,
Atty. George I. Howard, filed with the Court of Appeals an
urgent motion to recall the entry of judgment, 17 which
was denied by the appellate court on December 16, 1996.
18
The motion for reconsideration was likewise denied on the
ground that it raised arguments already discussed and
resolved in the urgent motion to recall entry of judgment.
19
Hence, the instant petition for review. 20
Petitioners claim that their title to the land became
incontrovertible and indefeasible one (1) year after
issuance of the decree of registration. Hence, the Republic’s
cause of action was barred by prescription and res judicata,
proceedings having been initiated only after about 18 years
from the time the decree of registration was made.
Contrary to the appellate court’s findings, the land is
agricultural and the inclusion and classification thereof by
the Bureau of Forestry in 1955 as timberland can not impair
the vested rights acquired by petitioners’ predecessors-in-
interest who have been in open, continuous, adverse and
public possession of the land in question since time
immemorial and for more than thirty (30) years prior to the
filing of the application for registration in 1960. Hence, the
Court of Appeals committed grave error when it denied
their motion to set aside entry of judgment in the land
registration case.
The petition lacks merit.
Unless public land is shown to have been reclassified or
alienated to a private person by the State, it remains part of
the inalienable public domain. Occupation thereof in the
concept of owner, no matter how long, cannot ripen into
ownership and be registered as a title. 21
Evidence extant on record showed that at the time of filing
of the application for land registration and issuance of the
certificate of title over the disputed land in the name of
petitioners, the same was timberland and formed part of
the public domain, as per certification issued by the Bureau
of Forest Development on April 1, 1985, thus:chanrob1es
virtual 1aw library
TO WHOM IT MAY CONCERN:chanrob1es virtual 1aw
library
This is to certify that the tract of land situated in Vigo
Cantidang, San Narciso, Quezon, containing an area of 3,
804.261 square meters as described in Transfer Certificate
of Title No. T-117618 . . . registered in the name of Spouses
Nestor E. Pagkatipunan and Rosalina Mañgas is verified to
be within the Timberland Block-B, Project No. 15-B of San
Narciso, Quezon, certified and declared as such on August
25, 1955 per BFD Map LC-1880. The land is, therefore,
within the administrative jurisdiction and control of the
Bureau of Forest Development, and not subject to
disposition under the Public Land Law.
[Sgd.] ARMANDO CRUZ
Supervising Cartographer 22
This fact was even admitted by petitioners during the
proceedings before the court a quo on March 10, 1986,
when they confirmed that the land has been classified as
forming part of forest land, albeit only on August 25, 1955.
23 Since no imperfect title can be confirmed over lands not
yet classified as disposable or alienable, the title issued to
herein petitioners is considered void ab initio. 24
Under the Regalian doctrine, all lands of the public domain
belong to the State, and the State is the source of any
asserted right to ownership in land and charged with the
conservation of such patrimony. This same doctrine also
states that all lands not otherwise appearing to be clearly
within private ownership are presumed to belong to the
State. 25 To overcome such presumption, incontrovertible
evidence must be shown by the applicant that the land
subject of the application is alienable or disposable. 26
In the case at bar, there was no evidence showing that the
land has been reclassified as disposable or alienable. Before
any land may be declassified from the forest group and
converted into alienable or disposable land for agricultural
or other purposes, there must be a positive act from the
government. Even rules on the confirmation of imperfect
titles do not apply unless and until the land classified as
forest land is released in an official proclamation to that
effect so that it may form part of the disposable agricultural
lands of the public domain. 27 Declassification of forest
land is an express and positive act of Government. 28 It
cannot be presumed. Neither should it be ignored nor
deemed waived. 29 It calls for proof. 30
The court a quo found registrable title in favor of
petitioners based on the Republic’s failure to show that the
land is more valuable as forest land than for agricultural
purposes, a finding which is based on a wrong concept of
what is forest land.chanrob1es virtua1 1aw 1ibrary
There is a big difference between "forest" as defined in the
dictionary and "forest or timber land" as a classification of
land of the public domain in the Constitution. One is
descriptive of what appears on the land while the other is a
legal status, a classification for legal purposes. The "forest
land" started out as a "forest" or vast tracts of wooded land
with dense growths of trees and underbrush. However, the
cutting down of trees and the disappearance of virgin forest
do not automatically convert the land of the public domain
from forest or timber land to alienable agricultural land. 31
The classification of forest land, or any land for that matter,
is descriptive of its legal nature or status, and does not have
to be descriptive of what the land actually looks like. 32 A
person cannot enter into forest land and by the simple act
of cultivating a portion of that land, earn credits towards an
eventual confirmation of imperfect title. The Government
must first declare the forest land to be alienable and
disposable agricultural land before the year of entry,
cultivation, and exclusive and adverse possession can be
counted for purposes of an imperfect title. 33
As ruled in the case of Heirs of Jose Amunategui v. Director
of Forestry: 34
A forested area classified as forest land of the public
domain does not lose such classification simply because
loggers or settlers may have stripped it of its forest cover.
Parcels of land classified as forest land may actually be
covered with grass or planted to crops by kaingin
cultivators or other farmers. "Forest lands" do not have to
be on mountains or in out of the way places. Swampy areas
covered by mangrove trees, nipa palms, and other trees
growing in brackish or sea water may also be classified as
forest land. The classification is descriptive of its legal
nature or status and does not have to be descriptive of
what the land actually looks like. Unless and until the land
classified as "forest" is released in an official proclamation
to that effect so that it may form part of the disposable
agricultural lands of the public domain, the rules on
confirmation of imperfect title do not apply.
Moreover, the original text of Section 48 (b), Chapter VIII of
the Public Land Act, which took effect on December 1,
1936, expressly provided that only agricultural land of the
public domain are subject to acquisitive prescription, to
wit:chanrob1es virtual 1aw library
Section 48. . . .
(a) . . .
(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 of ownership, except as against the
Government, since July twenty-six, eighteen hundred and
ninety-four, except when prevented by war 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)
Thus, it is clear that the applicant must prove not only his
open, continuous, exclusive and notorious possession and
occupation of the land either since time immemorial or for
the period prescribed therein, but most importantly, he
must prove that the land is alienable public land. 35 In the
case at bar, petitioners failed to do so.
Petitioners’ contention that the Republic is now barred
from questioning the validity of the certificate of title
issued to them considering that it took the government
almost eighteen (18) years to assail the same is erroneous.
It is a basic precept that prescription does not run against
the State. 36 The lengthy occupation of the disputed land
by petitioners cannot be counted in their favor, as it
remained part of the patrimonial property of the State,
which property, as stated earlier, is inalienable and
indisposable. 37
In light of the foregoing, the Court of Appeals did not err
when it set aside the June 15, 1967 decision of the court a
quo and ordered that the subject lot be reverted back to
the public domain. Since the land in question is
unregistrable, the land registration court did not acquire
jurisdiction over the same. Any proceedings had or
judgment rendered therein is void and is not entitled to the
respect accorded to a valid judgment.
Consequently, the Court of Appeals rightfully denied
petitioners’ motion to set aside the judgment rendered on
December 12, 1986, in the land registration
case.chanrob1es virtua1 1aw 1ibrary
WHEREFORE, in view of the foregoing, the decision of the
Court of Appeals dated June 27, 1986 in AC-G.R. SP No.
07115, is hereby AFFIRMED in toto.
Without pronouncement as to costs.
SO ORDERED.
[G.R. No. 137887. February 28, 2000.]
REPUBLIC OF THE PHILIPPINES, Petitioner, v. DAMIAN
ERMITAÑO DE GUZMAN, DEOGRACIAS ERMITAÑO DE
GUZMAN, ZENAIDA ERMITAÑO DE GUZMAN, ALICIA
ERMITAÑO DE GUZMAN, SALVADOR ERMITAÑO DE
GUZMAN, DOMINGA ERMITAÑON, NATIVIDAD
ENCARNACION, MELBA E. TORRES, FLORA MANALO,
SOCORRO DELA ROSA, JOSE ERMITAÑO, ESMERANDO
ERMITAÑO, TRICOM DEVELOPMENT CORPORATION and
FILOMENO ERMITAÑO, Respondents.
DECISION
YNARES-SANTIAGO, J.:
Before us is a Petition for Review on Certiorari of a decision
of the Court of Appeals 1 affirming the judgment of the
Regional Trial Court of Tagaytay, Branch 18, in LRC Cases
No. TG-362 and TG-396. 2
The facts are simple:chanrobles.com.ph:red
Conflicting applications for confirmation of imperfect title
were filed by Norma Almanzor and private respondent
Salvador De Guzman over parcels of land located in Silang,
Cavite. After trial on the merits, the lower court rendered
judgment in favor of private respondent De Guzman, to wit
— private respondents only in 1991. 6 Thus the period of
"WHEREFORE, judgment is hereby rendered by this Court
as follows:chanrob1es virtual 1aw library
(1) In LRC Case No. TG-362, this Court hereby denies the
application for registration of the parcels of land mentioned
therein by applicant Norma R. Almanzor for lack of factual
and legal bases;
(2) In LRC Case No. 396, this Court hereby approves the
petition for registration and thus places under the
operation of Act 141, Act 946 and/or P.D. 1529, otherwise
known as the Property Registration Law, the land described
in Plan Psu-67537-Amd-2 and containing an area of 308,638
square meters, as supported by its technical descriptions
now forming parts of the records of these cases, in addition
to other proofs adduced in the names of petitioners
Damian Ermitaño De Guzman, Deogracias Ermitaño De
Guzman, Zenaida Ermitaño De Guzman, Alicia Ermitaño De
Guzman and Salvador De Guzman, all married, of legal age
and with residence and postal addresses at Magallanes
Street, Carmona, Cavite, subject to the claims of oppositors
Dominga Ermitaño, Natividad Encarnacion, Melba E. Torres,
Flora Manalo, Socorro de la Rosa, Jose Ermitaño and
Esmeranso Ermitaño under an instrument entitled ‘Waiver
of Rights with Conformity" the terms and conditions of
which are hereby ordered by this Court to be annotated at
the back of the certificates of title to be issued to the
petitioners pursuant to the judgment of this Court.
SO ORDERED." 3
As earlier mentioned, on appeal to the Court of Appeals,
said judgment was affirmed and the petition for
registration of private respondents over the subject parcels
of land was approved.
Hence, the instant Petition, anchored upon the following
assignments of error —
I
THE TRIAL COURT ERRED IN NOT FINDING THAT THE DE
GUZMANS HAVE NOT SUBMITTED PROOF OF THEIR FEE
SIMPLE TITLE OR POSSESSION IN THE MANNER AND FOR
THE LENGTH OF TIME REQUIRED BY LAW TO JUSTIFY
CONFIRMATION OF AN IMPERFECT TITLE.
II
THE TRIAL COURT ERRED IN NOT DECLARING THAT THE DE
GUZMANS HAVE NOT OVERTHROWN THE PRESUMPTION
THAT THE LANDS ARE PORTIONS OF THE PUBLIC DOMAIN
BELONGING TO THE REPUBLIC OF THE PHILIPPINES. 4
We find merit in the instant Petition.
It is not disputed that the subject parcels of land were
released as agricultural land only in 1965 5 while the
petition for confirmation of imperfect title was filed by
occupancy of the subject parcels of land from 1965 until
the time the application was filed in 1991 was only twenty
six (26) years, four (4) years short of the required thirty (30)
year period possession requirement under Sec. 14, P.D. 29
and R.A. No. 6940.chanroblesvirtuallawlibrary
In finding that private respondents’ possession of the
subject property complied with law, the Court of Appeals
reasoned out that —
"(W)hile it is true that the land became alienable and
disposable only in December, 1965, however, records
indicate that as early as 1928, Pedro Ermitaño, appellees’
predecessor-in-interest, was already in possession of the
property, cultivating it and planting various crops thereon.
It follows that appellees’ possession as of the time of the
filing of the petition in 1991 when tacked to Pedro
Ermitaño’s possession is 63 years or more than the required
30 years period of possession. The land, which is
agricultural, has been converted to private property ." 7
We disagree.
The Court of Appeals’ consideration of the period of
possession prior to the time the subject land was released
as agricultural is in direct contravention of the
pronouncement in Almeda v. Court of Appeals, 8 to wit —
"The Court of Appeals correctly ruled that the private
respondents had not qualified for a grant under Section
48(b) of the Public Land Act because their possession of the
land while it was still inalienable forest land, or before it
was declared alienable and disposable land of the public
domain on January 13, 1968, could not ripen into private
ownership, and should be excluded from the computation
of the 30-year open and continuous possession in concept
of owner required under Section 48(b) of Com. Act 141. It
accords with our ruling in Director of Lands v. Court of
Appeals, Ibarra Bishar, Et Al., 178 SCRA 708,
that:chanrob1es virtual 1aw library
‘Unless and until the land classified as forest is released in
an official proclamation to that effect so that it may form
part of the disposable lands of the public domain, the rules
on confirmation of imperfect title do not apply
(Amunategui v. Director of Forestry, 126 SCRA 69; Director
of Lands v. Court of Appeals, 129 SCRA 689; Director of
Lands v. Court of Appeals, 133 SCRA 701; Republic v. Court
of Appeals, 148 SCRA 480; Vallarta v. Intermediate
Appellate Court, 151 SCRA 679).
‘Thus possession of forest lands, however long, cannot
ripen into private ownership (Vamo v. Government, 41 Phil.
161 [1920]; Adorable v. Director of Forestry, 17 Phil. 410
[1960]). A parcel of forest land is within the exclusive
jurisdiction of the Bureau of Forestry and beyond the
power and jurisdiction of the cadastral court to register
under the Torrens System (Republic v. Court of Appeals, 89
SCRA 648; Republic v. Vera, 120 SCRA 210 [1983]; Director
of Lands v. Court of Appeals, 129 SCRA 689 [1984]).’"
(Emphasis ours)
the time the subject land was declared alienable until the
time of their application, private respondents’ occupation
thereof was only twenty six (26) years. We cannot consider
their thirty seven (37) years of possession prior to the
release of the land as alienable because absent the fact of
declassification prior to the possession and cultivation in
good faith by petitioner, the property occupied by him
remained classified as forest or timberland, which he could
not have acquired by prescription. Further, jurisprudence is
replete with cases which reiterate that forest lands or
forest reserves are not capable of private appropriation and
possession thereof, however long, cannot convert them
into private property. Possession of the land by private
respondents, whether spanning decades or centuries, could
never ripen into ownership. This Court is constrained to
abide by the latin maxim" (d)ura lex, sed lex." 12
WHEREFORE, the instant Petition is GRANTED and the
February 26, 1998 decision of the Court of Appeals in CA-
G.R. CV No. 48785 as well as that of the Regional Trial Court
of Cavite, Branch 38, in LRC Case No. TG-396 are both
REVERSED. Judgment is rendered dismissing LRC Case No.
396 for failure of the applicants therein to comply with the
thirty year occupancy and possessory requirements of law
for confirmation of imperfect title. No pronouncement as
to costs.
SO ORDERED.chanrobles virtual lawlibrary

