SECOND DIVISION

September 7, 2015
GR. No. 197472
REPUBLIC OF THE PHILIPPINES, represented by Commander Raymond Alpuerto of the
Naval Base Camillo Osias, Port San Vicente, Sta. Ana, Cagayan, Petitioner,
vs.
REV. CLAUDIO R. CORTEZ, SR., Respondent.
DECISION
DEL CASTILLO, J.:
An inalienable public land cannot be appropriated and thus may not be the proper object of
possession. Hence, injunction cannot be issued in order to protect ones alleged right of possession
over the same.
This Petition for Review on Certiorari1 assails the June 29, 2011 Decision 2 of the Court of Appeals
(CA) in CA-GR. CV No. 89968, which dismissed the appeal therewith and affirmed the July 3, 2007
Decision3 of the Regional Trial Court (RTC) of Aparri, Cagayan, Branch 8 in Spl. Civil Action Case No.
II-2403.
Factual Antecedents
Respondent Rev. Claudio R. Cortez, Sr. (Rev. Cortez), a missionary by vocation engaged in
humanitarian and charitable activities, established an orphanage and school in Punta Verde, Palaui
Island, San Vicente, Sta. Ana, Cagayan. He claimed that since 1962, he has been in peaceful
possession of about 50 hectares of land located in the western portion of Palaui Island in Sitio
Siwangag, Sta. Ana, Cagayan which he, with the help of Aetas and other people under his care,
cleared and developed for agricultural purposes in order to support his charitable, humanitarian
and missionary works.4
On May 22, 1967, President Ferdinand E. Marcos issued Proclamation No. 201 reserving for military
purposes a parcel of the public domain situated in Palaui Island. Pursuant thereto, 2,000 hectares
of the southern half portion of the Palaui Island were withdrawn from sale or settlement and
reserved for the use of the Philippine Navy, subject, however, to private rights if there be any.
More than two decades later or on August 16, 1994, President Fidel V. Ramos issued Proclamation
No. 447 declaring Palaui Island and the surrounding waters situated in the Municipality of Sta. Ana,
Cagayan as marine reserve. Again subject to any private rights, the entire Palaui Island consisting
of an aggregate area of 7,415.48 hectares was accordingly reserved as a marine protected area.
On June 13, 2000, Rev. Cortez filed a Petition for Injunction with Prayer for the Issuance of a Writ of
Preliminary Mandatory Injunction5 against Rogelio C. Bias (Bias) in his capacity as Commanding
Officer of the Philippine Naval Command in Port San Vicente, Sta. Ana, Cagayan.1wphi1 According
to him, some members of the Philippine Navy, upon orders of Bias, disturbed his peaceful and
lawful possession of the said 50-hectare portion of Palaui Island when on March 15, 2000, they
commanded him and his men, through the use of force and intimidation, to vacate the area. When
he sought assistance from the Office of the Philippine Naval Command, he was met with sarcastic
remarks and threatened with drastic military action if they do not vacate. Thus, Rev. Cortez and his
men were constrained to leave the area. In view of these, Rev. Cortez filed the said Petition with
the RTC seeking preliminary mandatory injunction ordering Bias to restore to him possession and
to not disturb the same, and further, for the said preliminary writ, if issued, to be made permanent.
Proceedings before the Regional Trial Court
After the conduct of hearing on the application for preliminary mandatory injunction 6 and the
parties submission of their respective memoranda,7 the RTC issued an Order8 dated February 21,
2002 granting the application for a writ of preliminary mandatory injunction. However, the same

pertained to five hectares (subject area) only, not to the whole 50 hectares claimed to have been
occupied by Rev. Cortez, viz.:
It should be noted that the claim of [Rev. Cortez] covers an area of 50 hectares more or less
located at the western portion of Palaui Island which is within the Naval reservation. [Rev. Cortez]
presented what he called as a survey map (Exh. "H") indicating the location of the area claimed by
the Church of the Living God and/or Rev. Claudio Cortez with an approximate area of 50 hectares
identified as Exh. "H-4". However, the Survey Map allegedly prepared by [a] DENR personnel is only
a sketch map[,] not a survey map as claimed by [Rev. Cortez]. Likewise, the exact boundaries of
the area [are] not specifically indicated. The sketch only shows some lines without indicating the
exact boundaries of the 50 hectares claimed by [Rev. Cortez]. As such, the identification of the area
and its exact boundaries have not been clearly defined and delineated in the sketch map.
Therefore, the area of 50 hectares that [Rev. Cortez] claimed to have peacefully and lawfully
possessed for the last 38 years cannot reasonably be determined or accurately identified.
For this reason, there is merit to the contention of [Bias] that [Rev. Cortez] claim to the 50
hectares of land identified as Exh. ["]H-4" is unclear and ambiguous. It is a settled jurisprudence
that mandatory injunction is the strong arm of equity that never ought to be extended unless to
cases of great injury, where courts of law cannot afford an adequate and commensurate remedy in
damages. The right must be clear, the injury impending or threatened, so as to be averted only by
the protecting preventive process of injunction. The reason for this doctrine is that before the issue
of ownership is determined in the light of the evidence presented, justice and equity demand that
the [status quo be maintained] so that no advantage may be given to one to the prejudice of the
other. And so it was ruled that unless there is a clear pronouncement regarding ownership and
possession of the land, or unless the land is covered by the torrens title pointing to one of the
parties as the undisputed owner, a writ of preliminary injunction should not issue to take the
property out of possession of one party to place it in the hands of another x x x.
Admittedly, the documentary exhibits of [Rev. Cortez] tended only to show that [he] has a pending
application of patent with the DENR. Even so, [Rev. Cortez] failed to present in evidence the
application for patent allegedly filed by [him] showing that he applied for patent on the entire 50
hectares of land which he possessed or occupied for a long period of time. Under the
circumstances, therefore, the title of petitioner to the 50 hectares of land in Palaui Island remains
unclear and doubtful, and [is] seriously disputed by the government.
More significantly, at the time that Proc. No. 201 was issued on May 22, 1967, [Rev. Cortez] has not
perfected his right over the 50 hectares of land nor acquired any vested right thereto considering
that he only occupied the land as alleged by him in 1962 or barely five (5) years before the
issuance of the Presidential Proclamation. Proclamation No. 201 had the effect of removing Palaui
Island from the alienable or disposable portion of the public domain and therefore the island, as of
the date of [the] issuance [of the proclamation], has ceased to be disposable public land.
However, the court is not unmindful that [Rev. Cortez] has lawfully possessed and occupied at least
five (5) hectares of land situated at the western portion of the Palaui Island identified as Exh "H-4".
During the hearing, Cmdr.
Rogelio Bias admitted that when he was assigned as Commanding Officer in December 1999, he
went to Palaui Island and [saw only] two (2) baluga families tilling the land consisting of five (5)
hectares. Therefore, it cannot be seriously disputed that [Rev. Cortez] and his baluga tribesmen
cleared five (5) hectares of land for planting and cultivation since 1962 on the western portion
identified as Exhibit "H-4". The Philippine Navy also admitted that they have no objection to
settlers of the land prior to the Presidential Proclamation and [Rev. Cortez] had been identified as
one of the early settlers of the area before the Presidential Proclamation. The DENR also
acknowledged that [Rev. Cortez] has filed an application for patent on the western area and that he
must be allowed to pursue his claim.
Although the court is not persuaded by the argument of [Rev. Cortez] that he has already acquired
vested rights over the area claimed by him, the court must recognize that [Rev. Cortez] may have
acquired some propriety rights over the area considering the directive of the DENR to allow [Rev.
Cortez] to pursue his application for patent. However, the court wants to make clear that the
application for patent by [Rev. Cortez] should be limited to an area not to exceed five (5) hectares
situated at the western portion of x x x Palaui Island identified in the sketch map as Exh. "H-4." This
area appears to be the portion where [Rev. Cortez] has clearly established his right or title by
reason of his long possession and occupation of the land. 9

In his Answer,10 Bias countered that: (1) Rev. Cortez has not proven that he has been in exclusive,
open, continuous and adverse possession of the disputed land in the concept of an owner; (2) Rev.
Cortez has not shown the exact boundaries and identification of the entire lot claimed by him; (3)
Rev. Cortez has not substantiated his claim of exemption from Proclamation No. 201; (4) under
Proclamation No. 447, the entire Palaui Island, which includes the land allegedly possessed and
occupied by Rev. Cortez, was reserved as a marine protected area; and, (4) injunction is not a
mode to wrest possession of a property from one person by another.
Pre-trial and trial thereafter ensued.
On July 3, 2007, the RTC rendered its Decision11 making the injunction final and permanent. In so
ruling, the said court made reference to the Indigenous Peoples [Right] Act (IPRA) as follows:
The Indigenous [Peoples Right] Act should be given effect in this case. The affected community
belongs to the group of indigenous people which are protected by the State of their rights to
continue in their possession of the lands they have been tilling since time immemorial. No
subsequent passage of law or presidential decrees can alienate them from the land they are
tilling.12
Ultimately, the RTC held, thus:
WHEREFORE, finding the petition to be meritorious, the same is hereby GRANTED.
xxxx
SO DECIDED.13
Representing Bias, the Office of the Solicitor General (OSG) filed a Notice of Appeal 14 which was
given due course by the RTC in an Order 15 dated August 6, 2007.
Ruling of the Court of Appeals
In its brief,16 the OSG pointed out that Rev. Cortez admitted during trial that he filed the Petition for
injunction on behalf of the indigenous cultural communities in Palaui Island and not in his capacity
as pastor or missionary of the Church of the Living God. He also claimed that he has no interest
over the land. Based on these admissions, the OSG argued that the Petition should have been
dismissed outright on the grounds that it did not include the name of the indigenous cultural
communities that Rev. Cortez is supposedly representing and that the latter is not the real party-ininterest. In any case, the OSG averred that Rev. Cortez failed to show that he is entitled to the
issuance of the writ of injunction. Moreover, the OSG questioned the RTCs reference to the IPRA
and argued that it is not applicable to the present case since Rev. Cortez neither alleged in his
Petition that he is claiming rights under the said act nor was there any showing that he is a
member of the Indigenous Cultural Communities and/or the Indigenous Peoples as defined under
the IPRA.
In its Decision 17 dated June 29, 2011, the CA upheld the RTCs issuance of a final injunction based
on the following ratiocination:
The requisites necesary for the issuance of a writ of preliminary injunction are: (1) the existence of
a clear and unmistakable right that must be protected; and (2) an urgent and paramount necessity
for the writ to prevent serious damage. Here, [Rev. Cortez] has shown the existence of a clear and
unmistakable right that must be protected and an urgent and paramount necessity for the writ to
prevent serious damage. Records reveal that [Rev. Cortez] has been in peaceful possession and
occupation of the western portion of Palaui Island, Sitio Siwangag, San Vicente, Sta. Ana[,] Cagayan
since 1962 or prior to the issuance of Proclamation Nos. 201 and 447 in 1967 and 1994,
respectively. There he built an orphanage and a school for the benefit of the members of the
Dumagat Tribe, in furtherance of his missionary and charitable works. There exists a clear and
unmistakable right in favor [of Rev. Cortez] since he has been in open, continuous and notorious
possession of a portion of Palaui island. To deny the issuance of a writ of injunction would cause
grave and irreparable injury to [Rev. Cortez] since he will be displaced from the said area which he
has occupied since 1962. It must be emphasized that Proclamation Nos. 201 and 447 stated that
the same are subject to private rights, if there be [any]. Though Palaui Island has been declared to

be part of the naval reservation and the whole [i]sland as a marine protected area, both recognized
the existence of private rights prior to the issuance of the same.
From the foregoing, we rule that the trial court did not err when it made permanent the writ of
preliminary mandatory injunction. Section 9, Rule 58 of the Rules of Court provides that if after the
trial of the action it appears that the applicant is entitled to have the act or acts complained of
permanently enjoined, the court shall grant a final injunction perpetually restraining the party or
person enjoined from the commission or continuance of the act or acts or confirming the
preliminary mandatory injunction.18
Anent the issue of Rev. Cortez not being a real party-in-interest, the CA noted that this was not
raised before the RTC and therefore cannot be considered by it. Finally, with respect to the RTCs
mention of the IPRA, the CA found the same to be a mere obiter dictum.
The dispositive portion of the CA Decision reads:
WHEREFORE, premise[s] considered, the instant Appeal is hereby DENIED. The assailed 3 July 2007
Decision of the Regional Trial Court of Aparri, Cagayan, Branch 8 in Civil Case No. II-2403 is
AFFIRMED.
SO ORDERED.19
Hence, this Petition brought by the OSG on behalf of the Republic of the Philippines (the Republic).
The Issue
The ultimate issue to be resolved in this case is whether Rev. Cortez is entitled to a final writ of
mandatory injunction.
The Parties Arguments
The bone of contention as the OSG sees it is the injunctive writ since Rev. Cortez failed to prove his
clear and positive right over the 5-hectare portion of Palaui Island covered by the same. This is
considering that by his own admission, Rev. Cortez started to occupy the said area only in 1962.
Hence, when the property was declared as a military reserve in 1967, he had been in possession of
the 5-hectare area only for five years or short of the 30-year possession requirement for a bona
fide claim of ownership under the law. The OSG thus argues that the phrase "subject to private
rights" as contained in Proclamation No. 201 and Proclamation No. 447 cannot apply to him since it
only pertains to those who have already complied with the requirements for perfection of title over
the land prior to the issuance of the said proclamations.
Rev. Cortez, for his part, asserts that the arguments of the OSG pertaining to ownership are all
immaterial as his Petition for injunction does not involve the right to possess based on ownership
but on the right of possession which is a right independent from ownership. Rev. Cortez avers that
since he has been in peaceful and continuous possession of the subject portion of Palaui Island, he
has the right of possession over the same which is protected by law. He asserts that based on this
right, the writ of injunction was correctly issued by the RTC in his favor and aptly affirmed by the
CA. On the technical side, Rev. Cortez avers that the Republic has no legal personality to assail the
CA Decision through the present Petition since it was not a party in the appeal before the CA.
The Courts Ruling
We grant the Petition.
For starters, the Court shall distinguish a preliminary injunction from a final injunction.
"Injunction is a judicial writ, process or proceeding whereby a party is directed either to do a
particular act, in which case it is called a mandatory injunction, [as in this case,] or to refrain from
doing a particular act, in which case it is called a prohibitory injunction." 20 "It may be the main
action or merely a provisional remedy for and as an incident in the main action." 21

"The main action for injunction is distinct from the provisional or ancillary remedy of preliminary
injunction."22 A preliminary injunction does not determine the merits of a case or decide
controverted facts.23 Since it is a mere preventive remedy, it only seeks to prevent threatened
wrong, further injury and irreparable harm or injustice until the rights of the parties are settled. 24 "It
is usually granted when it is made to appear that there is a substantial controversy between the
parties and one of them is committing an act or threatening the immediate commission of an act
that will cause irreparable injury or destroy the status quo of the controversy before a full hearing
can be had on the merits of the case."25 A preliminary injunction is granted at any stage of an
action or proceeding prior to judgment or final order. 26 For its issuance, the applicant is required to
show, at least tentatively, that he has a right which is not vitiated by any substantial challenge or
contradiction.27 Simply stated, the applicant needs only to show that he has the ostensible right to
the final relief prayed for in his complaint. 28 On the other hand, the main action for injunction seeks
a judgment that embodies a final injunction. 29 A final injunction is one which perpetually restrains
the party or person enjoined from the commission or continuance of an act, or in case of
mandatory injunctive writ, one which confirms the preliminary mandatory injuction. 30 It is issued
when the court, after trial on the merits, is convinced that the applicant is entitled to have the act
or acts complained of permanently enjoined.31 Otherwise stated, it is only after the court has come
up with a definite pronouncement respecting an applicants right and of the act violative of such
right, based on its appreciation of the evidence presented, that a final injunction is issued. To be a
basis for a final and permanant injunction, the right and the act violative thereof must be
established by the applicant with absolute certainty. 32
What was before the trial court at the time of the issuance of its July 3, 2007 Decision is whether a
final injunction should issue. While the RTC seemed to realize this as it in fact made the injunction
permanent, the Court, however, finds the same to be wanting in basis.
Indeed, the RTC endeavored to provide a narrow distinction between a preliminary injunction and a
final injunction. Despite this, the RTC apparently confused itself. For one, what it cited in its
Decision were jurisprudence relating to preliminary injunction and/or mandatory injunction as an
ancillary writ and not as a final injunction. At that point, the duty of the RTC was to determine,
based on the evidence presented during trial, if Rev. Cortez has conclusively established his
claimed right (as opposed to preliminary injunction where an applicant only needs to at
least tentatively show that he has a right) over the subject area. This is considering that the
existence of such right plays an important part in determining whether the preliminary writ of
mandatory injunction should be confirmed.
Surprisingly, however, the said Decision is bereft of the trial courts factual findings on the matter
as well as of its analysis of the same vis-a-vis applicable jurisprudence. As it is, the said Decision
merely contains a restatement of the parties respective allegations in the Complaint and the
Answer, followed by a narration of the ensuing proceedings, an enumeration of the evidence
submitted by Rev. Cortez, a recitation of jurisprudence relating to preliminary injunction and/or
specifically, to mandatory injunction as an ancillary writ, a short reference to the IPRA which the
Court finds to be irrelevant and finally, a conclusion that a final and permanent injunction should
issue. No discussion whatsoever was made with respect to whether Rev. Cortez was able to
establish with absolute certainty hisclaimed right over the subject area.
Section 14, Article VIII of the Constitution, as well as Section 1 of Rule 36 and Section 1, Rule 120 of
the Rules on Civil Procedure, similarly state that a decision, judgment or final order determining the
merits of the case shall state, clearly and distinctly, the facts and the law on which it is based.
Pertinently, the Court issued on January 28, 1988 Administrative Circular No. 1, which requires
judges to make complete findings of facts in their decision, and scrutinize closely the legal aspects
of the case in the light of the evidence presented, and avoid the tendency to generalize and to
form conclusion without detailing the facts from which such conclusions are deduced. 33
Clearly, the Decision of the RTC in this case failed to comply with the aforestated guidelines.
In cases such as this, the Court would normally remand the case to the court a quo for compliance
with the form and substance of a Decision as required by the Constitution. In order, however, to
avoid further delay, the Court deems it proper to resolve the case based on the merits. 34
"Two requisites must concur for injunction to issue: (1) there must be a right to be protected and
(2) the acts against which the injunction is to be directed are violative of said right." 35 Thus, it is
necessary that the Court initially determine whether the right asserted by Rev. Cortez indeed

exists. As earlier stressed, it is necessary that such right must have been established by him with
absolute certainty.
Rev. Cortez argues that he is entitled to the injunctive writ based on the right of possession (jus
possesionis) by reason of his peaceful and continuous possession of the subject area since 1962.
He avers that as this right is protected by law, he cannot be peremptorily dispossessed therefrom,
or if already dispossessed, is entitled to be restored in possession. Hence, the mandatory injunctive
writ was correctly issued in his favor.
Jus possessionis or possession in the concept of an owner 36 is one of the two concepts of
possession provided under Article 52537 of the Civil Code. Also referred to as adverse
possession,38 this kind of possesion is one which can ripen into ownership by prescription. 39 As
correctly asserted by Rev. Cortez, a possessor in the concept of an owner has in his favor the legal
presumption that he possesses with a just title and he cannot be obliged to show or prove it. 40 In
the same manner, the law endows every possessor with the right to be respected in his
possession.41
It must be emphasized, however, that only things and rights which are susceptible of being
appropriated may be the object of possession.42 The following cannot be appropriated and hence,
cannot be possessed: property of the public dominion, common things (res communes) such as
sunlight and air, and things specifically prohibited by law. 43
Here, the Court notes that while Rev. Cortez relies heavily on his asserted right of possession, he,
nevertheless, failed to show that the subject area over which he has a claim is not part of the
public domain and therefore can be the proper object of possession.
Pursuant to the Regalian Doctrine, all lands of the public domain belong to the State. 44 Hence, "[a]ll
lands not appearing to be clearly under private ownership are presumed to belong to the State.
Also, public lands remain part of the inalienable land of the public domain unless the State is
shown to have reclassified or alienated them to private persons."45 To prove that a land is alienable,
the existence of a positive act of the government, such as presidential proclamation or an
executive order; an administrative action; investigation reports of Bureau of Lands investigators;
and a legislative act or a statute declaring the land as alienable and disposable must be
established.46
In this case, there is no such proof showing that the subject portion of Palaui Island has been
declared alienable and disposable when Rev. Cortez started to occupy the same. Hence, it must be
considered as still inalienable public domain. Being such, it cannot be appropriated and therefore
not a proper subject of possession under Article 530 of the Civil Code. Viewed in this light, Rev.
Cortez claimed right of possession has no leg to stand on. His possession of the subject area, even
if the same be in the concept of an owner or no matter how long, cannot produce any legal effect
in his favor since the property cannot be lawfully possessed in the first place.
The same goes true even if Proclamation No. 201 and Proclamation No. 447 were made subject to
private rights. The Court stated in Republic v. Bacas,47 viz.:
Regarding the subject lots, there was a reservation respecting private rights. In Republic v.
Estonilo, where the Court earlier declared that Lot No. 4319 was part of the Camp Evangelista
Military Reservation and, therefore, not registrable, it noted the proviso in Presidential Proclamation
No. 265 requiring the reservation to be subject to private rights as meaning that persons claiming
rights over the reserved land were not precluded from proving their claims. Stated differently, the
said proviso did not preclude the LRC from determining whether x x x the respondents indeed had
registrable rights over the property.
As there has been no showing that the subject parcels of land had been segregated
from the military reservation, the respondents had to prove that the subject properties
were alienable or disposable land of the public domain prior to its withdrawal from sale
and settlement and reservation for military purposes under Presidential Proclamation
No. 265. The question is primordial importance because it is determinative if the land can in fact
be subject to acquisitive prescription and, thus, registrable under the Torrens system. Without
first determining the nature and character of the land, all other requirements such as
length and nature of possession and occupation over such land do not come into play.

The required length of possession does not operate when the land is part of the public
domain.
In this case, however, the respondents miserably failed to prove that, before the proclamation, the
subject lands were already private lands. They merely relied on such recognition of possible
private rights. In their application, they alleged that at the time of their application, they had been
in open, continuous, exclusive and notorious possession of the subject parcels of land for at least
thirty (30) years and became its owners by prescription. There was, however, no allegation or
showing that the government had earlier declared it open for sale or settlement, or that it was
already pronounced as inalienable and disposable.48
In view of the foregoing, the Court finds that Rev. Cortez failed to conclusively establish his claimed
right over the subject portion of Palaui Island as would entitle him to the issuance of a final
injunction.
Anent the technical issue raised by Rev. Cortez, i. e, that the Republic has no personality to bring
this Petition since it was not a party before the CA, the Court deems it prudent to set aside this
procedural barrier. After all, "a party's standing before [the] Court is a [mere] procedural
technicality which may, in the exercise of [its] discretion, be set aside in view of the importance of
the issue raised."49
We note that Rev. Cortez alleged that he sought the injunction so that he could continue his
humanitarian works. However, considering that inalienable public land was involved, this Court is
constrained to rule in accordance with the aforementioned.
WHEREFORE, the Petition is GRANTED. The June 29, 2011 Decision of the Court of Appeals in CAGR. CV No. 89968 denying the appeal and affirming the July 3, 2007 Decision of the Regional Trial
Court of Aparri, Cagayan-Branch 08 in Spl. Civil Action Case No. II-2403, is REVERSED and SET
ASIDE. Accordingly, the final injunction issued in this case is ordered DISSOLVED and the Petition
for Injunction in Spl. Civil Action Case No. II-2403,DISMISSED.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 192896

July 24, 2013

DREAM VILLAGE NEIGHBORHOOD ASSOCIATION, INC., represented by its Incumbent

President, GREG SERIEGO, Petitioner,
vs.
BASES DEVELOPMENT AUTHORITY, Respondent.
G.R. No. 192896.July 24, 2013.*
DREAM VILLAGE NEIGHBORHOOD ASSOCIATION, INC., represented by its Incumbent President,
GREG SERIEGO, petitioner, vs. BASES CONVERSION DEVELOPMENT AUTHORITY, respondent.

Civil Law; Ownership; Bases Conversion and Development Authority (BCDA); That the Bases
Conversion and Development Authority (BCDA) has title to Fort Bonifacio has long been decided
with finality.That the BCDA has title to Fort Bonifacio has long been decided with finality. In
Samahan ng Masang Pilipino sa Makati, Inc. v. BCDA, 513 SCRA 88 (2007), it was categorically
ruled as follows: First, it is unequivocal that the Philippine Government, and now the BCDA, has title
and ownership over Fort Bonifacio. The case of Acting Registrars of Land Titles and Deeds of Pasay
City, Pasig and Makati is final and conclusive on the ownership of the then Hacienda de Maricaban
estate by the Republic of the Philippines. Clearly, the issue on the ownership of the subject lands in
Fort Bonifacio is laid to rest. Other than their view that the USA is still the owner of the subject lots,
petitioner has not put forward any claim of ownership or interest in them.
Same; Same; Prescription; Article 1113 of the Civil Code provides that property of the State or any
of its subdivisions not patrimonial in character shall not be the object of prescription.Article
1113 of the Civil Code provides that property of the State or any of its subdivisions not patrimonial
in character shall not be the object of prescription. Articles 420 and 421 identify what is property
of public dominion and what is patrimonial property: Art. 420. The following things are property of
public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2)
Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth. Art. 421. All other property of the State,
which is not of the character stated in the preceding article, is patrimonial property.
Civil Law; Military Lands; Alienable and Disposable Lands; In Heirs of Mario Malabanan v. Republic,
587 SCRA 172 (2009), it was pointed out that from the moment R.A. No. 7227 was enacted, the
subject military lands in Metro Manila became alienable and disposable. However, it was also
clarified that the said lands did not thereby become patrimonial, since the Bases Conversion and
Development Authority (BCDA) law makes the express reservation that they are to be sold in order
to raise funds for the conversion of the former American bases in Clark and Subic.One question
laid before us is whether the area occupied by Dream Village is susceptible of acquisition by
prescription. In Heirs of Mario Malabanan v. Republic, 587 SCRA 172 (2009), it was pointed out that
from the moment R.A. No. 7227 was enacted, the subject military lands in Metro Manila became
alienable and disposable. However, it was also clarified that the said lands did not thereby become
patrimonial, since the BCDA law makes the express reservation that they are to be sold in order to
raise funds for the conversion of the former American bases in Clark and Subic. The Court noted
that the purpose of the law can be tied to either public service or the development of national
wealth under Article 420(2) of the Civil Code, such that the lands remain property of the public
dominion, albeit their status is now alienable and disposable. The Court then explained that it is
only upon their sale to a private person or entity as authorized by the BCDA law that they become
private property and cease to be property of the public dominion: For as long as the property
belongs to the State, although already classified as alienable or disposable, it remains property of
the public dominion if when it is intended for some public service or for the development of the
national wealth.
Same; Same; Public Domains; Under Article 422 of the Civil Code, public domain lands become
patrimonial property only if there is a declaration that these are alienable or disposable, together
with an express government manifestation that the property is already patrimonial or no longer
retained for public service or the development of national wealth.Under Article 422 of the Civil
Code, public domain lands become patrimonial property only if there is a declaration that these are
alienable or disposable, together with an express government manifestation that the property is
already patrimonial or no longer retained for public service or the development of national wealth.
Only when the property has become patrimonial can the prescriptive period for the acquisition of
property of the public dominion begin to run. Also under Section 14(2) of Presidential Decree (P.D.)
No. 1529, it is provided that before acquisitive prescription can commence, the property sought to
be registered must not only be classified as alienable and disposable, it must also be expressly
declared by the State that it is no longer intended for public service or the development of the
national wealth, or that the property has been converted into patrimonial. Absent such an express
declaration by the State, the land remains to be property of public dominion.
Same; Same; Same; Fort Bonifacio remains property of public dominion of the State, because
although declared alienable and disposable, it is reserved for some public service or for the
development of the national wealth, in this case, for the conversion of military reservations in the
country to productive civilian uses.Since the issuance of Proclamation No. 423 in 1957, vast
portions of the former Maricaban have been legally disposed to settlers, besides those segregated
for public or government use. Proclamation No.

225

VOL. 702, JULY 24, 2013

225
Dream Village Neighborhood Association, Inc. vs. Dases Conversion Development Authority
1217 (1973) established the Maharlika Village in Bicutan, Taguig to serve the needs of resident
Muslims of Metro Manila; Proclamation No. 2476 (1986), as amended by Proclamation No. 172
(1987), declared more than 400 has. of Maricaban in Upper and Lower Bicutan, Signal Village, and
Western Bicutan as alienable and disposable; Proclamation No. 518 (1990) formally exempted from
Proclamation No. 423 the Barangays of Cembo, South Cembo, West Rembo, East Rembo,
Comembo, Pembo and Pitogo, comprising 314 has., and declared them open for disposition. The
above proclamations notwithstanding, Fort Bonifacio remains property of public dominion of the
State, because although declared alienable and disposable, it is reserved for some public service or
for the development of the national wealth, in this case, for the conversion of military reservations
in the country to productive civilian uses. Needless to say, the acquisitive prescription asserted by
Dream Village has not even begun to run.
Same; Ownership; Prescription; It is a settled rule that lands under a Torrens title cannot be
acquired by prescription or adverse possession.It is a settled rule that lands under a Torrens title
cannot be acquired by prescription or adverse possession. Section 47 of P.D. No. 1529, the Property
Registration Decree, expressly provides that no title to registered land in derogation of the title of
the registered owner shall be acquired by prescription or adverse possession. And, although the
registered landowner may still lose his right to recover the possession of his registered property by
reason of laches, nowhere has Dream Village alleged or proved laches, which has been defined as
such neglect or omission to assert a right, taken in conjunction with lapse of time and other
circumstances causing prejudice to an adverse party, as will operate as a bar in equity. Put any
way, it is a delay in the assertion of a right which works disadvantage to another because of the
inequity founded on some change in the condition or relations of the property or parties. It is based
on public policy which, for the peace of society, ordains that relief will be denied to a stale demand
which otherwise could be a valid claim.
Commission on the Settlement of Land Problems (COSLAP); Jurisdiction; A review of the history of
the Commission on the Settlement of Land Problems (COSLAP) will readily clarify that its
jurisdiction is limited to disputes over public lands not reserved or declared for a public use or
purpose.The CA said, under Section 3 of
226

226
SUPREME COURT REPORTS ANNOTATED
Dream Village Neighborhood Association, Inc. vs. Dases Conversion Development Authority
E.O. No. 561, the COSLAPs duty would have been to refer the conflict to another tribunal or agency
of government in view of the serious ramifications of the disputed claims: In fine, it is apparent that
the COSLAP acted outside its jurisdiction in taking cognizance of the case. It would have been more
prudent if the COSLAP has [sic] just referred the controversy to the proper forum in order to fully
thresh out the ramifications of the dispute at bar. As it is, the impugned Resolution is a patent
nullity since the tribunal which rendered it lacks jurisdiction. Thus, the pronouncements contained
therein are void. We have consistently ruled that a judgment for want of jurisdiction is no
judgment at all. It cannot be the source of any right or the creator of any obligation. All acts
performed pursuant to it and all claims emanating from it have no legal effect. We add that Fort
Bonifacio has been reserved for a declared specific public purpose under R.A. No. 7227, which
unfortunately for Dream Village does not encompass the present demands of its members. Indeed,

this purpose was the very reason why title to Fort Bonifacio has been transferred to the BCDA, and
it is this very purpose which takes the dispute out of the direct jurisdiction of the COSLAP. A review
of the history of the COSLAP will readily clarify that its jurisdiction is limited to disputes over public
lands not reserved or declared for a public use or purpose. Dream Village Neighborhood
Association, Inc. vs. Dases Conversion Development Authority, 702 SCRA 222, G.R. No. 192896 July
24, 2013
DECISION
REYES, J.:
Before us on Petition for Review1 under Rule 45 of the Rules of Court is the Decision 2 dated
September 10, 2009 and Resolution3 dated July 13, 2010 of the Court of Appeals (CA) in CA-G.R. SP
No. 85228 nullifying and setting aside for lack of jurisdiction the Resolution 4 dated April 28, 2004 of
the Commission on the Settlement of Land Problems (COSLAP) in COS LAP Case No. 99-500. The
fallo of the assailed COS LAP Resolution reads, as follows:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Declaring the subject property, covering an area of 78,466 square meters, now being
occupied by the members of the Dream Village Neighborhood Association, Inc. to be
outside of Swo-00-0001302 BCDA property.
2. In accordance with the tenets of social justice, members of said association are advised
to apply for sales patent on their respective occupied lots with the Land Management
Bureau, DENR-NCR, pursuant to R.A. Nos. 274 and 730.
3. Directing the Land Management Bureau-DENR-NCR to process the sales patent
application of complainants pursuant to existing laws and regulation.
4. The peaceful possession of actual occupants be respected by the respondents.
SO ORDERED.5
Antecedent Facts
Petitioner Dream Village Neighborhood Association, Inc. (Dream Village) claims to represent more
than 2,000 families who have been occupying a 78,466-square meter lot in Western Bicutan,
Taguig City since 1985 "in the concept of owners continuously, exclusively and notoriously." 6 The
lot used to be part of the Hacienda de Maricaban (Maricaban), owned by Dolores Casal y Ochoa
and registered under a Torrens title,7 Original Certificate of Title (OCT) No. 291, issued on October
17, 1906 by the Registry of Deeds of Rizal.8 Maricaban covered several parcels of land with a total
area of over 2,544 hectares spread out over Makati, Pasig, Taguig, Pasay, and Paraaque. 9
Following the purchase of Maricaban by the government of the United States of America (USA)
early in the American colonial period, to be converted into the military reservation known as Fort
William Mckinley, Transfer Certificate of Title (TCT) No. 192 was issued in the name of the USA to
cancel OCT No. 291.10 The US government later transferred 30 has. of Maricaban to the Manila
Railroad Company, for which TCT No. 192 was cancelled by TCT Nos. 1218 and 1219, the first in the
name of the Manila Railroad Company for 30 has., and the second in the name of the USA for the
rest of the Maricaban property.11
On January 29, 1914, TCT No. 1219 was cancelled and replaced by TCT No. 1688, and later that
year, on September 15, 1914, TCT No. 1688 was cancelled and replaced by TCT No. 2288, both
times in the name of the USA. 12 On December 6, 1956, the USA formally ceded Fort William
Mckinley to the Republic of the Philippines (Republic), and on September 11, 1958, TCT No. 2288
was cancelled and replaced by TCT No. 61524, this time in the name of the Republic. 13 On July 12,
1957, President Carlos P. Garcia issued Proclamation No. 423 withdrawing from sale or settlement
the tracts of land within Fort William Mckinley, now renamed Fort Bonifacio, and reserving them for
military purposes.14

On January 7, 1986, President Ferdinand E. Marcos issued Proclamation No. 2476 declaring certain
portions of Fort Bonifacio alienable and disposable 15 in the manner provided under Republic Act
(R.A.) Nos. 274 and 730, in relation to the Public Land Act, 16 thus allowing the sale to the settlers of
home lots in Upper Bicutan, Lower Bicutan, Signal Village, and Western Bicutan. 17
On October 16, 1987, President Corazon C. Aquino issued Proclamation No. 172 amending
Proclamation No. 2476 by limiting to Lots 1 and 2 of the survey Swo-13-000298 the areas in
Western Bicutan open for disposition.18
On March 13, 1992, R.A. No. 7227 was passed 19 creating the Bases Conversion and Development
Authority (BCDA) to oversee and accelerate the conversion of Clark and Subic military reservations
and their extension camps (John Hay Station, Wallace Air Station, ODonnell Transmitter Station,
San Miguel Naval Communications Station and Capas Relay Station) to productive civilian uses.
Section 820 of the said law provides that the capital of the BCDA will be provided from sales
proceeds or transfers of lots in nine (9) military camps in Metro Manila, including 723 has. of Fort
Bonifacio. The law, thus, expressly authorized the President of the Philippines "to sell the above
lands, in whole or in part, which are hereby declared alienable and disposable pursuant to the
provisions of existing laws and regulations governing sales of government properties," 21 specifically
to raise capital for the BCDA. Titles to the camps were transferred to the BCDA for this
purpose,22 and TCT No. 61524 was cancelled on January 3, 1995 by TCT Nos. 23888, 23887, 23886,
22460, 23889, 23890, and 23891, now in the name of the BCDA. 23
Excepted from disposition by the BCDA are: a) approximately 148.80 has. reserved for the National
Capital Region (NCR) Security Brigade, Philippine Army officers housing area, and Philippine
National Police jails and support services (presently known as Camp Bagong Diwa); b)
approximately 99.91 has. in Villamor Air Base for the Presidential Airlift Wing, one squadron of
helicopters for the NCR and respective security units; c) twenty one (21) areas segregated by
various presidential proclamations; and d) a proposed 30.15 has. as relocation site for families to
be affected by the construction of Circumferential Road 5 and Radial Road 4, provided that the
boundaries and technical description of these exempt areas shall be determined by an actual
ground survey.24
Now charging the BCDA of wrongfully asserting title to Dream Village and unlawfully subjecting its
members to summary demolition, resulting in unrest and tensions among the residents, 25 on
November 22, 1999, the latter filed a letter-complaint with the COSLAP to seek its assistance in the
verification survey of the subject 78,466-sq m property, which they claimed is within Lot 1 of Swo13-000298 and thus is covered by Proclamation No. 172. They claim that they have been
occupying the area for thirty (30) years "in the concept of owners continuously, exclusively and
notoriously for several years," and have built their houses of sturdy materials thereon and
introduced paved roads, drainage and recreational and religious facilities. Dream Village, thus,
asserts that the lot is not among those transferred to the BCDA under R.A. No. 7227, and therefore
patent applications by the occupants should be processed by the Land Management Bureau (LMB).
On August 15, 2000, Dream Village formalized its complaint by filing an Amended Petition 26 in the
COSLAP. Among the reliefs it sought were:
d. DECLARING the subject property as alienable and disposable by virtue of applicable
laws;
e. Declaring the portion of Lot 1 of subdivision Plan SWO-13-000298, situated in the barrio
of Western Bicutan, Taguig, Metro Manila, which is presently being occupied by herein
petitioner as within the coverage of Proclamation Nos. 2476 and 172 and outside the claim
of AFP-RSBS INDUSTRIAL PARK COMPLEX and/or BASES CONVESION DEVELOPMENT
AUTHORITY.
f. ORDERING the Land Management Bureau to process the application of the ASSOCIATION
members for the purchase of their respective lots under the provisions of Acts Nos. 274 and
730. (Underscoring supplied)
Respondent BCDA in its Answer28 dated November 23, 2000 questioned the jurisdiction of the
COSLAP to hear Dream Villages complaint, while asserting its title to the subject property pursuant
to R.A. No. 7227. It argued that under Executive Order (E.O.) No. 561 which created the COSLAP, its
task is merely to coordinate the various government offices and agencies involved in the

settlement of land problems or disputes, adding that BCDA does not fall in the enumeration in
Section 3 of E.O. No. 561, it being neither a pastureland-lease holder, a timber concessionaire, or a
government reservation grantee, but the holder of patrimonial government property which cannot
be the subject of a petition for classification, release or subdivision by the occupants of Dream
Village.
In its Resolution 29 dated April 28, 2004, the COSLAP narrated that it called a mediation conference
on March 22, 2001, during which the parties agreed to have a relocation/verification survey
conducted of the subject lot. On April 4, 2001, the COSLAP wrote to the Department of
Environment and Natural Resources (DENR)-Community Environment and Natural Resources OfficeNCR requesting the survey, which would also include Swo-00-0001302, covering the adjacent AFPRSBS Industrial Park established by Proclamation No. 1218 on May 8, 1998 as well as the
abandoned Circumferential Road 5 (C-5 Road). 30
On April 1, 2004, the COSLAP received the final report of the verification survey and a blueprint
copy of the survey plan from Atty. Rizaldy Barcelo, Regional Technical Director for Lands of DENR.
Specifically, Item No. 3 of the DENR report states:
3. Lot-1, Swo-000298 is inside Proclamation 172. Dream Village Neighborhood Association, Inc. is
outside Lot-1, Swo-13-000298 and inside Lot-10, 11 & Portion of Lot 13, Swo-00-0001302 with an
actual area of 78,466 square meters. Likewise, the area actually is outside Swo-00-0001302 of
BCDA.31 (Emphasis ours and underscoring supplied)
COSLAP Ruling
On the basis of the DENRs verification survey report, the COSLAP resolved that Dream Village lies
outside of BCDA, and particularly, outside of Swo-00-0001302, and thus directed the LMB of the
DENR to process the applications of Dream Villages members for sales patent, noting that in view
of the length of time that they "have been openly, continuously and notoriously occupying the
subject property in the concept of an owner, x x x they are qualified to apply for sales patent on
their respective occupied lots pursuant to R.A. Nos. 274 and 730 in relation to the provisions of the
Public Land Act."32
On the question of its jurisdiction over the complaint, the COSLAP cited the likelihood that the
summary eviction by the BCDA of more than 2,000 families in Dream Village could stir up serious
social unrest, and maintained that Section 3(2) of E.O. No. 561 authorizes it to "assume jurisdiction
and resolve land problems or disputes which are critical and explosive in nature considering, for
instance, the large number of parties involved, the presence or emergence of social tension or
unrest, or other similar critical situations requiring immediate action," even as Section 3(2)(d) of
E.O. No. 561 also allows it to take cognizance of "petitions for classification, release and/or
subdivision of lands of the public domain," exactly the ultimate relief sought by Dream Village.
Rationalizing that it was created precisely to provide a more effective mechanism for the
expeditious settlement of land problems "in general," the COSLAP invoked as its authority the 1990
case of Baaga v. COSLAP,33 where this Court said:
It is true that Executive Order No. 561 provides that the COSLAP may take cognizance of cases
which are "critical and explosive in nature considering, for instance, the large number of parties
involved, the presence or emergence of social tension or unrest, or other similar critical situations
requiring immediate action." However, the use of the word "may" does not mean that the
COSLAPs jurisdiction is merely confined to the above mentioned cases. The provisions of the said
Executive Order are clear that the COSLAP was created as a means of providing a more effective
mechanism for the expeditious settlement of land problems in general, which are frequently the
source of conflicts among settlers, landowners and cultural minorities. Besides, the COSLAP merely
took over from the abolished PACLAP whose functions, including its jurisdiction, power and
authority to act on, decide and resolve land disputes (Sec. 2, P.D. No. 832) were all assumed by it.
The said Executive Order No. 561 containing said provision, being enacted only on September 21,
1979, cannot affect the exercise of jurisdiction of the PACLAP Provincial Committee of Koronadal on
September 20, 1978. Neither can it affect the decision of the COSLAP which merely affirmed said
exercise of jurisdiction.34
In its Motion for Reconsideration 35 filed on May 20, 2004, the BCDA questioned the validity of the
survey results since it was conducted without its representatives present, at the same time
denying that it received a notification of the DENR verification survey. 36 It maintained that there is

no basis for the COSLAPs finding that the members of Dream Village were in open, continuous,
and adverse possession in the concept of owner, because not only is the property not among those
declared alienable and disposable, but it is a titled patrimonial property of the State. 37
In the Order38 dated June 17, 2004, the COSLAP denied BCDAs Motion for Reconsideration, insisting
that it had due notice of the verification survey, while also noting that although the BCDA wanted
to postpone the verification survey due to its tight schedule, it actually stalled the survey when it
failed to suggest an alternative survey date to ensure its presence.
CA Ruling
On Petition for Review39 to the CA, the BCDA argued that the dispute is outside the jurisdiction of
the COSLAP because of the lands history of private ownership and because it is registered under
an indefeasible Torrens title40; that Proclamation No. 172 covers only Lots 1 and 2 of Swo-13000298 in Western Bicutan, whereas Dream Village occupies Lots 10, 11 and part of 13 of Swo-000001302, which also belongs to the BCDA 41; that the COSLAP resolution is based on an erroneous
DENR report stating that Dream Village is outside of BCDA, because Lots 10, 11, and portion of Lot
13 of Swo-00-0001302 are within the DA42; that the COSLAP was not justified in ignoring BCDAs
request to postpone the survey to the succeeding year because the presence of its representatives
in such an important verification survey was indispensable for the impartiality of the survey aimed
at resolving a highly volatile situation 43; that the COSLAP is a mere coordinating administrative
agency with limited jurisdiction44; and, that the present case is not among those enumerated in
Section 3 of E.O. No. 56145.
The COSLAP, on the other hand, maintained that Section 3(2)(e) of E.O. No. 561 provides that it
may assume jurisdiction and resolve land problems or disputes in "other similar land problems of
grave urgency and magnitude,"46 and the present case is one such problem.
The CA in its Decision47 dated September 10, 2009 ruled that the COSLAP has no jurisdiction over
the complaint because the question of whether Dream Village is within the areas declared as
available for disposition in Proclamation No. 172 is beyond its competence to determine, even as
the land in dispute has been under a private title since 1906, and presently its title is held by a
government agency, the BCDA, in contrast to the case of Baaga relied upon by Dream Village,
where the disputed land was part of the public domain and the disputants were applicants for sales
patent thereto.
Dream Villages motion for reconsideration was denied in the appellate courts Order 48 of July 13,
2010.
Petition for Review in the Supreme Court
On petition for review on certiorari to this Court, Dream Village interposes the following issues:
A
IN ANNULLING THE RESOLUTION OF COSLAP IN COSLAP CASE NO. 99-500, THE HONORABLE CA
DECIDED THE CASE IN A MANNER NOT CONSISTENT WITH LAW AND APPLICABLE DECISIONS OF
THIS HONORABLE COURT;
B
THE HONORABLE CA ERRED IN RULING THAT COSLAP HAD NO JURISDICTION OVER THE
CONTROVERSY BETWEEN THE PARTIES HEREIN. 49
The Courts Ruling
We find no merit in the petition.
The BCDA holds title to Fort Bonifacio.

That the BCDA has title to Fort Bonifacio has long been decided with finality. In Samahan ng
Masang Pilipino sa Makati, Inc. v. BCDA,50 it was categorically ruled as follows:
First, it is unequivocal that the Philippine Government, and now the BCDA, has title and ownership
over Fort Bonifacio. The case of Acting Registrars of Land Titles and Deeds of Pasay City, Pasig and
Makati is final and conclusive on the ownership of the then Hacienda de Maricaban estate by the
Republic of the Philippines. Clearly, the issue on the ownership of the subject lands in Fort Bonifacio
is laid to rest. Other than their view that the USA is still the owner of the subject lots, petitioner has
not put forward any claim of ownership or interest in them. 51
The facts in Samahan ng Masang Pilipino sa Makati are essentially not much different from the
controversy below. There, 20,000 families were long-time residents occupying 98 has. of Fort
Bonifacio in Makati City, who vainly sought to avert their eviction and the demolition of their
houses by the BCDA upon a claim that the land was owned by the USA under TCT No. 2288. The
Supreme Court found that TCT No. 2288 had in fact been cancelled by TCT No. 61524 in the name
of the Republic, which title was in turn cancelled on January 3, 1995 by TCT Nos. 23888, 23887,
23886, 22460, 23889, 23890, and 23891, all in the name of the BCDA. The Court ruled that the
BCDAs aforesaid titles over Fort Bonifacio are valid, indefeasible and beyond question, since TCT
No. 61524 was cancelled in favor of BCDA pursuant to an explicit authority under R.A. No. 7227,
the legal basis for BCDAs takeover and management of the subject lots. 52
Dream Village sits on the
abandoned C-5 Road, which lies
outside the area declared in
Proclamation Nos. 2476 and 172 as
alienable and disposable.
Pursuant to Proclamation No. 2476, the following surveys were conducted by the Bureau of Lands
to delimit the boundaries of the areas excluded from the coverage of Proclamation No. 423:
Barangay Survey Plan Date Approved
1. Lower Bicutan SWO-13-000253 October 21, 1986
2. Signal Village SWO-13-000258 May 13, 1986
3. Upper Bicutan SWO-13-000258 May 13, 1986
4. Western Bicutan SWO-13-000298 January 15, 1987 53
However, the survey plan for Western Bicutan, Swo-13-000298, shows that Lots 3, 4, 5 and 6
thereof are inside the area segregated for the Libingan ng mga Bayani under Proclamation No. 208,
which then leaves only Lots 1 and 2 of Swo-13-000298 as available for disposition. For this reason,
it was necessary to amend Proclamation No. 2476. Thus, in Proclamation No. 172 only Lots 1 and 2
of Swo-13-000298 are declared alienable and disposable. 54
The DENR verification survey report states that Dream Village is not situated in Lot 1 of Swo-13000298 but actually occupies Lots 10, 11 and part of 13 of Swo-00-0001302: "x x x Dream Village
is outside Lot1, SWO-13-000298 and inside Lot 10, 11 & portion of Lot 13, SWO-00-0001302 with
an actual area of 78466 square meters. The area is actually is [sic] outside SWO-00-0001302 of
BCDA."55 Inexplicably and gratuitously, the DENR also states that the area is outside of BCDA,
completely oblivious that the BCDA holds title over the entire Fort Bonifacio, even as the BCDA
asserts that Lots 10, 11 and 13 of SWO-00-0001302 are part of the abandoned right-of-way of C-5
Road. This area is described as lying north of Lot 1 of Swo-13-000298 and of Lots 3, 4, 5 and 6 of
Swo-13-000298 (Western Bicutan) inside the Libingan ng mga Bayani, and the boundary line of Lot
1 mentioned as C-5 Road is really the proposed alignment of C-5 Road, which was abandoned
when, as constructed, it was made to traverse northward into the Libingan ng mga Bayani. Dream
Village has not disputed this assertion.
The mere fact that the original plan for C-5 Road to cross Swo-00-0001302 was abandoned by
deviating it northward to traverse the southern part of Libingan ng mga Bayani does not signify
abandonment by the government of the bypassed lots, nor that these lots would then become

alienable and disposable. They remain under the title of the BCDA, even as it is significant that
under Section 8(d) of R.A. No. 7227, a relocation site of 30.5 has. was to be reserved for families
affected by the construction of C-5 Road. It is nowhere claimed that Lots 10, 11 and 13 of Swo-000001302 are part of the said relocation site. These lots border C-5 Road in the south, 56making them
commercially valuable to BCDA, a farther argument against a claim that the government has
abandoned them to Dream Village.
While property of the State or any
of its subdivisions patrimonial in
character may be the object of
prescription, those "intended for
some public service or for the
development of the national
wealth" are considered property of
public dominion and therefore not
susceptible to acquisition by
prescription.
Article 1113 of the Civil Code provides that "property of the State or any of its subdivisions not
patrimonial in character shall not be the object of prescription." Articles 420 and 421 identify what
is property of public dominion and what is patrimonial property:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth.
Art. 421. All other property of the State, which is not of the character stated in the preceding
article, is patrimonial property.
One question laid before us is whether the area occupied by Dream Village is susceptible of
acquisition by prescription. In Heirs of Mario Malabanan v. Republic, 57 it was pointed out that from
the moment R.A. No. 7227 was enacted, the subject military lands in Metro Manila
became alienable and disposable. However, it was also clarified that the said lands did not thereby
become patrimonial, since the BCDA law makes the express reservation that they are to be sold in
order to raise funds for the conversion of the former American bases in Clark and Subic. The Court
noted that the purpose of the law can be tied to either "public service" or "the development of
national wealth" under Article 420(2) of the Civil Code, such that the lands remain property of the
public dominion, albeit their status is now alienable and disposable. The Court then explained that
it is only upon their sale to a private person or entity as authorized by the BCDA law that they
become private property and cease to be property of the public dominion: 58
For as long as the property belongs to the State, although already classified as alienable or
disposable, it remains property of the public dominion if when it is "intended for some public
service or for the development of the national wealth."59
Thus, under Article 422 of the Civil Code, public domain lands become patrimonial property only if
there is a declaration that these are alienable or disposable, together with an express government
manifestation that the property is already patrimonial or no longer retained for public service or the
development of national wealth. Only when the property has become patrimonial can the
prescriptive period for the acquisition of property of the public dominion begin to run. Also under
Section 14(2) of Presidential Decree (P.D.) No. 1529, it is provided that before acquisitive
prescription can commence, the property sought to be registered must not only be classified as
alienable and disposable, it must also be expressly declared by the State that it is no longer
intended for public service or the development of the national wealth, or that the property has
been converted into patrimonial. Absent such an express declaration by the State, the land
remains to be property of public dominion.60

Since the issuance of Proclamation No. 423 in 1957, vast portions of the former Maricaban have
been legally disposed to settlers, besides those segregated for public or government use.
Proclamation No. 1217 (1973) established the Maharlika Village in Bicutan, Taguig to serve the
needs of resident Muslims of Metro Manila; Proclamation No. 2476 (1986), as amended by
Proclamation No. 172 (1987), declared more than 400 has. of Maricaban in Upper and Lower
Bicutan, Signal Village, and Western Bicutan as alienable and disposable; Proclamation No. 518
(1990) formally exempted from Proclamation No. 423 the Barangays of Cembo, South Cembo, West
Rembo, East Rembo, Comembo, Pembo and Pitogo, comprising 314 has., and declared them open
for disposition.
The above proclamations notwithstanding, Fort Bonifacio remains property of public dominion of
the State, because although declared alienable and disposable, it is reserved for some public
service or for the development of the national wealth, in this case, for the conversion of military
reservations in the country to productive civilian uses. 61 Needless to say, the acquisitive
prescription asserted by Dream Village has not even begun to run.
Ownership of a land registered
under a Torrens title cannot be lost
by prescription or adverse
possession.
Dream Village has been unable to dispute BCDAs claim that Lots 10, 11 and part of 13 of Swo-000001302 are the abandoned right-of-way of C-5 Road, which is within the vast titled territory of Fort
Bonifacio. We have already established that these lots have not been declared alienable and
disposable under Proclamation Nos. 2476 or 172.
Moreover, it is a settled rule that lands under a Torrens title cannot be acquired by prescription or
adverse possession.62 Section 47 of P.D. No. 1529, the Property Registration Decree, expressly
provides that no title to registered land in derogation of the title of the registered owner shall be
acquired by prescription or adverse possession. And, although the registered landowner may still
lose his right to recover the possession of his registered property by reason of laches, 63 nowhere
has Dream Village alleged or proved laches, which has been defined as such neglect or omission to
assert a right, taken in conjunction with lapse of time and other circumstances causing prejudice to
an adverse party, as will operate as a bar in equity. Put any way, it is a delay in the assertion of a
right which works disadvantage to another because of the inequity founded on some change in the
condition or relations of the property or parties. It is based on public policy which, for the peace of
society, ordains that relief will be denied to a stale demand which otherwise could be a valid
claim.64
The subject property having been
expressly reserved for a specific
public purpose, the COSLAP
cannot exercise jurisdiction over the
complaint of the Dream Village
settlers.
BCDA has repeatedly asserted that the COSLAP has no jurisdiction to hear Dream Villages
complaint. Concurring, the CA has ruled that questions as to the physical identity of Dream Village
and whether it lies in Lots 10, 11 and 13 of Swo-00-0001302, or whether Proclamation No. 172 has
released the disputed area for disposition are issues which are "manifestly beyond the scope of the
COSLAPs jurisdiction vis--vis Paragraph 2, Section 3 of E.O. No. 561," 65 rendering its Resolution a
patent nullity and its pronouncements void. Thus, the CA said, under Section 3 of E.O. No. 561, the
COSLAPs duty would have been to refer the conflict to another tribunal or agency of government
in view of the serious ramifications of the disputed claims:
In fine, it is apparent that the COSLAP acted outside its jurisdiction in taking cognizance of the
case. It would have been more prudent if the COSLAP has [sic] just referred the controversy to the
proper forum in order to fully thresh out the ramifications of the dispute at bar. As it is, the
impugned Resolution is a patent nullity since the tribunal which rendered it lacks jurisdiction. Thus,
the pronouncements contained therein are void. "We have consistently ruled that a judgment for
want of jurisdiction is no judgment at all. It cannot be the source of any right or the creator of any
obligation. All acts performed pursuant to it and all claims emanating from it have no legal
effect."66 (Citation omitted)

We add that Fort Bonifacio has been reserved for a declared specific public purpose under R.A. No.
7227, which unfortunately for Dream Village does not encompass the present demands of its
members. Indeed, this purpose was the very reason why title to Fort Bonifacio has been transferred
to the BCDA, and it is this very purpose which takes the dispute out of the direct jurisdiction of the
COSLAP. A review of the history of the COSLAP will readily clarify that its jurisdiction is limited to
disputes over public lands not reserved or declared for a public use or purpose.
On July 31, 1970, President Marcos issued E.O. No. 251 creating the Presidential Action Committee
on Land Problems (PACLAP) to expedite and coordinate the investigation and resolution of all kinds
of land disputes between settlers, streamline and shorten administrative procedures, adopt bold
and decisive measures to solve land problems, or recommend other solutions. 67 E.O. No. 305,
issued on March 19, 1971, reconstituted the PACLAP and gave it exclusive jurisdiction over all
cases involving public lands and other lands of the public domain, 68 as well as adjudicatory powers
phrased in broad terms: "To investigate, coordinate, and resolve expeditiously land disputes,
streamline administrative proceedings, and, in general, to adopt bold and decisive measures to
solve problems involving public lands and lands of the public domain." 69
On November 27, 1975, P.D. No. 832 reorganized the PACLAP and enlarged its functions and duties.
Section 2 thereof even granted it quasi judicial functions, to wit:
Sec. 2. Functions and duties of the PACLAP. The PACLAP shall have the following functions and
duties:
1. Direct and coordinate the activities, particularly the investigation work, of the various
government agencies and agencies involved in land problems or disputes, and streamline
administrative procedures to relieve small settlers and landholders and members of
cultural minorities of the expense and time-consuming delay attendant to the solution of
such problems or disputes;
2. Refer for immediate action any land problem or dispute brought to the attention of the
PACLAP, to any member agency having jurisdiction thereof: Provided, That when the
Executive Committee decides to act on a case, its resolution, order or decision thereon
shall have the force and effect of a regular administrative resolution, order or decision, and
shall be binding upon the parties therein involved and upon the member agency having
jurisdiction thereof;
xxxx
4. Evolve and implement a system of procedure for the speedy investigation and resolution of land
disputes or problems at provincial level, if possible. (Underscoring supplied)
On September 21, 1979, E.O. No. 561 abolished the PACLAP and created the COSLAP to be a more
effective administrative body to provide a mechanism for the expeditious settlement of land
problems among small settlers, landowners and members of the cultural minorities to avoid social
unrest.70 Paragraph 2, Section 3 of E.O No. 561 now specifically enumerates the instances when the
COSLAP can exercise its adjudicatory functions:
Sec. 3. Powers and Functions. The Commission shall have the following powers and functions:
1. Coordinate the activities, particularly the investigation work, of the various government
offices and agencies involved in the settlement of land problems or disputes, and
streamline administrative procedures to relieve small settlers and landholders and
members of cultural minorities of the expense and time consuming delay attendant to the
solution of such problems or disputes;
2. Refer and follow-up for immediate action by the agency having appropriate jurisdiction
any land problem or dispute referred to the Commission: Provided, That the Commission
may, in the following cases, assume jurisdiction and resolve land problems or disputes
which are critical and explosive in nature considering, for instance, the large number of the
parties involved, the presence or emergence of social tension or unrest, or other similar
critical situations requiring immediate action:

(a) Between occupants/squatters and pasture lease agreement holders or timber

concessionaires;
(b) Between occupants/squatters and government reservation grantees;
(c) Between occupants/squatters and public land claimants or applicants;
(d) Petitions for classification, release and/or subdivision of lands of the public
domain; and
(e) Other similar land problems of grave urgency and magnitude.
xxxx
Citing the constant threat of summary eviction and demolition by the BCDA and the seriousness
and urgency of the reliefs sought in its Amended Petition, Dream Village insists that the COSLAP
was justified in assuming jurisdiction of COSLAP Case No. 99-500. But in Longino v. Atty.
General,71 it was held that as an administrative agency, COSLAPs jurisdiction is limited to cases
specifically mentioned in its enabling statute, E.O. No. 561. The Supreme Court said:
Administrative agencies, like the COSLAP, are tribunals of limited jurisdiction and, as such, could
wield only such as are specifically granted to them by the enabling statutes. x x x.
xxxx
Under the law, E.O. No. 561, the COSLAP has two options in acting on a land dispute or problem
lodged before it, namely, (a) refer the matter to the agency having appropriate jurisdiction for
settlement/resolution; or (b) assume jurisdiction if the matter is one of those enumerated in
paragraph 2(a) to (e) of the law, if such case is critical and explosive in nature, taking into account
the large number of the parties involved, the presence or emergence of social tension or unrest, or
other similar critical situations requiring immediate action. In resolving whether to assume
jurisdiction over a case or to refer the same to the particular agency concerned, the COSLAP has to
consider the nature or classification of the land involved, the parties to the case, the nature of the
questions raised, and the need for immediate and urgent action thereon to prevent injuries to
persons and damage or destruction to property. The law does not vest jurisdiction on the COSLAP
over any land dispute or problem.72(Citation omitted)
The Longino ruling has been consistently cited in subsequent COSLAP cases, among them Davao
New Town Development Corp. v. COSLAP,73 Barranco v. COSLAP,74 NHA v. COSLAP,75 Cayabyab v. de
Aquino,76 Ga, Jr. v. Tubungan,77 Machado v. Gatdula,78 and Vda. de Herrera v. Bernardo.79
Thus, in Machado, it was held that the COSLAP cannot invoke Section 3(2)(e) of E.O. No. 561 to
assume jurisdiction over "other similar land problems of grave urgency," since the statutory
construction principle of ejusdem generis prescribes that where general words follow an
enumeration of persons or things, by words of a particular and specific meaning, such general
words are not to be construed in their widest extent but are to be held as applying only to persons
or things of the same kind as those specifically mentioned. 80 Following this rule, COSLAPs
jurisdiction is limited to disputes involving lands in which the government has a proprietary or
regulatory interest,81 or public lands covered with a specific license from the government such as a
pasture lease agreements, a timber concessions, or a reservation grants, 82 and where moreover,
the dispute is between occupants/squatters and pasture lease agreement holders or timber
concessionaires; between occupants/squatters and government reservation grantees; and between
occupants/squatters and public land claimants or applicants.
In Longino, the parties competed to lease a property of the Philippine National Railways. The high
court rejected COSLAPs jurisdiction, noting that the disputed lot is not public land, and neither
party was a squatter, patent lease agreement holder, government reservation grantee, public land
claimant or occupant, or a member of any cultural minority, nor was the dispute critical and
explosive in nature so as to generate social tension or unrest, or a critical situation which required
immediate action.83

In Davao New Town Development Corp., it was held that the COSLAP has no concurrent jurisdiction
with the Department of Agrarian Reform (DAR) in respect of disputes concerning the
implementation of agrarian reform laws, since "the grant of exclusive and primary jurisdiction over
agrarian reform matters on the DAR implies that no other court, tribunal, or agency is authorized to
resolve disputes properly cognizable by the DAR." 84 Thus, instead of hearing and resolving the
case, COSLAP should have simply referred private respondents complaint to the DAR or DARAB.
According to the Court:
The abovementioned proviso Section (3)(2) of E.O. No. 561, which vests COSLAP the power to
resolve land disputes, does not confer upon COSLAP blanket authority to assume every matter
referred to it. Its jurisdiction is confined only to disputes over lands in which the government has
proprietary or regulatory interest. Moreover, the land dispute in Baaga involved parties with
conflicting free patent applications which was within the authority of PACLAP to resolve, unlike that
of the instant case which is exclusively cognizable by the DAR. 85
In Barranco, COSLAP issued a writ to demolish structures encroaching into private
property.1wphi1 The Supreme court ruled that COSLAP may resolve only land disputes "involving
public lands or lands of the public domain or those covered with a specific license from the
government such as a pasture lease agreement, a timber concession, or a reservation grant." 86
In NHA, it was held that COSLAP has no jurisdiction over a boundary dispute between two local
government units, that its decision is an utter nullity correctible by certiorari, that it can never
become final and any writ of execution based on it is void, and all acts performed pursuant to it
and all claims emanating from it have no legal effect. 87
In Cayabyab, it was held that "the jurisdiction of COSLAP does not extend to disputes involving the
ownership of private lands, or those already covered by a certificate of title, as these fall exactly
within the jurisdiction of the courts and other administrative agencies." 88
In Ga, Jr., it was reiterated that the COSLAP has no jurisdiction over controversies relating to
ownership and possession of private lands, and thus, the failure of respondents to properly appeal
from the COSLAP decision before the appropriate court was held not fatal to the petition for
certiorari that they eventually filed with the CA. The latter remedy remained available despite the
lapse of the period to appeal from the void COSLAP decision. 89
In Machado, the high court ruled that COSLAP has no jurisdiction in disputes over private lands
between private parties, reiterating the essential rules contained in Section 3 of E.O. No. 561
governing the exercise by COSLAP of its jurisdiction, to wit:
Under these terms, the COSLAP has two different rules in acting on a land dispute or problem
lodged before it, e.g., COSLAP can assume jurisdiction only if the matter is one of those
enumerated in paragraph 2(a) to (e) of the law. Otherwise, it should refer the case to the agency
having appropriate jurisdiction for settlement or resolution. In resolving whether to assume
jurisdiction over a case or to refer it to the particular agency concerned, the COSLAP considers: (a)
the nature or classification of the land involved; (b) the parties to the case; (c) the nature of the
questions raised; and (d) the need for immediate and urgent action thereon to prevent injury to
persons and damage or destruction to property. The terms of the law clearly do not vest on the
COSLAP the general power to assume jurisdiction over any land dispute or problem. Thus, under
EO 561, the instances when the COSLAP may resolve land disputes are limited only to those
involving public lands or those covered by a specific license from the government, such as pasture
lease agreements, timber concessions, or reservation grants. 90 (Citations omitted)
In Vda. de Herrera, the COSLAP assumed jurisdiction over a complaint for "interference,
disturbance, unlawful claim, harassment and trespassing" over a private parcel of land. The CA
ruled that the parties were estopped to question COSLAPs jurisdiction since they participated
actively in the proceedings. The Supreme Court, noting from the complaint that the case actually
involved a claim of title and possession of private land, ruled that the RTC or the MTC has
jurisdiction since the dispute did not fall under Section 3, paragraph 2 (a) to (e) of E.O. No. 561,
was not critical and explosive in nature, did not involve a large number of parties, nor was there
social tension or unrest present or emergent. 91
In the case at bar, COSLAP has invoked Baaga to assert its jurisdiction. There, Guillermo Baaga
had filed a free patent application with the Bureau of Lands over a public land with an area of 30

has. Gregorio Daproza (Daproza) also filed a patent application for the same property. The
opposing claims and protests of the claimants remained unresolved by the Bureau of Lands, and
neither did it conduct an investigation. Daproza wrote to the COSLAP, which then opted to exercise
jurisdiction over the controversy. The high court sustained COSLAP, declaring that its jurisdiction is
not confined to the cases mentioned in paragraph 2(a) to (e) of E.O. No. 561, but includes land
problems in general, which are frequently the source of conflicts among settlers, landowners and
cultural minorities.
But as the Court has since clarified in Longino and in the other cases aforecited, the land dispute in
Baaga was between private individuals who were free patent applicants over unregistered public
lands. In contrast, the present petition involves land titled to and managed by a government
agency which has been expressly reserved by law for a specific public purpose other than for
settlement. Thus, as we have advised in Longino, the law does not vest jurisdiction on the COSLAP
over any land dispute or problem, but it has to consider the nature or classification of the land
involved, the parties to the case, the nature of the questions raised, and the need for immediate
and urgent action thereon to prevent injuries to persons and damage or destruction to property.
WHEREFORE, premises considered, the petition is DENIED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-15829

December 4, 1967

ROMAN R. SANTOS, petitioner-appellee,

vs.
HON. FLORENCIO MORENO, as Secretary of Public Works and Communications and
JULIAN C. CARGULLO, respondents-appellants.
Gil R. Carlos and Associates for petitioner-appellee.
Office of the Solicitor General for respondents-appellants.
BENGZON, J.P., J.:
Property; Ownership of streams and canals.Pursuant to Article 71 of the Spanish Law of Waters of
August 3, 1866 and Article 408(5) of the Spanish Civil Code, channels of creeks and brooks belong
to the owners of estates over which they flow. The channels, therefore, of the streams in question,
which may be classified as creeks, belong to the owners of Hacienda San Esteban. The streams,
considered as canals, of which they originally were, are of private ownership in contemplation of
Article 339(1) of the Spanish Civil Code. Under Article 339, canals constructed by the State and
devoted to public use are of public ownership. Conversely, canals constructed by private persons
within private lands and devoted exclusively for private use must be of public ownership. Santos
vs. Moreno, 21 SCRA 1141, No. L-15829 December 4, 1967
THE APPEAL
The Honorable Secretary of Public Works & Communications appeals from the decision of the Court
of First Instance of Manila declaring of private ownership certain creeks situated in barrio San
Esteban, Macabebe, Pampanga.
THE BACKGROUND
The Zobel family of Spain formerly owned vast track of marshland in the municipality of Macabebe,
Pampanga province. Called Hacienda San Esteban, it was administered and managed by the Ayala

y Cia. From the year 1860 to about the year 1924 Ayala y Cia., devoted the hacienda to the
planting and cultivation of nipa palms from which it gathered nipa sap or "tuba." It operated a
distillery plant in barrio San Esteban to turn nipa tuba into potable alcohol which was in turn
manufactured into liquor.
Accessibility through the nipa palms deep into the hacienda posed as a problem. Ayala y Cia.,
therefore dug canals leading towards the hacienda's interior where most of them interlinked with
each other. The canals facilitated the gathering of tuba and the guarding and patrolling of the
hacienda by security guards called "arundines." By the gradual process of erosion these canals
acquired the characteristics and dimensions of rivers.
In 1924 Ayala y Cia shifted from the business of alcohol production to bangus culture. It converted
Hacienda San Esteban from a forest of nipa groves to a web of fishponds. To do so, it cut down the
nipa palm, constructed dikes and closed the canals criss-crossing the hacienda.
Sometime in 1925 or 1926 Ayala y Cia., sold a portion of Hacienda San Esteban to Roman Santos
who also transformed the swamp land into a fishpond. In so doing, he closed and built dikes across
Sapang Malauling Maragul, Quiorang Silab, Pepangebunan, Bulacus, Nigui and Nasi.
The closing of the man-made canals in Hacienda San Esteban drew complaints from residents of
the surrounding communities. Claiming that the closing of the canals caused floods during the
rainy season, and that it deprived them of their means of transportation and fishing grounds, said
residents demanded re-opening of those canals. Subsequently, Mayor Lazaro Yambao of Macabebe,
accompanied by policemen and some residents went to Hacienda San Esteban and opened the
closure dikes at Sapang Malauling Maragul Nigui and Quiorang Silab. Whereupon, Roman Santos
filed Civil Case No. 4488 in the Court of First Instance of Pampanga which preliminarily enjoined
Mayor Yambao and others from demolishing the dikes across the canals. The municipal officials of
Macabebe countered by filing a complaint (docketed as Civil Case No. 4527) in the same court. The
Pampanga Court of First Instance rendered judgment in both cases against Roman Santos who
immediately elevated the case to the Supreme Court.
In the meantime, the Secretary of Commerce and Communications 1 conducted his own
investigation and found that the aforementioned six streams closed by Roman Santos were natural,
floatable and navigable and were utilized by the public for transportation since time immemorial.
He consequently ordered Roman Santos on November 3, 1930 to demolish the dikes across said six
streams. However, on May 8, 1931 the said official revoked his decision of November 3, 1930 and
declared the streams in question privately owned because they were artificially constructed.
Subsequently, upon authority granted under Act 3982 the Secretary of Commerce and
Communications entered into a contract with Roman Santos whereby the former recognized the
private ownership of Sapang Malauling Maragul, Quiorang Silab, Pepangebunan, Bulacus, Nigui
and Nasi and the latter turned over for public use two artificial canals and bound himself to
maintain them in navigable state. The Provincial Board of Pampanga and the municipal councils of
Macabebe and Masantol objected to the contract. However, the Secretary of Justice, in his opinion
dated March 6, 1934, upheld its legality. Roman Santos withdraw his appeals in the Supreme Court.
With respect to the portion of Hacienda San Esteban still owned by the Zobel family, the municipal
authorities of Macabebe filed in 1930 an administrative complaint, in the Bureau of Public Works
praying for the opening of the dikes and dams across certain streams in Hacienda San Esteban.
Whereupon, the district engineer of Pampanga and a representative of the Bureau of Public Works
conducted investigations. In the meantime, the Attorney General, upon a query from the Secretary
of Commerce and Communications, rendered an opinion dated October 11, 1930 sustaining the
latter's power to declare streams as publicly owned under Sec. 4 of Act 2152, as amended by Act
3208.
On September 29, 1930 the investigator of the Bureau of Public Works, Eliseo Panopio, submitted
his report recommending the removal of the dikes and dams in question. And on the basis of said
report, the Secretary of Commerce and Communications rendered his decision on November 3,
1930 ordering Ayala y Cia., to demolish the dikes and dams across the streams named therein
situated in Hacienda San Esteban. Ayala y Cia., moved for reconsideration, questioning the power
of the Secretary of Commerce and Communications to order the demolition of said dikes.
Days before the Secretary of Commerce and Communications rendered his aforementioned
decision, Ayala y Cia., thru counsel, made representations with the Director of Public Works for a

compromise agreement. In its letter dated October 11, 1930, Ayala y Cia., offered to admit public
ownership of the following creeks:
Antipolo, Batasan Teracan, Biuas or Batasan, Capiz, Carbon, Cutut, Dalayap, Enrique, Iba,
Inaun, Margarita, Malauli or Budbud, Matalaba Palapat, Palipit Maisao, Panlovenas,
Panquitan, Quinapati, Quiorang, Bubong or Malauli Malati, Salop, Sinubli and Vitas.
provided the rest of the streams were declared private. Acting on said offer, the Director of Public
Works instructed the surveyor in his office, Eliseo Panopio, to proceed to Pampanga and conduct
another investigation.
On January 23, 1931 Panopio submitted his report to the Director of Public Works recommending
that some streams enumerated therein be declared public and some private on the ground that
they were originally dug by the hacienda owners. The private streams were:
Agape, Atlong, Cruz, Balanga, Batasan, Batasan Matlaue, Balibago, Baliti, Bato, Buengco
Malati, Bungalin, Bungo Malati, Bungo Maragui, Buta-buta, Camastiles, Catlu, Cauayan or
Biabas, Cela, Dampalit, Danlimpu, Dilinquente, Fabian, Laguzan, Lalap Maburac, Mabutol,
Macabacle, Maragul or Macanduli, Macabacle or Mababo, Maisac, Malande, Malati,
Magasawa, Maniup, Manulit, Mapanlao, Maisac, Maragul Mariablus Malate, Masamaral,
Mitulid, Nasi, Nigui or Bulacus, Palipit, Maragul, Pangebonan, Paumbong, Pasco or Culali,
Pilapil, Pinac Malati, Pinac, Maragul or Macabacle, Quiorang Silab or Malauli Maragul,
Raymundo, Salamin, Salop Maisac, Salop Maragul, Sermon and Sinca or Mabulog.
He therefore recommended revocation of the decision already mentioned above, dated November
3, 1930 of the Secretary of Commerce and Communications ordering the demolition of the dikes
closing Malauling Maragul, Quiorang, Silab, Pepangebonan, Nigui, Bulacus, Nasi, and Pinac. On
February 13, 1931 the Director of Public Works concurred in Panopio's report and forwarded the
same the Secretary of Commerce and Communications.
On February 25, 1935 the municipality of Macabebe and the Zobel family executed an agreement
whereby they recognized the nature of the streams mentioned in Panopio's report as public or
private, depending on the findings in said report. This agreement was approved by the Secretary of
Public Works and Communications on February 27, 1935 and confirmed the next day by the
municipal council of Macabebe under Resolution No. 36.
A few months later, that is, on June 12, 1935, the then Secretary of Justice issued an opinion
holding that the contract executed by the Zobel family and the municipality of Macabebe has no
validity for two reasons, namely, (1) the streams although originally dug by Ayala y Cia., lost their
private nature by prescription inasmuch as the public was allowed to use them for navigation and
fishing, citing Mercado vs. Municipality of Macabebe, 59 Phil. 592; and (2) at the time the Secretary
of Commerce and Communications approved the said contract, he had no more power so to do,
because such power under Sec. 2 of Act 2152 was revoked by the amending Act 4175 which took
effect on December 7, 1934.
Despite the above ruling of the Secretary of Justice, the streams in question remained closed.
In 1939 administrative investigations were again conducted by various agencies of the Executive
branch of our government culminating in an order of President Manuel Quezon immediately before
the national elections in 1941 requiring the opening of Sapang Macanduling, Maragul Macabacle,
Balbaro and Cansusu. Said streams were again closed in 1942 allegedly upon order of President
Quezon.
THE CASE
Roman Santos acquired in 1940 from the Zobel family a larger portion of Hacienda San Esteban
wherein are located 25 streams which were closed by Ayala y Cia., and are now the subject matter
in the instant controversy.
Eighteen years later, that is in 1958, Congress enacted Republic Act No. 2056 2 following a
congressional inquiry which was kindled by a speech delivered by Senator Rogelio de la Rosa in the
Senate. On August 15, 1958 Senator de la Rosa requested in writing the Secretary of Public Works

and communications to proceed in pursuance of Republic Act No. 2056 against fishpond owners in
the province of Pampanga who have closed rivers and appropriated them as fishponds without
color of title. On the same day, Benigno Musni and other residents in the vicinity of Hacienda San
Esteban petitioned the Secretary of Public Works and Communications to open the following
streams:
Balbaro, Batasan Matua, Bunga, Cansusu, Macabacle, Macanduling, Maragul, Mariablus,
Malate, Matalabang, Maisac, Nigui, Quiorang Silab, Sapang Maragul and Sepung Bato.
Thereupon, the Secretary of Public Works and Communications instructed Julian C. Cargullo to
conduct an investigation on the above named streams.
On October 20, 1958 Musni and his co-petitioners amended their petition to include other streams.
The amended petition therefore covered the following streams:
Balbaro, Balili, Banawa, Batasan Matua Bato, Bengco, Bunga, Buta-buta, Camastiles,
Cansusu, Cela, Don Timpo, Mabalanga, Mabutol, Macabacle, Macabacle qng. Iba,
Macanduling, Maragul, Malauli, Magasawa, Mariablus Malate Masamaral, Matalabang
Maisa, Mariablus,3 Nigui, Pita, Quiorang, Silab, Sapang Maragul, Sepung Bato, Sinag and
Tumbong.
On March 2, 4, 10, 30 and 31, and April 1, 1959, the Secretary of Public Works and Communications
rendered his decisions ordering the opening and restoration of the channel of all the streams in
controversy except Sapang Malauling, Maragul, Quiorang, Silab, Nigui Pepangebonan, Nasi and
Bulacus, within 30 days on the ground that said streams belong to the public domain.
On April 29, 1959, that is, after receipt of the Secretary's decision dated March 4, 1959, Roman
Santos filed a motion with the Court of First Instance of Man for junction against the Secretary of
Public Works and Communications and Julian C. Cargullo. As prayed for preliminary injunction was
granted on May 8, 1959. The Secretary of Public Work and Communications answered and alleged
as defense that venue was improperly laid; that Roman Santos failed to exhaust administrative
remedies; that the contract between Ayala y Cia., and the Municipality of Macabebe is null and
void; and, that Section 39 of Act 496 excludes public streams from the operation of the Torrens
System.
On April 29 and June 12, 1969, Roman Santos received the decision of the Secretary of Public
Works and Communications dated March 10 and March 30, March 31, and April 1, 1959.
Consequently, on June 24, 1959 he asked the court to cite in contempt Secretary Florendo Moreno,
Undersecretary M.D. Bautista and Julian Cargullo for issuing and serving upon him the said
decisions despite the existence of the preliminary injunction. The Solicitor General opposed the
motion alleging that the decisions in question had long been issued when the petition for injunction
was filed, that they were received after preliminary injunction issued because they were
transmitted through the District Engineer of Pampanga to Roman Santos; that their issuance was
for Roman Santos' information and guidance; and, that the motion did not allege that respondents
took steps to enforce the decision. Acting upon said motion, on July 17, 1959, the trial court
considered unsatisfactory the explanation of the Solicitor General but ruled that Secretary Florencio
Moreno, Undersecretary M.D. Bautista and Julian Cargullo acted in good faith. Hence, they were
merely "admonished to desist from any and further action in this case, observe the preliminary
injunction issued by this Court, with the stern warning, however, that a repetition of the acts
complained of shall be dealt with severely."
On July 18, 1959 the trial court declared all the streams under litigation private, and rendered the
following judgment:
The Writ of preliminary injunction restraining the respondent Secretary of Public Works &
Communications from enforcing the decisions of March 2 And 4, 1959 and all other similar
decisions is hereby made permanent.
The Secretary of Public Works and Communication and Julian Cargullo appealed to this Court from
the order of July 17, 1959 issued in connection with Roman Santos' motion for contempt and from
the decision of the lower court on the merits of the case.