So, too, is the Court of Appeals’ reliance on the case of

Director of Land Management v. Court of Appeals 9
misplaced. There, while the period of possession of the
applicant’s predecessor-in-interest was tacked to his own
possession to comply with the required thirty year period
possession requirement, the land involved therein was not
forest land but alienable public land. On the other hand, in
the case before us, the property subject of private
respondents’ application was only declared alienable in
1965. Prior to such date, the same was forest land
incapable of private appropriation. It was not registrable
and possession thereof, no matter how lengthy, could not
convert it into private property, (unless) and until such
lands were reclassified and considered disposable and
alienable. 10

In summary, therefore, prior to its declaration as alienable

land in 1965, any occupation or possession thereon cannot
be considered in the counting of the thirty year possession
requirement. This is in accord with the ruling in Almeda v.
Court of Appeals, (supra), and because the rules on the
confirmation of imperfect titles do not apply unless and
until the land classified as forest land is released in an
official proclamation to that effect so that it may form part
of the disposable agricultural lands of the public domain.
11

While we acknowledge the Court of Appeals’ finding that

private respondents and their predecessors-in-interest
have been in possession of the subject land for sixty three
(63) years at the time of the application of their petition,
our hands are tied by the applicable laws and jurisprudence
in giving practical relief to them. The fact remains that from
 [G.R. No. 95608. January 21, 1997.]
SPOUSES IGNACIO PALOMO and TRINIDAD PASCUAL, and
CARMEN PALOMO VDA. DE BUENAVENTURA, Petitioners,
v. THE HONORABLE COURT OF APPEALS, THE REPUBLIC OF
THE PHILIPPINES, FAUSTINO J. PERFECTO, RAFFY
SANTILLAN, BOY ARIADO, LORENZO BROCALES,
SALVADOR DOE, and other DOES, Respondents.
Kallos Law Office for petitioners.
SYLLABUS
1. CIVIL LAW; LAW ON NATURAL RESOURCES; MODES OF
ACQUISITION OF LANDS DURING THE SPANISH REGIME. —
The Philippines passed to the Spanish Crown by discovery
and conquest in the 16th century. Before the Treaty of Paris
in April 11, 1899, our lands, whether agricultural, mineral or
forest were under the exclusive patrimony and dominion of
the Spanish Crown. Hence, private ownership of land could
only be acquired through royal concessions which were
documented in various forms, such as (1) Titulo Real or
Royal Grant, (2) Concesion Especial or Special Grant, (3)
Titulo de Compra or Title by Purchase and (4) Informacion
Posesoria or Possessory Information title obtained under
the Spanish Mortgage Law or under the Royal Decree of
January 26, 1889. Unfortunately, no proof was presented
that the petitioners’ predecessors in interest derived title
from an old Spanish grant.
2. REMEDIAL LAW; CIVIL ACTIONS; LACHES; FAILURE FOR 83
YEARS TO ASSAIL INCLUSION OF CLAIMED PROPERTIES TO
FOREST RESERVATION. — Moreover, despite claims by the
petitioners that their predecessors in interest were in open,
adverse and continuous possession of the lands for 20 to 50
years prior to their registration in 1916- 1917, the lands
were surveyed only in December 1913, the very same year
they were acquired by Diego Palomo. Curiously in February
1913 or 10 months before the lands were surveyed for
Diego Palomo, the government had already surveyed the
area in preparation for its reservation for provincial park
purposes. If the petitioners’ predecessors in interest were
indeed in possession of the lands for a number of years
prior to their registration in 1916-1917, they would have
undoubtedly known about the inclusion of these properties
in the reservation in 1913. It certainly is a trifle late at this
point to argue that the government had no right to include
these properties in the reservation when the question
should have been raised 83 years ago.
3. ID.; ID.; ESTOPPEL; DOES NOT OPERATE AGAINST THE
GOVERNMENT FOR ACT OF ITS AGENTS. — As regards the
petitioners’ contention that inasmuch as they obtained the
titles without government opposition, the government is
now estopped from questioning the validity of the
certificates of title which were granted. As correctly
pointed out by the respondent Court of Appeals, the
principle of estoppel does not operate against the
Government for the act of its agents.
4. CIVIL LAW; LAW ON NATURAL RESOURCES; FOREST
LAND, NOT REGISTRABLE. — Assuming that the decrees of
the Court of First Instance were really issued, the lands are
still not capable of appropriation. The adverse possession
which may be the basis of a grant of title in confirmation of
imperfect title cases applies only to alienable lands of the
public domain.
5. REMEDIAL LAW; EVIDENCE; TAX DECLARATIONS; NOT
CONCLUSIVE PROOF OF OWNERSHIP. — There is no
question that the lands in the case at bar were not
alienable lands of the public domain. As testified by the
District Forester, records in the Bureau of Forestry show
that the subject lands were never declared as alienable and
disposable and subject to private alienation prior to 1913
up to the present. Moreover, as part of the reservation for
provincial park purposes, they form part of the forest zone.
It is elementary in the law governing natural resources that
forest land cannot be owned by private persons. It is not
registrable and possession thereof, no matter how lengthy,
cannot convert it into private property, unless such lands
are reclassified and considered disposable and alienable.
Neither do the tax receipts which were presented in
evidence prove ownership of the parcels of land inasmuch
as the weight of authority is that tax declarations are not
conclusive proof of ownership in land registration cases.
6. ID.; CIVIL ACTIONS; ANNULMENT OF TITLE; TITLE SHOULD
BE ANNULLED ONLY WITH RESPECT TO AREA FALLING
WITHIN THE FOREST RESERVATION. — Since 1,976 square
meters of the 3,384 square meters covered by TCT 3913 fall
within the reservation, TCT 3913 should be annulled only
with respect to the aforesaid area.
7. ID.; ID.; INJUNCTION WITH DAMAGES; ABSENCE OF
LIABILITY FOR DAMAGES WHERE BAMBOOS CUT BY THE
EMPLOYEES OF THE BUREAU OF FOREST DEVELOPMENT
WERE WITHIN THE PERIMETER OF THE NATIONAL PARK. —
Having disposed of the issue of ownership, we now come to
the matter regarding the forfeiture of improvements
introduced on the subject lands. It bears emphasis that
Executive Order No. 40 was already in force at the time the
lands in question were surveyed for Diego Palomo.
Petitioners also apparently knew that the subject lands
were covered under the reservation when they filed a
petition for reconstitution of the lost original certificates of
title inasmuch as the blueprint of Survey Work Order
Number 21781 of Plan II-9299 approved by the Chief of the
Land Registration Office Enrique Altavas in 1953 as a true
and correct copy for the Original Plan No. II-9299 filed in
the Bureau of Lands dated September 11, 1948 contains
the following note, "in conflict with provincial reservation."
In any case, petitioners are presumed to know the law and
the failure of the government to oppose the registration of
lands in question is no justification for the petitioners to
plead good faith in introducing improvements on the lots.
Inasmuch as the bamboo groves leveled in TCT 3913 and
subject of Civil Case T-143, were within the perimeter of
the national park, no pronouncement as to damages is in
order.
DECISION