ISSUES
The issues are: (1) Did Roman Santos exhaust administrative remedies? (2) Was venue properly
laid? (3) Did the lower court err in conducting a trial de novo of the case and in admitting evidence
not presented during the administrative proceeding? (4) Do the streams involved in this case
belong to the public domain or to the owner of Hacienda San Esteban according to law and the
evidence submitted to the Department of Public Works and Communications?
DISCUSSION OF THE ISSUES
1. Respondents maintain that Roman Santos resorted to the courts without first exhausting
administrative remedies available to him, namely, (a) motion for reconsideration of the decisions of
the Secretary of Public Works and Communications; and, (b) appeal to the President of the
Philippines.
Whether a litigant, in exhausting available administrative remedies, need move for the
reconsideration of an administrative decision before he can turn to the courts for relief, would
largely depend upon the pertinent law,4the rules of procedure and the usual practice followed in a
particular office.5
Republic Act No. 2056 does not require the filing of a motion for reconsideration as a condition
precedent to judicial relief. From the context of the law, the intention of the legislators to forego a
motion for reconsideration manifests itself clearly.1awphil.net Republic Act No. 2056 underscores
the urgency and summary nature of the proceedings authorized thereunder. Thus in Section 2
thereof the Secretary of Public Works and Communications under pain of criminal liability is duty
bound to terminate the proceedings and render his decision within a period not exceeding 90 days
from the filing of the complaint. Under the same section, the party respondent concerned is given
not than 30 days within which to comply with the decision of the Secretary of Public Works and
Communications, otherwise the removal of the dams would be done by the Government at the
expense of said party. Congress has precisely provided for a speedy and a most expeditious
proceeding for the removal of illegal obstructions to rivers and on the basis of such a provision it
would be preposterous to conclude that it had in mind to require a party to file a motion for
reconsideration an additional proceeding which would certainly lengthen the time towards the
final settlement of existing controversies. The logical conclusion is that Congress intended the
decision of the Secretary of Public Works and Communications to be final and executory subject to
a timely review by the courts without going through formal and time consuming preliminaries.
Moreover, the issues raised during the administrative proceedings of this case are the same ones
submitted to court for resolution. No new matter was introduced during the proceeding in the court
below which the Secretary of Public Works and Communications had no opportunity to correct
under his authority.
Furthermore, Roman Santos assailed the constitutionality of Republic Act No. 2056 and the
jurisdiction of the Secretary of Public Works and Communications to order the demolition of dams
across rivers or streams. Those questions are not within the competence of said Secretary to
decide upon a motion for reconsideration.itc-alf They are purely legal questions, not administrative
in nature, and should properly be aired before a competent court as was rightly done by petitioner
Roman Santos .
At any rate, there is no showing in the records of this case that the Secretary of Public Works and
Communications adopted rule of procedure in investigations authorized under Republic Act No.
2056 which require a party litigant to file a motion for the reconsideration of the Secretary's
decision before he can appeal to the courts. Roman Santos however stated in his brief that the
practice is not to entertain motions for reconsideration for the reason that Republic Act No. 2056
does not expressly or impliedly allow the Secretary to grant the same. Roman Santos' statement is
supported by Opinion No. 61, Series of 1959, dated April 14, 1959 of the Secretary of Justice.
As to the failure of Roman Santos to appeal from the decision of the Secretary of Public Works and
Communications to the President of the Philippines, suffice it to state that such appeal could be
dispensed with because said Secretary is the alter ego of the President.itc-alf The actions of the
former are presumed to have the implied sanction of the latter. 6

2. It is contended that if this case were considered as an ordinary civil action, venue was
improperly laid when the same was instituted in the Court of First Instance of Manila for the reason
that the case affects the title of a real property. In fine, the proposition is that since the controversy
dwells on the ownership of or title to the streams located in Hacienda San Esteban, the case is real
action which, pursuant to Sec. 3 of Rule 5 of the Rules of Court should have been filed in the Court
of First Instance of Pampanga.
The mere fact that the resolution of the controversy in this case would wholly rest on the ownership
of the streams involved herein would not necessarily classify it as a real action. The purpose of this
suit is to review the decision of the Secretary of Public Works and Communications to enjoin him
from enforcing them and to prevent him from making and issuing similar decisions concerning the
stream in Hacienda San Esteban. The acts of the Secretary of Public Works and Communications
are the object of the litigation, that is, petitioner Roman Santos seeks to control them, hence, the
suit ought to be filed in the Court of First Instance whose territorial jurisdiction encompasses the
place where the respondent Secretary is found or is holding office. For the rule is that outside its
territorial limits, the court has no power to enforce its order. 7
Section 3 of Rule 5 of the Rules of Court does not apply to determine venue of this action.
Applicable is Sec. 1 the same rule, which states:
Sec. 1. General rule. Civil actions in Courts of First Instance may be commenced and
tried where the defendant any of the defendants residents or may be found or where the
plaintiff or any of the plaintiffs resides, at the election of the plaintiff.
Accordingly, the Petition for injunction who correctly filed in the Court of First Instance of Manila.
Respondents Secretary of Public Works and Communications and Julian Cargullo are found and hold
office in the City of Manila.
3. The lower court tried this case de novo. Against this procedure respondents objected and
maintained that the action, although captioned as an injunction is really a petition for certiorari to
review the decision of the Secretary of Public Works and Communications. Therefore they now
contend that the court should have confined itself to reviewing the decisions of the respondent
Secretary of Public Works and Communications only on the basis of the evidence presented in the
administrative proceedings. On the other hand, Roman Santos now, submits that the action is a
proceeding independent and distinct from the administrative investigation; that, accordingly, the
lower court correctly acted in trying the case anew and rendering judgment upon evidence
adduced during the trial.
Whether the action instituted in the Court of First Instance be for mandamus, injunction
or certiorari is not very material. In reviewing the decision of the Secretary of Public Works and
Communications, the Court of First Instance shall confine its inquiry to the evidence presented
during, the administrative proceedings. Evidence not presented therein shall not be admitted, and
considered by the trial court. As aptly by this Court speaking through Mr. Justice J.B.L. Reyes, in a
similar case:
The findings of the Secretary can not be enervated by new evidence not laid before him,
for that would be tantamount to holding a new investigation, and to substitute for the
discretion and judgment of the Secretary the discretion and judgment of the court, to
whom the statute had not entrusted the case. It is immaterial that the present action
should be one for prohibition or injunction and not one for certiorari; in either event the
case must be resolved upon the evidence submitted to the Secretary, since a judicial
review of executive decisions does not import a trial de novo, but only an ascertainment of
whether the "executive findings are not in violation of the Constitution or of the laws, and
are free from fraud or imposition, and whether they find reasonable support in the
evidence. . . .8
The case at bar, no matter what the parties call it, is in reality a review of several administrative
decisions of the Secretary of Public Works and Communications. Being so, it was error for the lower
court to conduct a trial de novo. Accordingly, for purposes of this review, only the evidence
presented and admitted in the administrative investigation will be considered in our determination
of whether on the basis thereof the decisions of the Secretary of Public Works and Communications
were correct.

4. We come to the question whether the streams involved in this case belong to the public domain
or to the owner of Hacienda San Esteban. If said streams are public, then Republic Act 2056
applies, if private, then the Secretary of Public Works and Communications cannot order demolition
of the dikes and dams across them pursuant to his authority granted by said law.
First, we come to the question of the constitutionality of Republic Act No. 2056. The lower court
held Republic Act No. 2056 constitutional but ruled that it was applied by respondents
unconstitutionally. That is, it held that Roman Santos was being deprived of his property without
due process of law, for the dikes of his fishponds were ordered demolished through an
administrative, instead of a judicial, proceeding. This conclusion and rationalization of the lower
court amount in effect to declaring the law unconstitutional, stated inversely. Note that the law
provides for an expeditious administrative process to determine whether or not a dam or dike
should be declare a public nuisance and ordered demolished. And to say that such an
administrative process, when put to operation, is unconstitutional is tantamount to saying that the
law itself violates the Constitution. In Lovina vs. Moreno, supra, We held said law constitutional. We
see no reason here to hold otherwise.
Discussing now the applicability of Republic Act 2056, the same applies to two types of bodies of
water, namely (1) public navigable rivers, streams, coastal waters, or waterways and (b) areas
declared as communal fishing grounds, as provided for in Section 1 thereof:
Sec. 1. . . . the construction or building of dams, dikes or any other works which encroaches
into any public navigable river, stream, coastal waters and any other navigable public
waters or waterways as well as the construction or building of dams, dikes or any other
works in areas declared as communal fishing grounds, shall be ordered removed as public
nuisances or as prohibited constructions as herein provided: . . .
We are not concerned with communal fishing grounds because the streams here involved have not
been so declared, but with public navigable streams. The question therefore is: Are the streams in
Hacienda San Esteban which are mentioned in the petition of Benigno Musni and others, public and
navigable?
Respondents contend that said streams are public on the following grounds:
(1) Hacienda San Esteban was formerly a marshland and being so, it is not susceptible to
appropriation. It therefore belongs to the State. Respondents rely on Montano vs. Insular
Government, 12 Phil. 572.
(2) The streams in question are natural streams. They are tributaries of public streams. Cited are
the cases ofSamson vs. Dionisio, et al., 11 Phil. 538 and Bautista vs. Alarcon, 23 Phil. 636.
(3) The streams have for their source public rivers, therefore they cannot be classified as canals.
(4) Assuming the streams were artificially made by Ayala y Cia., said titleholder lost ownership over
them by prescription when it allowed the public to use them for navigation for a long time.
Respondents cite Mercado vs. Municipal President of Macabebe, 59 Phil. 592.
(5) Assuming the streams in question are not mentioned as public in the certificates of title held by
Ayala y Cia., over Hacienda San Esteban, still they cannot be considered as privately owned for
Section 39 of Act 496 expressly excepts public streams from private ownership.
(6) The Panopio Report, which found the streams in question of private ownership was nullified by
the Secretary of Justice in his opinion dated June 12, 1935.1awphil.net And, the contract between
Ayala y Cia., and the Secretary of Commerce and Communications agreeing on the ownership of
the streams in question is ultra vires.
The doctrine in Montano vs. Insular Government, supra, that a marshland which is inundated by
the rise of the tides belongs to the State and is not susceptible to appropriation by occupation
has no application here inasmuch as in said case the land subject matter of the litigation was not
yet titled and precisely Isabelo Montano sought title thereon on the strength of ten years'
occupation pursuant to paragraph 6, section 54 of Act 926 of the Philippine Commission. Whereas,
the subject matter in this case Hacienda San Esteban is titled land and private ownership

thereof by Ayala y Cia., has been recognized by the King of Spain and later by the Philippine
Government when the same was registered under Act 496.
Respondents further cite Bautista vs. Alarcon, 23 Phil. 631, where the plaintiff sought injunction
against the defendants who allegedly constructed a dam across a public canal which conveyed
water from the Obando River to fishponds belonging to several persons. The canal was situated
within a public land. In sustaining the injunction granted by the Court of First Instance, this Court
said:
No private persons has right to usurp possession of a watercourse, branch of a river, or
lake of the public domain and use, unless it shall have been proved that he constructed the
same within in property of his exclusive ownership, and such usurpation constitutes a
violation of the legal provisions which explicity exclude such waterways from the exclusive
use or possession of a private party. (Emphasis supplied)
As indicated in the above-cited case, a private person may take possession of a watercourse if he
constructed the same within his property.itc-alf This puts Us into inquiry whether the streams in
question are natural or artificial. In so doing, We shall examine only the evidence presented before
the Department of Public Works and Communications and disregard that which was presented for
the first time before the lower court, following our ruling in Lovina vs. Moreno, supra.
(1) Sapang Macanduling Maragul or Macanduli is presently enclosed in Fishpond No. 12 of Roman
Santos. Its banks cannot anymore be seen but some traces of them could be noted by a row of
isolated nipa palms. Its water is subject to the rise and fall of the tides coming from Guagua and
Antipolo Rivers and it is navigable by light watercrafts. Its inlet is Antipolo River; another dike at its
outlet along the Palapat River. 9 It is closed by four dikes: One dike at its inlet along the Antipolo
River; another dike at its cutlet along the Palatpat River; and, two dikes in between. Then exist
channel at the Palapat River where the fishpond gate lies has been filled up with dredge spoils from
the Pampanga River Control Project.
(2) Sapang Macabacle is found in Fishpond No. 13. Its banks are still evident. This stream is about
30 meters wide, two meters deep and one and one-half to two kilometers long. Its source is Rio
Cansusu. Like Macanduli, its channel is obstructed by four dikes. One of them was constructed by
the engineers of the Pampanga River Control Project.
(3) Sapang Balbaro which is found in Fishpond No. 13, runs from Canal Enrique near Rio Cansusu to
Sapang Macabacle, a distance of about one-half kilometer. It is passable by banca. The closures of
this stream consist of two dikes located at each ends on Canal Enrique and Sapang Macabacle.
(4) Sapang Cansusu is a continuation of the Cansusu River. The Cansusu River opens at the Guagua
River and allegedly ends at the Palanas River in front of Barrio San Esteban. At a point near the
mouth of Sapang Balbaro, the owners of Hacienda San Esteban built a canal leading straight to one
end of Barrio San Esteban. They called this canal "Canal Enrique." And at the point where Canal
Enrique joins Cansusu they built a dike across Cansusu, thus closing this very portion of the river
which extends up to Palanas River where they built another closure dike. This closed portion, called
"Sapang Cansusu," is now part of Fishpond No. 1.
Sapang Cansusu is half a kilometer long and navigable by banca.
Appellant's witnesses, Beligno Musni, 41, Macario Quiambao, 96, Roman Manansala, 55 and Castor
Quiambao, 76, all residents of Barrio San Esteban, testified that prior to their closure, Sapang
Macaduli, Macabacle, Balbaro and Cansusu were used as passageway and as fishing grounds; that
people transported through them tuba,10wood and sasa,11 and that the tuba was brought to the
distillery in Barrio San Esteban. Macario Quiambao testified also that said four streams "were
created by God for the town people"; and that if any digging was done it was only to deepen the
shallow parts to make passage easier. According to witness Anastacio Quiambao said streams were
navigable, even Yangco's ship "Cababayan" could pass through. Simplicio Quiambao, 36, and
Marcelino Ocampo, 55, stated on direct examination that before closure of the above named four
streams, people from the surrounding towns of Guagua, Bacolor, Macabebe, Masantol and
Sexmoan fished and navigated in them.
Against the aforementioned, testimonial evidence Roman Santos presented the testimony of
Nicanor Donarber, 80, Mariano Guinto, 71, and his own. Donarber, who started working as

an arundin12 testified that Ayala y Cia., dug Sapang Macanduli, Balbaro and Macabacle; that he
worked also in the construction together with other workers; and, that as an overseer he inspected
their work. Mariano Guinto testified that he worked for Ayala y Cia., as a tuba gatherer; that in
order to reach remote nipa groves by banca, they made canals; and, that he was one of the who
worked in the construction of those canals. Roman Santos also testified that Sapang Macanduli,
Macabacle, Balbaro and Cansusu are artificial canals excavated as far back as 1850 and due to
erosion coupled with the spongy nature of the land, they acquired the proportion of rivers; that he
joined Sapang Balbaro to Sapang Macabacle because the former was a dying canal; and that
Cansusu River is different from Sapang Cansusu Witness Domingo Yumang likewise testified that
Sapang Balbaro man-made.
We observe that witnesses positively stated that Sapang Macanduli, Macabacle and Balbaro were
made by the owners of Hacienda San Esteban. With respect to Sapang Cansusu none, except
Roman Santos himself, testified that Sapang Cansusu is an artificial canal. It is not one of the
streams found and recommended to be declared private in the Panopio Report. Sapang Cansusu
follows a winding course different and, distinct from that of a canal such as that of Canal Enrique
which is straight. Moreover, Sapang Cansusu is a part of Cansusu River, admittedly a public
stream.
(5) Sapang Maragul, Mabalanga and Don Timpo are all part of Fishpond No. 1. Maragul is 600
meters long and 30 to 35 meters wide. Mabalanga is 250 meters in length and 50 meters in width.
Don Timpo is 220 meters long and 20 meters wide. All of them are navigable by banca. Maragul
and Mabalanga open at Guagua River and join each other inside the hacienda to form one single
stream, Sapang Don Timpo, which leads to the Matalaba River. Maragul, Mabalanga and Don
Timpo, formerly ended inside the hacienda but later Mabalanga was connected to Don Timpo.
Maragul was connected to Mabalanga and Sapang Cela was extended to join Maragul.
Witnesses Nicanor Donarber, Mariano Ocampo and Mariano Guinto testified that Maragul,
Mabalanga and Don Timpo are artificial canals dug by Ayala y Cia., and that they (Donarber and
Mariano Guinto) worked in said excavations. 13 Witness Mariano Guinto clarified that Don Timpo was
originally dug but Mabalanga and Maragul were formerly small non-navigable streams which were
deepened into artificial navigable canals by Ayala y Cia. 14
Exhibit F, which is a map showing the streams and rivers in Hacienda San Esteban, shows that
Maragul, Mabalanga and Don Timpo are more or less straight. From the big rivers (Guagua and
Matalaba Rivers) they lead deep into the interior of the hacienda, thus confirming the testimony
that they were built precisely as a means of reaching the interior of the estate by banca. The
weight of evidence, therefore, indicate that said streams are manmade.
(6) Sapang Bunga, now part of Bunga fishpond, gets its water from Sapanga Iba and empties at
Sta. Cruz River. It is about 300-400 meters long, 5-6 meters wide and 1-1.60 meters deep.
(7) Sapang Batu is found in Capiz Fishpond. About 300-400 meters long, 4-5 meters wide and 1.502.20 meters deep, it starts at Capiz River and ends at Malauling Maragul. From Capiz River until it
intersects Sapang Nigui the stream is called Sapang Batu Commencing from Sapang Nigui and up
to its end at Sapang Malauling Maragul, the stream is called Sapang Batu. Commencing from
Sapang Nigui and up to its end at Sapang Malauling Maragul, the stream is called Sepong Batu.
Sepong Batu is not among those streams declared in the Panopio Report as private.
(8) Sapang Banawa has one end at Palanas River and the other at Sapang Macabacle. It is about
300 meters long, 3-4 meters wide and 1.30-1.40 meters deep. Its whole length is within Fishpond
No. 13 of Roman Santos.
(9) Sapang Mabutol is a dead-end stream, that is, it ends inside the hacienda. It opens along
Guagua river. Since its closure, it has become part of Fishpond No. 1.
(10) Sapang Buta-buta, like Mabutol, dies inside the hacienda. It connects with Cansusu River and
is about 100 meters long, 3-4 meters wide and 1.2-1.5 meters deep. It is now a part of Fishpond
No. 13.
(11) Sapang Masamaral, another stream which opens at Cansusu River And ends inside the
hacienda., is 100-200 meters long, 3-4 meters wide and 1.50-2 meters deep. It now forms part of
Fishpond No. 13.

The uncontradicted testimony of Marcos Guinto is that Sapang Bunga, Batu, Sepong Batu, Banawa,
Mabutol, Buta-Buta and Masamaral were constructed by Ayala y Cia., to gain access to the nipa
the, interior of the hacienda. This testimony tallies with the findings in the Panopio Report which
will be discussed herein later. The evidence adduced in the administrative proceeding conducted
before a representative of the Secretary of Public Works and Communications supports the
contention that said streams are merely canals built by Ayala y Cia., for easy passage into the
hinterland of its hacienda.
(12) Sapang Magasawa consists of two streams running parallel to each other commencing from
Matalaba River and terminating at Mariablus Rivers. About 600-700 meters long, 4-5 meters wide
and 1.5-2 meters deep, these two streams are navigable by banca. They are enclosed within
Fishpond No. 1.
(13) Sapang Mariablus Malate, about 3-4 meters wide and 250 meters long, is another stream that
ends inside the hacienda and gets its water from Guagua River. It is no part of Fishpond No. 1.
(14) Sapang Matalabang Malate or Maisac opens at Guagua River and ends at Sapang Cela and
Matalabang Maragul. This stream, which is about 800 meters long and 18 meters wide, forms part
of Fishpond No. 1 of Roman Santos.
(15) Sapang Batasan Matua about 600 meters long, three meters wide and .80 meters deep at low
tide and 1.90 meters deep at high tide crosses the hacienda from Mariablus River to Cansusu River.
It is at present a part of Fishpond No. 1-A.
(16) Sapang Camastiles, a dead end stream of about 200 to 300 meters in length, gets its water
from Biuas River. It is within Fishpond No. 1.
(17) Sapang Cela is within Fishpond No. 1. Its whole length situated inside the hacienda, it opens at
Sapang Matalabang Malate or Maisac and ends at Sapang Malungkot. Latter Cela was extended to
connect with Sapang Maragul. It is about 200 meters long and four meters wide.
Mariano Guinto, 71, testified without contradiction that Sapang Mariablus Malate and Matalabang
Malate were formerly small and non-navigable streams which were dug by Ayala y Cia., 15 while
Batasan Matua Camastiles, Magasawa and Cela are original canals made by Ayala y Cia., 16 that he
was one of those who worked in the construction of said canals; and that it took years to construct
them. All these streams were recommended in the Panopio Report for declaration as private
streams.
(18) Sapang Sinag, 200 meters long, four to five meters wide, one meter and one and one-half
meters deep at low and high tides, respectively, gets its water from Cutod River and leads inside
the hacienda to connect with Sapang Atlong Cruz, a stream declared private in the Panopio Report.
It is now inside Fishpond No. 14.
(19) Sapang Balili, also found inside Fishpond No. 14, is about 200 meters long, three to four
meters wide and one meter deep at low tide. From its mouth at Cutod River it drifts into the interior
of the hacienda and joins Sapang Bengco. 17
(20) Sapang Pita is within Fishpond Capiz. It takes water from Capiz River but dies 250 meters
inside the hacienda. It is about four to five meters wide, and one meter deep at low tide and 1.50
meters deep at high tide.
(21) Sapang Tumbong, situated inside Capiz Fishpond, derives its water from Sapang Quiorang
Silab, a stream declared private by the Secretary of Public Works and Communications, and ends
inside the hacienda.18
(22) Sapang Bengco is found within Fishpond No. 14.1awphil.net Two hundred meters long, five
meters wide, and one meter deep at low tide and 1.50 meters deep at high tide it gets water from
Sapang Biabas and connects with Baliling Maisac. 19
According to Marcos Guinto, a witness for Roman Santos, Sapang Sinag, Balili, Pita Tumbong and
Bengco were excavated a long time ago by Ayala y Cia.; and that they have a winding course
because when they were made the workers followed the location of the nipa palms. 20 On the other

hand, Marcelo Quiambao, testified that Sapang Tumbong is a natural stream and that the reason he
said so is because the stream was already there as far back as 1910 when he reached the age of
ten. No other oral evidence was presented to contradict the testimony of Marcos Guinto that the
said five streams were artificially made by Ayala y Cia.
To show that the streams involved in this case were used exclusively by the hacienda personnel
and occasionally by members of their families, Roman Santos introduced the testimony of Eliseo
Panopio, Nicanor Donarber, Blas Gaddi, Mariano Ocampo, Mariano Guinto, Alejandro Manansala
and himself. The witnesses categorically testified that the public was prohibited from using the
streams as a means of navigation and that the prohibition was enforced by guards
called arundines.
One and all, the evidence, oral and documentary, presented by Roman Santos in the administrative
proceedings supports the conclusion of the lower court that the streams involved in this case were
originally man-made canals constructed by the former owners of Hacienda San Esteban and that
said streams were not held open for public use. This same conclusion was reached 27 years earlier
by an investigator of the Bureau of Public Works whose report and recommendations were
approved by the Director of Public Works and submitted to the Secretary of Commerce and
Communications.
As stated, pursuant to Act 2152, as amended by Act 3208, the Bureau of Public Works and the
Department of Commerce and Communications locked into and settled the question of whether or
not the streams situated within Hacienda San Esteban are publicly or privately owned. We refer to
the so-called Panopio Report which contains the findings and recommendations of Eliseo Panopio, a
surveyor in the Bureau of Public Works, who was designated to conduct formal hearings and
investigation. Said report found the following streams, among others, of private ownership:
Camastiles, Cela Balanga, Bato, Batasan, Bengco, Buta-buta, Don Timpo, Mabutol,
Macabacle, Macanduli, Malande Malate (Bunga), Magasawa, Masamaral, Maragul,
Mariablus Malate, Matalaba Malate, Nasi, Nigui, Pangebonan and Quiorang Silab
on the ground that
The preponderance of the probatory facts, . . ., shows that the rivers, creeks, esteros and
canals listed in (1) have originally been constructed, deepened, widened, and lengthened
by the owners of the Hacienda San Esteban. That they have been used as means of
communication from one place to another and to the inner most of the nipales, exclusively
for the employees, colonos and laborers of the said Hacienda San Esteban. That they have
never been used by the public for navigation without the express consent of the owners of
the said Hacienda.21
Bases for the above-quoted conclusion were "the reliable informations gathered from old residents
of the locality, from outsiders, the sworn statements obtained from different persons not interested
in this case and the comparison of the three plans prepared in 1880, 1906 and 1930. 22 The persons
referred to are Martin Isip, Hilarion Lobo, Emigdio Ignacio, Castor Quiambao, Matias Sunga facio
Cruz, Inocencio Dayrit, Gabriel Manansala, Lope Quiambao, Marcelino Bustos and Juan Lara .
On February 13, 1931 the Director of Public Works transmitted the Panopio Report to the Secretary
of Commerce and Communications recommending approval thereof. Later, on February 27, 1935,
Secretary of Public Works and Communications De las Alas approved the agreement of Ayala y Cia.,
and the Municipality of Macabebe, concerning the ownership of the streams in Hacienda San
Esteban, for being in conformity with said Panopio Report.
This agreement of Ayala y Cia and the Municipality of Macabebe which was approved by the
Secretary of Public Works and Communications only on February 27, 1935, could not however bind
the Government because the power of the Secretary of Public Works and Communication to enter
thereto had been suppressed by the Philppine Legislature when it enacted Act 4175 which effect on
December 7, 1934.
Nullity of the aforesaid contract would not of course affect the findings of fact contained in the
Panopio Report.

In weighing the evidence presented before the administrative investigation which culminated in
this appeal, respondent Secretary seemed to have ignored the Panopio Report and other
documentary evidence as well as the testimony of witnesses presented by petitioner but instead
gave credence only to the witnesses of Benigno Musni, et al. Upon review, however, the lower
court, taking into account all the evidence adduced in the administrative hearing, including the
Panopio Report, as well as those presented for the first time before it, sustained petitioner's
averment that the streams in question were artificially made, hence of private ownership. As
stated, this conclusion of the lower court which is in accord with the findings of Panopio as
contained in his report, finds ample support from the evidence presented and admitted in the
administrative investigation. Accordingly, we see no merit in disturbing the lower court's findings
fact.
We next consider the issue of whether under pertinent laws, the streams in question are public or
private.
We quote Articles 339, 407 and 408 of the Spanish Civil Code of 1889:
Art. 339. Property of public ownerships is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, river banks, shores, roadsteads, and that of a similar character;
Art. 407. The following are of public ownership:
1. Rivers and their natural channels;
2. Continuous or intermittent waters from springs or brooks running in their natural
channels and the channels themselves.
3. Waters rising continuously or intermittently on lands of public ownership;
4. Lakes and ponds formed by nature, on public lands, and their beds;
5. Rain waters running through ravines or sand beds, the channels of which are of public
ownership;
6. Subterranean waters on public lands;
7. Waters found within the zone of operation of public works, even though constructed
under contract;
8. Waters which flow continuously or intermittently from lands belonging to private
persons, to the State, to provinces, or to towns, from the moment they leave such lands;
9. The waste waters of fountains, sewers, and public institutions.
Art. 408. The following are of private ownership:
1. Waters, either continuous or intermittent rising on private etates, while they run through
them;
2. Lakes and ponds and their beds when formed by nature on such estates;
3. Subterranean waters found therein;
4. Rain water falling thereon as long as their bounderies.
5. The channels of flowing streams, continuous or intermittent, formed by rain water, and
those of brooks crossing estates which are not of public ownership.

The water, bed, banks, and floodgates of a ditch or aqueduct are deemed to be an integral
part of the estate or building for which the waters are intended. The owners of estates
through or along the boundaries of which the aqueduct passes can assert no ownership
over it, nor any right to make use. of it beds or banks, unless they base their claims on title
deed which specify the right or the ownership claimed.
Articles 71 and 72 of the Spanish Law of Waters of August 3, 1866 state:
Art. 71. The water-beds of all creeks belong to the owners of the estates or lands over
which they flow.
Art. 72. The water-beds on public land, of creeks through which spring waters run, are a
part of the public domain.
The natural water-beds or channels of rivers are also part of the public domain.
Pursuant to Article 71 of the Spanish Law of Waters of August 3, 1866, and Article 408(5) of the
Spanish Civil Code, channels of creeks and brooks belong to the owners of estates over which they
flow. The channels, therefore, of the streams in question which may be classified creeks, belong to
the owners of Hacienda San Esteban.
The said streams, considered as canals, of which they originally were, are of private ownership in
contemplation of Article 339(l) of the Spanish Civil Code. Under Article 339, canals constructed by
the State and devoted to public use are of public ownership. Conversely, canals constructed by
private persons within private lands and devoted exclusively for private use must be of private
ownership.
Our attention has been called to the case of Mercado v. Municipal President of Macabebe, 59 Phil.
592. There the creek (Batasan-Limasan) involved was originally dug by the estate's owner who,
subsequently allowed said creek to be used by the public for navigation and fishing purposes for a
period of 22 years. Said this Court through Mr. Justice Diaz:
And even granting that the Batasan-Limasan creek acquired the proportions which it had,
before it was closed, as a result of excavations made by laborers of the appellant's
predecesor in interest, it being a fact that, since the time it was opened as a water route
between the Nasi River and Limasan creek, the owners thereof as well as strangers, that is,
both the residents of the hacienda and those of other nearby barrios and municipalities,
had been using it not only for their bancas to pass through but also for fishing purposes,
and it being also a fact that such was the condition of the creek at least since 1906 until it
was closed in 1928, if the appellant and her predecessors in interest had acquired any right
to the creek in question by virtue of excavations which they had made thereon, they had
such right through prescription, inasmuch as they failed to obtain, and in fact they have not
obtained, the necessary authorization to devote it to their own use to the exclusion of all
others. The use and enjoyment of a creek, as any other property simceptible of
appropriation, may be acquired or lost through prescription, and the appellant and her
predecessors in interest certainly lost such right through the said cause, and they cannot
now claim it exclusively for themselves after the general public had been openly using the
same from 1906 to 1928. . . .
In the cited case, the creek could have been of private ownership had not its builder lost it by
prescription. Applying the principle therein enunciated to the case at bar, the conclusion would be
inevitably in favor of private ownership, considering that the owners of Hacienda San Esteban held
them for their exclusive use and prohibited the public from using them.
It may be noted that in the opinion, mentioned earlier, issued on June 12, 1935, the Secretary of
Justice answered in the negative the query of the Secretary of Public Works and Communications
whether the latter can declare of private ownership those streams which "were dug up artificially",
because it was assumed that the streams were used "by the public as fishing ground and in
transporting their commerce in bancas or in small crafts without the objection of the parties who
dug" them. Precisely, Mercado v. Municipality of Macabebe was given application therein. However,
the facts, as then found by the Bureau of Public Works, do not support the factual premise that the
streams in question were used by the public "without the objection of the parties who dug" them.

We cannot therefore take as controlling in determining the merits of this the factual premises and
the legal conclusion contained in said opinion.
The case at bar should be differentiated from those cases where We held illegal the closing and/or
appropriation of rivers or streams by owners of estates through which they flow for purposes of
converting them into fishponds or other works.23 In those cases, the watercourses which were
dammed were natural navigable streams and used habitually by the public for a long time as a
means of navigation. Consequently, they belong to the public domain either as rivers pursuant to
Article 407 (1) of the Spanish Civil Code of 1889 or as property devoted to public use under Article
339 of the same code. Whereas, the streams involved in this case were artificially made and
devoted to the exclusive use of the hacienda owner.
Finally, Sapang Cansusu, being a natural stream and a continuation of the Cansusu River,
admittedly a public stream, belongs to the public domain. Its closure therefore by the predecessors
of Roman Santos was illegal.
The petition for the opening of Sapang Malauling Maragul, Quiorang Silab, Nigui, Pepangebunan,
Nasi and Bulacus was dismissed by the Secretary of Public Works and Communications and the
case considered closed. The said administrative decision has not been questioned in this appeal by
either party. Hence, they are deemed excluded herein.
All the other streams, being artificial and devoted exclusively for the use of the hacienda owner
and his personnel, are declared of private ownership. Hence, the dams across them should not he
ordered demolished as public nuisances.
With respect to the issue of contempt of court on the part of the Secretary of Public Works and
Communications and Julian Cargullo for the alleged issuance of a administrative decisions ordering
demolition of dikes involved in this case after the writ of injunction was granted and served, suffice
it to state that the lower court made no finding of contempt of court. Necessarily, there is no
conviction for contempt reviewable by this Court and any discussion on the matter would be
academic.
WHEREFORE, the decision appealed from is affirmed, except as to Sapang Cansusu which is hereby
declared public and as to which the judgment of the lower court is reversed. No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal. Zaldivar, Sanchez, Castro, Angeles and Fernando,
JJ.,concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 163767

March 10, 2014

REPUBLIC OF THE PHILIPPINES, represented by THE DIRECTOR OF LANDS, Petitioner,

vs.
ROSARIO DE GUZMAN VDA. DE JOSON, Respondent.
172 (2009), the Supreme Court set the guidelines concerning land registration proceedings brought
under these provisions of the Property Registration Decree in order provide clarity to the
application and scope of said provisions.Section 14(1) deals with possession and occupation in
the concept of an owner while Section 14(2) involves prescription as a mode of acquiring
ownership. In Heirs of Mario Malabanan v. Republic, 587 SCRA 172 (2009), the Court set the
guidelines concerning land registration proceedings brought under these provisions of the Property
Registration Decree in order provide clarity to the application and scope of said provisions.

Same; Same; Same; Under Section 14(1), of the Property Registration Decree, the respondent had
to prove that: (1) the land formed part of the alienable and disposable land of the public domain;
and (2) she, by herself or through her predecessors-in-interest, had been in open, continuous,
exclusive, and notorious possession and occupation of the subject land under a bona fide claim of
ownership from June 12, 1945, or earlier.Under Section 14(1), therefore, the respondent had to
prove that: (1) the land formed part of the alienable and disposable land of the public domain; and
(2) she, by herself or through her predecessors-in-interest, had been in open, continuous,
exclusive, and notorious possession and occupation of the subject land under a bona fide claim of
ownership from June 12, 1945, or earlier. It is the applicant who carries the burden of proving that
the two requisites have been met. Failure to do so warrants the dismissal of the application.
Same; Same; Same; In Menguito v. Republic, 348 SCRA 128 (2000), the Supreme Court pronounced
that a survey conducted by a geodetic engineer that included a certification on the classification of
the land as alienable and disposable was not sufficient to overcome the presumption that the land
still formed part of the inalienable public domain.Even had the respondents effort to insert the
certification been successful, the same would nonetheless be vain and ineffectual. In Menguito v.
Republic, 348 SCRA 128 (2000), the Court pronounced that a survey conducted by a geodetic
engineer that included a certification on the classification of the land as alienable and disposable
was not sufficient to overcome the presumption that the land still formed part of the inalienable
public domain.
230

Same; Same; Same; Land of the public domain, to be the subject of appropriation, must be
declared alienable and disposable either by the President or the Secretary of the Department of
Environment and Natural Resources (DENR).Land of the public domain, to be the subject of
appropriation, must be declared alienable and disposable either by the President or the Secretary
of the DENR. In Republic v. T.A.N. Properties, Inc., 555 SCRA 477 (2008), we explicitly ruled: The
applicant for land registration must prove that the DENR Secretary had approved the land
classification and released the land of the public domain as alienable and disposable, and that the
land subject of the application for registration falls within the approved area per verification
through survey by the PENRO or CENRO. In addition, the applicant for land registration must
present a copy of the original classification approved by the DENR Secretary and certified as a true
copy by the legal custodian of the official records. These facts must be established to prove that
the land is alienable and disposable. This doctrine unavoidably means that the mere certification
issued by the CENRO or PENRO did not suffice to support the application for registration, because
the applicant must also submit a copy of the original classification of the land as alienable and
disposable as approved by the DENR Secretary and certified as a true copy by the legal custodian
of the official records.
Same; Same; Same; The period of possession prior to the reclassification of the land as alienable
and disposable land of the public domain is not considered in reckoning the prescriptive period in
favor of the possessor.The period of possession prior to the reclassification of the land as
alienable and disposable land of the public domain is not considered in reckoning the prescriptive
period in favor of the possessor. As pointedly clarified also in Heirs of Mario Malabanan v. Republic,
587 SCRA 172 (2009): Should public domain lands become patrimonial because they are declared
as such in a duly enacted law or duly promulgated proclamation that they are no longer intended
for public service or for the development of the national wealth, would the period of possession
prior to the conversion of such public dominion into patrimonial be reckoned in counting the
prescriptive period in favor of the possessors? We rule in the negative. The limitation imposed by
Article 1113 dissuades us from ruling that the period of possession before the public domain land
becomes patrimonial may be counted for the purpose of completing the prescriptive period.
Possession of public dominion property before it becomes
231
patrimonial cannot be the object of prescription according to the Civil Code. As the application for
registration under Section 14(2) falls wholly within the framework of prescription under the Civil
Code, there is no way that possession during the time that the land was still classified as public
dominion property can be counted to meet the requisites of acquisitive prescription and justify
registration. Republic vs. De Guzman Vda. de Joson, 718 SCRA 228, G.R. No. 163767 March 10,
2014

DECISION
BERSAMIN, J.:
This case concerns the discharge of the burden of proof by the applicant in proceedings for the
registration of land under Section 14 (1) and (2) of Presidential Decree No. 1529 (Property
Registration Decree).
The Republic appeals the adverse decision promulgated on January 30, 2004, 1 whereby the Court
of Appeals (CA) affirmed the judgment rendered on August 10, 1981 by the erstwhile Court of First
Instance (CFI) of Bulacan (now the Regional Trial Court) in Registration Case No. 3446-M granting
the application of the respondent for the registration of her title covering a parcel of land situated
in San Isidro, Paombong, Bulacan. 2
The respondent filed her application for land registration in the CFI in Bulacan. 3 The jurisdictional
requirements were met when the notice of initial hearing was published in the Official Gazette for
two successive weeks,4 as evidenced by a certification of publication. 5 The notice of initial hearing
was also posted by the Provincial Sheriff of Bulacan in a conspicuous place in the municipal
building of Paombong, Bulacan as well as on the property itself. 6On June 2, 1977, at the initial
hearing of the application, Fiscal Liberato L. Reyes interposed an opposition in behalf of the
Director of Lands and the Bureau of Public Works. Upon motion by the respondent and without
objection from Fiscal Reyes, the CFI commissioned the Acting Deputy Clerk of Court to receive
evidence in the presence of Fiscal Reyes. 7
The records show that the land subject of the application was a riceland with an area of 12,342
square meters known as Lot 2633, Cad-297, Paombong, Bulacan, and covered by plan Ap-03001603;8 that the riceland had been originally owned and possessed by one Mamerto Dionisio
since 1907;9 that on May 13, 1926, Dionisio, by way of a deed of sale, 10 had sold the land to
Romualda Jacinto; that upon the death of Romualda Jacinto, her sister Maria Jacinto (mother of the
respondent) had inherited the land; that upon the death of Maria Jacinto in 1963, the respondent
had herself inherited the land, owning and possessing it openly, publicly, uninterruptedly,
adversely against the whole world, and in the concept of owner since then; that the land had been
declared in her name for taxation purposes; and that the taxes due thereon had been paid, as
shown in Official Receipt No. H-7100234. 11
In their opposition filed by Fiscal Reyes, 12 the Director of Lands and the Director of Forest
Development averred that whatever legal and possessory rights the respondent had acquired by
reason of any Spanish government grants had been lost, abandoned or forfeited for failure to
occupy and possess the land for at least 30 years immediately preceding the filing of the
application;13 and that the land applied for, being actually a portion of the Labangan Channel
operated by the Pampanga River Control System, could not be subject of appropriation or land
registration.14
The Office of the Solicitor General (OSG) also filed in behalf of the Government an opposition to the
application,15insisting that the land was within the unclassified region of Paombong, Bulacan, as
indicated in BF Map LC No. 637 dated March 1, 1927; that areas within the unclassified region were
denominated as forest lands and thus fell under the exclusive jurisdiction, control and authority of
the Bureau of Forest Development (BFD);16 and that the CFI did not acquire jurisdiction over the
application considering that: (1) the land was beyond the commerce of man; (2) the payment of
taxes vested no title or ownership in the declarant or taxpayer. 17
Ruling ofthe CFI
On August 10, 1981, the CFI rendered its decision, 18 ordering the registration of the land in favor of
the respondent on the ground that she had sufficiently established her open, public, continuous,
and adverse possession in the concept of an owner for more than 30 years, to wit:
Since it has been established that the applicants and her predecessors-in-interest have been in the
open, public, continuous, and adverse possession of the said parcel of land in the concept of an
owner for more than thirty (30) years, that it, since 1926 up to the present time, applicant
therefore is entitled to the registration thereof under the provisions od Act No. 496, in relation to
Commonwealth Act No. 141 as amended by Republic Act No. 6236 and other existing laws.

WHEREFORE, confirming the order of general default issued in this case, the Court hereby orders
the registration of this parcel of land Lot 2633, Cad 297. Case 5, Paombong Cadastre[)] described
in plan Ap-03-001603 (Exhibit D, page 7 of records) and in the technical description (Exhibit F,
page 5 of records) in favor of Rosario de Guzman Vda de Joson, of legal age, Filipino, widow and
resident of Malolos, Bulacan.
After the decision shall have become final, let the corresponding decree be issued,
SO ORDERED19.
The Republic, through the OSG, appealed to the CA, contending that the trial court had erred in
granting the application for registration despite the land not being the subject of land registration
due to its being part of the unclassified region denominated as forest land of Paombong, Bulacan. 20
Judgment of the CA
On January 30, 2004, the CA promulgated its assailed judgment, 21 affirming the decision of the trial
court upon the following ratiocination:
The foregoing documentary and testimonial evidence stood unrebutted and uncontroverted by the
oppositor-appellant and they should serve as proof of the paucity of the claim of the applicantappellee over the subject property.
Upon the other hand, oppositor-appellant, in a lackluster fashion, advanced pro forma theories and
arguments in its Opposition which naturally failed to merit any consideration from the court a quo
and also from this Court. The indorsement from the Bureau of Forest Development, San Fernando,
Pampanga to the effect that the subject area is within the unclassified region of Paombong,
Bulacan does not warrant any evidentiary weight since the same had never been formally offered
as evidence by the oppositor-appellant. All the other allegations in the Opposition field (sic) by the
oppositor-appellant failed to persuade this Court as to the veracity thereof considering that no
evidence was ever presented to prove the said allegations.
Such being the case, this Court is not inclined to have the positive proofs of her registrable rights
over the subject property adduced by the applicant-appellee be defeated by the bare and
unsubstantiated allegations of the oppositor-appellant.
WHEREFORE, PREMISES CONSIDERED, the assailed Decision is hereby AFFIRMED IN TOTO.
SO ORDERED.22
Hence, the Republic appeals by petition for review on certiorari.
Issue
(1) WHETHER OR NOT THE LAND SUBJECT OF THE APPLICATION FOR REGISTRATION IS
SUSCEPTIBLE OF PRIVATE ACQUISITION; and
(2) WHETHER OR NOT THE TRIAL COURT, AS WELL AS THE COURT OF APPEALS, ERRED IN
GRANTING THE APPLICATION FOR REGISTRATION.23
Ruling
The appeal is impressed with merit.
Section 14 (1) and (2) of the Property Registration Decree state:
Section 14. Who may apply. The following persons may file in the proper [Regional Trial Court] an
application for registration of title to land, whether personally or through their duly authorized
representatives:

(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.
(2) Those who have acquired ownership of private lands by prescription under the provision
of existing laws.
xxxx
Section 14(1) deals with possession and occupation in the concept of an owner while Section 14(2)
involves prescription as a mode of acquiring ownership. In Heirs of Mario Malabanan v.
Republic, 24 the Court set the guidelines concerning land registration proceedings brought under
these provisions of the Property Registration Decree in order provide clarity to the application and
scope of said provisions.
The respondent sought to have the land registered in her name by alleging that she and her
predecessors-in-interest had been in open, peaceful, continuous, uninterrupted and adverse
possession of the land in the concept of owner since time immemorial. However, the Republic
counters that the land was public land; and that it could not be acquired by prescription. The
determination of the issue hinges on whether or not the land was public; if so, whether the
respondent satisfactorily proved that the land had already been declared as alienable and
disposable land of the public domain; and that she and her predecessors-in-interest had been in
open, peaceful, continuous, uninterrupted and adverse possession of the land in the concept of
owner since June 12, 1945, or earlier.
In Republic vs. Tsai,25 the Court summarizes the amendments that have shaped the current
phraseology of Section 14(1), to wit:
Through the years, Section 48(b) of the CA 141 has been amended several times. The Court of
Appeals failed to consider the amendment introduced by PD 1073. In Republic v. Doldol, the Court
provided a summary of these amendments:
The original Section 48(b) of C.A. No.141 provided for possession and occupation of lands of the
public domain since July 26, 1894. This was superseded by R.A. No. 1942, which provided for a
simple thirty-year prescriptive period of occupation by an applicant for judicial confirmation of
imperfect title. The same, however, has already been amended by Presidential Decree No. 1073,
approved on January 25, 1977. As amended, Section 48(b) now reads:
(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, since June 12, 1945, or earlier,
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. (Emphasis supplied)
As the law now stands, a mere showing of possession and occupation for 30 years or more is not
sufficient. Therefore, since the effectivity of PD 1073 on 25 January 1977, it must now be shown
that possession and occupation of the piece of land by the applicant, by himself or through his
predecessors-in-interest, started on 12 June 1945 or earlier. This provision is in total conformity
with Section 14(1) of PD 1529.26
Under Section 14(1), therefore, the respondent had to prove that: (1) the land formed part of the
alienable and disposable land of the public domain; and (2) she, by herself or through her
predecessors-in-interest, had been in open, continuous, exclusive, and notorious possession and
occupation of the subject land under a bona fide claim of ownership from June 12, 1945, or
earlier.27 It is the applicant who carries the burden of proving that the two requisites have been
met. Failure to do so warrants the dismissal of the application.
The respondent unquestionably complied with the second requisite by virtue of her having been in
open, continuous, exclusive and notorious possession and occupation of the land since June 12,

1945, or earlier. She testified on how the land had been passed on to her from her predecessors-ininterest; and tendered documentary evidence like: (1) the Deed of Sale evidencing the transfer of
the property from Mamerto Dionisio to Romualda Jacinto in 1926; 28 (2) Tax Declaration No. 4547
showing that she had declared the property for taxation purposes in 1976; 29 and (3) Official Receipt
No. H-7100234 indicating that she had been paying taxes on the land since 1977. 30 The CFI found
her possession of the land and that of her predecessors-in-interest to have been open, public,
continuous, and adverse in the concept of an owner since 1926 until the present time, or for more
than 30 years, entitling her to the registration under the provisions of Act No. 496, in relation to
Commonwealth Act No. 141, as amended by Republic Act No. 6236 and other existing laws. 31 On its
part, the CA ruled that the documentary and testimonial evidence stood unrebutted and
uncontroverted by the Republic.32
Nonetheless, what is left wanting is the fact that the respondent did not discharge her burden to
prove the classification of the land as demanded by the first requisite. She did not present
evidence of the land, albeit public, having been declared alienable and disposable by the State.
During trial, she testified that the land was not within any military or naval reservation, and Frisco
Domingo, her other witness, corroborated her. Although the Republic countered that the
verification made by the Bureau of Forest Development showed that the land was within the
unclassified region of Paombong, Bulacan as per BF Map LC No. 637 dated March 1, 1927, 33 such
showing was based on the 1st Indorsement dated July 22, 1977 issued by the Bureau of Forest
Development,34which the CA did not accord any evidentiary weight to for failure of the Republic to
formally offer it in evidence. Still, Fiscal Reyes, in the opposition he filed in behalf of the
Government, argued that the land was a portion of the Labangan Channel operated by the
Pampanga River Control System, and could not be the subject of appropriation or land registration.
Thus, the respondent as the applicant remained burdened with proving her compliance with the
first requisite.
Belatedly realizing her failure to prove the alienable and disposable classification of the land, the
petitioner attached as Annex A to her appellees brief35 the certification dated March 8, 2000 issued
by the Department of Environment and Natural ResourcesCommunity Environment and Natural
Resources Office (DENR-CENRO),36viz:
THIS IS TO CERTIFY that the parcel of land described on lot 2633 located at San Isidro, Paombong,
Bulacan as shown in the sketch plan surveyed by Geodetic Engineer Carlos G. Reyes falls within the
Alienable or Disposable Land Project No. 19 of Paombong, Bulacan per Land Classification Map No.
2934 certified on October 15, 1980.
However, in its resolution of July 31, 2000, 37 the CA denied her motion to admit the appellees brief,
and expunged the appellees brief from the records. Seeing another opportunity to make the
certification a part of the records, she attached it as Annex A of her comment here. 38 Yet, that
attempt to insert would not do her any good because only evidence that was offered at the trial
could be considered by the Court.
Even had the respondents effort to insert the certification been successful, the same would
nonetheless be vain and ineffectual. In Menguito v. Republic, 39 the Court pronounced that a survey
conducted by a geodetic engineer that included a certification on the classification of the land as
alienable and disposable was not sufficient to overcome the presumption that the land still formed
part of the inalienable public domain, to wit:
To prove that the land in question formed part of the alienable and disposable lands of the public
domain, petitioners relied on the printed words which read: "This survey plan is inside Alienable
and Disposable Land Area, Project No. 27-B as per L.C. Map No. 2623, certified by the Bureau of
Forestry on January 3, 1968," appearing on Exhibit "E" (Survey Plan No. Swo-13-000227).
This proof is not sufficient. Section 2, Article XII of the 1987 Constitution, provides: "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. x x x." (Emphasis supplied.)
For the original registration of title, the applicant (petitioners in this case) must overcome the
presumption that the land sought to be registered forms part of the public domain. 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. Indeed, "occupation thereof in the concept of owner, no

matter how long, cannot ripen into ownership and be registered as a title." To overcome such
presumption, incontrovertible evidence must be shown by the applicant. Absent such evidence, the
land sought to be registered remains inalienable.
In the present case, petitioners cite a surveyor-geodetic engineers notation in Exhibit "E"
indicating that the survey was inside alienable and disposable land. Such notation does not
constitute a positive government act validly changing the classification of the land in question.
Verily, a mere surveyor has no authority to reclassify lands of the public domain. By relying solely
on the said surveyors assertion, petitioners have not sufficiently proven that the land in question
has been declared alienable. 40
We reiterate the standing doctrine that land of the public domain, to be the subject of
appropriation, must be declared alienable and disposable either by the President or the Secretary
of the DENR. In Republic v. T.A.N. Properties, Inc., 41 we explicitly ruled:
The applicant for land registration must prove that the DENR Secretary had approved the land
classification and released the land of the public domain as alienable and disposable, and that the
land subject of the application for registration falls within the approved area per verification
through survey by the PENRO or CENRO. In addition, the applicant for land registration must
present a copy of the original classification approved by the DENR Secretary and certified as a true
copy by the legal custodian of the official records. These facts must be established to prove that
the land is alienable and disposable.42
This doctrine unavoidably means that the mere certification issued by the CENRO or PENRO did not
suffice to support the application for registration, because the applicant must also submit a copy of
the original classification of the land as alienable and disposable as approved by the DENR
Secretary and certified as a true copy by the legal custodian of the official records. As the Court
said in Republic v. Bantigue Point Development Corporation: 43
The Regalian doctrine dictates that all lands of the public domain belong to the State. The applicant
for land registration has the burden of overcoming the presumption of State ownership by
establishing through incontrovertible evidence that the land sought to be registered is alienable or
disposable based on a positive act of the government. We held in Republic v. T.A.N. Properties, Inc.
that a CENRO certification is insufficient to prove the alienable and disposable character of the land
sought to be registered. The applicant must also show sufficient proof that the DENR Secretary has
approved the land classification and released the land in question as alienable and disposable.
Thus, the present rule is that an application for original registration must be accompanied by (1) a
CENRO or PENRO Certification; and (2) a copy of the original classification approved by the DENR
Secretary and certified as a true copy by the legal custodian of the official records.
Here, respondent Corporation only presented a CENRO certification in support of its application.
Clearly, this falls short of the requirements for original registration. 44
Yet, even assuming that the DENR-CENRO certification alone would have sufficed, the respondents
application would still be denied considering that the reclassification of the land as alienable or
disposable came only after the filing of the application in court in 1976. The certification itself
indicated that the land was reclassified as alienable or disposable only on October 15, 1980. The
consequence of this is fittingly discussed in Heirs of Mario Malabanan v. Republic, to wit:
We noted in Naguit that it should be distinguished from Bracewell v. Court of Appeals since in the
latter, the application for registration had been filed before the land was declared alienable or
disposable. The dissent though pronounces Bracewell as the better rule between the two. Yet two
years after Bracewell, its ponente, the esteemed Justice Consuelo Ynares-Santiago, penned the
ruling in Republic v. Ceniza, which involved a claim of possession that extended back to 1927 over
a public domain land that was declared alienable and disposable only in 1980. Ceniza cited
Bracewell, quoted extensively from it, and following the mindset of the dissent, the attempt at
registration in Ceniza should have failed. Not so.
To prove that the land subject of an application for registration is alienable, an applicant must
establish the existence of a positive act of the government such as a presidential proclamation or
an executive order; an administrative action; investigation reports of Bureau of Lands investigators;
and a legislative act or a statute.

In this case, private respondents presented a certification dated November 25, 1994, issued by
Eduardo M. Inting, the Community Environment and Natural Resources Officer in the Department of
Environment and Natural Resources Office in Cebu City, stating that the lots involved were "found
to be within the alienable and disposable (sic) Block-I, Land Classification Project No. 32-A, per map
2962 4-I555 dated December 9, 1980." This is sufficient evidence to show the real character of the
land subject of private respondents application. Further, the certification enjoys a presumption of
regularity in the absence of contradictory evidence, which is true in this case. Worth noting also
was the observation of the Court of Appeals stating that:
[n]o opposition was filed by the Bureaus of Lands and Forestry to contest the application of
appellees on the ground that the property still forms part of the public domain. Nor is there any
showing that the lots in question are forestal land...."
Thus, while the Court of Appeals erred in ruling that mere possession of public land for the period
required by law would entitle its occupant to a confirmation of imperfect title, it did not err in ruling
in favor of private respondents as far as the first requirement in Section 48(b) of the Public Land
Act is concerned, for they were able to overcome the burden of proving the alienability of the land
subject of their application.
As correctly found by the Court of Appeals, private respondents were able to prove their open,
continuous, exclusive and notorious possession of the subject land even before the year 1927. As a
rule, we are bound by the factual findings of the Court of Appeals. Although there are exceptions,
petitioner did not show that this is one of them."
Why did the Court in Ceniza, through the same eminent member who authored Bracewell, sanction
the registration under Section 48(b) of public domain lands declared alienable or disposable thirtyfive (35) years and 180 days after 12 June 1945? The telling difference is that in Ceniza, the
application for registration was filed nearly six (6) years after the land had been declared alienable
or disposable, while in Bracewell, the application was filed nine (9) years before the land was
declared alienable or disposable. That crucial difference was also stressed in Naguit to
contradistinguish it from Bracewell, a difference which the dissent seeks to belittle. 45(citations
omitted)
On the other hand, under Section 14(2), ownership of private lands acquired through prescription
may be registered in the owners name. Did the respondent then acquire the land through
prescription considering that her possession and occupation of the land by her and her
predecessors-in-interest could be traced back to as early as in 1926, and that the nature of their
possession and occupation was that of a bona fide claim of ownership for over 30 years?
Clearly, the respondent did not. Again, Heirs of Mario Malabanan v. Republic is enlightening, to wit:
It is clear that property of public dominion, which generally includes property belonging to the
State, cannot be the object of prescription or, indeed, be subject of the commerce of man. Lands of
the public domain, whether declared alienable and disposable or not, are property of public
dominion and thus insusceptible to acquisition by prescription.
Let us now explore the effects under the Civil Code of a declaration by the President or any duly
authorized government officer of alienability and disposability of lands of the public domain. Would
such lands so declared alienable and disposable be converted, under the Civil Code, from property
of the public dominion into patrimonial property? After all, by connotative definition, alienable and
disposable lands may be the object of the commerce of man; Article 1113 provides that all things
within the commerce of man are susceptible to prescription; and the same provision further
provides that patrimonial property of the State may be acquired by prescription.
Nonetheless, Article 422 of the Civil Code states that "[p]roperty of public dominion, when no
longer intended for public use or for public service, shall form part of the patrimonial property of
the State." It is this provision that controls how public dominion property may be converted into
patrimonial property susceptible to acquisition by prescription. After all, Article 420 (2) makes clear
that those property "which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth" are public dominion property.
For as long as the property belongs to the State, although already classified as alienable or
disposable, it remains property of the public dominion if when it is "intended for some public
service or for the development of the national wealth".1wphi1

Accordingly, there must be an express declaration by the State that the public dominion property is
no longer intended for public service or the development of the national wealth or that the
property has been converted into patrimonial. Without such express declaration, the property, even
if classified as alienable or disposable, remains property of the public dominion, pursuant to Article
420(2), and thus incapable of acquisition by prescription. It is only when such alienable and
disposable lands are expressly declared by the State to be no longer intended for public service or
for the development of the national wealth that the period of acquisitive prescription can begin to
run. Such declaration shall be in the form of a law duly enacted by Congress or a Presidential
Proclamation in cases where the President is duly authorized by law.
It is comprehensible with ease that this reading of Section 14(2) of the Property Registration
Decree limits its scope and reach and thus affects the registrability even of lands already declared
alienable and disposable to the detriment of the bona fide possessors or occupants claiming title to
the lands. Yet this interpretation is in accord with the Regalian doctrine and its concomitant
assumption that all lands owned by the State, although declared alienable or disposable, remain as
such and ought to be used only by the Government.
Recourse does not lie with this Court in the matter.1wphi1 The duty of the Court is to apply the
Constitution and the laws in accordance with their language and intent. The remedy is to change
the law, which is the province of the legislative branch. Congress can very well be entreated to
amend Section 14(2) of the Property Registration Decree and pertinent provisions of the Civil Code
to liberalize the requirements for judicial confirmation of imperfect or incomplete titles. 46
The period of possession prior to the reclassification of the land as alienable and disposable land of
the public domain is not considered in reckoning the prescriptive period in favor of the possessor.
As pointedly clarified also in Heirs of Mario Malabanan v. Republic: 47
Should public domain lands become patrimonial because they are declared as such in a duly
enacted law or duly promulgated proclamation that they are no longer intended for public service
or for the development of the national wealth, would the period of possession prior to the
conversion of such public dominion into patrimonial be reckoned in counting the prescriptive period
in favor of the possessors? We rule in the negative.
The limitation imposed by Article 1113 dissuades us from ruling that the period of possession
before the public domain land becomes patrimonial may be counted for the purpose of completing
the prescriptive period. Possession of public dominion property before it becomes patrimonial
cannot be the object of prescription according to the Civil Code. As the application for registration
under Section 14(2) falls wholly within the framework of prescription under the Civil Code, there is
no way that possession during the time that the land was still classified as public dominion
property can be counted to meet the requisites of acquisitive prescription and justify registration. 48
In other words, the period of possession prior to the reclassification of the land, no matter how
long, was irrelevant because prescription did not operate against the State before then.
WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the Court of Appeals
promulgated on January 30, 2004; DISMISSES the application for land registration of respondent
Rosario de Guzman Vda. De Joson respecting Lot 2633, Cad-297 with a total area of 12,342 square
meters, more or less, situated in San Isidro, Paombong, Bulacan; and DIRECTS the respondent to
pay the costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
WE CONCUR:

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION
G.R. No. L-66575 September 30, 1986
ADRIANO MANECLANG, JULIETA, RAMONA, VICTOR, ANTONINA, LOURDES, TEODORO and
MYRNA, all surnamed MANECLANG, petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT and ALFREDO MAZA, CORLETO CASTRO, SALOME
RODRIGUEZ, EDUCARDO CUISON, FERNANDO ZARCILLA, MARIANO GABRIEL, NICOMEDES
CORDERO, CLETO PEDROZO, FELIX SALARY and JOSE PANLILIO, respondents.
Loreto Novisteros for petitioners.
Corleto R. Castro for respondents.
Civil Law; Contracts; Compromise Agreement; Stipulations in agreement which partake of the
nature of an adjudication of ownership of the fishpond which was originally a creek, null and void,
as said creek is a property of the public domain not susceptible to private appropriation; Creek,
concept of.The stipulations contained in the Compromise Agreement partake of the nature of an
adjudication of ownership in favor of herein petitioners of the fishpond in dispute, which, as clearly
found by the lower and appellate courts, was originally a creek forming a tributary of the Agno
River. Considering that as held in the case of Mercado vs. Municipal President of Macabebe, 59 Phil.
592 [1934], a creek, defined as a recess or arm extending from a river and participating in the ebb
and flow of the sea, is a property belonging to the public domain which is not susceptible to private
appropriation and acquisitive prescription, and as a public water, it cannot be registered under the
Torrens System in the name of any individual [Diego v. Court of Appeals, 102 Phil. 494; Mangaldan
v. Manaoag, 38 Phil. 455]; and considering further that neither the mere construction of irrigation
dikes by the National Irrigation Administration which prevented the water from flowing in and out
of the subject fishpond, nor its conversion into a fishpond, alter or change the nature of the creek
as a property of the public domain, the Court finds the Compromise Agreement null and void and
of no legal effect, the same being contrary to law and public policy.
Same; Same; Same; Finding that subject body of water is a creek belonging to the public domain, a
factual determination binding on the Supreme Court; Denial of due process, not a case of;
Publication of notice of public bidding suffices as a constructive notice to the whole world.The
finding that the subject body of water is a creek belonging to the public domain is a factual
determination binding upon this Court. The Municipality of Bugallon, acting thru its dulyconstituted
municipal council is clothed with authority to pass, as it did the two resolutions dealing with its
municipal waters, and it cannot be said that petitioners were deprived of their right to due process
as mere publication of the notice of the public bidding suffices as a constructive notice to the
whole world. Maneclang vs. Intermediate Appellate Court, 144 SCRA 553, No. L-66575 September
30, 1986

FERNAN, J.:
Petitioners Adriano Maneclang, et. al. filed before the then Court of First Instance of Pangasinan,
Branch XI a complaint for quieting of title over a certain fishpond located within the four [41
parcels of land belonging to them situated in Barrio Salomague, Bugallon, Pangasinan, and the
annulment of Resolutions Nos. 38 and 95 of the Municipal Council of Bugallon Pangasinan. The trial
court dismissed the complaint in a decision dated August 15, 1975 upon a finding that the body of
water traversing the titled properties of petitioners is a creek constituting a tributary of the Agno
River; therefore public in nature and not subject to private appropriation. The lower court likewise
held that Resolution No. 38, ordering an ocular inspection of the Cayangan Creek situated between
Barrios Salomague Sur and Salomague Norte, and Resolution No. 95 authorizing public bidding for
the lease of all municipal ferries and fisheries, including the fishpond under consideration, were
passed by respondents herein as members of the Municipal Council of Bugallon, Pangasinan in the
exercise of their legislative powers.
Petitioners appealed said decision to the Intermediate Appellate Court, which affirmed the same on
April 29, 1983. Hence, this petition for review on certiorari.

Acting on the petition, the Court required the respondents to comment thereon. However, before
respondents could do so, petitioners manifested that for lack of interest on the part of respondent
Alfredo Maza, the awardee in the public bidding of the fishpond, the parties desire to amicably
settle the case by submitting to the Court a Compromise Agreement praying that judgment be
rendered recognizing the ownership of petitioners over the land the body of water found within
their titled properties, stating therein, among other things, that "to pursue the case, the same will
not amount to any benefit of the parties, on the other hand it is to the advantage and benefit of the
municipality if the ownership of the land and the water found therein belonging to petitioners be
recognized in their favor as it is now clear that after the National Irrigation Administration [NIA] had
built the dike around the land, no water gets in or out of the land. 1
The stipulations contained in the Compromise Agreement partake of the nature of an adjudication
of ownership in favor of herein petitioners of the fishpond in dispute, which, as clearly found by the
lower and appellate courts, was originally a creek forming a tributary of the Agno River.
Considering that as held in the case of Mercado vs. Municipal President of Macabebe, 59 Phil. 592
[1934], a creek, defined as a recess or arm extending from a river and participating in the ebb and
flow of the sea, is a property belonging to the public domain which is not susceptible to private
appropriation and acquisitive prescription, and as a public water, it cannot be registered under the
Torrens System in the name of any individual [Diego v. Court of Appeals, 102 Phil. 494; Mangaldan
v. Manaoag, 38 Phil. 4551; and considering further that neither the mere construction of irrigation
dikes by the National Irrigation Administration which prevented the water from flowing in and out of
the subject fishpond, nor its conversion into a fishpond, alter or change the nature of the creek as a
property of the public domain, the Court finds the Compromise Agreement null and void and of no
legal effect, the same being contrary to law and public policy.
The finding that the subject body of water is a creek belonging to the public domain is a factual
determination binding upon this Court. The Municipality of Bugallon, acting thru its duly-constituted
municipal council is clothed with authority to pass, as it did the two resolutions dealing with its
municipal waters, and it cannot be said that petitioners were deprived of their right to due process
as mere publication of the notice of the public bidding suffices as a constructive notice to the whole
world.
IN VIEW OF THE FOREGOING, the Court Resolved to set aside the Compromise Agreement and
declare the same null and void for being contrary to law and public policy. The Court further
resolved to DISMISS the instant petition for lack of merit.
SO ORDERED.
Feria (Chairman), Alampay, Gutierrez, Jr. and Paras, JJ., concur.

THIRD DIVISION

[G.R. No. 152115. January 26, 2005]

NIMFA USERO, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA
POLINAR, respondents.

[G.R. No. 155055. January 26, 2005]

LUTGARDA R. SAMELA, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO &
CECILIA POLINAR,respondents.

Civil Law; Property; Property is either of public dominion or of private ownership.

Property is either of public dominion or of private ownership. Concomitantly,
Article 420 of the Civil Code provides: ART. 420. The following things are
property of public dominion: (1) Those intended for public use, such as roads,
canals, rivers, torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character.
Same; Same; Public Lands; The phrase others of similar character includes a creek
which is a recess or an arm of a river. It is a property belonging to the public
domain which is not susceptible to private ownership.The phrase others of
similar character includes a creek which is a recess or an arm of a river. It is
property belonging to the public domain which is not susceptible to private
ownership. Being public water, a creek cannot be registered under the Torrens
System in the name of any individual. Usero vs. Court of Appeals, 449 SCRA 352,
G.R. No. 152115, G.R. No. 155055 January 26, 2005
DECISION
CORONA, J.:
Before this Court are two consolidated petitions for review on certiorari under Rule 45 of the
Rules of Court. The first petition, docketed as G.R. No. 152115, filed by Nimfa Usero, assails the
September 19, 2001 decision[1] of the Court of Appeals in CA-GR SP No. 64718. The second petition,
docketed as G.R. No. 155055, filed by Lutgarda R. Samela, assails the January 11, 2002
decision[2] of the Court of Appeals in CA-GR SP NO. 64181.
The undisputed facts follow.
Petitioners Lutgarda R. Samela and Nimfa Usero are the owners respectively of lots 1 and 2,
Block 5, Golden Acres Subdivision, Barrio Almanza, Las Pias City.
Private respondent spouses Polinar are the registered owners of a parcel of land at no. 18
Anahaw St., Pilar Village, Las Pias City, behind the lots of petitioners Samela and Usero.
Situated between the lots of the parties is a low-level strip of land, with a stagnant body of
water filled with floating water lilies; abutting and perpendicular to the lot of petitioner Samela, the
lot of the Polinars and the low-level strip of land is the perimeter wall of Pilar Village Subdivision.
Apparently, every time a storm or heavy rains occur, the water in said strip of land rises and
the strong current passing through it causes considerable damage to the house of respondent
Polinars. Frustrated by their predicament, private respondent spouses, on July 30, 1998, erected a
concrete wall on the bank of the low-level strip of land about three meters from their house and riprapped the soil on that portion of the strip of land.
Claiming ownership of the subject strip of land, petitioners Samela and Usero demanded that
the spouses Apolinar stop their construction but the spouses paid no heed, believing the strip to be
part of a creek. Nevertheless, for the sake of peace, the Polinars offered to pay for the land being
claimed by petitioners Samela and Usero. However, the parties failed to settle their differences.
On November 9, 1998, petitioners filed separate complaints for forcible entry against the
Polinars at the Metropolitan Trial Court of Las Pias City. The case filed by petitioner Samela was
docketed as Civil Case No. 5242, while that of petitioner Usero was docketed as Civil Case No.
5243.
In Civil Case No. 5242, petitioner Samela adduced in evidence a copy of her Transfer
Certificate of Title, plan of consolidation, subdivision survey, the tax declaration in her name, and
affidavits of petitioner Usero and a certain Justino Gamela whose property was located beside the
perimeter wall of Pilar Village.
The spouses Polinar, on the other hand, presented in evidence their own TCT; a barangay
certification as to the existence of the creek; a certification from the district engineer that the
western portion of Pilar Village is bound by a tributary of Talon Creek throughout its entire length;
boundary and index map of Pilar Village showing that the village is surrounded by a creek and that
the Polinar property is situated at the edge of said creek; and pictures of the subject strip of land
filled with water lilies.
On March 22, 1999, the trial court rendered a decision in favor of petitioner Samela:

WHEREFORE, the Court hereby renders judgment ordering the defendants to vacate and remove at
their expense the improvements made on the subject lot; ordering the defendants to pay the
plaintiff P1,000.00 a month as reasonable compensation for the use of the portion encroached from
the filing of the complaint until the same is finally vacated; and to pay plaintiff P10,000.00 as
reasonable attorneys fees plus costs of suit.[3]
In a parallel development, the Metropolitan Trial Court, in Civil Case No. 5243, issued an order
on February 29, 2000, directing petitioner Usero and the Polinar spouses to commission a
professional geodetic engineer to conduct a relocation survey and to submit the report to the trial
court.
On April 24, 2000, Mariano Flotilde, a licensed geodetic engineer, conducted a relocation
survey of Useros property covered by TCT No. T- 29545. The result of the said relocation survey, as
stated in his affidavit, was as follows:
1. That I executed a relocation survey of Lot 2, Block 5, (LRC) PCS-4463 covered by TCT
No. T-29545 registered in the name of Nimfa O. Usero;
2. That according to my survey, I found out that there is no existing creek on the
boundary of the said lot;
3. That based on the relocation plan surveyed by the undersigned, attached herewith,
appearing is the encroachment on the above-mentioned lot by Spouses Herminigildo
and Cecilia Polinar with an area of FORTY THREE (43) SQUARE METERS;
4. That this affidavit was made in compliance with Court Order dated February 23, 2000
of Metropolitan Trial Court, Las Pias City, Branch LXXIX. [4]
On August 25, 2000, the Metropolitan Trial Court decided in favor of petitioner Usero:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants
ordering them:
a) To vacate and remove at their expense the improvement made on the subject lot;
b) To pay the plaintiff P1,000.00 a month as reasonable compensation for the portion
encroached from the time of the filing of the complaint until the same is finally
vacated;
c) To pay plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit.
SO ORDERED.[5]
The Polinar spouses appealed the decisions of the two Municipal Trial Courts to the Regional
Trial Court of Las Pias, Branch 253 which heard the appeals separately.
On December 20, 2000, the Regional Trial Court, deciding Civil Case No. 5242, reversed the
decision of the trial court and ordered the dismissal of the complaint. It confirmed the existence of
the creek between the northwestern portion of the lot of petitioner Samela and the southwestern
portion of the lot of the spouses Polinar:
Finding the existence of a creek between the respective properties of the parties, plaintiff-appellee
cannot therefore lay claim of lawful ownership of that portion because the same forms part of
public dominion. Consequently, she cannot legally stop the defendants-appellants from rip-rapping
the bank of the creek to protect the latters property from soil erosion thereby avoiding danger to
their lives and damage to property.
Absent a lawful claim by the plaintiff-appellee over the subject portion of that lot, defendantsappellants are not duty bound to pay the former compensation for the use of the same. As a result,
they may maintain the said improvements introduced thereon subject to existing laws, rules and
regulations and/or ordinances appurtenant thereto.
WHEREFORE, premises considered, the Decision rendered by Branch 79 of the Metropolitan Trial
Court, Las Pias is REVERSED. Accordingly, the instant complaint is DISMISSED.
SO ORDERED.[6]

On March 16, 2001, the Regional Trial Court, in Civil Case No. 5243, also reversed the finding
of the Municipal Trial Court:
From the foregoing, defendants-appellants may maintain the improvements introduced on the
subject portion of the lot subject to existing laws, rules and regulations and/or ordinances
pertaining thereto. Consequently, no compensation may be awarded in favor of the plaintiffappellee.
WHEREFORE, premises considered, the above-mentioned Decision rendered by Branch 79 of the
Las Pias City Metropolitan Trial Court is REVERSED. Accordingly, the instant complaint is
DISMISSED.
From the adverse decisions of the Regional Trial Court, petitioners filed their respective
petitions for review on certiorari to the Court of Appeals. Petitioner Samelas case was docketed as
CA-G.R. SP 64181 while that of petitioner Usero was docketed as CA-G.R. SP 64718.
Both petitions failed in the CA. Thus the instant consolidated petitions.
The pivotal issue in the case at bar is whether or not the disputed strip of land, allegedly
encroached upon by the spouses Polinar, is the private property of petitioners or part of the creek
and therefore part of the public domain. Clearly this an issue which calls for a review of facts
already determined by the Court of Appeals.
The jurisdiction of the Court in petitions for review on certiorari under Rule 45 of the Rules of
Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained
of are devoid of support by the evidence on record or the assailed judgment is based on a
misapprehension of facts.[7] This is obviously not the case here.
A careful scrutiny of the records reveals that the assailed decisions are founded on sufficient
evidence. That the subject strip of land is a creek is evidenced by: (1) a barangay certification that
a creek exists in the disputed strip of land; (2) a certification from the Second Manila Engineering
District, NCR-DPWH, that the western portion of Pilar Village where the subject strip of land is
located is bounded by a tributary of Talon Creek and (3) photographs showing the abundance of
water lilies in the subject strip of land. The Court of Appeals was correct: the fact that water lilies
thrive in that strip of land can only mean that there is a permanent stream of water or creek there.
In contrast, petitioners failed to present proof sufficient to support their claim. Petitioners
presented the TCTs of their respective lots to prove that there is no creek between their properties
and that of the Polinars. However, an examination of said TCTs reveals that the descriptions
thereon are incomplete. In petitioner Samelas TCT No. T-30088, there is no boundary description
relative to the northwest portion of the property pertaining to the site of the creek. Likewise in TCT
No. T-22329-A of the spouses Polinar, the southeast portion which pertains to the site of the creek
has no described boundary. Moreover the tax declaration presented by petitioner is devoid of any
entry on the west boundary vis-a-vis the location of the creek. All the pieces of evidence taken
together, we can only conclude that the adjoining portion of these boundaries is in fact a creek and
belongs to no one but the state.
Property is either of public dominion or of private ownership. [8] Concomitantly, Article 420 of
the Civil Code provides:
ART. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks, shores, roadsteads, and others of
similar character;
The phrase others of similar character includes a creek which is a recess or an arm of a river. It
is property belonging to the public domain which is not susceptible to private ownership. [9] Being
public water, a creek cannot be registered under the Torrens System in the name of any
individual[10].
Accordingly, the Polinar spouses may utilize the rip-rapped portion of the creek to prevent the
erosion of their property.
WHEREFORE, the consolidated petitions are hereby denied. The assailed decisions of the
Court of Appeals in CA-G.R. SP 64181 and CA-G.R. SP 64718 are affirmed in toto.

SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Carpio-Morales, and Garcia, JJ., concur.
THIRD DIVISION
OFFICE OF THE CITY MAYOR OF PARAAQUE
CITY, OFFICE OF THE CITY ADMINISTRATOR OF
PARAAQUE CITY, OFFICE OF THE CITY
ENGINEER OF PARAAQUE CITY, OFFICE OF THE
CITY
PLANNING
AND
DEVELOPMENT
COORDINATOR, OFFICE OF THE BARANGAY
CAPTAIN AND SANGGUNIANG PAMBARANGAY
OF BARANGAY VITALEZ, PARAAQUE CITY,
TERESITA A. GATCHALIAN, ENRICO R.
ESGUERRA, ERNESTO T. PRACALE, JR.,
MANUEL M. ARGOTE, CONRADO M. CANLAS,
JOSEPHINE S. DAUIGOY, ALLAN L. GONZALES,
ESTER C. ASEHAN, MANUEL A. FUENTES, and
MYRNA P. ROSALES,
Petitioners,

G.R. No. 178411

Present:
CARPIO MORALES, J.,
Chairperson,
BRION,
BERSAMIN,
ABAD,* and
VILLARAMA, JR., JJ.

- versus MARIO D. EBIO AND HIS CHILDREN/HEIRS Promulgated:

namely, ARTURO V. EBIO, EDUARDO V. EBIO,
RENATO V. EBIO, LOURDES E. MAGTANGOB, June 23, 2010
MILA V. EBIO, and ARNEL V. EBIO,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
Actions; Injunction; An action for injunction is brought specifically to restrain or command the
performance of an act.An action for injunction is brought specifically to restrain or command the
performance of an act. It is distinct from the ancillary remedy of preliminary injunction, which
cannot exist except only as part or as an incident to an independent action or proceeding.
Moreover, in an action for injunction, the auxiliary remedy of a preliminary prohibitory or
mandatory injunction may issue.
Ownership; Accretion; Alluvial deposits along the banks of a creek do not form part of the public
domain as the alluvial property automatically belongs to the owner of the estate to which it may
have been added.It is an uncontested fact that the subject land was formed from the alluvial
deposits that have gradually settled along the banks of Cut-cut creek. This being the case, the law
that governs ownership over the accreted portion is Article 84 of the Spanish Law of Waters of
1866, which remains in effect, in relation to Article 457 of the Civil Code. Article 84 of the Spanish
Law of Waters of 1866 specifically covers ownership over alluvial deposits along the banks of a
creek. It reads: ART. 84. Accretions deposited gradually upon lands contiguous to creeks, streams,
rivers, and lakes, by accessions or sediments from the waters thereof, belong to the owners of such
lands. Interestingly, Article 457 of the Civil Code states: Art. 457. To the owners of lands adjoining
the banks of rivers belong the accretion which they gradually receive from the effects of the
current of the waters. It is therefore explicit from the foregoing provisions that alluvial deposits
along the banks of a creek do not form part of the public domain as the alluvial property
automatically belongs to the owner of the estate to which it may have been added. The only
restriction provided for by law is that the owner of the adjoining property must register the same
under the Torrens system; otherwise, the alluvial property may be subject to acquisition through
prescription by third persons.
Parties; The State is not a necessary party to an action where no positive act shall be required from
it or where no obligation shall be imposed upon it, and neither would it be an indispensable party if
none of its properties shall be divested nor any of its rights infringed.An indispensable party is
one whose interest in the controversy is such that a final decree would necessarily affect his/her
right, so that the court cannot proceed without their presence. In contrast, a necessary party is one
whose presence in the proceedings is necessary to adjudicate the whole controversy but whose
interest is separable such that a final decree can be made in their absence without affecting them.
In the instant case, the action for prohibition seeks to enjoin the city government of Paraaque

from proceeding with its implementation of the road construction project. The State is neither a
necessary nor an indispensable party to an action where no positive act shall be required from it or
where no obligation shall be imposed upon it, such as in the case at bar. Neither would it be an
indispensable party if none of its properties shall be divested nor any of its rights infringed.
Injunction; Words and Phrases; A right in esse means a clear and unmistakable right.A right in
esse means a clear and unmistakable right. A party seeking to avail of an injunctive relief must
prove that he or she possesses a right in esse or one that is actual or existing. It should not be
contingent, abstract, or future rights, or one which may never arise.
Land Registration; The purpose of land registration is not the acquisition of lands, but only the
registration of title which the applicant already possessed over the landregistration was never
intended as a means of acquiring ownership.From these findings of fact by both the trial court
and the Court of Appeals, only one conclusion can be made: that for more than thirty (30) years,
neither Guaranteed Homes, Inc. nor the local government of Paraaque in its corporate or private
capacity sought to register the accreted portion. Undoubtedly, respondents are deemed to have
acquired ownership over the subject property through prescription. Respondents can assert such
right despite the fact that they have yet to register their title over the said lot. It must be
remembered that the purpose of land registration is not the acquisition of lands, but only the
registration of title which the applicant already possessed over the land. Registration was never
intended as a means of acquiring ownership. A decree of registration merely confirms, but does not
confer, ownership.
Same; Confirmation of Imperfect Title; Confirmation of an imperfect title over a parcel of land may
be done either through judicial proceedings or through administrative process; The State does not
have any authority to convey a property through the issuance of a grant or a patent if the land is
no longer a public land.Confirmation of an imperfect title over a parcel of land may be done
either through judicial proceedings or through administrative process. In the instant case,
respondents admitted that they opted to confirm their title over the property administratively by
filing an application for sales patent. Respondents application for sales patent, however, should
not be used to prejudice or derogate what may be deemed as their vested right over the subject
property. The sales patent application should instead be considered as a mere superfluity
particularly since ownership over the land, which they seek to buy from the State, is already vested
upon them by virtue of acquisitive prescription. Moreover, the State does not have any authority to
convey a property through the issuance of a grant or a patent if the land is no longer a public land.
Nemo dat quod dat non habet. No one can give what he does not have. Such principle is equally
applicable even against a sovereign entity that is the State. Offices of the City Mayor of Paraaque
City vs. Ebio, 621 SCRA 555, G.R. No. 178411 June 23, 2010
DECISION
VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the January 31, 2007 Decision [1] and June 8, 2007 Resolution [2] of the Court of
Appeals (CA) in CA-G.R. SP No. 91350 allegedly for being contrary to law and jurisprudence. The CA
had reversed the Order[3] of the Regional Trial Court (RTC) of Paraaque City, Branch 196, issued
on April 29, 2005 in Civil Case No. 05-0155.
Below are the facts.
Respondents claim that they are the absolute owners of a parcel of land consisting of 406 square
meters, more or less, located at 9781 Vitalez Compound in Barangay Vitalez, Paraaque City and
covered by Tax Declaration Nos. 01027 and 01472 in the name of respondent Mario D. Ebio. Said
land was an accretion of Cut-cut creek. Respondents assert that the original occupant and
possessor of the said parcel of land was their great grandfather, Jose Vitalez. Sometime in 1930,
Jose gave the land to his son, Pedro Vitalez. From then on, Pedro continuously and exclusively
occupied and possessed the said lot. In 1966, after executing an affidavit declaring possession and
occupancy,[4] Pedro was able to obtain a tax declaration over the said property in his name. [5] Since
then, respondents have been religiously paying real property taxes for the said property. [6]
Meanwhile, in 1961, respondent Mario Ebio married Pedros daughter, Zenaida. Upon Pedros advice,
the couple established their home on the said lot. In April 1964 and in October 1971, Mario Ebio
secured building permits from the Paraaque municipal office for the construction of their house
within the said compound. [7] On April 21, 1987, Pedro executed a notarized Transfer of

Rights[8] ceding his claim over the entire parcel of land in favor of Mario Ebio. Subsequently, the tax
declarations under Pedros name were cancelled and new ones were issued in Mario Ebios name. [9]
On March 30, 1999, the Office of the Sangguniang Barangay of Vitalez passed Resolution No. 08,
series of 1999[10] seeking assistance from the City Government of Paraaque for the construction of
an access road along Cut-cut Creek located in the said barangay. The proposed road, projected to
be eight (8) meters wide and sixty (60) meters long, will run from Urma Drive to the main road of
Vitalez Compound[11] traversing the lot occupied by the respondents. When the city government
advised all the affected residents to vacate the said area, respondents immediately registered their
opposition thereto. As a result, the road project was temporarily suspended. [12]
In January 2003, however, respondents were surprised when several officials from the barangay
and the city planning office proceeded to cut eight (8) coconut trees planted on the said lot.
Respondents filed letter-complaints before the Regional Director of the Bureau of Lands, the
Department of Interior and Local Government and the Office of the Vice Mayor. [13] On June 29,
2003, the Sangguniang Barangay of Vitalez held a meeting to discuss the construction of the
proposed road. In the said meeting, respondents asserted their opposition to the proposed project
and their claim of ownership over the affected property. [14] On November 14, 2003, respondents
attended another meeting with officials from the city government, but no definite agreement was
reached by and among the parties.[15]
On March 28, 2005, City Administrator Noli Aldip sent a letter to the respondents ordering them to
vacate the area within the next thirty (30) days, or be physically evicted from the said property.
[16]
Respondents sent a letter to the Office of the City Administrator asserting, in sum, their claim
over the subject property and expressing intent for a further dialogue. [17] The request remained
unheeded.
Threatened of being evicted, respondents went to the RTC of Paraaque City on April 21, 2005 and
applied for a writ of preliminary injunction against petitioners. [18] In the course of the proceedings,
respondents admitted before the trial court that they have a pending application for the issuance
of a sales patent before the Department of Environment and Natural Resources (DENR). [19]
On April 29, 2005, the RTC issued an Order [20] denying the petition for lack of merit. The trial court
reasoned that respondents were not able to prove successfully that they have an established right to
the property since they have not instituted an action for confirmation of title and their application for
sales patent has not yet been granted. Additionally, they failed to implead the Republic of
the Philippines, which is an indispensable party.
Respondents moved for reconsideration, but the same was denied. [21]
Aggrieved, respondents elevated the matter to the Court of Appeals. On January 31, 2007, the
Court of Appeals issued its Decision in favor of the respondents. According to the Court of Appeals-The issue ultimately boils down to the question of ownership of the lands adjoining
Cutcut Creek particularly Road Lot No. 8 (hereinafter RL 8) and the accreted portion
beside RL 8.
The evidentiary records of the instant case, shows that RL 8 containing an area of
291 square meters is owned by Guaranteed Homes, Inc. covered by TCT No. S62176. The same RL 8 appears to have been donated by the Guaranteed Homes to
the City Government of Paraaque on 22 March 1966 and which was accepted by
the then Mayor FLORENCIO BERNABE on 5 April 1966. There is no evidence
however, when RL 8 has been intended as a road lot.
On the other hand, the evidentiary records reveal that PEDRO VITALEZ possessed
the accreted property since 1930 per his Affidavit dated 21 March 1966 for the
purpose of declaring the said property for taxation purposes. The property then
became the subject of Tax Declaration No. 20134 beginning the year 1967 and the
real property taxes therefor had been paid for the years 1966, 1967, 1968, 1969,
1970, 1972, 1973, 1974, 1978, 1980, 1995, 1996, 1997, 1998, 1999, 2000, 2001,
2002, 2003, and 2004. Sometime in 1964 and 1971, construction permits were
issued in favor of Appellant MARIO EBIO for the subject property. On 21 April 1987,

PEDRO VITALEZ transferred his rights in the accreted property to MARIO EBIO and
his successors-in-interest.
Applying [Article 457 of the Civil Code considering] the foregoing documentary
evidence, it could be concluded that Guaranteed Homes is the owner of the
accreted property considering its ownership of the adjoining RL 8 to which the
accretion attached. However, this is without the application of the provisions of the
Civil Code on acquisitive prescription which is likewise applicable in the instant
case.
xxxx
The subject of acquisitive prescription in the instant case is the accreted portion
which [was] duly proven by the Appellants. It is clear that since 1930, Appellants
together with their predecessor-in-interest, PEDRO VITALEZ[,] have been in
exclusive possession of the subject property and starting 1964 had introduced
improvements thereon as evidenced by their construction permits. Thus, even by
extraordinary acquisitive prescription[,] Appellants have acquired ownership of the
property in question since 1930 even if the adjoining RL 8 was subsequently
registered in the name of Guaranteed Homes. x x x.
xxxx
Further, it was only in 1978 that Guaranteed Homes was able to have RL 8
registered in its name, which is almost fifty years from the time PEDRO VITALEZ
occupied the adjoining accreted property in 1930. x x x.
xxxx
We likewise note the continuous payment of real property taxes of Appellants
which bolster their right over the subject property. x x x.
xxxx
In sum, We are fully convinced and so hold that the Appellants [have] amply
proven their right over the property in question.
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The
challenged Order of the court a quo is REVERSED andSET ASIDE.
SO ORDERED.[22]
On June 8, 2007, the appellate court denied petitioners motion for reconsideration. Hence, this
petition raising the following assignment of errors:
I.
WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE
COURT OF APPEALS THAT RESPONDENTS HAVE A RIGHT IN ESSE IS IN ACCORD
WITH THE LAW AND ESTABLISHED JURISPRUDENCE[;]
II.

WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE

COURT OF APPEALS THAT THE SUBJECT LOT IS AVAILABLE FOR ACQUISITIVE
PRESCRIPTION IS IN ACCORD WITH THE LAW AND ESTABLISHED
JURISPRUDENCE[;] AND

III. WHETHER OR NOT THE STATE IS AN INDISPENSABLE PARTY TO THE COMPLAINT

FILED BY RESPONDENTS IN THELOWER COURT. [23]
The issues may be narrowed down into two (2): procedurally, whether the State is an indispensable
party to respondents action for prohibitory injunction; and substantively, whether the character of
respondents possession and occupation of the subject property entitles them to avail of the relief
of prohibitory injunction.
The petition is without merit.

An action for injunction is brought specifically to restrain or command the performance of an act.
[24]
It is distinct from the ancillary remedy of preliminary injunction, which cannot exist except only
as part or as an incident to an independent action or proceeding. Moreover, in an action for
injunction, the auxiliary remedy of a preliminary prohibitory or mandatory injunction may issue. [25]
In the case at bar, respondents filed an action for injunction to prevent the local government of
Paraaque City from proceeding with the construction of an access road that will traverse through a
parcel of land which they claim is owned by them by virtue of acquisitive prescription.
Petitioners, however, argue that since the creek, being a tributary of the river, is classified as part
of the public domain, any land that may have formed along its banks through time should also be
considered as part of the public domain. And respondents should have included the State as it is an
indispensable party to the action.
We do not agree.
It is an uncontested fact that the subject land was formed from the alluvial deposits that have
gradually settled along the banks of Cut-cut creek. This being the case, the law that governs
ownership over the accreted portion is Article 84 of the Spanish Law of Waters of 1866, which
remains in effect,[26] in relation to Article 457 of the Civil Code.
Article 84 of the Spanish Law of Waters of 1866 specifically covers ownership over alluvial deposits
along the banks of a creek. It reads:
ART. 84. Accretions deposited gradually upon lands contiguous to creeks, streams,
rivers, and lakes, by accessions or sediments from the waters thereof, belong to
the owners of such lands.[27]
Interestingly, Article 457 of the Civil Code states:
Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion
which they gradually receive from the effects of the current of the waters.
It is therefore explicit from the foregoing provisions that alluvial deposits along the banks of a creek
do not form part of the public domain as the alluvial property automatically belongs to the owner of
the estate to which it may have been added. The only restriction provided for by law is that the
owner of the adjoining property must register the same under the Torrens system; otherwise, the
alluvial property may be subject to acquisition through prescription by third persons. [28]
In contrast, properties of public dominion cannot be acquired by prescription. No matter how long
the possession of the properties has been, there can be no prescription against the State regarding
property of public domain.[29] Even a city or municipality cannot acquire them by prescription as
against the State.[30]
Hence, while it is true that a creek is a property of public dominion, [31] the land which is formed by
the gradual and imperceptible accumulation of sediments along its banks does not form part of the
public domain by clear provision of law.
Moreover, an indispensable party is one whose interest in the controversy is such that a final
decree would necessarily affect his/her right, so that the court cannot proceed without their
presence. [32] In contrast, a necessary party is one whose presence in the proceedings is necessary
to adjudicate the whole controversy but whose interest is separable such that a final decree can be
made in their absence without affecting them.[33]
In the instant case, the action for prohibition seeks to enjoin the city government of Paraaque from
proceeding with its implementation of the road construction project. The State is neither a
necessary nor an indispensable party to an action where no positive act shall be required from it or

where no obligation shall be imposed upon it, such as in the case at bar. Neither would it be an
indispensable party if none of its properties shall be divested nor any of its rights infringed.
We also find that the character of possession and ownership by the respondents over the contested
land entitles them to the avails of the action.
A right in esse means a clear and unmistakable right.[34] A party seeking to avail of an injunctive
relief must prove that he or she possesses a right in esse or one that is actual or existing. [35] It
should not be contingent, abstract, or future rights, or one which may never arise. [36]
In the case at bar, respondents assert that their predecessor-in-interest, Pedro Vitalez, had
occupied and possessed the subject lot as early as 1930. In 1964, respondent Mario Ebio secured a
permit from the local government of Paraaque for the construction of their family dwelling on the
said lot. In 1966, Pedro executed an affidavit of possession and occupancy allowing him to declare
the property in his name for taxation purposes. Curiously, it was also in 1966 when Guaranteed
Homes, Inc., the registered owner of Road Lot No. 8 (RL 8) which adjoins the land occupied by the
respondents, donated RL 8 to the local government of Paraaque.
From these findings of fact by both the trial court and the Court of Appeals, only one conclusion can
be made: that for more than thirty (30) years, neither Guaranteed Homes, Inc. nor the local
government of Paraaque in its corporate or private capacity sought to register the accreted portion.
Undoubtedly, respondents are deemed to have acquired ownership over the subject property
through prescription. Respondents can assert such right despite the fact that they have yet to
register their title over the said lot. It must be remembered that the purpose of land registration is
not the acquisition of lands, but only the registration of title which the applicant already possessed
over the land. Registration was never intended as a means of acquiring ownership. [37] A decree of
registration merely confirms, but does not confer, ownership. [38]
Did the filing of a sales patent application by the respondents, which remains pending before the
DENR, estop them from filing an injunction suit?
We answer in the negative.
Confirmation of an imperfect title over a parcel of land may be done either through judicial
proceedings or through administrative process. In the instant case, respondents admitted that they
opted to confirm their title over the property administratively by filing an application for sales
patent.
Respondents application for sales patent, however, should not be used to prejudice or derogate
what may be deemed as their vested right over the subject property. The sales patent application
should instead be considered as a mere superfluity particularly since ownership over the land,
which they seek to buy from the State, is already vested upon them by virtue of acquisitive
prescription. Moreover, the State does not have any authority to convey a property through the
issuance of a grant or a patent if the land is no longer a public land.[39]
Nemo dat quod dat non habet. No one can give what he does not have. Such principle is equally
applicable even against a sovereign entity that is the State.
WHEREFORE, the petition is DENIED for lack of merit. The January 31, 2007 Decision, as well as
the July 8, 2007 Resolution, of the Court of Appeals in CA-G.R. SP No. 91350 are
hereby AFFIRMED.
With costs against petitioners.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 133250

July 9, 2002

FRANCISCO I. CHAVEZ, petitioner,

vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, respondents.
Actions; Injunction; An action for injunction is brought specifically to restrain or command the
performance of an act.An action for injunction is brought specifically to restrain or command the
performance of an act. It is distinct from the ancillary remedy of preliminary injunction, which
cannot exist except only as part or as an incident to an independent action or proceeding.
Moreover, in an action for injunction, the auxiliary remedy of a preliminary prohibitory or
mandatory injunction may issue.
Ownership; Accretion; Alluvial deposits along the banks of a creek do not form part of the public
domain as the alluvial property automatically belongs to the owner of the estate to which it may
have been added.It is an uncontested fact that the subject land was formed from the alluvial
deposits that have gradually settled along the banks of Cut-cut creek. This being the case, the law
that governs ownership over the accreted portion is Article 84 of the Spanish Law of Waters of
1866, which remains in effect, in relation to Article 457 of the Civil Code. Article 84 of the Spanish
Law of Waters of 1866 specifically covers ownership over alluvial deposits along the banks of a
creek. It reads: ART. 84. Accretions deposited gradually upon lands contiguous to creeks, streams,
rivers, and lakes, by accessions or sediments from the waters thereof, belong to the owners of such
lands. Interestingly, Article 457 of the Civil Code states: Art. 457. To the owners of lands adjoining
the banks of rivers belong the accretion which they gradually receive from the effects of the
current of the waters. It is therefore explicit from the foregoing provisions that alluvial deposits
along the banks of a creek do not form part of the public domain as the alluvial property
automatically belongs to the owner of the estate to which it may have been added. The only
restriction provided for by law is that the owner of the adjoining property must register the same
under the Torrens system; otherwise, the alluvial property may be subject to acquisition through
prescription by third persons.
Parties; The State is not a necessary party to an action where no positive act shall be required from
it or where no obligation shall be imposed upon it, and neither would it be an indispensable party if
none of its properties shall be divested nor any of its rights infringed.An indispensable party is
one whose interest in the controversy is such that a final decree would necessarily affect his/her
right, so that the court cannot proceed without their presence. In contrast, a necessary party is one
whose presence in the proceedings is necessary to adjudicate the whole controversy but whose
interest is separable such that a final decree can be made in their absence without affecting them.
In the instant case, the action for prohibition seeks to enjoin the city government of Paraaque
from proceeding with its implementation of the road construction project. The State is neither a
necessary nor an indispensable party to an action where no positive act shall be required from it or
where no obligation shall be imposed upon it, such as in the case at bar. Neither would it be an
indispensable party if none of its properties shall be divested nor any of its rights infringed.
Injunction; Words and Phrases; A right in esse means a clear and unmistakable right.A right in
esse means a clear and unmistakable right. A party seeking to avail of an injunctive relief must
prove that he or she possesses a right in esse or one that is actual or existing. It should not be
contingent, abstract, or future rights, or one which may never arise.
Land Registration; The purpose of land registration is not the acquisition of lands, but only the
registration of title which the applicant already possessed over the landregistration was never
intended as a means of acquiring ownership.From these findings of fact by both the trial court
and the Court of Appeals, only one conclusion can be made: that for more than thirty (30) years,
neither Guaranteed Homes, Inc. nor the local government of Paraaque in its corporate or private
capacity sought to register the accreted portion. Undoubtedly, respondents are deemed to have
acquired ownership over the subject property through prescription. Respondents can assert such

right despite the fact that they have yet to register their title over the said lot. It must be
remembered that the purpose of land registration is not the acquisition of lands, but only the
registration of title which the applicant already possessed over the land. Registration was never
intended as a means of acquiring ownership. A decree of registration merely confirms, but does not
confer, ownership.
Same; Confirmation of Imperfect Title; Confirmation of an imperfect title over a parcel of land may
be done either through judicial proceedings or through administrative process; The State does not
have any authority to convey a property through the issuance of a grant or a patent if the land is
no longer a public land.Confirmation of an imperfect title over a parcel of land may be done
either through judicial proceedings or through administrative process. In the instant case,
respondents admitted that they opted to confirm their title over the property administratively by
filing an application for sales patent. Respondents application for sales patent, however, should
not be used to prejudice or derogate what may be deemed as their vested right over the subject
property. The sales patent application should instead be considered as a mere superfluity
particularly since ownership over the land, which they seek to buy from the State, is already vested
upon them by virtue of acquisitive prescription. Moreover, the State does not have any authority to
convey a property through the issuance of a grant or a patent if the land is no longer a public land.
Nemo dat quod dat non habet. No one can give what he does not have. Such principle is equally
applicable even against a sovereign entity that is the State. Offices of the City Mayor of Paraaque
City vs. Ebio, 621 SCRA 555, G.R. No. 178411 June 23, 2010
CARPIO, J.:
This is an original Petition for Mandamus with prayer for a writ of preliminary injunction and a
temporary restraining order. The petition seeks to compel the Public Estates Authority ("PEA" for
brevity) to disclose all facts on PEA's then on-going renegotiations with Amari Coastal Bay and
Development Corporation ("AMARI" for brevity) to reclaim portions of Manila Bay. The petition
further seeks to enjoin PEA from signing a new agreement with AMARI involving such reclamation.
The Facts
On November 20, 1973, the government, through the Commissioner of Public Highways, signed a
contract with the Construction and Development Corporation of the Philippines ("CDCP" for brevity)
to reclaim certain foreshore and offshore areas of Manila Bay. The contract also included the
construction of Phases I and II of the Manila-Cavite Coastal Road. CDCP obligated itself to carry out
all the works in consideration of fifty percent of the total reclaimed land.
On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree No. 1084
creating PEA. PD No. 1084 tasked PEA "to reclaim land, including foreshore and submerged areas,"
and "to develop, improve, acquire, x x x lease and sell any and all kinds of lands." 1 On the same
date, then President Marcos issued Presidential Decree No. 1085 transferring to PEA the "lands
reclaimed in the foreshore and offshore of the Manila Bay" 2 under the Manila-Cavite Coastal Road
and Reclamation Project (MCCRRP).
On December 29, 1981, then President Marcos issued a memorandum directing PEA to amend its
contract with CDCP, so that "[A]ll future works in MCCRRP x x x shall be funded and owned by PEA."
Accordingly, PEA and CDCP executed a Memorandum of Agreement dated December 29, 1981,
which stated:
"(i) CDCP shall undertake all reclamation, construction, and such other works in the
MCCRRP as may be agreed upon by the parties, to be paid according to progress of works
on a unit price/lump sum basis for items of work to be agreed upon, subject to price
escalation, retention and other terms and conditions provided for in Presidential Decree No.
1594. All the financing required for such works shall be provided by PEA.
xxx
(iii) x x x CDCP shall give up all its development rights and hereby agrees to cede and
transfer in favor of PEA, all of the rights, title, interest and participation of CDCP in and to
all the areas of land reclaimed by CDCP in the MCCRRP as of December 30, 1981 which
have not yet been sold, transferred or otherwise disposed of by CDCP as of said date,
which areas consist of approximately Ninety-Nine Thousand Four Hundred Seventy Three

(99,473) square meters in the Financial Center Area covered by land pledge No. 5 and
approximately Three Million Three Hundred Eighty Two Thousand Eight Hundred Eighty
Eight (3,382,888) square meters of reclaimed areas at varying elevations above Mean Low
Water Level located outside the Financial Center Area and the First Neighborhood Unit." 3
On January 19, 1988, then President Corazon C. Aquino issued Special Patent No. 3517, granting
and transferring to PEA "the parcels of land so reclaimed under the Manila-Cavite Coastal Road and
Reclamation Project (MCCRRP) containing a total area of one million nine hundred fifteen thousand
eight hundred ninety four (1,915,894) square meters." Subsequently, on April 9, 1988, the Register
of Deeds of the Municipality of Paraaque issued Transfer Certificates of Title Nos. 7309, 7311, and
7312, in the name of PEA, covering the three reclaimed islands known as the "Freedom Islands"
located at the southern portion of the Manila-Cavite Coastal Road, Paraaque City. The Freedom
Islands have a total land area of One Million Five Hundred Seventy Eight Thousand Four Hundred
and Forty One (1,578,441) square meters or 157.841 hectares.
On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for brevity) with AMARI, a
private corporation, to develop the Freedom Islands. The JVA also required the reclamation of an
additional 250 hectares of submerged areas surrounding these islands to complete the
configuration in the Master Development Plan of the Southern Reclamation Project-MCCRRP. PEA
and AMARI entered into the JVA through negotiation without public bidding. 4 On April 28, 1995, the
Board of Directors of PEA, in its Resolution No. 1245, confirmed the JVA. 5On June 8, 1995, then
President Fidel V. Ramos, through then Executive Secretary Ruben Torres, approved the JVA. 6
On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege speech in the
Senate and denounced the JVA as the "grandmother of all scams." As a result, the Senate
Committee on Government Corporations and Public Enterprises, and the Committee on
Accountability of Public Officers and Investigations, conducted a joint investigation. The Senate
Committees reported the results of their investigation in Senate Committee Report No. 560 dated
September 16, 1997.7 Among the conclusions of their report are: (1) the reclaimed lands PEA seeks
to transfer to AMARI under the JVA are lands of the public domain which the government has not
classified as alienable lands and therefore PEA cannot alienate these lands; (2) the certificates of
title covering the Freedom Islands are thus void, and (3) the JVA itself is illegal.
On December 5, 1997, then President Fidel V. Ramos issued Presidential Administrative Order No.
365 creating a Legal Task Force to conduct a study on the legality of the JVA in view of Senate
Committee Report No. 560. The members of the Legal Task Force were the Secretary of Justice, 8 the
Chief Presidential Legal Counsel,9 and the Government Corporate Counsel.10 The Legal Task Force
upheld the legality of the JVA, contrary to the conclusions reached by the Senate Committees. 11
On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that there were
on-going renegotiations between PEA and AMARI under an order issued by then President Fidel V.
Ramos. According to these reports, PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo and
retired Navy Officer Sergio Cruz composed the negotiating panel of PEA.
On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition with
Application for the Issuance of a Temporary Restraining Order and Preliminary Injunction docketed
as G.R. No. 132994 seeking to nullify the JVA. The Court dismissed the petition "for unwarranted
disregard of judicial hierarchy, without prejudice to the refiling of the case before the proper
court."12
On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a taxpayer, filed the
instant Petition for Mandamus with Prayer for the Issuance of a Writ of Preliminary Injunction and
Temporary Restraining Order. Petitioner contends the government stands to lose billions of pesos in
the sale by PEA of the reclaimed lands to AMARI. Petitioner prays that PEA publicly disclose the
terms of any renegotiation of the JVA, invoking Section 28, Article II, and Section 7, Article III, of the
1987 Constitution on the right of the people to information on matters of public concern. Petitioner
assails the sale to AMARI of lands of the public domain as a blatant violation of Section 3, Article XII
of the 1987 Constitution prohibiting the sale of alienable lands of the public domain to private
corporations. Finally, petitioner asserts that he seeks to enjoin the loss of billions of pesos in
properties of the State that are of public dominion.
After several motions for extension of time,13 PEA and AMARI filed their Comments on October 19,
1998 and June 25, 1998, respectively. Meanwhile, on December 28, 1998, petitioner filed an

Omnibus Motion: (a) to require PEA to submit the terms of the renegotiated PEA-AMARI contract;
(b) for issuance of a temporary restraining order; and (c) to set the case for hearing on oral
argument. Petitioner filed a Reiterative Motion for Issuance of a TRO dated May 26, 1999, which the
Court denied in a Resolution dated June 22, 1999.
In a Resolution dated March 23, 1999, the Court gave due course to the petition and required the
parties to file their respective memoranda.
On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement ("Amended JVA,"
for brevity). On May 28, 1999, the Office of the President under the administration of then
President Joseph E. Estrada approved the Amended JVA.
Due to the approval of the Amended JVA by the Office of the President, petitioner now prays that on
"constitutional and statutory grounds the renegotiated contract be declared null and void." 14
The Issues
The issues raised by petitioner, PEA15 and AMARI16 are as follows:
I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE PETITION ARE MOOT AND
ACADEMIC BECAUSE OF SUBSEQUENT EVENTS;
II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO OBSERVE THE PRINCIPLE
GOVERNING THE HIERARCHY OF COURTS;
III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION OF ADMINISTRATIVE
REMEDIES;
IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT;
V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES OFFICIAL
INFORMATION ON ON-GOING NEGOTIATIONS BEFORE A FINAL AGREEMENT;
VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE AGREEMENT FOR THE
TRANSFER TO AMARI OF CERTAIN LANDS, RECLAIMED AND STILL TO BE RECLAIMED,
VIOLATE THE 1987 CONSTITUTION; AND
VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE ISSUE OF WHETHER
THE AMENDED JOINT VENTURE AGREEMENT IS GROSSLY DISADVANTAGEOUS TO THE
GOVERNMENT.
The Court's Ruling
First issue: whether the principal reliefs prayed for in the petition are moot and
academic because of subsequent events.
The petition prays that PEA publicly disclose the "terms and conditions of the on-going negotiations
for a new agreement." The petition also prays that the Court enjoin PEA from "privately entering
into, perfecting and/or executing any new agreement with AMARI."
PEA and AMARI claim the petition is now moot and academic because AMARI furnished petitioner
on June 21, 1999 a copy of the signed Amended JVA containing the terms and conditions agreed
upon in the renegotiations. Thus, PEA has satisfied petitioner's prayer for a public disclosure of the
renegotiations. Likewise, petitioner's prayer to enjoin the signing of the Amended JVA is now moot
because PEA and AMARI have already signed the Amended JVA on March 30, 1999. Moreover, the
Office of the President has approved the Amended JVA on May 28, 1999.
Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply fasttracking the signing and approval of the Amended JVA before the Court could act on the issue.

Presidential approval does not resolve the constitutional issue or remove it from the ambit of
judicial review.
We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the President
cannot operate to moot the petition and divest the Court of its jurisdiction. PEA and AMARI have
still to implement the Amended JVA. The prayer to enjoin the signing of the Amended JVA on
constitutional grounds necessarily includes preventing its implementation if in the meantime PEA
and AMARI have signed one in violation of the Constitution. Petitioner's principal basis in assailing
the renegotiation of the JVA is its violation of Section 3, Article XII of the Constitution, which
prohibits the government from alienating lands of the public domain to private corporations. If the
Amended JVA indeed violates the Constitution, it is the duty of the Court to enjoin its
implementation, and if already implemented, to annul the effects of such unconstitutional contract.
The Amended JVA is not an ordinary commercial contract but one which seeks to transfer title
and ownership to 367.5 hectares of reclaimed lands and submerged areas of Manila Bay
to a single private corporation. It now becomes more compelling for the Court to resolve the
issue to insure the government itself does not violate a provision of the Constitution intended to
safeguard the national patrimony. Supervening events, whether intended or accidental, cannot
prevent the Court from rendering a decision if there is a grave violation of the Constitution. In the
instant case, if the Amended JVA runs counter to the Constitution, the Court can still prevent the
transfer of title and ownership of alienable lands of the public domain in the name of AMARI. Even
in cases where supervening events had made the cases moot, the Court did not hesitate to resolve
the legal or constitutional issues raised to formulate controlling principles to guide the bench, bar,
and the public.17
Also, the instant petition is a case of first impression. All previous decisions of the Court involving
Section 3, Article XII of the 1987 Constitution, or its counterpart provision in the 1973
Constitution,18 covered agricultural landssold to private corporations which acquired the lands
from private parties. The transferors of the private corporations claimed or could claim the right
to judicial confirmation of their imperfect titles19 under Title II of Commonwealth Act. 141
("CA No. 141" for brevity). In the instant case, AMARI seeks to acquire from PEA, a public
corporation, reclaimed lands and submerged areas for non-agricultural purposes
by purchase under PD No. 1084 (charter of PEA) and Title III of CA No. 141. Certain undertakings
by AMARI under the Amended JVA constitute the consideration for the purchase. Neither AMARI nor
PEA can claim judicial confirmation of their titles because the lands covered by the Amended JVA
are newly reclaimed or still to be reclaimed. Judicial confirmation of imperfect title requires open,
continuous, exclusive and notorious occupation of agricultural lands of the public domain for at
least thirty years since June 12, 1945 or earlier. Besides, the deadline for filing applications for
judicial confirmation of imperfect title expired on December 31, 1987. 20
Lastly, there is a need to resolve immediately the constitutional issue raised in this petition
because of the possible transfer at any time by PEA to AMARI of title and ownership to portions of
the reclaimed lands. Under the Amended JVA, PEA is obligated to transfer to AMARI the latter's
seventy percent proportionate share in the reclaimed areas as the reclamation progresses. The
Amended JVA even allows AMARI to mortgage at any time the entire reclaimed area to raise
financing for the reclamation project. 21
Second issue: whether the petition merits dismissal for failing to observe the principle
governing the hierarchy of courts.
PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly from the
Court. The principle of hierarchy of courts applies generally to cases involving factual questions. As
it is not a trier of facts, the Court cannot entertain cases involving factual issues. The instant case,
however, raises constitutional issues of transcendental importance to the public. 22 The Court can
resolve this case without determining any factual issue related to the case. Also, the instant case is
a petition for mandamus which falls under the original jurisdiction of the Court under Section 5,
Article VIII of the Constitution. We resolve to exercise primary jurisdiction over the instant case.
Third issue: whether the petition merits dismissal for non-exhaustion of administrative
remedies.
PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose publicly certain
information without first asking PEA the needed information. PEA claims petitioner's direct resort to

the Court violates the principle of exhaustion of administrative remedies. It also violates the rule
that mandamus may issue only if there is no other plain, speedy and adequate remedy in the
ordinary course of law.
PEA distinguishes the instant case from Taada v. Tuvera 23 where the Court granted the petition for
mandamus even if the petitioners there did not initially demand from the Office of the President the
publication of the presidential decrees. PEA points out that in Taada, the Executive Department
had an affirmative statutory duty under Article 2 of the Civil Code24 and Section 1 of
Commonwealth Act No. 63825 to publish the presidential decrees. There was, therefore, no need for
the petitioners in Taada to make an initial demand from the Office of the President. In the instant
case, PEA claims it has no affirmative statutory duty to disclose publicly information about its
renegotiation of the JVA. Thus, PEA asserts that the Court must apply the principle of exhaustion of
administrative remedies to the instant case in view of the failure of petitioner here to demand
initially from PEA the needed information.
The original JVA sought to dispose to AMARI public lands held by PEA, a government corporation.
Under Section 79 of the Government Auditing Code,26 the disposition of government lands to
private parties requires public bidding. PEA was under a positive legal duty to disclose to
the public the terms and conditions for the sale of its lands. The law obligated PEA to make
this public disclosure even without demand from petitioner or from anyone. PEA failed to make this
public disclosure because the original JVA, like the Amended JVA, was the result of a negotiated
contract, not of a public bidding. Considering that PEA had an affirmative statutory duty to make
the public disclosure, and was even in breach of this legal duty, petitioner had the right to seek
direct judicial intervention.
Moreover, and this alone is determinative of this issue, the principle of exhaustion of administrative
remedies does not apply when the issue involved is a purely legal or constitutional question. 27 The
principal issue in the instant case is the capacity of AMARI to acquire lands held by PEA in view of
the constitutional ban prohibiting the alienation of lands of the public domain to private
corporations. We rule that the principle of exhaustion of administrative remedies does not apply in
the instant case.
Fourth issue: whether petitioner has locus standi to bring this suit
PEA argues that petitioner has no standing to institute mandamus proceedings to enforce his
constitutional right to information without a showing that PEA refused to perform an affirmative
duty imposed on PEA by the Constitution. PEA also claims that petitioner has not shown that he will
suffer any concrete injury because of the signing or implementation of the Amended JVA. Thus,
there is no actual controversy requiring the exercise of the power of judicial review.
The petitioner has standing to bring this taxpayer's suit because the petition seeks to compel PEA
to comply with its constitutional duties. There are two constitutional issues involved here. First is
the right of citizens to information on matters of public concern. Second is the application of a
constitutional provision intended to insure the equitable distribution of alienable lands of the public
domain among Filipino citizens. The thrust of the first issue is to compel PEA to disclose publicly
information on the sale of government lands worth billions of pesos, information which the
Constitution and statutory law mandate PEA to disclose. The thrust of the second issue is to
prevent PEA from alienating hundreds of hectares of alienable lands of the public domain in
violation of the Constitution, compelling PEA to comply with a constitutional duty to the nation.
Moreover, the petition raises matters of transcendental importance to the public. In Chavez v.
PCGG,28 the Court upheld the right of a citizen to bring a taxpayer's suit on matters of
transcendental importance to the public, thus "Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the
Marcoses is an issue of 'transcendental importance to the public.' He asserts that ordinary
taxpayers have a right to initiate and prosecute actions questioning the validity of acts or
orders of government agencies or instrumentalities, if the issues raised are of 'paramount
public interest,' and if they 'immediately affect the social, economic and moral well being
of the people.'
Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest,
when the proceeding involves the assertion of a public right, such as in this case. He

invokes several decisions of this Court which have set aside the procedural matter of locus
standi, when the subject of the case involved public interest.
xxx
In Taada v. Tuvera, the Court asserted that when the issue concerns a public right and the
object of mandamus is to obtain the enforcement of a public duty, the people are regarded
as the real parties in interest; and because it is sufficient that petitioner is a citizen and as
such is interested in the execution of the laws, he need not show that he has any legal or
special interest in the result of the action. In the aforesaid case, the petitioners sought to
enforce their right to be informed on matters of public concern, a right then recognized in
Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order
to be valid and enforceable must be published in the Official Gazette or otherwise
effectively promulgated. In ruling for the petitioners' legal standing, the Court declared that
the right they sought to be enforced 'is a public right recognized by no less than the
fundamental law of the land.'
Legaspi v. Civil Service Commission, while reiterating Taada, further declared that 'when a
mandamus proceeding involves the assertion of a public right, the requirement of personal
interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the
general 'public' which possesses the right.'
Further, in Albano v. Reyes, we said that while expenditure of public funds may not have
been involved under the questioned contract for the development, management and
operation of the Manila International Container Terminal, 'public interest [was] definitely
involved considering the important role [of the subject contract] . . . in the economic
development of the country and the magnitude of the financial consideration involved.' We
concluded that, as a consequence, the disclosure provision in the Constitution would
constitute sufficient authority for upholding the petitioner's standing.
Similarly, the instant petition is anchored on the right of the people to information and
access to official records, documents and papers a right guaranteed under Section 7,
Article III of the 1987 Constitution. Petitioner, a former solicitor general, is a Filipino citizen.
Because of the satisfaction of the two basic requisites laid down by decisional law to
sustain petitioner's legal standing, i.e. (1) the enforcement of a public right (2) espoused by
a Filipino citizen, we rule that the petition at bar should be allowed."
We rule that since the instant petition, brought by a citizen, involves the enforcement of
constitutional rights - to information and to the equitable diffusion of natural resources - matters of
transcendental public importance, the petitioner has the requisite locus standi.
Fifth issue: whether the constitutional right to information includes official information
on on-going negotiations before a final agreement.
Section 7, Article III of the Constitution explains the people's right to information on matters of
public concern in this manner:
"Sec. 7. The right of the people to information on matters of public concern shall be
recognized. Access to official records, and to documents, and papers pertaining to
official acts, transactions, or decisions, as well as to government research data used
as basis for policy development, shall be afforded the citizen, subject to such limitations as
may be provided by law." (Emphasis supplied)
The State policy of full transparency in all transactions involving public interest reinforces the
people's right to information on matters of public concern. This State policy is expressed in Section
28, Article II of the Constitution, thus:
"Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and
implements a policy of full public disclosure of all its transactions involving public
interest." (Emphasis supplied)

These twin provisions of the Constitution seek to promote transparency in policy-making and in the
operations of the government, as well as provide the people sufficient information to exercise
effectively other constitutional rights. These twin provisions are essential to the exercise of
freedom of expression. If the government does not disclose its official acts, transactions and
decisions to citizens, whatever citizens say, even if expressed without any restraint, will be
speculative and amount to nothing. These twin provisions are also essential to hold public officials
"at all times x x x accountable to the people,"29 for unless citizens have the proper information,
they cannot hold public officials accountable for anything. Armed with the right information,
citizens can participate in public discussions leading to the formulation of government policies and
their effective implementation. An informed citizenry is essential to the existence and proper
functioning of any democracy. As explained by the Court in Valmonte v. Belmonte, Jr.30
"An essential element of these freedoms is to keep open a continuing dialogue or process
of communication between the government and the people. It is in the interest of the State
that the channels for free political discussion be maintained to the end that the
government may perceive and be responsive to the people's will. Yet, this open dialogue
can be effective only to the extent that the citizenry is informed and thus able to formulate
its will intelligently. Only when the participants in the discussion are aware of the issues
and have access to information relating thereto can such bear fruit."
PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations the right to
information is limited to "definite propositions of the government." PEA maintains the right does
not include access to "intra-agency or inter-agency recommendations or communications during
the stage when common assertions are still in the process of being formulated or are in the
'exploratory stage'."
Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage or before
the closing of the transaction. To support its contention, AMARI cites the following discussion in the
1986 Constitutional Commission:
"Mr. Suarez. And when we say 'transactions' which should be distinguished from
contracts, agreements, or treaties or whatever, does the Gentleman refer to the steps
leading to the consummation of the contract, or does he refer to the contract itself?
Mr. Ople: The 'transactions' used here, I suppose is generic and therefore, it can
cover both steps leading to a contract and already a consummated contract, Mr.
Presiding Officer.
Mr. Suarez: This contemplates inclusion of negotiations leading to the
consummation of the transaction.
Mr. Ople: Yes, subject only to reasonable safeguards on the national interest.
Mr. Suarez: Thank you."32 (Emphasis supplied)
AMARI argues there must first be a consummated contract before petitioner can invoke the right.
Requiring government officials to reveal their deliberations at the pre-decisional stage will degrade
the quality of decision-making in government agencies. Government officials will hesitate to
express their real sentiments during deliberations if there is immediate public dissemination of
their discussions, putting them under all kinds of pressure before they decide.
We must first distinguish between information the law on public bidding requires PEA to disclose
publicly, and information the constitutional right to information requires PEA to release to the
public. Before the consummation of the contract, PEA must, on its own and without demand from
anyone, disclose to the public matters relating to the disposition of its property. These include the
size, location, technical description and nature of the property being disposed of, the terms and
conditions of the disposition, the parties qualified to bid, the minimum price and similar
information. PEA must prepare all these data and disclose them to the public at the start of the
disposition process, long before the consummation of the contract, because the Government
Auditing Code requires public bidding. If PEA fails to make this disclosure, any citizen can
demand from PEA this information at any time during the bidding process.

Information, however, on on-going evaluation or review of bids or proposals being undertaken

by the bidding or review committee is not immediately accessible under the right to information.
While the evaluation or review is still on-going, there are no "official acts, transactions, or
decisions" on the bids or proposals. However, once the committee makes its official
recommendation, there arises a "definite proposition" on the part of the government. From
this moment, the public's right to information attaches, and any citizen can access all the nonproprietary information leading to such definite proposition. In Chavez v. PCGG,33 the Court ruled
as follows:
"Considering the intent of the framers of the Constitution, we believe that it is incumbent
upon the PCGG and its officers, as well as other government representatives, to disclose
sufficient public information on any proposed settlement they have decided to take up with
the ostensible owners and holders of ill-gotten wealth. Such information, though, must
pertain to definite propositions of the government, not necessarily to intra-agency or
inter-agency recommendations or communications during the stage when common
assertions are still in the process of being formulated or are in the "exploratory" stage.
There is need, of course, to observe the same restrictions on disclosure of information in
general, as discussed earlier such as on matters involving national security, diplomatic or
foreign relations, intelligence and other classified information." (Emphasis supplied)
Contrary to AMARI's contention, the commissioners of the 1986 Constitutional Commission
understood that the right to information "contemplates inclusion of negotiations leading to
the consummation of the transaction." Certainly, a consummated contract is not a
requirement for the exercise of the right to information. Otherwise, the people can never exercise
the right if no contract is consummated, and if one is consummated, it may be too late for the
public to expose its defects.1wphi1.nt
Requiring a consummated contract will keep the public in the dark until the contract, which may be
grossly disadvantageous to the government or even illegal, becomes a fait accompli. This negates
the State policy of full transparency on matters of public concern, a situation which the framers of
the Constitution could not have intended. Such a requirement will prevent the citizenry from
participating in the public discussion of any proposedcontract, effectively truncating a basic right
enshrined in the Bill of Rights. We can allow neither an emasculation of a constitutional right, nor a
retreat by the State of its avowed "policy of full disclosure of all its transactions involving public
interest."
The right covers three categories of information which are "matters of public concern," namely: (1)
official records; (2) documents and papers pertaining to official acts, transactions and decisions;
and (3) government research data used in formulating policies. The first category refers to any
document that is part of the public records in the custody of government agencies or officials. The
second category refers to documents and papers recording, evidencing, establishing, confirming,
supporting, justifying or explaining official acts, transactions or decisions of government agencies
or officials. The third category refers to research data, whether raw, collated or processed, owned
by the government and used in formulating government policies.
The information that petitioner may access on the renegotiation of the JVA includes evaluation
reports, recommendations, legal and expert opinions, minutes of meetings, terms of reference and
other documents attached to such reports or minutes, all relating to the JVA. However, the right to
information does not compel PEA to prepare lists, abstracts, summaries and the like relating to the
renegotiation of the JVA.34 The right only affords access to records, documents and papers, which
means the opportunity to inspect and copy them. One who exercises the right must copy the
records, documents and papers at his expense. The exercise of the right is also subject to
reasonable regulations to protect the integrity of the public records and to minimize disruption to
government operations, like rules specifying when and how to conduct the inspection and
copying.35
The right to information, however, does not extend to matters recognized as privileged information
under the separation of powers.36 The right does not also apply to information on military and
diplomatic secrets, information affecting national security, and information on investigations of
crimes by law enforcement agencies before the prosecution of the accused, which courts have long
recognized as confidential.37 The right may also be subject to other limitations that Congress may
impose by law.

There is no claim by PEA that the information demanded by petitioner is privileged information
rooted in the separation of powers. The information does not cover Presidential conversations,
correspondences, or discussions during closed-door Cabinet meetings which, like internal
deliberations of the Supreme Court and other collegiate courts, or executive sessions of either
house of Congress,38 are recognized as confidential. This kind of information cannot be pried open
by a co-equal branch of government. A frank exchange of exploratory ideas and assessments, free
from the glare of publicity and pressure by interested parties, is essential to protect the
independence of decision-making of those tasked to exercise Presidential, Legislative and Judicial
power.39This is not the situation in the instant case.
We rule, therefore, that the constitutional right to information includes official information on ongoing negotiations before a final contract. The information, however, must constitute definite
propositions by the government and should not cover recognized exceptions like privileged
information, military and diplomatic secrets and similar matters affecting national security and
public order.40 Congress has also prescribed other limitations on the right to information in several
legislations.41
Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of lands,
reclaimed or to be reclaimed, violate the Constitution.
The Regalian Doctrine
The ownership of lands reclaimed from foreshore and submerged areas is rooted in the Regalian
doctrine which holds that the State owns all lands and waters of the public domain. Upon the
Spanish conquest of the Philippines, ownership of all "lands, territories and possessions" in the
Philippines passed to the Spanish Crown.42The King, as the sovereign ruler and representative of
the people, acquired and owned all lands and territories in the Philippines except those he disposed
of by grant or sale to private individuals.
The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting, however, the
State, in lieu of the King, as the owner of all lands and waters of the public domain. The Regalian
doctrine is the foundation of the time-honored principle of land ownership that "all lands that were
not acquired from the Government, either by purchase or by grant, belong to the public
domain."43 Article 339 of the Civil Code of 1889, which is now Article 420 of the Civil Code of 1950,
incorporated the Regalian doctrine.
Ownership and Disposition of Reclaimed Lands
The Spanish Law of Waters of 1866 was the first statutory law governing the ownership and
disposition of reclaimed lands in the Philippines. On May 18, 1907, the Philippine Commission
enacted Act No. 1654 which provided for the lease, but not the sale, of reclaimed lands of
the government to corporations and individuals. Later, on November 29, 1919, the Philippine
Legislature approved Act No. 2874, the Public Land Act, which authorized the lease, but not the
sale, of reclaimed lands of the government to corporations and individuals. On November
7, 1936, the National Assembly passed Commonwealth Act No. 141, also known as the Public Land
Act, which authorized the lease, but not the sale, of reclaimed lands of the government
to corporations and individuals. CA No. 141 continues to this day as the general law governing
the classification and disposition of lands of the public domain.
The Spanish Law of Waters of 1866 and the Civil Code of 1889
Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters within the
maritime zone of the Spanish territory belonged to the public domain for public use. 44 The Spanish
Law of Waters of 1866 allowed the reclamation of the sea under Article 5, which provided as
follows:
"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State,
or by the provinces, pueblos or private persons, with proper permission, shall become the
property of the party constructing such works, unless otherwise provided by the terms of
the grant of authority."

Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party undertaking
the reclamation, provided the government issued the necessary permit and did not reserve
ownership of the reclaimed land to the State.
Article 339 of the Civil Code of 1889 defined property of public dominion as follows:
"Art. 339. Property of public dominion is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, riverbanks, shores, roadsteads, and that of a similar character;
2. That belonging exclusively to the State which, without being of general public use, is
employed in some public service, or in the development of the national wealth, such as
walls, fortresses, and other works for the defense of the territory, and mines, until granted
to private individuals."
Property devoted to public use referred to property open for use by the public. In contrast, property
devoted to public service referred to property used for some specific public service and open only
to those authorized to use the property.
Property of public dominion referred not only to property devoted to public use, but also to
property not so used but employed to develop the national wealth. This class of property
constituted property of public dominion although employed for some economic or commercial
activity to increase the national wealth.
Article 341 of the Civil Code of 1889 governed the re-classification of property of public dominion
into private property, to wit:
"Art. 341. Property of public dominion, when no longer devoted to public use or to the
defense of the territory, shall become a part of the private property of the State."
This provision, however, was not self-executing. The legislature, or the executive department
pursuant to law, must declare the property no longer needed for public use or territorial defense
before the government could lease or alienate the property to private parties. 45
Act No. 1654 of the Philippine Commission
On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the lease of
reclaimed and foreshore lands. The salient provisions of this law were as follows:
"Section 1. The control and disposition of the foreshore as defined in existing law, and
the title to all Government or public lands made or reclaimed by the Government
by dredging or filling or otherwise throughout the Philippine Islands, shall be retained
by the Government without prejudice to vested rights and without prejudice to rights
conceded to the City of Manila in the Luneta Extension.
Section 2. (a) The Secretary of the Interior shall cause all Government or public lands made
or reclaimed by the Government by dredging or filling or otherwise to be divided into lots
or blocks, with the necessary streets and alleyways located thereon, and shall cause plats
and plans of such surveys to be prepared and filed with the Bureau of Lands.
(b) Upon completion of such plats and plans the Governor-General shall give notice to
the public that such parts of the lands so made or reclaimed as are not needed
for public purposes will be leased for commercial and business purposes, x x x.
xxx
(e) The leases above provided for shall be disposed of to the highest and best
bidder therefore, subject to such regulations and safeguards as the Governor-General may
by executive order prescribe." (Emphasis supplied)

Act No. 1654 mandated that the government should retain title to all lands reclaimed by
the government. The Act also vested in the government control and disposition of foreshore
lands. Private parties could lease lands reclaimed by the government only if these lands were no
longer needed for public purpose. Act No. 1654 mandated public bidding in the lease of
government reclaimed lands. Act No. 1654 made government reclaimed lands sui generis in that
unlike other public lands which the government could sell to private parties, these reclaimed lands
were available only for lease to private parties.
Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866. Act No. 1654
did not prohibit private parties from reclaiming parts of the sea under Section 5 of the Spanish Law
of Waters. Lands reclaimed from the sea by private parties with government permission remained
private lands.
Act No. 2874 of the Philippine Legislature
On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public Land Act. 46 The
salient provisions of Act No. 2874, on reclaimed lands, were as follows:
"Sec. 6. The Governor-General, upon the recommendation of the Secretary of
Agriculture and Natural Resources, shall from time to time classify the lands of
the public domain into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands, x x x.
Sec. 7. For the purposes of the government and disposition of alienable or disposable
public lands, the Governor-General, upon recommendation by the Secretary of
Agriculture and Natural Resources, shall from time to time declare what lands
are open to disposition or concession under this Act."
Sec. 8. Only those lands shall be declared open to disposition or concession
which have been officially delimited or classified x x x.
xxx
Sec. 55. Any tract of land of the public domain which, being neither timber nor mineral
land, shall be classified as suitable for residential purposes or for commercial,
industrial, or other productive purposes other than agricultural purposes, and
shall be open to disposition or concession, shall be disposed of under the provisions of this
chapter, and not otherwise.
Sec. 56. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other
means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores or banks
of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six shall
be disposed of to private parties by lease only and not otherwise, as soon as the

Governor-General, upon recommendation by the Secretary of Agriculture and

Natural Resources, shall declare that the same are not necessary for the public
service and are open to disposition under this chapter. The lands included in class
(d) may be disposed of by sale or lease under the provisions of this Act."
(Emphasis supplied)
Section 6 of Act No. 2874 authorized the Governor-General to "classify lands of the public domain
into x x x alienable or disposable" 47 lands. Section 7 of the Act empowered the Governor-General to
"declare what lands are open to disposition or concession." Section 8 of the Act limited alienable or
disposable lands only to those lands which have been "officially delimited and classified."
Section 56 of Act No. 2874 stated that lands "disposable under this title 48 shall be classified" as
government reclaimed, foreshore and marshy lands, as well as other lands. All these lands,
however, must be suitable for residential, commercial, industrial or other productive nonagricultural purposes. These provisions vested upon the Governor-General the power to classify
inalienable lands of the public domain into disposable lands of the public domain. These provisions
also empowered the Governor-General to classify further such disposable lands of the public
domain into government reclaimed, foreshore or marshy lands of the public domain, as well as
other non-agricultural lands.
Section 58 of Act No. 2874 categorically mandated that disposable lands of the public domain
classified as government reclaimed, foreshore and marshy lands "shall be disposed of to
private parties by lease only and not otherwise." The Governor-General, before allowing the
lease of these lands to private parties, must formally declare that the lands were "not necessary for
the public service." Act No. 2874 reiterated the State policy to lease and not to sell government
reclaimed, foreshore and marshy lands of the public domain, a policy first enunciated in 1907 in
Act No. 1654. Government reclaimed, foreshore and marshy lands remained sui generis, as the
only alienable or disposable lands of the public domain that the government could not sell to
private parties.
The rationale behind this State policy is obvious. Government reclaimed, foreshore and marshy
public lands for non-agricultural purposes retain their inherent potential as areas for public service.
This is the reason the government prohibited the sale, and only allowed the lease, of these lands to
private parties. The State always reserved these lands for some future public service.
Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore and marshy
lands into other non-agricultural lands under Section 56 (d). Lands falling under Section 56 (d) were
the only lands for non-agricultural purposes the government could sell to private parties. Thus,
under Act No. 2874, the government could not sell government reclaimed, foreshore and marshy
lands to private parties, unless the legislature passed a law allowing their sale.49
Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant to Section 5
of the Spanish Law of Waters of 1866. Lands reclaimed from the sea by private parties with
government permission remained private lands.
Dispositions under the 1935 Constitution
On May 14, 1935, the 1935 Constitution took effect upon its ratification by the Filipino people. The
1935 Constitution, in adopting the Regalian doctrine, declared in Section 1, Article XIII, that
"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, renewable for another
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 limit of the grant." (Emphasis supplied)

The 1935 Constitution barred the alienation of all natural resources except public agricultural lands,
which were the only natural resources the State could alienate. Thus, foreshore lands, considered
part of the State's natural resources, became inalienable by constitutional fiat, available only for
lease for 25 years, renewable for another 25 years. The government could alienate foreshore lands
only after these lands were reclaimed and classified as alienable agricultural lands of the public
domain. Government reclaimed and marshy lands of the public domain, being neither timber nor
mineral lands, fell under the classification of public agricultural lands. 50 However, government
reclaimed and marshy lands, although subject to classification as disposable public agricultural
lands, could only be leased and not sold to private parties because of Act No. 2874.
The prohibition on private parties from acquiring ownership of government reclaimed and marshy
lands of the public domain was only a statutory prohibition and the legislature could therefore
remove such prohibition. The 1935 Constitution did not prohibit individuals and corporations from
acquiring government reclaimed and marshy lands of the public domain that were classified as
agricultural lands under existing public land laws. Section 2, Article XIII of the 1935 Constitution
provided as follows:
"Section 2. No private corporation or association may acquire, lease, or hold
public agricultural lands in excess of one thousand and twenty four hectares,
nor may any individual acquire such lands by purchase in excess of one hundred
and forty hectares, or by lease in excess of one thousand and twenty-four
hectares, or by homestead in excess of twenty-four hectares. Lands adapted to grazing,
not exceeding two thousand hectares, may be leased to an individual, private corporation,
or association." (Emphasis supplied)
Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58 of Act
No. 2874 to open for sale to private parties government reclaimed and marshy lands of the public
domain. On the contrary, the legislature continued the long established State policy of retaining for
the government title and ownership of government reclaimed and marshy lands of the public
domain.
Commonwealth Act No. 141 of the Philippine National Assembly
On November 7, 1936, the National Assembly approved Commonwealth Act No. 141, also known as
the Public Land Act, which compiled the then existing laws on lands of the public domain. CA No.
141, as amended, remains to this day the existing general law governing the classification and
disposition of lands of the public domain other than timber and mineral lands. 51
Section 6 of CA No. 141 empowers the President to classify lands of the public domain into
"alienable or disposable"52 lands of the public domain, which prior to such classification are
inalienable and outside the commerce of man. Section 7 of CA No. 141 authorizes the President to
"declare what lands are open to disposition or concession." Section 8 of CA No. 141 states that the
government can declare open for disposition or concession only lands that are "officially delimited
and classified." Sections 6, 7 and 8 of CA No. 141 read as follows:
"Sec. 6. The President, upon the recommendation of the Secretary of Agriculture
and Commerce, shall from time to time classify the lands of the public domain
into
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in like manner transfer such lands from one class to another, 53 for
the purpose of their administration and disposition.
Sec. 7. For the purposes of the administration and disposition of alienable or disposable
public lands, the President, upon recommendation by the Secretary of Agriculture
and Commerce, shall from time to time declare what lands are open to
disposition or concession under this Act.

Sec. 8. Only those lands shall be declared open to disposition or concession

which have been officially delimited and classified and, when practicable,
surveyed, and which have not been reserved for public or quasi-public uses, nor
appropriated by the Government, nor in any manner become private property, nor those on
which a private right authorized and recognized by this Act or any other valid law may be
claimed, or which, having been reserved or appropriated, have ceased to be so. x x x."
Thus, before the government could alienate or dispose of lands of the public domain, the President
must first officially classify these lands as alienable or disposable, and then declare them open to
disposition or concession. There must be no law reserving these lands for public or quasi-public
uses.
The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy lands of the
public domain, are as follows:
"Sec. 58. Any tract of land of the public domain which, being neither timber nor
mineral land, is intended to be used for residential purposes or for commercial,
industrial, or other productive purposes other than agricultural, and is open to
disposition or concession, shall be disposed of under the provisions of this
chapter and not otherwise.
Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other
means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores or banks
of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
Sec. 60. Any tract of land comprised under this title may be leased or sold, as the case may
be, to any person, corporation, or association authorized to purchase or lease public lands
for agricultural purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine shall
be disposed of to private parties by lease only and not otherwise, as soon as the
President, upon recommendation by the Secretary of Agriculture, shall declare that the
same are not necessary for the public service and are open to disposition under this
chapter. The lands included in class (d) may be disposed of by sale or lease under
the provisions of this Act." (Emphasis supplied)
Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution, Section 58 of Act
No. 2874 prohibiting the sale of government reclaimed, foreshore and marshy disposable lands of
the public domain. All these lands are intended for residential, commercial, industrial or other nonagricultural purposes. As before, Section 61 allowed only the lease of such lands to private parties.
The government could sell to private parties only lands falling under Section 59 (d) of CA No. 141,
or those lands for non-agricultural purposes not classified as government reclaimed, foreshore and
marshy disposable lands of the public domain. Foreshore lands, however, became inalienable
under the 1935 Constitution which only allowed the lease of these lands to qualified private
parties.
Section 58 of CA No. 141 expressly states that disposable lands of the public domain intended for
residential, commercial, industrial or other productive purposes other than agricultural "shall be
disposed of under the provisions of this chapter and not otherwise." Under Section 10 of
CA No. 141, the term "disposition" includes lease of the land. Any disposition of government
reclaimed, foreshore and marshy disposable lands for non-agricultural purposes must comply with
Chapter IX, Title III of CA No. 141,54 unless a subsequent law amended or repealed these provisions.

In his concurring opinion in the landmark case of Republic Real Estate Corporation v. Court of
Appeals,55Justice Reynato S. Puno summarized succinctly the law on this matter, as follows:
"Foreshore lands are lands of public dominion intended for public use. So too are lands
reclaimed by the government by dredging, filling, or other means. Act 1654 mandated that
the control and disposition of the foreshore and lands under water remained in the national
government. Said law allowed only the 'leasing' of reclaimed land. The Public Land Acts of
1919 and 1936 also declared that the foreshore and lands reclaimed by the government
were to be "disposed of to private parties by lease only and not otherwise." Before leasing,
however, the Governor-General, upon recommendation of the Secretary of Agriculture and
Natural Resources, had first to determine that the land reclaimed was not necessary for the
public service. This requisite must have been met before the land could be disposed
of. But even then, the foreshore and lands under water were not to be alienated
and sold to private parties. The disposition of the reclaimed land was only by
lease. The land remained property of the State." (Emphasis supplied)
As observed by Justice Puno in his concurring opinion, "Commonwealth Act No. 141 has remained
in effect at present."
The State policy prohibiting the sale to private parties of government reclaimed, foreshore and
marshy alienable lands of the public domain, first implemented in 1907 was thus reaffirmed in CA
No. 141 after the 1935 Constitution took effect. The prohibition on the sale of foreshore lands,
however, became a constitutional edict under the 1935 Constitution. Foreshore lands became
inalienable as natural resources of the State, unless reclaimed by the government and classified as
agricultural lands of the public domain, in which case they would fall under the classification of
government reclaimed lands.
After the effectivity of the 1935 Constitution, government reclaimed and marshy disposable lands
of the public domain continued to be only leased and not sold to private parties. 56 These lands
remained sui generis, as the only alienable or disposable lands of the public domain the
government could not sell to private parties.
Since then and until now, the only way the government can sell to private parties government
reclaimed and marshy disposable lands of the public domain is for the legislature to pass a law
authorizing such sale. CA No. 141 does not authorize the President to reclassify government
reclaimed and marshy lands into other non-agricultural lands under Section 59 (d). Lands classified
under Section 59 (d) are the only alienable or disposable lands for non-agricultural purposes that
the government could sell to private parties.
Moreover, Section 60 of CA No. 141 expressly requires congressional authority before lands under
Section 59 that the government previously transferred to government units or entities could be
sold to private parties. Section 60 of CA No. 141 declares that
"Sec. 60. x x x The area so leased or sold shall be such as shall, in the judgment of the
Secretary of Agriculture and Natural Resources, be reasonably necessary for the purposes
for which such sale or lease is requested, and shall not exceed one hundred and forty-four
hectares: Provided, however, That this limitation shall not apply to grants, donations, or
transfers made to a province, municipality or branch or subdivision of the Government for
the purposes deemed by said entities conducive to the public interest;but the land so
granted, donated, or transferred to a province, municipality or branch or
subdivision of the Government shall not be alienated, encumbered, or otherwise
disposed of in a manner affecting its title, except when authorized by Congress:
x x x." (Emphasis supplied)
The congressional authority required in Section 60 of CA No. 141 mirrors the legislative authority
required in Section 56 of Act No. 2874.
One reason for the congressional authority is that Section 60 of CA No. 141 exempted government
units and entities from the maximum area of public lands that could be acquired from the State.
These government units and entities should not just turn around and sell these lands to private
parties in violation of constitutional or statutory limitations. Otherwise, the transfer of lands for
non-agricultural purposes to government units and entities could be used to circumvent
constitutional limitations on ownership of alienable or disposable lands of the public domain. In the

same manner, such transfers could also be used to evade the statutory prohibition in CA No. 141
on the sale of government reclaimed and marshy lands of the public domain to private parties.
Section 60 of CA No. 141 constitutes by operation of law a lien on these lands. 57
In case of sale or lease of disposable lands of the public domain falling under Section 59 of CA No.
141, Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA No. 141 provide as
follows:
"Sec. 63. Whenever it is decided that lands covered by this chapter are not needed for
public purposes, the Director of Lands shall ask the Secretary of Agriculture and Commerce
(now the Secretary of Natural Resources) for authority to dispose of the same. Upon receipt
of such authority, the Director of Lands shall give notice by public advertisement in the
same manner as in the case of leases or sales of agricultural public land, x x x.
Sec. 67. The lease or sale shall be made by oral bidding; and adjudication shall be
made to the highest bidder. x x x." (Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to public auction all leases or sales of alienable
or disposable lands of the public domain.58
Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the Spanish
Law of Waters of 1866. Private parties could still reclaim portions of the sea with government
permission. However, thereclaimed land could become private land only if classified as
alienable agricultural land of the public domain open to disposition under CA No. 141. The
1935 Constitution prohibited the alienation of all natural resources except public agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the definition of property of public dominion found
in the Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950 state that
"Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth.
x x x.
Art. 422. Property of public dominion, when no longer intended for public use or for public
service, shall form part of the patrimonial property of the State."
Again, the government must formally declare that the property of public dominion is no longer
needed for public use or public service, before the same could be classified as patrimonial property
of the State.59 In the case of government reclaimed and marshy lands of the public domain, the
declaration of their being disposable, as well as the manner of their disposition, is governed by the
applicable provisions of CA No. 141.
Like the Civil Code of 1889, the Civil Code of 1950 included as property of public dominion those
properties of the State which, without being for public use, are intended for public service or the
"development of the national wealth." Thus, government reclaimed and marshy lands of the
State, even if not employed for public use or public service, if developed to enhance the national
wealth, are classified as property of public dominion.
Dispositions under the 1973 Constitution
The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the Regalian
doctrine. Section 8, Article XIV of the 1973 Constitution stated that

"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 twentyfive 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." (Emphasis supplied)
The 1973 Constitution prohibited the alienation of all natural resources with the exception of
"agricultural, industrial or commercial, residential, and resettlement lands of the public domain." In
contrast, the 1935 Constitution barred the alienation of all natural resources except "public
agricultural lands." However, the term "public agricultural lands" in the 1935 Constitution
encompassed industrial, commercial, residential and resettlement lands of the public domain. 60 If
the land of public domain were neither timber nor mineral land, it would fall under the classification
of agricultural land of the public domain. Both the 1935 and 1973 Constitutions, therefore,
prohibited the alienation of all natural resources except agricultural lands of the public
domain.
The 1973 Constitution, however, limited the alienation of lands of the public domain to individuals
who were citizens of the Philippines. Private corporations, even if wholly owned by Philippine
citizens, were no longer allowed to acquire alienable lands of the public domain unlike in the 1935
Constitution. Section 11, Article XIV of the 1973 Constitution declared that
"Sec. 11. The Batasang Pambansa, taking into account conservation, ecological, and
development requirements of the natural resources, shall determine by law the size of land
of the public domain which may be developed, held or acquired by, or leased to, any
qualified individual, corporation, or association, and the conditions therefor. No private
corporation or association may hold alienable lands of the public domain except
by lease not to exceed one thousand hectares in area nor may any citizen hold such lands
by lease in excess of five hundred hectares or acquire by purchase, homestead or grant, in
excess of twenty-four hectares. No private corporation or association may hold by lease,
concession, license or permit, timber or forest lands and other timber or forest resources in
excess of one hundred thousand hectares. However, such area may be increased by the
Batasang Pambansa upon recommendation of the National Economic and Development
Authority." (Emphasis supplied)
Thus, under the 1973 Constitution, private corporations could hold alienable lands of the public
domain only through lease. Only individuals could now acquire alienable lands of the public
domain, and private corporations became absolutely barred from acquiring any kind of
alienable land of the public domain. The constitutional ban extended to all kinds of alienable
lands of the public domain, while the statutory ban under CA No. 141 applied only to government
reclaimed, foreshore and marshy alienable lands of the public domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No. 1084 creating
PEA, a wholly government owned and controlled corporation with a special charter. Sections 4 and
8 of PD No. 1084, vests PEA with the following purposes and powers:
"Sec. 4. Purpose. The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by dredging,
filling or other means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell
any and all kinds of lands, buildings, estates and other forms of real property, owned,
managed, controlled and/or operated by the government;
(c) To provide for, operate or administer such service as may be necessary for the efficient,
economical and beneficial utilization of the above properties.

Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying out the
purposes for which it is created, have the following powers and functions:
(a)To prescribe its by-laws.
xxx
(i) To hold lands of the public domain in excess of the area permitted to private
corporations by statute.
(j) To reclaim lands and to construct work across, or otherwise, any stream, watercourse,
canal, ditch, flume x x x.
xxx
(o) To perform such acts and exercise such functions as may be necessary for the
attainment of the purposes and objectives herein specified." (Emphasis supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the public domain.
Foreshore areas are those covered and uncovered by the ebb and flow of the tide. 61 Submerged
areas are those permanently under water regardless of the ebb and flow of the tide. 62 Foreshore
and submerged areas indisputably belong to the public domain63 and are inalienable unless
reclaimed, classified as alienable lands open to disposition, and further declared no longer needed
for public service.
The ban in the 1973 Constitution on private corporations from acquiring alienable lands of the
public domain did not apply to PEA since it was then, and until today, a fully owned government
corporation. The constitutional ban applied then, as it still applies now, only to "private
corporations and associations." PD No. 1084 expressly empowers PEA "to hold lands of the
public domain" even "in excess of the area permitted to private corporations by statute." Thus,
PEA can hold title to private lands, as well as title to lands of the public domain.
In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the public domain,
there must be legislative authority empowering PEA to sell these lands. This legislative authority is
necessary in view of Section 60 of CA No.141, which states
"Sec. 60. x x x; but the land so granted, donated or transferred to a province, municipality,
or branch or subdivision of the Government shall not be alienated, encumbered or
otherwise disposed of in a manner affecting its title, except when authorized by
Congress; x x x." (Emphasis supplied)
Without such legislative authority, PEA could not sell but only lease its reclaimed foreshore and
submerged alienable lands of the public domain. Nevertheless, any legislative authority granted to
PEA to sell its reclaimed alienable lands of the public domain would be subject to the constitutional
ban on private corporations from acquiring alienable lands of the public domain. Hence, such
legislative authority could only benefit private individuals.
Dispositions under the 1987 Constitution
The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the Regalian
doctrine. The 1987 Constitution declares that all natural resources are "owned by the State," and
except for alienable agricultural lands of the public domain, natural resources cannot be alienated.
Sections 2 and 3, Article XII of the 1987 Constitution state that
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. The
exploration, development, and utilization of natural resources shall be under the full control
and supervision of the State. x x x.

Section 3. Lands of the public domain are classified into agricultural, forest or timber,
mineral lands, and national parks. Agricultural lands of the public domain may be further
classified by law according to the uses which they may be devoted. Alienable lands of
the public domain shall be limited to agricultural lands. Private corporations or
associations may not hold such alienable lands of the public domain except by
lease, for a period not exceeding twenty-five years, renewable for not more than
twenty-five years, and not to exceed one thousand hectares in area. Citizens of
the Philippines may lease not more than five hundred hectares, or acquire not more than
twelve hectares thereof by purchase, homestead, or grant.
Taking into account the requirements of conservation, ecology, and development, and
subject to the requirements of agrarian reform, the Congress shall determine, by law, the
size of lands of the public domain which may be acquired, developed, held, or leased and
the conditions therefor." (Emphasis supplied)
The 1987 Constitution continues the State policy in the 1973 Constitution banning private
corporations fromacquiring any kind of alienable land of the public domain. Like the 1973
Constitution, the 1987 Constitution allows private corporations to hold alienable lands of the public
domain only through lease. As in the 1935 and 1973 Constitutions, the general law governing
the lease to private corporations of reclaimed, foreshore and marshy alienable lands of the public
domain is still CA No. 141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on corporations from acquiring, except through lease,
alienable lands of the public domain is not well understood. During the deliberations of the 1986
Constitutional Commission, the commissioners probed the rationale behind this ban, thus:
"FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5 which says:
`No private corporation or association may hold alienable lands of the public domain
except by lease, not to exceed one thousand hectares in area.'
If we recall, this provision did not exist under the 1935 Constitution, but this was
introduced in the 1973 Constitution. In effect, it prohibits private corporations from
acquiring alienable public lands. But it has not been very clear in jurisprudence what
the reason for this is. In some of the cases decided in 1982 and 1983, it was indicated
that the purpose of this is to prevent large landholdings. Is that the intent of this
provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were instances where
the Iglesia ni Cristo was not allowed to acquire a mere 313-square meter land where a
chapel stood because the Supreme Court said it would be in violation of this." (Emphasis
supplied)
In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional ban in this way:
"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."
However, if the constitutional intent is to prevent huge landholdings, the Constitution could have
simply limited the size of alienable lands of the public domain that corporations could acquire. The
Constitution could have followed the limitations on individuals, who could acquire not more than 24
hectares of alienable lands of the public domain under the 1973 Constitution, and not more than 12
hectares under the 1987 Constitution.

If the constitutional intent is to encourage economic family-size farms, placing the land in the name
of a corporation would be more effective in preventing the break-up of farmlands. If the farmland is
registered in the name of a corporation, upon the death of the owner, his heirs would inherit shares
in the corporation instead of subdivided parcels of the farmland. This would prevent the continuing
break-up of farmlands into smaller and smaller plots from one generation to the next.
In actual practice, the constitutional ban strengthens the constitutional limitation on individuals
from acquiring more than the allowed area of alienable lands of the public domain. Without the
constitutional ban, individuals who already acquired the maximum area of alienable lands of the
public domain could easily set up corporations to acquire more alienable public lands. An individual
could own as many corporations as his means would allow him. An individual could even hide his
ownership of a corporation by putting his nominees as stockholders of the corporation. The
corporation is a convenient vehicle to circumvent the constitutional limitation on acquisition by
individuals of alienable lands of the public domain.
The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a
limited area of alienable land of the public domain to a qualified individual. This constitutional
intent is safeguarded by the provision prohibiting corporations from acquiring alienable lands of the
public domain, since the vehicle to circumvent the constitutional intent is removed. The available
alienable public lands are gradually decreasing in the face of an ever-growing population. The most
effective way to insure faithful adherence to this constitutional intent is to grant or sell alienable
lands of the public domain only to individuals. This, it would seem, is the practical benefit arising
from the constitutional ban.
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its second Whereas clause, consists of three
properties, namely:
1. "[T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo
Boulevard in Paranaque and Las Pinas, Metro Manila, with a combined titled area of
1,578,441 square meters;"
2. "[A]nother area of 2,421,559 square meters contiguous to the three islands;" and
3. "[A]t AMARI's option as approved by PEA, an additional 350 hectares more or less to
regularize the configuration of the reclaimed area."65
PEA confirms that the Amended JVA involves "the development of the Freedom Islands and further
reclamation of about 250 hectares x x x," plus an option "granted to AMARI to subsequently
reclaim another 350 hectares x x x."66
In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84 hectares of
the 750-hectare reclamation project have been reclaimed, and the rest of the 592.15
hectares are still submerged areas forming part of Manila Bay.
Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for PEA's "actual
cost" in partially reclaiming the Freedom Islands. AMARI will also complete, at its own expense, the
reclamation of the Freedom Islands. AMARI will further shoulder all the reclamation costs of all the
other areas, totaling 592.15 hectares, still to be reclaimed. AMARI and PEA will share, in the
proportion of 70 percent and 30 percent, respectively, the total net usable area which is defined in
the Amended JVA as the total reclaimed area less 30 percent earmarked for common areas. Title to
AMARI's share in the net usable area, totaling 367.5 hectares, will be issued in the name of AMARI.
Section 5.2 (c) of the Amended JVA provides that
"x x x, PEA shall have 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. 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, x x x; provided, that if more than seventy percent (70%) of the titled
area at any given time pertains to AMARI, PEA shall deliver to AMARI only seventy percent

(70%) of the titles pertaining to AMARI, until such time when a corresponding proportionate
area of additional land pertaining to PEA has been titled." (Emphasis supplied)
Indisputably, under the Amended JVA AMARI will acquire and own a maximum of 367.5
hectares of reclaimed land which will be titled in its name.
To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint venture
PEA's statutory authority, rights and privileges to reclaim foreshore and submerged areas in Manila
Bay. Section 3.2.a of the Amended JVA states that
"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, thereby
granting the Joint Venture the full and exclusive right, authority and privilege to undertake
the Project in accordance with the Master Development Plan."
The Amended JVA is the product of a renegotiation of the original JVA dated April 25, 1995 and its
supplemental agreement dated August 9, 1995.
The Threshold Issue
The threshold issue is whether AMARI, a private corporation, can acquire and own under the
Amended JVA 367.5 hectares of reclaimed foreshore and submerged areas in Manila Bay in view of
Sections 2 and 3, Article XII of the 1987 Constitution which state that:
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. x x x.
xxx
Section 3. x x x Alienable lands of the public domain shall be limited to agricultural
lands. Private corporations or associations may not hold such alienable lands of
the public domain except by lease, x x x."(Emphasis supplied)
Classification of Reclaimed Foreshore and Submerged Areas
PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila Bay are
alienable or disposable lands of the public domain. In its Memorandum, 67 PEA admits that
"Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as
alienable and disposable lands of the public domain:
'Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the government by dredging, filling, or other means;
x x x.'" (Emphasis supplied)
Likewise, the Legal Task Force68 constituted under Presidential Administrative Order No. 365
admitted in its Report and Recommendation to then President Fidel V. Ramos, "[R]eclaimed lands
are classified as alienable and disposable lands of the public domain."69 The Legal Task
Force concluded that
"D. Conclusion
Reclaimed lands are lands of the public domain. However, by statutory authority, the rights
of ownership and disposition over reclaimed lands have been transferred to PEA, by virtue
of which PEA, as owner, may validly convey the same to any qualified person without
violating the Constitution or any statute.

The constitutional provision prohibiting private corporations from holding public land,
except by lease (Sec. 3, Art. XVII,70 1987 Constitution), does not apply to reclaimed lands
whose ownership has passed on to PEA by statutory grant."
Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila
Bay are part of the "lands of the public domain, waters x x x and other natural resources" and
consequently "owned by the State." As such, foreshore and submerged areas "shall not be
alienated," unless they are classified as "agricultural lands" of the public domain. The mere
reclamation of these areas by PEA does not convert these inalienable natural resources of the State
into alienable or disposable lands of the public domain. There must be a law or presidential
proclamation officially classifying these reclaimed lands as alienable or disposable and open to
disposition or concession. Moreover, these reclaimed lands cannot be classified as alienable or
disposable if the law has reserved them for some public or quasi-public use. 71
Section 8 of CA No. 141 provides that "only those lands shall be declared open to disposition or
concession which have been officially delimited and classified."72 The President has the
authority to classify inalienable lands of the public domain into alienable or disposable lands of the
public domain, pursuant to Section 6 of CA No. 141. In Laurel vs. Garcia, 73 the Executive
Department attempted to sell the Roppongi property in Tokyo, Japan, which was acquired by the
Philippine Government for use as the Chancery of the Philippine Embassy. Although the Chancery
had transferred to another location thirteen years earlier, the Court still ruled that, under Article
42274of the Civil Code, a property of public dominion retains such character until formally declared
otherwise. The Court ruled that
"The fact that the Roppongi site has not been used for a long time for actual Embassy
service does not automatically convert it to patrimonial property. Any such conversion
happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene Co.
v. Bercilles, 66 SCRA 481 [1975]. A property continues to be part of the public
domain, not available for private appropriation or ownership 'until there is a
formal declaration on the part of the government to withdraw it from being
such'(Ignacio v. Director of Lands, 108 Phil. 335 [1960]." (Emphasis supplied)
PD No. 1085, issued on February 4, 1977, authorized the issuance of special land patents for lands
reclaimed by PEA from the foreshore or submerged areas of Manila Bay. On January 19, 1988 then
President Corazon C. Aquino issued Special Patent No. 3517 in the name of PEA for the 157.84
hectares comprising the partially reclaimed Freedom Islands. Subsequently, on April 9, 1999 the
Register of Deeds of the Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the
name of PEA pursuant to Section 103 of PD No. 1529 authorizing the issuance of certificates of title
corresponding to land patents. To this day, these certificates of title are still in the name of PEA.
PD No. 1085, coupled with President Aquino's actual issuance of a special patent covering the
Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as
alienable or disposable lands of the public domain. PD No. 1085 and President Aquino's issuance of
a land patent also constitute a declaration that the Freedom Islands are no longer needed for public
service. The Freedom Islands are thus alienable or disposable lands of the public
domain, open to disposition or concession to qualified parties.
At the time then President Aquino issued Special Patent No. 3517, PEA had already reclaimed the
Freedom Islands although subsequently there were partial erosions on some areas. The
government had also completed the necessary surveys on these islands. Thus, the Freedom Islands
were no longer part of Manila Bay but part of the land mass. Section 3, Article XII of the 1987
Constitution classifies lands of the public domain into "agricultural, forest or timber, mineral lands,
and national parks." Being neither timber, mineral, nor national park lands, the reclaimed Freedom
Islands necessarily fall under the classification of agricultural lands of the public domain. Under the
1987 Constitution, agricultural lands of the public domain are the only natural resources that the
State may alienate to qualified private parties. All other natural resources, such as the seas or
bays, are "waters x x x owned by the State" forming part of the public domain, and are inalienable
pursuant to Section 2, Article XII of the 1987 Constitution.
AMARI claims that the Freedom Islands are private lands because CDCP, then a private corporation,
reclaimed the islands under a contract dated November 20, 1973 with the Commissioner of Public
Highways. AMARI, citing Article 5 of the Spanish Law of Waters of 1866, argues that "if the
ownership of reclaimed lands may be given to the party constructing the works, then it cannot be

said that reclaimed lands are lands of the public domain which the State may not
alienate."75 Article 5 of the Spanish Law of Waters reads as follows:
"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State,
or by the provinces, pueblos or private persons, with proper permission, shall become the
property of the party constructing such works, unless otherwise provided by the
terms of the grant of authority." (Emphasis supplied)
Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from the sea
only with "proper permission" from the State. Private parties could own the reclaimed land only if
not "otherwise provided by the terms of the grant of authority." This clearly meant that no one
could reclaim from the sea without permission from the State because the sea is property of public
dominion. It also meant that the State could grant or withhold ownership of the reclaimed land
because any reclaimed land, like the sea from which it emerged, belonged to the State. Thus, a
private person reclaiming from the sea without permission from the State could not acquire
ownership of the reclaimed land which would remain property of public dominion like the sea it
replaced.76 Article 5 of the Spanish Law of Waters of 1866 adopted the time-honored principle of
land ownership that "all lands that were not acquired from the government, either by purchase or
by grant, belong to the public domain."77
Article 5 of the Spanish Law of Waters must be read together with laws subsequently enacted on
the disposition of public lands. In particular, CA No. 141 requires that lands of the public domain
must first be classified as alienable or disposable before the government can alienate them. These
lands must not be reserved for public or quasi-public purposes. 78 Moreover, the contract between
CDCP and the government was executed after the effectivity of the 1973 Constitution which
barred private corporations from acquiring any kind of alienable land of the public domain. This
contract could not have converted the Freedom Islands into private lands of a private corporation.
Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing the
reclamation of areas under water and revested solely in the National Government the power to
reclaim lands. Section 1 of PD No. 3-A declared that
"The provisions of any law to the contrary notwithstanding, the reclamation of
areas under water, whether foreshore or inland, shall be limited to the National
Government or any person authorized by it under a proper contract. (Emphasis
supplied)
x x x."
PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because reclamation of areas
under water could now be undertaken only by the National Government or by a person contracted
by the National Government. Private parties may reclaim from the sea only under a contract with
the National Government, and no longer by grant or permission as provided in Section 5 of the
Spanish Law of Waters of 1866.
Executive Order No. 525, issued on February 14, 1979, designated PEA as the National
Government's implementing arm to undertake "all reclamation projects of the government," which
"shall be undertaken by the PEA or through a proper contract executed by it with any
person or entity." Under such contract, a private party receives compensation for reclamation
services rendered to PEA. Payment to the contractor may be in cash, or in kind consisting of
portions of the reclaimed land, subject to the constitutional ban on private corporations from
acquiring alienable lands of the public domain. The reclaimed land can be used as payment in kind
only if the reclaimed land is first classified as alienable or disposable land open to disposition, and
then declared no longer needed for public service.
The Amended JVA covers not only the Freedom Islands, but also an additional 592.15 hectares
which are still submerged and forming part of Manila Bay. There is no legislative or
Presidential act classifying these submerged areas as alienable or disposable lands of
the public domain open to disposition. These submerged areas are not covered by any patent
or certificate of title. There can be no dispute that these submerged areas form part of the public
domain, and in their present state are inalienable and outside the commerce of man. Until
reclaimed from the sea, these submerged areas are, under the Constitution, "waters x x x owned
by the State," forming part of the public domain and consequently inalienable. Only when actually

reclaimed from the sea can these submerged areas be classified as public agricultural lands, which
under the Constitution are the only natural resources that the State may alienate. Once reclaimed
and transformed into public agricultural lands, the government may then officially classify these
lands as alienable or disposable lands open to disposition. Thereafter, the government may declare
these lands no longer needed for public service. Only then can these reclaimed lands be
considered alienable or disposable lands of the public domain and within the commerce of man.
The classification of PEA's reclaimed foreshore and submerged lands into alienable or disposable
lands open to disposition is necessary because PEA is tasked under its charter to undertake public
services that require the use of lands of the public domain. Under Section 5 of PD No. 1084, the
functions of PEA include the following: "[T]o own or operate railroads, tramways and other kinds of
land transportation, x x x; [T]o construct, maintain and operate such systems of sanitary sewers as
may be necessary; [T]o construct, maintain and operate such storm drains as may be necessary."
PEA is empowered to issue "rules and regulations as may be necessary for the proper use by
private parties of any or all of the highways, roads, utilities, buildings and/or any of its
properties and to impose or collect fees or tolls for their use." Thus, part of the reclaimed
foreshore and submerged lands held by the PEA would actually be needed for public use or service
since many of the functions imposed on PEA by its charter constitute essential public services.
Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily responsible
for integrating, directing, and coordinating all reclamation projects for and on behalf of the National
Government." The same section also states that "[A]ll reclamation projects shall be approved by
the President upon recommendation of the PEA, and shall be undertaken by the PEA or through a
proper contract executed by it with any person or entity; x x x." Thus, under EO No. 525, in relation
to PD No. 3-A and PD No.1084, PEA became the primary implementing agency of the National
Government to reclaim foreshore and submerged lands of the public domain. EO No. 525
recognized PEA as the government entity "to undertake the reclamation of lands and ensure their
maximum utilization in promoting public welfare and interests."79 Since large portions of these
reclaimed lands would obviously be needed for public service, there must be a formal declaration
segregating reclaimed lands no longer needed for public service from those still needed for public
service.1wphi1.nt
Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to or be owned
by the PEA," could not automatically operate to classify inalienable lands into alienable or
disposable lands of the public domain. Otherwise, reclaimed foreshore and submerged lands of the
public domain would automatically become alienable once reclaimed by PEA, whether or not
classified as alienable or disposable.
The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No. 525, vests
in the Department of Environment and Natural Resources ("DENR" for brevity) the following powers
and functions:
"Sec. 4. Powers and Functions. The Department shall:
(1) x x x
xxx
(4) Exercise supervision and control over forest lands, alienable and disposable
public lands, mineral resources and, in the process of exercising such control, impose
appropriate taxes, fees, charges, rentals and any such form of levy and collect such
revenues for the exploration, development, utilization or gathering of such resources;
xxx
(14) Promulgate rules, regulations and guidelines on the issuance of licenses,
permits, concessions, lease agreements and such other privileges concerning
the development, exploration and utilization of the country's marine, freshwater,
and brackish water and over all aquatic resources of the country and shall
continue to oversee, supervise and police our natural resources; cancel or cause to
cancel such privileges upon failure, non-compliance or violations of any regulation, order,
and for all other causes which are in furtherance of the conservation of natural resources
and supportive of the national interest;

(15) Exercise exclusive jurisdiction on the management and disposition of all

lands of the public domain and serve as the sole agency responsible for
classification, sub-classification, surveying and titling of lands in consultation with
appropriate agencies."80 (Emphasis supplied)
As manager, conservator and overseer of the natural resources of the State, DENR exercises
"supervision and control over alienable and disposable public lands." DENR also exercises
"exclusive jurisdiction on the management and disposition of all lands of the public domain." Thus,
DENR decides whether areas under water, like foreshore or submerged areas of Manila Bay, should
be reclaimed or not. This means that PEA needs authorization from DENR before PEA can undertake
reclamation projects in Manila Bay, or in any part of the country.
DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain.
Hence, DENR decides whether reclaimed lands of PEA should be classified as alienable under
Sections 681 and 782 of CA No. 141. Once DENR decides that the reclaimed lands should be so
classified, it then recommends to the President the issuance of a proclamation classifying the lands
as alienable or disposable lands of the public domain open to disposition. We note that then DENR
Secretary Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the
Revised Administrative Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under water, while
PEA is vested with the power to undertake the physical reclamation of areas under water, whether
directly or through private contractors. DENR is also empowered to classify lands of the public
domain into alienable or disposable lands subject to the approval of the President. On the other
hand, PEA is tasked to develop, sell or lease the reclaimed alienable lands of the public domain.
Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas does not
make the reclaimed lands alienable or disposable lands of the public domain, much less
patrimonial lands of PEA. Likewise, the mere transfer by the National Government of lands of the
public domain to PEA does not make the lands alienable or disposable lands of the public domain,
much less patrimonial lands of PEA.
Absent two official acts a classification that these lands are alienable or disposable and open to
disposition and a declaration that these lands are not needed for public service, lands reclaimed by
PEA remain inalienable lands of the public domain. Only such an official classification and formal
declaration can convert reclaimed lands into alienable or disposable lands of the public domain,
open to disposition under the Constitution, Title I and Title III 83of CA No. 141 and other applicable
laws.84
PEA's Authority to Sell Reclaimed Lands
PEA, like the Legal Task Force, argues that as alienable or disposable lands of the public domain,
the reclaimed lands shall be disposed of in accordance with CA No. 141, the Public Land Act. PEA,
citing Section 60 of CA No. 141, admits that reclaimed lands transferred to a branch or subdivision
of the government "shall not be alienated, encumbered, or otherwise disposed of in a manner
affecting its title, except when authorized by Congress: x x x."85 (Emphasis by PEA)
In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised Administrative Code of 1987,
which states that
"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following: x x x."
Thus, the Court concluded that a law is needed to convey any real property belonging to the
Government. The Court declared that "It is not for the President to convey real property of the government on his or her own sole
will. Any such conveyance must be authorized and approved by a law enacted by
the Congress. It requires executive and legislative concurrence." (Emphasis supplied)

PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority allowing PEA to
sell its reclaimed lands. PD No. 1085, issued on February 4, 1977, provides that
"The land reclaimed in the foreshore and offshore area of Manila Bay pursuant to
the contract for the reclamation and construction of the Manila-Cavite Coastal Road Project
between the Republic of the Philippines and the Construction and Development Corporation
of the Philippines dated November 20, 1973 and/or any other contract or reclamation
covering the same area is hereby transferred, conveyed and assigned to the
ownership and administration of the Public Estates Authority established pursuant
to PD No. 1084; Provided, however, That the rights and interests of the Construction and
Development Corporation of the Philippines pursuant to the aforesaid contract shall be
recognized and respected.
Henceforth, the Public Estates Authority shall exercise the rights and assume the
obligations of the Republic of the Philippines (Department of Public Highways) arising from,
or incident to, the aforesaid contract between the Republic of the Philippines and the
Construction and Development Corporation of the Philippines.
In consideration of the foregoing transfer and assignment, the Public Estates Authority shall
issue in favor of the Republic of the Philippines the corresponding shares of stock in said
entity with an issued value of said shares of stock (which) shall be deemed fully paid and
non-assessable.
The Secretary of Public Highways and the General Manager of the Public Estates Authority
shall execute such contracts or agreements, including appropriate agreements with the
Construction and Development Corporation of the Philippines, as may be necessary to
implement the above.
Special land patent/patents shall be issued by the Secretary of Natural
Resources in favor of the Public Estates Authority without prejudice to the
subsequent transfer to the contractor or his assignees of such portion or
portions of the land reclaimed or to be reclaimed as provided for in the abovementioned contract. On the basis of such patents, the Land Registration
Commission shall issue the corresponding certificate of title." (Emphasis supplied)
On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that "Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the PEA which
shall be responsible for its administration, development, utilization or disposition in
accordance with the provisions of Presidential Decree No. 1084. Any and all income that
the PEA may derive from the sale, lease or use of reclaimed lands shall be used in
accordance with the provisions of Presidential Decree No. 1084."
There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its reclaimed
lands. PD No. 1085 merely transferred "ownership and administration" of lands reclaimed from
Manila Bay to PEA, while EO No. 525 declared that lands reclaimed by PEA "shall belong to or be
owned by PEA." EO No. 525 expressly states that PEA should dispose of its reclaimed lands "in
accordance with the provisions of Presidential Decree No. 1084," the charter of PEA.
PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer, deal in,
subdivide, dispose, lease and sell any and all kinds of lands x x x owned, managed, controlled
and/or operated by the government." 87 (Emphasis supplied) There is, therefore, legislative
authority granted to PEA to sell its lands, whether patrimonial or alienable lands of the
public domain. PEA may sell to private parties itspatrimonial properties in accordance with the
PEA charter free from constitutional limitations. The constitutional ban on private corporations from
acquiring alienable lands of the public domain does not apply to the sale of PEA's patrimonial
lands.
PEA may also sell its alienable or disposable lands of the public domain to private individuals
since, with the legislative authority, there is no longer any statutory prohibition against such sales
and the constitutional ban does not apply to individuals. PEA, however, cannot sell any of its
alienable or disposable lands of the public domain to private corporations since Section 3, Article
XII of the 1987 Constitution expressly prohibits such sales. The legislative authority benefits only

individuals. Private corporations remain barred from acquiring any kind of alienable land of the
public domain, including government reclaimed lands.
The provision in PD No. 1085 stating that portions of the reclaimed lands could be transferred by
PEA to the "contractor or his assignees" (Emphasis supplied) would not apply to private
corporations but only to individuals because of the constitutional ban. Otherwise, the provisions of
PD No. 1085 would violate both the 1973 and 1987 Constitutions.
The requirement of public auction in the sale of reclaimed lands
Assuming the reclaimed lands of PEA are classified as alienable or disposable lands open to
disposition, and further declared no longer needed for public service, PEA would have to conduct a
public bidding in selling or leasing these lands. PEA must observe the provisions of Sections 63 and
67 of CA No. 141 requiring public auction, in the absence of a law exempting PEA from holding a
public auction.88 Special Patent No. 3517 expressly states that the patent is issued by authority of
the Constitution and PD No. 1084, "supplemented by Commonwealth Act No. 141, as amended."
This is an acknowledgment that the provisions of CA No. 141 apply to the disposition of reclaimed
alienable lands of the public domain unless otherwise provided by law. Executive Order No.
654,89 which authorizes PEA "to determine the kind and manner of payment for the transfer" of its
assets and properties, does not exempt PEA from the requirement of public auction. EO No. 654
merely authorizes PEA to decide the mode of payment, whether in kind and in installment, but
does not authorize PEA to dispense with public auction.
Moreover, under Section 79 of PD No. 1445, otherwise known as the Government Auditing Code,
the government is required to sell valuable government property through public bidding. Section
79 of PD No. 1445 mandates that
"Section 79. When government property has become unserviceable for any cause, or is
no longer needed, it shall, upon application of the officer accountable therefor, be
inspected by the head of the agency or his duly authorized representative in the presence
of the auditor concerned and, if found to be valueless or unsaleable, it may be destroyed in
their presence. If found to be valuable, it may be sold at public auction to the
highest bidder under the supervision of the proper committee on award or similar body in
the presence of the auditor concerned or other authorized representative of the
Commission, after advertising by printed notice in the Official Gazette, or for not
less than three consecutive days in any newspaper of general circulation, or
where the value of the property does not warrant the expense of publication, by notices
posted for a like period in at least three public places in the locality where the property is
to be sold. In the event that the public auction fails, the property may be sold at a
private sale at such price as may be fixed by the same committee or body
concerned and approved by the Commission."
It is only when the public auction fails that a negotiated sale is allowed, in which case the
Commission on Audit must approve the selling price. 90 The Commission on Audit implements
Section 79 of the Government Auditing Code through Circular No. 89-296 91 dated January 27, 1989.
This circular emphasizes that government assets must be disposed of only through public auction,
and a negotiated sale can be resorted to only in case of "failure of public auction."
At the public auction sale, only Philippine citizens are qualified to bid for PEA's reclaimed foreshore
and submerged alienable lands of the public domain. Private corporations are barred from bidding
at the auction sale of any kind of alienable land of the public domain.
PEA originally scheduled a public bidding for the Freedom Islands on December 10, 1991. PEA
imposed a condition that the winning bidder should reclaim another 250 hectares of submerged
areas to regularize the shape of the Freedom Islands, under a 60-40 sharing of the additional
reclaimed areas in favor of the winning bidder. 92 No one, however, submitted a bid. On December
23, 1994, the Government Corporate Counsel advised PEA it could sell the Freedom Islands through
negotiation, without need of another public bidding, because of the failure of the public bidding on
December 10, 1991.93
However, the original JVA dated April 25, 1995 covered not only the Freedom Islands and the
additional 250 hectares still to be reclaimed, it also granted an option to AMARI to reclaim another
350 hectares. The original JVA, a negotiated contract, enlarged the reclamation area to 750

hectares.94 The failure of public bidding on December 10, 1991, involving only 407.84
hectares,95 is not a valid justification for a negotiated sale of 750 hectares, almost double the area
publicly auctioned. Besides, the failure of public bidding happened on December 10, 1991, more
than three years before the signing of the original JVA on April 25, 1995. The economic situation in
the country had greatly improved during the intervening period.
Reclamation under the BOT Law and the Local Government Code
The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is absolute and clear:
"Private corporations or associations may not hold such alienable lands of the public domain except
by lease, x x x." Even Republic Act No. 6957 ("BOT Law," for brevity), cited by PEA and AMARI as
legislative authority to sell reclaimed lands to private parties, recognizes the constitutional ban.
Section 6 of RA No. 6957 states
"Sec. 6. Repayment Scheme. - For the financing, construction, operation and maintenance
of any infrastructure projects undertaken through the build-operate-and-transfer
arrangement or any of its variations pursuant to the provisions of this Act, the project
proponent x x x may likewise be repaid in the form of a share in the revenue of the project
or other non-monetary payments, such as, but not limited to, the grant of a portion or
percentage of the reclaimed land, subject to the constitutional requirements with
respect to the ownership of the land: x x x." (Emphasis supplied)
A private corporation, even one that undertakes the physical reclamation of a government BOT
project, cannot acquire reclaimed alienable lands of the public domain in view of the constitutional
ban.
Section 302 of the Local Government Code, also mentioned by PEA and AMARI, authorizes local
governments in land reclamation projects to pay the contractor or developer in kind consisting of a
percentage of the reclaimed land, to wit:
"Section 302. Financing, Construction, Maintenance, Operation, and Management of
Infrastructure Projects by the Private Sector. x x x
xxx
In case of land reclamation or construction of industrial estates, the repayment plan may
consist of the grant of a portion or percentage of the reclaimed land or the industrial estate
constructed."
Although Section 302 of the Local Government Code does not contain a proviso similar to that of
the BOT Law, the constitutional restrictions on land ownership automatically apply even though not
expressly mentioned in the Local Government Code.
Thus, under either the BOT Law or the Local Government Code, the contractor or developer, if a
corporate entity, can only be paid with leaseholds on portions of the reclaimed land. If the
contractor or developer is an individual, portions of the reclaimed land, not exceeding 12
hectares96 of non-agricultural lands, may be conveyed to him in ownership in view of the legislative
authority allowing such conveyance. This is the only way these provisions of the BOT Law and the
Local Government Code can avoid a direct collision with Section 3, Article XII of the 1987
Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the "act of conveying the ownership of the reclaimed lands to public
respondent PEA transformed such lands of the public domain to private lands." This theory is
echoed by AMARI which maintains that the "issuance of the special patent leading to the eventual
issuance of title takes the subject land away from the land of public domain and converts the
property into patrimonial or private property." In short, PEA and AMARI contend that with the
issuance of Special Patent No. 3517 and the corresponding certificates of titles, the 157.84
hectares comprising the Freedom Islands have become private lands of PEA. In support of their
theory, PEA and AMARI cite the following rulings of the Court:

1. Sumail v. Judge of CFI of Cotabato,97 where the Court held

"Once the patent was granted and the corresponding certificate of title was issued, the
land ceased to be part of the public domain and became private property over which the
Director of Lands has neither control nor jurisdiction."
2. Lee Hong Hok v. David,98 where the Court declared "After the registration and issuance of the certificate and duplicate certificate of title based
on a public land patent, the land covered thereby automatically comes under the operation
of Republic Act 496 subject to all the safeguards provided therein."3. Heirs of Gregorio
Tengco v. Heirs of Jose Aliwalas,99 where the Court ruled "While the Director of Lands has the power to review homestead patents, he may do so
only so long as the land remains part of the public domain and continues to be under his
exclusive control; but once the patent is registered and a certificate of title is issued, the
land ceases to be part of the public domain and becomes private property over which the
Director of Lands has neither control nor jurisdiction."
4. Manalo v. Intermediate Appellate Court,100 where the Court held
"When the lots in dispute were certified as disposable on May 19, 1971, and free patents
were issued covering the same in favor of the private respondents, the said lots ceased to
be part of the public domain and, therefore, the Director of Lands lost jurisdiction over the
same."
5.Republic v. Court of Appeals,101 where the Court stated
"Proclamation No. 350, dated October 9, 1956, of President Magsaysay legally effected a
land grant to the Mindanao Medical Center, Bureau of Medical Services, Department of
Health, of the whole lot, validly sufficient for initial registration under the Land Registration
Act. Such land grant is constitutive of a 'fee simple' title or absolute title in favor of
petitioner Mindanao Medical Center. Thus, Section 122 of the Act, which governs the
registration of grants or patents involving public lands, provides that 'Whenever public
lands in the Philippine Islands belonging to the Government of the United States or to the
Government of the Philippines are alienated, granted or conveyed to persons or to public or
private corporations, the same shall be brought forthwith under the operation of this Act
(Land Registration Act, Act 496) and shall become registered lands.'"
The first four cases cited involve petitions to cancel the land patents and the corresponding
certificates of titlesissued to private parties. These four cases uniformly hold that the Director of
Lands has no jurisdiction over private lands or that upon issuance of the certificate of title the land
automatically comes under the Torrens System. The fifth case cited involves the registration under
the Torrens System of a 12.8-hectare public land granted by the National Government to Mindanao
Medical Center, a government unit under the Department of Health. The National Government
transferred the 12.8-hectare public land to serve as the site for the hospital buildings and other
facilities of Mindanao Medical Center, which performed a public service. The Court affirmed the
registration of the 12.8-hectare public land in the name of Mindanao Medical Center under Section
122 of Act No. 496. This fifth case is an example of a public land being registered under Act No. 496
without the land losing its character as a property of public dominion.
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.
Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant private or
public ownership of the land. Registration is not a mode of acquiring ownership but is merely
evidence of ownership previously conferred by any of the recognized modes of acquiring
ownership. Registration does not give the registrant a better right than what the registrant had

prior to the registration.102 The registration of lands of the public domain under the Torrens system,
by itself, cannot convert public lands into private lands. 103
Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the
alienable land of the public domain automatically becomes private land cannot apply to
government units and entities like PEA. The transfer of the Freedom Islands to PEA was made
subject to the provisions of CA No. 141 as expressly stated in Special Patent No. 3517 issued by
then President Aquino, to wit:
"NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the Philippines and in
conformity with the provisions of Presidential Decree No. 1084, supplemented by
Commonwealth Act No. 141, as amended, there are hereby granted and conveyed
unto the Public Estates Authority the aforesaid tracts of land containing a total area of one
million nine hundred fifteen thousand eight hundred ninety four (1,915,894) square meters;
the technical description of which are hereto attached and made an integral part hereof."
(Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered by PD No.
1084. Section 60 of CA No. 141 prohibits, "except when authorized by Congress," the sale of
alienable lands of the public domain that are transferred to government units or entities. Section
60 of CA No. 141 constitutes, under Section 44 of PD No. 1529, a "statutory lien affecting title" of
the registered land even if not annotated on the certificate of title. 104 Alienable lands of the public
domain held by government entities under Section 60 of CA No. 141 remain public lands because
they cannot be alienated or encumbered unless Congress passes a law authorizing their
disposition. Congress, however, cannot authorize the sale to private corporations of reclaimed
alienable lands of the public domain because of the constitutional ban. Only individuals can benefit
from such law.
The grant of legislative authority to sell public lands in accordance with Section 60 of CA No. 141
does not automatically convert alienable lands of the public domain into private or patrimonial
lands. The alienable lands of the public domain must be transferred to qualified private parties, or
to government entities not tasked to dispose of public lands, before these lands can become
private or patrimonial lands. Otherwise, the constitutional ban will become illusory if Congress can
declare lands of the public domain as private or patrimonial lands in the hands of a government
agency tasked to dispose of public lands. This will allow private corporations to acquire directly
from government agencies limitless areas of lands which, prior to such law, are concededly public
lands.
Under EO No. 525, PEA became the central implementing agency of the National Government
to reclaim foreshore and submerged areas of the public domain. Thus, EO No. 525 declares that
"EXECUTIVE ORDER NO. 525
Designating the Public Estates Authority as the Agency Primarily Responsible for all
Reclamation Projects
Whereas, there are several reclamation projects which are ongoing or being proposed to be
undertaken in various parts of the country which need to be evaluated for consistency with
national programs;
Whereas, there is a need to give further institutional support to the Government's declared
policy to provide for a coordinated, economical and efficient reclamation of lands;
Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall be limited
to the National Government or any person authorized by it under proper contract;
Whereas, a central authority is needed to act on behalf of the National
Government which shall ensure a coordinated and integrated approach in the
reclamation of lands;

Whereas, Presidential Decree No. 1084 creates the Public Estates Authority as a
government corporation to undertake reclamation of lands and ensure their
maximum utilization in promoting public welfare and interests; and
Whereas, Presidential Decree No. 1416 provides the President with continuing authority to
reorganize the national government including the transfer, abolition, or merger of functions
and offices.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the
powers vested in me by the Constitution and pursuant to Presidential Decree No. 1416, do
hereby order and direct the following:
Section 1. The Public Estates Authority (PEA) shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on
behalf of the National Government. All reclamation projects shall be approved by the
President upon recommendation of the PEA, and shall be undertaken by the PEA or through
a proper contract executed by it with any person or entity; Provided, that, reclamation
projects of any national government agency or entity authorized under its charter shall be
undertaken in consultation with the PEA upon approval of the President.
x x x ."
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 of
disposable lands of the public domain, these lands are still public, not private lands.
Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as
well as "any and all kinds of lands." PEA can hold both lands of the public domain and private
lands. Thus, the mere fact that alienable lands of the public domain like the Freedom Islands are
transferred to PEA and issued land patents or certificates of title in PEA's name does not
automatically make such lands private.
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 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.105 The 1973 Constitution prohibited private
corporations from acquiring any kind of public land, and the 1987 Constitution has unequivocally
reiterated this prohibition.
The contention of PEA and AMARI that public lands, once registered under Act No. 496 or PD No.
1529, automatically become private lands is contrary to existing laws. Several laws authorize lands
of the public domain to be registered under the Torrens System or Act No. 496, now PD No. 1529,
without losing their character as public lands. Section 122 of Act No. 496, and Section 103 of PD
No. 1529, respectively, provide as follows:

Act No. 496

"Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x
Government of the Philippine Islands are alienated, granted, or conveyed to persons or
the public or private corporations, the same shall be brought forthwith under the
operation of this Act and shall become registered lands."
PD No. 1529
"Sec. 103. Certificate of Title to Patents. Whenever public land is by the Government
alienated, granted or conveyed to any person, the same shall be brought forthwith under
the operation of this Decree." (Emphasis supplied)
Based on its legislative history, the phrase "conveyed to any person" in Section 103 of PD No. 1529
includes conveyances of public lands to public corporations.
Alienable lands of the public domain "granted, donated, or transferred to a province, municipality,
or branch or subdivision of the Government," as provided in Section 60 of CA No. 141, may be
registered under the Torrens System pursuant to Section 103 of PD No. 1529. Such registration,
however, is expressly subject to the condition in Section 60 of CA No. 141 that the land "shall not
be alienated, encumbered or otherwise disposed of in a manner affecting its title, except
when authorized by Congress." This provision refers to government reclaimed, foreshore and
marshy lands of the public domain that have been titled but still cannot be alienated or
encumbered unless expressly authorized by Congress. The need for legislative authority prevents
the registered land of the public domain from becoming private land that can be disposed of to
qualified private parties.
The Revised Administrative Code of 1987 also recognizes that lands of the public domain may be
registered under the Torrens System. Section 48, Chapter 12, Book I of the Code states
"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following:
(1) x x x
(2) For property belonging to the Republic of the Philippines, but titled in the
name of any political subdivision or of any corporate agency or instrumentality,
by the executive head of the agency or instrumentality." (Emphasis supplied)
Thus, private property purchased by the National Government for expansion of a public wharf may
be titled in the name of a government corporation regulating port operations in the country. Private
property purchased by the National Government for expansion of an airport may also be titled in
the name of the government agency tasked to administer the airport. Private property donated to a
municipality for use as a town plaza or public school site may likewise be titled in the name of the
municipality.106 All these properties become properties of the public domain, and if already
registered under Act No. 496 or PD No. 1529, remain registered land. There is no requirement or
provision in any existing law for the de-registration of land from the Torrens System.
Private lands taken by the Government for public use under its power of eminent domain become
unquestionably part of the public domain. Nevertheless, Section 85 of PD No. 1529 authorizes the
Register of Deeds to issue in the name of the National Government new certificates of title
covering such expropriated lands. Section 85 of PD No. 1529 states
"Sec. 85. Land taken by eminent domain. Whenever any registered land, or interest
therein, is expropriated or taken by eminent domain, the National Government, province,
city or municipality, or any other agency or instrumentality exercising such right shall file
for registration in the proper Registry a certified copy of the judgment which shall state
definitely by an adequate description, the particular property or interest expropriated, the
number of the certificate of title, and the nature of the public use. A memorandum of the
right or interest taken shall be made on each certificate of title by the Register of Deeds,
and where the fee simple is taken, a new certificate shall be issued in favor of the

National Government, province, city, municipality, or any other agency or

instrumentality exercising such right for the land so taken. The legal expenses incident to
the memorandum of registration or issuance of a new certificate of title shall be for the
account of the authority taking the land or interest therein." (Emphasis supplied)
Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively private or
patrimonial lands. Lands of the public domain may also be registered pursuant to existing laws.
AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the Freedom Islands or
of the lands to be reclaimed from submerged areas of Manila Bay. In the words of AMARI, the
Amended JVA "is not a sale but a joint venture with a stipulation for reimbursement of the original
cost incurred by PEA for the earlier reclamation and construction works performed by the CDCP
under its 1973 contract with the Republic." Whether the Amended JVA is a sale or a joint venture,
the fact remains that the Amended JVA requires PEA to "cause the issuance and delivery of the
certificates of title conveying AMARI's Land Share in the name of AMARI." 107
This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which provides that
private corporations "shall not hold such alienable lands of the public domain except by lease." The
transfer of title and ownership to AMARI clearly means that AMARI will "hold" the reclaimed lands
other than by lease. The transfer of title and ownership is a "disposition" of the reclaimed lands, a
transaction considered a sale or alienation under CA No. 141, 108 the Government Auditing
Code,109 and Section 3, Article XII of the 1987 Constitution.
The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas
form part of the public domain and are inalienable. Lands reclaimed from foreshore and submerged
areas also form part of the public domain and are also inalienable, unless converted pursuant to
law into alienable or disposable lands of the public domain. Historically, lands reclaimed by the
government are sui generis, not available for sale to private parties unlike other alienable public
lands. Reclaimed lands retain their inherent potential as areas for public use or public service.
Alienable lands of the public domain, increasingly becoming scarce natural resources, are to be
distributed equitably among our ever-growing population. To insure such equitable distribution, the
1973 and 1987 Constitutions have barred private corporations from acquiring any kind of alienable
land of the public domain. Those who attempt to dispose of inalienable natural resources of the
State, or seek to circumvent the constitutional ban on alienation of lands of the public domain to
private corporations, do so at their own risk.
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 hectares110 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
hectares111 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 1409112 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.
Seventh issue: whether the Court is the proper forum to raise the issue of whether the
Amended JVA is grossly disadvantageous to the government.
Considering that the Amended JVA is null and void ab initio, there is no necessity to rule on this last
issue. Besides, the Court is not a trier of facts, and this last issue involves a determination of
factual matters.
WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari Coastal Bay
Development Corporation are PERMANENTLY ENJOINED from implementing the Amended Joint
Venture Agreement which is hereby declared NULL and VOID ab initio.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, YnaresSantiago, Sandoval-Gutierrez, Austria-Martinez, and Corona, JJ., concur.

EN BANC

[G.R. No. 103882. November 25, 1998]

REPUBLIC OF THE PHILIPPINES, petitioner, vs. THE HONORABLE COURT OF APPEALS AND
REPUBLIC REAL ESTATE CORPORATION, respondents. CULTURAL CENTER OF THE
PHILIPPINES, intervenor.

[G.R. No. 105276. November 25, 1998]

PASAY CITY AND REPUBLIC REAL ESTATE CORPORATION, petitioners, vs. COURT OF
APPEALS and REPUBLIC OF THE PHILIPPINES, respondents.
Reclamations; Republic Act 1899; Foreshore Lands; Statutory Construction; Words and
Phrases; The Court of Appeals unduly stretched and broadened the meaning of
foreshore lands, beyond the intendment of the law, and against the
recognized legal connotation of foreshore lands.To begin with, erroneous
and unsustainable is the opinion of respondent court that under RA 1899, the
term foreshore lands includes submerged areas. As can be gleaned from its
disquisition and rationalization aforequoted, the respondent court unduly
stretched and broadened the meaning of foreshore lands, beyond the
intendment of the law, and against the recognized legal connotation of
foreshore lands.
Same; Same; Same; Same; Administrative Law; When the law speaks in clear and
categorical language, there is no reason for interpretation or construction, but
only for application; Opinions of the Secretary of Justice are unavailing to

supplant or rectify any mistake or omission in the law.Well entrenched, to the

point of being elementary, is the rule that when the law speaks in clear and
categorical language, there is no reason for interpretation or construction, but
only for application. So also, resort to extrinsic aids, like the records of the
constitutional convention, is unwarranted, the language of the law being plain
and unambiguous. Then, too, opinions of the Secretary of Justice are unavailing
to supplant or rectify any mistake or omission in the law.
Same; Same; Same; Words and Phrases; Foreshore Lands, Explained.To repeat, the
term foreshore lands refers to: The strip of land that lies between the high
and low water marks and that is alternately wet and dry according to the flow of
the tide. (Words and Phrases, Foreshore) A strip of land margining a body of
water (as a lake or stream); the part of a seashore between the low-water line
usually at the seaward margin of a low-tide terrace and the upper limit of wave
wash at high tide usually marked by a beach scarp or berm. (Websters Third
New International Dictionary)
Same; Same; Same; Same; Statutory Construction; That Congress did not include
submerged areas could only signify the exclusion of submerged areas from the
term foreshore lands.The duty of the court is to interpret the enabling Act,
RA 1899. In so doing, we cannot broaden its meaning, much less widen the
coverage thereof. If the intention of Congress were to include submerged areas,
it should have provided expressly. That Congress did not so provide could only
signify the exclusion of submerged areas from the term foreshore lands.
Same; Same; Same; Same; The term foreshore refers to that part of the land
adjacent to the sea which is alternately covered and left dry by the ordinary flow
of the tides.All things viewed in proper perspective, we reiterate what was
said in Ponce v. Gomez (L-21870) and Ponce v. City of Cebu (L-22669) that the
term foreshore refers to that part of the land adjacent to the sea which is
alternately covered and left dry by the ordinary flow of the tides. As opined by
this Court in said cases: WHEREAS, six (6) members of the Court (Justices
Bautista Angelo, Concepcion, Reyes, Barrera, Dizon and Jose P. Bengzon) opine
that said city ordinance and contracts are ultra vires and hence, null and void,
insofar as the remaining 60% of the area aforementioned, because the term
foreshore lands as used in Republic Act No. 1899 should be understood in the
sense attached thereto by common parlance. (italics ours)
Same; Same; Same; Same; Municipal Corporations; Local Government Units; Pasay City
Ordinance No. 121, as amended by Ordinance No. 158, and the Agreement
executed pursuant thereto, are outside the intendment and scope of Republic
Act 1899, and therefore ultra vires and null and void.It bears stressing that the
subject matter of Pasay City Ordinance No. 121, as amended by Ordinance No.
158, and the Agreement under attack, have been found to be outside the
intendment and scope of RA 1899, and therefore ultra vires and null and void.
Land Titles; Actions; Lis Pendens; A notice of lis pendens is necessary when the action
is for recovery of possession or ownership of a parcel of land.Under the
aforecited provision of law in point, a notice of lis pendens is necessary when
the action is for recovery of possession or ownership of a parcel of land. In the
present litigation, RREC and Pasay City, as defendants in the main case, did not
counterclaim for the turnover to Pasay City of the titled lots aforementioned.
Same; Same; Torrens Titles; A torrens title cannot be collaterally attackedthe issue of
validity of a torrens title, whether fraudulently issued or not, may be posed only
in an action brought to impugn or annul it.What is more, a torrens title cannot
be collaterally attacked. The issue of validity of a torrens title, whether
fraudulently issued or not, may be posed only in an action brought to impugn or
annul it. (Halili vs. National Labor Relations Commission, 257 SCRA 174;
Cimafranca vs. Intermediate Appellate Court, 147 SCRA 611.) Unmistakable, and
cannot be ignored, is the germane provision of Section 48 of P.D. 1529, that a
certificate of title can never be the subject of a collateral attack. It cannot be
altered, modified, or cancelled except in a direct proceeding instituted in
accordance with law.
Equity; Reclamations; No one, not even the government, shall unjustly enrich
oneself/itself at the expense of another; It appearing that something
compensable was accomplished by them, Pasay City and Republic Real Estate

Corporation should be paid for the said actual work done and dredge-fill poured
in.Although Pasay City and RREC did not succeed in their undertaking to
reclaim any area within subject reclamation project, it appearing that something
compensable was accomplished by them, following the applicable provision of
law and hearkening to the dictates of equity, that no one, not even the
government, shall unjustly enrich oneself/itself at the expense of another, we
believe; and so hold, that Pasay City and RREC should be paid for the said actual
work done and dredge-fill poured in, worth P10,926,071.29, as verified by the
former Ministry of Public Highways, and as claimed by RREC itself in its
aforequoted letter dated June 25, 1981.
Supreme Court; National Patrimony; Cultural Heritage; It is fervently hoped that long
after the end of our sojourn in this valley of tears, the court, for its herein
historic disposition, will be exalted by the future generations of Filipinos, for the
preservation of the national patrimony and promotion of our cultural heritage.
It is fervently hoped that long after the end of our sojourn in this valley of tears,
the court, for its herein historic disposition, will be exalted by the future
generations of Filipinos, for the preservation of the national patrimony and
promotion of our cultural heritage. As writer Channing rightly puts it: Whatever
expands the affections, or enlarges the sphere of our sympathiesWhatever
makes us feel our relation to the universe and all that it inherits in time and in
eternity, and to the great and beneficent cause of all, must unquestionably
refine our nature, and elevate us in the scale of being. , 299 SCRA 199, G.R. No.
103882, G.R. No. 105276 November 25, 1998
DECISION
PURISIMA, J.:
At bar are two consolidated petitions for review on certiorari under Rule 45 of the Revised
Rules of Court. Here, the Court is confronted with a case commenced before the then Court of
First Instance (now Regional Trial Court) of Rizal in Pasay City, in 1961, more than 3 decades back,
that has spanned six administrations of the Republic and outlasted the tenure of ten (10) Chief
Justices of the Supreme Court.
In G.R. No. 103882, the Republic of the Philippines, as petitioner, assails the Decision, dated
January 29, 1992 and Amended Decision, dated April 28, 1992, of the Court of Appeals [1], which
affirmed with modification the Decision of the former Court of First Instance of Rizal (Branch 7,
Pasay City) in Civil Case No. 2229-P, entitled Republic of the Philippines versus Pasay City and
Republic Real Estate Corporation.
The facts that matter are, as follows:
Republic Act No. 1899 (RA 1899), which was approved on June 22, 1957, authorized the
reclamation of foreshore lands by chartered cities and municipalities.Section I of said law, reads:
SECTION 1. Authority is hereby granted to all municipalities and chartered cities to undertake and
carry out at their own expense the reclamation by dredging, filling, or other means, of any
foreshore lands bordering them, and to establish, provide, construct, maintain and repair proper
and adequate docking and harbor facilities as such municipalities and chartered cities may
determine in consultation with the Secretary of Finance and the Secretary of Public Works and
Communications.
On May 6, 1958, invoking the aforecited provision of RA 1899, the Pasay City Council passed
Ordinance No. 121, for the reclamation of Three Hundred(300) hectares of foreshore lands in Pasay
City, empowering the City Mayor to award and enter into reclamation contracts, and prescribing
terms and conditions therefor. The said Ordinance was amended on April 21, 1959 by Ordinance
No. 158, which authorized the Republic Real Estate Corporation(RREC) to reclaim foreshore lands of
Pasay City under certain terms and conditions.
On April 24, 1959, Pasay City and RREC entered into an Agreement [2] for the reclamation of the
foreshore lands in Pasay City.
On December 19, 1961, the Republic of the Philippines (Republic) filed a Complaint[3] for
Recovery of Possession and Damages with Writ of Preliminary Preventive Injunction and Mandatory

Injunction, docketed as Civil Case No. 2229-P before the former Court of First Instance of
Rizal, (Branch 7, Pasay City).
On March 5, 1962, the Republic of the Philippines filed an Amended Complaint [4] questioning
subject Agreement between Pasay City and RREC (Exhibit P) on the grounds that the subjectmatter of such Agreement is outside the commerce of man, that its terms and conditions are
violative of RA 1899, and that the said Agreement was executed without any public bidding.
The Answers[5] of RREC and Pasay City, dated March 10 and March 14, 1962, respectively,
averred that the subject-matter of said Agreement is within the commerce of man, that the phrase
foreshore lands within the contemplation of RA 1899 has a broader meaning than the cited
definition of the term in the Words and Phrases and in the Websters Third New International
Dictionary and the plans and specifications of the reclamation involved were approved by the
authorities concerned.
On April 26,1962, Judge Angel H. Mojica, (now deceased) of the former Court of First Instance
of Rizal (Branch 7, Pasay City) issued an Order[6] the dispositive portion of which was to the
following effect:
WHEREFORE, the court hereby orders the defendants, their agents, and all persons
claiming under them, to refrain from further reclaiming or committing acts of
dispossession or dispoilation over any area within the Manila Bay or the Manila Bay Beach
Resort, until further orders of the court.
On the following day, the same trial court issued a writ of preliminary injunction [7] which
enjoined the defendants, RREC and Pasay City, their agents, and all persons claiming under them
from further reclaiming or committing acts of dispossession.
Thereafter, a Motion to Intervene [8], dated June 27, 1962, was filed by Jose L. Bautista,
Emiliano Custodio, Renato Custodio, Roger de la Rosa, Belen Gonzales, Norma Martinez, Emilia E.
Paez, Ambrosio R. Parreno, Antolin M. Oreta, Sixto L. Orosa, Pablo S. Sarmiento, Jesus Yujuico,
Zamora Enterprises, Inc., Industrial and Commercial Factors, Inc., Metropolitan Distributors of the
Philippines, and Bayview Hotel, Inc. stating inter alia that they were buyers of lots in the Manila Bay
area being reclaimed by RREC, whose rights would be affected by whatever decision to be
rendered in the case. The Motion was granted by the trial court and the Answer attached thereto
admitted.[9]
The defendants and the intervenors then moved to dismiss [10] the Complaint of the Republic,
placing reliance on Section 3 of Republic Act No. 5187, which reads:
Sec. 3. Miscellaneous Projects
xxx
m. For the construction of seawall and limited access highway from the south boundary of
the City of Manila to Cavite City, to the south, and from the north boundary of the City of
Manila to the municipality of Mariveles, province of Bataan, to the north, including the
reclamation of the foreshore and submerged areas: Provided, That priority in the
construction of such seawalls, highway and attendant reclamation works shall be given to
any corporation and/or corporations that may offer to undertake at its own expense such
projects, in which case the President of the Philippines may, after competitive bidding,
award contracts for the construction of such projects, with the winning bidder shouldering
all costs thereof, the same to be paid in terms of percentage fee of the contractor which
shall not exceed fifty percent of the area reclaimed by the contractor and shall represent
full compensation for the purpose, the provisions of the Public Land Law concerning
disposition of reclaimed and foreshore lands to the contrary notwithstanding: Provided,
finally, that the foregoing provisions and those of other laws, executive orders, rules and
regulations to the contrary notwithstanding, existing rights, projects and/or contracts of
city or municipal governments for the reclamation of foreshore and submerged lands shall
be respected. x x x. (underscoring ours)
Since the aforecited law provides that existing contracts shall be respected, movants contended
that the issues raised by the pleadings have become moot, academic and of no further validity or
effect.
Meanwhile, the Pasay Law and Conscience Union, Inc. (PLCU) moved to intervene[11], alleging
as legal interest in the matter in litigation the avowed purpose of the organization for the

promotion of good government in Pasay City. In its Order of June 10, 1969, the lower court of origin
allowed the said intervention[12].
On March 24, 1972, the trial court of origin came out with a Decision, disposing, thus:
WHEREFORE, after carefully considering (1) the original complaint, (2) the first Amended
Complaint, (3) the Answer of Defendant Republic Real Estate Corporation to the first
Amended Complaint, (4) the Answer of Defendant Pasay City to the first Amended
Complaint, (5) the Second Amended Complaint, (6) the Answer of Defendant Republic
Real Estate Corporation to the Second Amended Complaint, (7) the Answer of Defendant
Pasay City to the Second Amended Complaint, (8) the Memorandum in Support of
Preliminary Injunction of Plaintiff, (9) the Memorandum In Support of the Opposition to the
Issuance of Preliminary Injunction of Defendant Pasay City and Defendant Republic Real
Estate Corporation, (10) the Answer in Intervention of Intervenors Bautista, et. al., (11)
Plaintiffs Opposition to Motion to Intervene, (12) the Reply to Opposition to Motion to
Intervene of Intervenors Bautista, et. al. , (13) the Stipulation of Facts by all the parties,
(14) the Motion for Leave to Intervene of Intervenor Pasay Law and Conscience Union,
Inc., (15) the Opposition to Motion For Leave to Intervene of Intervenors Bautista, et. al.,
(16) the Reply of Intervenor Pasay Law and Conscience Union, Inc., (17) the Supplement
to Opposition to Motion to Intervene of Defendant Pasay City and Republic Real Estate
Corporation, (18) the Complaint in Intervention of Intervenor Pasay Law and Conscience
Union, Inc., (19) the Answer of Defendant Republic Real Estate Corporation, (20) the
Answer of Intervenor Jose L. Bautista, et. al., to Complaint in Intervention, (21) the Motion
to Dismiss of Defendant Republic Real Estate Corporation, and Intervenors Bautista, et.
al., (22) the Opposition of Plaintiff to said Motion to Dismiss, (23) the Opposition of
Intervenor Pasay Law and Conscience Union, Inc., (24) the Memorandum of the Defendant
Republic Real Estate Corporation, (25) the Memorandum for the Intervenor Pasay Law and
Conscience Union, Inc., (26) the Manifestation of Plaintiff filed by the Office of the Solicitor
General, and all the documentary evidence by the parties to wit: (a) Plaintiffs Exhibits A to
YYY-4, (b) Defendant Republic Real Estate Corporations Exhibits 1-RREC to 40-a and (c)
Intervenor Pasay Law and Conscience Union, Incs., Exhibits A-PLACU to C-PLACU, the
Court hereby:
(1) Denies the Motion to Dismiss filed on January 10, 1968, by Defendant Republic Real Estate
Corporation and Intervenors Bautista, et. al., as it is the finding of this Court that Republic Act No.
5187 was not passed by Congress to cure any defect in the ordinance and agreement in question
and that the passage of said Republic Act No. 5187 did not make the legal issues raised in the
pleadings moot, academic and of no further validity or effect; and
(2) Renders judgment:
(a) dismissing the Plaintiffs Complaint;
(b) Dismissing the Complaint in Intervention of Intervenor Pasay Law and Conscience Union, Inc.,
(c)Enjoining Defendant Republic Real Estate Corporation and Defendant Pasay City to have all the
plans and specifications in the reclamation approved by the Director of Public Works and to have
all the contracts and sub-contracts for said reclamation awarded by means of, and only after,
public bidding; and
(d) Lifting the preliminary Injunction issued by the Court on April 26, 1962, as soon as Defendant
Republic Real Estate Corporation and Defendant Pasay City shall have submitted the
corresponding plans and specifications to the Director of Public Works, and shall have obtained
approval thereof, and as soon as the corresponding public bidding for the award to the contractor
and sub-contractor that will undertake the reclamation project shall have been effected.
No pronouncement as to costs.
SO ORDERED. (See Court of Appeals Decision dated January 28, 1992; pp. 6-8)
Dissatisfied with the said judgment, the Republic appealed therefrom to the Court of
Appeals. However, on January 11, 1973, before the appeal could be resolved, Presidential Decree
No. 3-A issued, amending Presidential Decree No. 3, thus:

SECTION 1. Section 7 of Presidential Decree No. 3, dated September 26, 1972, is hereby
amended by the addition of the following paragraphs:
The provisions of any law to the contrary notwithstanding, the reclamation of areas under water,
whether foreshore or inland, shall be limited to the National Government or any person authorized
by it under a proper contract.
All reclamations made in violation of this provision shall be forfeited to the State without need of
judicial action.
Contracts for reclamation still legally existing or whose validity has been accepted by the National
Government shall be taken over by the National Government on the basis of quantum meruit, for
proper prosecution of the project involved by administration.
On November 20, 1973, the Republic and the Construction Development Corporation of the
Philippines (CDCP) signed a Contract[13] for the Manila-Cavite Coastal Road Project (Phases I and
II) which contract included the reclamation and development of areas covered by the Agreement
between Pasay City and RREC. Then, there was issued Presidential Decree No. 1085 which
transferred to the Public Estate Authority (PEA) the rights and obligations of the Republic of the
Philippines under the contract between the Republic and CDCP.
Attempts to settle amicably the dispute between representatives of the Republic, on the one
hand, and those of Pasay City and RREC, on the other, did not work out. The parties involved failed
to hammer out a compromise.
On January 28, 1992, the Court of Appeals came out with a Decision [14] dismissing the appeal
of the Republic and holding, thus:
WHEREFORE, the decision appealed from is hereby AFFIRMED with the following
modifications:
1. The requirement by the trial court on public bidding and the submission of RRECs plans and
specification to the Department of Public Works and Highways in order that RREC may continue
the implementation of the reclamation work is deleted for being moot and academic;
2. Ordering the plaintiff-appellant to turn over to Pasay City the ownership and possession over all
vacant spaces in the twenty-one hectare area already reclaimed by Pasay City and RREC at the
time it took over the same. Areas thereat over which permanent structures has (sic) been
introduced shall, including the structures, remain in the possession of the present possessor,
subject to any negotiation between Pasay City and the said present possessor, as regards the
continued possession and ownership of the latter area.
3. Sustaining RRECs irrevocable option to purchase sixty (60%) percent of the Twenty-One (21)
hectares of land already reclaimed by it, to be exercised within one (1) year from the finality of this
decision, at the same terms and condition embodied in the Pasay City-RREC reclamation contract,
and enjoining appellee Pasay City to respect RRECs option.
SO ORDERED.
On February 14, 1992, Pasay City and RREC presented a Motion for Reconsideration of such
Decision of the Court of Appeals, contending, among others, that RREC had actually reclaimed
Fifty-Five (55) hectares, and not only Twenty-one (21) hectares, and the respondent Court of
Appeals erred in not awarding damages to them, movants.
On April 28, 1992, the Court of Appeals acted favorably on the said Motion for
Reconsideration, by amending the dispositive portion of its judgment of January 28, 1992, to read
as follows:
WHEREFORE, the dispositive portion of our Decision dated January 28, 1992 is hereby
AMENDED to read as follows:
1. The requirement by the trial court on public bidding and the submission of the RRECs plans and
specification to the Department of Public Works and Highways in order that RREC may continue
the implementation of the reclamation work is deleted for being moot and academic.

2. Ordering plaintiff-appellant to turn over to Pasay City the ownership and possession of the above
enumerated lots (1 to 9).
3. Sustaining RRECs irrevocable option to purchase sixty (60%) percent of the land referred to in
No. 2 of this dispositive portion, to be exercised within one (1) year from the finality of this
Decision, at the same terms and condition embodied in the Pasay City-RREC reclamation contract,
and enjoining Pasay City to respect RRECs irrevocable option.
SO ORDERED.
From the Decision and Amended Decision of the Court of Appeals aforementioned, the
Republic of the Philippines, as well as Pasay City and RREC, have come to this Court to seek relief,
albeit with different prayers.
On September 10, 1997, the Court commissioned the former thirteenth Division of Court of
Appeals to hear and receive evidence on the controversy. The corresponding Commissioners
Report, dated November 25, 1997, was submitted and now forms part of the records.
On October 11, 1997, the Cultural Center of the Philippines (CCP) filed a Petition in
Intervention, theorizing that it has a direct interest in the case being the owner of subject
nine (9) lots titled in its (CCP) name, which the respondent Court of Appeals ordered to be turned
over to Pasay City. The CCP, as such intervenor, was allowed to present its evidence, as it did,
before the Court of Appeals, which evidence has been considered in the formulation of this
disposition.
In G.R. No. 103882, the Republic of the Philippines theorizes, by way of assignment of errors,
that:
I
THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF PASAY CITY ORDINANCE
NO. 158 DATED APRIL 21, 1959 AND THE RECLAMATION CONTRACT ENTERED INTO
BETWEEN PASAY CITY AND RREC;
II
THE COURT OF APPEALS ERRED IN FINDING THAT RREC HAD RECLAIMED 55 HECTARES
AND IN ORDERING THE TURN-OVER TO PASAY CITY OF THE OWNERSHIP AND POSSESSION
OF NINE (9) LOTS TITLED IN THE NAME OF CCP.
In G.R. No. 105276, the petitioners, Pasay City and RREC, contend, that::
I
THE COURT OF APPEALS ERRED IN NOT DECLARING PRESIDENTIAL DECREE NO. 3-A
UNCONSTITUTIONAL;
II
THE COURT OF APPEALS ERRED IN NOT AWARDING DAMAGES IN FAVOR OF PASAY CITY
AND RREC.
Let us first tackle the issues posed in G.R. No. 103882.
On the first question regarding the validity of Pasay City Ordinance No. 158 dated April 21,
1959 and the Agreement dated April 24, 1959 between Pasay City and RREC, we rule in the
negative.
Section 1 of RA 1899, reads:
SECTION 1. Authority is hereby granted to all municipalities and chartered cities to
undertake and carry out at their own expense the reclamation by dredging, filling, or
other means, of any foreshore lands bordering them, and to establish, provide, construct,
maintain and repair proper and adequate docking and harbor facilities as such
municipalities and chartered cities may determine in consultation with the Secretary of
Finance and the Secretary of Public Works and Communications.
It is the submission of the petitioner, Republic of the Philippines, that there are no foreshore
lands along the seaside of Pasay City [15]; that what Pasay City has are submerged or offshore areas
outside the commerce of man which could not be a proper subject matter of the Agreement

between Pasay City and RREC in question as the area affected is within the National Park, known as
Manila Bay Beach Resort, established under Proclamation No. 41, dated July 5, 1954, pursuant to
Act No. 3915, of which area it (Republic) has been in open, continuous and peaceful possession
since time immemorial.
Petitioner faults the respondent court for unduly expanding what may be considered foreshore
land through the following disquisition:
The former Secretary of Justice Alejo Mabanag, in response to a request for an opinion
from the then Secretary of Public Works and Communications as to whether the term
foreshore areas as used in Section I of the immediately aforequoted law is that defined in
Websters Dictionary and the Law of Waters so as to make any dredging or filling beyond
its prescribed limit illegal, opined:
According to the basic letter of the Director of Public Works, the law of Waters
speaks of shore and defines it thus: that space movement of the tide. Its interior
or terrestrial limit in the line reached by highest equinoctial tides.
Websters definition of foreshore reads as follows:
That part of the shore between high water and low-water marks usually fixed at
the line to which the ordinary means tide flows: also, by extension, the beach, the
shore near the waters edge.
If we were to be strictly literal the term foreshore or foreshore lands should be
confined to but a portion of the shore, in itself a very limited area. (p. 6,
Intervenors-appellees brief).
Bearing in mind the (Websters and Law of Waters) definitions of shore and of
foreshore lands, one is struck with the apparent inconsistency between the areas
thus described and the purpose to which that area, when reclaimed under the
provision of Republic Act No. 1899, shall be devoted. Section I (of said Law)
authorizes the construction thereat of adequate docking and harbor facilities. This
purpose is repeated in Sections 3 and 4 of the Act.
And yet, it is well known fact that foreshore lands normally extend only from 10
to 20 meters along the coast. Not very much more if at all. In fact, certain parts in
Manila bordering on Manila Bay, has no foreshore to speak of since the sea
washes the sea wall.
It does not seem logical, then, that Congress had in mind. Websters limited
concept of foreshore when it enacted Republic Act No. 1899, unless it intends
that the wharves, piers, docks, etc. should be constructed parallel to the shore,
which is impractical.
Since it is to be presumed that Congress could not have intended to enact an
ineffectual measure not one that would lead to absurd consequences, it would
seem that it used foreshore in a sense wider in scope that that defined by
Webster. xxx
To said opinion on the interpretation of the R.A. 1899, plaintiff-appellant could not offer
any refutation or contrary opinion. Neither can we. In fact, the above construction is
consistent with the rule on context in statutory construction which provides that in
construing a statute, the same must be construed as a whole. The particular words,
clauses and phrases should not be studied as detached and isolated expressions, but the
whole and every part of the statute must be considered in fixing the meaning of any of its
parts in order to produce a harmonious whole (see Araneta vs. Concepcion, 99 Phil.
709). There are two reasons for this. Firstly, the force and significance of particular
expressions will largely depend upon the connection in which they are found and their
relation to the general subject-matter of the law. The legislature must be understood to
have expressed its whole mind on the special object to which the legislative act is
directed but the vehicle for the expressions of that meaning is the statute, considered as
one entire and continuous act, and not as an agglomeration of unrelated clauses . Each
clause or provision will be illuminated by those which are cognate to it and by the general
tenor of the whole statute and thus obscurities and ambiguities may often be cleared up
by the most direct and natural means.Secondly, effect must be given, if it is possible, to
every word and clause of the statute, so that nothing shall be left devoid of meaning or
destitute of force. To this end, each provision of the statute should be read in the light of

the whole. For the general meaning of the legislature, as gathered from the entire act,
may often prevail over the construction which would appear to be the most natural and
obvious on the face of a particular clause. It is by this means that contradiction and
repugnance between the different parts of the statute may be avoided. (See Black,
Interpretation of Laws, 2nd Ed., pp. 317-319).
Resorting to extrinsic aids, the Explanatory Note to House Bill No. 3630, which was subsequently
enacted as Republic Act No. 1899, reads:
In order to develop and expand the Maritime Commerce of the Philippines, it is
necessary that harbor facilities be correspondingly improved, and, where
necessary, expanded and developed. The national government is not in a
financial position to handle all this work. On the other hand, with a greater
autonomy, many chartered cities and provinces are financially able to have credit
position which will allow them to undertake these projects. Some cities, such as
the City of Bacolod under R.A. 161, has been authorized to reclaim foreshore
lands bordering it.
Other cities and provinces have continuously been requesting for authority to
reclaim foreshore lands on the basis of the Bacolod City pattern, and to
undertake work to establish, construct on the reclaimed area and maintain such
port facilities as may be necessary. In order not to unduly delay the undertaking
of these projects, and inorder to obviate the passage of individual pieces of
legislation for every chartered city and province, it is hereby recommended that
the accompanying bill be approved. It covers Authority for All chartered cities and
provinces to undertake this work. x x x (underscoring supplied)
Utilizing the above explanatory note in interpreting and construing the provisions of R.A.
1899, then Secretary of Justice Mabanag opined:
It is clear that the Bacolod City pattern was the basis of the enactment of the
aforementioned bill of general application. This so-called Bacolod City pattern
appears to be composed of 3 parts, namely: Republic Act No. 161, which grants
authority to Bacolod City to undertake or carry out ... the reclamation ... of any
[sic] carry out the reclamation project conformably with Republic Act No. 161;
and Republic Act No. 1132 authorizing Bacolod City to contract indebtedness or
to issue bonds in the amount not exceeding six million pesos to finance the
reclamation of land in said city.
Republic Act No. 161 did not in itself specify the precise space therein referred to
as foreshore lands, but it provided that docking and harbor facilities should be
erected on the reclaimed portions thereof, while not conclusive would indicate
that Congress used the word foreshore in its broadest sense. Significantly, the
plan of reclamation of foreshore drawn up by the Bureau of Public Works maps
out an area of approximately 1,600,000 square meters, the boundaries of which
clearly extend way beyond Websters limited concept of the term foreshore. As a
contemporaneous construction by that branch of the Government empowered to
oversee at least, the conduct of the work, such an interpretation deserves great
weight. Finally, Congress in enacting Republic Act No. 1132 (supplement to RA
161), tacitly confirmed and approved the Bureaus interpretation of the term
foreshore when instead of taking the occasion to correct the Bureau of over
extending its plan, it authorized the city of Bacolod to raise the full estimated cost
of reclaiming the total area covered by the plan. The explanatory note to House
Bill No. 1249 which became Republic Act No. 1132 states among the things:
The Bureau of Public Works already prepared a plan for the reclamation of about 1,600,000 square
meters of land at an estimated costs of aboutP6,000,000.00. The project is self-supporting because
the proceeds from the sales or leases of lands so reclaimed will be more than sufficient to cover
the cost of the project.
Consequently, when Congress passed Republic Act No. 1899 in order to facilitate the reclamation
by local governments of foreshore lands on the basis of the Bacolod City pattern and in order to
obviate the passage of individual pieces of legislation for every chartered city and provinces
requesting authority to undertake such projects, the lawmaking body could not have had in mind
the limited area described by Webster as foreshore lands. x x x.