ROMERO, J.:
The issue in the case at bar pertains to ownership of 15
parcels of land in Tiwi, Albay which form part of the "Tiwi
Hot Spring National Park." The facts of the case are as
follows.
On June 13, 1913, then Governor General of the Philippine
Islands, William Cameron Forbes issued Executive Order
No. 40 which reserved for provincial park purposes some
440,530 square meters of land situated in Barrio Naga,
Municipality of Tiwi, Province of Albay pursuant to the
provisions of Act 648 of the Philippine Commission. 1
Subsequently, the then Court of First Instance of Albay,
15th Judicial District, United States of America, ordered the
registration of 15 parcels of land covered by Executive
Order No. 40 in the name of Diego Palomo on December 9,
1916; 2 December 28, 1916; 3 and January 17, 1917. 4
Diego Palomo donated these parcels of land consisting of
74,872 square meters which were allegedly covered by
Original Certificates of Title Nos. 513, 169, 176 and 173 5 to
his heirs, herein petitioners, Ignacio and Carmen Palomo
two months before his death in April 1937. 6
Claiming that the aforesaid original certificates of title were
lost during the Japanese occupation, Ignacio Palomo filed a
petition for reconstitution with the Court of First Instance
of Albay on May 30, 1950. 7 The Register of Deeds of Albay
issued Transfer Certificates of Title Nos. 3911, 3912, 3913
and 3914 sometime in October 1953. 8
On July 10, 1954 President Ramon Magsaysay issued
Proclamation No. 47 converting the area embraced by
Executive Order No. 40 into the "Tiwi Hot Spring National
Park," under the control, management, protection and
administration of the defunct Commission of Parks and
Wildlife, now a division of the Bureau of Forest
Development. The area was never released as alienable and
disposable portion of the public domain and, therefore, is
neither susceptible to disposition under the provisions of
the Public Land Law (CA 141) nor registrable under the Land
Registration Act (Act No. 496).
The Palomos, however, continued in possession of the
property, paid real estate taxes thereon 9 and introduced
improvements by planting rice, bananas, pandan and
coconuts. On April 8, 1971, petitioner Carmen vda. de
Buenaventura and spouses Ignacio Palomo and Trinidad
Pascual mortgaged the parcels of land covered by TCT
3911, 3912, 3913 and 3914 to guarantee a loan of P200,000
from the Bank of the Philippine Islands.
In May 7, 1974 petitioner Carmen vda. de Buenaventura
and spouses Ignacio Palomo and Trinidad Pascual filed Civil
Case No. T-143 before the then Court of First Instance of
Albay for Injunction with damages against private
respondents Faustino J. Perfecto, Raffy Santillan, Boy
Ariado, Lorenzo Brocales, Salvador Doe and other Does
who are all employees of the Bureau of Forest
Development who entered the land covered by TCT No.
3913 and/or TCT 3914 and cut down bamboos thereat,
totally leveling no less than 4 groves worth not less than
P2,000.00.
On October 11, 1974, the Republic of the Philippines filed
Civil Case No. T-176 for annulment and cancellation of
Certificates of Title involving the 15 parcels of land
registered in the name of the petitioners and subject of
Civil Case T-143. Impleaded with the petitioners as
defendants were the Bank of the Philippine Islands, Legazpi
Branch and the Register of Deeds of Albay.
The case against the Bank of Philippine Islands was
dismissed because the loan of P200,000 with the Bank was
already paid and the mortgage in its favor cancelled.
A joint trial of Civil Case T-143 and T-176 was conducted
upon agreement of the parties and on July 31, 1986, the
trial court rendered the following
decision:jgc:chanrobles.com.ph
"WHEREFORE, premises considered, judgment is hereby
rendered:chanrob1es virtual 1aw library
IN CIVIL CASE No. T-143, in favor of the defendants and
against the plaintiffs, dismissing the complaint for
injunction and damages, as it is hereby DISMISSED.
Costs against the plaintiffs.
In CIVIL CASE No. T-176, in favor of the plaintiffs and
against the defendants:chanrob1es virtual 1aw library
(1) Declaring null and void and no force and effect the
Order dated September 14, 1953, as well as the Original
Certificate of Titles Nos. 153, 10 169, 173 and 176 and
Transfer Certificates of Titles Nos. 3911, T-3912, T-3913,
and T-3914, all of the Register of Deeds of Albay and all
transactions based on said titles.
(2) Forfeiting in favor of the plaintiff Government any and
all improvements on the lands in question that are found
therein and introduced by the defendants;
(3) Declaring Lot Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12,
Plan II-9299 and Lots 1, 21, 11 3 and 4 of Plan II-9205 as
part of the Tiwi Hot Spring National Park;
(4) and Finally, the Register of Deeds of Albay is hereby
ordered to cancel the alleged Original Certificates of Titles
Nos. 513, 169, 173 and 176, Transfer Certificates of Title
Nos. T-3911, T-3912, T-3913 and T-3914.
Costs against the defendants.
So Ordered." 12
The court a quo in ruling for the Republic found no
sufficient proof that the Palomos have established property
rights over the parcels of land in question before the Treaty
of Paris which ended the Spanish-American War at the end
of the century. The court further stated that assuming that
the decrees of the Court of First Instance of Albay were
really issued, the Palomos obtained no right at all over the
properties because these were issued only when Executive
Order No. 40 was already in force. At this point, we take
note that although the Geodetic Engineer of the Bureau of
Lands appointed as one of the Commissioners in the
relocation survey of the properties stated in his reamended
report that of the 3,384 square meters covered by Lot 2,
Plan II-9205, only 1,976 square meters fall within the
reservation area, 13 the RTC ordered TCT 3913 covering the
entire Lot 21 (sic) Plan II-9205 cancelled.
The petitioners appealed to the Court of Appeals which
affirmed in toto the findings of the lower Court; hence this
petition raising the following issues:chanrob1es virtual 1aw
library
1. The respondent Court of Appeals committed grave abuse
of discretion in affirming in toto the decision of the lower
court.
2. The declaration of nullity of the original certificates of
title and subsequent transfer certificates of titles of the
petitioners over the properties in question is contrary to
law and jurisprudence on the matter.
3. The forfeiture of all improvements introduced by the
petitioners in the premises in favor of the government is
against our existing law and jurisprudence.
The issues raised essentially boil down to whether or not
the alleged original certificate of titles issued pursuant to
the order of the Court of First Instance in 1916-1917 and
the subsequent TCTs issued in 1953 pursuant to the
petition for reconstitution are valid.
Petitioners contend that the Treaty of Paris which ended
the Spanish-American War at the end of the 19th century
recognized the property rights of Spanish and Filipino
citizens and the American government had no inherent
power to confiscate properties of private citizens and
declare them part of any kind of government reservation.
They allege that their predecessors in interest have been in
open, adverse and continuous possession of the subject
lands for 20-50 years prior to their registration in 1916-
1917. Hence, the reservation of the lands for provincial
purposes in 1913 by then Governor-general Forbes was
tantamount to deprivation of private property without due
process of law.
In support of their claim, the petitioners presented copies
of a number of decisions of the Court of First Instance of
Albay, 15th Judicial District of the United States of America
which state that the predecessors in interest of the
petitioners’ father Diego Palomo, were in continuous, open
and adverse possession of the lands from 20 to 50 years at
the time of their registration in 1916.
We are not convinced.
The Philippines passed to the Spanish Crown by discovery
and conquest in the 16th century. Before the Treaty of Paris
in April 11, 1899, our lands, whether agricultural, mineral or
forest were under the exclusive patrimony and dominion of
the Spanish Crown. Hence, private ownership of land could
only be acquired through royal concessions which were
documented in various forms, such as (1) Titulo Real or
Royal Grant," (2) Concession Especial or Special Grant, (3)
Titulo de Compra or Title by Purchase and (4) Informacion
Posesoria or Possessory Information title obtained under
the Spanish Mortgage Law or under the Royal Decree of
January 26, 1889.
Unfortunately, no proof was presented that the petitioners’
predecessors in interest derived title from an old Spanish
grant. Petitioners placed much reliance upon the
declarations in Expediente No. 5, G.L.R.O. Record Decision
No. 9820, dated January 17, 1917; Expediente No. 6,
G.L.R.O. Record No. 9821, dated December 28, 1916;
Expediente No. 7, G.L.R.O. Record No. 9822, dated
December 9, 1916; Expediente No. 8, G.L.R.O. Record No.
9823, dated December 28, 1916 and Expediente No. 10,
G.L.R.O. Record No. 9868, dated December 9, 1916 of the
Court of First Instance of Albay, 15th Judicial District of the
United States of America presided by Judge Isidro Paredes
that their predecessors in interest were in open, adverse
and continuous possession of the subject lands for 20-50
years. 14 The aforesaid "decisions" of the Court of First
Instance, however, were not signed by the judge but were
merely certified copies of notification to Diego Palomo
bearing the signature of the clerk of court.
Moreover, despite claims by the petitioners that their
predecessors in interest were in open , adverse and
continuous possession of the lands for 20 to 50 years prior
to their registration in 1916-1917, the lands were surveyed
only in December 1913, the very same year they were
acquired by Diego Palomo. Curiously, in February 1913 or
10 months before the lands were surveyed for Diego
Palomo, the government had already surveyed the area in
preparation for its reservation for provincial park purposes.
If the petitioners’ predecessors in interest were indeed in
possession of the lands for a number of years prior to their
registration in 1916-1917, they would have undoubtedly
known about the inclusion of these properties in the
reservation in 1913. It certainly is a trifle late at this point to
argue that the government had no right to include these
properties in the reservation when the question should
have been raised 83 years ago.
As regards the petitioners’ contention that inasmuch as
they obtained the titles without government opposition,
the government is now estopped from questioning the
validity of the certificates of title which were granted. As
correctly pointed out by the respondent Court of Appeals,
the principle of estoppel does not operate against the
Government for the act of its agents. 15
Assuming that the decrees of the Court of First Instance
were really issued, the lands are still not capable of
appropriation. The adverse possession which may be the
basis of a grant of title in confirmation of imperfect title
cases applies only to alienable lands of the public domain.
There is no question that the lands in the case at bar were
not alienable lands of the public domain. As testified by the
District Forester, records in the Bureau of Forestry show
that the subject lands were never declared as alienable and
disposable and subject to private alienation prior to 1913
up to the present. 16 Moreover, as part of the reservation
for provincial park purposes, they form part of the forest
zone.

It is elementary in the law governing natural resources that

forest land cannot be owned by private persons. It is not
registrable and possession thereof, no matter how lengthy,
cannot convert it into private property, 17 unless such
lands are reclassified and considered disposable and
alienable. chanroblesvirtuallawlibrary

Neither do the tax receipts which were presented in

evidence prove ownership of the parcels of land inasmuch
as the weight of authority is that tax declarations are not
conclusive proof of ownership in land registration cases. 18

Having disposed of the issue of ownership, we now come to

the matter regarding the forfeiture of improvements
introduced on the subject lands. It bears emphasis that
Executive Order No. 40 was already in force at the time the
lands in question were surveyed for Diego Palomo.
Petitioners also apparently knew that the subject lands
were covered under the reservation when they filed a
petition for reconstitution of the lost original certificates of
title inasmuch as the blueprint of Survey Work Order
Number 21781 of Plan II-9299 approved by the Chief of the
Land Registration Office Enrique Altavas in 1953 as a true
and correct copy of the Original Plan No. II-9299 filed in the
Bureau of Lands dated September 11, 1948 19 contains the
following note, "in conflict with provincial reservation." 20
In any case, petitioners are presumed to know the law and
the failure of the government to oppose the registration of
the lands in question is no justification for the petitioners to
plead good faith in introducing improvements on the lots.

Finally, since 1,976 square meters of the 3,384 square

meters covered by TCT 3913 fall within the reservation, TCT
3913 should be annulled only with respect to the aforesaid
area. Inasmuch as the bamboo groves leveled in TCT 3913
and subject of Civil Case T-143, 21 were within the
perimeter of the national park, 22 no pronouncement as to
damages is in order.

WHEREFORE, the decision of the Court of Appeals is hereby

AFFIRMED with the modification that TCT 3913 be annulled
with respect to the 1,976 square meter area falling within
the reservation zone.