If it was really the intention of Congress to limit the area to the strict literal meaning of
foreshore lands which may be reclaimed by chartered cities and municipalities, Congress
would have excluded the cities of Manila, Iloilo, Cebu, Zamboanga and Davao from the
operation of RA 1899 as suggested by Senator Cuenco during the deliberation of the bill
considering that these cities do not have foreshore lands in the strict meaning of the
term. Yet, Congress did not approve the proposed amendment of Senator
Cuenco, implying therefore, that Congress intended not to limit the area that may be
reclaimed to the strict definition of foreshore lands.
The opinion of the then Secretary of Justice Mabanag, who was at that time the chief law
officer and legal adviser of the government and whose office is required by law to issue
opinions for the guidance of the various departments of the government, there being
then no judicial interpretation to the contrary, is entitled to respect (see Bengzon vs.
Secretary of Justice and Insular Auditor, 68 Phil. 912).
We are not unmindful of the Supreme Court Resolution dated February 3, 1965 in Ponce
vs. Gomez (L-21870) and Ponce vs. City of Cebu (L-2266 , by a unanimous vote of six (6)
justices (the other five (5) members deemed it unnecessary to express their view
because in their opinion the questions raised were not properly brought before the court),
which in essence applied the strict dictionary meaning of foreshore lands as used in RA
1899 in the case of the city of Cebu. But this was promulgated long after the then
Secretary of Justice Mabanag rendered the above opinion on November 16, 1959 and
long after RREC has started the subject reclamation project.
Furthermore, as held by the lower court, Congress, after the Supreme Court issued the
aforementioned Resolution, enacted RA 5187. In Sec. 3 (m) of said law, Congress
appropriated money for the construction of the seawall and limited access highway from
the South boundary of the city of Manila to Cavite City, to the South, and from the North
boundary of the city of Manila to the municipality of Mariveles, province of Bataan, to
the North (including the reclamation of foreshore and submerged areas ... provided ...
that ... existing projects and/or contracts of city or municipal governments for the
reclamation of foreshore and submerged lands shall be respected... This is a clear
manifestation that Congress in enacting RA 1899, did not intend to limit the
interpretation of the term foreshore land to its dictionary meaning.
It is presumed that the legislature was acquainted with and had in mind the judicial
construction given to a former statute on the subject, and that the statute on the subject,
and that the statute was enacted having in mind the judicial construction that the prior
enactment had received , or in the light of such existing judicial decisions as have direct
bearing upon it (see 50 Am. Jur., Sec. 321, pp. 312-313). But notwithstanding said
interpretation by the Supreme Court of RA 1899 in the Ponce cases, Congress enacted a
law covering the same areas previously embraced in a RA 1899 (as mentioned earlier,
cities without foreshore lands which were sought to be excluded from the operation of RA
1899 were not excluded), providing that respect be given the reclamation of not only
foreshore lands but also of submerged lands signifying its non-conformity to the judicial
construction given to RA 1899. If Congress was in accord with the interpretation and
construction made by the Supreme Court on RA 1899, it would have mentioned
reclamation of foreshore lands only in RA 5187, but Congress included submerged lands
in order to clarify the intention on the grant of authority to cities and municipalities in the
reclamation of lands bordering them as provided in RA 1899. It is, therefore, our opinion
that it is actually the intention of Congress in RA 1899 not to limit the authority granted
to cities and municipalities to reclaim foreshore lands in its strict dictionary meaning but
rather in its wider scope as to include submerged lands.
The Petition is impressed with merit.
To begin with, erroneous and unsustainable is the opinion of respondent court that under RA
1899, the term foreshore lands includes submerged areas. As can be gleaned from its disquisition
and rationalization aforequoted, the respondent court unduly stretched and broadened the
meaning of foreshore lands, beyond the intentment of the law, and against the recognized legal
connotation of foreshore lands. Well entrenched, to the point of being elementary, is the rule that
when the law speaks in clear and categorical language, there is no reason for interpretation or
construction, but only for application. [16] So also, resort to extrinsic aids, like the records of the
constitutional convention, is unwarranted, the language of the law being plain and unambiguous.
[17]
Then, too, opinions of the Secretary of Justice are unavailing to supplant or rectify any mistake
or omission in the law.[18] To repeat, the term foreshore lands refers to:

The strip of land that lies between the high and low water marks and that is alternately
wet and dry according to the flow of the tide. (Words and Phrases, Foreshore)
A strip of land margining a body of water (as a lake or stream); the part of a seashore
between the low-water line usually at the seaward margin of a low-tide terrace and the
upper limit of wave wash at high tide usually marked by a beach scarp or
berm. (Websters Third New International Dictionary)
The duty of the court is to interpret the enabling Act, RA 1899. In so doing, we cannot broaden
its meaning, much less widen the coverage thereof. If the intention of Congress were to include
submerged areas, it should have provided expressly. That Congress did not so provide could only
signify the exclusion of submerged areas from the term foreshore lands.
Neither is there any valid ground to disregard the Resolution of this Court dated February 3,
1965 in Ponce v. Gomez (L-21870) and Ponce v. City of Cebu (L-22669) despite the enactment of
Republic Act No. 5187 (RA 5187), the relevant portion of which, reads:
Sec. 3. Miscellaneous Projects
xxx
m. For the construction of seawall and limited access highway from the south boundary
of the City of Manila to Cavite City, to the south, and from the north boundary of the City
of Manila to the municipality of Mariveles, province of Bataan, to the north, including the
reclamation of the foreshore and submerged areas: Provided, That priority in the
construction of such seawalls, highway and attendant reclamation works shall be given to
any corporation and/or corporations that may offer to undertake at its own expense such
projects, in which case the President of the Philippines may, after competitive bidding,
award contracts for the construction of such projects, with the winning bidder shouldering
all costs thereof, the same to be paid in terms of percentage fee of the contractor which
shall not exceed fifty percent of the area reclaimed by the contractor and shall represent
full compensation for the purpose, the provisions of the Public Land Law concerning
disposition of reclaimed and foreshore lands to the contrary notwithstanding: Provided,
finally, that the foregoing provisions and those of other laws, executive orders, rules and
regulations to the contrary notwithstanding, existing rights, projects and/or contracts of
city or municipal governments for the reclamation of foreshore and submerged lands
shall be respected. x x x.
There is nothing in the foregoing provision of RA 5187 which can be interpreted to broaden the
scope of foreshore lands. The said law is not amendatory to RA 1899. It is an Appropriations Act,
entitled AN ACT APPROPRIATING FUNDS FOR PUBLIC WORKS, SYNCHRONIZING THE SAME WITH
PREVIOUS PUBLIC WORKS APPROPRIATIONS.
All things viewed in proper perspective, we reiterate what was said in Ponce v. Gomez (L21870) and Ponce v. City of Cebu (L-22669) that the term foreshore refers to that part of the land
adjacent to the sea which is alternately covered and left dry by the ordinary flow of the tides. As
opined by this Court in said cases:
WHEREAS, six (6) members of the Court (Justices Bautista Angelo, Concepcion, Reyes,
Barrera, Dizon and Jose P. Bengzon) opine that said city ordinance and contracts are ultra
vires and hence, null and void, insofar as the remaining 60% of the area aforementioned,
because the term foreshore lands as used in Republic Act No. 1899 should be understood
in the sense attached thereto by common parlance; (underscoring ours)
The aforesaid ruling was applied by then Secretary of Justice Claudio Teehankee, in his opinion
dated December 22, 1966, in a case with analogous facts as the present one, to wit:
December 22, 1966
The Secretary of Agriculture
and Natural Resources
Diliman, Quezon City
Sir:
xxx

I. Facts 1. On January 19, 1961, pursuant to the provisions of Republic Act No. 1899, the
Municipality of Navotas enacted Ordinance No. 1 authorizing the Municipal Mayor to enter
into a reclamation contract with Mr. Chuanico.
2. On March 15, 1961, a reclamation contract was concluded between the Municipality of
Navotas, represented by the Municipal Mayor, and Mr. Chuanico in accordance with the
above ordinance. Thereunder, Mr. Chuanico shall be the attorney-in-fact of the
Municipality in prosecuting the reclamation project and shall advance the money needed
therefor; that the actual expenses incurred shall be deemed a loan to the Municipality;
that Mr. Chuanico shall have the irrevocable option to buy 70% of the reclaimed area at
P7.00 per square meter; that he shall have the full and irrevocable powers to do any and
all things necessary and proper in and about the premises, including the power to hire
necessary personnel for the prosecution of the work, purchase materials and supplies,
and purchase or lease construction machineries and equipment, but any and all contracts
to be concluded by him in behalf of the Municipality shall be submitted to public bidding.
xxx
3. On March 16, 1961, the Municipal Council of Navotas passed Resolution No. 22
approving and ratifying the contract.
xxx
III. Comments 1. The above reclamation contract was concluded on the basis of Navotas Ordinance No.
1 which, in turn, had been enacted avowedly pursuant to Republic Act No. 1899. This
being so, the contract, in order to be valid, must conform to the provisions of the said
law.
By authorizing local governments to execute by administration any reclamation work,
(Republic Act No. 1899 impliedly forbids the execution of said project by contract. Thus,
in the case of Ponce et al. vs. Gomez (February 3, 1966), five justices of the Supreme
Court voted to annul the contract between Cebu Development Corporation and Cebu City
for the reclamation of foreshore lands because the provisions of said ... contract are
not ... in accordance with the provisions of Republic Act No. 1899, as against one Justice
who opined that the contract substantially complied with the provisions of the said
law. (Five Justices expressed no opinion on this point.)
Inasmuch as the Navotas reclamation contract is substantially similar to the Cebu
reclamation contract, it is believed that the former is likewise fatally defective.
2. The Navotas reclamation project envisages the construction of a channel along the
Manila Bay periphery of that town and the reclamation of approximately 650 hectares of
land from said channel to a seaward distance of one kilometer. In the basic letter it is
stated that practically, all the 650 hectares of lands proposed to be reclaimed under the
agreement do not constitute foreshore lands and that the greater portion of the area . . .
is in fact navigable and presently being used as a fishing harbor by deep-sea fishing
operators as well as a fishing ground of sustenance fisherman. Assuming the correctness
of these averments, the Navotas reclamation contract evidently transcends the authority
granted under Republic Act No. 1899, which empowers the local governments to reclaim
nothing more than foreshore lands, i.e., that part of the land adjacent to the sea which is
alternately covered and left dry by the ordinary flow of the tides. (26 C.J. 890.) It was for
this reason that in the cited case Ponce case, the Supreme Court, by a vote of 6-0 with
five Justices abstaining, declared ultra vires and void the contractual stipulation for the
reclamation of submerged lands off Cebu City, and permanently enjoined its execution
under Republic Act No. 1899.
xxx
In accordance with the foregoing, I have the honor to submit the view that the Navotas
reclamation contract is not binding and should be disregarded for non-compliance with
law.
Very truly yours,

(SGD) CLAUDIO TEEHANKEE

Secretary of Justice
The said opinion of Justice Secretary Teehankee who became Associate Justice, and later Chief
Justice, of this Court, did, in our considered view, supersede the earlier opinion of former Justice
Secretary Alejo Mabanag, aforestated, as the cases, in connection with which subject opinions were
sought, were with similar facts. The said Teehankee opinion accords with RA 1899.
It bears stressing that the subject matter of Pasay City Ordinance No. 121, as amended by
Ordinance No. 158, and the Agreement under attack, have been found to be outside the
intendment and scope of RA 1899, and therefore ultra vires and null and void.
What is worse, the same Agreement was vitiated by the glaring absence of a public bidding.
Obviously, there is a complete dearth of evidence to prove that RREC had really reclaimed 55
hectares. The letter of Minister Baltazar Aquino relied upon by RREC is no proof at all that RREC
had reclaimed 55 hectares. Said letter was just referring to a tentative schedule of work to be done
by RREC, even as it required RREC to submit the pertinent papers to show its supposed
accomplishment, to secure approval by the Ministry of Public Works and Highways to the
reclamation plan, and to submit to a public bidding all contracts and sub-contracts for subject
reclamation project but RREC never complied with such requirements and conditions sine qua non.
No contracts or sub-contracts or agreements, plans, designs, and/or specifications of the
reclamation project were presented to reflect any accomplishment.Not even any statement or
itemization of works accomplished by contractors or subcontractors or vouchers and other relevant
papers were introduced to describe the extent of RRECs accomplishment. Neither was the requisite
certification from the City Engineer concerned that portions of the reclamation project not less than
50 hectares in area shall have been accomplished or completed obtained and presented by RREC.
As a matter of fact, no witness ever testified on any reclamation work done by RREC,
and extent thereof, as of April 26, 1962. Not a single contractor, sub-contractor, engineer,
surveyor, or any other witness involved in the alleged reclamation work of RREC testified on the 55
hectares supposedly reclaimed by RREC. What work was done, who did the work, where was it
commenced, and when was it completed, was never brought to light by any witness before the
court. Certainly, onus probandi was on RREC and Pasay City to show and point out the as yet
unidentified 55 hectares they allegedly reclaimed. But this burden of proof RREC and Pasay City
miserably failed to discharge.
So also, in the decision of the Pasay Court of First Instance dismissing the complaint of
plaintiff-appellant, now petitioner Republic of the Philippines, the lifting of the writ of Preliminary
Injunction issued on April 26, 1962 would become effective only as soon as Defendant Republic
Real Estate Corporation and Defendant Pasay City shall have submitted the corresponding plans
and specifications to the Director of Public Works, and shall have obtained approval thereof, and as
soon as corresponding public bidding for the award to the contractor and sub-contractor that will
undertake the reclamation project shall have been effected. (Rollo, pp. 127-129, G.R. No. 103882)
From the records on hand, it is abundantly clear that RREC and Pasay City never complied with
such prerequisites for the lifting of the writ of Preliminary Injunction. Consequently, RREC had no
authority to resume its reclamation work which was stopped by said writ of preliminary injunction
issued on April 26, 1962.
From the Contract for Dredging Work, dated November 26, 1960, marked Exhibit 21-A for
RREC before the lower court, and Exhibit EE for CCP before the Court of Appeals, it can be deduced
that only on November 26, 1960 did RREC contract out the dredging work to C and A Construction
Company, Inc., for the reclamation of the 55 hectares initially programmed to be reclaimed by
it. But, as stated by RREC itself in the position paper filed with this Court on July 15, 1997, with
reference to CDCPs reclamation work, mobilization of the reclamation team would take one year
before a reclamation work could actually begin. Therefore, the reclamation work undertaken by
RREC could not have started before November 26, 1961.
Considering that on April 26, 1962 RREC was enjoined from proceeding any further with its
reclamation work, it had barely five (5) months, from November, 1961 to April, 1962, to work on
subject reclamation project. It was thus physically impossible for RREC to reclaim 55 hectares, with
the stipulated specifications and elevation, in such a brief span of time. In the report of
RREC (Exhibit DD for CCP), it was conceded that due to the writ of preliminary injunction issued on
April 26, 1962, C and A Construction Co., Inc. had suspended its dredging operation since May,
1962.

The graphical report on the Pasay Reclamation project, as of April 30, 1962, attached to the
Progress Report marked Exhibit DD, is a schematic representation of the work accomplishment
referred to in such Progress Report, indicating the various elevations of the land surface it
embraced, ranging from 0.00 meters to the highest elevation of 2.5 meters above MLLW. Such
portrayal of work accomplished is crucial in our determination of whether or not RREC had actually
reclaimed any land as under its Contract for Dredging Work with C and A Construction
Company (Exhibit EE), the required final elevation for a completely reclaimed land was 3.5 meters
above MLLW, as explicitly provided in said Contract for Dredging Work. So, the irresistible
conclusion is - when the work on subject RREC-Pasay City reclamation project stopped in April,
1962 in compliance with the writ of preliminary injunction issued by the trial court of origin, no
portion of the reclamation project worked on by RREC had reached the stipulated elevation of 3.5
meters above MLLW. The entire area it worked on was only at sea level or 0.00 meter above
MLLW. In short, RREC had not yet reclaimed any area when the writ of preliminary injunction issued
in April 1962.
On this point, the testimonies of Architect Ruben M. Protacio, Architect and Managing partner
of Leandro V. Locsin and partners, Architect and City Planner Manuel T. Maoza, Jr. of Planning
Resources and Operation System, Inc., Rose D. Cruz, Executive Assistant, Office of the President,
from 1966 to 1970, and Dr. Lucrecia Kasilag, National Artist and member of CCP Advisory
Committee, come to the fore. These credible, impartial and knowledgeable witnesses recounted on
the witness stand that when the construction of the Main Building of the Cultural Center of the
Philippines (CCP) began in 1966, the only surface land available was the site for the said
building (TSN, Sept. 29, 1997, pages 8, 14 and 50), what could be seen in front of and behind it
was all water (TSN, Sept. 29, 1997, pages 127-128). When the CCP Main Building was being
constructed, from 1966 to 1969, the land above sea level thereat was only where the CCP Main
Building was erected and the rest of the surroundings were all under water, particularly the back
portion fronting the bay. (TSN, Sept. 13, 1997, pp. 181, 182, 185, 186, 188). Dr. Lucrecia R. Kasilag
stressed that on April 16, 1966, during the ground breaking for the CCP Main Building, it was water
all around (TSN, Sept. 30, 1997, pp. 320, 324, 325).
There was indeed no legal and factual basis for the Court of Appeals to order and declare that
the requirement by the trial court on public bidding and the submission of RRECs plans and
specification to the Department of Public Works and Highways in order that RREC may continue the
implementation of the reclamation work is deleted for being moot and academic. Said requirement
has never become moot and academic. It has remained indispensable, as ever, and noncompliance therewith restrained RREC from lawfully resuming the reclamation work under
controversy, notwithstanding the rendition below of the decision in its favor.
Verily, contrary to what the Court of Appeals found, RREC had not reclaimed any area with the
prescribed elevation of 3.5 meters above MLLW, so much so that in 1978, it (RREC) opted to file
with the former Ministry of Public Highways, a claim for compensation of P30,396,878.20, for
reclamation work allegedly done before the CDCP started working on the reclamation of the CCP
grounds. On September 7, 1979, RREC asked the Solicitor General to settle its subject claim for
compensation at the same amount of P30,396,878.20. But on June 10, 1981, guided by the cost
data, work volume accomplished and other relevant information gathered by the former Ministry of
Public Highways, the Solicitor General informed RREC that the value of what it had accomplished,
based on 1962 price levels, was only P8,344,741.29, and the expenses for mobilization of
equipment amounted to P2,581,330.00. The aforesaid evaluation made by the government,
through the then Minister of Public Highways, is factual and realistic, so much so that on June 25,
1981, RREC, in its reply letter to the Solicitor General, stated:
We regret that we are not agreeable to the amount of P10,926,071.29, based on 1962 cost
data, etc., as compensation based on quantum meruit. The least we would consider is the
amount of P10.926,071.29 plus interest at the rate of 6% per annum from 1962 to the time of
payment. We feel that 6% is very much less than the accepted rate of inflation that has
supervened since 1962 to the present, and even less than the present legal rate of 12% per
annum.[19]
Undoubtedly, what RREC claimed for was payment for what it had done, and for the dredge fill
of 1,558,395 cubic meters it used, on subject reclamation project.
Respondent Court likewise erred in ordering the turn-over to Pasay City of the following titled
lots, to wit:
LOT NO. BUILDING AREA OCT/TCT
42 Gloria Maris 9,516 sq.m. OCT 159 in the Restaurant name of GSIS

3 Asean Garden 76,299 sq.m. OCT 10251 in the

name of CCP
12 Folk Arts Theater 1.7503 sq.m. TCT 18627 in the
and PICC parking name of CCP
space
22 landscaped with 132,924 sq.m. TCT 75676 in the
sculpture of Asean name of CCP
Artists-site of
Boom na Boom
23 open space, back 34,346 sq.m. TCT 75677 in the
of Philcite name of CCP
24 Parking space for 10,352 sq.m. TCT 75678 in the
Star City, CCP, name of CCP
Philcite
25 open space, 11,323 sq.m. TCT 75679 in the
occupied by Star name of CCP
City
28 open space, 27,689 sq.m. TCT 75684 in the
beside PICC name of CCP
29 open space, 106,067 sq.m. TCT 75681 in the
leased by El name of CCP
Shaddai
We discern no factual basis nor any legal justification therefor. In the first place, in their answer to
the Complaint and Amended Complaint below, RREC and Pasay City never prayed for the transfer
to Pasay City of subject lots, title to which had long become indefeasible in favor of the rightful title
holders, CCP and GSIS, respectively.
The annotation of a notice of lis pendens on the certificates of title covering the said lots is of
no moment. It did not vest in Pasay City and RREC any real right superior to the absolute
ownership thereover of CCP and GSIS. Besides, the nature of the action did not really warrant the
issuance of a notice of lis pendens.
Section 14 of Rule 13, Revised Rules of Civil Procedure, reads:
Sec. 14. Notice of lis pendens. - In an action affecting the title or the right of possession of
real property, the plaintiff and the defendant, when affirmative relief is claimed in his
answer, may record in the office of the registry of deeds of the province in which the
property is situated a notice of the pendency of the action. Said notice shall contain the
names of the parties and the object of the action or defense, and a description of the
property in that province affected thereby. Only from the time of filing such notice for
record shall a purchaser, or encumbrancer of the property affected thereby, be deemed to
have constructive notice of the pendency of the action, and only of its pendency against
the parties designated by their real names.
The notice of lis pendens herein above mentioned may be cancelled only upon order of
the court, after proper showing that the notice is for the purpose of molesting the adverse
party, or that it is not necessary to protect the rights of the party who caused it to be
recorded.
Under the aforecited provision of law in point, a notice of lis pendens is necessary when the
action is for recovery of possession or ownership of a parcel of land. In the present litigation, RREC
and Pasay City, as defendants in the main case, did not counterclaim for the turnover to Pasay City
of the titled lots aforementioned.
What is more, a torrens title cannot be collaterally attacked. The issue of validity of a torrens
title, whether fraudulently issued or not, may be posed only in an action brought to impugn or
annul it. (Halili vs. National Labor Relations Commission, 257 SCRA 174; Cimafranca vs.
Intermediate Appellate Court, 147 SCRA 611.) Unmistakable, and cannot be ignored, is the
germane provision of Section 48 of P.D. 1529, that a certificate of title can never be the subject of a

collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding

instituted in accordance with law.
Although Pasay City and RREC did not succeed in their undertaking to reclaim any area within
subject reclamation project, it appearing that something compensable was accomplished by them,
following the applicable provision of law and hearkening to the dictates of equity, that no one, not
even the government, shall unjustly enrich oneself/itself at the expense of another [20], we believe;
and so hold, that Pasay City and RREC should be paid for the said actual work done and dredge-fill
poured in, worth P10,926,071.29, as verified by the former Ministry of Public Highways, and as
claimed by RREC itself in its aforequoted letter dated June 25, 1981.
It is fervently hoped that long after the end of our sojourn in this valley of tears, the court, for
its herein historic disposition, will be exalted by the future generations of Filipinos, for the
preservation of the national patrimony and promotion of our cultural heritage. As writer Channing
rightly puts it: Whatever expands the affections, or enlarges the sphere of our sympathies Whatever makes us feel our relation to the universe and all that it inherits in time and in
eternity, and to the great and beneficent cause of all, must unquestionably refine our nature, and
elevate us in the scale of being.
WHEREFORE:
In G.R. No. 103882, the Petition is GRANTED; the Decision, dated January 28, 1992, and
Amended Decision, dated April 28, 1992, of the Court of Appeals, are both SET ASIDE; and Pasay
City Ordinance No. 121, dated May 6, 1958, and Ordinance No. 158, dated April 21, 1959, as well
as the Reclamation Agreements entered into by Pasay City and Republic Real Estate
Corporation (RREC) as authorized by said city ordinances, are declared NULL and VOID for
being ultra vires, and contrary to Rep. Act 1899.
The writ of preliminary injunction issued on April 26, 1962 by the trial court a quo in Civil Case
No. 2229-P is made permanent, and the notice of lis pendens issued by the Court of Appeals in CA
G.R. CV No. 51349 ordered CANCELLED. The Register of Deeds of Pasay City is directed to take note
of and annotate on the certificates of title involved, the cancellation of subject notice of lis
pendens.
The petitioner, Republic of the Philippines, is hereby ordered to pay Pasay City and Republic
Real Estate Corporation the sum of TEN MILLION NINE HUNDRED TWENTY-SIX THOUSAND SEVENTYONE AND TWENTY-NINE CENTAVOS (P10,926,071.29) PESOS, plus interest thereon of
six (6%)percent per annum from May 1, 1962 until full payment, which amount shall be divided by
Pasay City and RREC, share and share alike.
In G.R. No. 105276, the Petition is hereby DENIED for lack of merit.
No pronouncement as to costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 184203

November 26, 2014

CITY OF LAPU-LAPU, Petitioner,

vs.
PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.
x-----------------------x
G.R. No. 187583
PROVINCE OF BATAAN, represented by GOVERNOR ENRIQUE T. GARCIA, JR., and
EMERLINDA S. TALENTO, in her capacity as Provincial Treasurer of Bataan, Petitioners,

vs.
PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.
Remedial Law; Civil Procedure; Appeals; Under the Rules of Court, there are three (3) modes of
appeal from Regional Trial Court (RTC) decisions.Under the Rules of Court, there are three modes
of appeal from Regional Trial Court decisions. The first mode is through an ordinary appeal before
the Court of Appeals where the decision assailed was rendered in the exercise of the Regional Trial
Courts original jurisdiction. Ordinary appeals are governed by Rule 41, Sections 3 to 13 of the
Rules of Court. In ordinary appeals, questions of fact or mixed questions of fact and law may be
raised. The second mode is through a petition for review before the Court of Appeals where the
decision assailed was rendered by the Regional Trial Court in the exercise of its appellate
jurisdiction. Rule 42 of the Rules of Court governs petitions for review before the Court of Appeals.
In petitions for review under Rule 42, questions of fact, of law, or mixed questions of fact and law
may be raised. The third mode is through an appeal by certiorari before this court under Rule 45
where only questions of law shall be raised.
Same; Same; Same; Question of Fact and Question of Law, Distinguished.A question of fact
exists when there is doubt as to the truth or falsity of the alleged facts. On the other hand, there is
a question of law if the appeal raises doubt as to the applicable law on a certain set of facts.
Same; Same; Same; Under Rule 50, Section 2, an improper appeal before the Court of Appeals (CA)
is dismissed outright and shall not be referred to the proper court.Under Rule 50, Section 2, an
improper appeal before the Court of Appeals is dismissed outright and shall not be referred to the
proper court: SEC. 2. Dismissal of improper appeal to the Court of Appeals.An appeal under Rule
41 taken from the Regional Trial Court to the Court of Appeals raising only questions of law shall be
dismissed, issues purely of law not being reviewable by said court. Similarly, an appeal by notice of
appeal instead of by petition for review from the appellate judgment of a Regional Trial Court shall
be dismissed. An appeal erroneously taken to the Court of Appeals shall not be transferred to the
appropriate court but shall be dismissed outright. Rule 50, Section 2 repealed Rule 50, Section 3 of
the 1964 Rules of Court, which provided that improper appeals to the Court of Appeals shall not be
dismissed but shall be certified to the proper court for resolution: Sec. 3. Where appealed case
erroneously, brought.Where the appealed case has been erroneously brought to the Court of
Appeals, it shall not dismiss the appeal, but shall certify the case to the proper court, with a
specific and clear statement of the grounds therefor.
Same; Same; Same; Petition for Review on Certiorari; With respect to appeals by certiorari directly
filed before the Supreme Court (SC) but which raise questions of fact, paragraph 4(b) of Circular
No. 2-90 dated March 9, 1990 states that the SC retains the option, in the exercise of its sound
discretion and considering the attendant circumstances, either itself to take cognizance of and
decide such issues or to refer them to the Court of Appeals (CA) for determination.With respect
to appeals by certiorari directly filed before this court but which raise questions of fact, paragraph
4(b) of Circular No. 2-90 dated March 9, 1990 states that this court retains the option, in the
exercise of its sound discretion and considering the attendant circumstances, either itself to take
cognizance of and decide such issues or to refer them to the Court of Appeals for determination.
Same; Special Civil Actions; Jurisdiction; Courts; Regional Trial Courts; Declaratory Relief; The court
with jurisdiction over petitions for declaratory relief is the Regional Trial Court (RTC), the subject
matter of litigation in an action for declaratory relief being incapable of pecuniary estimation.
Section 19 of the Judiciary Reorganization Act of 1980 provides: SEC. 19. Jurisdiction in Civil Cases.
Regional Trial Courts shall exercise exclusive original jurisdiction: (1) In all civil actions in which
the subject of litigation is incapable of pecuniary estimation[.] Consistent with the law, the Rules
state that a petition for declaratory relief is filed in the appropriate Regional Trial Court. A special
civil action for declaratory relief is filed for a judicial determination of any question of construction
or validity arising from, and for a declaration of rights and duties, under any of the following
subject matters: a deed, will, contract or other written instrument, statute, executive order or
regulation, ordinance, or any other governmental regulation. However, a declaratory judgment may
issue only if there has been no breach of the documents in question. If the contract or statute
subject matter of the action has already been breached, the appropriate ordinary civil action must
be filed. If adequate relief is available through another form of action or proceeding, the other
action must be preferred over an action for declaratory relief.
Same; Same; Same; Same; Same; Same; It is required that the parties to the action for declaratory
relief be those whose rights or interests are affected by the contract or statute in question.It is
also required that the parties to the action for declaratory relief be those whose rights or interests

are affected by the contract or statute in question. There must be an actual justiciable controversy
or the ripening seeds of one between the parties. The issue between the parties must be ripe
for judicial determination. An action for declaratory relief based on theoretical or hypothetical
questions cannot be filed for our courts are not advisory courts.
Same; Same; Same; Jurisdiction over the subject matter is the power to hear and determine cases
of the general class to which the proceedings in question belong.There are several aspects of
jurisdiction. Jurisdiction over the subject matter is the power to hear and determine cases of the
general class to which the proceedings in question belong. It is conferred by law, which may either
be the Constitution or a statute. Jurisdiction over the subject matter means the nature of the
cause of action and the relief sought. Thus, the cause of action and character of the relief sought
as alleged in the complaint are examined to determine whether a court had jurisdiction over the
subject matter. Any decision rendered by a court without jurisdiction over the subject matter of the
action is void.
Same; Civil Procedure; Jurisdiction; Jurisdiction over the person of the defendant is indispensable in
actions in personam or those actions based on a partys personal liability.Another aspect of
jurisdiction is jurisdiction over the person. It is the power of [a] court to render a personal
judgment or to subject the parties in a particular action to the judgment and other rulings rendered
in the action. A court automatically acquires jurisdiction over the person of the plaintiff upon the
filing of the initiatory pleading. With respect to the defendant, voluntary appearance in court or a
valid service of summons vests the court with jurisdiction over the defendants person. Jurisdiction
over the person of the defendant is indispensable in actions in personam or those actions based on
a partys personal liability. The proceedings in an action in personam are void if the court had no
jurisdiction over the person of the defendant.
Same; Same; Same; Jurisdiction over the res is necessary in actions in rem or those actions
directed against the thing or property or status of a person and seek judgments with respect
thereto as against the whole world.Jurisdiction over the res or the thing under litigation is
acquired either by the seizure of the property under legal process, whereby it is brought into
actual custody of the law; or as a result of the institution of legal proceedings, in which the power
of the court is recognized and made effective. Jurisdiction over the res is necessary in actions in
rem or those actions directed against the thing or property or status of a person and seek
judgments with respect thereto as against the whole world. The proceedings in an action in rem
are void if the court had no jurisdiction over the thing under litigation.
Taxation; Assessment; Exhaustion of Administrative Remedies; In case of an erroneous assessment,
the taxpayer must exhaust the administrative remedies provided under the Local Government
Code (LGC) before resorting to judicial action.Once an assessment has already been issued by
the assessor, the proper remedy of a taxpayer depends on whether the assessment was erroneous
or illegal. An erroneous assessment presupposes that the taxpayer is subject to the tax but is
disputing the correctness of the amount assessed. With an erroneous assessment, the taxpayer
claims that the local assessor erred in determining any of the items for computing the real property
tax, i.e., the value of the real property or the portion thereof subject to tax and the proper
assessment levels. In case of an erroneous assessment, the taxpayer must exhaust the
administrative remedies provided under the Local Government Code before resorting to judicial
action.
Same; Same; Payment under protest and appeal to the Local Board of Assessment Appeals (LBAA)
are successive administrative remedies to a taxpayer who questions the correctness of an
assessment.Payment under protest and appeal to the Local Board of Assessment Appeals are
successive administrative remedies to a taxpayer who questions the correctness of an
assessment. The Local Board Assessment Appeals shall not entertain an appeal without the
action of the local assessor on the protest. If the taxpayer is still unsatisfied after appealing with
the Local Board of Assessment Appeals, the taxpayer may appeal with the Central Board of
Assessment Appeals within 30 days from receipt of the Local Boards decision.
Same; Same; In case of an illegal assessment, the taxpayer may directly resort to judicial action
without paying under protest the assessed tax and filing an appeal with the Local and Central
Board of Assessment Appeals (CBAA).On the other hand, an assessment is illegal if it was made
without authority under the law. In case of an illegal assessment, the taxpayer may directly resort
to judicial action without paying under protest the assessed tax and filing an appeal with the Local
and Central Board of Assessment Appeals.

Remedial Law; Injunction; Words and Phrases; Injunction is a judicial writ, process or proceeding
whereby a party is ordered to do or refrain from doing a certain act.Injunction is a judicial writ,
process or proceeding whereby a party is ordered to do or refrain from doing a certain act. It may
be the main action or merely a provisional remedy for and as incident in the main action. The
essential requisites of a writ of injunction are: (1) there must be a right in esse or the existence of
a right to be protected; and (2) the act against which the injunction is directed to constitute a
violation of such right.
Same; Civil Procedure; Jurisdiction; Objections to jurisdiction cannot be waived and may be brought
at any stage of the proceedings, even on appeal.Jurisdiction is the power to hear and determine
cases of the general class to which the proceedings in question belong. Jurisdiction is a matter of
substantive law. Thus, an action may be filed only with the court or tribunal where the Constitution
or a statute says it can be brought. Objections to jurisdiction cannot be waived and may be brought
at any stage of the proceedings, even on appeal. When a case is filed with a court which has no
jurisdiction over the action, the court shall motu proprio dismiss the case.
Same; Same; Venue; A partys objections to venue must be brought at the earliest opportunity
either in a motion to dismiss or in the answer; otherwise the objection shall be deemed waived.
Venue is the place of trial or geographical location in which an action or proceeding should be
brought. In civil cases, venue is a matter of procedural law. A partys objections to venue must be
brought at the earliest opportunity either in a motion to dismiss or in the answer; otherwise the
objection shall be deemed waived. When the venue of a civil action is improperly laid, the court
cannot motu proprio dismiss the case.
Same; Same; Same; The venue of an action depends on whether the action is a real or personal
action.The venue of an action depends on whether the action is a real or personal action. Should
the action affect title to or possession of real property, or interest therein, it is a real action. The
action should be filed in the proper court which has jurisdiction over the area wherein the real
property involved, or a portion thereof, is situated. If the action is a personal action, the action shall
be filed with the proper court where the plaintiff or any of the principal plaintiffs resides, or where
the defendant or any of the principal defendants resides, or in the case of a nonresident defendant
where he may be found, at the election of the plaintiff.
Same; Same; Judgments; Judgment on the Merits; Words and Phrases; A judgment on the merits is
one which determines the rights and liabilities of the parties based on the disclosed facts,
irrespective of the formal, technical or dilatory objections.Appeal is the remedy to obtain a
reversal or modification of a judgment on the merits. A judgment on the merits is one which
determines the rights and liabilities of the parties based on the disclosed facts, irrespective of the
formal, technical or dilatory objections. It is not even necessary that the case proceeded to trial.
So long as the judgment is general and the parties had a full legal opportunity to be heard on
their respective claims and contentions, the judgment is on the merits.
Same; Same; Appeals; Petition for Review on Certiorari; An appeal before the Supreme Court (SC)
raising pure questions of law is commenced by filing a petition for review on certiorari under Rule
45 of the Rules of Court.In our jurisdiction, the term certiorari is used in two ways. An appeal
before this court raising pure questions of law is commenced by filing a petition for review on
certiorari under Rule 45 of the Rules of Court. An appeal by certiorari, which continues the
proceedings commenced before the lower courts, is filed to reverse or modify judgments or final
orders. Under the Rules, an appeal by certiorari must be filed within 15 days from notice of the
judgment or final order, or of the denial of the appellants motion for new trial or reconsideration.
Same; Special Civil Actions; Certiorari; A petition for certiorari under Rule 65, is an independent and
original action filed to set aside proceedings conducted without or in excess of jurisdiction or with
grave abuse of discretion amounting to lack or excess of jurisdiction.A petition for certiorari
under Rule 65, on the other hand, is an independent and original action filed to set aside
proceedings conducted without or in excess of jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction. Under the Rules, a petition for certiorari may only be
filed if there is no appeal or any plain, speedy, or adequate remedy in the ordinary course of law.
The petition must be filed within 60 days from notice of the judgment, order, or resolution.
Taxation; Real Property Taxes; Real property taxes are collected by the Local Treasurer, not by the
Bureau of Internal Revenue (BIR) in charge of collecting national internal revenue taxes, fees, and
charges.The local tax cases referred to in Section 7, paragraph (a)(3) of Republic Act No. 1125, as
amended, include cases involving real property taxes. Real property taxation is governed by Book II

of the Local Government Code on Local Taxation and Fiscal Matters. Real property taxes are
collected by the Local Treasurer, not by the Bureau of Internal Revenue in charge of collecting
national internal revenue taxes, fees, and charges. Section 7, paragraph (a)(5) of Republic Act No.
1125, as amended by Republic Act No. 9282, separately provides for the exclusive appellate
jurisdiction of the Court of Tax Appeals over decisions of the Central Board of Assessment Appeals
involving the assessment or collection of real property taxes.
Remedial Law; Civil Procedure; Courts; Court of Tax Appeals; Jurisdiction; The Supreme Court (SC)
has ruled that the Court of Tax Appeals (CTA), not the Court of Appeals (CA), has the exclusive
original jurisdiction over petitions for certiorari assailing interlocutory orders issued by Regional
Trial Courts (RTCs) in a local tax case.We have also ruled that the Court of Tax Appeals, not the
Court of Appeals, has the exclusive original jurisdiction over petitions for certiorari assailing
interlocutory orders issued by Regional Trial Courts in a local tax case. We explained in The City of
Manila v. Hon. Grecia-Cuerdo, 715 SCRA 182 (2014), that while the Court of Tax Appeals has no
express grant of power to issue writs of certiorari under Republic Act No. 1125, as amended, the
tax courts judicial power as defined in the Constitution includes the power to determine whether
or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of the [Regional Trial Court] in issuing an interlocutory order of jurisdiction in cases falling
within the exclusive appellate jurisdiction of the tax court.
Same; Same; Exhaustion of Administrative Remedies; Exhaustion of administrative remedies under
the Local Government Code (LGC) is necessary in cases of erroneous assessments where the
correctness of the amount assessed is assailed.Exhaustion of administrative remedies under the
Local Government Code is necessary in cases of erroneous assessments where the correctness of
the amount assessed is assailed. The taxpayer must first pay the tax then file a protest with the
Local Treasurer within 30 days from date of payment of tax. If protest is denied or upon the lapse of
the 60-day period to decide the protest, the taxpayer may appeal to the Local Board of Assessment
Appeals within 60 days from the denial of the protest or the lapse of the 60-day period to decide
the protest. The Local Board of Assessment Appeals has 120 days to decide the appeal.
Taxation; Local Board of Assessment Appeals; If the taxpayer is unsatisfied with the Local Boards
decision, the taxpayer may decision.If the taxpayer is unsatisfied with the Local Boards decision,
the taxpayer may appeal before the Central Board of Assessment Appeals within 30 days from
receipt of the Local Boards decision. The decision of the Central Board of Assessment Appeals is
appealable before the Court of Tax Appeals En Banc. The appeal before the Court of Tax Appeals
shall be filed following the procedure under Rule 43 of the Rules of Court. The Court of Tax Appeals
decision may then be appealed before this court through a petition for review on certiorari under
Rule 45 of the Rules of Court raising pure questions of law.
Assessment; Exhaustion of Administrative Remedies; In case of an illegal assessment where the
assessment was issued without authority, exhaustion of administrative remedies is not necessary
and the taxpayer may directly resort to judicial action.In case of an illegal assessment where the
assessment was issued without authority, exhaustion of administrative remedies is not necessary
and the taxpayer may directly resort to judicial action. The taxpayer shall file a complaint for
injunction before the Regional Trial Court to enjoin the local government unit from collecting real
property taxes. The party unsatisfied with the decision of the Regional Trial Court shall file an
appeal, not a petition for certiorari, before the Court of Tax Appeals, the complaint being a local tax
case decided by the Regional Trial Court. The appeal shall be filed within fifteen (15) days from
notice of the trial courts decision.
Taxation; Notice of Delinquency; Injunction; In case the local government unit (LGU) has issued a
notice of delinquency, the taxpayer may file a complaint for injunction to enjoin the impending sale
of the real property at public auction.In case the local government unit has issued a notice of
delinquency, the taxpayer may file a complaint for injunction to enjoin the impending sale of the
real property at public auction. In case the local government unit has already sold the property at
public auction, the taxpayer must first deposit with the court the amount for which the real
property was sold, together with interest of 2% per month from the date of sale to the time of the
institution of action. The taxpayer may then file a complaint to assail the validity of the public
auction. The decisions of the Regional Trial Court in these cases shall be appealable before the
Court of Tax Appeals, and the latters decisions appealable before this court through a petition for
review on certiorari under Rule 45 of the Rules of Court.
Same; Real Property Taxes; Real property taxes are annual taxes levied on real property such as
lands, buildings, machinery, and other improvements not otherwise specifically exempted under

the Local Government Code (LGC).Real property taxes are annual taxes levied on real property
such as lands, buildings, machinery, and other improvements not otherwise specifically exempted
under the Local Government Code. Real property taxes are ad valorem, with the amount charged
based on a fixed proportion of the value of the property. Under the law, provinces, cities, and
municipalities within the Metropolitan Manila Area have the power to levy real property taxes within
their respective territories. The general rule is that real properties are subject to real property
taxes. This is true especially since the Local Government Code has withdrawn exemptions from real
property taxes of all persons, whether natural or juridical.
Same; Same; Tax Exemptions; For persons granted tax exemptions or incentives before the
effectivity of the Local Government Code (LGC), Section 193 withdrew these tax exemption
privileges; Nevertheless, local government units (LGUs) may grant tax exemptions under such
terms and conditions as they may deem necessary.For persons granted tax exemptions or
incentives before the effectivity of the Local Government Code, Section 193 withdrew these tax
exemption privileges. These persons consist of both natural and juridical persons, including
government-owned or -controlled corporations: SEC. 193. Withdrawal of Tax Exemption Privileges.
Unless otherwise provided in this code, tax exemptions or incentives granted to or presently
enjoyed by all persons, whether natural or juridical, including government-owned or -controlled
corporations, except local water districts, cooperatives duly registered under R.A. 6938, non-stock
and nonprofit hospitals and educational institutions, are hereby withdrawn upon effectivity of this
Code. As discussed, Section 234 withdrew all tax privileges with respect to real property taxes.
Nevertheless, local government units may grant tax exemptions under such terms and conditions
as they may deem necessary.
Same; Same; Same; In Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667
(1996), the Supreme Court (SC) classified the exemptions from real property taxes into ownership,
character, and usage exemptions.In Mactan Cebu International Airport Authority v. Marcos, 261
SCRA 667 (1996), this court classified the exemptions from real property taxes into ownership,
character, and usage exemptions. Ownership exemptions are exemptions based on the ownership
of the real property. The exemptions of real property owned by the Republic of the Philippines,
provinces, cities, municipalities, barangays, and registered cooperatives fall under this
classification. Character exemptions are exemptions based on the character of the real property.
Thus, no real property taxes may be levied on charitable institutions, houses and temples of prayer
like churches, parsonages, or convents appurtenant thereto, mosques, and nonprofit or religious
cemeteries. Usage exemptions are exemptions based on the use of the real property. Thus, no real
property taxes may be levied on real property such as: (1) lands and buildings actually, directly,
and exclusively used for religious, charitable or educational purpose; (2) machineries and
equipment actually, directly and exclusively used by local water districts or by government-owned
or -controlled corporations engaged in the supply and distribution of water and/or generation and
transmission of electric power; and (3) machinery and equipment used for pollution control and
environmental protection.
Same; Philippine Economic Zone Authority; The Philippine Economic Zone Authority (PEZA) is an
instrumentality of the national government. It is not integrated within the department framework
but is an agency attached to the Department of Trade and Industry (DTI).An instrumentality is
any agency of the National Government, not integrated within the department framework, vested
with special functions or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually through a charter.
Examples of instrumentalities of the national government are the Manila International Airport
Authority, the Philippine Fisheries Development Authority, the Government Service Insurance
System, and the Philippine Reclamation Authority. These entities are not integrated within the
department framework but are nevertheless vested with special functions to carry out a declared
policy of the national government. Similarly, the PEZA is an instrumentality of the national
government. It is not integrated within the department framework but is an agency attached to the
Department of Trade and Industry.
Same; Same; Special Economic Zones; Congress created the Philippine Economic Zone Authority
(PEZA) to operate, administer, manage and develop special economic zones in the Philippines.
Special economic zones are areas with highly developed or which have the potential to be
developed into agro-industrial, industrial tourist/recreational, commercial, banking, investment and
financial centers.As an instrumentality of the national government, the PEZA is vested with
special functions or jurisdiction by law. Congress created the PEZA to operate, administer, manage
and develop special economic zones in the Philippines. Special economic zones are areas with
highly developed or which have the potential to be developed into agro-industrial, industrial
tourist/recreational, commercial, banking, investment and financial centers.

Same; Same; Tax Exemptions; Real Property Taxes; Being an instrumentality of the national
government, the Philippine Economic Zone Authority (PEZA) cannot be taxed by local government
units (LGUs).Being an instrumentality of the national government, the PEZA cannot be taxed by
local government units. Although a body corporate vested with some corporate powers, the PEZA is
not a government-owned or -controlled corporation taxable for real property taxes.
Government-Owned or -Controlled Corporations; Under the Constitution, government-owned or
-controlled corporations (GOCCs) are created in the interest of the common good and should satisfy
the test of economic viability.Government entities are created by law, specifically, by the
Constitution or by statute. In the case of government-owned or -controlled corporations, they are
incorporated by virtue of special charters to participate in the market for special reasons which
may be related to dysfunctions or inefficiencies of the market structure. This is to adjust reality as
against the concept of full competition where all market players are price takers. Thus, under the
Constitution, government-owned or -controlled corporations are created in the interest of the
common good and should satisfy the test of economic viability. Article XII, Section 16 of the
Constitution provides: Section 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Government-owned or -controlled
corporations may be created or established by special charters in the interest of the common good
and subject to the test of economic viability.
Government Instrumentality; When a government entity performs sovereign functions, it need not
meet the test of economic viability.Government instrumentalities, on the other hand, are also
created by law but partake of sovereign functions. When a government entity performs sovereign
functions, it need not meet the test of economic viability.
Philippine Economic Zone Authority; Under the Special Economic Zone Act of 1995, the Philippine
Economic Zone Authority (PEZA) was established primarily to perform the governmental function of
operating, administering, managing, and developing special economic zones to attract investments
and provide opportunities for preferential use of Filipino labor.The law created the PEZAs charter.
Under the Special Economic Zone Act of 1995, the PEZA was established primarily to perform the
governmental function of operating, administering, managing, and developing special economic
zones to attract investments and provide opportunities for preferential use of Filipino labor. Under
its charter, the PEZA was created a body corporate endowed with some corporate powers.
However, it was not organized as a stock or non-stock corporation. Nothing in the PEZAs charter
provides that the PEZAs capital is divided into shares. The PEZA also has no members who shall
share in the PEZAs profits.
Same; Taxation; Tax Exemptions; Real Property Taxes; The Supreme Court (SC) ruled that the
Philippine Economic Zone Authority (PEZA) is exempt from real property taxes by virtue of its
charter. A provision in the Special Economic Zone Act of 1995 explicitly exempting the PEZA is
unnecessary.We rule that the PEZA is exempt from real property taxes by virtue of its charter. A
provision in the Special Economic Zone Act of 1995 explicitly exempting the PEZA is unnecessary.
The PEZA assumed the real property exemption of the EPZA under Presidential Decree No. 66.
Section 11 of the Special Economic Zone Act of 1995 mandated the EPZA to evolve into the PEZA
in accordance with the guidelines and regulations set forth in an executive order issued for this
purpose. President Ramos then issued Executive Order No. 282 in 1995, ordering the PEZA to
assume the EPZAs powers, functions, and responsibilities under Presidential Decree No. 66 not
inconsistent with the Special Economic Zone Act of 1995.
Same; Same; Same; Same; Contrary to the Philippine Economic Zone Authoritys (PEZAs) claim,
developers of economic zones, whether public or private developers, are liable for real property
taxes on lands they own.Contrary to the PEZAs claim, developers of economic zones, whether
public or private developers, are liable for real property taxes on lands they own. Section 24 does
not distinguish between a public and private developer. Thus, courts cannot distinguish. Unless the
public developer is exempt under the Local Government Code or under its charter enacted after the
Local Government Codes effectivity, the public developer must pay real property taxes on their
land.
Same; Same; Same; Same; The Philippine Economic Zone Authority (PEZA) cannot be taxed for real
property taxes even if it acts as a developer or operator of special economic zones. The PEZA is an
instrumentality of the national government exempt from payment of real property taxes under
Section 133(o) of the Local Government Code (LGC).At any rate, the PEZA cannot be taxed for
real property taxes even if it acts as a developer or operator of special economic zones. The PEZA
is an instrumentality of the national government exempt from payment of real property taxes

under Section 133(o) of the Local Government Code. As this court said in Manila International
Airport Authority v. Court of Appeals, 495 SCRA 591 (2006), there must be express language in the
law empowering local governments to tax national government instrumentalities. Any doubt
whether such power exists is resolved against local governments.
Public Dominion; Properties of public dominion are outside the commerce of man. These properties
are exempt from levy, encumbrance or disposition through public or private sale.Properties of
public dominion are outside the commerce of man. These properties are exempt from levy,
encumbrance or disposition through public or private sale. As this court explained in Manila
International Airport Authority: Properties of public dominion, being for public use, are not subject
to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on
execution or auction sale of any property of public dominion is void for being contrary to public
policy. Essential public services will stop if properties of public dominion are subject to
encumbrances, foreclosures and auction sale[.] On the other hand, all other properties of the state
that are not intended for public use or are not intended for some public service or for the
development of the national wealth are patrimonial properties. Article 421 of the Civil Code of the
Philippines provides: Art. 421. All other property of the State, which is not of the character stated in
the preceding article, is patrimonial property. Patrimonial properties are also properties of the
state, but the state may dispose of its patrimonial property similar to private persons disposing of
their property. Patrimonial properties are within the commerce of man and are susceptible to
prescription, unless otherwise provided.
Same; Taxation; Tax Exemptions; Real Property Taxes; Freeport Area of Bataan; The Freeport Area of
Bataan, where the government allows tax and duty-free importation of goods, is considered
property of public dominion. The Freeport Area of Bataan is owned by the state and cannot be
taxed under Section 234(a) of the Local Government Code (LGC).A port of entry, where imported
goods are unloaded then introduced in the market for public consumption, is considered property
for public use. Thus, Article 420 of the Civil Code classifies a port as property of public dominion.
The Freeport Area of Bataan, where the government allows tax and duty-free importation of goods,
is considered property of public dominion. The Freeport Area of Bataan is owned by the state and
cannot be taxed under Section 234(a) of the Local Government Code. Properties of public
dominion, even if titled in the name of an instrumentality as in this case, remain owned by the
Republic of the Philippines. If property registered in the name of an instrumentality is conveyed to
another person, the property is considered conveyed on behalf of the Republic of the Philippines.
Philippine Economic Zone Authority; Taxation; Tax Exemptions; Real Property Taxes; Even the
Philippine Economic Zone Authoritys (PEZAs) lands and buildings whose beneficial use have been
granted to other persons may not be taxed with real property taxes; Under Section 24 of the
Special Economic Zone Act of 1995, no taxes, whether local or national, shall be imposed on all
business establishments operating within the economic zones.Even the PEZAs lands and
buildings whose beneficial use have been granted to other persons may not be taxed with real
property taxes. The PEZA may only lease its lands and buildings to PEZA-registered economic zone
enterprises and entities. These PEZA-registered enterprises and entities, which operate within
economic zones, are not subject to real property taxes. Under Section 24 of the Special Economic
Zone Act of 1995, no taxes, whether local or national, shall be imposed on all business
establishments operating within the economic zones.
City of Lapu-Lapu vs. Philippine Econimic Zone Authority, 742 SCRA 524, G.R. No. 187583
November 26, 2014
DECISION
LEONEN, J.:
The Philippine Economic Zone Authority is exempt from payment of real property taxes.
These are consolidated1 petitions for review on certiorari the City of Lapu-Lapu and the Province of
Bataan separately filed against the Philippine Economic Zone Authority (PEZA).
In G.R. No. 184203, the City of Lapu-Lapu (the City) assails the Court of Appeals decision 2 dated
January 11, 2008 and resolution3 dated August 6, 2008, dismissing the Citys appeal for being the
wrong mode of appeal. The City appealed the Regional Trial Court,Branch 111, Pasay Citys decision
finding the PEZA exempt from payment of real property taxes.

In G.R. No. 187583, the Province of Bataan (the Province) assails the Court of Appeals
decision4 dated August 27, 2008 and resolution5 dated April 16, 2009, granting the PEZAs petition
for certiorari. The Court of Appeals ruled that the Regional Trial Court, Branch 115, Pasay City
gravely abused its discretion in finding the PEZA liable for real property taxes to the Province of
Bataan.
Facts common to the consolidated petitions
In the exercise of his legislative powers,6 President Ferdinand E. Marcos issued Presidential Decree
No. 66 in 1972, declaring as government policy the establishment of export processing zones in
strategic locations in the Philippines. Presidential Decree No. 66 aimed "to encourage and promote
foreign commerce as a means of making the Philippines a center of international trade, of
strengthening our export trade and foreign exchange position, of hastening industrialization,of
reducing domestic unemployment, and of accelerating the development of the country." 7
To carry out this policy, the Export Processing Zone Authority (EPZA) was created to operate,
administer, and manage the export processing zones established in the Port of Mariveles,
Bataan8 and such other export processing zones that may be created by virtue of the decree. 9
The decree declared the EPZA non-profit in character 10 with all its revenues devoted to its
development, improvement, and maintenance. 11 To maintain this non-profit character, the EPZA
was declared exempt from all taxes that may be due to the Republic of the Philippines, its
provinces, cities, municipalities, and other government agencies and
instrumentalities.12 Specifically, Section 21 of Presidential Decree No. 66 declared the EPZA exempt
from payment of real property taxes:
Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority shall be
non-profit and shall devote and use all its returns from its capital investment, as well as excess
revenues from its operations, for the development, improvement and maintenance and other
related expenditures of the Authority to pay its indebtedness and obligations and in furtherance
and effective implementation of the policy enunciated in Section 1 of this Decree. In consonance
therewith, the Authority is hereby declared exempt:
....
(b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and licenses to
be paid to the National Government, its provinces, cities, municipalities and other government
agenciesand instrumentalities[.]
In 1979, President Marcos issued Proclamation No. 1811, establishing the Mactan Export Processing
Zone. Certain parcels of land of the public domain located in the City of Lapu-Lapuin Mactan, Cebu
were reserved to serve as site of the Mactan Export Processing Zone.
In 1995, the PEZA was created by virtue of Republic Act No. 7916 or "the Special Economic Zone
Act of 1995"13to operate, administer, manage, and develop economic zones in the country. 14 The
PEZA was granted the power to register, regulate, and supervise the enterprises located in the
economic zones.15 By virtue of the law, the export processing zone in Mariveles, Bataan became
the Bataan Economic Zone16 and the Mactan Export Processing Zone the Mactan Economic Zone. 17
As for the EPZA, the law required it to "evolve into the PEZA in accordance with the guidelines and
regulations set forth in an executive order issued for [the] purpose." 18
On October 30, 1995, President Fidel V. Ramos issued Executive Order No. 282, directing the PEZA
to assume and exercise all of the EPZAs powers, functions, and responsibilities "as provided in
Presidential Decree No. 66, as amended, insofar as they are not inconsistent with the powers,
functions, and responsibilities of the PEZA, as mandated under [the Special Economic Zone Act of
1995]."19 All of EPZAs properties, equipment, and assets, among others, were ordered transferred
to the PEZA.20
Facts of G.R. No. 184203

In the letter21 dated March 25, 1998, the City of Lapu-Lapu, through the Office of the Treasurer,
demanded from the PEZA 32,912,350.08 in real property taxes for the period from 1992 to 1998 on
the PEZAs properties located in the Mactan Economic Zone.
The City reiterated its demand in the letter 22 dated May 21, 1998. It cited Sections 193 and 234 of
the Local Government Code of 1991 that withdrew the real property tax exemptions previously
granted to or presently enjoyed by all persons. The City pointed out that no provision in the Special
Economic Zone Act of 1995 specifically exempted the PEZA from payment of real property taxes,
unlike Section 21 of Presidential Decree No. 66 that explicitly provided for EPZAs exemption. Since
no legal provision explicitly exempted the PEZA from payment of real property taxes, the City
argued that it can tax the PEZA.
The City made subsequent demands 23 on the PEZA. In its last reminder24 dated May 13, 2002, the
City assessed the PEZA 86,843,503.48 as real property taxes for the period from 1992 to 2002.
On September 11, 2002, the PEZAfiled a petition for declaratory Relief 25 with the Regional Trial
Court of Pasay City, praying that the trial court declare it exempt from payment ofreal property
taxes. The case was raffled to Branch 111.
The City answered26 the petition, maintaining that the PEZA is liable for real property taxes. To
support its argument, the City cited a legal opinion dated September 6, 1999 issued by the
Department of Justice,27 which stated that the PEZA is not exempt from payment of real property
taxes. The Department of Justice based its opinion on Sections 193 and 234 of the Local
Government Code that withdrew the tax exemptions, including real property tax exemptions,
previously granted to all persons.
A reply28 was filed by the PEZA to which the City filed a rejoinder. 29
Pursuant to Rule 63, Section 3 of Rules of Court,30 the Office of the Solicitor General filed a
comment31 on the PEZAs petition for declaratory relief. It agreed that the PEZA is exempt from
payment of real property taxes, citing Sections 24 and 51 of the Special Economic Zone Act of
1995.
The trial court agreed with the Solicitor General. Section 24 of the Special Economic Zone Act of
1995 provides:
SEC. 24. Exemption from National and Local Taxes. Except for real property taxes on land owned
by developers, no taxes, local and national, shall be imposed on business establishments operating
within the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business
enterprises within the ECOZONE shall be paid and remitted as follows:
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the business establishments to the
treasurers office of the municipality or city where the enterprise is located.
Section 51 of the law, on the other hand, provides:
SEC. 51. Ipso-Facto Clause. All privileges, benefits, advantages or exemptions granted to special
economic zones under Republic Act No. 7227, shall ipso-facto be accorded to special economic
zones already created or to be created under this Act. The free port status shall not be vested upon
new special economic zones.
Based on Section 51, the trial court held that all privileges, benefits, advantages, or exemptions
granted tospecial economic zones created under the Bases Conversion and Development Act of
1992 apply to special economic zones created under the Special Economic ZoneAct of 1995.
Since these benefits include exemption from payment of national or local taxes, these benefits
apply to special economic zones owned by the PEZA.

According to the trial court, the PEZA remained tax-exempt regardless of Section 24 of the Special
Economic Zone Act of 1995. It ruled that Section 24, which taxes real property owned by
developers of economic zones, only applies to private developers of economic zones, not to public
developers like the PEZA. The PEZA, therefore, is not liable for real property taxes on the land it
owns.
Characterizing the PEZA as an agency of the National Government, the trial court ruled that the
City had no authority to tax the PEZA under Sections 133(o) and 234(a) of the Local Government
Code of 1991.
In the resolution32 dated June 14, 2006, the trial court granted the PEZAs petition for declaratory
relief and declared it exempt from payment of real property taxes.
The City filed a motion for reconsideration, 33 which the trial court denied in its resolution 34 dated
September 26, 2006.
The City then appealed35 to the Court of Appeals.
The Court of Appeals noted the following issues the City raised in its appellants brief: (1) whether
the trial court had jurisdiction over the PEZAs petition for declaratory relief; (2) whether the PEZA
is a government agency performing governmental functions; and (3) whether the PEZA is exempt
from payment of real property taxes.
The issues presented by the City, according to the Court of Appeals, are pure questions of law
which should have been raised in a petition for review on certiorari directly filed before this court.
Since the City availed itself of the wrong mode of appeal, the Court of Appeals dismissed the Citys
appeal in the decision36 dated January 11, 2008.
The City filed a motion for extension of time to file a motion for reconsideration, 37 which the Court
of Appeals denied in the resolution38 dated April 11, 2008.
Despite the denial of its motion for extension, the City filed a motion for reconsideration. 39 In the
resolution40 dated August 6, 2008, the Court of Appeals denied that motion.
In its petition for review on certiorari with this court, 41 the City argues that the Court of Appeals
"hid under the skirts of technical rules"42 in resolving its appeal. The City maintains that its appeal
involved mixed questions of fact and law. According to the City, whether the PEZA performed
governmental functions "cannot completely be addressed by law but [by] the factual and actual
activities [the PEZA is] carrying out."43
Even assuming that the petition involves pure questions of law, the City contends that the subject
matter of the case "is of extreme importance with [far-reaching] consequence that [its magnitude]
would surely shape and determine the course ofour nations future." 44 The Court of Appeals, the
City argues, should have resolved the case on the merits.
The City insists that the trial court had no jurisdiction to hear the PEZAs petition for declaratory
relief. According to the City, the case involves real property located in the City of Lapu-Lapu. The
petition for declaratory relief should have been filed before the Regional Trial Court of the City of
Lapu-Lapu.45
Moreover, the Province of Bataan, the City of Baguio, and the Province of Cavite allegedly
demanded real property taxes from the PEZA. The City argues that the PEZA should have likewise
impleaded these local government units as respondents in its petition for declaratory relief. For its
failure to do so, the PEZA violated Rule 63, Section 2 of the Rules of Court, and the trial court
should have dismissed the petition.46
This court ordered the PEZA to comment on the Citys petition for review on certiorari. 47
At the outset of its comment, the PEZA argues that the Court of Appeals decision dated January
11, 2008 had become final and executory. After the Court of Appeals had denied the Citys appeal,
the City filed a motion for extension of time to file a motion for reconsideration. Arguing that the

time to file a motion for reconsideration is not extendible, the PEZA filed its motion for
reconsideration out of time. The Cityhas no more right to appeal to this court. 48
The PEZA maintains that the City availed itself of the wrong mode of appeal before the Court of
Appeals. Since the City raised pure questions of law in its appeal, the PEZA argues that the proper
remedy is a petition for review on certiorari with this court, not an ordinary appeal before the
appellate court. The Court of Appeals, therefore, correctly dismissed outright the Citys appeal
under Rule 50, Section 2 of the Rules of Court.49
On the merits, the PEZA argues that it is an agency and instrumentality of the National
Government. It is therefore exempt from payment of real property taxes under Sections 133(o) and
234(a) of the Local Government Code.50It adds that the tax privileges under Sections 24 and 51 of
the Special Economic Zone Act of 1995 applied to it. 51
Considering that the site of the Mactan Economic Zoneis a reserved land under Proclamation No.
1811, the PEZA claims that the properties sought to be taxed are lands of public dominion exempt
from real property taxes.52
As to the jurisdiction issue, the PEZA counters that the Regional Trial Court of Pasay had jurisdiction
to hear its petition for declaratory relief under Rule 63, Section 1 of the Rules of Court.[53]] It also
argued that it need not implead the Province of Bataan, the City of Baguio, and the Province of
Cavite as respondents considering that their demands came after the PEZA had already filed the
petition in court.54
Facts of G.R. No. 187583
After the City of Lapu-Lapu had demanded payment of real property taxes from the PEZA, the
Province of Bataan followed suit. In its letter 55 dated May 29, 2003, the Province, through the Office
of the Provincial Treasurer, informed the PEZA that it would be sending a real property tax billing to
the PEZA. Arguing that the PEZA is a developer of economic zones, the Province claimed that the
PEZA is liable for real property taxes under Section 24 of the Special Economic Zone Act of 1995.
In its reply letter56 dated June 18, 2003, the PEZA requested the Province to suspend the service of
the real property tax billing. It cited its petition for declaratory relief against the City of Lapu-Lapu
pending before the Regional Trial Court, Branch 111, Pasay City as basis.
The Province argued that serving a real property tax billing on the PEZA "would not in any way
affect [its] petition for declaratory relief before [the Regional Trial Court] of Pasay City." 57 Thus, in its
letter58 dated June 27, 2003, the Province notified the PEZAof its real property tax liabilities for June
1, 1995 to December 31, 2002 totallingP110,549,032.55.
After having been served a tax billing, the PEZA again requested the Province to suspend collecting
its alleged real property tax liabilities until the Regional Trial Court of Pasay Cityresolves its petition
for declaratory relief.59
The Province ignored the PEZAs request. On January 20, 2004, the Province served on the PEZA a
statement of unpaid real property tax for the period from June 1995 to December 2004. 60
The PEZA again requested the Province to suspend collecting its alleged real property taxes. 61 The
Province denied the request in its letter 62 dated January 29, 2004, then servedon the PEZA a
warrant of levy63 covering the PEZAs real properties located in Mariveles, Bataan.
The PEZAs subsequent requests 64 for suspension of collection were all denied by the
Province.65 The Province then served on the PEZA a notice of delinquency in the payment of real
property taxes66 and a notice of sale of real property for unpaid real property tax. 67 The Province
finally sent the PEZA a notice of public auction of the latters properties in Mariveles, Bataan. 68
On June 14, 2004, the PEZA filed a petition for injunction 69 with prayer for issuance of a temporary
restraining order and/or writ of preliminary injunction before the Regional Trial Court of Pasay City,
arguing that it is exempt from payment ofreal property taxes. It added that the notice of sale
issued by the Province was void because it was not published in a newspaper ofgeneral circulation
asrequired by Section 260 of the Local Government Code. 70

The case was raffled to Branch 115.

In its order71 dated June 18, 2004, the trial court issued a temporary restraining order against the
Province. After the PEZA had filed a P100,000.00 bond,72 the trial court issued a writ of preliminary
injunction,73 enjoining the Province from selling the PEZAs real properties at public auction.
On March 3, 2006, the PEZA and Province both manifested that each would file a memorandum
after which the case would be deemed submitted for decision. The parties then filed their
respective memoranda.74
In the order75 dated January 31, 2007, the trial court denied the PEZAs petition for injunction. The
trial court ruled that the PEZA is not exempt from payment of real property taxes. According to the
trial court, Sections 193 and 234 of the Local Government Code had withdrawn the real property
tax exemptions previously granted to all persons, whether natural or juridical. 76 As to the tax
exemptions under Section 51 of the Special Economic Zone Act of 1995, the trial court ruled that
the provision only applies to businesses operating within the economic zones, not to the PEZA. 77
The PEZA filed before the Court of Appeals a petition for certiorari 78 with prayer for issuance of a
temporary restraining order.
The Court of Appeals issued a temporary restraining order, enjoining the Province and its Provincial
Treasurer from selling PEZA's properties at public auction scheduled on October 17, 2007. 79 It also
ordered the Province to comment on the PEZAs petition.
In its comment,80 the Province alleged that it received a copy of the temporary restraining order
only on October 18, 2007 when it had already sold the PEZAs properties at public auction. Arguing
that the act sought to be enjoined was already fait accompli, the Province prayed for the dismissal
of the petition for certiorari.
The PEZA then filed a supplemental petition for certiorari, prohibition, and mandamus 81 against the
Province, arguing that the Provincial Treasurer of Bataan acted with grave abuse of discretion in
issuing the notice of delinquency and notice of sale. It maintained that it is exempt from payment
of real property taxes because it is a government instrumentality. It added that its lands are
property of public dominion which cannot be sold at public auction.
The PEZA also filed a motion82 for issuance of an order affirming the temporary restraining order
and a writ of preliminary injunction to enjoin the Province from consolidating title over the PEZAs
properties.
In its resolution83 dated January 16, 2008,the Court of Appeals admitted the supplemental petition
for certiorari, prohibition, and mandamus. It required the Province to comment on the supplemental
petition and to file a memorandum on the PEZAs prayer for issuance of temporary restraining
order.
The Province commented84 on the PEZAs supplemental petition, to which the PEZA replied. 85
The Province then filed a motion86 for leave to admit attached rejoinder with motion to dismiss. In
the rejoinder with motion to dismiss,87 the Province argued for the first time that the Court of
Appeals had no jurisdiction over the subject matter of the action.
According to the Province, the PEZA erred in filing a petition for certiorari. Arguing that the PEZA
sought to reverse a Regional Trial Court decision in a local tax case, the Province claimed that the
court with appellate jurisdiction over the action is the Court of Tax Appeals. The PEZA then prayed
that the Court of Appeals dismiss the petition for certiorari for lack of jurisdiction over the subject
matter of the action.
The Court of Appeals held that the issue before it was whether the trial court judge gravely abused
his discretion in dismissing the PEZAs petition for prohibition. This issue, according to the Court of
Appeals, is properly addressed in a petition for certiorari over which it has jurisdiction to resolve. It,
therefore, maintained jurisdiction to resolve the PEZAs petition for certiorari. 88

Although it admitted that appeal, not certiorari, was the PEZAs proper remedy to reverse the trial
courts decision,89 the Court of Appeals proceeded to decide the petition for certiorari in "the
broader interest of justice."90
The Court of Appeals ruled that the trial court judge gravely abused his discretion in dismissing the
PEZAs petition for prohibition. It held that Section 21 of Presidential Decree No. 66 and Section 51
of the Special Economic Zone Act of 1995 granted the PEZA exemption from payment of real
property taxes.91 Based on the criteria set in Manila International Airport Authority v. Court of
Appeals,92 the Court of Appeals found that the PEZA is an instrumentality of the national
government. No taxes, therefore, could be levied on it by local government units. 93
In the decision94 dated August 27, 2008, the Court of Appeals granted the PEZAs petition for
certiorari. It set aside the trial courts decision and nullified all the Provinces proceedings with
respect to the collection of real property taxes from the PEZA.
The Province filed a motion for reconsideration, 95 which the Court of Appeals denied in the
resolution96 dated April 16, 2009 for lack of merit.
In its petition for review on certiorari with this court, 97 the Province of Bataan insists that the Court
of Appeals had no jurisdiction to take cognizance of the PEZAs petition for certiorari. The Province
maintains that the Court of Tax Appeals had jurisdiction to hear the PEZAs petition since it involved
a local tax case decided by a Regional Trial Court.98
The Province reiterates that the PEZA is not exempt from payment of real property taxes. The
Province points out that the EPZA, the PEZAs predecessor, had to be categorically exempted from
payment of real property taxes. The EPZA, therefore, was not inherently exempt from payment of
real property taxes and so is the PEZA. Since Congress omitted from the Special Economic Zone Act
of 1995 a provision specifically exempting the PEZA from payment of real property taxes, the
Province argues that the PEZA is a taxable entity. It cited the rule in statutory construction that
provisions omitted in revised statutes are deemed repealed. 99
With respect to Sections 24 and 51 of the Special Economic Zone Act of 1995 granting tax
exemptions and benefits, the Province argues that these provisions only apply to business
establishments operating within special economic zones, 100 not to the PEZA.
This court ordered the PEZA tocomment on the Provinces petition for review on certiorari. 101 In its
comment,102the PEZA argues that the Court of Appeals had jurisdiction to hear its petition for
certiorari since the issue was whether the trial court committed grave abuse of discretion in
denying its petition for injunction. The PEZA maintains thatit is exempt from payment of real
property taxes under Section 21 of Presidential Decree No. 66 and Section 51 of the Special
Economic Zone Act of 1995.
The Province filed its reply,103 reiterating its arguments in its petition for review on certiorari. On
the PEZAs motion,104 this court consolidated the petitions filed by the City of Lapu-Lapu and the
Province of Bataan.105
The issues for our resolution are the following:
I. Whether the Court of Appeals erred in dismissing the City of Lapu-Lapus appeal for
raising pure questions of law;
II. Whether the Regional Trial Court, Branch 111, Pasay City had jurisdiction to hear, try,
and decide the City of Lapu-Lapus petition for declaratory relief;
III. Whether the petition for injunction filed before the Regional Trial Court, Branch 115,
Pasay City, is a local tax case appealable to the Court of Tax Appeals; and
IV. Whether the PEZA is exempt from payment of real property taxes.
We deny the consolidated petitions.

I.
The Court of Appeals did not err in
dismissing the City of Lapu-Lapus
appeal for raising pure questions of law
Under the Rules of Court, there are three modes of appeal from Regional Trial Court decisions. The
first mode is through an ordinary appeal before the Court of Appeals where the decision assailed
was rendered in the exercise of the Regional Trial Courts original jurisdiction. Ordinary appeals are
governed by Rule 41, Sections 3 to 13 of the Rules of Court. In ordinary appeals, questions of fact
or mixed questions of fact and law may be raised.106
The second mode is through a petition for review before the Court of Appeals where the decision
assailed was rendered by the Regional Trial Court in the exercise of its appellate jurisdiction. Rule
42 of the Rules of Court governs petitions for review before the Court of Appeals. In petitions for
review under Rule 42, questions of fact, of law, or mixed questions of fact and law may be raised. 107
The third mode is through an appealby certiorari before this court under Rule 45 where only
questions of law shall be raised.108
A question of fact exists when there is doubt as to the truth or falsity of the alleged facts. 109 On the
other hand, there is a question of law if the appeal raises doubt as to the applicable law on a
certain set of facts.110
Under Rule 50, Section 2, an improper appeal before the Court of Appeals is dismissed outright and
shall not be referred to the proper court:
SEC. 2. Dismissal of improper appeal to the Court of Appeals. An appeal under Rule 41 taken from
the Regional Trial Court to the Court of Appeals raising only questions of law shall be dismissed,
issues purely of law not being reviewable by said court. Similarly, an appeal by notice of appeal
instead of by petition for review from the appellate judgment of a Regional Trial Court shall be
dismissed.
An appeal erroneously taken to the Court of Appeals shall not be transferred to the appropriate
court but shall be dismissed outright.
Rule 50, Section 2 repealed Rule 50, Section 3 of the 1964 Rules of Court, which provided that
improper appeals to the Court of Appeals shall not be dismissed but shall be certified to the proper
court for resolution:
Sec. 3. Where appealed case erroneously, brought. Where the appealed case has been
erroneously brought to the Court of Appeals, it shall not dismiss the appeal, but shall certify the
case to the proper court, with a specific and clear statement of the grounds therefor.
With respect to appeals by certiorari directly filed before this court but which raise questions of
fact, paragraph 4(b) of Circular No. 2-90 dated March 9, 1990 states that this court "retains the
option, in the exercise of its sound discretion and considering the attendant circumstances, either
itself to take cognizance of and decide such issues or to refer them to the Court of Appeals for
determination." In Indoyon, Jr. v. Court of Appeals,111 we said that this court "cannot tolerate
ignorance of the law on appeals."112 It is not this courts task to determine for litigants their proper
remedies under the Rules.113
We agree that the City availed itself of the wrong mode of appeal before the Court of Appeals. The
City raised pure questions of law in its appeal. The issue of whether the Regional Trial Court of
Pasay had jurisdiction over the PEZAs petition for declaratory relief is a question of law, jurisdiction
being a matter of law.114 The issue of whether the PEZA is a government instrumentality exempt
from payment of real property taxes is likewise a question of law since this question is resolved by
examining the provisions of the PEZAs charter as well as other laws relating to the PEZA. 115
The Court of Appeals, therefore, did not err in dismissing the Citys appeal pursuant to Rule 50,
Section 2 of the Rules of Court.

Nevertheless, considering the important questions involved in this case, we take cognizance of the
Citys petition for review on certiorari in the interest of justice.
In Municipality of Pateros v. The Honorable Court of Appeals, 116 the Municipality of Pateros filed an
appeal under Rule 42 before the Court of Appeals, which the Court of Appeals denied outright for
raising pure questions of law. This court agreed that the Municipality of Pateros "committed a
procedural infraction"117 and should have directly filed a petition for review on certiorari before this
court. Nevertheless, "in the interest of justice and in order to write finisto [the] controversy," 118 this
court "opt[ed] to relax the rules"119 and proceeded to decide the case. This court said:
While it is true that rules of procedure are intended to promote rather than frustrate the ends of
justice, and while the swift unclogging of the dockets of the courts is a laudable objective, it
nevertheless must not be met at the expense of substantial justice.
The Court has allowed some meritorious cases to proceed despite inherent procedural defects and
lapses. Thisis in keeping with the principle that rules of procedure are mere tools designed to
facilitate the attainment of justice, and that strict and rigid application ofrules which should result
in technicalities that tend to frustrate rather than promote substantial justice must always be
avoided. It is a far better and more prudent cause of action for the court to excuse a technical
lapse and afford the parties a review of the case to attain the ends of justice, rather than dispose of
the case on technicality and cause grave injustice to the parties, giving a false impression of
speedy disposal of cases while actually resulting in more delay, if not a miscarriage of justice. 120
Similar to Municipality of Pateros, we opt to relax the rules in this case. The PEZA operates or
otherwise administers special economic zones all over the country. Resolving the substantive issue
of whether the PEZA is taxable for real property taxes will clarify the taxing powers of all local
government units where special economic zones are operated. This case, therefore, should be
decided on the merits.
II.
The Regional Trial Court of Pasay had no
jurisdiction to hear, try, and decide the
PEZAs petition for declaratory relief
against the City of Lapu-Lapu
Rule 63 of the Rules of Court governs actions for declaratory relief. Section 1 of Rule 63 provides:
SECTION 1. Who may file petition. Any person interested under a deed, will, contract or other
written instrument, or whose rights are affected by a statute, executive order or regulation,
ordinance, or any other governmental regulation may, before breach or violation, thereof, bring an
action in the appropriate Regional Trial Court to determine any question of construction or validity
arising, and for a declaration of his rights or duties, thereunder.
An action for reformation of an instrument, to quiet title to real property or remove clouds
therefrom, or to consolidate ownership under Article 1607 of the Civil Code, may be brought under
this Rule.
The court with jurisdiction over petitions for declaratory relief is the Regional Trial Court, the
subject matter of litigation in an action for declaratory relief being incapable of pecuniary
estimation.121 Section 19 of the Judiciary Reorganization Act of 1980 provides:
SEC. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall exercise exclusive original
jurisdiction:
(1) In all civil actions in which the subject of litigation is incapable of pecuniary estimation[.]
Consistent with the law, the Rules state that a petition for declaratory relief is filed "in the
appropriate Regional Trial Court."122

A special civil action for declaratory relief is filed for a judicial determination of any question of
construction or validity arising from, and for a declaration of rights and duties, under any of the
following subject matters: a deed, will, contract or other written instrument, statute, executive
order or regulation, ordinance, orany other governmental regulation. 123 However, a declaratory
judgment may issue only if there has been "no breach of the documents in question." 124 If the
contract or statute subject matter of the action has already been breached, the appropriate
ordinary civil action must be filed.125 If adequate relief is available through another form of action or
proceeding, the other action must be preferred over an action for declaratory relief. 126
In Ollada v. Central Bank of the Philippines, 127 the Central Bank issued CB-IED Form No. 5 requiring
certified public accountants to submit an accreditation under oath before they were allowed to
certify financial statements submitted to the bank. Among those financial statements the Central
Bank disallowed were those certified by accountant Felipe B. Ollada. 128 Claiming that the
requirement "restrained the legitimate pursuit of ones trade," 129
Ollada filed a petition for declaratory relief against the Central Bank.
This court ordered the dismissal of Olladas petition "without prejudice to [his] seeking relief in
another appropriate action."130 According to this court, Olladas right had already been violated
when the Central Bank refused to accept the financial statements he prepared. Since there was
already a breach, a petition for declaratory relief was not proper. Ollada must pursue the
"appropriate ordinary civil action or proceeding."131 This court explained:
Petitioner commenced this action as, and clearly intended it to be one for Declaratory Relief under
the provisions of Rule 66 of the Rules of Court. On the question of when a special civil action of this
nature would prosper, we have already held that the complaint for declaratory relief will not
prosper if filed after a contract, statute or right has been breached or violated. In the present case
such is precisely the situation arising from the facts alleged in the petition for declaratory relief. As
vigorously claimed by petitioner himself, respondent had already invaded or violated his right and
caused him injury all these giving him a complete cause of action enforceable in an appropriate
ordinary civil action or proceeding. The dismissal of the action was, therefore, proper in the lightof
our ruling in De Borja vs. Villadolid, 47 O.G. (5) p. 2315, and Samson vs. Andal, G.R. No. L-3439,
July 31, 1951, where we held that an action for declaratory relief should be filed before there has
been a breach of a contract, statutes or right, and that it is sufficient tobar such action, that there
had been a breach which would constitute actionable violation. The rule is that an action for
Declaratory Relief is proper only if adequate relief is not available through the means of other
existing forms of action or proceeding (1 C.J.S. 1027-1028). 132
It is also required that the parties to the action for declaratory relief be those whose rights or
interests are affected by the contract or statute in question. 133 "There must be an actual justiciable
controversy or the ripening seeds of one"134 between the parties. The issue between the parties
"must be ripe for judicial determination."135 An action for declaratory relief based on theoreticalor
hypothetical questions cannot be filed for our courts are not advisory courts. 136
In Republic v. Roque,137 this court dismissed respondents petition for declaratory relief for lack of
justiciable controversy. According to this court, "[the respondents] fear of prospective prosecution
[under the Human Security Act] was solely based on remarks of certain government officials which
were addressed to the general public."138
In Velarde v. Social Justice Society, 139 this court refused to resolve the issue of "whether or not [a
religious leaders endorsement] of a candidate for elective office or in urging or requiring the
members of his flock to vote for a specific candidate is violative [of the separation
clause]."140 According to the court, there was no justiciable controversy and ordered the dismissal
of the Social Justice Societys petition for declaratory relief. This court explained: Indeed, SJS
merely speculated or anticipated without factual moorings that, as religious leaders, the petitioner
and his co-respondents below had endorsed or threatened to endorse a candidate or candidates for
elective offices; and that such actual or threatened endorsement "will enable [them] to elect men
to public office who [would] in turn be forever beholden to their leaders, enabling them to control
the government"[;] and "pos[ing] a clear and present danger ofserious erosion of the peoples faith
in the electoral process[;] and reinforc[ing] their belief that religious leaders determine the ultimate
result of elections," which would then be violative of the separation clause.

Such premise is highly speculative and merely theoretical, to say the least. Clearly, it does not
suffice to constitute a justiciable controversy. The Petition does not even allege any indication or
manifest intent on the part of any of the respondents below to champion an electoral candidate, or
to urge their so-called flock to vote for, or not to vote for, a particular candidate. It is a timehonored rule that sheer speculation does not give rise to an actionable right.
Obviously, there is no factual allegation that SJS rights are being subjected to any threatened,
imminent and inevitable violation that should be prevented by the declaratory relief sought. The
judicial power and duty of the courts to settle actual controversies involving rights that are legally
demandable and enforceable cannot be exercised when there is no actual or threatened violation
of a legal right.
All that the 5-page SJS Petition prayed for was "that the question raised in paragraph 9 hereof be
resolved." In other words, it merely sought an opinion of the trial court on whether the speculated
acts of religious leaders endorsing elective candidates for political offices violated the
constitutional principle on the separation of church and state. SJS did not ask for a declaration of its
rights and duties; neither did it pray for the stoppage of any threatened violation of its declared
rights. Courts, however, are proscribed from rendering an advisory opinion. 141In sum, a petition for
declaratory relief must satisfy six requisites:
[F]irst, the subject matter of the controversy must be a deed, will, contract or other written
instrument, statute, executive order or regulation, or ordinance; second, the terms of said
documents and the validity thereof are doubtful and require judicial construction; third, there must
have been no breach of the documents in question; fourth, there must be an actual justiciable
controversy or the "ripening seeds" of one between persons whose interests are adverse; fifth, the
issue must be ripe for judicial determination; and sixth, adequate relief is not available through
other means or other forms of action or proceeding. 142 (Emphases omitted)
We rule that the PEZA erred in availing itself of a petition for declaratory relief against the City. The
City had already issued demand letters and real property tax assessment against the PEZA, in
violation of the PEZAs alleged tax-exempt status under its charter. The Special Economic Zone Act
of 1995, the subject matter of PEZAs petition for declaratory relief, had already been breached.
The trial court, therefore, had no jurisdiction over the petition for declaratory relief. There are
several aspects of jurisdiction. 143 Jurisdiction over the subject matter is "the power to hear and
determine cases of the general class to which the proceedings in question belong." 144 It is conferred
by law, which may either be the Constitution or a statute. 145 Jurisdiction over the subject matter
means "the nature of the cause of action and the relief sought."146 Thus, the cause of action and
character of the relief sought as alleged in the complaint are examinedto determine whether a
court had jurisdiction over the subject matter. 147 Any decision rendered by a court without
jurisdiction over the subjectmatter of the action is void. 148
Another aspect of jurisdiction is jurisdiction over the person. It is "the power of [a] court to render a
personal judgment or to subject the parties in a particular action to the judgment and other rulings
rendered in the action."149 A court automatically acquires jurisdiction over the person of the plaintiff
upon the filing of the initiatory pleading. 150 With respect to the defendant, voluntary appearance in
court or a valid service of summons vests the court with jurisdiction over the defendants
person.151 Jurisdiction over the person of the defendant is indispensable in actions in personamor
those actions based on a partys personal liability. 152 The proceedings in an action in personamare
void if the court had no jurisdiction over the person of the defendant. 153
Jurisdiction over the resor the thing under litigation is acquired either "by the seizure of the
property under legal process, whereby it is brought into actual custody of the law; or asa result of
the institution of legal proceedings, in which the power of the court is recognized and made
effective."154 Jurisdiction over the res is necessary in actions in remor those actions "directed
against the thing or property or status of a person and seek judgments with respect thereto as
against the whole world."155 The proceedings in an action in rem are void if the court had no
jurisdiction over the thing under litigation.156
In the present case, the Regional Trial Court had no jurisdiction over the subject matter of the
action, specifically, over the remedy sought. As this court explained in Malana v. Tappa: 157
. . . an action for declaratory relief presupposes that there has been no actual breach of the
instruments involved or of rights arising thereunder. Since the purpose of an action for declaratory

relief is to secure an authoritative statement of the rights and obligations of the parties under a
statute, deed, or contract for their guidance in the enforcement thereof, or compliance therewith,
and not to settle issues arising from an alleged breach thereof, it may be entertained only before
the breach or violation of the statute, deed, or contract to which it refers. A petition for declaratory
relief gives a practical remedy for ending controversies that have not reached the state where
another relief is immediately available; and supplies the need for a form of action that will set
controversies at rest before they lead to a repudiation of obligations, an invasion of rights, and a
commission of wrongs.
Where the law or contract has already been contravened prior to the filing of an action for
declaratory relief, the courts can no longer assume jurisdiction over the action. In other words, a
court has no more jurisdiction over an action for declaratory relief if its subject has already been
infringed or transgressed before the institution of the action. 158 (Emphasis supplied)
The trial court should have dismissed the PEZAs petition for declaratory relief for lack of
jurisdiction.
Once an assessment has already been issued by the assessor, the proper remedy of a taxpayer
depends on whether the assessment was erroneous or illegal.
An erroneous assessment "presupposes that the taxpayer is subject to the tax but is disputing the
correctness of the amount assessed."159 With an erroneous assessment, the taxpayer claims that
the local assessor erred in determining any of the items for computing the real property tax, i.e.,
the value of the real property or the portion thereof subject to tax and the proper assessment
levels. In case of an erroneous assessment, the taxpayer must exhaust the administrative
remedies provided under the Local Government Code before resorting to judicial action.
The taxpayer must first pay the realproperty tax under protest. Section 252 of the Local
Government Code provides:
SECTION 252. Payment Under Protest. -(a) No protest shall be entertained unless the taxpayer first
paysthe tax. There shall be annotated on the tax receipts the words "paid under protest". The
protest in writing must be filed within thirty (30) days from payment of the tax to the provincial,
city treasurer or municipal treasurer, in the case of a municipality within Metropolitan Manila Area,
who shall decide the protest within sixty (60) days from receipt.
(b) The tax or a portion thereof paidunder protest, shall be held in trust by the treasurer
concerned.
(c) In the event that the protest is finally decided in favor of the taxpayer, the amount or
portion of the tax protested shall be refunded to the protestant, or applied as tax credit
against his existing or future tax liability.
(d) In the event that the protest is denied or upon the lapse of the sixty day period
prescribed in subparagraph (a), the taxpayer may avail of the remedies as provided for in
Chapter 3, Title II, Book II of this Code.
Should the taxpayer find the action on the protest unsatisfactory, the taxpayer may appeal with
the Local Board of Assessment Appeals within 60 days from receipt of the decision on the protest:
SECTION 226. Local Board of Assessment Appeals. - Any owner or person having legal interest in
the property who is not satisfied with the action of the provincial, city or municipal assessor in the
assessment of his property may, within sixty (60) days from the date of receipt of the written
notice of assessment, appeal to the Board of Assessment Appeals of the provincial or city by filing
a petition under oath in the form prescribed for the purpose, together with copies of the tax
declarations and such affidavits or documents submitted in support of the appeal.
Payment under protest and appeal to the Local Board of Assessment Appeals are "successive
administrative remedies to a taxpayer who questions the correctness of an assessment." 160 The
Local Board Assessment Appeals shall not entertain an appeal "without the action of the local
assessor"161 on the protest.

If the taxpayer is still unsatisfied after appealing with the Local Board of Assessment Appeals, the
taxpayer may appeal with the Central Board of Assessment Appeals within 30 days from receipt of
the Local Boards decision:
SECTION 229. Action by the Local Board of Assessment Appeals. - (a) The Board shall decide the
appeal within one hundred twenty (120) days from the date of receipt of such appeal. The Board,
after hearing, shall render its decision based on substantial evidence or such relevant evidence on
record as a reasonable mind might accept as adequate to support the conclusion. (b) In the
exercise ofits appellate jurisdiction, the Board shall have the power to summon witnesses,
administer oaths, conduct ocular inspection, take depositions, and issue subpoena and subpoena
duces tecum. The proceedings of the Board shall be conducted solely for the purpose of
ascertaining the facts without necessarily adhering to technical rules applicable in judicial
proceedings.
(c) The secretary of the Board shall furnish the owner of the property or the person having legal
interest therein and the provincial or city assessor with a copy of the decision of the Board. In case
the provincial or city assessor concurs in the revision or the assessment, it shall be his duty to
notify the owner of the property or the person having legal interest therein of such factusing the
form prescribed for the purpose. The owner of the property or the person having legal interest
therein or the assessor who is not satisfied with the decision of the Board, may, within thirty (30)
days after receipt of the decision of said Board, appeal to the Central Board of Assessment
Appeals, as herein provided. The decision of the Central Board shall be final and executory.
(Emphasis supplied)
On the other hand, an assessment is illegal if it was made without authority under the law. 162 In
case of an illegal assessment, the taxpayer may directly resort to judicial action without paying
under protest the assessed tax and filing an appeal with the Local and Central Board of Assessment
Appeals.
In Ty v. Trampe,163 the Municipal Assessor of Pasig sent Alejandro B. Ty a notice of assessment with
respect to Tys real properties in Pasig. Without resorting to the administrative remedies under the
Local Government Code, Ty filed before the Regional Trial Court a petition, praying that the trial
court nullify the notice of assessment. In assessing the real property taxes due, the Municipal
Assessor used a schedule of market values solely prepared by him. This, Ty argued, was void for
being contrary to the Local Government Code requiring that the schedule of market values be
jointly prepared by the provincial, city, and municipal assessors of the municipalities within the
Metropolitan Manila Area.
This court ruled that the assessmentwas illegal for having been issued without authority of the
Municipal Assessor. Reconciling provisions of the Real Property Tax Code and the Local Government
Code, this court held that the schedule of market valuesmust be jointly prepared by the provincial,
city, and municipal assessors of the municipalities within the Metropolitan Manila Area.
As to the issue of exhaustion of administrative remedies, this court held that Ty did not err in
directly resorting to judicial action. According to this court, payment under protest is required only
"where there is a question as to the reasonableness of the amount assessed." 164 As to appeals
before the Local and Central Board of Assessment Appeals, they are "fruitful only where questions
of fact are involved."165
Ty raised the issue of the legality of the notice of assessment, an issue that did not go into the
reasonableness of the amount assessed. Neither did the issue involve a question of fact. Ty raised
a question of law and, therefore, need not resort to the administrative remedies provided under the
Local Government Code.
In the present case, the PEZA did not avail itself of any of the remedies against a notice of
assessment. A petition for declaratory relief is not the proper remedy once a notice of assessment
was already issued.
Instead of a petition for declaratory relief, the PEZA should have directly resorted to a judicial
action. The PEZA should have filed a complaint for injunction, the "appropriate ordinary civil
action"166 to enjoin the City from enforcing its demand and collecting the assessed taxes from the
PEZA. After all, a declaratory judgment as to the PEZAs tax-exempt status is useless unless the
City isenjoined from enforcing its demand.

Injunction "is a judicial writ, process or proceeding whereby a party is ordered to do or refrain from
doing a certain act."167 "It may be the main action or merely a provisional remedy for and as
incident in the main action."168 The essential requisites of a writ of injunction are: "(1) there must
be a right in esseor the existence of a right to be protected; and (2) the act against which the
injunction is directed to constitute a violation of such right."169
We note, however, that the City confused the concepts of jurisdiction and venue in contending that
the Regional Trial Court of Pasay had no jurisdiction because the real properties involved in this
case are located in the City of Lapu-Lapu.
On the one hand, jurisdiction is "the power to hear and determine cases of the general class to
which the proceedings in question belong."170 Jurisdiction is a matter of substantive law.171 Thus, an
action may be filed only with the court or tribunal where the Constitution or a statute says it can be
brought.172 Objections to jurisdiction cannot be waived and may be brought at any stage of the
proceedings, even on appeal.173 When a case is filed with a court which has no jurisdiction over the
action, the court shall motu propriodismiss the case. 174
On the other hand, venue is "the place of trial or geographical location in which an action or
proceeding should be brought." 175 In civil cases, venue is a matter of procedural law. 176 A partys
objections to venue must be brought at the earliest opportunity either in a motion to dismiss or in
the answer; otherwise the objection shall be deemed waived. 177 When the venue of a civil action is
improperly laid, the court cannot motu propriodismiss the case. 178
The venue of an action depends on whether the action is a real or personal action. Should the
action affect title to or possession of real property, or interest therein, it is a real action. The action
should be filed in the proper court which has jurisdiction over the area wherein the real property
involved, or a portion thereof, is situated.179 If the action is a personal action, the action shall be
filed with the proper court where the plaintiff or any of the principal plaintiffs resides, or where the
defendant or any of the principal defendants resides, or in the case of a non-resident defendant
where he may be found, at the election of the plaintiff. 180
The City was objecting to the venue of the action, not to the jurisdiction of the Regional Trial Court
of Pasay. In essence, the City was contending that the PEZAs petition is a real action as it affects
title to or possession of real property, and, therefore, the PEZA should have filed the petition with
the Regional Trial Court of Lapu-Lapu City where the real properties are located. However, whatever
objections the City has against the venue of the PEZAs action for declaratory relief are already
deemed waived. Objections to venue must be raised at the earliest possible opportunity. 181 The City
did not file a motion to dismiss the petition on the ground that the venue was improperly laid.
Neither did the City raise this objection in its answer.
In any event, the law sought to be judicially interpreted in this case had already been breached.
The Regional Trial Court of Pasay, therefore, had no jurisdiction over the PEZAs petition for
declaratory relief against the City.
III.
The Court of Appeals had no jurisdiction
over the PEZAs petition for certiorari
against the Province of Bataan
Appeal is the remedy "to obtain a reversal or modification of a judgment on the merits." 182 A
judgment on the merits is one which "determines the rights and liabilities of the parties based on
the disclosed facts, irrespective of the formal, technical or dilatory objections." 183 It is not even
necessary that the case proceeded to trial.184 So long as the "judgment is general" 185 and "the
parties had a full legal opportunity to be heard on their respective claims and contentions," 186 the
judgment is on the merits.
On the other hand, certiorari is a special civil action filed to annul or modify a proceeding of a
tribunal, board, or officer exercising judicial or quasi-judicial functions. 187 Certiorari, which in Latin
means "to be more fully informed,"188 was originally a remedy in the common law. This court
discussed the history of the remedy of certiorari in Spouses Delos Santos v. Metropolitan Bank and
Trust Company:189

In the common law, from which the remedy of certiorari evolved, the writ of certiorari was issued
out of Chancery, or the Kings Bench, commanding agents or officers of the inferior courts to return
the record of a cause pending before them, so as to give the party more sure and speedy justice,
for the writ would enable the superior court to determine froman inspection of the record whether
the inferior courts judgment was rendered without authority. The errors were of such a nature that,
if allowed to stand, they would result in a substantial injury to the petitioner to whom no other
remedy was available. If the inferior court acted without authority, the record was then revised and
corrected in matters of law. The writ of certiorari was limited to cases in which the inferior court
was said to be exceeding its jurisdiction or was not proceeding according to essential requirements
of law and would lie only to review judicial or quasi-judicial acts. 190
In our jurisdiction, the term "certiorari" is used in two ways. An appeal before this court raising pure
questions of law is commenced by filing a petition for reviewon certiorari under Rule 45 of the
Rules of Court. An appeal by certiorari, which continues the proceedings commenced before the
lower courts,191 is filed to reverse or modify judgments or final orders. 192 Under the Rules, an appeal
by certiorarimust be filed within 15 days from notice of the judgment or final order, or of the denial
of the appellants motion for new trial or reconsideration. 193
A petition for certiorari under Rule 65, on the other hand, is an independent and original action
filed to set aside proceedings conducted without or in excess of jurisdiction or with grave abuse of
discretion amounting to lack or excess of jurisdiction. 194 Under the Rules, a petition for certiorari
may only be filed if there is no appeal or any plain, speedy, or adequate remedy in the ordinary
course of law.195 The petition must be filed within 60 days from notice of the judgment, order, or
resolution.196
Because of the longer period to file a petition for certiorari, some litigants attempt to file petitions
for certiorari as substitutes for lost appeals by certiorari. However, Rule 65 is clear that a petition
for certiorari will not prosper if appeal is available. Appealis the proper remedy even if the error, or
one of the errors, raised is grave abuse of discretion on the part of the court rendering
judgment.197 If appeal is available, a petition for certiorari cannot be filed.
In this case, the trial courts decision dated January 31, 2007 is a judgment on the merits. Based on
the facts disclosed by the parties, the trial court declared the PEZA liable to the Province of Bataan
for real property taxes. The PEZAs proper remedy against the trial courts decision, therefore, is
appeal.
Since the PEZA filed a petition for certiorari against the trial courts decision, it availed itself of the
wrong remedy. As the Province of Bataan contended, the trial courts decision dated January 31,
2007 "is only an error of judgment appealable to the higher level court and may not be corrected
by filing a petition for certiorari."198 That the trial court judge allegedly committed grave abuse of
discretion does not make the petition for certiorari the correct remedy. The PEZA should haveraised
this ground in an appeal filed within 15 days from notice of the assailed resolution.
This court, "in the liberal spirit pervading the Rules of Court and in the interest of substantial
justice,"199 has treated petitions for certiorari as an appeal: "(1) if the petition for certiorari was filed
within the reglementary period within which to file a petition for review on certiorari; (2) when
errors of judgment are averred; and (3) when there is sufficient reason to justify the relaxation of
the rules."200 Considering that "the nature of an action is determined by the allegationsof the
complaint or the petition and the character of the relief sought,"201 a petition which "actually avers
errors of judgment rather than errors than that of jurisdiction" 202 may be considered a petition for
review.
However, suspending the application of the Rules has its disadvantages. Relaxing procedural rules
may reduce the "effective enforcement of substantive rights,"203 leading to "arbitrariness, caprice,
despotism, or whimsicality in the settlement of disputes." 204 Therefore, for this court to suspend the
application of the Rules, the accomplishment of substantial justice must outweigh the importance
of predictability of court procedures.
The PEZAs petition for certiorari may be treated as an appeal. First, the petition for certiorari was
filed withinthe 15-day reglementary period for filing an appeal. The PEZA filed its petition for
certiorari before the Court of Appeals on October 15, 2007,205 which was 12 days from October 3,
2007206 when the PEZA had notice of the trial courts order denying the motion for reconsideration.

Second, the petition for certiorari raised errors of judgment. The PEZA argued that the trial court
erred in ruling that it is not exempt from payment of real property taxes given Section 21 of
Presidential Decree No. 66 and Sections 11 and 51 of the Special Economic Zone Act of 1995. 207
Third, there is sufficient reason to relax the rules given the importance of the substantive issue
presented in this case.
However, the PEZAs petition for certiorari was filed before the wrong court. The PEZA should have
filed its petition before the Court of Tax Appeals.
The Court of Tax Appeals has the exclusive appellate jurisdiction over local tax cases decided by
Regional Trial Courts. Section 7, paragraph (a)(3) of Republic Act No. 1125, as amended by Republic
Act No. 9282, provides:
Sec. 7. Jurisdiction. The [Court of Tax Appeals] shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
....
3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally
decided or resolved by them in the exercise of their original or appellate jurisdiction[.]
The local tax cases referred to in Section 7, paragraph (a)(3) of Republic Act No. 1125, as
amended, include cases involving real property taxes. Real property taxation is governed by Book II
of the Local Government Code on "Local Taxation and Fiscal Matters." Real property taxes are
collected by the Local Treasurer,208 not by the Bureau of Internal Revenue in charge of collecting
national internal revenue taxes, fees, and charges. 209
Section 7, paragraph (a)(5) of Republic Act No. 1125, as amended by Republic Act No. 9282,
separately provides for the exclusive appellate jurisdiction of the Court of Tax Appeals over
decisions of the Central Board of Assessment Appeals involving the assessment or collection of real
property taxes:
Sec. 7. Jurisdiction. The [Court of Tax Appeals] shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
....
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction
over cases involving the assessment and taxation of real property originally decided by the
provincial or city board of assessment appeals[.]
This separate provision, nevertheless, does not bar the Court of Tax Appeals from taking
cognizance of trial court decisions involving the collection of real property tax cases. Sections
256210 and 266211 of the Local Government Code expressly allow localgovernment units to file "in
any court of competent jurisdiction" civil actions to collect basic real property taxes. Should the
trial court rule against them, local government units cannot be barred from appealing before the
Court of Tax Appeals the "highly specialized body specifically created for the purpose of reviewing
tax cases."212
We have also ruled that the Court of Tax Appeals, not the Court of Appeals, has the exclusive
original jurisdiction over petitions for certiorari assailing interlocutory orders issued by Regional
Trial Courts in a local tax case. We explained in The City of Manila v. Hon. Grecia-Cuerdo 213 that
while the Court of Tax Appeals has no express grant of power to issue writs of certiorari under
Republic Act No. 1125,214 as amended, the tax courts judicial power as defined in the
Constitution215 includes the power to determine "whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the [Regional Trial Court] in
issuing an interlocutory order of jurisdiction in cases falling within the exclusive appellate
jurisdiction of the tax court."216 We further elaborated:

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must
have the authority to issue, among others, a writ of certiorari. In transferring exclusive jurisdiction
over appealed tax cases to the CTA, it can reasonably be assumed that the law intended to transfer
also such power as is deemed necessary, if not indispensable, in aid of such appellate jurisdiction.
There is no perceivable reason why the transfer should only be considered as partial, not total.
....
If this Court were to sustain petitioners' contention that jurisdiction over their certiorari petition lies
with the CA, this Court would be confirming the exercise by two judicial bodies, the CA and the CTA,
of jurisdiction over basically the same subject matter precisely the split-jurisdiction situation
which is anathema to the orderly administration of justice.The Court cannot accept that such was
the legislative motive, especially considering that the law expressly confers on the CTA, the
tribunal with the specialized competence over tax and tariff matters, the role of judicial review over
local tax cases without mention of any other court that may exercise such power. Thus, the Court
agrees with the ruling of the CA that since appellate jurisdiction over private respondents'
complaint for tax refund is vested in the CTA, it follows that a petition for certiorari seeking
nullification of an interlocutory order issued in the said case should, likewise, be filed with the same
court. To rule otherwise would lead to an absurd situation where one court decides an appeal in the
main case while another court rules on an incident in the very same case.
Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence to
split jurisdiction to conclude that the intention of the law is to divide the authority over a local tax
case filed with the RTC by giving to the CA or this Court jurisdiction to issue a writ of certiorari
against interlocutory orders of the RTC but giving to the CTA the jurisdiction over the appeal from
the decision of the trial court in the same case. It is more in consonance with logic and legal
soundness to conclude that the grant of appellate jurisdiction to the CTA over tax cases filed in and
decided by the RTC carries withit the power to issue a writ of certiorari when necessary in aid of
such appellate jurisdiction. The supervisory power or jurisdiction of the CTA to issue a writ of
certiorari in aid of its appellate jurisdiction should co-exist with, and be a complement to, its
appellate jurisdiction to review, by appeal, the final orders and decisionsof the RTC, in order to
have complete supervision over the acts of the latter. 217(Citations omitted)
In this case, the petition for injunction filed before the Regional Trial Court of Pasay was a local tax
case originally decided by the trial court in its original jurisdiction. Since the PEZA assailed a
judgment, not an interlocutory order, of the Regional Trial Court, the PEZAs proper remedy was an
appeal to the Court of Tax Appeals.
Considering that the appellate jurisdiction of the Court of Tax Appeals is to the exclusion of all other
courts, the Court of Appeals had no jurisdiction to take cognizance of the PEZAs petition. The Court
of Appeals acted without jurisdiction in rendering the decision in CA-G.R. SP No. 100984. Its
decision in CA-G.R. SP No. 100984 is void.218
The filing of appeal in the wrong court does not toll the period to appeal. Consequently, the
decision of the Regional Trial Court, Branch 115, Pasay City, became final and executory after the
lapse of the 15th day from the PEZAs receipt of the trial courts decision. 219 The denial of the
petition for injunction became final and executory.
IV.
The remedy of a taxpayer depends on the
stage in which the local government unit
is enforcing its authority to impose real
property taxes
The proper remedy of a taxpayer depends on the stage in which the local government unit is
enforcing its authority to collect real property taxes. For the guidance of the members of the bench
and the bar, we reiterate the taxpayers remedies against the erroneous or illegal assessment of
real property taxes.
Exhaustion of administrative remedies under the Local Government Code is necessary in cases of
erroneous assessments where the correctness of the amount assessed is assailed. The taxpayer
must first pay the tax then file a protest with the Local Treasurer within 30 days from date of

payment of tax.220 If protest is denied or upon the lapse of the 60-day period to decide the protest,
the taxpayer may appeal to the Local Board of Assessment Appeals within 60 days from the denial
of the protest or the lapse of the 60-day period to decide the protest. 221The Local Board of
Assessment Appeals has 120 days to decide the appeal. 222
If the taxpayer is unsatisfied withthe Local Boards decision, the taxpayer may appeal before the
Central Board of Assessment Appeals within 30 days from receipt of the Local Boards decision. 223
The decision of the Central Board of Assessment Appeals is appealable before the Court of Tax
Appeals En Banc.224 The appeal before the Court of Tax Appeals shall be filed following the
procedure under Rule 43 of the Rules of Court.225
The Court of Tax Appeals decision may then be appealed before this court through a petition for
review on certiorari under Rule 45 of the Rules of Court raising pure questions of law. 226
In case of an illegal assessment where the assessment was issued without authority, exhaustion of
administrative remedies is not necessary and the taxpayer may directly resort to judicial
action.227 The taxpayer shall file a complaint for injunction before the Regional Trial Court 228 to
enjoin the local government unit from collecting real property taxes.
The party unsatisfied with the decision of the Regional Trial Court shall file an appeal, not a petition
for certiorari, before the Court of Tax Appeals, the complaint being a local tax case decided by the
Regional Trial Court.229 The appeal shall be filed within fifteen (15) days from notice of the trial
courts decision.
The Court of Tax Appeals decision may then be appealed before this court through a petition for
review on certiorari under Rule 45 of the Rules of Court raising pure questions of law. 230
In case the local government unit has issued a notice of delinquency, the taxpayer may file a
complaint for injunction to enjoin the impending sale of the real property at public auction. In case
the local government unit has already sold the property at public auction, the taxpayer must first
deposit with the court the amount for which the real property was sold, together with interest of
2% per month from the date ofsale to the time of the institution of action. The taxpayer may then
file a complaint to assail the validity of the public auction. 231 The decisions of the Regional Trial
Court in these cases shall be appealable before the Court of Tax Appeals, 232 and the latters
decisions appealable before this court through a petition for review on certiorari under Rule 45 of
the Rules of Court.233
V.
The PEZA is exempt from payment of
real property taxes
The jurisdictional errors in this case render these consolidated petitions moot. We do not review
void decisions rendered without jurisdiction.
However, the PEZA alleged that several local government units, including the City of Baguio and
the Province of Cavite, have issued their respective real property tax assessments against the
PEZA. Other local government units will likely follow suit, and either the PEZA or the local
government units taxing the PEZA may file their respective actions against each other.
In the interest of judicial economy234 and avoidance of conflicting decisions involving the same
issues,235 we resolve the substantive issue of whether the PEZA is exempt from payment of real
property taxes.
Real property taxes are annual taxes levied on real property such as lands, buildings, machinery,
and other improvements not otherwise specifically exempted under the Local Government
Code.236 Real property taxes are ad valorem, with the amount charged based on a fixed proportion
of the value of the property.237 Under the law, provinces, cities, and municipalities within the
Metropolitan Manila Area have the power to levy real property taxes within their respective
territories.238

The general rule is that real properties are subject to real property taxes. This is true especially
since the Local Government Code has withdrawn exemptions from real property taxes of all
persons, whether natural or juridical:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of real
property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration or otherwise, to
a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,
mosques, nonprofit or religious cemeteries and all lands, buildings, and improvements
actually, directly, and exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by local
water districts and government-owned or controlled corporations engaged in the supply
and distribution of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided under R.A. No.
6938; and
(e) Machinery and equipment usedfor pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property taxes previously granted
to, or presently enjoyed by, all persons, whether natural or juridical, including government-owned
or -controlled corporations are hereby withdrawn upon the effectivity of this Code. (Emphasis
supplied)
The person liable for real property taxes is the "taxable person who had actual or beneficial use
and possession [of the real property for the taxable period,] whether or not [the person owned the
property for the period he or she is being taxed]." 239
The exceptions to the rule are provided in the Local Government Code. Under Section 133(o), local
government units have no power to levy taxes of any kind on the national government, its agencies
and instrumentalities and local government units:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise
provided herein, the exercise of taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:
....
(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities and local government units.
Specifically on real property taxes, Section 234 enumerates the persons and real property exempt
from real property taxes:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of real
property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration or otherwise, to
a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,
mosques, nonprofitor religious cemeteries and all lands, buildings, and improvements
actually, directly, and exclusively used for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local
water districts and government-owned or controlled corporations engaged in the supply
and distribution of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided under R.A. No.
6938; and
(e) Machinery and equipment used for pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property tax previously granted to,
or presently enjoyed by, all persons, whether natural or juridical, including all government-owned
or -controlled corporations are hereby withdrawn upon the effectivity of this Code. (Emphasis
supplied)
For persons granted tax exemptions or incentives before the effectivity of the Local Government
Code, Section 193 withdrew these tax exemption privileges. These persons consist of both natural
and juridical persons, including government-owned or controlled corporations:
SEC. 193. Withdrawal of Tax Exemption Privileges. Unless otherwise provided in this code, tax
exemptions or incentives granted to or presently enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations, except local water districts,
cooperatives duly registered under R.A. 6938, non stock and non profit hospitals and educational
institutions, are hereby withdrawn upon effectivity of this Code.
As discussed, Section 234 withdrew all tax privileges with respect to real property taxes.
Nevertheless, local government units may grant tax exemptions under such terms and conditions
asthey may deem necessary:
SEC. 192. Authority to Grant Tax Exemption Privileges. Local government units may, through
ordinances duly approved, grant tax exemptions, incentives or reliefs under such terms and
conditions as they may deem necessary.
In Mactan Cebu International Airport Authority v. Hon. Marcos, 240 this court classified the
exemptions from real property taxes into ownership, character, and usage exemptions. Ownership
exemptions are exemptions based on the ownership of the real property. The exemptions of real
property owned by the Republic of the Philippines, provinces, cities, municipalities, barangays, and
registered cooperatives fall under this classification. 241 Character exemptions are exemptions based
on the character of the real property. Thus, no real property taxes may be levied on charitable
institutions, houses and temples of prayer like churches, parsonages, or convents appurtenant
thereto, mosques, and non profitor religious cemeteries. 242
Usage exemptions are exemptions based on the use of the real property. Thus, no real property
taxes may be levied on real property such as: (1) lands and buildings actually, directly, and
exclusively used for religious, charitable or educational purpose; (2) machineries and equipment
actually, directly and exclusively used by local water districts or by government-owned or
controlled corporations engaged in the supply and distribution of water and/or generation and
transmission of electric power; and (3) machinery and equipment used for pollution control and
environmental protection. 243
Persons may likewise be exempt from payment of real properties if their charters, which were
enacted or reenacted after the effectivity of the Local Government Code, exempt them payment of
real property taxes.244
V.
(A) The PEZA is an instrumentality of the national government
An instrumentality is "any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some if
not all corporate powers, administering special funds, and enjoying operational autonomy, usually
through a charter."245

Examples of instrumentalities of the national government are the Manila International Airport
Authority,246 the Philippine Fisheries Development Authority,247 the Government Service Insurance
System,248 and the Philippine Reclamation Authority. 249 These entities are not integrated within the
department framework but are nevertheless vested with special functions to carry out a declared
policy of the national government.
Similarly, the PEZA is an instrumentality of the national government. It is not integrated within the
department framework but is an agency attached to the Department of Trade and Industry. 250 Book
IV, Chapter 7, Section 38(3)(a) of the Administrative Code of 1987 defines "attachment": SEC. 38.
Definition of Administrative Relationship. Unless otherwise expressly stated in the Code or in other
laws defining the special relationships of particular agencies, administrative relationships shall be
categorized and defined as follows:
....
(3) Attachment. (a) This refers to the lateral relationship between the department or its equivalent
and the attached agency or corporation for purposes of policy and program coordination. The
coordination may be accomplished by having the department represented in the governing board
of the attached agency or corporation, either as chairman or as a member, with or without voting
rights, if this is permitted by the charter; having the attached corporation or agency comply with a
system of periodic reporting which shall reflect the progress of the programs and projects; and
having the department or its equivalent provide general policies through its representative in the
board, which shall serve as the framework for the internal policies of the attached corporation or
agency[.]
Attachment, which enjoys "a larger measure of independence" 251 compared with other
administrative relationships such as supervision and control, is further explained in Beja, Sr. v.
Court of Appeals:252
An attached agency has a larger measure of independence from the Department to which it is
attached than one which is under departmental supervision and control or administrative
supervision. This is borne out by the "lateral relationship" between the Department and the
attached agency. The attachment is merely for "policy and program coordination." With respect to
administrative matters, the independence of an attached agency from Departmental control and
supervision is further reinforced by the fact that even an agency under a Departments
administrative supervision is free from Departmental interference with respect to appointments
and other personnel actions "in accordance with the decentralization of personnel functions" under
the Administrative Code of 1987. Moreover, the Administrative Code explicitly provides that
Chapter 8 of Book IV on supervision and control shall not apply to chartered institutions attached to
a Department.253
With the PEZA as an attached agency to the Department of Trade and Industry, the 13-person PEZA
Board is chaired by the Department Secretary. 254 Among the powers and functions of the PEZA is its
ability to coordinate with the Department of Trade and Industry for policy and program formulation
and implementation.255 In strategizing and prioritizing the development of special economic zones,
the PEZA coordinates with the Department of Trade and Industry. 256
The PEZA also administers its own funds and operates autonomously, with the PEZA Board
formulating and approving the PEZAs annual budget. 257 Appointments and other personnel actions
in the PEZA are also free from departmental interference, with the PEZA Board having the exclusive
and final authority to promote, transfer, assign and reassign officers of the PEZA. 258
As an instrumentality of the national government, the PEZA is vested with special functions or
jurisdiction by law. Congress created the PEZA to operate, administer, manage and develop special
economic zones in the Philippines. 259 Special economic zones are areas with highly developed or
which have the potential to be developed into agro-industrial, industrial tourist/recreational,
commercial, banking, investment and financial centers. 260 By operating, administering, managing,
and developing special economic zones which attract investments and promote use of domestic
labor, the PEZA carries out the following policy of the Government: SECTION 2. Declaration of
Policy. It is the declared policy of the government to translate into practical realities the following
State policies and mandates in the 1987 Constitution, namely:

(a) "The State recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investments." (Sec. 20, Art. II)
(b) "The State shall promote the preferential use of Filipino labor, domestic materials and
locally produced goods, and adopt measures that help make them competitive." (Sec. 12,
Art. XII) In pursuance of these policies, the government shall actively encourage, promote,
induce and accelerate a sound and balanced industrial, economic and social development
of the country in order to provide jobs to the people especially those in the rural areas,
increase their productivity and their individual and family income, and thereby improve the
level and quality of their living condition through the establishment, among others, of
special economic zones in suitable and strategic locations in the country and through
measures that shall effectively attract legitimate and productive foreign investments. 261
Being an instrumentality of the national government, the PEZA cannot be taxed by local
government units.
Although a body corporate vested with some corporate powers,262 the PEZA is not a governmentowned or controlled corporation taxable for real property taxes.
Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines the term
"government-owned or controlled corporation":
SEC. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole, or
a particular statute, shall require a different meaning:
....
(13) Government-owned or controlled corporation refers to any agency organized as a stock or
non-stock corporation, vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through its instrumentalities either
wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one
(51) per cent of its capital stock: Provided, That government owned or controlled corporations may
be further categorized by the Department of the Budget, the Civil Service Commission, and the
Commission on Audit for purposes of the exercise and discharge of their respective powers,
functions and responsibilities with respect to such corporations.
Government entities are created by law, specifically, by the Constitution or by statute. In the case
of government-owned or controlled corporations, they are incorporated by virtue of special
charters263 to participate in the market for special reasons which may be related to dysfunctions or
inefficiencies of the market structure. This is to adjust reality as against the concept of full
competition where all market players are price takers. Thus, under the Constitution, governmentowned or controlled corporations are created in the interest of the common good and should satisfy
the test of economic viability. 264 Article XII, Section 16 of the Constitution provides:
Section 16. The Congress shall not, except by general law, provide for the formation, organization,
or regulation of private corporations. Government-owned or controlled corporations may be
created or established by special charters in the interest of the common good and subject to the
test of economic viability.
Economic viability is "the capacity to function efficiently in business." 265 To be economically viable,
the entity "should not go into activities which the private sector can do better." 266
To be considered a government-owned or controlled corporation, the entity must have been
organized as a stock or non-stock corporation. 267
Government instrumentalities, on the other hand, are also created by law but partake of sovereign
functions. When a government entity performs sovereign functions, it need not meet the test of
economic viability. In Manila International Airport Authority v. Court of Appeals, 268 this court
explained:
In contrast, government instrumentalities vested with corporate powers and performing
governmental orpublic functions need not meet the test of economic viability. These

instrumentalities perform essential public services for the common good, services that every
modern State must provide its citizens. These instrumentalities need not be economically viable
since the government may even subsidize their entire operations. These instrumentalities are not
the "government-owned or controlled corporations" referred to in Section 16, Article XII of the 1987
Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government
instrumentalities vested with corporate powers but performing essential governmental or public
functions. Congress has plenary authority to create government instrumentalities vested with
corporate powers provided these instrumentalities perform essential government functions or
public services. However, when the legislature creates through special charters corporations that
perform economic or commercial activities, such entities known as "government-owned or
controlled corporations" must meetthe test of economic viability because they compete in the
market place.
....
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the
Constitutional Commission the purpose of this test, as follows:
MR. OPLE: Madam President, the reason for this concern is really that when the government creates
a corporation, there is a sense in which this corporation becomes exempt from the test of economic
performance. We know what happened in the past. If a government corporation loses, then it
makes its claim upon the taxpayers' money through new equity infusions from the government and
what is always invoked is the common good. That is the reason why this year, out of a budget
of P115 billion for the entire government, about P28 billion of this will go into equity infusions to
support a few government financial institutions. And this is all taxpayers' money which could have
been relocated to agrarian reform, to social services like health and education, to augment the
salaries of grossly underpaid public employees. And yet this is all going down the drain.
Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good,"
this becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the
responsibility of meeting the market test so that they become viable. And so, Madam President, I
reiterate, for the committee's consideration and I am glad that I am joined in this proposal by
Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC
TEST," together with the common good.
....
Clearly, the test of economic viability does not apply to government entities vested with corporate
powers and performing essential public services. The State is obligated to render essential public
services regardless of the economic viability of providing such service. The noneconomic viability
of rendering such essential public service does not excuse the State from withholding such
essential services from the public.269 (Emphases and citations omitted)
The law created the PEZAs charter. Under the Special Economic Zone Act of 1995, the PEZA was
established primarily to perform the governmental function of operating,administering, managing,
and developing special economic zones to attract investments and provide opportunities for
preferential use of Filipino labor.
Under its charter, the PEZA was created a body corporate endowed with some corporate powers.
However, it was not organized as a stock270 or non-stock271 corporation. Nothing in the PEZAs
charter provides that the PEZAs capital is divided into shares. 272 The PEZA also has no members
who shall share in the PEZAs profits.
The PEZA does not compete with other economic zone authorities in the country. The government
may even subsidize the PEZAs operations. Under Section 47 of the Special Economic Zone Act of
1995, "any sum necessary to augment [the PEZAs] capital outlay shall be included in the General
Appropriations Act to be treated as an equity of the national government." 273
The PEZA, therefore, need not be economically viable. It is not a government-owned or controlled
corporation liable for real property taxes.

V. (B)
The PEZA assumed the non-profit character, including the tax exempt status, of the EPZA
The PEZAs predecessor, the EPZA, was declared non-profit in character with all its revenues
devoted for its development, improvement, and maintenance. Consistent with this non-profit
character, the EPZA was explicitly declared exempt from real property taxes under its charter.
Section 21 of Presidential Decree No. 66 provides:
Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority shall be
non-profit and shall devote and use all its returns from its capital investment, as well as excess
revenues from its operations, for the development, improvement and maintenance and other
related expenditures of the Authority to pay its indebtedness and obligations and in furtherance
and effective implementation of the policy enunciated in Section 1 of this Decree. In consonance
therewith, the Authority is hereby declared exempt:
....
(b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and licenses to
be paid to the National Government, its provinces, cities, municipalities and other government
agencies and instrumentalities[.]
The Special Economic Zone Act of 1995, on the other hand, does not specifically exempt the PEZA
from payment of real property taxes.
Nevertheless, we rule that the PEZA is exempt from real property taxes by virtue of its charter. A
provision in the Special Economic Zone Act of 1995 explicitly exempting the PEZA is unnecessary.
The PEZA assumed the real property exemption of the EPZA under Presidential Decree No. 66.
Section 11 of the Special Economic Zone Act of 1995 mandated the EPZA "to evolve into the PEZA
in accordance with the guidelines and regulations set forth in an executive order issued for this
purpose." President Ramos then issued Executive Order No. 282 in 1995, ordering the PEZA to
assume the EPZAs powers, functions, and responsibilities under Presidential Decree No. 66 not
inconsistent with the Special Economic Zone Act of 1995:
SECTION 1. Assumption of EPZAs Powers and Functions by PEZA. All the powers, functions and
responsibilities of EPZA as provided under its Charter, Presidential Decree No. 66, as amended,
insofar as they are not inconsistent with the powers,functions and responsibilities of the PEZA, as
mandated under Republic Act No. 7916, shall hereafter be assumed and exercised by the PEZA.
Henceforth, the EPZA shall be referred to as the PEZA.
The following sections of the Special Economic Zone Act of 1995 provide for the PEZAs
powers,functions, and responsibilities:
SEC. 5. Establishment of ECOZONES. To ensure the viability and geographical dispersal of
ECOZONES through a system of prioritization, the following areas are initially identified as
ECOZONES, subject to the criteria specified in Section 6:
....
The metes and bounds of each ECOZONE are to be delineated and more particularly described in a
proclamation to be issued by the President of the Philippines, upon the recommendation of the
Philippine Economic Zone Authority (PEZA), which shall be established under this Act, in
coordination with the municipal and / or city council, National Land Use Coordinating Committee
and / or the Regional Land Use Committee.
SEC. 6. Criteria for the Establishment of Other ECOZONES. In addition to the ECOZONES identified
in Section 5 of this Act, other areas may be established as ECOZONES in a proclamation to be
issued by the President of the Philippines subject to the evaluation and recommendation of the
PEZA, based on a detailed feasibility and engineering study which must conform to the following
criteria:

(a) The proposed area must be identified as a regional growth center in the Medium-Term
Philippine Development Plan or by the Regional Development Council;
(b) The existence of required infrastructure in the proposed ECOZONE, such as roads,
railways, telephones, ports, airports, etc., and the suitability and capacity of the proposed
site to absorb such improvements;
(c) The availability of water source and electric power supply for use of the ECOZONE;
(d) The extent of vacant lands available for industrial and commercial development and
future expansion of the ECOZONE as well as of lands adjacent to the ECOZONE available
for development of residential areas for the ECOZONE workers;
(e) The availability of skilled, semi-skilled and non-skilled trainable labor force in and
around the ECOZONE;
(f) The area must have a significant incremental advantage over the existing economic
zones and its potential profitability can be established;
(g) The area must be strategically located; and
(h) The area must be situated where controls can easily be established to curtail smuggling
activities.
Other areas which do not meet the foregoing criteria may be established as ECOZONES: Provided,
That the said area shall be developed only through local government and/or private sector initiative
under any of the schemes allowed in Republic Act No. 6957 (the build-operate-transfer law), and
without any financial exposure on the part of the national government: Provided, further, That the
area can be easily secured to curtail smuggling activities: Provided, finally, That after five (5) years
the area must have attained a substantial degree of development, the indicators of which shall be
formulated by the PEZA.
SEC. 7. ECOZONE to be a Decentralized Agro-Industrial, Industrial, Commercial / Trading, Tourist,
Investment and Financial Community. - Within the framework of the Constitution, the interest of
national sovereignty and territorial integrity of the Republic, ECOZONE shall be developed, as much
as possible, into a decentralized, self-reliant and self-sustaining industrial, commercial/trading,
agro-industrial, tourist, banking, financial and investment center with minimum government
intervention. Each ECOZONE shall be provided with transportation, telecommunications, and other
facilities needed to generate linkage with industries and employment opportunitiesfor its own
inhabitants and those of nearby towns and cities.
The ECOZONE shall administer itself on economic, financial, industrial, tourism development and
such other matters within the exclusive competence of the national government.
The ECOZONE may establish mutually beneficial economic relations with other entities within the
country, or, subject to the administrative guidance of the Department of Foreign Affairs and/or the
Department of Trade and Industry, with foreign entities or enterprises.
Foreign citizens and companies owned by non-Filipinos in whatever proportion may set up
enterprises in the ECOZONE, either by themselves or in joint venture with Filipinos in any sector of
industry, international trade and commerce within the ECOZONE. Their assets, profits and other
legitimate interests shall be protected: Provided, That the ECOZONE through the PEZA may require
a minimum investment for any ECOZONE enterprises in freely convertible currencies: Provided,
further, That the new investment shall fall under the priorities, thrusts and limits provided for in the
Act.
SEC. 8. ECOZONE to be Operated and Managed as Separate Customs Territory. The ECOZONE
shall be managed and operated by the PEZA as separate customs territory.
The PEZA is hereby vested with the authority to issue certificate of origin for products
manufactured or processed in each ECOZONE in accordance with the prevailing rules or origin, and

the pertinent regulations of the Department of Trade and Industry and/or the Department of
Finance.
SEC. 9. Defense and Security. The defense of the ECOZONE and the security of its perimeter
fence shall be the responsibility of the national government in coordination with the PEZA. Military
forces sent by the national government for the purpose of defense shall not interfere in the internal
affairs of any of the ECOZONE and expenditure for these military forces shall be borne by the
national government. The PEZA may provide and establish the ECOZONES internal security and
firefighting forces.
SEC. 10. Immigration. Any investor within the ECOZONE whose initial investment shall not be less
than One Hundred Fifty Thousand Dollars ($150,000.00), his/her spouse and dependent children
under twenty-one (21) years of age shall be granted permanent resident status within the
ECOZONE. They shall have freedom of ingress and egress to and from the ECOZONE without any
need of special authorization from the Bureau of Immigration.
The PEZA shall issue working visas renewable every two (2) years to foreign executives and other
aliens, processing highly-technical skills which no Filipino within the ECOZONE possesses, as
certified by the Department of Labor and Employment. The names of aliens granted permanent
resident status and working visas by the PEZA shall be reported to the Bureau of Immigration
within thirty (30) days after issuance thereof.
SEC. 13. General Powers and Functions of the Authority. The PEZA shall have the following powers
and functions:
(a) To operate, administer, manage and develop the ECOZONE according to the principles
and provisions set forth in this Act;
(b) To register, regulate and supervise the enterprises in the ECOZONE in an efficient and
decentralized manner;
(c) To coordinate with local government units and exercise general supervision over the
development, plans, activities and operations of the ECOZONES, industrial estates, export
processing zones, free trade zones, and the like;
(d) In coordination with local government units concerned and appropriate agencies, to
construct,acquire, own, lease, operate and maintain on its own or through contract,
franchise, license, bulk purchase from the private sector and build-operate-transfer scheme
or joint venture, adequate facilities and infrastructure, such as light and power systems,
water supply and distribution systems, telecommunication and transportation, buildings,
structures, warehouses, roads, bridges, ports and other facilities for the operation and
development of the ECOZONE;
(e) To create, operate and/or contractto operate such agencies and functional units or
offices of the authority as it may deem necessary;
(f) To adopt, alter and use a corporate seal; make contracts, lease, own or otherwise
dispose of personal or real property; sue and be sued; and otherwise carry out its duties
and functions as provided for in this Act;
(g) To coordinate the formulation and preparation of the development plans of the different
entities mentioned above;
(h) To coordinate with the National Economic Development Authority (NEDA), the
Department of Trade and Industry (DTI), the Department of Science and Technology
(DOST), and the local government units and appropriate government agencies for policy
and program formulation and implementation; and
(i) To monitor and evaluate the development and requirements of entities in subsection (a)
and recommend to the local government units or other appropriate authorities the location,
incentives, basic services, utilities and infrastructure required or to be made available for
said entities.

SEC. 17. Investigation and Inquiries. Upon a written formal complaint made under oath, which on
its face provides reasonable basis to believe that some anomaly or irregularity might have been
committed, the PEZA or the administrator of the ECOZONE concerned, shall have the power to
inquire into the conduct of firms or employees of the ECOZONE and to conduct investigations, and
for that purpose may subpoena witnesses, administer oaths, and compel the production of books,
papers, and other evidences: Provided, That to arrive at the truth, the investigator(s) may grant
immunity from prosecution to any person whose testimony or whose possessions of documents or
other evidence is necessary or convenient to determine the truth in any investigation conducted by
him or under the authority of the PEZA or the administrator of the ECOZONE concerned.
SEC. 21. Development Strategy of the ECOZONE. - The strategy and priority of development of
each ECOZONE established pursuant to this Act shall be formulated by the PEZA, in coordination
with the Department of Trade and Industry and the National Economic and Development Authority;
Provided, That such development strategy is consistent with the priorities of the national
government as outlined in the medium-term Philippine development plan. It shall be the policy of
the government and the PEZA to encourage and provide Incentives and facilitate private sector
participation in the construction and operation of public utilities and infrastructure in the ECOZONE,
using any of the schemes allowed in Republic Act No. 6957 (the build-operate-transfer law).
SEC. 22. Survey of Resources. The PEZA shall, in coordination with appropriate authorities and
neighboring cities and municipalities, immediately conduct a survey of the physical, natural assets
and potentialities of the ECOZONE areas under its jurisdiction.
SEC. 26. Domestic Sales. Goods manufactured by an ECOZONE enterprise shall be made
available for immediate retail sales in the domestic market, subject to payment of corresponding
taxes on the raw materials and other regulations that may be adopted by the Board of the PEZA.
However, in order to protect the domestic industry, there shall be a negative list of Industries that
willbe drawn up by the PEZA. Enterprises engaged in the industries included in the negative list
shall not be allowed to sell their products locally. Said negative list shall be regularly updated by
the PEZA.
The PEZA, in coordination with the Department of Trade and Industry and the Bureau of Customs,
shall jointly issue the necessary implementing rules and guidelines for the effective
Implementation of this section.
SEC. 29. Eminent Domain. The areas comprising an ECOZONE may be expanded or reduced when
necessary. For this purpose, the government shall have the power to acquire, either by purchase,
negotiation or condemnation proceedings, any private lands within or adjacent to the ECOZONE
for:
a. Consolidation of lands for zone development purposes;
b. Acquisition of right of way to the ECOZONE; and
c. The protection of watershed areas and natural assets valuable to the prosperity of the
ECOZONE.
If in the establishment of a publicly-owned ECOZONE, any person or group of persons who has
been occupying a parcel of land within the Zone has to be evicted, the PEZA shall provide the
person or group of persons concerned with proper disturbance compensation: Provided, however,
That in the case of displaced agrarian reform beneficiaries, they shall be entitled to the benefits
under the Comprehensive Agrarian Reform Law, including but not limited to Section 36 of Republic
Act No. 3844, in addition to a homelot in the relocation site and preferential employment in the
project being undertaken.
SEC. 32. Shipping and Shipping Register. Private shipping and related business including private
container terminals may operate freely in the ECOZONE, subject only to such minimum reasonable
regulations of local application which the PEZA may prescribe.
The PEZA shall, in coordination with the Department of Transportation and Communications,
maintain a shipping register for each ECOZONE as a business register of convenience for oceangoing vessels and issue related certification.

Ships of all sizes, descriptions and nationalities shall enjoy access to the ports of the ECOZONE,
subject only to such reasonable requirement as may be prescribed by the PEZA In coordination
with the appropriate agencies of the national government.
SEC. 33. Protection of Environment. - The PEZA, in coordination with the appropriate agencies, shall
take concrete and appropriate steps and enact the proper measure for the protection of the local
environment.
SEC. 34. Termination of Business. - Investors In the ECOZONE who desire to terminate business or
operations shall comply with such requirements and procedures which the PEZA shall set,
particularly those relating to the clearing of debts. The assets of the closed enterprise can be
transferred and the funds con be remitted out of the ECOZONE subject to the rules, guidelines and
procedures prescribed jointly by the Bangko Sentral ng Pilipinas, the Department of Finance and
the PEZA.
SEC. 35. Registration of Business Enterprises. - Business enterprises within a designated ECOZONE
shall register with the PEZA to avail of all incentives and benefits provided for in this Act.
SEC. 36. One Stop Shop Center. - The PEZA shall establish a one stop shop center for the purpose
of facilitating the registration of new enterprises in the ECOZONE. Thus, all appropriate government
agencies that are Involved In registering, licensing or issuing permits to investors shall assign their
representatives to the ECOZONE to attend to Investors requirements.
SEC. 39. Master Employment Contracts. - The PEZA, in coordination with the Department of Tabor
and Employment, shall prescribe a master employment contract for all ECOZONE enterprise staff
members and workers, the terms of which provide salaries and benefits not less than those
provided under this Act, the Philippine Labor Code, as amended, and other relevant issuances of
the national government.
SEC. 41. Migrant Worker. - The PEZA, in coordination with the Department of Labor and
Employment, shall promulgate appropriate measures and programs leading to the expansion of the
services of the ECOZONE to help the local governments of nearby areas meet the needs of the
migrant workers.
SEC. 42. Incentive Scheme. - An additional deduction equivalent to one- half (1/2) of the value of
training expenses incurred in developing skilled or unskilled labor or for managerial or other
management development programs incurred by enterprises in the ECOZONE can be deducted
from the national government's share of three percent (3%) as provided In Section 24.
The PEZA, the Department of Labor and Employment, and the Department of Finance shall jointly
make a review of the incentive scheme provided In this section every two (2) years or when
circumstances so warrant.
SEC. 43. Relationship with the Regional Development Council. - The PEZA shall determine the
development goals for the ECOZONE within the framework of national development plans, policies
and goals, and the administrator shall, upon approval by the PEZA Board, submit the ECOZONE
plans, programs and projects to the regional development council for inclusion in and as inputs to
the overall regional development plan.
SEC. 44. Relationship with the Local Government Units. - Except as herein provided, the local
government units comprising the ECOZONE shall retain their basic autonomy and identity. The
cities shall be governed by their respective charters and the municipalities shall operate and
function In accordance with Republic Act No. 7160, otherwise known as the Local Government Code
of 1991.
SEC. 45. Relationship of PEZA to Privately-Owned Industrial Estates. Privately-owned industrial
estates shall retain their autonomy and independence and shall be monitored by the PEZA for the
implementation of incentives.
SEC. 46. Transfer of Resources. - The relevant functions of the Board of Investments over industrial
estates and agri-export processing estates shall be transferred to the PEZA. The resources of
government owned Industrial estates and similar bodies except the Bases Conversion Development

Authority and those areas identified under Republic Act No. 7227, are hereby transferred to the
PEZA as the holding agency. They are hereby detached from their mother agencies and attached to
the PEZA for policy, program and operational supervision.
The Boards of the affected government-owned industrial estates shall be phased out and only the
management level and an appropriate number of personnel shall be retained.
Government personnel whose services are not retained by the PEZA or any government office
within the ECOZONE shall be entitled to separation pay and such retirement and other benefits
theyare entitled to under the laws then in force at the time of their separation: Provided, That in no
case shall the separation pay be less than one and one-fourth (1 1/4) month of every year of
service.
The non-profit character of the EPZA under Presidential Decree No. 66 is not inconsistent with any
of the powers, functions, and responsibilities of the PEZA. The EPZAs non-profit character,
including the EPZAs exemption from real property taxes, must be deemed assumed by the PEZA.
In addition, the Local Government Code exempting instrumentalities of the national government
from real property taxes was already in force274 when the PEZAs charter was enacted in 1995. It
would have been redundant to provide for the PEZAs exemption in its charter considering that the
PEZA is already exempt by virtue of Section 133(o) of the Local Government Code.
As for the EPZA, Commonwealth Act No. 470 or the Assessment Law was in force when the EPZAs
charter was enacted. Unlike the Local Government Code, Commonwealth Act No. 470 does not
contain a provision specifically exempting instrumentalities of the national government from
payment of real property taxes.275 It was necessary to put an exempting provision in the EPZAs
charter.
Contrary to the PEZAs claim, however, Section 24 of the Special Economic Zone Act of 1995 is not
a basis for the PEZAs exemption. Section 24 of the Special Economic Zone Act of 1995 provides:
Sec. 24. Exemption from National and Local Taxes. Except for real property taxes on land owned
by developers, no taxes, local and national, shall be imposed on business establishments operating
within the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business
enterprises within the ECOZONEshall be paid and remitted as follows:
(a) Three percent (3%) to the National Government;
(b) Two percent (2%) which shall be directly remitted by the business establishments to the
treasurer's office of the municipality or city where the enterprise is located. (Emphasis
supplied)
Tax exemptions provided under Section 24 apply only to business establishments operating within
economic zones. Considering that the PEZA is not a business establishment but an instrumentality
performing governmental functions, Section 24 is inapplicable to the PEZA. Also, contrary to the
PEZAs claim, developers ofeconomic zones, whether public or private developers, are liable for
real property taxes on lands they own. Section 24 does not distinguish between a public and
private developer. Thus, courts cannot distinguish. 276 Unless the public developer is exempt under
the Local Government Code or under its charter enacted after the Local Government Codes
effectivity, the public developer must pay real property taxes on their land.
At any rate, the PEZA cannot be taxed for real property taxes even if it acts as a developer or
operator of special economic zones. The PEZA is an instrumentality of the national government
exempt from payment of real property taxes under Section 133(o) of the Local Government Code.
As this court said in Manila International Airport Authority, "there must be express language in the
law empowering local governments to tax national government instrumentalities. Any doubt
whether such power exists is resolved against local governments." 277
V. (C)
Real properties under the PEZAs title are owned by the Republic of the Philippines

Under Section 234(a) of the LocalGovernment Code, real properties owned by the Republic of the
Philippines are exempt from real property taxes:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from payment of real
property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person[.]
Properties owned by the state are either property of public dominion or patrimonial property. Article
420 of the Civil Code of the Philippines enumerates property of public dominion:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without belonging for public use, and are intended for
some public service or for the development of the national wealth.
Properties of public dominion are outside the commerce of man. These properties are exempt from
"levy, encumbrance or disposition through public or private sale." 278 As this court explained in
Manila International Airport Authority:
Properties of public dominion, being for public use, are not subject to levy, encumbrance or
disposition through public or private sale. Any encumbrance, levy on execution or auction sale of
any property of public dominion is void for being contrary to public policy. Essential public services
will stop if properties of public dominion are subject to encumbrances, foreclosures and auction
sale[.]279
On the other hand, all other properties of the state that are not intended for public use or are not
intended for some public service or for the development of the national wealth are patrimonial
properties. Article 421 of the Civil Code of the Philippines provides:
Art. 421. All other property of the State, which is not of the character stated in the preceding
article, is patrimonial property.
Patrimonial properties are also properties of the state, but the state may dispose of its patrimonial
property similar to private persons disposing of their property. Patrimonial properties are within the
commerce of man and are susceptible to prescription, unless otherwise provided. 280
In this case, the properties sought to be taxed are located in publicly owned economic zones.
These economic zones are property of public dominion. The City seeks to tax properties located
within the Mactan Economic Zone,281 the site of which was reserved by President Marcos under
Proclamation No. 1811, Series of 1979. Reserved lands are lands of the public domain set aside for
settlement or public use, and for specific public purposes by virtue of a presidential
proclamation.282 Reserved lands are inalienable and outside the commerce of man, 283 and remain
property of the Republic until withdrawn from publicuse either by law or presidential
proclamation.284 Since no law or presidential proclamation has been issued withdrawing the site of
the Mactan Economic Zone from public use, the property remains reserved land.
As for the Bataan Economic Zone, the law consistently characterized the property as a port. Under
Republic Act No. 5490, Congress declared Mariveles, Bataan "a principal port of entry" 285 to serve
as site of a foreign trade zone where foreign and domestic merchandise may be brought in without
being subject to customs and internal revenue laws and regulations of the Philippines. 286
Section 4 of Republic Act No. 5490 provided that the foreign trade zone in Mariveles, Bataan "shall
at all times remain to be owned by the Government":

SEC. 4. Powers and Duties. The Foreign Trade Zone Authority shall have the following powers and
duties:
a. To fix and delimit the site of the Zone which at all times remain to be owned by the Government,
and which shall have a contiguous and adequate area with well defined and policed boundaries,
with adequate enclosures to segregate the Zone from the customs territory for protection of
revenues, together with suitable provisions for ingress and egress of persons, conveyance, vessels
and merchandise sufficient for the purpose of this Act[.] (Emphasis supplied)
The port in Mariveles, Bataan then became the Bataan Economic Zone under the Special Economic
Zone Act of 1995.287 Republic Act No. 9728 then converted the Bataan Economic Zone into the
Freeport Area of Bataan.288
A port of entry, where imported goods are unloaded then introduced in the market for public
consumption, is considered property for public use. Thus, Article 420 of the Civil Code classifies a
port as property of public dominion. The Freeport Area of Bataan, where the government allows tax
and duty-free importation of goods,289is considered property of public dominion. The Freeport Area
of Bataan is owned by the state and cannot be taxed under Section 234(a) of the Local
Government Code.
Properties of public dominion, even if titled in the name of an instrumentality as in this case,
remain owned by the Republic of the Philippines. If property registered in the name of an
instrumentality is conveyed to another person,the property is considered conveyed on behalf of the
Republic of the Philippines. Book I, Chapter 12, Section 48 of the Administrative Code of 1987
provides:
SEC. 48. Official Authorized to Convey Real Property. Whenever real property of the government is
authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
....
(2) For property belonging to the Republic of the Philippines, but titled in the name of any political
subdivision orof any corporate agency or instrumentality, by the executive head of the agency or
instrumentality. (Emphasis supplied)
In Manila International Airport Authority, this court explained:
[The exemption under Section 234(a) of the Local Government Code] should be read in relation
with Section 133(o) of the same Code, which prohibits local governments from imposing "[t]axes,
fess or charges of any kind on the National Government, its agencies and instrumentalitiesx x x."
The real properties owned by the Republic are titled either in the name of the Republic itself or in
the name of agencies or instrumentalities of the National Government.The Administrative Code
allows real property owned by the Republic to be titled in the name of agencies or instrumentalities
of the national government. Such real properties remained owned by the Republic of the
Philippines and continue to be exempt from real estate tax.
The Republic may grant the beneficialuse of its real property to an agency or instrumentality of the
national government. This happens when title of the real property is transferred to an agency or
instrumentality even as the Republic remains the owner of the real property. Such arrangement
does not result in the loss of the tax exemption/ Section 234(a) of the Local Government Code
states that real property owned by the Republic loses its tax exemption only if the "beneficial use
thereof has been granted, for consideration or otherwise, to a taxable person." . . . 290 (Emphasis in
the original; italics supplied)
Even the PEZAs lands and buildings whose beneficial use have been granted to other persons may
not be taxed with real property taxes. The PEZA may only lease its lands and buildings to PEZAregistered economic zone enterprises and entities. 291 These PEZA-registered enterprises and
entities, which operate within economic zones, are not subject to real property taxes. Under
Section 24 of the Special Economic Zone Act of 1995, no taxes, whether local or national, shall be
imposed on all business establishments operating within the economic zones: SEC. 24. Exemption
from National and Local Taxes. Except for real property on land owned by developers, no taxes,

local and national, shall be imposed on business establishments operating within the ECOZONE. In
lieu thereof, five percent (5%) of the gross income earned by all business enterprises within the
ECOZONE shall be paid and remitted as follows:
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the business establishments to the
treasurers office of the municipality or city where the enterprise is located. 292 (Emphasis supplied)
In lieu of revenues from real property taxes, the City of Lapu-Lapu collects two-fifths of 5% final tax
on gross income paid by all business establishments operating withinthe Mactan Economic Zone:
SEC. 24. Exemption from National and Local Taxes. Except for real property on land owned by
developers, no taxes, local and national, shall be imposed on business establishments operating
within the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business
enterprises within the ECOZONE shall be paid and remitted as follows:
a. Three percent (3%) to the National Government;
b. Two percent (2%) which shall be directly remitted by the business establishments to the
treasurers office of the municipality or city where the enterprise is located. 293 (Emphasis
supplied)
For its part, the Province of Bataan collects a fifth of the 5% final tax on gross income paid by all
business establishments operating within the Freeport Area of Bataan:
Section 6. Imposition of a Tax Rate of Five Percent (5%) on Gross Income Earned. - No taxes, local
and national, shall be imposed on business establishments operating withinthe FAB. In lieu thereof,
said business establishments shall pay a five percent (5%) final tax on their gross income earned in
the following percentages:
(a) One per centum (1%) to the National Government;
(b) One per centum (1%) to the Province of Bataan;
(c) One per centum (1%) to the treasurer's office of the Municipality of Mariveles; and
(d) Two per centum (2%) to the Authority of the Freeport of Area of Bataan. 294 (Emphasis
supplied)
Petitioners, therefore, are not deprived of revenues from the operations of economic zones within
their respective territorial jurisdictions.
The national government ensured that loeal government units comprising economic zones shall
retain their basic autonomy and identity. 295
All told, the PEZA is an instrumentality of the national government.1wphi1 Furthermore, the lands
owned by the PEZA are real properties owned by the Republic of the Philippines. The City of LapuLapu and the Province of Bataan cannot collect real property taxes from the PEZA.
WHEREFORE, the consolidated petitions are DENIED.
SO ORDERED.
MARVIC M.V.F. LEONEN
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 155650

July 20, 2006

MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner,

vs.
COURT OF APPEALS, CITY OF PARAAQUE, CITY MAYOR OF PARAAQUE, SANGGUNIANG
PANGLUNGSOD NG PARAAQUE, CITY ASSESSOR OF PARAAQUE, and CITY TREASURER
OF PARAAQUE, respondents.
Manila International Airport Authority; Taxation; MIAAs Airport Lands and Buildings are exempt
from real estate tax imposed by local governments.We rule that MIAAs Airport Lands and
Buildings are exempt from real estate tax imposed by local governments. First, MIAA is not a
government-owned or controlled corporation but an instrumentality of the National Government
and thus exempt from local taxation. Second, the real properties of MIAA are owned by the
Republic of the Philippines and thus exempt from real estate tax.
Same; Same; While there is no dispute that a government-owned or controlled corporation is not
exempt from real estate tax, MIAA is not a government-owned or controlled corporation; A
government-owned or controlled corporation must be organized as a stock or non-stock
corporation, of which MIAA is neither; MIAA is not a stock corporation because it has no capital
stock divided into shares.There is no dispute that a government-owned or controlled corporation
is not exempt from real estate tax. However, MIAA is not a government-owned or controlled
corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines
a government-owned or controlled corporation as follows: SEC. 2. General Terms Defined.x x x x
(13) Government-owned or controlled corporation refers to any agency organized as a stock or
non-stock corporation, vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government directly or through its instrumentalities either
wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one
(51) percent of its capital stock: x x x. (Emphasis supplied) A government-owned or controlled
corporation must be organized as a stock or non-stock corporation. MIAA is not organized as a
stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock
divided into shares.
Same; Same; Manila International Airport Authority (MIAA) is not a non-stock corporation because it
has no members; Section 11 of the MIAA Charter which mandates MIAA to remit 20% of its annual
gross operating income to the National Treasury prevents it from qualifying as a non-stock
corporation.MIAA is also not a non-stock corporation because it has no members. Section 87 of
the Corporation Code defines a non-stock corporation as one where no part of its income is
distributable as dividends to its members, trustees or officers. A non-stock corporation must have
members. Even if we assume that the Government is considered as the sole member of MIAA, this
will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of
their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its
annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a
non-stock corporation.
Administrative Law; Manila International Airport Authority (MIAA) is a government instrumentality
vested with corporate powers to perform efficiently its governmental functions.Since MIAA is
neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or
controlled corporation. What then is the legal status of MIAA within the National Government? MIAA
is a government instrumentality vested with corporate powers to perform efficiently its
governmental functions. MIAA is like any other government instrumentality, the only difference is
that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government instrumentality as follows: SEC. 2. General Terms
Defined.x x x x (10) Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special functions or jurisdiction by law,
endowed with some if not all corporate powers, administering special funds, and enjoying
operational autonomy, usually through a charter. x x x (Emphasis supplied)