SO ORDERED.
 [G.R. No. 130906. February 11, 1999]
REPUBLIC OF THE PHILIPPINES represented by the
DIRECTOR, LANDS MANAGEMENT
BUREAU, Petitioner,v. FELIX S. IMPERIAL JR., FELIZA S.
IMPERIAL, ELIAS S. IMPERIAL, MIRIAM S. IMPERIAL,
LOLITA ALCAZAR, SALVADOR ALCAZAR, EANCRA
CORPORATION, and the REGISTER OF DEEDS of LEGASPI
CITY,Respondents.
DECISION
DAVIDE, JR., C.J.:
In this petition for review on certiorari, petitioner seeks to
reverse and set aside the (1) Resolution1 of 30 July 1997 of
the Court Appeals in CA-G.R. CV No. 53972 granting
petitioner until 11 August 1997 within which to file its
appellants brief, and the (2) Resolution2 of 29 September
1997 dismissing petitioners appeal. The appeal was taken
from the Order3 of Branch I, Regional Trial Court of Legaspi
City in Civil Case No. 9176, which petitioner instituted to
cancel the title to some lots issued to private respondents
for the reversion thereof to the mass of the public domain.
The facts of the case, as found by the trial court, are as
follows:
On September 12, 1917, the late Elias Imperial was issued
Original Certificate of Title (OCT) 408 (500) pursuant to
Decree No. 55173 of the then Court of First Instance of
Albay, covering a parcel of land identified as Lot No. 1113
of the Cadastral Survey of Legazpi, G.L. Cad. Rec. No. 88,
containing an area of fifty eight thousand and twenty six
square meters (58,026), more or less, situated in Legazpi
City.
Original Certificate of Title No. 408 (500) was subdivided
and further subdivided resulting in the issuance of several
titles, which are now the subject of this case, in the name
of the following defendants:
TCT NO. LOT NO. AREA (sq.m.) REGISTERED OWNER
1. 978 1113-M-3 5,853 Elias S. Imperial
2. 31054 1113-M-4-A 1,200 Felix S. Imperial
3. 31055 1113-M-4-B 4,653 Felix S. Imperial
4. 35508 1113-M-2-A 1,335 EANCRA CORPORATION
5. 35509 1113-M-2-B 4,518 Feliza S. Imperial
6. 35213 1113-M-1-A 1,500 Lolita Alcazar and Salvador
Alcazar
7. 35214 1113-M-1-B 4,353 Miriam S. Imperial
The plaintiff seeks to judicially declare the transfer
certificate of titles described in the preceding paragraphs
null and void; to order the said defendants to surrender the
owners duplicate of their aforesaid titles to the Register of
Deeds of Legazpi City and directing [sic] the latter to cancel
them as well as the originals thereof and to declare the
reversion of the lots covered by the aforesaid titles to the
mass of the public domain.
In support of its stand, the plaintiff contends among others
that on letter request addressed to the Honorable Solicitor
General dated March 20, 1994, residents of Purok No. 1
and Bgy. 24, Legazpi City, represented by Antonio F.
Aguilar, requested that Original Certificate of Title No. 408
(500) in the name of Elias Imperial be cancelled and the
land covered thereby reverted back to the State on the
ground that the land subject thereof is a foreshore land.
Subsequent investigation conducted by the Department of
Environment and Natural Resources (DENR), Region V,
Legazpi City, upon the request of the Office of the Solicitor
General (OSG) disclosed that OCT No. 408 (500), from
whence the transfer certificate of titles of the defendants
were derived is null and void, and was, thus, acquired to
the prejudice of the State, considering that:
a. the parcel of land covered by OCT No. 408
(500) has the features of a foreshore land;
b. natural ground plants such as mangroves and
nipas thrive on certain portions of the land in
question;
c. some portions of the same land are
permanently submerged in seawater even at
low tide;
d. some portions of the same land are not
anymore inundated by seawater due to the
considerable amount of improvements built
thereon and the placing of boulders and other
land-filling materials by the actual residents
therein.
The plaintiff alleged that consequently on the basis of said
findings, the Director, Lands Management Bureau
recommended to the Director, Lands Services, DENR, the
cancellation of OCT No. 406 [sic] (500) as well as its
derivative titles through appropriate proceedings.
The plaintiff contended that since the land in question is a
foreshore land, the same cannot be registered under the
Land Registration Act (Act No. 496, now P.D. No. 1529) in
the name of private persons since it is non-alienable and
belongs to the public domain, administered and managed
by the State for the benefit of the general public.
The plaintiff further contended that under Public Land Act
No. 141, as amended, such land shall be disposed of to
private parties by lease only and not otherwise as soon as
the President upon recommendation of the Secretary of
Agriculture and Natural Resources, now DENR, shall declare
that the same are not necessary for public services and are
open to disposition.
Within the time for pleading, defendants EANCRA
Corporation, Lolita Alcazar and Salvador Alcazar filed their
answer with cross-claim, while the rest of the defendants,
namely, Felix S. Imperial, Jr., Feliza S. Imperial, Elias S.
Imperial and Miriam S. Imperial filed a motion to dismiss.
The aforesaid motion to dismiss was anchored on the
following grounds: (a) the lands covered by the defendants
transfer certificate of titles which were derived from OCT
No. 408 (500) was already the subject of the cadastral
proceedings in 1917 and which has been implemented by
the issuance of OCT No. 408 (500) under the Torrens
system.
The adjudication by the cadastral court is binding against
the whole world including the plaintiff since cadastral
proceedings are in rem and the government itself through
the Director of Lands instituted the proceedings and is a
direct and active participant. OCT No. 408 (500) issued
under the Torrens system has long become incontrovertible
after the lapse of one year from the entry of decree of
registration; (b) OCT No. 408 (500) was judicially
reconstituted in 1953 in accordance with Republic Act [No.]
26 in the then Court of First Instance of Albay, by Jose R.
Imperial Samson in Court Case No. RT-305, entitled, The
Director of Lands vs. Jose R. Imperial Samson. The
proceedings in the judicial reconstitution in said case No.
RT-305 is one in rem and has long become final and gave
rise to resjudicata and therefore can no longer legally be
assailed; (c) the findings of the Director of Lands dated
February 22, 1983 [sic] from which no appeal was taken in
said administrative investigation that Lot No. 1113, Cad. 27
and a portion of it covered by Lot No. 1113-M-5 in the
name of Jose Baritua cannot be considered as part of the
shore or foreshore of Albay Gulf. This finding of the
Director of Lands has become final and thus constitute res
judicata, and finally moving defendants contended that
several interrelated cases have been decided related to
OCT No. 408 (500), specifically Civil Cases Nos. 6556, 6885,
6999 and 7104, all of the Regional Trial Court, Legazpi City
which have been brought by several squatters [sic] family
against Jose Baritua attacking the latters title over Lot No.
1113-M-5 which was derived from OCT No. 408 (500) which
cases were all decided in favor of Jose Baritua, hence, the
decisions rendered therein have become final and
executory and constitute res judicata.
The plaintiff through the Office of the Solicitor General filed
an objection to the motion to dismiss based on the
following grounds: (1) the purported decision issued by the
Court of First Instance of Albay in G.R. Cad. Rec. No. 88
supposedly resulting in the issuance of OCT No. 408 (500)
pursuant to Decree No. 55173 does not constitute res
judicata to the present case; (2) the incontestable and
indisputable character of a Torrens certificate of title does
not apply when the land thus covered, like foreshore land,
is not capable of registration; (3) a certificate of title
judicially reconstituted from a void certificate of title is,
likewise, void; (4) administrative investigation conducted by
the Director of Lands is not a bar to the filing of reversion
suits; and (5) the filing of the motion to dismiss carries with
it the admission of the truth of all material facts of the
complaint.4
After hearing the motion to dismiss, or on 9 August 1996,
the trial court dismissed the complaint on the ground that
the judgment rendered by the cadastral court in G.R. Cad.
Rec. No. 88 and our resolution in the petition to quiet title,
G.R. No. 85770, both decreed that the parcel of land
covered by OCT No. 408 (500) was not foreshore. The 1917
cadastral proceeding was binding upon the government,
which had initiated the same and had been an active and
direct participant thereon. Likewise, the 1982 petition to
cancel OCT No. 408 (500) filed by the claimants of Lot No.
1113, Cad-47, and resolved by the Director of Lands in his
22 February 1984 letter5 to the effect that Original
Certificate of Title No. 408 (500) 2113 in the name of Elias
Imperial and its derivative title[s] were legally issued wasres
judicata to the instant case. Petitioners contention that the
judicially reconstituted certificate of title was void since the
land covered by OCT No. 408 (500) was foreshore land was
a mere assumption contrary to existing physical facts. The
court further considered as forum shopping petitioners
attempt to seek a favorable opinion after it was declared in
related cases questioning the title of a certain Jose Baritua,
which was also derived from OCT No. 408(500), that the
land in question was foreshore.
On 28 October 1996, petitioner filed a notice of appeal.
On 18 April 1997, the Court of Appeals required petitioner
to file its appellants brief within forty-five (45) days from
receipt of the notice. Petitioner received said notice ten
(10) days later, or on 28 April 1997.
Due to the alleged heavy workload of the solicitor assigned
to the case, petitioner moved for an extension of thirty (30)
days from 12 June 1997, or until 12 July 1997, within which
to file the appellants brief. The Court of Appeals granted
petitioners motion for extension in a resolution dated 26
June 1997.
On the same ground of continuing heavy pressure of work,
petitioner filed, on 12 July 1997, its second motion for
extension of thirty (30) days or until 11 August 1997 within
which to file the appellants brief.
On 11 August 1997, petitioner asked for a third extension
of thirty (30) days, or until 10 September 1997, within
which to file appellants brief citing the same ground of
heavy pressure of work.
Meanwhile, on 30 July 1997, the Court of Appeals issued a
resolution, the full text of which reads:
The Office of the Solicitor General is GRANTED a LAST
EXTENSION of thirty (30) days from July 12, 1997, or until
August 11, 1997, within which to file the oppositor-
appellants brief. Failure to file said brief within the said
period will mean dismissal of the appeal.6
On 12 August 1997, petitioner received a copy of the
aforesaid resolution.
On 26 August 1997, petitioner moved to reconsider the 30
July 1997 resolution and, despite the appellate courts
warning, reiterated its third motion for extension of
another thirty (30) days to file the appellants brief.
On 10 September 1997, petitioner filed a manifestation and
motion requesting another extension of five (5) days, or
until 15 September 1997, within which to file appellants
brief, reasoning that the brief, although finalized, was yet
to be signed by the Solicitor General.
On 15 September 1997, petitioner filed the required
appellants brief.
On 29 September 1997, the Court of Appeals denied
petitioners motion for reconsideration for lack of merit and
sustained its Resolution of 30 July 1997 dismissing the case
for failure to file the appellants brief within the extended
period.
Hence, petitioner filed this petition assailing the dismissal
of its appeal on purely technical grounds. It alleges that it
has raised meritorious grounds in support of its appeal
which, if not allowed to be laid down before the proper
Court, will result to the prejudice of, and irreparable injury
to, public interest, as the Government would lose its
opportunity to recover what it believes to be non-
registrable lands of the public domain. Minor lapses in
adherence to procedural rules should be condoned in order
not to frustrate the ends of justice. Thus, petitioner begs
the courts indulgence, enumerating the cases that had
occupied its time and attention which prevented the filing
of the required brief within the extended periods granted
by the Court of Appeals.
Petitioner maintains that our resolution of 8 May 1989 in
G.R. No. 85770 entitled Spouses Espiritu v. Baritua does not
constitute res judicata to the instant case because there is
no identity of parties, causes of action, and subject matter
between the two cases. The Supreme Court case was
instituted by Spouses Jose and Maura Espiritu and others
against Jose Baritua, while the instant case was filed by no
less than the Republic of the Philippines against herein
respondents. The former arose from a proceeding to quiet
title, while the latter is an action for reversion.
Anent the unappealed letter-decision of the Director of
Lands, petitioner contends that the same was a reversible
mistake which did not bar the filing of a reversion suit, as
the government is never estopped by the mistakes of its
officials or agents.
Petitioner also argues that the 1953 reconstitution case
only involved the restoration of the title which was
supposed to have been lost or destroyed. The issue as to
the nature of the land covered by OCT No. 408 (500) was
never delved into by the court. Petitioner insists that the
parcels of land in question are foreshore lands, and hence,
inalienable and incapable of registration. Consequently, the
certificates of title covering said lands are void ab initio.
As regards the trial courts finding of forum shopping,
petitioner asserts that the same is without basis. It is the
first time that petitioner instituted an action against herein
respondents concerning the lands in question.
On the other hand, respondents maintain that the dismissal
of the appeal for failure to file brief on time was not an
abuse of discretion on the part of the Court of Appeals.
Petitioner failed to present special circumstances or good
reasons to justify its motions for extension. Moreover, that
the parcels of land involved are foreshore was confirmed in
the 1917 cadastral and 1953 reconstitution proceedings.
This finding attained finality through our resolution in the
action for quieting of title (G.R. No. 85770), and was further
affirmed through the administrative investigation
conducted by the Director of Lands. Thus, the instant case
is now barred by res judicata.
We have long observed that the Office of the Solicitor
General (OSG) regularly presents motions for extension of
time to file pleadings, taking for granted the courts leniency
in granting the same. Instead of contributing to the swift
administration of justice as an instrumentality of the State,
the OSG contributes to needless delays in litigation. Despite
the numerous cases that need the OSGs time and attention,
equal importance should be allotted to each and every
case. Deadlines must be respected and court warnings not
taken lightly.
However, after a thorough reexamination of this case, we
are of the view that the challenged resolutions should be
reconsidered.
The rules of court governing practice and procedure were
formulated in order to promote just, speedy, and
inexpensive disposition of every action or proceeding
without sacrificing substantial justice and equity
considerations.7cräläwvirtualibräry
The filing of appellants brief in appeals is not a jurisdictional
requirement. Nevertheless, an appeal may be dismissed by
the Court of Appeals on its own motion or on that of the
appellee upon failure of the appellant to serve and file the
required number of copies of the brief within the time
provided. 8cräläwvirtualibräry
If the appeal brief cannot be filed on time, extension of
time may be allowed provided (1) there is good and
sufficient cause, and (2) the motion for extension is filed
before the expiration of the time sought to be
extended.9 The courts liberality on extensions
notwithstanding, lawyers should never presume that their
motions for extension would be granted as a matter of
course or for the length of time sought; their concession
lies in the sound discretion of the Court exercised in
accordance with the attendant
circumstances.10cräläwvirtualibräry
What constitutes good and sufficient cause that will merit appeal presents an exceptional circumstance impressed
suspension of the rules is discretionary upon the court. The with public interest and must then be given due course.
court has the power to relax or suspend the rules or to
except a case from their operation when compelling WHEREFORE, the instant petition is hereby GRANTED; the
reasons so warrant or when the purpose of justice requires Resolutions of 30 July 1997 and 29 September 1997 of the
it.11 Among the reasons which the court allowed in Court of Appeals are SET ASIDE; petitioners appeal is
suspending application of the rules on filing an appeal brief reinstated; and the instant case is REMANDED to the Court
were the following: (1) the cause for the delay was not of Appeals for further proceedings.
entirely attributable to the fault or negligence of the party
favored by the suspension of the rules;12 (2) there was no SO ORDERED.
objection from the State,13 and the brief was filed within
the period requested; (3) no material injury was suffered by
the appellee by reason of the delay in filing the brief; 14 (4)
the fake lawyer failed to file the brief;15 (5) appellant was
represented by counsel de oficio;16 (6) petitioners original
counsel died;17 and (7) the preparation of the consolidated
brief involved a comparative study of many
exhibits.18cräläwvirtualibräry

At the core of the controversy is whether the parcels of

land in question are foreshore lands. Foreshore land is a
part of the alienable land of the public domain and may be
disposed of only by lease and not otherwise. It was defined
as that part (of the land) which is between high and low
water and left dry by the flux and reflux of the tides. 19 It is
also known as a strip of land that lies between the high and
low water marks and is alternatively wet and dry according
to the flow of the tide.20cräläwvirtualibräry

The classification of public lands is a function of the

executive branch of government, specifically the director of
lands (now the director of the Lands Management Bureau).
The decision of the director of lands when approved by the
Secretary of the Department of Environment and Natural
Resources (DENR)21 as to questions of fact is conclusive
upon the court. The principle behind this ruling is that the
subject has been exhaustively weighed and discussed and
must therefore be given credit. This doctrine finds no
application, however, when the decision of the director of
lands is revoked by, or in conflict with that of, the DENR
Secretary.22cräläwvirtualibräry

There is allegedly a conflict between the findings of the

Director of Lands and the DENR, Region V, in the present
case. Respondents contend that the Director of Lands
found Jose Barituas land covered by TCT No. 18655, which
stemmed from OCT 408(500), to be definitely outside of the
foreshore area.23 Petitioner, on the other hand, claims that
subsequent investigation of the DENR, Region V, Legazpi
City, disclosed that the land covered by OCT No. 408 (500)
from whence the titles were derived has the features of a
foreshore land.24 The contradictory views of the Director of
Lands and the DENR, Region V, Legazpi City, on the true
nature of the land, which contradiction was neither
discussed nor resolved by the RTC, cannot be the premise
of any conclusive classification of the land involved.