Same; When the law vests in a government instrumentality corporate powers, the instrumentality
does not become a corporationunless the government instrumentality is organized as a stock or
non-stock corporation, it remains a government instrumentality exercising not only governmental
but also corporate powers.When the law vests in a government instrumentality corporate
powers, the instrumentality does not become a corporation. Unless the government instrumentality
is organized as a stock or non-stock corporation, it remains a government instrumentality
exercising not only governmental but also corporate powers. Thus, MIAA exercises the
governmental powers of eminent domain, police authority and the levying of fees and charges. At
the same time, MIAA exercises all the powers of a corporation under the Corporation Law, insofar
as these powers are not inconsistent with the provisions of this Executive Order.
Same; When the law makes a government instrumentality operationally autonomous, the
instrumentality remains part of the National Government machinery although not integrated with
the department framework.Likewise, when the law makes a government instrumentality
operationally autonomous, the instrumentality remains part of the National Government machinery
although not integrated with the department framework. The MIAA Charter expressly states that
transforming MIAA into a separate and autonomous body will make its operation more
financially viable.
Same; Manila International Airport Authority; Taxation; Local Government Code; A government
instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which provision
recognizes the basic principle that local governments cannot tax the national government.A
government instrumentality like MIAA falls under Section 133(o) of the Local Government Code,
which states: SEC. 133. Common Limitations on the Taxing Powers of Local Government Units.
Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following: x x x x (o) Taxes, fees or
charges of any kind on the National Government, its agencies and instrumentalities and local
government units. (Emphasis and italics supplied) Section 133(o) recognizes the basic principle
that local governments cannot tax the national government, which historically merely delegated to
local governments the power to tax. While the 1987 Constitution now includes taxation as one of
the powers of local governments, local governments may only exercise such power subject to
such guidelines and limitations as the Congress may provide.
Taxation; Local Government Code; Statutory Construction; When local governments invoke the
power to tax on national government instrumentalities, such power is construed strictly against
local governments, and when Congress grants an exemption to a national government
instrumentality from local taxation, such exemption is construed liberally in favor of the national
government instrumentality.Section 133(o) recognizes the basic principle that local governments
cannot tax the national government, which historically merely delegated to local governments the
power to tax. While the 1987 Constitution now includes taxation as one of the powers of local
governments, local governments may only exercise such power subject to such guidelines and
limitations as the Congress may provide. When local governments invoke the power to tax on
national government instrumentalities, such power is construed strictly against local governments.
The rule is that a tax is never presumed and there must be clear language in the law imposing the
tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule
applies with greater force when local governments seek to tax national government
instrumentalities. Another rule is that a tax exemption is strictly construed against the taxpayer
claiming the exemption. However, when Congress grants an exemption to a national government
instrumentality from local taxation, such exemption is construed liberally in favor of the national
government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.: The reason for the
rule does not apply in the case of exemptions running to the benefit of the government itself or its
agencies. In such case the practical effect of an exemption is merely to reduce the amount of
money that has to be handled by government in the course of its operations. For these reasons,
provisions granting exemptions to government agencies may be construed liberally, in favor of non
tax-liability of such agencies. There is, moreover, no point in national and local governments taxing
each other, unless a sound and compelling policy requires such transfer of public funds from one
government pocket to another.
Same; Same; Taxation; Local Government Code; There is also no reason for local governments to
tax national government instrumentalities for rendering essential public services to inhabitants of
local governments, the only exception being when the legislature clearly intended to tax
government instrumentalities for the delivery of essential services for sound and compelling policy
considerations.There is also no reason for local governments to tax national government
instrumentalities for rendering essential public services to inhabitants of local governments. The
only exception is when the legislature clearly intended to tax government instrumentalities for the

delivery of essential public services for sound and compelling policy considerations. There must be
express language in the law empowering local governments to tax national government
instrumentalities. Any doubt whether such power exists is resolved against local governments.
Manila International Airport Authority; The Airport Lands and Buildings of the MIAA are property of
public dominion and therefore owned by the State or the Republic of the Philippines.The Airport
Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or
the Republic of the Philippines. The Civil Code provides: ARTICLE 419. Property is either of public
dominion or of private ownership. ARTICLE 420. The following things are property of public
dominion: (1)
Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed
by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to
the State, without being for public use, and are intended for some public service or for the
development of the national wealth. (Emphasis supplied) ARTICLE 421. All other property of the
State, which is not of the character stated in the preceding article, is patrimonial property. ARTICLE
422. Property of public dominion, when no longer intended for public use or for public service, shall
form part of the patrimonial property of the State.
Same; Words and Phrases; The term ports in Article 420 (1) of the Civil Code includes seaports
and airportsthe MIAA Airport Lands and Buildings constitute a port constructed by the State.
No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code,
like roads, canals, rivers, torrents, ports and bridges constructed by the State, are owned by the
State. The term ports includes seaports and airports. The MIAA Airport Lands and Buildings
constitute a port constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport
Lands and Buildings are properties of public dominion and thus owned by the State or the Republic
of the Philippines.
Same; Same; The Airport Lands and Buildings are devoted to public use because they are used by
the public for international and domestic travel and transportation; The charging of fees to the
public does not determine the character of the property whether it is of public dominion or not.
The Airport Lands and Buildings are devoted to public use because they are used by the public for
international and domestic travel and transportation. The fact that the MIAA collects terminal fees
and other charges from the public does not remove the character of the Airport Lands and
Buildings as properties for public use. The operation by the government of a tollway does not
change the character of the road as one for public use. Someone must pay for the maintenance of
the road, either the public indirectly through the taxes they pay the government, or only those
among the public who actually use the road through the toll fees they pay upon using the road. The
tollway system is even a more efficient and equitable manner of taxing the public for the
maintenance of public roads. The charging of fees to the public does not determine the character
of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property
of public dominion as one intended for public use. Even if the government collects toll fees, the
road is still intended for public use if anyone can use the road under the same terms and
conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles that
can use the road, the speed restrictions and other conditions for the use of the road do not affect
the public character of the road.
Same; Taxation; Users Tax; Words and Phrases; The terminal fees MIAA charges passengers, as
well as the landing fees MIAA charges airlines, are often termed users tax; A users tax is more
equitablea principle of taxation mandated by the 1987 Constitution.The terminal fees MIAA
charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of
the income that maintains the operations of MIAA. The collection of such fees does not change the
character of MIAA as an airport for public use. Such fees are often termed users tax. This means
taxing those among the public who actually use a public facility instead of taxing all the public
including those who never use the particular public facility. A users tax is more equitablea
principle of taxation mandated in the 1987 Constitution.
Same; The Airport Lands and Buildings of MIAA, as properties of public dominion, are outside the
commerce of man.The Airport Lands and Buildings of MIAA are devoted to public use and thus
are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings
are outside the commerce of man. The Court has ruled repeatedly that properties of public
dominion are outside the commerce of man. As early as 1915, this Court already ruled in
Municipality of Cavite v. Rojas that properties devoted to public use are outside the commerce of
man, thus: According to article 344 of the Civil Code: Property for public use in provinces and in

towns comprises the provincial and town roads, the squares, streets, fountains, and public waters,
the promenades, and public works of general service supported by said towns or provinces.
Same; Public Auctions; Property of public dominion, being outside the commerce of man, cannot be
the subject of an auction sale; Any encumbrance, levy on execution or auction sale of any property
of public dominion is void for being contrary to public policy.Again in Espiritu v. Municipal Council,
the Court declared that properties of public dominion are outside the commerce of man: x x x Town
plazas are properties of public dominion, to be devoted to public use and to be made available to
the public in general. They are outside the commerce of man and cannot be disposed of or even
leased by the municipality to private parties. While in case of war or during an emergency, town
plazas may be occupied temporarily by private individuals, as was done and as was tolerated by
the Municipality of Pozorrubio, when the emergency has ceased, said temporary occupation or use
must also cease, and the town officials should see to it that the town plazas should ever be kept
open to the public and free from encumbrances or illegal private constructions. (Emphasis
supplied) The Court has also ruled that property of public dominion, being outside the commerce of
man, cannot be the subject of an auction sale. Properties of public dominion, being for public use,
are not subject to levy, encumbrance or disposition through public or private sale. Any
encumbrance, levy on execution or auction sale of any property of public dominion is void for being
contrary to public policy. Essential public services will stop if properties of public dominion are
subject to encumbrances, foreclosures and auction sale. This will happen if the City of Paraaque
can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment
of real estate tax.
Same; Unless the President issues a proclamation withdrawing the Airport Lands and Buildings
from public use, these properties remain properties of public dominion and are inalienable.Before
MIAA can encumber the Airport Lands and Buildings, the President must first withdraw from public
use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth
Act No. 141, which remains to this day the existing general law governing the classification and
disposition of lands of the public domain other than timber and mineral lands, provide: x x x Thus,
unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public
use, these properties remain properties of public dominion and are inalienable. Since the Airport
Lands and Buildings are inalienable in their present status as properties of public dominion, they
are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings
are reserved for public use, their ownership remains with the State or the Republic of the
Philippines.
Same; Trusts; MIAA is merely holding title to the Airport Lands and Buildings in trust for the
Republic.MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic.
Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold
title to real properties owned by the Republic.
Same; The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to
MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA
the Republic remains the beneficial owner of the Airport Lands and Buildings.The transfer of the
Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to
transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to
reorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The
Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned
solely by the Republic. No party claims any ownership rights over MIAAs assets adverse to the
Republic. The MIAA Charter expressly provides that the Airport Lands and Buildings shall not be
disposed through sale or through any other mode unless specifically approved by the President of
the Philippines. This only means that the Republic retained the beneficial ownership of the Airport
Lands and Buildings because under Article 428 of the Civil Code, only the owner has the right to x
x x dispose of a thing. Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does
not own the Airport Lands and Buildings. At any time, the President can transfer back to the
Republic title to the Airport Lands and Buildings without the Republic paying MIAA any
consideration. Under Section 3 of the MIAA Charter, the President is the only one who can authorize
the sale or disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands
and Buildings belong to the Republic.
Taxation; Local Government Code; Section 234(a) of the Local Government Code exempts from real
estate tax any real property owned by the Republic of the Philippines.Section 234(a) of the
Local Government Code exempts from real estate tax any [r]eal property owned by the Republic
of the Philippines. Section 234(a) provides: SEC. 234. Exemptions from Real Property Tax.The

following are exempted from payment of the real property tax: (a) Real property owned by the
Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof
has been granted, for consideration or otherwise, to a taxable person; x x x. (Emphasis supplied)
This exemption should be read in relation with Section 133(o) of the same Code, which prohibits
local governments from imposing [t]axes, fees or charges of any kind on the National
Government, its agencies and instrumentalities x x x. The real properties owned by the Republic
are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of
the National Government. The Administrative Code allows real property owned by the Republic to
be titled in the name of agencies or instrumentalities of the national government. Such real
properties remain owned by the Republic and continue to be exempt from real estate tax.
Manila International Airport Authority; Local Government Code; The Republic may grant the
beneficial use of its real property to an agency or instrumentality of the national government, an
arrangement which does not result in the loss of the tax exemption; MIAA, as a government
instrumentality, is not a taxable person under Section 133(o) of the Local Government Code.The
Republic may grant the beneficial use of its real property to an agency or instrumentality of the
national government. This happens when title of the real property is transferred to an agency or
instrumentality even as the Republic remains the owner of the real property. Such arrangement
does not result in the loss of the tax exemption. Section 234(a) of the Local Government Code
states that real property owned by the Republic loses its tax exemption only if the beneficial use
thereof has been granted, for consideration or otherwise, to a taxable person. MIAA, as a
government instrumentality, is not a taxable person under Section 133(o) of the Local Government
Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the
Airport Lands and Buildings, such fact does not make these real properties subject to real estate
tax.
Same; Same; Taxation; Portions of the Airport Lands and Buildings that MIAA leases to private
entities are not exempt from real estate tax.Portions of the Airport Lands and Buildings that MIAA
leases to private entities are not exempt from real estate tax. For example, the land area occupied
by hangars that MIAA leases to private corporations is subject to real estate tax. In such a case,
MIAA has granted the beneficial use of such land area for a consideration to a taxable person and
therefore such land area is subject to real estate tax. In Lung Center of the Philippines v. Quezon
City, 433 SCRA 119, 138 (2004), the Court ruled: Accordingly, we hold that the portions of the land
leased to private entities as well as those parts of the hospital leased to private individuals are not
exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and
portions of the hospital used for its patients, whether paying or non-paying, are exempt from real
property taxes.
Same; Taxation; By express mandate of the Local Government Code, local governments cannot
impose any kind of tax on national government instrumentalities like the MIAA.By express
mandate of the Local Government Code, local governments cannot impose any kind of tax on
national government instrumentalities like the MIAA. Local governments are devoid of power to tax
the national government, its agencies and instrumentalities. The taxing powers of local
governments do not extend to the national government, its agencies and instrumentalities,
[u]nless otherwise provided in this Code as stated in the saving clause of Section 133. The saving
clause refers to Section 234(a) on the exception to the exemption from real estate tax of real
property owned by the Republic.
Same; Same; The determinative test whether MIAA is exempt from local taxation is not whether
MIAA is a juridical person, but whether it is a national government instrumentality under Section
133(o) of the Local Government Code.The minoritys theory violates Section 133(o) of the Local
Government Code which expressly prohibits local governments from imposing any kind of tax on
national government instrumentalities. Section 133(o) does not distinguish between national
government instrumentalities with or without juridical personalities. Where the law does not
distinguish, courts should not distinguish. Thus, Section 133(o) applies to all national government
instrumentalities, with or without juridical personalities. The determinative test whether MIAA is
exempt from local taxation is not whether MIAA is a juridical person, but whether it is a national
government instrumentality under Section 133(o) of the Local Government Code. Section 133(o) is
the specific provision of law prohibiting local governments from imposing any kind of tax on the
national government, its agencies and instrumentalities.
Taxation; The saving clause in Section 133 of the Local Government Code refers to the exception to
the exemption in Section 234(a) of the Code, which makes the national government subject to real
estate tax when it gives the beneficial use of its real properties to a taxable entity; The exception

to the exemption in Section 234(a) is the only instance when the national government, its agencies
and instrumentalities are subject to any kind of tax by local governments.The saving clause in
Section 133 refers to the exception to the exemption in Section 234(a) of the Code, which makes
the national government subject to real estate tax when it gives the beneficial use of its real
properties to a taxable entity. Section 234(a) of the Local Government Code provides: SEC. 234.
Exemptions from Real Property Tax.The following are exempted from payment of the real
property tax: (a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person. x x x. (Emphasis supplied) Under Section 234(a), real property
owned by the Republic is exempt from real estate tax. The exception to this exemption is when the
government gives the beneficial use of the real property to a taxable entity. The exception to the
exemption in Section 234(a) is the only instance when the national government, its agencies and
instrumentalities are subject to any kind of tax by local governments. The exception to the
exemption applies only to real estate tax and not to any other tax. The justification for the
exception to the exemption is that the real property, although owned by the Republic, is not
devoted to public use or public service but devoted to the private gain of a taxable person.
Same; Statutory Construction; When a provision of law grants a power but withholds such power on
certain matters, there is no conflict between the grant of power and the withholding of power.
There is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly
admits its subordination to other provisions of the Code when Section 193 states [u]nless
otherwise provided in this Code. By its own words, Section 193 admits the superiority of other
provisions of the Local Government Code that limit the exercise of the taxing power in Section 193.
When a provision of law grants a power but withholds such power on certain matters, there is no
conflict between the grant of power and the withholding of power. The grantee of the power simply
cannot exercise the power on matters withheld from its power.
Same; Words and Phrases; By their very meaning and purpose, the common limitations on the
taxing power prevail over the grant or exercise of the taxing power.Since Section 133 prescribes
the common limitations on the taxing powers of local governments, Section 133 logically prevails
over Section 193 which grants local governments such taxing powers. By their very meaning and
purpose, the common limitations on the taxing power prevail over the grant or exercise of the
taxing power. If the taxing power of local governments in Section 193 prevails over the limitations
on such taxing power in Section 133, then local governments can impose any kind of tax on the
national government, its agencies and instrumentalitiesa gross absurdity.
Administrative Law; The Administrative Law is the governing law defining the status and
relationship of government departments, bureaus, offices, agencies and instrumentalities.The
third whereas clause of the Administrative Code states that the Code incorporates in a unified
document the major structural, functional and procedural principles and rules of governance.
Thus, the Administrative Code is the governing law defining the status and relationship of
government departments, bureaus, offices, agencies and instrumentalities. Unless a statute
expressly provides for a different status and relationship for a specific government unit or entity,
the provisions of the Administrative Code prevail.
Same; The government-owned or controlled corporations created through special charters are
those that meet the two conditions prescribed in Section 16, Article XII of the Constitution,
regarding their creation in the interest of common good and their being subject to the test of
economic viability.The government-owned or controlled corporations created through special
charters are those that meet the two conditions prescribed in Section 16, Article XII of the
Constitution. The first condition is that the government-owned or controlled corporation must be
established for the common good. The second condition is that the government-owned or
controlled corporation must meet the test of economic viability. Section 16, Article XII of the 1987
Constitution provides: SEC. 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Government-owned or controlled
corporations may be created or established by special charters in the interest of the common good
and subject to the test of economic viability.
Same; The test of economic viability applies only to government-owned or controlled corporations
that perform economic or commercial activities and need to compete in the market place
government instrumentalities vested with corporate powers and performing governmental or public
functions need not meet the test of economic viability.The Constitution expressly authorizes the
legislature to create government-owned or controlled corporations through special charters only
if these entities are required to meet the twin conditions of common good and economic viability. In

other words, Congress has no power to create government-owned or controlled corporations with
special charters unless they are made to comply with the two conditions of common good and
economic viability. The test of economic viability applies only to government-owned or controlled
corporations that perform economic or commercial activities and need to compete in the market
place. Being essentially economic vehicles of the State for the common goodmeaning for
economic development purposesthese government-owned or controlled corporations with special
charters are usually organized as stock corporations just like ordinary private corporations. In
contrast, government instrumentalities vested with corporate powers and performing
governmental or public functions need not meet the test of economic viability. These
instrumentalities perform essential public services for the common good, services that every
modern State must provide its citizens. These instrumentalities need not be economically viable
since the government may even subsidize their entire operations. These instrumentalities are not
the government-owned or controlled corporations referred to in Section 16, Article XII of the 1987
Constitution.
Manila International Airport Authority; Administrative Law; The MIAA need not meet the test of
economic viability because the legislature did not create MIAA to compete in the market place.
The MIAA need not meet the test of economic viability because the legislature did not create MIAA
to compete in the market place. MIAA does not compete in the market place because there is no
competing international airport operated by the private sector. MIAA performs an essential public
service as the primary domestic and international airport of the Philippines.
Same; Words and Phrases; The terminal fees that MIAA charges every passenger are regulatory or
administrative fees and not income from commercial transactions.MIAA performs an essential
public service that every modern State must provide its citizens. MIAA derives its revenues
principally from the mandatory fees and charges MIAA imposes on passengers and airlines. The
terminal fees that MIAA charges every passenger are regulatory or administrative fees and not
income from commercial transactions.
Same; Judgments; If Mactan-Cebu International Airport v. Marcos, 330 Phil. 392 (1996), truly
deserves to be discarded as precedent, it deserves a more honorable end than death by amnesia
or ignominous disregardthe majority could have devoted its discussion in explaining why it thinks
Mactan is wrong, instead of pretending that Mactan never existed at all.Before I dwell upon the
numerous flaws of the majority, a brief comment is necessitated on the majoritys studied
murkiness vis--vis the Mactan precedent. The majority is obviously inconsistent with Mactan and
there is no way these two rulings can stand together. Following basic principles in statutory
construction, Mactan will be deemed as giving way to this new ruling. However, the majority does
not bother to explain why Mactan is wrong. The interpretation in Mactan of the relevant provisions
of the Local Government Code is elegant and rational, yet the majority refuses to explain why this
reasoning of the Court in Mactan is erroneous. In fact, the majority does not even engage Mactan
in any meaningful way. If the majority believes that Mactan may still stand despite this ruling, it
remains silent as to the viable distinctions between these two cases. The majoritys silence on
Mactan is baffling, considering how different this new ruling is with the ostensible precedent.
Perhaps the majority does not simply know how to dispense with the ruling in Mactan. If Mactan
truly deserves to be discarded as precedent, it deserves a more honorable end than death by
amnesia or ignonominous disregard. The majority could have devoted its discussion in explaining
why it thinks Mactan is wrong, instead of pretending that Mactan never existed at all. Such an
approach might not have won the votes of the minority, but at least it would provide some degree
of intellectual clarity for the parties, LGUs and the national government, students of jurisprudence
and practitioners. A more meaningful debate on the matter would have been possible, enriching
the study of law and the intellectual dynamic of this Court.
Manila International Airport Authority; Administrative Law; Based on the Administrative Code, a
GOCC may be an instrumentality or an agency of the National Government.Based on the
Administrative Code, a GOCC may be an instrumentality or an agency of the National Government.
Thus, there actually is no point in the majoritys assertion that MIAA is not a GOCC, since based on
the majoritys premise of Section 133 as the key provision, the material question is whether MIAA is
either an instrumentality, an agency, or the National Government itself. The very provisions of the
Administrative Code provide that a GOCC can be either an instrumentality or an agency, so why
even bother to extensively discuss whether or not MIAA is a GOCC?
Same; Same; The majority effectively declassifies many entities created and recognized as GOCCs
and would give primacy to the Administrative Code of 1987 rather than their respective charters as
to the definition of these entities.The inconsequential verbiage stewing in judicial opinions

deserve little rebuttal. However, the entire discussion of the majority on the definition of a GOCC,
obiter as it may ultimately be, deserves emphatic refutation. The views of the majority on this
matter are very dangerous, and would lead to absurdities, perhaps unforeseen by the majority. For
in fact, the majority effectively declassifies many entities created and recognized as GOCCs and
would give primacy to the Administrative Code of 1987 rather than their respective charters as to
the definition of these entities.
Taxation; It is sad, but not surprising that the majority is not willing to consider or even discuss the
general rule, but only the exemptions under Section 133 and Section 234 of the Local Government
Codeafter all, if the majority is dead set in ruling for MIAA no matter what the law says, why
bother citing what the law does say.The majority abjectly refuses to engage Section 232 of the
Local Government Code although it provides the indubitable general rule that LGUs may levy an
annual ad valorem tax on real property such as land, building, machinery, and other improvements
not hereafter specifically exempted. The specific exemptions are provided by Section 234. Section
232 comes sequentially after Section 133(o), and even if the sequencing is irrelevant, Section 232
would fall under the qualifying phrase of Section 133, Unless otherwise provided herein. It is sad,
but not surprising that the majority is not willing to consider or even discuss the general rule, but
only the exemptions under Section 133 and Section 234. After all, if the majority is dead set in
ruling for MIAA no matter what the law says, why bother citing what the law does say.
Manila International Airport Authority; If the distinction is to be blurred, as the majority does,
between the State/Republic/Government and a body corporate such as the MIAA, then the MIAA
charter showcases the remarkable absurdity of an entity transferring property to itself.It is the
MIAA, and not either the State, the Republic of the Philippines or the national government that
asserts legal title over the Airport Lands and Buildings. There was an express transfer of ownership
between the MIAA and the national government. If the distinction is to be blurred, as the majority
does, between the State/Republic/Government and a body corporate such as the MIAA, then the
MIAA charter showcases the remarkable absurdity of an entity transferring property to itself.
Nothing in the Civil Code or the Constitution prohibits the State from transferring ownership over
property of public dominion to an entity that it similarly owns. It is just like a family transferring
ownership over the properties its members own into a family corporation. The family exercises
effective control over the administration and disposition of these properties. Yet for several
purposes under the law, such as taxation, it is the corporation that is deemed to own those
properties. A similar situation obtains with MIAA, the State, and the Airport Lands and Buildings.
Same; The operation of an airport facility by the State may be imbued with public interest, but it is
by no means indispensable or obligatory on the national government.The simple truth is that,
based on these accepted doctrinal tests, MIAA performs proprietary functions. The operation of an
airport facility by the State may be imbued with public interest, but it is by no means indispensable
or obligatory on the national government. In fact, as demonstrated in other countries, it makes a
lot of economic sense to leave the operation of airports to the private sector.
Same; International airlines take into account the quality and conditions of various international
airports in determining the number of flights it would assign to a particular airport, or even in
choosing a hub through which destinations necessitating connecting flights would pass through.
The majority tries to becloud this issue by pointing out that the MIAA does not compete in the
marketplace as there is no competing international airport operated by the private sector; and that
MIAA performs an essential public service as the primary domestic and international airport of the
Philippines. This premise is false, for one. On a local scale, MIAA competes with other international
airports situated in the Philippines, such as Davao International Airport and MCIAA. More
pertinently, MIAA also competes with other international airports in Asia, at least. International
airlines take into account the quality and conditions of various international airports in determining
the number of flights it would assign to a particular airport, or even in choosing a hub through
which destinations necessitating connecting flights would pass through.
Same; Public Utilities; If the determinative point in distinguishing between sovereign functions and
proprietary functions is the vitality of the public service being performed, then it should be noted
that there is no more important public service performed than that engaged in by public utilities.
If the determinative point in distinguishing between sovereign functions and proprietary functions
is the vitality of the public service being performed, then it should be noted that there is no more
important public service performed than that engaged in by public utilities. But notably, the
Constitution itself authorizes private persons to exercise these functions as it allows them to
operate public utilities in this country. If indeed such functions are actually sovereign and belonging

properly to the government, shouldnt it follow that the exercise of these tasks remain within the
exclusive preserve of the State?
Same; Taxation; Administrative Law; There really is no prohibition against the government taxing
itself, and nothing obscene with allowing government entities exercising proprietary functions to be
taxed for the purpose of raising the coffers of LGUs.There really is no prohibition against the
government taxing itself, and nothing obscene with allowing government entities exercising
proprietary functions to be taxed for the purpose of raising the coffers of LGUs. On the other hand,
it would be an even more noxious proposition that the government or the instrumentalities that it
owns are above the law and may refuse to pay a validly imposed tax. MIAA, or any similar entity
engaged in the exercise of proprietary, and not sovereign functions, cannot avoid the adverseeffects of tax evasion simply on the claim that it is imbued with some of the attributes of
government.
Same; Same; Local Governent Code; While the Local Government Code withdrew all previous local
tax exemptions of the MIAA and other natural and juridical persons, it did not similarly withdraw
any previously enacted prohibitions on properties owned by GOCCs, agencies or instrumentalities.
Despite the fact that the City of Paraaque ineluctably has the power to impose real property
taxes over the MIAA, there is an equally relevant statutory limitation on this power that must be
fully upheld. Section 3 of the MIAA charter states that [a]ny portion [of the [lands transferred,
conveyed and assigned to the ownership and administration of the MIAA] shall not be disposed
through sale or through any other mode unless specifically approved by the President of the
Philippines. Nothing in the Local Government Code, even with its wide grant of powers to LGUs,
can be deemed as repealing this prohibition under Section 3, even if it effectively forecloses one
possible remedy of the LGU in the collection of delinquent real property taxes. While the Local
Government Code withdrew all previous local tax exemptions of the MIAA and other natural and
juridical persons, it did not similarly withdraw any previously enacted prohibitions on properties
owned by GOCCs, agencies or instrumentalities. Moreover, the resulting legal effect, subjecting on
one hand the MIAA to local taxes but on the other hand shielding its properties from any form of
sale or disposition, is not contradictory or paradoxical, onerous as its effect may be on the LGU. It
simply means that the LGU has to find another way to collect the taxes due from MIAA, thus paving
the way for a mutually acceptable negotiated solution.
Same; Same; The prohibition in Section 3 of the MIAA Charter against the sale or disposition of
MIAA properties without the consent of the President prevents the peremptory closure of the MIAA
or the hampering of its operations on account of the demands of its creditorsthe airport is
important enough to be sheltered by legislation from ordinary legal processes.There are several
other reasons this statutory limitation should be upheld and applied to this case. It is at this
juncture that the importance of the Manila Airport to our national life and commerce may be
accorded proper consideration. The closure of the airport, even by reason of MIAAs legal omission
to pay its taxes, will have an injurious effect to our national economy, which is ever reliant on air
travel and traffic. The same effect would obtain if ownership and administration of the airport were
to be transferred to an LGU or some other entity which were not specifically chartered or tasked to
perform such vital function. It is for this reason that the MIAA charter specifically forbids the sale or
disposition of MIAA properties without the consent of the President. The prohibition prevents the
peremptory closure of the MIAA or the hampering of its operations on account of the demands of
its creditors. The airport is important enough to be sheltered by legislation from ordinary legal
processes.
Same; Same; Had this petition been denied instead with Mactan as basis, but with the caveat that
the MIAA properties could not be subject of execution sale without the consent of the President, I
suspect that the parties would feel little distressunfortunately, the majority will cause precisely
the opposite result of unremitting hostility, not only to the City of Paraaque, but to the thousands
of LGUs in the country.Had this petition been denied instead with Mactan as basis, but with the
caveat that the MIAA properties could not be subject of execution sale without the consent of the
President, I suspect that the parties would feel little distress. Through such action, both the Local
Government Code and the MIAA charter would have been upheld. The prerogatives of LGUs in real
property taxation, as guaranteed by the Local Government Code, would have been preserved, yet
the concerns about the ruinous effects of having to close the Manila International Airport would
have been averted. The parties would then be compelled to try harder at working out a
compromise, a task, if I might add, they are all too willing to engage in. Unfortunately, the majority
will cause precisely the opposite result of unremitting hostility, not only to the City of Paraaque,
but to the thousands of LGUs in the country.

Local Government Code; Taxation; Bangko Sentral ng Pilipinas; If the BSP is already preternaturally
exempt from local taxation owing to its personality as a government instrumentality, why then
the need to make a new grant of exemption, which if the majority is to be believed, is actually a
redundancy.The New Central Bank Act was promulgated after the Local Government Code if the
BSP is already preternaturally exempt from local taxation owing to its personality as an
government instrumentality, why then the need to make a new grant of exemption, which if the
majority is to be believed, is actually a redundancy. But even more tellingly, does not this provision
evince a clear intent that after the lapse of five (5) years, that the Bangko Sentral will be liable for
provincial, municipal and city taxes? This is the clear congressional intent, and it is Congress, not
this Court which dictates which entities are subject to taxation and which are exempt.
Courts; Supreme Court; Judgments; One might say, certainly a decision of the Supreme Court
cannot be construed to promote an absurdity, but precisely the majority, and the faulty reasoning
it utilizes, opens itself up to all sorts of mischief, and certainly, a tax-exempt massage parlor is one
of the lesser evils that could arise from the majority ruling.Consider further the example of the
Philippine Institute of Traditional and Alternative Health Care (PITAHC), created by Republic Act No.
8243 in 1997. It has similar characteristics as MIAA in that it is established as a body corporate,
and empowered with the attributes of a corporation, including the power to purchase or acquire
real properties. However the PITAHC has no capital stock and no members, thus following the
majority, it is not a GOCC. The state policy that guides PITAHC is the development of traditional and
alternative health care, and its objectives include the promotion and advocacy of alternative,
preventive and curative health care modalities that have been proven safe, effective and cost
effective. Alternative health care modalities include other forms of non-allophatic, occasionally
non-indigenous or imported healing methods which include, among others reflexology,
acupuncture, massage, acupressure and chiropractics. Given these premises, there is no
impediment for the PITAHC to purchase land and construct thereupon a massage parlor that would
provide a cheaper alternative to the opulent spas that have proliferated around the metropolis.
Such activity is in line with the purpose of the PITAHC and with state policy. Is such massage parlor
exempt from realty taxes? For the majority, it is, for PITAHC is an instrumentality or agency exempt
from local government taxation, which does not fall under the exceptions under Section 234 of the
Local Government Code. Hence, this massage parlor would not just be a shelter for frazzled nerves,
but for taxes as well. Ridiculous? One might say, certainly a decision of the Supreme Court cannot
be construed to promote an absurdity. But precisely the majority, and the faulty reasoning it
utilizes, opens itself up to all sorts of mischief, and certainly, a tax-exempt massage parlor is one of
the lesser evils that could arise from the majority ruling. This is indeed a very strange and very
wrong decision. Manila International Airport Authority vs. Court of Appeals, 495 SCRA 591, G.R. No.
155650 July 20, 2006
DECISION
CARPIO, J.:
The Antecedents
Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International
Airport (NAIA) Complex in Paraaque City under Executive Order No. 903, otherwise known as
the Revised Charter of the Manila International Airport Authority ("MIAA Charter"). Executive Order
No. 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Subsequently,
Executive Order Nos. 9091 and 2982 amended the MIAA Charter.
As operator of the international airport, MIAA administers the land, improvements and equipment
within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of
land,3 including the runways and buildings ("Airport Lands and Buildings") then under the Bureau of
Air Transportation.4 The MIAA Charter further provides that no portion of the land transferred to
MIAA shall be disposed of through sale or any other mode unless specifically approved by the
President of the Philippines. 5
On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No.
061. The OGCC opined that the Local Government Code of 1991 withdrew the exemption from real
estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with
respondent City of Paraaque to pay the real estate tax imposed by the City. MIAA then paid some
of the real estate tax already due.

On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of
Paraaque for the taxable years 1992 to 2001. MIAA's real estate tax delinquency is broken down
as follows:
TAX DECLARATION
E-016-01370
E-016-01374
E-016-01375
E-016-01376
E-016-01377
E-016-01378
E-016-01379
E-016-01380
*E-016-013-85
*E-016-01387
*E-016-01396
GRAND TOTAL

TAXABLE YEAR
1992-2001
1992-2001
1992-2001
1992-2001
1992-2001
1992-2001
1992-2001
1992-2001
1998-2001
1998-2001
1998-2001

TAX DUE
19,558,160.00
111,689,424.90
20,276,058.00
58,144,028.00
18,134,614.65
111,107,950.40
4,322,340.00
7,776,436.00
6,444,810.00
34,876,800.00
75,240.00
P392,435,861.95

PENALTY
11,201,083.20
68,149,479.59
12,371,832.00
35,477,712.00
11,065,188.59
67,794,681.59
2,637,360.00
4,744,944.00
2,900,164.50
5,694,560.00
33,858.00
P232,070,863.47

TOTAL
30,789,243.20
179,838,904.49
32,647,890.00
93,621,740.00
29,199,803.24
178,902,631.99
6,959,700.00
12,521,380.00
9,344,974.50
50,571,360.00
109,098.00
P 624,506,725.42

1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75
#9476101 for P28,676,480.00
#9476103 for P49,115.00 6
On 17 July 2001, the City of Paraaque, through its City Treasurer, issued notices of levy and
warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Paraaque threatened
to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax
delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061.
On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC
pointed out that Section 206 of the Local Government Code requires persons exempt from real
estate tax to show proof of exemption. The OGCC opined that Section 21 of the MIAA Charter is the
proof that MIAA is exempt from real estate tax.
On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and
injunction, with prayer for preliminary injunction or temporary restraining order. The petition sought
to restrain the City of Paraaque from imposing real estate tax on, levying against, and auctioning
for public sale the Airport Lands and Buildings. The petition was docketed as CA-G.R. SP No. 66878.
On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the
60-day reglementary period. The Court of Appeals also denied on 27 September 2002 MIAA's
motion for reconsideration and supplemental motion for reconsideration. Hence, MIAA filed on 5
December 2002 the present petition for review. 7
Meanwhile, in January 2003, the City of Paraaque posted notices of auction sale at the Barangay
Halls of Barangays Vitalez, Sto. Nio, and Tambo, Paraaque City; in the public market of Barangay
La Huerta; and in the main lobby of the Paraaque City Hall. The City of Paraaque published the
notices in the 3 and 10 January 2003 issues of the Philippine Daily Inquirer, a newspaper of general
circulation in the Philippines. The notices announced the public auction sale of the Airport Lands
and Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at the Legislative Session Hall
Building of Paraaque City.
A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court
an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The
motion sought to restrain respondents the City of Paraaque, City Mayor of
Paraaque, Sangguniang Panglungsod ng Paraaque, City Treasurer of Paraaque, and the City
Assessor of Paraaque ("respondents") from auctioning the Airport Lands and Buildings.

On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately.
The Court ordered respondents to cease and desist from selling at public auction the Airport Lands
and Buildings. Respondents received the TRO on the same day that the Court issued it. However,
respondents received the TRO only at 1:25 p.m. or three hours after the conclusion of the public
auction.
On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.
On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive
issued during the hearing, MIAA, respondent City of Paraaque, and the Solicitor General
subsequently submitted their respective Memoranda.
MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the
name of MIAA. However, MIAA points out that it cannot claim ownership over these properties since
the real owner of the Airport Lands and Buildings is the Republic of the Philippines. The MIAA
Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the general
public. Since the Airport Lands and Buildings are devoted to public use and public service, the
ownership of these properties remains with the State. The Airport Lands and Buildings are thus
inalienable and are not subject to real estate tax by local governments.
MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the
payment of real estate tax. MIAA insists that it is also exempt from real estate tax under Section
234 of the Local Government Code because the Airport Lands and Buildings are owned by the
Republic. To justify the exemption, MIAA invokes the principle that the government cannot tax
itself. MIAA points out that the reason for tax exemption of public property is that its taxation would
not inure to any public advantage, since in such a case the tax debtor is also the tax creditor.
Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the
tax exemption privileges of "government-owned and-controlled corporations" upon the
effectivity of the Local Government Code. Respondents also argue that a basic rule of statutory
construction is that the express mention of one person, thing, or act excludes all others. An
international airport is not among the exceptions mentioned in Section 193 of the Local
Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands and
Buildings are exempt from real estate tax.
Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos8 where
we held that the Local Government Code has withdrawn the exemption from real estate tax
granted to international airports. Respondents further argue that since MIAA has already paid some
of the real estate tax assessments, it is now estopped from claiming that the Airport Lands and
Buildings are exempt from real estate tax.
The Issue
This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA are
exempt from real estate tax under existing laws. If so exempt, then the real estate tax assessments
issued by the City of Paraaque, and all proceedings taken pursuant to such assessments, are void.
In such event, the other issues raised in this petition become moot.
The Court's Ruling
We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local
governments.
First, MIAA is not a government-owned or controlled corporation but an instrumentality of the
National Government and thus exempt from local taxation. Second, the real properties of MIAA
are owned by the Republic of the Philippines and thus exempt from real estate tax.
1. MIAA is Not a Government-Owned or Controlled Corporation
Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt
from real estate tax. Respondents claim that the deletion of the phrase "any government-owned or
controlled so exempt by its charter" in Section 234(e) of the Local Government Code withdrew the

real estate tax exemption of government-owned or controlled corporations. The deleted phrase
appeared in Section 40(a) of the 1974 Real Property Tax Code enumerating the entities exempt
from real estate tax.
There is no dispute that a government-owned or controlled corporation is not exempt from real
estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of
the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or
controlled corporation as follows:
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any agency organized as a
stock or non-stock corporation, vested with functions relating to public needs whether
governmental or proprietary in nature, and owned by the Government directly or through
its instrumentalities either wholly, or, where applicable as in the case of stock corporations,
to the extent of at least fifty-one (51) percent of its capital stock: x x x. (Emphasis supplied)
A government-owned or controlled corporation must be "organized as a stock or non-stock
corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock
corporation because it has no capital stock divided into shares. MIAA has no stockholders or
voting shares. Section 10 of the MIAA Charter 9provides:
SECTION 10. Capital. The capital of the Authority to be contributed by the National
Government shall be increased from Two and One-half Billion (P2,500,000,000.00) Pesos to
Ten Billion (P10,000,000,000.00) Pesos to consist of:
(a) The value of fixed assets including airport facilities, runways and equipment and such
other properties, movable and immovable[,] which may be contributed by the National
Government or transferred by it from any of its agencies, the valuation of which shall be
determined jointly with the Department of Budget and Management and the Commission
on Audit on the date of such contribution or transfer after making due allowances for
depreciation and other deductions taking into account the loans and other liabilities of the
Authority at the time of the takeover of the assets and other properties;
(b) That the amount of P605 million as of December 31, 1986 representing about seventy
percentum (70%) of the unremitted share of the National Government from 1983 to 1986
to be remitted to the National Treasury as provided for in Section 11 of E. O. No. 903 as
amended, shall be converted into the equity of the National Government in the Authority.
Thereafter, the Government contribution to the capital of the Authority shall be provided in
the General Appropriations Act.
Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.
Section 3 of the Corporation Code10 defines a stock corporation as one whose "capital stock is
divided into shares and x x x authorized to distribute to the holders of such shares
dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no
stockholders or voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation
Code defines a non-stock corporation as "one where no part of its income is distributable as
dividends to its members, trustees or officers." A non-stock corporation must have members. Even
if we assume that the Government is considered as the sole member of MIAA, this will not make
MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to
their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross
operating income to the National Treasury. 11 This prevents MIAA from qualifying as a non-stock
corporation.
Section 88 of the Corporation Code provides that non-stock corporations are "organized for
charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific,
social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is
not organized for any of these purposes. MIAA, a public utility, is organized to operate an
international and domestic airport for public use.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a governmentowned or controlled corporation. What then is the legal status of MIAA within the National
Government?
MIAA is a government instrumentality vested with corporate powers to perform efficiently its
governmental functions. MIAA is like any other government instrumentality, the only difference is
that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government "instrumentality" as follows:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not integrated within
the department framework, vested with special functions or jurisdiction by law, endowed
with some if not all corporate powers, administering special funds, and enjoying
operational autonomy, usually through a charter. x x x (Emphasis supplied)
When the law vests in a government instrumentality corporate powers, the instrumentality does
not become a corporation. Unless the government instrumentality is organized as a stock or nonstock corporation, it remains a government instrumentality exercising not only governmental but
also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, 12 police
authority13 and the levying of fees and charges. 14 At the same time, MIAA exercises "all the powers
of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the
provisions of this Executive Order." 15
Likewise, when the law makes a government instrumentality operationally autonomous, the
instrumentality remains part of the National Government machinery although not integrated with
the department framework. The MIAA Charter expressly states that transforming MIAA into a
"separate and autonomous body"16 will make its operation more "financially viable." 17
Many government instrumentalities are vested with corporate powers but they do not become
stock or non-stock corporations, which is a necessary condition before an agency or instrumentality
is deemed a government-owned or controlled corporation. Examples are the Mactan International
Airport Authority, the Philippine Ports Authority, the University of the Philippines and Bangko
Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they are
not organized as stock or non-stock corporations as required by Section 2(13) of the Introductory
Provisions of the Administrative Code. These government instrumentalities are sometimes loosely
called government corporate entities. However, they are not government-owned or controlled
corporations in the strict sense as understood under the Administrative Code, which is the
governing law defining the legal relationship and status of government entities.
A government instrumentality like MIAA falls under Section 133(o) of the Local Government
Code, which states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kind on the National Government, its agencies
and instrumentalities and local government units.(Emphasis and underscoring supplied)
Section 133(o) recognizes the basic principle that local governments cannot tax the national
government, which historically merely delegated to local governments the power to tax. While the
1987 Constitution now includes taxation as one of the powers of local governments, local
governments may only exercise such power "subject to such guidelines and limitations as the
Congress may provide."18
When local governments invoke the power to tax on national government instrumentalities, such
power is construed strictly against local governments. The rule is that a tax is never presumed and
there must be clear language in the law imposing the tax. Any doubt whether a person, article or

activity is taxable is resolved against taxation. This rule applies with greater force when local
governments seek to tax national government instrumentalities.
Another rule is that a tax exemption is strictly construed against the taxpayer claiming the
exemption. However, when Congress grants an exemption to a national government
instrumentality from local taxation, such exemption is construed liberally in favor of the national
government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:
The reason for the rule does not apply in the case of exemptions running to the benefit of
the government itself or its agencies. In such case the practical effect of an exemption is
merely to reduce the amount of money that has to be handled by government in the
course of its operations. For these reasons, provisions granting exemptions to government
agencies may be construed liberally, in favor of non tax-liability of such agencies. 19
There is, moreover, no point in national and local governments taxing each other, unless a sound
and compelling policy requires such transfer of public funds from one government pocket to
another.
There is also no reason for local governments to tax national government instrumentalities for
rendering essential public services to inhabitants of local governments. The only exception is
when the legislature clearly intended to tax government instrumentalities for the
delivery of essential public services for sound and compelling policy considerations.
There must be express language in the law empowering local governments to tax national
government instrumentalities. Any doubt whether such power exists is resolved against local
governments.
Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the
Code, local governments cannot tax national government instrumentalities. As this Court held
in Basco v. Philippine Amusements and Gaming Corporation:
The states have no power by taxation or otherwise, to retard, impede, burden or in
any manner control the operation of constitutional laws enacted by Congress to
carry into execution the powers vested in the federal government. (MC Culloch v.
Maryland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local
governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the entire
absence of power on the part of the States to touch, in that way (taxation) at least,
the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it
can be agreed that no state or political subdivision can regulate a federal
instrumentality in such a way as to prevent it from consummating its federal
responsibilities, or even to seriously burden it in the accomplishment of them."
(Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru extermination of
what local authorities may perceive to be undesirable activities or enterprise using the
power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the "power to destroy" (Mc
Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of
the very entity which has the inherent power to wield it. 20
2. Airport Lands and Buildings of MIAA are Owned by the Republic
a. Airport Lands and Buildings are of Public Dominion
The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned
by the State or the Republic of the Philippines. The Civil Code provides:

ARTICLE 419. Property is either of public dominion or of private ownership.

ARTICLE 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and
others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth. (Emphasis supplied)
ARTICLE 421. All other property of the State, which is not of the character stated in the
preceding article, is patrimonial property.
ARTICLE 422. Property of public dominion, when no longer intended for public use or for
public service, shall form part of the patrimonial property of the State.
No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code,
like "roads, canals, rivers, torrents, ports and bridges constructed by the State," are
owned by the State. The term "ports" includes seaports and airports. The MIAA Airport Lands
and Buildings constitute a "port" constructed by the State. Under Article 420 of the Civil Code, the
MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or
the Republic of the Philippines.
The Airport Lands and Buildings are devoted to public use because they are used by the public
for international and domestic travel and transportation. The fact that the MIAA collects
terminal fees and other charges from the public does not remove the character of the Airport Lands
and Buildings as properties for public use. The operation by the government of a tollway does not
change the character of the road as one for public use. Someone must pay for the maintenance of
the road, either the public indirectly through the taxes they pay the government, or only those
among the public who actually use the road through the toll fees they pay upon using the road. The
tollway system is even a more efficient and equitable manner of taxing the public for the
maintenance of public roads.
The charging of fees to the public does not determine the character of the property whether it is of
public dominion or not. Article 420 of the Civil Code defines property of public dominion as one
"intended for public use." Even if the government collects toll fees, the road is still "intended for
public use" if anyone can use the road under the same terms and conditions as the rest of the
public. The charging of fees, the limitation on the kind of vehicles that can use the road, the speed
restrictions and other conditions for the use of the road do not affect the public character of the
road.
The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines,
constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees
does not change the character of MIAA as an airport for public use. Such fees are often termed
user's tax. This means taxing those among the public who actually use a public facility instead of
taxing all the public including those who never use the particular public facility. A user's tax is more
equitable a principle of taxation mandated in the 1987 Constitution. 21
The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the
Philippines for both international and domestic air traffic," 22 are properties of public dominion
because they are intended for public use. As properties of public dominion, they
indisputably belong to the State or the Republic of the Philippines.
b. Airport Lands and Buildings are Outside the Commerce of Man
The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public
dominion. As properties of public dominion, the Airport Lands and Buildings are outside
the commerce of man. The Court has ruled repeatedly that properties of public dominion are
outside the commerce of man. As early as 1915, this Court already ruled in Municipality of
Cavite v. Rojas that properties devoted to public use are outside the commerce of man, thus:

According to article 344 of the Civil Code: "Property for public use in provinces and in towns
comprises the provincial and town roads, the squares, streets, fountains, and public waters,
the promenades, and public works of general service supported by said towns or
provinces."
The said Plaza Soledad being a promenade for public use, the municipal council of Cavite
could not in 1907 withdraw or exclude from public use a portion thereof in order to lease it
for the sole benefit of the defendant Hilaria Rojas. In leasing a portion of said plaza or
public place to the defendant for private use the plaintiff municipality exceeded its
authority in the exercise of its powers by executing a contract over a thing of which it could
not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not outside the commerce
of man may be the object of a contract, and plazas and streets are outside of this
commerce, as was decided by the supreme court of Spain in its decision of February 12,
1895, which says: "Communal things that cannot be sold because they are by their
very nature outside of commerce are those for public use, such as the plazas,
streets, common lands, rivers, fountains, etc." (Emphasis supplied) 23
Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are
outside the commerce of man:
xxx Town plazas are properties of public dominion, to be devoted to public use and to
be made available to the public in general. They are outside the commerce of man and
cannot be disposed of or even leased by the municipality to private parties. While in case
of war or during an emergency, town plazas may be occupied temporarily by private
individuals, as was done and as was tolerated by the Municipality of Pozorrubio, when the
emergency has ceased, said temporary occupation or use must also cease, and the town
officials should see to it that the town plazas should ever be kept open to the public and
free from encumbrances or illegal private constructions. 24 (Emphasis supplied)
The Court has also ruled that property of public dominion, being outside the commerce of man,
cannot be the subject of an auction sale.25
Properties of public dominion, being for public use, are not subject to levy, encumbrance or
disposition through public or private sale. Any encumbrance, levy on execution or auction sale of
any property of public dominion is void for being contrary to public policy. Essential public services
will stop if properties of public dominion are subject to encumbrances, foreclosures and auction
sale. This will happen if the City of Paraaque can foreclose and compel the auction sale of the
600-hectare runway of the MIAA for non-payment of real estate tax.
Before MIAA can encumber26 the Airport Lands and Buildings, the President must first withdraw
from public use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or
Commonwealth Act No. 141, which "remains to this day the existing general law governing the
classification and disposition of lands of the public domain other than timber and mineral
lands,"27 provide:
SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural
Resources, the President may designate by proclamation any tract or tracts of land of the
public domain as reservations for the use of the Republic of the Philippines or of any of its
branches, or of the inhabitants thereof, in accordance with regulations prescribed for this
purposes, or for quasi-public uses or purposes when the public interest requires it,
including reservations for highways, rights of way for railroads, hydraulic power sites,
irrigation systems, communal pastures or lequas communales, public parks, public
quarries, public fishponds, working men's village and other improvements for the public
benefit.
SECTION 88. The tract or tracts of land reserved under the provisions of Section
eighty-three shall be non-alienable and shall not be subject to occupation, entry,
sale, lease, or other disposition until again declared alienable under the
provisions of this Act or by proclamation of the President. (Emphasis and
underscoring supplied)

Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from
public use, these properties remain properties of public dominion and are inalienable. Since the
Airport Lands and Buildings are inalienable in their present status as properties of public dominion,
they are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and
Buildings are reserved for public use, their ownership remains with the State or the Republic of the
Philippines.
The authority of the President to reserve lands of the public domain for public use, and to withdraw
such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of
1987, which states:
SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government.
(1) The President shall have the power to reserve for settlement or public use,
and for specific public purposes, any of the lands of the public domain, the use
of which is not otherwise directed by law. The reserved land shall thereafter
remain subject to the specific public purpose indicated until otherwise provided
by law or proclamation;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or
presidential proclamation from public use, they are properties of public dominion, owned by the
Republic and outside the commerce of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48,
Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold
title to real properties owned by the Republic, thus:
SEC. 48. Official Authorized to Convey Real Property. Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following:
(1) For property belonging to and titled in the name of the Republic of the Philippines, by
the President, unless the authority therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the
name of any political subdivision or of any corporate agency or instrumentality,
by the executive head of the agency or instrumentality. (Emphasis supplied)
In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer because
even its executive head cannot sign the deed of conveyance on behalf of the Republic. Only the
President of the Republic can sign such deed of conveyance. 28
d. Transfer to MIAA was Meant to Implement a Reorganization
The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings
from the Bureau of Air Transportation of the Department of Transportation and Communications.
The MIAA Charter provides:
SECTION 3. Creation of the Manila International Airport Authority. x x x x
The land where the Airport is presently located as well as the surrounding land
area of approximately six hundred hectares, are hereby transferred, conveyed
and assigned to the ownership and administration of the Authority, subject to
existing rights, if any. The Bureau of Lands and other appropriate government agencies
shall undertake an actual survey of the area transferred within one year from the
promulgation of this Executive Order and the corresponding title to be issued in the name
of the Authority. Any portion thereof shall not be disposed through sale or through

any other mode unless specifically approved by the President of the Philippines.
(Emphasis supplied)
SECTION 22. Transfer of Existing Facilities and Intangible Assets. All existing public
airport facilities, runways, lands, buildings and other property, movable or
immovable, belonging to the Airport, and all assets, powers, rights, interests and
privileges belonging to the Bureau of Air Transportation relating to airport works or
air operations, including all equipment which are necessary for the operation of crash fire
and rescue facilities, are hereby transferred to the Authority. (Emphasis supplied)
SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air
Transportation and Transitory Provisions. The Manila International Airport including the
Manila Domestic Airport as a division under the Bureau of Air Transportation is hereby
abolished.
x x x x.
The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic
receiving cash, promissory notes or even stock since MIAA is not a stock corporation.
The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands
and Buildings to MIAA, thus:
WHEREAS, the Manila International Airport as the principal airport of the Philippines for
both international and domestic air traffic, is required to provide standards of airport
accommodation and service comparable with the best airports in the world;
WHEREAS, domestic and other terminals, general aviation and other facilities, have to be
upgraded to meet the current and future air traffic and other demands of aviation in Metro
Manila;
WHEREAS, a management and organization study has indicated that the objectives of
providing high standards of accommodation and service within the context of a
financially viable operation, will best be achieved by a separate and autonomous
body; and
WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No.
1772, the President of the Philippines is given continuing authority to reorganize the
National Government, which authority includes the creation of new entities,
agencies and instrumentalities of the Government[.] (Emphasis supplied)
The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was
not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose
was merely to reorganize a division in the Bureau of Air Transportation into a separate
and autonomous body. The Republic remains the beneficial owner of the Airport Lands and
Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over
MIAA's assets adverse to the Republic.
The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed
through sale or through any other mode unless specifically approved by the President
of the Philippines." This only means that the Republic retained the beneficial ownership of the
Airport Lands and Buildings because under Article 428 of the Civil Code, only the "owner has the
right to x x x dispose of a thing." Since MIAA cannot dispose of the Airport Lands and Buildings,
MIAA does not own the Airport Lands and Buildings.
At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings
without the Republic paying MIAA any consideration. Under Section 3 of the MIAA Charter, the
President is the only one who can authorize the sale or disposition of the Airport Lands and
Buildings. This only confirms that the Airport Lands and Buildings belong to the Republic.
e. Real Property Owned by the Republic is Not Taxable

Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property
owned by the Republic of the Philippines." Section 234(a) provides:
SEC. 234. Exemptions from Real Property Tax. The following are exempted from
payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;
x x x. (Emphasis supplied)
This exemption should be read in relation with Section 133(o) of the same Code, which prohibits
local governments from imposing "[t]axes, fees or charges of any kind on the National
Government, its agencies andinstrumentalities x x x." The real properties owned by the Republic
are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of
the National Government. The Administrative Code allows real property owned by the Republic to
be titled in the name of agencies or instrumentalities of the national government. Such real
properties remain owned by the Republic and continue to be exempt from real estate tax.
The Republic may grant the beneficial use of its real property to an agency or instrumentality of the
national government. This happens when title of the real property is transferred to an agency or
instrumentality even as the Republic remains the owner of the real property. Such arrangement
does not result in the loss of the tax exemption. Section 234(a) of the Local Government Code
states that real property owned by the Republic loses its tax exemption only if the "beneficial use
thereof has been granted, for consideration or otherwise, to a taxable person." MIAA, as a
government instrumentality, is not a taxable person under Section 133(o) of the Local Government
Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the
Airport Lands and Buildings, such fact does not make these real properties subject to real estate
tax.
However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not
exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to
private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial
use of such land area for a consideration to ataxable person and therefore such land area is
subject to real estate tax. In Lung Center of the Philippines v. Quezon City, the Court ruled:
Accordingly, we hold that the portions of the land leased to private entities as well as those
parts of the hospital leased to private individuals are not exempt from such taxes. On the
other hand, the portions of the land occupied by the hospital and portions of the hospital
used for its patients, whether paying or non-paying, are exempt from real property taxes. 29
3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the
Local Government Code of 1991 withdrew the tax exemption of "all persons, whether natural
or juridical" upon the effectivity of the Code. Section 193 provides:
SEC. 193. Withdrawal of Tax Exemption Privileges Unless otherwise provided in this
Code, tax exemptions or incentives granted to, or presently enjoyed by all persons,
whether natural or juridical, including government-owned or controlled corporations,
except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock
and non-profit hospitals and educational institutions are hereby withdrawn upon effectivity
of this Code. (Emphasis supplied)
The minority states that MIAA is indisputably a juridical person. The minority argues that since
the Local Government Code withdrew the tax exemption of all juridical persons, then MIAA is not
exempt from real estate tax. Thus, the minority declares:
It is evident from the quoted provisions of the Local Government Code that the
withdrawn exemptions from realty tax cover not just GOCCs, but all persons. To
repeat, the provisions lay down the explicit proposition that the withdrawal of realty tax

exemption applies to all persons. The reference to or the inclusion of GOCCs is only
clarificatory or illustrative of the explicit provision.
The term "All persons" encompasses the two classes of persons recognized
under our laws, natural and juridical persons. Obviously, MIAA is not a natural
person. Thus, the determinative test is not just whether MIAA is a GOCC, but
whether MIAA is a juridical person at all. (Emphasis and underscoring in the original)
The minority posits that the "determinative test" whether MIAA is exempt from local taxation is its
status whether MIAA is a juridical person or not. The minority also insists that "Sections 193 and
234 may be examined in isolation from Section 133(o) to ascertain MIAA's claim of exemption."
The argument of the minority is fatally flawed. Section 193 of the Local Government Code
expressly withdrew the tax exemption of all juridical persons "[u]nless otherwise provided in
this Code." Now, Section 133(o) of the Local Government Code expressly provides otherwise,
specifically prohibiting local governments from imposing any kind of tax on national government
instrumentalities. Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kinds on the National Government, its agencies and
instrumentalities, and local government units. (Emphasis and underscoring supplied)
By express mandate of the Local Government Code, local governments cannot impose any kind of
tax on national government instrumentalities like the MIAA. Local governments are devoid of power
to tax the national government, its agencies and instrumentalities. The taxing powers of local
governments do not extend to the national government, its agencies and instrumentalities,
"[u]nless otherwise provided in this Code" as stated in the saving clause of Section 133. The saving
clause refers to Section 234(a) on the exception to the exemption from real estate tax of real
property owned by the Republic.
The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons
are subject to tax by local governments. The minority insists that the juridical persons exempt from
local taxation are limited to the three classes of entities specifically enumerated as exempt in
Section 193. Thus, the minority states:
x x x Under Section 193, the exemption is limited to (a) local water districts; (b)
cooperatives duly registered under Republic Act No. 6938; and (c) non-stock and non-profit
hospitals and educational institutions. It would be belaboring the obvious why the MIAA
does not fall within any of the exempt entities under Section 193. (Emphasis supplied)
The minority's theory directly contradicts and completely negates Section 133(o) of the Local
Government Code. This theory will result in gross absurdities. It will make the national government,
which itself is a juridical person, subject to tax by local governments since the national government
is not included in the enumeration of exempt entities in Section 193. Under this theory, local
governments can impose any kind of local tax, and not only real estate tax, on the national
government.
Under the minority's theory, many national government instrumentalities with juridical
personalities will also be subject to any kind of local tax, and not only real estate tax. Some of the
national government instrumentalities vested by law with juridical personalities are: Bangko Sentral
ng Pilipinas,30 Philippine Rice Research Institute, 31Laguna Lake
Development Authority,32 Fisheries Development Authority,33 Bases Conversion Development
Authority,34Philippine Ports Authority,35 Cagayan de Oro Port Authority,36 San Fernando Port
Authority,37 Cebu Port Authority,38 and Philippine National Railways.39

The minority's theory violates Section 133(o) of the Local Government Code which expressly
prohibits local governments from imposing any kind of tax on national government
instrumentalities. Section 133(o) does not distinguish between national government
instrumentalities with or without juridical personalities. Where the law does not distinguish, courts
should not distinguish. Thus, Section 133(o) applies to all national government instrumentalities,
with or without juridical personalities. The determinative test whether MIAA is exempt from local
taxation is not whether MIAA is a juridical person, but whether it is a national government
instrumentality under Section 133(o) of the Local Government Code. Section 133(o) is the specific
provision of law prohibiting local governments from imposing any kind of tax on the national
government, its agencies and instrumentalities.
Section 133 of the Local Government Code starts with the saving clause "[u]nless otherwise
provided in this Code." This means that unless the Local Government Code grants an express
authorization, local governments have no power to tax the national government, its agencies and
instrumentalities. Clearly, the rule is local governments have no power to tax the national
government, its agencies and instrumentalities. As an exception to this rule, local governments
may tax the national government, its agencies and instrumentalities only if the Local Government
Code expressly so provides.
The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the
Code, which makes the national government subject to real estate tax when it gives the beneficial
use of its real properties to a taxable entity. Section 234(a) of the Local Government Code provides:
SEC. 234. Exemptions from Real Property Tax The following are exempted from payment
of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration or otherwise, to
a taxable person.
x x x. (Emphasis supplied)
Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The
exception to this exemption is when the government gives the beneficial use of the real property to
a taxable entity.
The exception to the exemption in Section 234(a) is the only instance when the national
government, its agencies and instrumentalities are subject to any kind of tax by local governments.
The exception to the exemption applies only to real estate tax and not to any other tax. The
justification for the exception to the exemption is that the real property, although owned by the
Republic, is not devoted to public use or public service but devoted to the private gain of a taxable
person.
The minority also argues that since Section 133 precedes Section 193 and 234 of the Local
Government Code, the later provisions prevail over Section 133. Thus, the minority asserts:
x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an
accepted rule of construction, in case of conflict the subsequent provisions should prevail.
Therefore, MIAA, as a juridical person, is subject to real property taxes, the general
exemptions attaching to instrumentalities under Section 133(o) of the Local Government
Code being qualified by Sections 193 and 234 of the same law. (Emphasis supplied)
The minority assumes that there is an irreconcilable conflict between Section 133 on one hand, and
Sections 193 and 234 on the other. No one has urged that there is such a conflict, much less has
any one presenteda persuasive argument that there is such a conflict. The minority's assumption of
an irreconcilable conflict in the statutory provisions is an egregious error for two reasons.
First, there is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly
admits its subordination to other provisions of the Code when Section 193 states "[u]nless
otherwise provided in this Code." By its own words, Section 193 admits the superiority of other
provisions of the Local Government Code that limit the exercise of the taxing power in Section 193.
When a provision of law grants a power but withholds such power on certain matters, there is no

conflict between the grant of power and the withholding of power. The grantee of the power simply
cannot exercise the power on matters withheld from its power.
Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local Government
Units." Section 133 limits the grant to local governments of the power to tax, and not merely the
exercise of a delegated power to tax. Section 133 states that the taxing powers of local
governments "shall not extend to the levy" of any kind of tax on the national government, its
agencies and instrumentalities. There is no clearer limitation on the taxing power than this.
Since Section 133 prescribes the "common limitations" on the taxing powers of local governments,
Section 133 logically prevails over Section 193 which grants local governments such taxing powers.
By their very meaning and purpose, the "common limitations" on the taxing power prevail over the
grant or exercise of the taxing power. If the taxing power of local governments in Section 193
prevails over the limitations on such taxing power in Section 133, then local governments can
impose any kind of tax on the national government, its agencies and instrumentalities a gross
absurdity.
Local governments have no power to tax the national government, its agencies and
instrumentalities, except as otherwise provided in the Local Government Code pursuant to the
saving clause in Section 133 stating "[u]nless otherwise provided in this Code." This exception
which is an exception to the exemption of the Republic from real estate tax imposed by local
governments refers to Section 234(a) of the Code. The exception to the exemption in Section
234(a) subjects real property owned by the Republic, whether titled in the name of the national
government, its agencies or instrumentalities, to real estate tax if the beneficial use of such
property is given to a taxable entity.
The minority also claims that the definition in the Administrative Code of the phrase "governmentowned or controlled corporation" is not controlling. The minority points out that Section 2 of the
Introductory Provisions of the Administrative Code admits that its definitions are not controlling
when it provides:
SEC. 2. General Terms Defined. Unless the specific words of the text, or the context as a
whole, or a particular statute, shall require a different meaning:
xxxx
The minority then concludes that reliance on the Administrative Code definition is "flawed."
The minority's argument is a non sequitur. True, Section 2 of the Administrative Code recognizes
that a statute may require a different meaning than that defined in the Administrative Code.
However, this does not automatically mean that the definition in the Administrative Code does not
apply to the Local Government Code. Section 2 of the Administrative Code clearly states that
"unless the specific words x x x of a particular statute shall require a different meaning," the
definition in Section 2 of the Administrative Code shall apply. Thus, unless there is specific
language in the Local Government Code defining the phrase "government-owned or controlled
corporation" differently from the definition in the Administrative Code, the definition in the
Administrative Code prevails.
The minority does not point to any provision in the Local Government Code defining the phrase
"government-owned or controlled corporation" differently from the definition in the Administrative
Code. Indeed, there is none. The Local Government Code is silent on the definition of the phrase
"government-owned or controlled corporation." The Administrative Code, however, expressly
defines the phrase "government-owned or controlled corporation." The inescapable conclusion is
that the Administrative Code definition of the phrase "government-owned or controlled
corporation" applies to the Local Government Code.
The third whereas clause of the Administrative Code states that the Code "incorporates in a unified
document the major structural, functional and procedural principles and rules of governance."
Thus, the Administrative Code is the governing law defining the status and relationship of
government departments, bureaus, offices, agencies and instrumentalities. Unless a statute
expressly provides for a different status and relationship for a specific government unit or entity,
the provisions of the Administrative Code prevail.

The minority also contends that the phrase "government-owned or controlled corporation" should
apply only to corporations organized under the Corporation Code, the general incorporation law,
and not to corporations created by special charters. The minority sees no reason why government
corporations with special charters should have a capital stock. Thus, the minority declares:
I submit that the definition of "government-owned or controlled corporations" under the
Administrative Code refer to those corporations owned by the government or its
instrumentalities which are created not by legislative enactment, but formed and organized
under the Corporation Code through registration with the Securities and Exchange
Commission. In short, these are GOCCs without original charters.
xxxx
It might as well be worth pointing out that there is no point in requiring a capital structure
for GOCCs whose full ownership is limited by its charter to the State or Republic. Such
GOCCs are not empowered to declare dividends or alienate their capital shares.
The contention of the minority is seriously flawed. It is not in accord with the Constitution and
existing legislations. It will also result in gross absurdities.
First, the Administrative Code definition of the phrase "government-owned or controlled
corporation" does not distinguish between one incorporated under the Corporation Code or under a
special charter. Where the law does not distinguish, courts should not distinguish.
Second, Congress has created through special charters several government-owned corporations
organized as stock corporations. Prime examples are the Land Bank of the Philippines and the
Development Bank of the Philippines. The special charter 40 of the Land Bank of the Philippines
provides:
SECTION 81. Capital. The authorized capital stock of the Bank shall be nine billion pesos,
divided into seven hundred and eighty million common shares with a par value of ten pesos
each, which shall be fully subscribed by the Government, and one hundred and twenty
million preferred shares with a par value of ten pesos each, which shall be issued in
accordance with the provisions of Sections seventy-seven and eighty-three of this Code.
(Emphasis supplied)
Likewise, the special charter41 of the Development Bank of the Philippines provides:
SECTION 7. Authorized Capital Stock Par value. The capital stock of the Bank shall be
Five Billion Pesos to be divided into Fifty Million common shares with par value of P100 per
share. These shares are available for subscription by the National Government. Upon the
effectivity of this Charter, the National Government shall subscribe to Twenty-Five Million
common shares of stock worth Two Billion Five Hundred Million which shall be deemed paid
for by the Government with the net asset values of the Bank remaining after the transfer of
assets and liabilities as provided in Section 30 hereof. (Emphasis supplied)
Other government-owned corporations organized as stock corporations under their special charters
are the Philippine Crop Insurance Corporation, 42 Philippine International Trading Corporation,43 and
the Philippine National Bank44 before it was reorganized as a stock corporation under the
Corporation Code. All these government-owned corporations organized under special charters as
stock corporations are subject to real estate tax on real properties owned by them. To rule that
they are not government-owned or controlled corporations because they are not registered with
the Securities and Exchange Commission would remove them from the reach of Section 234 of the
Local Government Code, thus exempting them from real estate tax.
Third, the government-owned or controlled corporations created through special charters are those
that meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first
condition is that the government-owned or controlled corporation must be established for the
common good. The second condition is that the government-owned or controlled corporation must
meet the test of economic viability. Section 16, Article XII of the 1987 Constitution provides:

SEC. 16. The Congress shall not, except by general law, provide for the formation,
organization, or regulation of private corporations. Government-owned or controlled
corporations may be created or established by special charters in the interest of the
common good and subject to the test of economic viability. (Emphasis and underscoring
supplied)
The Constitution expressly authorizes the legislature to create "government-owned or controlled
corporations" through special charters only if these entities are required to meet the twin
conditions of common good and economic viability. In other words, Congress has no power to
create government-owned or controlled corporations with special charters unless they are made to
comply with the two conditions of common good and economic viability. The test of economic
viability applies only to government-owned or controlled corporations that perform economic or
commercial activities and need to compete in the market place. Being essentially economic
vehicles of the State for the common good meaning for economic development purposes
these government-owned or controlled corporations with special charters are usually organized as
stock corporations just like ordinary private corporations.
In contrast, government instrumentalities vested with corporate powers and performing
governmental or public functions need not meet the test of economic viability. These
instrumentalities perform essential public services for the common good, services that every
modern State must provide its citizens. These instrumentalities need not be economically viable
since the government may even subsidize their entire operations. These instrumentalities are not
the "government-owned or controlled corporations" referred to in Section 16, Article XII of the 1987
Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government
instrumentalities vested with corporate powers but performing essential governmental or public
functions. Congress has plenary authority to create government instrumentalities vested with
corporate powers provided these instrumentalities perform essential government functions or
public services. However, when the legislature creates through special charters corporations that
perform economic or commercial activities, such entities known as "government-owned or
controlled corporations" must meet the test of economic viability because they compete in the
market place.
This is the situation of the Land Bank of the Philippines and the Development Bank of the
Philippines and similar government-owned or controlled corporations, which derive their income to
meet operating expenses solely from commercial transactions in competition with the private
sector. The intent of the Constitution is to prevent the creation of government-owned or controlled
corporations that cannot survive on their own in the market place and thus merely drain the public
coffers.
Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the
Constitutional Commission the purpose of this test, as follows:
MR. OPLE: Madam President, the reason for this concern is really that when the government
creates a corporation, there is a sense in which this corporation becomes exempt from the
test of economic performance. We know what happened in the past. If a government
corporation loses, then it makes its claim upon the taxpayers' money through new equity
infusions from the government and what is always invoked is the common good. That is the
reason why this year, out of a budget of P115 billion for the entire government, about P28
billion of this will go into equity infusions to support a few government financial institutions.
And this is all taxpayers' money which could have been relocated to agrarian reform, to
social services like health and education, to augment the salaries of grossly underpaid
public employees. And yet this is all going down the drain.
Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common
good," this becomes a restraint on future enthusiasts for state capitalism to excuse
themselves from the responsibility of meeting the market test so that they become viable.
And so, Madam President, I reiterate, for the committee's consideration and I am glad that I
am joined in this proposal by Commissioner Foz, the insertion of the standard of
"ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the common good. 45

Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his
textbook The 1987 Constitution of the Republic of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission. The significant
addition, however, is the phrase "in the interest of the common good and subject to the
test of economic viability." The addition includes the ideas that they must show capacity to
function efficiently in business and that they should not go into activities which the private
sector can do better. Moreover, economic viability is more than financial viability but also
includes capability to make profit and generate benefits not quantifiable in financial
terms.46 (Emphasis supplied)
Clearly, the test of economic viability does not apply to government entities vested with corporate
powers and performing essential public services. The State is obligated to render essential public
services regardless of the economic viability of providing such service. The non-economic viability
of rendering such essential public service does not excuse the State from withholding such
essential services from the public.
However, government-owned or controlled corporations with special charters, organized essentially
for economic or commercial objectives, must meet the test of economic viability. These are the
government-owned or controlled corporations that are usually organized under their special
charters as stock corporations, like the Land Bank of the Philippines and the Development Bank of
the Philippines. These are the government-owned or controlled corporations, along with
government-owned or controlled corporations organized under the Corporation Code, that fall
under the definition of "government-owned or controlled corporations" in Section 2(10) of the
Administrative Code.
The MIAA need not meet the test of economic viability because the legislature did not create MIAA
to compete in the market place. MIAA does not compete in the market place because there is no
competing international airport operated by the private sector. MIAA performs an essential public
service as the primary domestic and international airport of the Philippines. The operation of an
international airport requires the presence of personnel from the following government agencies:
1. The Bureau of Immigration and Deportation, to document the arrival and departure of
passengers, screening out those without visas or travel documents, or those with hold
departure orders;
2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited
importations;
3. The quarantine office of the Department of Health, to enforce health measures against
the spread of infectious diseases into the country;
4. The Department of Agriculture, to enforce measures against the spread of plant and
animal diseases into the country;
5. The Aviation Security Command of the Philippine National Police, to prevent the entry of
terrorists and the escape of criminals, as well as to secure the airport premises from
terrorist attack or seizure;
6. The Air Traffic Office of the Department of Transportation and Communications, to
authorize aircraft to enter or leave Philippine airspace, as well as to land on, or take off
from, the airport; and
7. The MIAA, to provide the proper premises such as runway and buildings for the
government personnel, passengers, and airlines, and to manage the airport operations.
All these agencies of government perform government functions essential to the operation of an
international airport.
MIAA performs an essential public service that every modern State must provide its citizens. MIAA
derives its revenues principally from the mandatory fees and charges MIAA imposes on passengers

and airlines. The terminal fees that MIAA charges every passenger are regulatory or administrative
fees47 and not income from commercial transactions.
MIAA falls under the definition of a government instrumentality under Section 2(10) of the
Introductory Provisions of the Administrative Code, which provides:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not integrated within
the department framework, vested with special functions or jurisdiction by law, endowed
with some if not all corporate powers, administering special funds, and enjoying
operational autonomy, usually through a charter. x x x (Emphasis supplied)
The fact alone that MIAA is endowed with corporate powers does not make MIAA a governmentowned or controlled corporation. Without a change in its capital structure, MIAA remains a
government instrumentality under Section 2(10) of the Introductory Provisions of the
Administrative Code. More importantly, as long as MIAA renders essential public services, it need
not comply with the test of economic viability. Thus, MIAA is outside the scope of the phrase
"government-owned or controlled corporations" under Section 16, Article XII of the 1987
Constitution.
The minority belittles the use in the Local Government Code of the phrase "government-owned or
controlled corporation" as merely "clarificatory or illustrative." This is fatal. The 1987 Constitution
prescribes explicit conditions for the creation of "government-owned or controlled corporations."
The Administrative Code defines what constitutes a "government-owned or controlled corporation."
To belittle this phrase as "clarificatory or illustrative" is grave error.
To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of
the Introductory Provisions of the Administrative Code because it is not organized as a stock or
non-stock corporation. Neither is MIAA a government-owned or controlled corporation under
Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of
economic viability. MIAA is a government instrumentality vested with corporate powers and
performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the
Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by
local governments under Section 133(o) of the Local Government Code. The exception to the
exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the
Local Government Code. Such exception applies only if the beneficial use of real property owned by
the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are
properties of public dominion. Properties of public dominion are owned by the State or the
Republic. Article 420 of the Civil Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth. (Emphasis supplied)
The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands
and Buildings of MIAA are intended for public use, and at the very least intended for public service.
Whether intended for public use or public service, the Airport Lands and Buildings are properties of
public dominion. As properties of public dominion, the Airport Lands and Buildings are owned by
the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government
Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which
governs the legal relation and status of government units, agencies and offices within the entire

government machinery, MIAA is a government instrumentality and not a government-owned or

controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a government
instrumentality is not a taxable person because it is not subject to "[t]axes, fees or charges of any
kind" by local governments. The only exception is when MIAA leases its real property to a "taxable
person" as provided in Section 234(a) of the Local Government Code, in which case the specific
real property leased becomes subject to real estate tax. Thus, only portions of the Airport Lands
and Buildings leased to taxable persons like private parties are subject to real estate tax by the
City of Paraaque.
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to
public use, are properties of public dominion and thus owned by the State or the Republic of the
Philippines. Article 420 specifically mentions "ports x x x constructed by the State," which includes
public airports and seaports, as properties of public dominion and owned by the Republic. As
properties of public dominion owned by the Republic, there is no doubt whatsoever that the Airport
Lands and Buildings are expressly exempt from real estate tax under Section 234(a) of the Local
Government Code. This Court has also repeatedly ruled that properties of public dominion are not
subject to execution or foreclosure sale.
WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of
Appeals of 5 October 2001 and 27 September 2002 in CA-G.R. SP No. 66878. We DECLARE the
Airport Lands and Buildings of the Manila International Airport Authority EXEMPT from the real
estate tax imposed by the City of Paraaque. We declare VOID all the real estate tax assessments,
including the final notices of real estate tax delinquencies, issued by the City of Paraaque on the
Airport Lands and Buildings of the Manila International Airport Authority, except for the portions
that the Manila International Airport Authority has leased to private parties. We also
declare VOID the assailed auction sale, and all its effects, of the Airport Lands and Buildings of the
Manila International Airport Authority.
No costs.
SO ORDERED.
Panganiban, C.J., Puno, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez,
Corona, Carpio Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, Garcia, Velasco, Jr., J.J., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 92013 July 25, 1990
SALVADOR H. LAUREL, petitioner,
vs.
RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as Secretary of Foreign
Affairs, and CATALINO MACARAIG, as Executive Secretary, respondents.
G.R. No. 92047 July 25, 1990
DIONISIO S. OJEDA, petitioner,
vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST CHAIRMAN RAMON T.
GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as members of the PRINCIPAL AND BIDDING
COMMITTEES ON THE UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT
PROPERTIES IN JAPAN,respondents.
Arturo M. Tolentino for petitioner in 92013.
Civil Law; Property; Roppongi property is of public dominion.There can be no doubt that it is of
public dominion unless it is convincingly shown that the property has become patrimonial. This,
the respondents have failed to do.

Same; Same; Same; As property of public dominion, the Roppongi lot is outside the commerce of
man and can not be alienated.As property of public dominion, the Roppongi lot is outside the
commerce of man. It cannot be alienated. Its ownership is a special collective ownership for
general use and enjoyment, an application to the satisfaction of collective needs, and resides in
the social group. The purpose is not to serve the State as a juridical person, but the citizens; it is
intended for the common and public welfare and cannot be the object of appropriation.
Same; Same; Same; Roppongi property correctly classified under paragraph 2 of Article 420 of the
Civil Code as property belonging to the State and intended for some public service.The Roppongi
property is correctly classified under paragraph 2 of Article 420 of the Civil Code as property
belonging to the State and intended for some public service.
Same; Same; Same; A property continues to be part of the public domain, not available for private
appropriation or ownership until there is a formal declaration on the part of the government to
withdraw it from being such.The fact that the Roppongi site has not been used for a long time for
actual Embassy service does not automatically convert it to patrimonial property. Any such
conversion happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene
Co. v. Bercilles, 66 SCRA 481 [1975]). A property continues to be part of the public domain, not
available for private appropriation or ownership until there is a formal declaration on the part of
the government to withdraw it from being such.
Same; Same; Same; Same; An abandonment of the intention to use the Roppongi property for
public service and to make it patrimonial property under Article 422 of the Civil Code must be
definite.The respondents enumerate various pronouncements by concerned public officials
insinuating a change of intention. We emphasize, however, that an abandonment of the intention
to use the Roppongi property for public service and to make it patrimonial property under Article
422 of the Civil Code must be definite. Abandonment cannot be inferred from the non-use alone
specially if the non-use was attributable not to the governments own deliberate and indubitable
will but to a lack of financial support to repair and improve the property (See Heirs of Felino
Santiago v. Lazaro, 166 SCRA 368 [1988]. Abandonment must be a certain and positive act based
on correct legal premises.
Same; Same; Same; Same; A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not
relinquishment of the Roppongi propertys original purpose.A mere transfer of the Philippine
Embassy to Nampeidai in 1976 is not relinquishment of the Roppongi propertys original purpose.
Even the failure by the government to repair the building in Roppongi is not abandonment since as
earlier stated, there simply was a shortage of government funds. The recent Administrative Orders
authorizing a study of the status and conditions of government properties in Japan were merely
directives for investigation but did not in any way signify a clear intention to dispose of the
properties.
Same; Same; Same; Same; Republic Act No. 6657 (the CARP Law) does not authorize the Executive
Department to sell the Roppongi property.Section 63 (c) of Rep. Act No. 6657 (the CARP Law)
which provides as one of the sources of funds for its implementation, the proceeds of the
disposition of the properties of the Government in foreign countries, did not withdraw the Roppongi
property from being classified as one of public dominion when it mentions Philippine properties
abroad. Section 63 (c) refers to properties which are alienable and not to those reserved for public
use or service. Rep. Act No. 6657, therefore, does not authorize the Executive Department to sell
the Roppongi property. It merely enumerates possible sources of future funding to augment (as
and when needed) the Agrarian Reform Fund created under Executive Order No. 299. Obviously
any property outside of the commerce of man cannot be tapped as a source of funds.
Administrative Law; Political Law; President can not convey valuable real property of the
government on his or her own sole will; Conveyance must be authorized and approved by a law
enacted by Congress.It is not for the President to convey valuable real property of the
government on his or her own sole will. Any such conveyance must be authorized and approved by
a law enacted by the Congress. It requires executive and legislative concurrence.
Same; Same; Same; Resolution No. 55 of the Senate dated June 8, 1989 asking for the deferment
of the sale of the Roppongi property does not withdraw the property from public domain much less
authorize its sale.Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of
the sale of the Roppongi property does not withdraw the property from public domain much less
authorize its sale. It is a mere resolution; it is not a formal declaration abandoning the public
character of the Roppongi property. In fact, the Senate Committee on Foreign Relations is

conducting hearings on Senate Resolution No. 734 which raises serious policy considerations and
calls for a fact-finding investigation of the circumstances behind the decision to sell the Philippine
government properties in Japan.
CRUZ, J., Concurring

Property.The sale of the property may be authorized only by Congress through a duly enacted
statute and there is no such law.
PADILLA, J., Concurring Statement

Property.It is Congress which can decide and declare the conversion of Roppongi from a public
dominion property to a state patrimonial property. Congress has made no such decision or
declaration. It is clear that the President cannot sell or order the sale of Roppongi thru public
bidding or otherwise without a prior congressional approval, first, converting Roppongi from a
public dominion property to a State patrimonial property and second, authorizing the President to
sell the same.
FELICIANO, J., Dissenting
Property.The only requirement which is legitimately imposable is that the intent to convert must
be reasonably clear from a consideration of the act or acts of the Executive Department or of the
Legislative Department which are said to have effected such conversion.
Same.Assuming that the majority opinion is right in saying that Executive Order No. 296 is
insufficient to authorize the sale of the Roppongi property; it is here submitted with respect that
Executive Order No. 296 is more than sufficient to indicate an intention to convert the property
previously devoted to public service into patrimonial property that is capable of being sold or
otherwise dispose of.
SARMIENTO, J., Concurring:
Property; To turn public property to patrimonial, a legislative or executive declaration is necessary,
not were non-use thereof.In holding that there is a need for a law or formal declaration to
withdraw the Roppongi property from public domain to make it alienable and a land for legislative
authority to allow the sale of the property, the majority lays stress to the fact that: (1) An
affirmative actexecutive or legislativeis necessary to reclassify property of the public dominion,
and (2) a legislative decree is required to make it alienable. It also clears the uncertainties brought
about by earlier interpretations that the nature of propertywhether public or patrimonialis
predicated on the manner it is actually used, or not used, and in the same breath, repudiates the
Governments position that the continuous non-use of Roppongi, among other arguments, for
diplomatic purposes, has turned it into State patrimonial property. Laurel vs. Garcia, 187 SCRA
797, G.R. No. 92013, G.R. No. 92047 July 25, 1990
GUTIERREZ, JR., J.:
These are two petitions for prohibition seeking to enjoin respondents, their representatives and
agents from proceeding with the bidding for the sale of the 3,179 square meters of land at 306
Roppongi, 5-Chome Minato-ku Tokyo, Japan scheduled on February 21, 1990. We granted the
prayer for a temporary restraining order effective February 20, 1990. One of the petitioners (in G.R.
No. 92047) likewise prayes for a writ of mandamus to compel the respondents to fully disclose to
the public the basis of their decision to push through with the sale of the Roppongi property inspire
of strong public opposition and to explain the proceedings which effectively prevent the
participation of Filipino citizens and entities in the bidding process.
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court on March 13,
1990. After G.R. No. 92047, Ojeda v. Secretary Macaraig, et al. was filed, the respondents were

required to file a comment by the Court's resolution dated February 22, 1990. The two petitions
were consolidated on March 27, 1990 when the memoranda of the parties in the Laurel case were
deliberated upon.
The Court could not act on these cases immediately because the respondents filed a motion for an
extension of thirty (30) days to file comment in G.R. No. 92047, followed by a second motion for an
extension of another thirty (30) days which we granted on May 8, 1990, a third motion for
extension of time granted on May 24, 1990 and a fourth motion for extension of time which we
granted on June 5, 1990 but calling the attention of the respondents to the length of time the
petitions have been pending. After the comment was filed, the petitioner in G.R. No. 92047 asked
for thirty (30) days to file a reply. We noted his motion and resolved to decide the two (2) cases.
I
The subject property in this case is one of the four (4) properties in Japan acquired by the Philippine
government under the Reparations Agreement entered into with Japan on May 9, 1956, the other
lots being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area of
approximately 2,489.96 square meters, and is at present the site of the Philippine Embassy
Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72 square
meters and categorized as a commercial lot now being used as a warehouse and parking lot for the
consulate staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a
residential lot which is now vacant.
The properties and the capital goods and services procured from the Japanese government for
national development projects are part of the indemnification to the Filipino people for their losses
in life and property and their suffering during World War II.
The Reparations Agreement provides that reparations valued at $550 million would be payable in
twenty (20) years in accordance with annual schedules of procurements to be fixed by the
Philippine and Japanese governments (Article 2, Reparations Agreement). Rep. Act No. 1789, the
Reparations Law, prescribes the national policy on procurement and utilization of reparations and
development loans. The procurements are divided into those for use by the government sector and
those for private parties in projects as the then National Economic Council shall determine. Those
intended for the private sector shall be made available by sale to Filipino citizens or to one hundred
(100%) percent Filipino-owned entities in national development projects.
The Roppongi property was acquired from the Japanese government under the Second Year
Schedule and listed under the heading "Government Sector", through Reparations Contract No. 300
dated June 27, 1958. The Roppongi property consists of the land and building "for the Chancery of
the Philippine Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As intended, it became
the site of the Philippine Embassy until the latter was transferred to Nampeidai on July 22, 1976
when the Roppongi building needed major repairs. Due to the failure of our government to provide
necessary funds, the Roppongi property has remained undeveloped since that time.
A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to
Japan, Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese firm
- Kajima Corporation which shall construct two (2) buildings in Roppongi and one (1) building in
Nampeidai and renovate the present Philippine Chancery in Nampeidai. The consideration of the
construction would be the lease to the foreign corporation of one (1) of the buildings to be
constructed in Roppongi and the two (2) buildings in Nampeidai. The other building in Roppongi
shall then be used as the Philippine Embassy Chancery. At the end of the lease period, all the three
leased buildings shall be occupied and used by the Philippine government. No change of ownership
or title shall occur. (See Annex "B" to Reply to Comment) The Philippine government retains the
title all throughout the lease period and thereafter. However, the government has not acted
favorably on this proposal which is pending approval and ratification between the parties. Instead,
on August 11, 1986, President Aquino created a committee to study the disposition/utilization of

Philippine government properties in Tokyo and Kobe, Japan through Administrative Order No. 3,
followed by Administrative Orders Numbered 3-A, B, C and D.
On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino citizens or
entities to avail of separations' capital goods and services in the event of sale, lease or disposition.
The four properties in Japan including the Roppongi were specifically mentioned in the first
"Whereas" clause.
Amidst opposition by various sectors, the Executive branch of the government has been pushing,
with great vigor, its decision to sell the reparations properties starting with the Roppongi lot. The
property has twice been set for bidding at a minimum floor price of $225 million. The first bidding
was a failure since only one bidder qualified. The second one, after postponements, has not yet
materialized. The last scheduled bidding on February 21, 1990 was restrained by his Court. Later,
the rules on bidding were changed such that the $225 million floor price became merely a
suggested floor price.
The Court finds that each of the herein petitions raises distinct issues. The petitioner in G.R. No.
92013 objects to the alienation of the Roppongi property to anyone while the petitioner in G.R. No.
92047 adds as a principal objection the alleged unjustified bias of the Philippine government in
favor of selling the property to non-Filipino citizens and entities. These petitions have been
consolidated and are resolved at the same time for the objective is the same - to stop the sale of
the Roppongi property.
The petitioner in G.R. No. 92013 raises the following issues:
(1) Can the Roppongi property and others of its kind be alienated by the Philippine Government?;
and
(2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to sell the
Roppongi property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of the government
to alienate the Roppongi property assails the constitutionality of Executive Order No. 296 in making
the property available for sale to non-Filipino citizens and entities. He also questions the bidding
procedures of the Committee on the Utilization or Disposition of Philippine Government Properties
in Japan for being discriminatory against Filipino citizens and Filipino-owned entities by denying
them the right to be informed about the bidding requirements.
II
In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related lots were
acquired as part of the reparations from the Japanese government for diplomatic and consular use
by the Philippine government. Vice-President Laurel states that the Roppongi property is classified
as one of public dominion, and not of private ownership under Article 420 of the Civil Code (See
infra).
The petitioner submits that the Roppongi property comes under "property intended for public
service" in paragraph 2 of the above provision. He states that being one of public dominion, no
ownership by any one can attach to it, not even by the State. The Roppongi and related properties
were acquired for "sites for chancery, diplomatic, and consular quarters, buildings and other
improvements" (Second Year Reparations Schedule). The petitioner states that they continue to be
intended for a necessary service. They are held by the State in anticipation of an opportune use.
(Citing 3 Manresa 65-66). Hence, it cannot be appropriated, is outside the commerce of man, or to
put it in more simple terms, it cannot be alienated nor be the subject matter of contracts (Citing
Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]). Noting the non-use of the Roppongi property at
the moment, the petitioner avers that the same remains property of public dominion so long as the
government has not used it for other purposes nor adopted any measure constituting a removal of
its original purpose or use.
The respondents, for their part, refute the petitioner's contention by saying that the subject
property is not governed by our Civil Code but by the laws of Japan where the property is located.
They rely upon the rule of lex situs which is used in determining the applicable law regarding the

acquisition, transfer and devolution of the title to a property. They also invoke Opinion No. 21,
Series of 1988, dated January 27, 1988 of the Secretary of Justice which used the lex situs in
explaining the inapplicability of Philippine law regarding a property situated in Japan.
The respondents add that even assuming for the sake of argument that the Civil Code is applicable,
the Roppongi property has ceased to become property of public dominion. It has become
patrimonial property because it has not been used for public service or for diplomatic purposes for
over thirteen (13) years now (Citing Article 422, Civil Code) and because the intention by the
Executive Department and the Congress to convert it to private use has been manifested by overt
acts, such as, among others: (1) the transfer of the Philippine Embassy to Nampeidai (2) the
issuance of administrative orders for the possibility of alienating the four government properties in
Japan; (3) the issuance of Executive Order No. 296; (4) the enactment by the Congress of Rep. Act
No. 6657 [the Comprehensive Agrarian Reform Law] on June 10, 1988 which contains a provision
stating that funds may be taken from the sale of Philippine properties in foreign countries; (5) the
holding of the public bidding of the Roppongi property but which failed; (6) the deferment by the
Senate in Resolution No. 55 of the bidding to a future date; thus an acknowledgment by the Senate
of the government's intention to remove the Roppongi property from the public service purpose;
and (7) the resolution of this Court dismissing the petition in Ojeda v. Bidding Committee, et al.,
G.R. No. 87478 which sought to enjoin the second bidding of the Roppongi property scheduled on
March 30, 1989.
III
In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the constitutionality of
Executive Order No. 296. He had earlier filed a petition in G.R. No. 87478 which the Court
dismissed on August 1, 1989. He now avers that the executive order contravenes the constitutional
mandate to conserve and develop the national patrimony stated in the Preamble of the 1987
Constitution. It also allegedly violates:
(1) The reservation of the ownership and acquisition of alienable lands of the public domain to
Filipino citizens. (Sections 2 and 3, Article XII, Constitution; Sections 22 and 23 of Commonwealth
Act 141).itc-asl
(2) The preference for Filipino citizens in the grant of rights, privileges and concessions covering
the national economy and patrimony (Section 10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair competition and trade practices;
(4) The guarantee of the right of the people to information on all matters of public concern (Section
7, Article III, Constitution);
(5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned by Filipino
citizens of capital goods received by the Philippines under the Reparations Act (Sections 2 and 12
of Rep. Act No. 1789); and
(6) The declaration of the state policy of full public disclosure of all transactions involving public
interest (Section 28, Article III, Constitution).
Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional
executive order is a misapplication of public funds He states that since the details of the bidding for
the Roppongi property were never publicly disclosed until February 15, 1990 (or a few days before
the scheduled bidding), the bidding guidelines are available only in Tokyo, and the accomplishment
of requirements and the selection of qualified bidders should be done in Tokyo, interested Filipino
citizens or entities owned by them did not have the chance to comply with Purchase Offer
Requirements on the Roppongi. Worse, the Roppongi shall be sold for a minimum price of $225
million from which price capital gains tax under Japanese law of about 50 to 70% of the floor price
would still be deducted.
IV
The petitioners and respondents in both cases do not dispute the fact that the Roppongi site and
the three related properties were through reparations agreements, that these were assigned to the

government sector and that the Roppongi property itself was specifically designated under the
Reparations Agreement to house the Philippine Embassy.
The nature of the Roppongi lot as property for public service is expressly spelled out. It is dictated
by the terms of the Reparations Agreement and the corresponding contract of procurement which
bind both the Philippine government and the Japanese government.
There can be no doubt that it is of public dominion unless it is convincingly shown that the property
has become patrimonial. This, the respondents have failed to do.
As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be
alienated. Its ownership is a special collective ownership for general use and enjoyment, an
application to the satisfaction of collective needs, and resides in the social group. The purpose is
not to serve the State as a juridical person, but the citizens; it is intended for the common and
public welfare and cannot be the object of appropration. (Taken from 3 Manresa, 66-69; cited in
Tolentino, Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol. II, p. 26).
The applicable provisions of the Civil Code are:
ART. 419. Property is either of public dominion or of private ownership.
ART. 420. The following things are property of public dominion
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks shores roadsteads, and others of similar
character;
(2) Those which belong to the State, without being for public use, and are intended
for some public service or for the development of the national wealth.
ART. 421. All other property of the State, which is not of the character stated in the
preceding article, is patrimonial property.
The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code as
property belonging to the State and intended for some public service.
Has the intention of the government regarding the use of the property been changed because the
lot has been Idle for some years? Has it become patrimonial?
The fact that the Roppongi site has not been used for a long time for actual Embassy service does
not automatically convert it to patrimonial property. Any such conversion happens only if the
property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481
[1975]). A property continues to be part of the public domain, not available for private
appropriation or ownership until there is a formal declaration on the part of the government to
withdraw it from being such (Ignacio v. Director of Lands, 108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by concerned public officials insinuating a
change of intention. We emphasize, however, that an abandonment of the intention to use the
Roppongi property for public service and to make it patrimonial property under Article 422 of the
Civil Code must be definite Abandonment cannot be inferred from the non-use alone specially if the
non-use was attributable not to the government's own deliberate and indubitable will but to a lack
of financial support to repair and improve the property (See Heirs of Felino Santiago v. Lazaro, 166
SCRA 368 [1988]). Abandonment must be a certain and positive act based on correct legal
premises.
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the
Roppongi property's original purpose. Even the failure by the government to repair the building in
Roppongi is not abandonment since as earlier stated, there simply was a shortage of government
funds. The recent Administrative Orders authorizing a study of the status and conditions of
government properties in Japan were merely directives for investigation but did not in any way
signify a clear intention to dispose of the properties.