The need, therefore, to determine once and for all whether

the lands subject of petitioners reversion efforts are
foreshore lands constitutes good and sufficient cause for
relaxing procedural rules and granting the third and fourth
motions for extension to file appellants brief. Petitioners
 G.R. No. 133250. November 11, 2003.]
FRANCISCO I. CHAVEZ, Petitioner, v. PUBLIC ESTATES
AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, Respondents.
RESOLUTION
CARPIO, J.:
This Court is asked to legitimize a government contract that
conveyed to a private entity 157.84 hectares of reclaimed
public lands along Roxas Boulevard in Metro Manila at the
negotiated price of P1,200 per square meter. However,
published reports place the market price of land near that
area at that time at a high of P90,000 per square meter. 1
The difference in price is a staggering P140.16 billion,
equivalent to the budget of the entire Judiciary for
seventeen years and more than three times the Marcos
Swiss deposits that this Court forfeited in favor of the
government.chanrob1es virtua1 1aw 1ibrary
Many worry to death that the private investors will lose
their investments, at most not more than one-half billion
pesos in legitimate expenses, 2 if this Court voids the
contract. No one seems to worry about the more than tens
of billion pesos that the hapless Filipino people will lose if
the contract is allowed to stand. There are those who
question these figures, but the questions arise only because
the private entity somehow managed to inveigle the
government to sell the reclaimed lands without public
bidding in patent violation of the Government Auditing
Code.
Fortunately for the Filipino people, two Senate
Committees, the Senate Blue Ribbon Committee and the
Committee on Accountability of Public Officers, conducted
extensive public hearings to determine the actual market
value of the public lands sold to the private entity. The
Senate Committees established the clear, indisputable and
unalterable fact that the sale of the public lands is grossly
and unconscionably undervalued based on official
documents submitted by the proper government agencies
during the Senate investigation. We quote the joint report
of these two Senate Committees, Senate Committee Report
No. 560, as approved by the Senate in plenary session on
27 September 1997: 3
The Consideration for the Property
PEA, under the JVA, obligated itself to convey title and
possession over the Property, consisting of approximately
One Million Five Hundred Seventy Eight Thousand Four
Hundred Forty One (1,578,441) Square Meters for a total
consideration of One Billion Eight Hundred Ninety Four
Million One Hundred Twenty Nine Thousand Two Hundred
(P1,894,129,200.00) Pesos, or a price of One Thousand Two
Hundred (P1,200.00) Pesos per square meter.
According to the zonal valuation of the Bureau of Internal
Revenue, the value of the Property is Seven Thousand Eight
Hundred Pesos (P7,800.00) per square meter. The
Municipal Assessor of Parañaque, Metro Manila, where the
Property is located, pegs the market value of the Property
at Six Thousand Pesos (P6,000.00) per square meter. Based
on these alone, the price at which PEA agreed to convey
the property is a pittance. And PEA cannot claim ignorance
of these valuations, at least not those of the Municipal
Assessors’ office, since it has been trying to convince the
Office of the Municipal Assessor of Parañaque to reduce
the valuation of various reclaimed properties thereat in
order for PEA to save on accrued real property taxes.
PEA’s justification for the purchase price are various
appraisal reports, particularly the following:chanrob1es
virtual 1aw library
(1) An appraisal by Vic T. Salinas Realty and Consultancy
Services concluding that the Property is worth P500.00 per
square meter for the smallest island and P750.00 per
square meter for the two other islands, or a total of
P1,170,000.00 as of 22 February 1995;
(2) An appraisal by Valencia Appraisal Corporation
concluding that the Property is worth P850 per square
meter for Island I, P800 per square meter for Island II and
P600 per square meter for the smallest island, or a total of
P1,289,732,000, also as of 22 February 1995; and
(3) An Appraisal by Asian Appraisal Company, Inc. (AACI),
stating that the Property is worth approximately P1,000 per
square meter for Island I, P950 per square meter for Island
II and P600 per square meter for Island III, or a total of
P1,518,805,000 as of 27 February 1995.
The credibility of the foregoing appraisals, however, are
[sic] greatly impaired by a subsequent appraisal report of
AACI stating that the property is worth P4,500.00 per
square meter as of 26 March 1996. Such discrepancies in
the appraised value as appearing in two different reports
by the same appraisal company submitted within a span of
one year render all such appraisal reports unworthy of even
the slightest consideration. Furthermore, the appraisal
report submitted by the Commission on Audit estimates
the value of the Property to be approximately
P33,673,000,000.00, or P21,333.07 per square meter.
There were also other offers made for the property from
other parties which indicate that the Property has been
undervalued by PEA. For instance, on 06 March 1995, Mr.
Young D. See, President of Saeil Heavy Industries Co., Ltd.,
(South Korea), offered to buy the property at P1,400.00 and
expressed its willingness to issue a stand-by letter of credit
worth $10 million. PEA did not consider this offer and
instead finalized the JVA with AMARI. Other offers were
made on various dates by Aspac Management and
Development Group Inc. (for P1,600 per square meter),
Universal Dragon Corporation (for P1,600 per square
meter), Cleene Far East Manila Incorporated and Hyosan
Prime Construction Co. Ltd. which had prepared an
Irrevocable Clean Letter of Credit for P100,000,000.
In addition, AMARI agreed to pay huge commissions and
bonuses to various persons, amounting to
P1,596,863,050.00 (P1,754,707,150.00 if the bonus is
included), as will be discussed fully below, which indicate
that AMARI itself believed the market value to be much
higher than the agreed purchase price. If such commissions
are added to the purchase price, AMARI’s acquisition cost
for the Property will add-up to P3,490,992,250.00
(excluding the bonus). If AMARI was willing to pay such
amount for the Property, why was PEA willing to sell for
only P1,894,129,200.00, making the Government stand to
lose approximately P1,596,863,050.00?
x x x A Letter-Agreement dated 09 June 1995 signed by Messrs.
Even if we simply assume that the market value of the
Property is half of the market value fixed by the Municipal
Assessors Office of Parañaque for lands along Roxas
Boulevard, or P3,000.00 per square meter, the Government
now stands to lose approximately P2,841,193,800.00. But
an even better assumption would be that the value of the
Property is P4,500.00 per square meter, as per the AACI
appraisal report dated 26 March 1996, since this is the
valuation used to justify the issuance of P4 billion worth of
shares of stock of Centennial City Inc. (CCI) in exchange for
4,800,000 AMARI shares with a total par value of only
P480,000,000.00. With such valuation, the Government’s
loss will amount to P5,208,855,300.00.
Clearly, the purchase price agreed to by PEA is way below
the actual value of the Property, thereby subjecting the
Government to grave injury and enabling AMARI to enjoy
tremendous benefit and advantage. (Emphasis supplied)
The Senate Committee Report No. 560 attached the
following official documents from the Bureau of Internal
Revenue, the Municipal Assessor of Parañaque, Metro
Manila, and the Commission on Audit:chanrob1es virtual
1aw library
1. Annex "M," Certified True Copy of BIR Zonal Valuations
as certified by Antonio F. Montemayor, Revenue District
Officer. This official document fixed the market value of the
157.84 hectares at P7,800 per square meter.
2. Annex "N," Certification of Soledad S. Medina-Cue,
Municipal Assessor, Parañaque, dated 10 December 1996.
This official document fixed the market value at P6,000 per
square meter.
3. Exhibit "I-Engr. Santiago," the Appraisal Report of the
Commission on Audit. This official document fixed the
market value at P21,333.07 per square meter.
Whether based on the official appraisal of the BIR, the
Municipal Assessor or the Commission on Audit, the P1,200
per square meter purchase price, or a total of P1.894 billion
for the 157.84 hectares of government lands, is grossly and
unconscionably undervalued. The authoritative appraisal,
of course, is that of the Commission on Audit which valued
the 157.84 hectares at P21,333.07 per square meter or a
total of P33.673 billion. Thus, based on the official appraisal
of the Commission on Audit, the independent
constitutional body that safeguards government assets, the
actual loss to the Filipino people is a shocking P31.779
billion.
This gargantuan monetary anomaly, aptly earning the
epithet "Grandmother of All Scams," 4 is not the major
defect of this government contract. The major flaw is not
even the P1.754 billion in commissions the Senate
Committees discovered the private entity paid to various
persons to secure the contract, 5 described in Senate
Report No. 560 as follows:chanrob1es virtual 1aw library
Premchai Karnasuta and Emmanuel Sy for and in behalf of
AMARI, on the one hand, and stockholders of AMARI
namely, Mr. Chin San Cordova (a.k.a. Benito Co) and Mr.
Chua Hun Siong (a.k.a. Frank Chua), on the other, sets forth
various payments AMARI paid or agreed to pay the
aforesaid stockholders by way of fees for "professional
efforts and services in successfully negotiating and securing
for AMARI the Joint Venture Agreement", as
follows:chanrob1es virtual 1aw library
Form of Payment Paid/Payable On Amount
Manager’s Checks 28 April 1995 P400,000,000.00
Manager’s Checks Upon signing of letter 262,500,000.00
10 Post Dated Checks (PDCs) 60 days from date of letter
127,000,000.00
24 PDCs 31 Aug.’95 to 31 Jan.’98 150,000,000.00
48 PDCs Monthly, over a 12-month
pd. from date of letter 357,363,050.00
Cash bonus When sale of land begins not exceeding
157,844,100.00
Developed land from Project Upon completion of each
Costing
phase 300,000,000.00
TOTAL P1,754,707,150.00
==============
Mr. Luis Benitez of SGV, the external auditors of AMARI,
testified that said Letter-Agreement was approved by the
AMARI Board. 6 (Emphasis supplied)
The private entity that purchased the reclaimed lands for
P1.894 billion expressly admitted before the Senate
Committees that it spent P1.754 billion in commissions to
pay various individuals for "professional efforts and services
in successfully negotiating and securing" the contract. By
any legal or moral yardstick, the P1.754 billion in
commissions obviously constitutes bribe money.
Nonetheless, there are those who insist that the billions in
investments of the private entity deserve protection by this
Court. Should this Court establish a new doctrine by
elevating grease money to the status of legitimate
investments deserving of protection by the law? Should this
Court reward the patently illegal and grossly unethical
business practice of the private entity in securing the
contract? Should we allow those with hands dripping with
dirty money equitable relief from this Court?
Despite these revolting anomalies unearthed by the Senate
Committees, the fatal flaw of this contract is that it glaringly
violates provisions of the Constitution expressly prohibiting
the alienation of lands of the public domain.
Thus, we now come to the resolution of the second
Motions for Reconsideration 7 filed by public respondent
Public Estates Authority ("PEA") and private respondent
Amari Coastal Bay Development Corporation ("Amari"). As
correctly pointed out by petitioner Francisco I. Chavez in his
Consolidated Comment, 8 the second Motions for
Reconsideration raise no new issues.
However, the Supplement to "Separate Opinion, Concurring
and Dissenting" of Justice Josue N. Bellosillo brings to the
Court’s attention the Resolutions of this Court on 3
February 1965 and 24 June 1966 in L-21870 entitled
"Manuel O. Ponce, Et. Al. v. Hon. Amador Gomez, Et. Al."
and No. L-22669 entitled "Manuel O. Ponce, Et. Al. v. The
City of Cebu, Et. Al." ("Ponce Cases"). In effect, the
Supplement to the Dissenting Opinion claims that these
two Resolutions serve as authority that a single private
corporation like Amari may acquire hundreds of hectares of
submerged lands, as well as reclaimed submerged lands,
within Manila Bay under the Amended Joint Venture
Agreement ("Amended JVA").
We find the cited Ponce Cases inapplicable to the instant
case.
First, as Justice Bellosillo himself states in his supplement to
his dissent, the Ponce Cases admit that "submerged lands
still belong to the National Government." 9 The correct
formulation, however, is that submerged lands are owned
by the State and are inalienable. Section 2, Article XII of the
1987 Constitution provides:chanrob1es virtual 1aw library
All lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna,
and other natural resources are owned by the State. With
the exception of agricultural lands, all other natural
resources shall not be alienated. . . . (Emphasis supplied)
Submerged lands, like the waters (sea or bay) above them,
are part of the State’s inalienable natural resources.
Submerged lands are property of public dominion,
absolutely inalienable and outside the commerce of man.
10 This is also true with respect to foreshore lands. Any sale
of submerged or foreshore lands is void being contrary to
the Constitution. 11
This is why the Cebu City ordinance merely granted Essel,
Inc. an "irrevocable option" to purchase the foreshore lands
after the reclamation and did not actually sell to Essel, Inc.
the still to be reclaimed foreshore lands. Clearly, in the
Ponce Cases the option to purchase referred to reclaimed
lands, and not to foreshore lands which are inalienable.
Reclaimed lands are no longer foreshore or submerged
lands, and thus may qualify as alienable agricultural lands
of the public domain provided the requirements of public
land laws are met.
In the instant case, the bulk of the lands subject of the
Amended JVA are still submerged lands even to this very
day, and therefore inalienable and outside the commerce
of man. Of the 750 hectares subject of the Amended JVA,
592.15 hectares or 78% of the total area are still
submerged, permanently under the waters of Manila Bay.
Under the Amended JVA, the PEA conveyed to Amari the
submerged lands even before their actual reclamation,
although the documentation of the deed of transfer and
issuance of the certificates of title would be made only
after actual reclamation.
The Amended JVA states that the PEA "hereby contributes
to the Joint Venture its rights and privileges to perform
Rawland Reclamation and Horizontal Development as well
as own the Reclamation Area." 12 The Amended JVA
further states that "the sharing of the Joint Venture
Proceeds shall be based on the ratio of thirty percent (30%)
for PEA and seventy percent (70%) for AMARI." 13 The
Amended JVA also provides that the PEA "hereby
designates AMARI to perform PEA’s rights and privileges to
reclaim, own and develop the Reclamation Area." 14 In
short, under the Amended JVA the PEA contributed its
rights, privileges and ownership over the Reclamation Area
to the Joint Venture which is 70% owned by Amari.
Moreover, the PEA delegated to Amari the right and
privilege to reclaim the submerged lands.
The Amended JVA mandates that the PEA had "the duty to
execute without delay the necessary deed of transfer or
conveyance of the title pertaining to AMARI’s Land share
based on the Land Allocation Plan." 15 The Amended JVA
also provides that "PEA, when requested in writing by
AMARI, shall then cause the issuance and delivery of the
proper certificates of title covering AMARI’s Land Share in
the name of AMARI, . . ." 16
In the Ponce Cases, the City of Cebu retained ownership of
the reclaimed foreshore lands and Essel, Inc. only had an
"irrevocable option" to purchase portions of the foreshore
lands once actually reclaimed. In sharp contrast, in the
instant case ownership of the reclamation area, including
the submerged lands, was immediately transferred to the
joint venture. Amari immediately acquired the absolute
right to own 70% percent of the reclamation area, with the
deeds of transfer to be documented and the certificates of
title to be issued upon actual reclamation. Amari’s right to
own the submerged lands is immediately effective upon the
approval of the Amended JVA and not merely an option to
be exercised in the future if and when the reclamation is
actually realized. The submerged lands, being inalienable
and outside the commerce of man, could not be the subject
of the commercial transactions specified in the Amended
JVA.

Second, in the Ponce Cases the Cebu City ordinance
granted Essel, Inc. an "irrevocable option" to purchase from
Cebu City not more than 70% of the reclaimed lands. The
ownership of the reclaimed lands remained with Cebu City
until Essel, Inc. exercised its option to purchase. With the
subsequent enactment of the Government Auditing Code
(Presidential Decree No. 1445) on 11 June 1978, any sale of
government land must be made only through public
bidding. Thus, such an "irrevocable option" to purchase
government land would now be void being contrary to the
requirement of public bidding expressly required in Section
79 17 of PD No. 1445. This requirement of public bidding is
reiterated in Section 379 18 of the 1991 Local Government
Code. 19 Obviously, the ingenious reclamation scheme
adopted in the Cebu City ordinance can no longer be
followed in view of the requirement of public bidding in the
sale of government lands. In the instant case, the Amended
JVA is a negotiated contract which clearly contravenes
Section 79 of PD No. 1445.
Third, Republic Act No. 1899 authorized municipalities and
chartered cities to reclaim foreshore lands. The two
Resolutions in the Ponce Cases upheld the Cebu City
ordinance only with respect to foreshore areas, and
nullified the same with respect to submerged areas. Thus,
the 27 June 1965 Resolution made the injunction of the
trial court against the City of Cebu "permanent insofar . . .
as the area outside or beyond the foreshore land proper is
concerned."cralaw virtua1aw library
As we held in the 1998 case of Republic Real Estate
Corporation v. Court of Appeals, 20 citing the Ponce Cases,
RA No. 1899 applies only to foreshore lands, not to
submerged lands. In his concurring opinion in Republic Real
Estate Corporation, Justice Reynato S. Puno stated that
under Commonwealth Act No. 141, "foreshore and lands
under water were not to be alienated and sold to private
parties," and that such lands "remained property of the
State." Justice Puno emphasized that "Commonwealth Act
No. 141 has remained in effect at present." The instant case
involves principally submerged lands within Manila Bay. On
this score, the Ponce Cases, which were decided based on
RA No. 1899, are not applicable to the instant case.
Fourth, the Ponce Cases involve the authority of the City of
Cebu to reclaim foreshore areas pursuant to a general law,
RA No. 1899. The City of Cebu is a public corporation and is
qualified, under the 1935, 1973, and 1987 Constitutions, to
hold alienable or even inalienable lands of the public
domain. There is no dispute that a public corporation is not
covered by the constitutional ban on acquisition of
alienable public lands. Both the 9 July 2002 Decision and
the 6 May 2003 Resolution of this Court in the instant case
expressly recognize this.
Cebu City is an end user government agency, just like the
Bases Conversion and Development Authority or the
Department of Foreign Affairs. 21 Thus, Congress may by
law transfer public lands to the City of Cebu to be used for
municipal purposes, which may be public or patrimonial.
Lands thus acquired by the City of Cebu for a public
purpose may not be sold to private parties. However, lands
so acquired by the City of Cebu for a patrimonial purpose
may be sold to private parties, including private
corporations.
However, in the instant case the PEA is not an end user
agency with respect to the reclaimed lands under the
Amended JVA. As we explained in the 6 May 2003
Resolution:chanrob1es virtual 1aw library
PEA is the central implementing agency tasked to
undertake reclamation projects nationwide. PEA took the
place of the Department of Environment and Natural
Resources ("DENR" for brevity) as the government agency
charged with leasing or selling all reclaimed lands of the
public domain. In the hands of PEA, which took over the
leasing and selling functions of DENR, reclaimed foreshore
(or submerged lands) lands are public lands in the same
manner that these same lands would have been public
lands in the hands of DENR. (Emphasis supplied)
Our 9 July 2002 Decision explained the rationale for
treating the PEA in the same manner as the DENR with
respect to reclaimed foreshore or submerged lands in this
wise:chanrob1es virtual 1aw library
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. PEA will simply turn around, as PEA has
now done under the Amended JVA, and transfer several
hundreds of hectares of these reclaimed and still to be
reclaimed lands to a single private corporation in only one
transaction. This scheme will effectively nullify the
constitutional ban in Section 3, Article XII of the 1987
Constitution which was intended to diffuse equitably the
ownership of alienable lands of the public domain among
Filipinos, now numbering over 80 million strong. (Emphasis
supplied)
Finally, the Ponce Cases were decided under the 1935
Constitution which allowed private corporations to acquire
alienable lands of the public domain. However, the 1973
Constitution prohibited private corporations from acquiring
alienable lands of the public domain, and the 1987
Constitution reiterated this prohibition. Obviously, the
Ponce Cases cannot serve as authority for a private
corporation to acquire alienable public lands, much less
submerged lands, since under the present Constitution a
private corporation like Amari is barred from acquiring
alienable lands of the public domain.
Clearly, the facts in the Ponce Cases are different from the
facts in the instant case. Moreover, the governing
constitutional and statutory provisions have changed since
the Ponce Cases were disposed of in 1965 and 1966
through minute Resolutions of a divided (6 to 5) Court.
This Resolution does not prejudice any innocent third party
purchaser of the reclaimed lands covered by the Amended
JVA. Neither the PEA nor Amari has sold any portion of the
reclaimed lands to third parties. Title to the reclaimed lands
remains with the PEA. As we stated in our 9 July 2002
Decision:chanrob1es virtual 1aw library

In the instant case, the only patent and certificates of title

issued are those in the name of PEA, a wholly government
owned corporation performing public as well as proprietary
functions. No patent or certificate of title has been issued
to any private party. No one is asking the Director of Lands
to cancel PEA’s patent or certificates of title. In fact, the
thrust of the instant petition is that PEA’s certificates of
title should remain with PEA, and the land covered by these
certificates, being alienable lands of the public domain,
should not be sold to a private corporation.

As we held in our 9 July 2002 Decision, the Amended JVA

"violates glaringly Sections 2 and 3, Article XII of the 1987
Constitution." In our 6 May 2003 Resolution, we DENIED
with FINALITY respondents’ Motions for Reconsideration.
Litigations must end some time. It is now time to write finis
to this "Grandmother of All Scams."cralaw virtua1aw library

WHEREFORE, the second Motions for Reconsideration filed

by Public Estates Authority and Amari Coastal Bay
Development Corporation are DENIED for being prohibited
pleadings. In any event, these Motions for Reconsideration
have no merit. No further pleadings shall be allowed from
any of the parties.

SO ORDERED.
G. R. No. 133250 : May 6, 2003
FRANCISCO I. CHAVEZ, Petitioner, v. PUBLIC ESTATES
AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, Respondents.
RESOLUTION
CARPIO, J.:
For resolution of the Court are the following motions: (1)
Motion to Inhibit and for Re-Deliberation filed by
respondent Amari Coastal Bay Development Corporation
(Amari for brevity) on September 13, 2002; (2) Motion to
Set Case for Hearing on Oral Argument filed by Amari on
August 20, 2002; (3) Motion for Reconsideration and
Supplement to Motion for Reconsideration filed by Amari
on July 26, 2002 and August 20, 2002, respectively; (4)
Motion for Reconsideration and Supplement to Motion for
Reconsideration filed by respondent Public Estates
Authority (PEA for brevity) on July 26, 2002 and August 8,
2002, respectively; and (5) Motion for Reconsideration
and/or Clarification filed by the Office of the Solicitor
General on July 25, 2002. Petitioner Francisco I. Chavez
filed on November 13, 2002 his Consolidated Opposition to
the main and supplemental motions for reconsideration.
To recall, the Courts decision of July 9, 2002 (Decision for
brevity) on the instant case states in its summary:
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands comprising the
Freedom Islands, now covered by certificates of title in the
name of PEA, are alienable lands of the public domain. PEA
may lease these lands to private corporations but may not
sell or transfer ownership of these lands to private
corporations. PEA may only sell these lands to Philippine
citizens, subject to the ownership limitations in the 1987
Constitution and existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay
remain inalienable natural resources of the public domain
until classified as alienable or disposable lands open to
disposition and declared no longer needed for public
service. The government can make such classification and
declaration only after PEA has reclaimed these submerged
areas. Only then can these lands qualify as agricultural
lands of the public domain, which are the only natural
resources the government can alienate. In their present
state, the 592.15 hectares of submerged areas
are inalienable and outside the commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI, a
private corporation, ownership of 77.34 hectares of the
Freedom Islands, such transfer is void for being contrary to
Section 3, Article XII of the 1987 Constitution which
prohibits private corporations from acquiring any kind of
alienable land of the public domain.
4. Since the Amended JVA also seeks to transfer to AMARI
ownership of 290.156 hectares of still submerged areas of
Manila Bay, such transfer is void for being contrary to
Section 2, Article XII of the 1987 Constitution which
prohibits the alienation of natural resources other than
agricultural lands of the public domain. PEA may reclaim
these submerged areas. Thereafter, the government can
classify the reclaimed lands as alienable or disposable, and
further declare them no longer needed for public service.
Still, the transfer of such reclaimed alienable lands of the
public domain to AMARI will be void in view of Section 3,
Article XII of the 1987 Constitution which prohibits private
corporations from acquiring any kind of alienable land of
the public domain.
Clearly, the Amended JVA violates glaringly Sections 2 and
3, Article XII of the 1987 Constitution. Under Article 1409 of
the Civil Code, contracts whose object or purpose is
contrary to law, or whose object is outside the commerce
of men, are inexistent and void from the beginning. The
Court must perform its duty to defend and uphold the
Constitution, and therefore declares the Amended JVA null
and void ab initio.
Amari seeks the inhibition of Justice Antonio T.
Carpio, ponente of the Decision, on the ground that Justice
Carpio, before his appointment to the Court, wrote in
his Manila Times column of July 1, 1997, I have always
maintained that the law requires the public bidding of
reclamation projects. Justice Carpio, then a private law
practitioner, also stated in the same column, The Amari-
PEA reclamation contract is legally flawed because it was
not bid out by the PEA. Amari claims that because of these
statements Justice Carpio should inhibit himself on the
grounds of bias and prejudgment and that the instant case
should be re-deliberated after being assigned to a
new ponente.
The motion to inhibit Justice Carpio must be denied for
three reasons. First, the motion to inhibit came after Justice
Carpio had already rendered his opinion on the merits of
the case. The rule is that a motion to inhibit must be denied
if filed after a member of the Court had already given an
opinion on the merits of the case,[1 the rationale being that
a litigant cannot be permitted to speculate upon the action
of the Court xxx (only to) raise an objection of this sort after
a decision has been rendered. Second, as can be readily
gleaned from the summary of the Decision quoted above,
the absence of public bidding is not one of the ratio
decidendi of the Decision which is anchored on violation of
specific provisions of the Constitution. The absence of
public bidding was not raised as an issue by the parties. The
absence of public bidding was mentioned in the Decision
only to complete the discussion on the law affecting
reclamation contracts for the guidance of public officials. At
any rate, the Office of the Solicitor General in its Motion for
Reconsideration concedes that the absence of public
bidding in the disposition of the Freedom Islands rendered
the Amended JVA null and void.[2 Third, judges and justices
are not disqualified from participating in a case just
because they have written legal articles on the law involved
in the case. As stated by the Court in Republic v.
Cocofed,[3] -
The mere fact that, as a former columnist, Justice Carpio
has written on the coconut levy will not disqualify him, in
the same manner that jurists will not be disqualified just
because they may have given their opinions as textbook
writers on the question involved in a case.
Besides, the subject and title of the column in question was
The CCP reclamation project and the column referred to
the Amari-PEA contract only in passing in one sentence.
Amaris motion to set the case for oral argument must also
be denied since the pleadings of the parties have discussed
exhaustively the issues involved in the case.
The motions for reconsideration reiterate mainly the
arguments already discussed in the Decision. We shall
consider in this Resolution only the new arguments raised
by respondents.
In its Supplement to Motion for Reconsideration, Amari
argues that the Decision should be made to apply
prospectively, not retroactively to cover the Amended JVA.
Amari argues that the existence of a statute or executive
order prior to its being adjudged void is an operative fact to
which legal consequences are attached, citing De Agbayani
v. PNB,[4 thus:
x x x. It does not admit of doubt that prior to the
declaration of nullity such challenged legislative or
executive act must have been in force and had to be
complied with. This is so as until after the judiciary, in an
appropriate case, declares its invalidity, it is entitled to
obedience and respect. Parties may have acted under it and
may have changed their positions. What could be more
fitting than that in a subsequent litigation regard be had to
what has been done while such legislative or executive act
was in operation and presumed to be valid in all respects. It
is now accepted as a doctrine that prior to its being
nullified, its existence as a fact must be reckoned with. This
is merely to reflect awareness that precisely because the
judiciary is the governmental organ which has the final say
on whether or not a legislative or executive measure is
valid, a period of time may have elapsed before it can
exercise the power of judicial review that may lead to a
declaration of nullity. It would be to deprive the law of its
quality of fairness and justice then, if there be no
recognition of what had transpired prior to such
adjudication.
In the language of an American Supreme Court decision:
"The actual existence of a statute, prior to such a
determination [of unconstitutionality], is an operative fact
and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial
declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, -
with respect to particular relations, individual and
corporate, and particular conduct, private and official." This
language has been quoted with approval in a resolution in
Araneta v. Hill and the decision in Manila Motor Co., Inc. v.
Flores. x x x.
xxx
x x x That before the decision they were not constitutionally
infirm was admitted expressly. There is all the more reason
then to yield assent to the now prevailing principle that the
existence of a statute or executive order prior to its being
adjudged void is an operative fact to which legal
consequences are attached.
Amari now claims that assuming arguendo that Presidential
Decree Nos. 1084 and 1085, and Executive Order Nos. 525
and 654 are inconsistent with the 1987 Constitution, the
limitation imposed by the Decision on these decrees and
executive orders should only be applied prospectively from
the finality of the Decision.
Amari likewise asserts that a new doctrine of the Court
cannot operate retroactively if it impairs vested rights.
Amari maintains that the new doctrine embodied in the
Decision cannot apply retroactively on those who relied on
the old doctrine in good faith, citing Spouses Benzonan v.
Court of Appeals,[5 thus:
At that time, the prevailing jurisprudence interpreting
section 119 of R.A. 141 as amended was that enunciated
inMonge and Tupas cited above. The petitioners Benzonan
and respondent Pe and the DBP are bound by these
decisions for pursuant to Article 8 of the Civil Code "judicial
decisions applying or interpreting the laws or the
Constitution shall form a part of the legal system of the
Philippines." But while our decisions form part of the law of
the land, they are also subject to Article 4 of the Civil Code
which provides that "laws shall have no retroactive effect
unless the contrary is provided." This is expressed in the
familiar legal maxim lex prospicit, non respicit, the law looks
forward not backward. The rationale against retroactivity is
easy to perceive. The retroactive application of a law
usually divests rights that have already become vested or
impairs the obligations of contract and hence, is
unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]).
The same consideration underlies our rulings giving only
prospective effect to decisions enunciating new doctrines.
Thus, we emphasized in People v. Jabinal, 55 SCRA 607
[1974] "x x x when a doctrine of this Court is overruled and
a different view is adopted, the new doctrine should be
applied prospectively and should not apply to parties who
had relied on the old doctrine and acted on the faith
thereof.
There may be special cases where weighty considerations
of equity and social justice will warrant a retroactive
application of doctrine to temper the harshness of
statutory law as it applies to poor farmers or their widows
and orphans. In the present petitions, however, we find no
such equitable considerations. Not only did the private
respondent apply for free agricultural land when he did not
need it and he had no intentions of applying it to the noble
purposes behind the law, he would now repurchase for
only P327,995.00, the property purchased by the
petitioners in good faith for P1,650,000.00 in 1979 and
which, because of improvements and the appreciating
value of land must be worth more than that amount now.
The buyers in good faith from DBP had a right to rely on our
rulings in Monge and Tupas when they purchased the
property from DBP in 1979 or thirteen (13) years ago.
Under the rulings in these two cases, the period to
repurchase the disputed lot given to respondent Pe expired
on June 18, 1982. He failed to exercise his right. His lost
right cannot be revived by relying on the 1988 case
of Belisario. The right of petitioners over the subject lot had
already become vested as of that time and cannot be
impaired by the retroactive application of
the Belisario ruling.
Amaris reliance on De Agbayani and Spouses Benzonan is
misplaced. These cases would apply if the prevailing law or
doctrine at the time of the signing of the Amended JVA was
that a private corporation could acquire alienable lands of
the public domain, and the Decision annulled the law or
reversed this doctrine. Obviously, this is not the case here.
Under the 1935 Constitution, private corporations were
allowed to acquire alienable lands of the public domain. But
since the effectivity of the 1973 Constitution, private
corporations were banned from holding, except by lease,
alienable lands of the public domain. The 1987 Constitution
continued this constitutional prohibition. The prevailing law
before, during and after the signing of the Amended JVA is
that private corporations cannot hold, except by lease,
alienable lands of the public domain. The Decision has not
annulled or in any way changed the law on this matter. The
Decision, whether made retroactive or not, does not
change the law since the Decision merely reiterates the law
that prevailed since the effectivity of the 1973 Constitution.
Thus, De Agbayani, which refers to a law that is invalidated
by a decision of the Court, has no application to the instant
case.
Likewise, Spouses Benzonan is inapplicable because it
refers to a doctrine of the Court that is overruled by a
subsequent decision which adopts a new doctrine. In the
instant case, there is no previous doctrine that is overruled
by the Decision. Since the case of Manila Electric Company
v. Judge Castro-Bartolome,[6 decided on June 29, 1982,
the Court has applied consistently the constitutional
provision that private corporations cannot hold, except by
lease, alienable lands of the public domain. The Court
reiterated this in numerous cases, and the only dispute in
the application of this constitutional provision is whether
the land in question had already become private property
before the effectivity of the 1973 Constitution.[7 If the land
was already private land before the 1973 Constitution
because the corporation had possessed it openly,
continuously, exclusively and adversely for at least thirty
years since June 12, 1945 or earlier, then the corporation
could apply for judicial confirmation of its imperfect title.
But if the land remained public land upon the effectivity of
the 1973 Constitution, then the corporation could never
hold, except by lease, such public land. Indisputably, the
Decision does not overrule any previous doctrine of the
Court.
The prevailing doctrine before, during and after the signing
of the Amended JVA is that private corporations cannot
hold, except by lease, alienable lands of the public domain.
This is one of the two main reasons why the Decision
annulled the Amended JVA. The other main reason is that
submerged areas of Manila Bay, being part of the sea, are
inalienable and beyond the commerce of man, a doctrine
that has remained immutable since the Spanish Law on
Waters of 1886. Clearly, the Decision merely reiterates, and
does not overrule, any existing judicial doctrine.
Even on the characterization of foreshore lands reclaimed
by the government, the Decision does not overrule existing
law or doctrine. Since the adoption of the Regalian doctrine
in this jurisdiction, the sea and its foreshore areas have
always been part of the public domain. And since the
enactment of Act No. 1654 on May 18, 1907 until the
effectivity of the 1973 Constitution, statutory law never
allowed foreshore lands reclaimed by the government to be
sold to private corporations. The 1973 and 1987
Constitution enshrined and expanded the ban to include
any alienable land of the public domain.
There are, of course, decisions of the Court which, while
recognizing a violation of the law or Constitution, hold that
the sale or transfer of the land may no longer be
invalidated because of weighty considerations of equity and
social justice.[8 The invalidation of the sale or transfer may
also be superfluous if the purpose of the statutory or
constitutional ban has been achieved. But none of these
cases apply to Amari.
Thus, the Court has ruled consistently that where a Filipino
citizen sells land to an alien who later sells the land to a
Filipino, the invalidity of the first transfer is corrected by
the subsequent sale to a citizen.[9 Similarly, where the alien
who buys the land subsequently acquires Philippine
citizenship, the sale is validated since the purpose of the
constitutional ban to limit land ownership to Filipinos has
been achieved.[10 In short, the law disregards the
constitutional disqualification of the buyer to hold land if
the land is subsequently transferred to a qualified party, or
the buyer himself becomes a qualified party. In the instant
case, however, Amari has not transferred the Freedom
Islands, or any portion of it, to any qualified party. In fact,
Amari admits that title to the Freedom Islands still remains
with PEA.[11cräläwvirtualibräry
The Court has also ruled consistently that a sale or transfer
of the land may no longer be questioned under the
principle of res judicata, provided the requisites for res
judicata are present.[12 Under this principle, the courts and
the parties are bound by a prior final decision, otherwise
there will be no end to litigation. As the Court declared
inToledo-Banaga v. Court of Appeals,[13] once a
judgement has become final and executory, it can no longer
be disturbed no matter how erroneous it may be. In the
instant case, there is no prior final decision adjudicating the
Freedom Islands to Amari.
There are, moreover, special circumstances that disqualify
Amari from invoking equity principles. Amari cannot claim
good faith because even before Amari signed the Amended
JVA on March 30, 1999, petitioner had already filed the
instant case on April 27, 1998 questioning precisely the
qualification of Amari to acquire the Freedom Islands. Even
before the filing of this petition, two Senate
Committees[14 had already approved on September 16,
1997 Senate Committee Report No. 560. This Report
concluded, after a well-publicized investigation into PEAs
sale of the Freedom Islands to Amari, that the Freedom
Islands are inalienable lands of the public domain. Thus,
Amari signed the Amended JVA knowing and assuming all
the attendant risks, including the annulment of the
Amended JVA.
Amari has also not paid to PEA the full reimbursement cost
incurred by PEA in reclaiming the Freedom Islands. Amari
states that it has paid PEA only P300,000,000.00[15 out of
the P1,894,129,200.00 total reimbursement cost agreed
upon in the Amended JVA. Moreover, Amari does not claim
to have even initiated the reclamation of the 592.15
hectares of submerged areas covered in the Amended JVA,
or to have started to construct any permanent
infrastructure on the Freedom Islands. In short, Amari does
not claim to have introduced any physical improvement or
development on the reclamation project that is the subject
of the Amended JVA. And yet Amari claims that it had
already spent a whopping P9,876,108,638.00 as its total
development cost as of June 30, 2002.[16 Amari does not
explain how it spent the rest of the P9,876,108,638.00 total
project cost after paying PEA P300,000,000.00. Certainly,
Amari cannot claim to be an innocent purchaser in good
faith and for value.
In its Supplement to Motion for Reconsideration, PEA
claims that it is similarly situated as the Bases Conversion
Development Authority (BCDA) which under R.A. No. 7227
is tasked to sell portions of the Metro Manila military
camps and other military reservations. PEAs comparison is
incorrect. The Decision states as follows:
As the central implementing agency tasked to undertake
reclamation projects nationwide, with authority to sell
reclaimed lands, PEA took the place of DENR as the
government agency charged with leasing or selling
reclaimed lands of the public domain. The reclaimed lands
being leased or sold by PEA are not private lands, in the
same manner that DENR, when it disposes of other
alienable lands, does not dispose of private lands but
alienable lands of the public domain. Only when qualified
private parties acquire these lands will the lands become
private lands. In the hands of the government agency
tasked and authorized to dispose of alienable or
disposable lands of the public domain, these lands are still
public, not private lands.
PEA is the central implementing agency tasked to
undertake reclamation projects nationwide. PEA took the
place of Department of Environment and Natural Resources
(DENR for brevity) as the government agency charged with
leasing or selling all reclaimed lands of the public
domain. In the hands of PEA, which took over the leasing
and selling functions of DENR, reclaimed foreshore lands
are public lands in the same manner that these same
lands would have been public lands in the hands of DENR.
BCDA is an entirely different government entity. BCDA is
authorized by law to sell specific government lands that
have long been declared by presidential proclamations as
military reservations for use by the different services of the
armed forces under the Department of National Defense.
BCDAs mandate is specific and limited in area, while PEAs
mandate is general and national. BCDA holds government
lands that have been granted to end-user government
entities the military services of the armed forces. In
contrast, under Executive Order No. 525, PEA holds the
reclaimed public lands, not as an end-user entity, but as the
government agency primarily responsible for integrating,
directing, and coordinating all reclamation projects for and
on behalf of the National Government.
In Laurel v. Garcia,[17] cited in the Decision, the Court
ruled that land devoted to public use by the Department of
Foreign Affairs, when no longer needed for public use, may
be declared patrimonial property for sale to private parties
provided there is a law authorizing such act. Well-settled is
the doctrine that public land granted to an end-user
government agency for a specific public use may
subsequently be withdrawn by Congress from public use
and declared patrimonial property to be sold to private
parties. R.A. No. 7227 creating the BCDA is a law that
declares specific military reservations no longer needed for
defense or military purposes and reclassifies such lands as
patrimonial property for sale to private parties.
Government owned lands, as long they are patrimonial
property, can be sold to private parties, whether Filipino
citizens or qualified private corporations. Thus, the so-
called Friar Lands acquired by the government under Act
No. 1120 are patrimonial property[18 which even private
corporations can acquire by purchase. Likewise, reclaimed
alienable lands of the public domain if sold or transferred
to a public or municipal corporation for a monetary
consideration become patrimonial property in the hands of
the public or municipal corporation. Once converted to
patrimonial property, the land may be sold by the public or
municipal corporation to private parties, whether Filipino
citizens or qualified private corporations.
We reiterate what we stated in the Decision is the rationale
for treating PEA in the same manner as DENR with respect
to reclaimed foreshore lands, thus:
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. PEA will simply turn around, as PEA has
now done under the Amended JVA, and transfer several
hundreds of hectares of these reclaimed and still to be
reclaimed lands to a single private corporation in only one
transaction. This scheme will effectively nullify the
constitutional ban in Section 3, Article XII of the 1987
Constitution which was intended to diffuse equitably the
ownership of alienable lands of the public domain among
Filipinos, now numbering over 80 million strong.

This scheme, if allowed, can even be applied to alienable

agricultural lands of the public domain since PEA can
acquire x x x any and all kinds of lands. This will open the
floodgates to corporations and even individuals acquiring
hundreds, if not thousands, of hectares of alienable lands
of the public domain under the guise that in the hands of
PEA these lands are private lands. This will result in
corporations amassing huge landholdings never before
seen in this country - creating the very evil that the
constitutional ban was designed to prevent. This will
completely reverse the clear direction of constitutional
development in this country. The 1935 Constitution allowed
private corporations to acquire not more than 1,024
hectares of public lands. The 1973 Constitution prohibited
private corporations from acquiring any kind of public land,
and the 1987 Constitution has unequivocally reiterated this
prohibition.

Finally, the Office of the Solicitor General and PEA argue

that the cost of reclaiming deeply submerged areas is
enormous and it would be difficult for PEA to accomplish
such project without the participation of private
corporations.[19 The Decision does not bar private
corporations from participating in reclamation projects and
being paid for their services in reclaiming lands. What the
Decision prohibits, following the explicit constitutional
mandate, is for private corporations to acquire reclaimed
lands of the public domain. There is no prohibition on the
directors, officers and stockholders of private corporations,
if they are Filipino citizens, from acquiring at public auction
reclaimed alienable lands of the public domain. They can
acquire not more than 12 hectares per individual, and the
land thus acquired becomes private land.

Despite the nullity of the Amended JVA, Amari is not

precluded from recovering from PEA in the proper
proceedings, on a quantum meruit basis, whatever Amari
may have incurred in implementing the Amended JVA prior
to its declaration of nullity.

WHEREFORE, finding the Motions for Reconsideration to be

without merit, the same are hereby DENIED with FINALITY.
The Motion to Inhibit and for Re-Deliberation and the
Motion to Set Case for Hearing on Oral Argument are
likewise DENIED.

SO ORDERED.