Executive Order No. 296, though its title declares an "authority to sell", does not have a provision
in its text expressly authorizing the sale of the four properties procured from Japan for the
government sector. The executive order does not declare that the properties lost their public
character. It merely intends to make the properties available to foreigners and not to Filipinos
alone in case of a sale, lease or other disposition. It merely eliminates the restriction under Rep. Act
No. 1789 that reparations goods may be sold only to Filipino citizens and one hundred (100%)
percent Filipino-owned entities. The text of Executive Order No. 296 provides:
Section 1. The provisions of Republic Act No. 1789, as amended, and of other laws
to the contrary notwithstanding, the above-mentioned properties can be made
available for sale, lease or any other manner of disposition to non-Filipino citizens
or to entities owned by non-Filipino citizens.
Executive Order No. 296 is based on the wrong premise or assumption that the Roppongi and the
three other properties were earlier converted into alienable real properties. As earlier stated, Rep.
Act No. 1789 differentiates the procurements for the government sector and the private sector
(Sections 2 and 12, Rep. Act No. 1789). Only the private sector properties can be sold to end-users
who must be Filipinos or entities owned by Filipinos. It is this nationality provision which was
amended by Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the sources of funds
for its implementation, the proceeds of the disposition of the properties of the Government in
foreign countries, did not withdraw the Roppongi property from being classified as one of public
dominion when it mentions Philippine properties abroad. Section 63 (c) refers to properties which
are alienable and not to those reserved for public use or service. Rep Act No. 6657, therefore, does
not authorize the Executive Department to sell the Roppongi property. It merely enumerates
possible sources of future funding to augment (as and when needed) the Agrarian Reform Fund
created under Executive Order No. 299. Obviously any property outside of the commerce of man
cannot be tapped as a source of funds.
The respondents try to get around the public dominion character of the Roppongi property by
insisting that Japanese law and not our Civil Code should apply.
It is exceedingly strange why our top government officials, of all people, should be the ones to
insist that in the sale of extremely valuable government property, Japanese law and not Philippine
law should prevail. The Japanese law - its coverage and effects, when enacted, and exceptions to
its provision is not presented to the Court It is simply asserted that the lex loci rei sitae or
Japanese law should apply without stating what that law provides. It is a ed on faith that Japanese
law would allow the sale.
We see no reason why a conflict of law rule should apply when no conflict of law situation exists. A
conflict of law situation arises only when: (1) There is a dispute over the title or ownership of an
immovable, such that the capacity to take and transfer immovables, the formalities of conveyance,
the essential validity and effect of the transfer, or the interpretation and effect of a conveyance,
are to be determined (See Salonga, Private International Law, 1981 ed., pp. 377-383); and (2) A
foreign law on land ownership and its conveyance is asserted to conflict with a domestic law on the
same matters. Hence, the need to determine which law should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or title. There is no question that the
property belongs to the Philippines. The issue is the authority of the respondent officials to validly
dispose of property belonging to the State. And the validity of the procedures adopted to effect its
sale. This is governed by Philippine Law. The rule of lex situs does not apply.
The assertion that the opinion of the Secretary of Justice sheds light on the relevance of the lex
situsrule is misplaced. The opinion does not tackle the alienability of the real properties procured
through reparations nor the existence in what body of the authority to sell them. In discussing who
are capableof acquiring the lots, the Secretary merely explains that it is the foreign law which
should determine who can acquire the properties so that the constitutional limitation on acquisition
of lands of the public domain to Filipino citizens and entities wholly owned by Filipinos is
inapplicable. We see no point in belaboring whether or not this opinion is correct. Why should we
discuss who can acquire the Roppongi lot when there is no showing that it can be sold?

The subsequent approval on October 4, 1988 by President Aquino of the recommendation by the
investigating committee to sell the Roppongi property was premature or, at the very least,
conditioned on a valid change in the public character of the Roppongi property. Moreover, the
approval does not have the force and effect of law since the President already lost her legislative
powers. The Congress had already convened for more than a year.
Assuming for the sake of argument, however, that the Roppongi property is no longer of public
dominion, there is another obstacle to its sale by the respondents.
There is no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917 provides
Section 79 (f ) Conveyances and contracts to which the Government is a party.
In cases in which the Government of the Republic of the Philippines is a party to
any deed or other instrument conveying the title to real estate or to any other
property the value of which is in excess of one hundred thousand pesos, the
respective Department Secretary shall prepare the necessary papers which,
together with the proper recommendations, shall be submitted to the Congress of
the Philippines for approval by the same. Such deed, instrument, or contract shall
be executed and signed by the President of the Philippines on behalf of the
Government of the Philippines unless the Government of the Philippines unless the
authority therefor be expressly vested by law in another officer. (Emphasis
supplied)
The requirement has been retained in Section 48, Book I of the Administrative Code of 1987
(Executive Order No. 292).
SEC. 48. Official Authorized to Convey Real Property. Whenever real property of
the Government is authorized by law to be conveyed, the deed of conveyance shall
be executed in behalf of the government by the following:
(1) For property belonging to and titled in the name of the Republic of the
Philippines, by the President, unless the authority therefor is expressly vested by
law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the name
of any political subdivision or of any corporate agency or instrumentality, by the
executive head of the agency or instrumentality. (Emphasis supplied)
It is not for the President to convey valuable real property of the government on his or her own sole
will. Any such conveyance must be authorized and approved by a law enacted by the Congress. It
requires executive and legislative concurrence.
Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the sale of the
Roppongi property does not withdraw the property from public domain much less authorize its sale.
It is a mere resolution; it is not a formal declaration abandoning the public character of the
Roppongi property. In fact, the Senate Committee on Foreign Relations is conducting hearings on
Senate Resolution No. 734 which raises serious policy considerations and calls for a fact-finding
investigation of the circumstances behind the decision to sell the Philippine government properties
in Japan.
The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass upon the
constitutionality of Executive Order No. 296. Contrary to respondents' assertion, we did not uphold
the authority of the President to sell the Roppongi property. The Court stated that the
constitutionality of the executive order was not the real issue and that resolving the constitutional
question was "neither necessary nor finally determinative of the case." The Court noted that
"[W]hat petitioner ultimately questions is the use of the proceeds of the disposition of the Roppongi
property." In emphasizing that "the decision of the Executive to dispose of the Roppongi property to
finance the CARP ... cannot be questioned" in view of Section 63 (c) of Rep. Act No. 6657, the Court
did not acknowledge the fact that the property became alienable nor did it indicate that the
President was authorized to dispose of the Roppongi property. The resolution should be read to

mean that in case the Roppongi property is re-classified to be patrimonial and alienable by
authority of law, the proceeds of a sale may be used for national economic development projects
including the CARP.
Moreover, the sale in 1989 did not materialize. The petitions before us question the proposed 1990
sale of the Roppongi property. We are resolving the issues raised in these petitions, not the issues
raised in 1989.
Having declared a need for a law or formal declaration to withdraw the Roppongi property from
public domain to make it alienable and a need for legislative authority to allow the sale of the
property, we see no compelling reason to tackle the constitutional issues raised by petitioner
Ojeda.
The Court does not ordinarily pass upon constitutional questions unless these questions are
properly raised in appropriate cases and their resolution is necessary for the determination of the
case (People v. Vera, 65 Phil. 56 [1937]). The Court will not pass upon a constitutional question
although properly presented by the record if the case can be disposed of on some other ground
such as the application of a statute or general law (Siler v. Louisville and Nashville R. Co., 213 U.S.
175, [1909], Railroad Commission v. Pullman Co., 312 U.S. 496 [1941]).
The petitioner in G.R. No. 92013 states why the Roppongi property should not be sold:
The Roppongi property is not just like any piece of property. It was given to the
Filipino people in reparation for the lives and blood of Filipinos who died and
suffered during the Japanese military occupation, for the suffering of widows and
orphans who lost their loved ones and kindred, for the homes and other properties
lost by countless Filipinos during the war. The Tokyo properties are a monument to
the bravery and sacrifice of the Filipino people in the face of an invader; like the
monuments of Rizal, Quezon, and other Filipino heroes, we do not expect economic
or financial benefits from them. But who would think of selling these monuments?
Filipino honor and national dignity dictate that we keep our properties in Japan as
memorials to the countless Filipinos who died and suffered. Even if we should
become paupers we should not think of selling them. For it would be as if we sold
the lives and blood and tears of our countrymen. (Rollo- G.R. No. 92013, p.147)
The petitioner in G.R. No. 92047 also states:
Roppongi is no ordinary property. It is one ceded by the Japanese government in
atonement for its past belligerence for the valiant sacrifice of life and limb and for
deaths, physical dislocation and economic devastation the whole Filipino people
endured in World War II.
It is for what it stands for, and for what it could never bring back to life, that its
significance today remains undimmed, inspire of the lapse of 45 years since the
war ended, inspire of the passage of 32 years since the property passed on to the
Philippine government.
Roppongi is a reminder that cannot should not be dissipated ... (Rollo-92047,
p. 9)
It is indeed true that the Roppongi property is valuable not so much because of the inflated prices
fetched by real property in Tokyo but more so because of its symbolic value to all Filipinos
veterans and civilians alike. Whether or not the Roppongi and related properties will eventually be
sold is a policy determination where both the President and Congress must concur. Considering the
properties' importance and value, the laws on conversion and disposition of property of public
dominion must be faithfully followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of prohibition is
issued enjoining the respondents from proceeding with the sale of the Roppongi property in Tokyo,
Japan. The February 20, 1990 Temporary Restraining Order is made PERMANENT.
SO ORDERED.

Melencio-Herrera, Paras, Bidin, Grio-Aquino and Regalado, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 172931

June 18, 2009

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF ENVIRONMENT AND

NATURAL RESOURCES (DENR), Petitioner,
vs.
REGIONAL TRIAL COURT, BRANCH 18, ROXAS CITY, CAPIZ, RIZAL RECIO, TERESITA RECIO,
PACIENCIA RECIO, and HEIR OF OSCAR RECIO, HARRIET VILLANUEVA vda. DE RECIO, and
the REGISTER OF DEEDS, ROXAS CITY, CAPIZ, Respondents.
Land Registration; Judgments; Void Judgments; Forest lands or forest reserves are not capable of
private appropriation, and possession thereof, however long, cannot convert them into private
propertyverily, non-disposable public lands registered under the Land Registration Act may be
recovered by the State at any time and the defense of res judicata would not apply; A void
judgment may be assailed or impugned at any time either directly or collaterally, by means of a
petition filed in the same case or by means of a separate action, or by resisting such judgment in
any action or proceeding wherein it is invoked.Petitioner contends that the RTC acted without
jurisdiction in allowing the registration of the subject land because the land is forest land and thus,
inalienable. Verily, jurisprudence is replete with cases which iterate that forest lands or forest
reserves are not capable of private appropriation, and possession thereof, however long, cannot
convert them into private property. If indeed the subject land is forest land, then the decision of the
RTC is void. A void judgment may be assailed or impugned at any time either directly or
collaterally, by means of a petition filed in the same case or by means of a separate action, or by
resisting such judgment in any action or proceeding wherein it is invoked. Moreover, an action for
reversion filed by the State to recover property registered in favor of any party which is part of the
public forest or of a forest reservation never prescribes. Verily, non-disposable public lands
registered under the Land Registration Act may be recovered by the State at any time and the
defense of res judicata would not apply as courts have no jurisdiction to dispose of such lands of
the public domain.
Same; Same; Same; In an action to annul a void judgment, the burden of proving the judgments
nullity rests upon the petitioner.As to the second issue, we agree with the Court of Appeals that
petitioner failed to discharge the burden of establishing the inalienable character of the land. In an
action to annul a judgment, the burden of proving the judgments nullity rests upon the petitioner.
The petitioner has to establish by clear and convincing evidence that the judgment being
challenged is fatally defective.
Appeals; The jurisdiction of the Supreme Court in cases brought before it from the Court of Appeals
is limited to reviewing or revising errors of law.The ruling of the Court of Appeals, based on the
abovementioned findings of fact, is upheld by this Court. The jurisdiction of this Court in cases
brought before it from the Court of Appeals is limited to reviewing or revising errors of law. The
findings of facts of the latter are conclusive for it is not the function of this Court to analyze and
weigh such evidence all over again. Our jurisdiction is in principle limited to reviewing errors of law
that might have been committed by the Court of Appeals. Factual findings of courts, when adopted
and confirmed by the Court of Appeals, are final and conclusive on this Court unless these findings
are not supported by the evidence on record.
Republic vs. Regional Trial Court, Br. 18, Roxas City, Capiz, 589 SFRA 552, G.R. No. 172931 June 18,
2009
DECISION

QUISUMBING, J.:
This petition for review on certiorari, filed by the Department of Environment and Natural
Resources on behalf of the Republic of the Philippines (RP), seeks to annul and set aside the
Decision1 dated May 25, 2006 of the Court of Appeals, Cebu City, 18th Division, in CA-G.R. SP No.
72691. The Court of Appeals had dismissed RPs petition for annulment of judgment 2 of the
Decision3 dated September 14, 1984 of the Regional Trial Court (RTC) of Roxas City, Branch 18,
which ordered the confirmation and registration of title to Lot No. 900 of the Pilar Cadastre, LRC
Cadastral Record No. 50963 located at Marita, Pilar, Capiz in the names of the applicants and
private respondents herein Rizal Recio, Teresita L. Recio, Paciencia L. Recio, and the only heir of
Oscar L. Recio, his mother, Harriet Villanueva Vda. de Recio.
The undisputed facts are as follows:
On September 14, 1984, said RTC rendered a decision in Land Registration Case (LRC) No. N-785
granting the Application for Registration of Title4 dated June 20, 1977 filed by Rizal Recio for himself
and in behalf of his brother Oscar Recio and sisters Teresita Recio and Paciencia Recio. The RTC
decreed:
WHEREFORE, judgment is hereby rendered ordering the confirmation and registration of title to
land, Lot No. 900 of Pilar Cadastre, LRC Cadastral Record No. 50963 situated in Marita, Municipality
of Pilar, Province of Capiz, Island of Panay, described in the technical description (Exhibit "E") and
the approved plan AP-06-000028 (Exhibit "X") in the names of the applicants Rizal Recio, of legal
age, married to Alita B. Laada, with residence in Loctugan Hills, Roxas City; Teresita L. Recio, of
legal age, Filipino, married to Pio Acelentaba and a resident of Panay, Capiz; Paciencia L. Recio, of
legal age, Filipino, married to Nestor Donado and a resident of Dayao, Roxas City, and to the only
heir of Oscar L. Recio, his mother Harriet Villanueva Vda. de Recio, who is of legal age, Filipino, a
widow and a resident of Roxas City, and a decree may issue after this decision shall have become
final.
SO ORDERED.5
The abovementioned decision became final, and pursuant thereto, Original Certificate of Title (OCT)
No. 0-21076covering the 11,189-square meter piece of land, was issued in the Recios names on
April 17, 1985.
In 1997, a number of occupants of Lot No. 900, namely Joselito Alba, Virginia Bengora, Teodosia
Alba, Celso Bullos, Elizabeth Barrosa, Noel Gallardo, Paquita Ducit and Arturo Borleo filed a protest
before the DENR, Roxas City against the issuance of OCT No. 0-2107 on the ground that the land
covered therein is within forest lands or timberlands, hence it cannot be the subject of private
appropriation.
Acting on the protest, Lorna L. Jomento, Special Investigator II of the Lands Management
Department (LMD), DENR, Region VI, Iloilo City conducted an ocular inspection and investigation on
the status of Lot No. 900.
On January 19, 1998, Jomento rendered a written report7 that Lot No. 900 falls within the forest
lands of Project No. 20-A, established on January 17, 1986 under Forestry Administrative Order No.
4-1777, per Land Classification (LC) Map No. 3132. 8 Jomento recommended that an action be
instituted in the proper court for the cancellation of OCT No. 0-2107.
On September 9, 2002, RP, represented by the DENR, through the Office of the Solicitor General
(OSG), filed a petition for annulment of judgment before the Court of Appeals seeking to annul the
Decision dated September 14, 1984 on the ground that the RTC had no jurisdiction to adjudicate
title over the subject parcel of land which forms part of the public forest. 9 In the petition, the OSG
cited Section 1410 of Presidential Decree No. 152911which allows the court to adjudicate only
alienable and disposable lands of the public domain in favor of those who have successfully
acquired title to said lands by acquisitive prescription. The OSG argued that the trial court
exceeded its jurisdiction when it adjudicated the subject land which is forest land and, accordingly,
its decision is null and void.12

In their Answer to the Petition for Annulment of Judgment, 13 the Recios argued that the RTC of
Roxas City, Branch 18 has jurisdiction over the case. They contended that petitioner hastily and
negligently filed the petition without first examining the records of LRC No. N-785 and despite its
knowledge of their duly approved Plan LRC-SWO-14402 for Lot No. 900 of the Pilar Cadastre. They
pointed out that said approved plan clearly showed that Lot No. 900 was not within LC Project No.
20-A, but LC Project No. 20 which was duly certified as alienable and disposable on September 28,
1960 as per BFD Map LC-2401. They also argued that the Decision dated September 14, 1984, has
been declared final and executory, and OCT No. 0-2107 has been issued on April 17, 1985, in their
names. Hence, LRC No. N-785 is already a closed case and res judicata has set in.14
On September 24, 2003, the Court of Appeals issued a Resolution 15 directing the Executive Judge of
the RTC in Roxas City to conduct a pre-trial conference and reception of evidence. However, since
the Executive Judge presides in the same branch where the decision in LRC No. N-785 was
rendered, the incident was assigned by raffle to another judge in the RTC of Roxas City. 16 In a
Report and Recommendation 17 dated December 13, 2005, Judge Juliana C. Azarraga, RTC of Roxas
City, Branch 15, recommended that the petition for annulment of judgment be dismissed.1avvphi1
Subsequently, on May 25, 2006, the Court of Appeals dismissed the petition for lack of sufficient
evidence. The decision states:
After going over the evidence offered by both parties, the Court finds it proper to dismiss the
petition.
Petitioner failed to sufficiently prove its allegation that Lot 900 forms part of the forest lands of the
public domain. The evidence offered by the petitioner that Lot 900 falls within forest lands consists
only of the testimonies of its two witnesses, the written report of Lorna Jomento (Exhibit A), and the
ordinary photocopy of the sketch plan of Lot 900 (Exhibit E) and the verification (Exhibit E-1)
appearing on it.
The mere photocopy of the sketch plan of Lot 900 (Exhibit E) as well as the verification (Exhibit E-1)
appearing thereon is without probative value and inadmissible in evidence pursuant to the best
evidence rule. In Philippine Banking Corporation vs. Court of Appeals, the Supreme Court held:
"The Best Evidence Rule provides that the court shall not receive any evidence that is merely
substitutionary in its nature, such as photocopies, as long as the original evidence can be had.
Absent a clear showing that the original writing has been lost, destroyed or cannot be produced in
court, the photocopy must be disregarded, being unworthy of any probative value and being an
inadmissible evidence."
The testimonies of petitioners two witnesses and the written report of Lorna Jomento, a Special
Investigator, stating that based on the records Lot 900 falls within the forest lands reserved for
fishpond created under Project 20-A dated January 17, 1986 under Forestry Administrative Order
No. 4-1777 per Land Classification Map No. 3132 do not overcome the Certification (Exhibit 1-D for
private respondents) dated November 8, 1976 of the then Bureau of Forest Development,
Department of Natural Resources (now DENR, the representative of herein petitioner) certifying
that Lot 900 falls within the alienable and disposable land Block LC Project No. 20 of Pilar, Capiz
certified as such on September 28, 1960 per BFD Map LC-2401. If, indeed, Lot 900 falls within the
forest lands reserved for fishpond purposes created under Project 20-A dated January 17, 1986
under Forestry Administrative Order No. 4-1777 per Land Classification Map No. 3132, petitioner
should have presented such land classification map indicating that Lot 900 lies therein and not in
Block LC No. 20 of Pilar Cadastre per BFD Map LC-4201 as stated in the Certification dated
November 8, 1976 of the then Bureau of Forest Development, Department of Natural Resources.
Thus, for failure of the petitioner to adduce sufficient evidence to prove its allegation that Lot 900
falls within the forest lands the petition has to be dismissed.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED.
SO ORDERED.18
Hence, this petition.

Petitioner raises the following issues for our resolution:

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN DISMISSING THE PETITION FOR THE
ANNULMENT OF JUDGMENT OF THE REGIONAL TRIAL COURT, BRANCH 18, IN ROXAS CITY BECAUSE:
A. SAID RTC JUDGMENT WAS ISSUED WITHOUT JURISDICTION AS IT ALLOWED THE
REGISTRATION OF INALIENABLE LAND IN FAVOR OF PRIVATE INDIVIDUALS.
B. PETITIONER HAD DISCHARGE[D] THE BURDEN OF ESTABLISHING THE INALIENABLE
AND INDISPOSABLE CHARACTER OF SUBJECT PARCEL OF LAND BY THE QUANTUM OF
EVIDENCE REQUIRED BY LAW.19
Simply stated, the issues raised are: (1) Did the RTC act without jurisdiction in allowing the
registration of the subject land? And (2) Did petitioner fail to discharge the burden of establishing
the inalienable character of the land?
Petitioner, through the OSG, contends in its Memorandum 20 that it is a well-entrenched rule that the
classification of public lands is an exclusive prerogative of the executive department of the
government and not of the courts.21In this case, it was ascertained in the investigation conducted
by Special Investigator Jomento that the land in question falls within the forest land reserved for
fishpond purposes created under Project No. 20-A dated January 17, 1986, under Forestry
Administrative Order No. 4-1777 per Land Classification (LC) Map No. 3123 dated August 25, 1983.
The land, therefore, is inalienable and indisposable and can never be subject to appropriation. The
OSG reiterates that under Section 14 of P.D. No. 1529, the court is allowed to adjudicate only
"alienable and disposable lands of the public domain" in favor of those who have successfully
acquired title thereto by acquisitive prescription. In adjudicating forest land in favor of the private
respondents, the RTC of Roxas City, Branch 18 exceeded its jurisdiction, and its decision confirming
title to the subject land in favor of private respondents is null and void and should have been
annulled by the Court of Appeals.22 Petitioner also argues that the claim of private respondents that
the present appeal is barred by res judicata is incorrect since the present petition ultimately seeks
the nullification of the decision of the RTC of Roxas City, Branch 18, allowing the registration of
inalienable land in their favor. 23
The OSG also argues that it had discharged the burden of establishing the inalienable character of
the subject parcel of land by the quantum of evidence required. The actual presentation of LC Map
No. 3132 is no longer necessary because the determination of the nature and character of public
land in a land investigation conducted by government authorities on land classification is binding
on the courts.24 It further argues that Special Investigators Lorna L. Jomento and Eugenio B. Bernas
were merely performing their official duties as special land investigators of the LMD, DENR, Region
VI, in Iloilo City when they conducted an investigation on the land in question; hence, in the
absence of any evidence showing that said special investigators were biased in favor of one party,
their testimonies and the investigation report should be accorded the presumption of regularity in
the performance of their duties as public officers. 25
Private respondents, in their Memorandum26 dated June 14, 2007, for their part maintain that the
Decision dated September 14, 1984 had become final, the Land Registration Commission had
issued a final decree of registration after one year and OCT No. 0-2017 was issued by the Register
of Deeds of Capiz in their names on May 14, 1985. The decision in LRC No. N-785 has therefore
become the law between RP, the applicants and the whole world, and is already a closed case that
could no longer be revived in subsequent unnecessary litigations. 27
As to the first issue, did the RTC act without jurisdiction in allowing the registration of inalienable
land?
Petitioner contends that the RTC acted without jurisdiction in allowing the registration of the subject
land because the land is forest land and thus, inalienable. Verily, jurisprudence is replete with
cases which iterate that forest lands or forest reserves are not capable of private appropriation,
and possession thereof, however long, cannot convert them into private property. 28
If indeed the subject land is forest land, then the decision of the RTC is void. A void judgment may
be assailed or impugned at any time either directly or collaterally, by means of a petition filed in
the same case or by means of a separate action, or by resisting such judgment in any action or
proceeding wherein it is invoked. 29

Moreover, an action for reversion filed by the State to recover property registered in favor of any
party which is part of the public forest or of a forest reservation never prescribes. Verily, nondisposable public lands registered under the Land Registration Act may be recovered by the State
at any time and the defense of res judicata would not apply as courts have no jurisdiction to
dispose of such lands of the public domain.30
Under the facts and circumstances of this case, however, we disagree with petitioner that the
subject land is inalienable.lawphil
At the time of application for registration of the subject land by the Recios in 1977, the land was
classified as alienable public land. The Recios presented a Certification 31 dated November 8, 1976
from the then Bureau of Forest Development certifying that the subject land containing an area of
11,189 square meters and described as Lot No. 900, Pilar Cadastre is found to be within the
alienable and disposable land block of LC Project No. 20 of Pilar, Capiz certified as such on
September 28, 1960 per BFD Map LC-2401. In contrast, petitioner presented Jomentos report
which stated that Lot No. 900 falls within forest lands for fishpond development of Project 20-A,
established on January 17, 1986 under Forestry Administrative Order No. 4-1777 per LC Map No.
3132.32
It is clear that at the time the Recios filed their application for registration of title in 1977 and at
the time the RTC rendered its decision in 1984, the land was not inalienable forest land but was
alienable land. Hence, the RTC had jurisdiction to adjudicate title to the land.
As to the second issue, we agree with the Court of Appeals that petitioner failed to discharge the
burden of establishing the inalienable character of the land.
In an action to annul a judgment, the burden of proving the judgments nullity rests upon the
petitioner. The petitioner has to establish by clear and convincing evidence that the judgment
being challenged is fatally defective. 33
The Court of Appeals ruled that petitioner failed to sufficiently prove its allegation that Lot No. 900
forms part of the forest lands of the public domain since its evidence consists only of the
testimonies of two witnesses, a written report of Jomento, and a photocopy of the sketch plan of
Lot No. 900. It ruled that a mere photocopy is without probative value and inadmissible in evidence
and petitioner should have presented a land classification map indicating where Lot No. 900 lies to
refute the Certification dated November 8, 1976 of the then Bureau of Forest Development.
The ruling of the Court of Appeals, based on the abovementioned findings of fact, is upheld by this
Court. The jurisdiction of this Court in cases brought before it from the Court of Appeals is limited to
reviewing or revising errors of law. The findings of facts of the latter are conclusive for it is not the
function of this Court to analyze and weigh such evidence all over again. 34 Our jurisdiction is in
principle limited to reviewing errors of law that might have been committed by the Court of
Appeals. Factual findings of courts, when adopted and confirmed by the Court of Appeals, are final
and conclusive on this Court unless these findings are not supported by the evidence on record. 35
Finding no reason to deviate from the ruling of the Court of Appeals that petitioner failed to adduce
sufficient evidence to prove its allegation that Lot No. 900 falls within forest lands, we affirm such
ruling.
WHEREFORE, the petition is DENIED. The Decision dated May 25, 2006 of the Court of Appeals,
Cebu City, Eighteenth Division, in CA-G.R. SP No. 72691 is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
LEONARDO A. QUISUMBING
Associate Justice
WE CONCUR:

FIRST DIVISION
[G.R. No. 145838. July 20, 2001]
NICASIO I. ALCANTARA, petitioner, vs. COMMISSION ON THE SETTLEMENT OF LAND
PROBLEMS, SECRETARY OF DEPARTMENT OF ENVIRONMENT AND NATURAL
RESOURCES ANTONIO CERILLES, THE DEPARTMENT OF ENVIRONMENT AND
NATURAL RESOURCES, ROLANDO PAGLANGAN, ET AL., respondents.
HEIRS OF DATU ABDUL S. PENDATUN, REP. BY DATU NASSER B. PENDATUN, AL HAJ.,
HEIRS OF SABAL MULA, and GAWAN CLAN, REP. BY TRIBAL CHIEFTAIN LORETO
GAWAN, intervenors.
Actions; Jurisdiction; Estoppel; The active participation of a party in a case pending against him
before a court or a quasi-judicial body is tantamount to a recognition of that courts or bodys
recognition and a willingness to abide by the resolution of the case and will bar said party from
later on impugning the courts or bodys jurisdiction.The Court of Appeals did not commit any
reversible error in the assailed decision. The Court agrees with the appellate court that petitioner is
estopped from questioning the jurisdiction of the COSLAP since he participated actively in the
proceedings before said body by filing an Answer, a Motion for Reconsideration of the COSLAPs
decision and a Supplement to Respondents Motion for Reconsideration. The Court also notes the
appellate courts observation that petitioner began to question the jurisdiction of the COSLAP only
when he realized that his period to appeal the COSLAPs decision had already lapsed. It has been
repeatedly held by this Court that the active participation of a respondent in the case pending
against him before a court or a quasi-judicial body is tantamount to a recognition of that courts or
bodys recognition and a willingness to abide by the resolution of the case and will bar said party
from later on impugning the courts or bodys jurisdiction.
Indigenous Cultural Communities; Ancestral Lands; Presidential Decree No. 410; Section 1 of
Presidential Decree No. 410 states that all unappropriated agricultural lands forming part of the
public domain are declared part of the ancestral lands of the indigenous cultural groups occupying
the same, and these lands are further declared alienable and disposable, to be distributed
exclusively among the members of the indigenous cultural group concerned.The Court of Appeals
also stated that based on the records, the land area being claimed by private respondents belongs
to the Blaan indigenous cultural community since they have been in possession of, and have been
occupying and cultivating the same since time immemorial, a fact has not been disputed by
petitioner. It was likewise declared by the appellate court that FLGLA No. 542 granted to petitioner
violated Section 1 of Presidential Decree No. 410 which states that all unappropriated agricultural
lands forming part of the public domain are declared part of the ancestral lands of the indigenous
cultural groups occupying the same, and these lands are further declared alienable and disposable,
to be distributed exclusively among the members of the indigenous cultural group concerned. The
Court finds no reason to depart from such finding by the appellate court, it being a settled rule that
findings of fact of the Court of Appeals are binding and conclusive upon the Supreme Court absent
any showing that such findings are not supported by the evidence on record. Alcantara vs.
Commission on the Settlement of Land Problems, 361 SCRA 664, G.R. No. 145838 July 20, 2001
DECISION
KAPUNAN, J.:
This is a petition for review on certiorari assailing the Decision of the Court of Appeals dated
June 22, 2000 in CA-G.R. SP No. 53159 [1] and its Resolution dated October 16, 2000 denying
petitioners motion for reconsideration.
The facts of the case are as follows:
Sometime in 1993, petitioner Nicasio Alcantara was granted Forest Land Grazing Lease
Agreement No. 542 (FLGLA No. 542) by the Department of Environment and Natural Resources
(DENR). Under said FLGLA, Alcantara was allowed to lease Nine Hundred Twenty-Three (923)
hectares of public forest land at Sitio Lanton, Barrio Apopong, General Santos City for grazing
purposes for a period of twenty-five (25) years to expire on 31 December 2018.
As early as 1990, however, private respondent Rolando Paglangan together with Esmael Sabel
and Lasid Acop filed a letter-complaint with the Commission on Settlement of Land Problems
(COSLAP) seeking the cancellation of FLGLA No. 542 and the reversion of the entire 923 hectares to
the Blaan and Maguindanaoan tribes. The case was docketed as COSLAP Case No. 98-052.

Petitioner filed his Answer questioning the jurisdiction of the COSLAP over the case, since the
dispute involved a claim for recovery of ancestral land.Petitioner claimed that the case should have
been filed with the DENR since it is the latter which has jurisdiction to administer and dispose of
public lands, including grazing lands.
Notwithstanding petitioners objection to the COSLAPs exercise of jurisdiction over the case,
said body continued the hearings thereon. Petitioner alleged that COSLAP did not conduct formal
hearings on the case, and that he was not notified nor given the opportunity to be present and
participate in the field interviews and ocular inspections conducted by COSLAP. [2]
On August 3, 1998, the COSLAP issued a Decision ordering the cancellation of FLGLA No.
542. Petitioner appealed the same to the Court of Appeals by petition for review on certiorari.
The Court of Appeals dismissed the petition in its Decision dated June 22, 2000, and also
denied petitioners motion for reconsideration in a Resolution dated October 16, 2000. [3]
Hence, the present petition.
Petitioner contends that the Court of Appeals erred in ruling that he had earlier recognized the
jurisdiction of the COSLAP over the case. He stated further that the appellate court should have
considered that the COSLAP does not possess the historical, genealogical and anthropological
expertise to act on ancestral land claims, and that it is the National Commission on Indigenous
Peoples (NCIP), under the Indigenous Peoples Rights Act of 1997 [4] which has jurisdiction over such
claims. Petitioner thus submits that the COSLAPs decision ordering the cancellation of FLGLA No.
542 and declaring the area being claimed by private respondent as ancestral land is void for
having been issued by a body which does not have jurisdiction over said matters. [5]
In his Comment, private respondent Rolando Paglangan argued that the petition should be
dismissed since the petition for certiorari filed by petitioner in the Court of Appeals was filed out of
time.[6] He also contended that the COSLAP has the power to entertain cases involving indigenous
cultural communities when the DENR or the NCIP fails or refuses to act on a complaint or grievance
brought before them.[7] He alleged that the dispute between petitioner and the Blaan tribe
antedated the creation of the NCIP, hence, filing of the petition for cancellation of the FLGLA with
the COSLAP.[8]
On April 6, 2001, a Motion for Leave to Intervene and to File Complaint-in-Intervention was
filed with this Court by the Heirs of Datu Abdul S. Pendatun, represented by Datu Nasser B.
Pendatun, Al Haj; the Heirs of Sabal Mula, represented by Hadji Latip K. Mula; and the Gawan Clan,
represented by their Tribal Chieftain Loreto Gawan.
Subsequently, on May 24, 2001, they filed an Amended Motion for Leave to Intervene and to
File Amended Complaint-in-Intervention. In their Amended Complaint-in-Intervention, they allege
that the parcels of land in dispute form part of their ancestral lands, and that they have been in
open, continuous, exclusive and notorious possession under claim of ownership of the same. They
stated further that private respondent Rolando Paglangan acts only as agent of the Mula clan, and
not of the other intervenors.[9]
The Court finds no reason to disturb the ruling of the Court of Appeals.
The Court of Appeals did not commit any reversible error in the assailed decision. The Court
agrees with the appellate court that petitioner is estopped from questioning the jurisdiction of the
COSLAP since he participated actively in the proceedings before said body by filing an Answer, a
Motion for Reconsideration of the COSLAPs decision and a Supplement to Respondents Motion for
Reconsideration. The Court also notes the appellate courts observation that petitioner began to
question the jurisdiction of the COSLAP only when he realized that his period to appeal the
COSLAPs decision had already lapsed. [10] It has been repeatedly held by this Court that the active
participation of a respondent in the case pending against him before a court or a quasi-judicial
body is tantamount to a recognition of that courts or bodys recognition and a willingness to abide
by the resolution of the case and will bar said party from later on impugning the courts or bodys
jurisdiction.[11]
Moreover, Executive Order No. 561 creating the COSLAP, the law then prevailing when private
respondents filed their complaint for cancellation ofFLGLA No. 542, provides in Section 3,
paragraph 2(a) thereof that said Commission may assume jurisdiction over land disputes
involving occupants of the land in question and pasture lease agreement holders:
Sec. 3. Powers and Functions. -- The Commission shall have the following powers and functions:
xxx

2. Refer and follow-up for immediate action by the agency having appropriate jurisdiction any land
problem or dispute referred to the Commission: Provided,That the Commission, may, in the
following cases, assume jurisdiction and resolve land problems or disputes which are critical and
explosive in nature considering, for instance, the large number of the parties involved, the
presence or emergence of social tension or unrest, or other similar critical situations requiring
immediate action:
(a) Between occupants/squatters and pasture lease agreement holders or timber
concessionaires;
(b) Between occupants/squatters and government reservation grantees;
(c) Between occupants/squatters and public land claimants or applicants;
(d) Petitions for classification, release and/or subdivision of lands of the public domain;
and
(e) Other similar land problems of grave urgency and magnitude.
The Commission shall promulgate such rules of procedure as will insure expeditious resolution and
action on the above cases. The resolution, order or decision of the Commission on any of the
foregoing cases shall have the force and effect of a regular administrative resolution, order or
decision and shall be binding upon the parties therein and upon the agency having jurisdiction over
the same. Said resolution, order or decision shall become final and executory within thirty (30)
days from its promulgation and shall be appealable by certiorari only to the Supreme Court.
(Emphasis supplied.)
The Court of Appeals also stated that based on the records, the the land area being claimed
by private respondents belongs to the Blaan indigenous cultural community since they have been
in possession of, and have been occupying and cultivating the same since time immemorial, a fact
has not been disputed by petitioner. [12] It was likewise declared by the appellate court that FLGLA
No. 542 granted to petitioner violated Section 1 of Presidential Decree No. 410 [13]which states that
all unappropriated agricultural lands forming part of the public domain are declared part of the
ancestral lands of the indigenous cultural groups occupying the same, and these lands are further
declared alienable and disposable, to be distributed exclusively among the members of the
indigenous cultural group concerned.
The Court finds no reason to depart from such finding by the appellate court, it being a settled
rule that findings of fact of the Court of Appeals are binding and conclusive upon the Supreme
Court absent any showing that such findings are not supported by the evidence on record. [14]
WHEREFORE, the petition is hereby DENIED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.
THIRD DIVISION
IN THE MATTER OF REVERSION/RECALL
OF RECONSTITUTED OCT NO. 0-116
DECREE NO. 3999 OF LOT4239; DECREE
NO. 59327; OCT NO. 388; IN THE
TARLAC REGISTRY OF DEEDS HEIRS OF
THE
LATE
SPS.
TIMOTEA
L.
PALAGANAS,
WIFE
OF
RAMON
PARAGAS, ET AL.; GLORIFICADOR D.
PALAGANAS; ROSELYN E. MENDOZA
and DANILO M. MARCELO, representing
in this act as Attorneys-in-Fact,
Petitioners,
- versus -

G.R. No. 171304

Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CARPIO MORALES,
CHICO-NAZARIO, and
REYES, JJ.

REGISTRY OF DEEDS -TARLAC CITY;

RTC-BR.
67
PANIQUI,
TARLAC;
andMUNICIPALITY OF PANIQUI TARLAC,
Respondents.

Promulgated:

October 10, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
Civil Procedure; Annulment of Judgments; Section 2, Rule 47 of the 1997 Rules of Civil Procedure
provides that the annulment of a judgment may be based only on the grounds of extrinsic fraud
and lack of jurisdiction.Section 2, Rule 47 of the 1997 Rules of Civil Procedure provides that the
annulment of a judgment may be based only on the grounds of extrinsic fraud and lack of
jurisdiction. A perusal of the records of the case reveals that petitioners did not allege, much less
prove, either extrinsic fraud or lack of jurisdiction by the RTC in Land Case No. 274-P93.
Petitioners claim was that municipal officials ordered their alleged ascendants to vacate the
subject property way back in 1910 to build a school, a public market and a cemetery thereon, and
that the municipality was subsequently issued OCTs after a judicial confirmation of its title in 1911
and 1915. Petitioners allege that their ascendants were defrauded when they were not given a
chance or opportunity to appear or answer and present their side at the cadastral proceedings
involving the subject property. It is apparent that what petitioners are actually challenging are the
cadastral proceedings in which the OCTs over the subject property were issued in the name of the
Municipality of Paniqui. Their Petition was, however, directed against the Decision of the RTC 78
years later decreeing reconstitution of said OCTs.
Parties; Petitioners are not the real parties-in-interest as provided in Section 2, Rule 3 of the Rules
of Court.This brings us to
_______________
In the Matter of Reversion/Recall of Reconstituted OCT No. 0-116, et al. vs. Registry of Deeds, Tarlac
City
the final reason for the denial of the present petition. The records of the case are bereft of any
proof on the part of petitioners that they are indeed the successors-in-interest of the supposed
former owners of the subject property. Bearing the same surnames as the individuals indicated in
the technical descriptions of the OCTs being reconstituted is woefully inadequate to prove their
relationship. As petitioners failed to establish that they are the descendants of the supposed
former owners of the subject property, the case at bar cannot be prosecuted in their name, as they
are not the real parties-in-interest as provided in Section 2, Rule 3 of the Rules of Court. A real
party-in-interest is one who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit. By real interest is meant a present substantial interest, as
distinguished from a mere expectancy; or a future, contingent, subordinate, or consequential
interest. Rule 3, Section 2, of the Rules of Court provides explicitly that every action must be
prosecuted and defended in the name of the real party-in-interest. Petitioners failure to prove such
real interest constrained the Court of Appeals to dismiss the petition.
Civil Law; Laches; Laches is the negligence or omission to assert a right within a reasonable time,
warranting the presumption that the party entitled to assert it has either abandoned or declined to
assert it.We likewise affirm the finding of the Court of Appeals that the claim of petitioners had
already been barred by laches. Laches is defined as failure or neglect for an unreasonable and
unexplained length of time to do that which, by exercising due diligence, could or should have
been done earlier. It is negligence or omission to assert a right within a reasonable time,
warranting the presumption that the party entitled to assert it has either abandoned or declined to
assert it. In the Matter of Reversion/Recall of Reconstituted OCT No. 0-116, et al. vs. Registry of
Deeds, Tarlac City, 535 SCRA 476, G.R. No. 171304 October 10, 2007

DECISION

CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the
reversal of (1) the 29 April 2005 Resolution [1] of the Court of Appeals in CA-G.R. SP UDK No. 5314,
which dismissed petitioners Petition for Annulment of Judgment and (2) the 5 August 2005
Resolution[2] of the appellate court which denied petitioners Motion for Reconsideration. The
Petition for Annulment of Judgment filed by the petitioners with the Court of Appeals was, in turn,
directed against the 29 October 1993 Decision [3] of the Regional Trial Court (RTC) of Tarlac, Branch

67, in Land Case No. 274-P93, which ordered the reconstitution of the Original Certificates of Title
(OCTs) in the name of the Municipality of Paniqui, Tarlac over the subject property.
The factual and procedural antecedents of the case are as follows:
Sometime in 1910, officials of the Municipal Government of Paniqui, headed by Maximo
Parazo, built a school, a public market, and a cemetery on an untitled parcel of land. Thereafter,
OCTs No. R0-532 (O-116) and No. 388 were issued on 17 February 1911 and 7 June 1915,
respectively, in the name of the Municipal Government of Paniqui, by virtue of the judicial
confirmation of its title to the subject property. OCTs No. R0-532 (O-116) and No. 388 covered the
property being claimed by petitioners.
On 29 October 1993, pursuant to a Verified Petition for Reconstitution filed by the
Municipality of Paniqui, represented by Mayor Cesar E. Cuchapin, the RTC issued a Decision
resolving that OCTs No. R0-532 (O-116) and No. 388 were indeed lost, and ordering the cancellation
and the reconstitution of the same as Transfer Certificates of Title (TCTs) No. 259969, No. 259970,
No. 260900, No. 260901, No. 260902, No. 260903, and No. 336772 of the Registry of Deeds of
Tarlac City, registered in the name of the Municipality ofPaniqui.
On 3 February 2005, the Municipality of Paniqui demolished its old Public Market in order to
build a new one. Around this time, a former Board Member of the municipality inadvertently
showed a close friend of the petitioners the cancelled OCTs No. RO-532 (O-116) and No. 338
covering the lot where the public market is located. The said OCTs allegedly named the petitioners
ascendants as the former owners of the subject property.
On 28 March 2005, petitioners filed the Petition for Annulment of Judgment [4] with the Court
of Appeals, praying for the cancellation of the TCTs and for the reconveyance in their favor of the
title to the parcels of land.
Petitioners based their petition on the claim that their alleged ascendants were the original
pioneers/settlers/occupants of the land in question since 1843 as its indigenous inhabitants. In
1910, however, officials of the Municipal Government of Paniqui, headed by Maximo Parazo,
ordered the occupants of the land to vacate their property so that the municipality could build
thereon a school, a public market, and a cemetery. According to petitioners, their ascendants were
not given a chance or opportunity to appear or answer and present their side at the cadastral
proceedings involving the subject properties, from which resulted the issuance of the OCTs in the
name of the Municipality of Paniqui.
On 29 April 2005, the Court of Appeals issued the first assailed Resolution, wherein it
dismissed the Petition for Annulment of Judgment on the following grounds:
1.
2.
3.
4.

The Petition was not verified, contrary to Section 4, Rule 47 of the Rules of Court;
The attached copy of the assailed RTC Decision is a mere photocopy and not a
certified true copy, also contrary to Section 4, Rule 47 of the Rules of Court;
The corresponding Special Powers of Attorney of the alleged Attorneys-in-Fact were
not attached; and
Petitioners failed to indicate the material dates pertinent to the filing of the Petition,
hence, failing to prove that the same was brought within four years from the discovery
of the extrinsic fraud alleged in the assailed 29 October 1993 Decision, contrary to
Section 3, Rule 47 of the Rules of Court.

Petitioners filed a Motion for Reconsideration of the dismissal of their Petition, attaching
thereto the following:
1.
2.
3.
4.

a copy of page 7 of the Petition containing the Verification of the same[5];

a photocopy of the assailed 29 October 1993 RTC Decision[6];
Special Power of Attorney of petitioners Conrado Rivera and Perseveranda Domingo,
appointing and constituting Glorificador D. Palaganas, Roselynne E. Mendoza, and
Danilo M. Marcelo as their Attorneys-in-Fact [7]; and
Special Power of Attorney of petitioners Jose Velasquez, Demetria de Vera and Luz P.
Labutong, appointing and constituting Paciano P. Paragas and Benedicto P. Manuel as
their Attorneys-in-Fact.[8]

The Court of Appeals, noting that the attached copy of the assailed RTC Decision is still only
a photocopy of a certified xerox copy, held that even if the technicalities were brushed aside, the
Petition would still be dismissed for lack of substantial merit, for the following reasons:

1.

2.

3.

Petitioners failed to show that they are the real parties-in-interest authorized to
institute the Petition for Annulment of Judgment. The Petition did not establish that the
petitioners are truly the successors-in-interest of the individuals indicated in the
technical descriptions of OCT No. R0-532 (0-116) and OCT No. 388. Although the
surnames appearing in the technical descriptions are the same as those of some of the
petitioners, there was no allegation of how the alleged original inhabitants and the
petitioners were related nor was any proof thereof presented;
Petitioners failed to allege fraud in connection with the proceedings in Land Case No.
274-P93 which culminated in the rendition of the assailed Decision dated 29 October
1993 by the RTC. The fraud averred by the petitioners was allegedly committed in the
cadastral proceedings for the judicial confirmation of title to the subject property
conducted on 17 February 1911, 7 June 1915 and 20 September 1917, and not in the
rendition of the judgment dated 29 October 1993 by the RTC in Land Case No. 274-P93
which petitioners seek to annul; and
The claim of petitioners had already been barred by laches. Although petitioners
discovered their supposed right to the disputed property only recently, their alleged
ascendants should have instituted an action against the Municipal Government of
Paniqui, Tarlac, or against Maximo Parazo for the purportedly unlawful taking of the
property way back in the 1920s. The petitioners make no allegation as to any action
taken by the alleged ascendants to recover the subject property.

The Motion for Reconsideration thus having been denied for lack of merit, petitioners filed
the present Petition for Review onCertiorari.
Section 2, Rule 47 of the 1997 Rules of Civil Procedure provides that the annulment of a
judgment may "be based only on the grounds of extrinsic fraud and lack of jurisdiction." [9]
A perusal of the records of the case reveals that petitioners did not allege, much less
prove, either extrinsic fraud or lack of jurisdiction by the RTC in Land Case No. 274-P93. Petitioners
claim was that municipal officials ordered their alleged ascendants to vacate the subject property
way back in 1910 to build a school, a public market and a cemetery thereon, and that the
municipality was subsequently issued OCTs after a judicial confirmation of its title in 1911 and
1915. Petitioners allege that their ascendants were defrauded when they were not given a chance
or opportunity to appear or answer and present their side at the cadastral proceedings involving
the subject property. It is apparent that what petitioners are actually challenging are the cadastral
proceedings in which the OCTs over the subject property were issued in the name of
the Municipality of Paniqui. Their Petition was, however, directed against the Decision of the RTC 78
years later decreeing reconstitution of said OCTs.
Even if we consider that the petition for annulment was, in effect, filed against the 1911
and 1915 judicial decrees confirming the title of the Municipality of Paniqui over the subject
property, as petitioners imply in their Memorandum, their petition must still be dismissed.
Petitioners failed to prove either extrinsic fraud or lack of jurisdiction, the grounds for a
petition for annulment of judgment, even with respect to the 1911 and 1915 Decrees.
There is extrinsic fraud when the unsuccessful party had been prevented from exhibiting
fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away
from court, or where the defendant never had knowledge of the suit, being kept in ignorance by
the acts of the plaintiff.[10] Petitioners presented no proof to substantiate their allegation that their
ascendants were not given a chance or opportunity to appear or answer and present their side at
the cadastral proceedings involving the subject property.
Likewise, petitioners presented neither any evidence nor any legal argument in support of
their claim of lack of jurisdiction of the court which took cognizance of the cadastral proceedings in
which the OCTs over the subject property were issued in the name of theMunicipality of Paniqui.
In order to cover up for the lack of evidence to prove the grounds for an annulment of
judgment, petitioners relied on an erroneous interpretation of a very old case. Citing the 1906
case, Nicolas v. Jose,[11] petitioners claim that extrinsic fraud and lack of jurisdiction are shown by
the mere fact that a municipality had a real property devoted to public use registered in its name.
[12]

In Nicolas, the then Municipality of Cavite sought to be inscribed as the owner of a certain
track of land situated within said municipality. Finding that the property in question is a public
square, this Court, applying a provision in the Spanish Civil Code, held that:
The evidence shows, and the court below so found, that at the time the
Kiosko Cafe and the theater were built, they were built upon a public street or
square known as the Paseo Plaza de la Soledad.
xxxx
The question remains as to whether the municipality is entitled to have the
land upon which the Kiosko Caf stands registered in its name. Article 344 of the
Civil Code is as follows:
Property for public use in provinces and in towns comprises the provincial
and town roads, the squares, streets, fountains, and public waters, the
promenades, and public works of general service supported by the said towns or
provinces.
All other property possessed by either is patrimonial, and shall be governed
by the provisions of this code, unless otherwise prescribed in special laws.
The land in question, upon which this Kiosko Caf stands, being dedicated to
public use, we do not think it is subject to inscription by the municipality. Article 25
of the regulations for the execution of the Mortgage Law prohibits the inscription of
public streets in the old registry. Public streets are not bienes patrimoniales of the
municipality so long as they are destined to public use. [13]
Properties of local government units under the Spanish Civil Code were limited to
properties for public use and patrimonial property. [14] The same is still true under the 1950 Civil
Code which governs us today. The principle has remained constant: property for public use can be
used by everybody, even by strangers or aliens, in accordance with its nature; but nobody can
exercise over it the rights of a private owner. [15] As aptly held by this court in The Province of
Zamboanga del Norte v. City of Zamboanga[16]:
The Civil Code classification is embodied in its Arts. 423 and 424 which
provide:
"ART. 423. The property of provinces, cities and municipalities, is divided
into property for public use and patrimonial property. "
"ART. 424. Property for public use, in the provinces, cities, and
municipalities, consists of the provincial roads, city streets, municipal streets, the
squares, fountains, public waters, promenades, and public works for public service
paid for by said provinces, cities, or municipalities.
"All other property possessed by any of them is patrimonial and shall be
governed by this Code, without prejudice to the provisions of special laws."
Applying the above cited norm, all the properties in question, except the
two (2) lots used as High School playgrounds, could be considered as patrimonial
properties of the former Zamboanga province. Even the capitol site, the hospital
and leprosarium sites, and the school sites will be considered patrimonial for they
are not for public use. They would not fall under the phrase "public works for public
service" for it has been held that under the ejusdem generis rule, such public
works must be for free and indiscriminate use by anyone, just like the
preceeding enumerated properties in the first paragraph of Art. 424. The
playgrounds, however, would fit into this category. [17]
While this Court in Province of Zamboanga del Norte ended up using the Municipal
Corporation Law classification instead of that of the Civil Code classification, [18] Nicolas has settled
the application of the Civil Code classification with respect to the provision of the then-in-effect
regulations for the execution of the Mortgage Law.
In the case at bar, a school, a public market, and a cemetery were built upon the subject
property. Unlike a public square as that inNicolas or a playground as that in

the Province of Zamboanga del Norte, schools, public markets and cemeteries are not for the free
and indiscriminate use of everyone. The determination of the persons allowed to study in such
schools, or put up stalls in the public market, or bury their dead in public cemeteries are regulated
by the government. As such, the subject property is, under the Civil Code classification, patrimonial
property, and the Municipality may have the same registered in its name.
As neither extrinsic fraud nor lack of jurisdiction had been proven by petitioners, we hold
that the Court of Appeals was correct in dismissing petitioners Petition for Annulment of Judgment.
We likewise affirm the finding of the Court of Appeals that the claim of petitioners had
already been barred by laches. Laches is defined as failure or neglect for an unreasonable and
unexplained length of time to do that which, by exercising due diligence, could or should have
been done earlier. It is negligence or omission to assert a right within a reasonable time,
warranting the presumption that the party entitled to assert it has either abandoned or declined to
assert it.[19]
The recent discovery by petitioners of their supposed right to the disputed property
notwithstanding, petitioners alleged ascendants should have instituted an action against the
Municipal Government of Paniqui or against Maximo Parazo for the allegedly unlawful taking of the
property
way
back
in
the
1920s. As
asserted
by
petitioners
themselves,
the Municipality of Paniqui had openly taken over the property and exercised rights over the
same. The period of the omission of petitioners purported predecessors-in-interest since the taking
of the property in 1910 up to the filing of the petition is certainly an unreasonable time. Being the
purported successors-in-interest of the former owners of the subject property, petitioners merely
stepped into the shoes of their predecessors-in-interest, and are bound by their actions and
inactions.[20]
This brings us to the final reason for the denial of the present petition. The records of the
case are bereft of any proof on the part of petitioners that they are indeed the successors-ininterest of the supposed former owners of the subject property. Bearing the same surnames as the
individuals indicated in the technical descriptions of the OCTs being reconstituted is woefully
inadequate to prove their relationship. As petitioners failed to establish that they are the
descendants of the supposed former owners of the subject property, the case at bar cannot be
prosecuted in their name, as they are not the real parties-in-interest as provided in Section 2, Rule
3 of the Rules of Court.
A real party-in-interest is one who stands to be benefited or injured by the judgment in the
suit, or the party entitled to the avails of the suit. By real interest is meant a present substantial
interest, as distinguished from a mere expectancy; or a future, contingent, subordinate, or
consequential interest.[21] Rule 3, Section 2, of the Rules of Court provides explicitly that every
action must be prosecuted and defended in the name of the real party-in-interest. Petitioners
failure to prove such real interest constrained the Court of Appeals to dismiss the petition.

WHEREFORE, the Petition is DENIED. The 29 April 2005 Resolution of the Court of Appeals
dismissing petitioners Petition for Annulment of Judgment in CA-G.R. SP UDK No. 5314 and the 5
August 2005 Resolution of the same court denying petitioners Motion for Reconsideration
are AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-24440

March 28, 1968

THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee,

vs.

CITY OF ZAMBOANGA, SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL

REVENUE,defendants-appellants.
Fortugaleza, Lood, Sarmiento, M. T. Yap & Associates for plaintiff-appellee.
Office of the Solicitor General for defendants-appellants.
Municipal corporations; Test as to the extent of legislative control over properties of the
municipalities.If the property is owned by the municipality in its public and governmental
capacity, the property is public and Congress has absolute control over it. But if the property is
owned in its private or proprietary capacity, then it is patrimonial and Congress has no absolute
control. The municipality cannot be deprived of it without due process and payment of just
compensation.
Same; Properties; Classification under the Civil Code. Articles 423 and 424 of the Civil Code
classify property of provinces, cities, and municipalities into property for public use and patrimonial
property. Property for public use consists of provincial roads, city streets, municipal streets, the
squares, fountains, public waters, promenades, and public works for public service paid for by said
provinces, cities, or municipalities. All other property possessed by any of them is patrimonial and
shall be governed by this Code, without prejudice to the provisions of special laws.
Municipal corporations; Properties; Law on municipal corporation.Under the principles
constituting the law of Municipal Corporations, all those of the 50 properties in question which are
devoted to public service are deemed public; the rest remain patrimonial . Und er t his n or m, to
be consi dered p it is enough that the property be held and devoted for governmental purposes like
local administration, public education, public health, etc.
Same; Same; Rep. Act 3039, validity of.Republic Act 3039 which provides that all buildings,
properties and assets belonging to the former province of Zamboanga, and located within the City
of Zamboanga, are transferred to Zamboanga City free of charge, is valid insofar as it affects lots
used as capitol site, school sites and its grounds, hospital and leprosarium sites, and the high
school playground sitesa total of 24 lotssince these were held by the former Zamboanga
province in its governmental capacity they are, therefore, subject to the absolute control of
Congress.
Same; Same; Lots adjoining public schools partake of the nature of the same.The eight lots which
are adjoining each other, and in turn are between two lots wherein the Burleigh Schools, are built,
constitute the appurtenant grounds of the said Burleigh Schools, and partake of the nature of the
same.
Same; Same; Buildings which were erected by the national government, using national fund, can
very well be disposed of by Congress in the same manner that it did with the lots in question.
Buildings built on lots which are public in nature follow the classification of the lots on which they
are built. Moreover, said buildings, then located in the city, will not be for the exclusive use and
benefit of city residents for they could be availed of also by the provincial residents. The province
thenand its successors-in-interestare not really deprived of the benefits thereof.
Same; Same; Same; Republic Act 3039; Effect on patrimonial project.Republic Act 3039 cannot
be applied to deprive Zamboanga del Norte of its share in the value of the rest of the 26 lots which
are patrimonial properties since they are not being utilized for distinctly governmenta l purpose s.
Morover, the fact that they are registered strengthens the proposition that they are truly private in
nature.
Municipal Corporations; Properties; Principles under Law of Municipal Corporations considered
"special laws"Under the provisions of Art. 424 of the Civil Code, the principles obtaining under
the law of Municipal Corporations can be considered as "special laws." Hence, the classification of
municipal property devoted for distinctly governmental purposes as public should prevail over the
Civil Code classification in this particular case.
Same; Action; Laches.Defendants' claim that plaintiff and its predecessor-in-interest are guilty of
laches is without merit. Under Commonwealth Act 39, Sec. 50, the cause of action in favor of the
defunct Zamboanga Province arose only in 1949, after the Auditor General f ixed the value of the
properties in question. While in 1951, the Cabinet resolved to transfer said properties practically for
free to Zamboanga City, a reconsideration thereof was reasonably sought. In 1952, the old

province was dissolved. As successor-in-interest to more than half of the properties involved,
Zamboanga del Norte was able to get a reconsideration of the Cabinet Resolution in 1959. In fact,
partial payments were effected subsequently and it was only after the passage of Republic Act
3039 in- 1961 that the present controversy arose. Plaintiff brought suit in 1962. All the foregoing,
negative laches.
Same; Claim cannot be paid in lump sum.Plaintiff's share, however, cannot be paid in lump sum,
except as to the P43,030.11 already returned to defendant City. The return of said amount to
defendant was without legal basis. Republic Act 3039 took effect only on June 17, 1961 after a
partial payment of P57,373.46 had already been made. Since the law did not provide for
retroactivity, it could not have validly affected a completed act. Hence, the amount of P43,030.11
should be immediately returned by defendant City to plaintiff province The remaining balance, if
any, in the amount of plaintiff's 54.39% share in the 26 lots should then be paid by defendant City
in the same manner originally adopted by the Secretary of Finance and the Commissioner of
Internal Revenue, and not in lump sum. Plaintiff's prayer, particularly pars. 5 and 6, read together
with pars. 10 and 11 of the first cause of action recited in the complaint clearly shows that the
relief sought was merely the continuance of the quarterly payment from the internal revenue
allotments of defendant City. Art. 1169 of the Civil Code on reciprocal obligations invoked by
plaintiff to justify lump sum payment is inapplicable since there has been so far in legal
contemplation no complete delivery of the lots in question. The titles to the registered lots are not
yet in the name of defendant Zamboanga City. Province of Zamboanga del Norte vs. City of
Zamboanga, 22 SCRA 1334, No. L-24440 March 28, 1968
BENGZON, J.P., J.:
Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the
provincial capital of the then Zamboanga Province. On October 12, 1936, Commonwealth Act 39
was approved converting the Municipality of Zamboanga into Zamboanga City. Sec. 50 of the Act
also provided that
Buildings and properties which the province shall abandon upon the transfer of the
capital to another place will be acquired and paid for by the City of Zamboanga at a price
to be fixed by the Auditor General.
The properties and buildings referred to consisted of 50 lots and some buildings constructed
thereon, located in the City of Zamboanga and covered individually by Torrens certificates of title in
the name of Zamboanga Province. As far as can be gleaned from the records, 1 said properties were
being utilized as follows
No. of
Lots

Use

1 ................................................
3 ................................................
3 ................................................
3 ................................................
1 ................................................
1 ................................................
2 ................................................
................................................
2
Playground
9 ................................................
................................................
1
Site (Magay)
1 ................................................
23 ................................................

Capitol Site
School Site
Hospital Site
Leprosarium
Curuan School
Trade School
Burleigh School
High School
Burleighs
Hydro-Electric
San Roque
vacant

It appears that in 1945, the capital of Zamboanga Province was transferred to

Dipolog. 2 Subsequently, or on June 16, 1948, Republic Act 286 was approved creating the
municipality of Molave and making it the capital of Zamboanga Province.

On May 26, 1949, the Appraisal Committee formed by the Auditor General, pursuant to
Commonwealth Act 39, fixed the value of the properties and buildings in question left by
Zamboanga Province in Zamboanga City at P1,294,244.00. 3
On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga into
two (2): Zamboanga del Norte and Zamboanga del Sur. As to how the assets and obligations of the
old province were to be divided between the two new ones, Sec. 6 of that law provided:
Upon the approval of this Act, the funds, assets and other properties and the
obligations of the province of Zamboanga shall be divided equitably between the Province
of Zamboanga del Norte and the Province of Zamboanga del Sur by the President of the
Philippines, upon the recommendation of the Auditor General.
Pursuant thereto, the Auditor General, on January 11, 1955, apportioned the assets and
obligations of the defunct Province of Zamboanga as follows: 54.39% for Zamboanga del Norte and
45.61% for Zamboanga del Sur. Zamboanga del Norte therefore became entitled to 54.39% of
P1,294,244.00, the total value of the lots and buildings in question, or P704,220.05 payable by
Zamboanga City.
On March 17, 1959, the Executive Secretary, by order of the President, issued a
ruling 4 holding that Zamboanga del Norte had a vested right as owner (should be co-owner proindiviso) of the properties mentioned in Sec. 50 of Commonwealth Act 39, and is entitled to the
price thereof, payable by Zamboanga City. This ruling revoked the previous Cabinet Resolution of
July 13, 1951 conveying all the said 50 lots and buildings thereon to Zamboanga City for P1.00,
effective as of 1945, when the provincial capital of the then Zamboanga Province was transferred
to Dipolog.
The Secretary of Finance then authorized the Commissioner of Internal Revenue to deduct an
amount equal to 25% of the regular internal revenue allotment for the City of Zamboanga for the
quarter ending March 31, 1960, then for the quarter ending June 30, 1960, and again for the first
quarter of the fiscal year 1960-1961. The deductions, all aggregating P57,373.46, was credited to
the province of Zamboanga del Norte, in partial payment of the P764,220.05 due it.
However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of
Commonwealth Act 39 by providing that
All buildings, properties and assets belonging to the former province of Zamboanga
and located within the City of Zamboanga are hereby transferred, free of charge, in favor of
the said City of Zamboanga. (Stressed for emphasis).
Consequently, the Secretary of Finance, on July 12, 1961, ordered the Commissioner of
Internal Revenue to stop from effecting further payments to Zamboanga del Norte and to return to
Zamboanga City the sum of P57,373.46 taken from it out of the internal revenue allotment of
Zamboanga del Norte. Zamboanga City admits that since the enactment of Republic Act 3039,
P43,030.11 of the P57,373.46 has already been returned to it.
This constrained plaintiff-appellee Zamboanga del Norte to file on March 5, 1962, a
complaint entitled "Declaratory Relief with Preliminary Mandatory Injunction" in the Court of First
Instance of Zamboanga del Norte against defendants-appellants Zamboanga City, the Secretary of
Finance and the Commissioner of Internal Revenue. It was prayed that: (a) Republic Act 3039 be
declared unconstitutional for depriving plaintiff province of property without due process and just
compensation; (b) Plaintiff's rights and obligations under said law be declared; (c) The Secretary of
Finance and the Internal Revenue Commissioner be enjoined from reimbursing the sum of
P57,373.46 to defendant City; and (d) The latter be ordered to continue paying the balance of
P704,220.05 in quarterly installments of 25% of its internal revenue allotments.
On June 4, 1962, the lower court ordered the issuance of preliminary injunction as prayed for.
After defendants filed their respective answers, trial was held. On August 12, 1963, judgment was
rendered, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring Republic Act No. 3039
unconstitutional insofar as it deprives plaintiff Zamboanga del Norte of its private

properties, consisting of 50 parcels of land and the improvements thereon under

certificates of title (Exhibits "A" to "A-49") in the name of the defunct province of
Zamboanga; ordering defendant City of Zamboanga to pay to the plaintiff the sum of
P704,220.05 payment thereof to be deducted from its regular quarterly internal revenue
allotment equivalent to 25% thereof every quarter until said amount shall have been fully
paid; ordering defendant Secretary of Finance to direct defendant Commissioner of Internal
Revenue to deduct 25% from the regular quarterly internal revenue allotment for
defendant City of Zamboanga and to remit the same to plaintiff Zamboanga del Norte until
said sum of P704,220.05 shall have been fully paid; ordering plaintiff Zamboanga del Norte
to execute through its proper officials the corresponding public instrument deeding to
defendant City of Zamboanga the 50 parcels of land and the improvements thereon under
the certificates of title (Exhibits "A" to "A-49") upon payment by the latter of the aforesaid
sum of P704,220.05 in full; dismissing the counterclaim of defendant City of Zamboanga;
and declaring permanent the preliminary mandatory injunction issued on June 8, 1962,
pursuant to the order of the Court dated June 4, 1962. No costs are assessed against the
defendants.
It is SO ORDERED.
Subsequently, but prior to the perfection of defendants' appeal, plaintiff province filed a
motion to reconsider praying that Zamboanga City be ordered instead to pay the P704,220.05 in
lump sum with 6% interest per annum. Over defendants' opposition, the lower court granted
plaintiff province's motion.
The defendants then brought the case before Us on appeal.
Brushing aside the procedural point concerning the property of declaratory relief filed in the
lower court on the assertion that the law had already been violated and that plaintiff sought to give
it coercive effect, since assuming the same to be true, the Rules anyway authorize the conversion
of the proceedings to an ordinary action, 5 We proceed to the more important and principal question
of the validity of Republic Act 3039.
The validity of the law ultimately depends on the nature of the 50 lots and buildings thereon
in question. For, the matter involved here is the extent of legislative control over the properties of a
municipal corporation, of which a province is one. The principle itself is simple: If the property is
owned by the municipality (meaning municipal corporation) in its public and governmental
capacity, the property is public and Congress has absolute control over it. But if the property is
owned in its private or proprietary capacity, then it is patrimonial and Congress has no absolute
control. The municipality cannot be deprived of it without due process and payment of just
compensation. 6
The capacity in which the property is held is, however, dependent on the use to which it is
intended and devoted. Now, which of two norms, i.e., that of the Civil Code or that obtaining under
the law of Municipal Corporations, must be used in classifying the properties in question?
The Civil Code classification is embodied in its Arts. 423 and 424 which provide:1wph1.t
ART. 423. The property of provinces, cities, and municipalities is divided into
property for public use and patrimonial property.
ART. 424. Property for public use, in the provinces, cities, and municipalities, consists
of the provincial roads, city streets, municipal streets, the squares, fountains, public waters,
promenades, and public works for public service paid for by said provinces, cities, or
municipalities.
All other property possessed by any of them is patrimonial and shall be governed by this
Code, without prejudice to the provisions of special laws. (Stressed for emphasis).
Applying the above cited norm, all the properties in question, except the two (2) lots used as
High School playgrounds, could be considered as patrimonial properties of the former Zamboanga
province. Even the capital site, the hospital and leprosarium sites, and the school sites will be
considered patrimonial for they are not for public use. They would fall under the phrase "public

works for public service" for it has been held that under theejusdem generis rule, such public works
must be for free and indiscriminate use by anyone, just like the preceding enumerated properties
in the first paragraph of Art 424. 7 The playgrounds, however, would fit into this category.
This was the norm applied by the lower court. And it cannot be said that its actuation was
without jurisprudential precedent for in Municipality of Catbalogan v. Director of Lands, 8 and
in Municipality of Tacloban v. Director of Lands, 9 it was held that the capitol site and the school
sites in municipalities constitute their patrimonial properties. This result is understandable
because, unlike in the classification regarding State properties, properties for public service in the
municipalities are not classified as public. Assuming then the Civil Code classification to be the
chosen norm, the lower court must be affirmed except with regard to the two (2) lots used as
playgrounds.
On the other hand, applying the norm obtaining under the principles constituting the law of
Municipal Corporations, all those of the 50 properties in question which are devoted to public
service are deemed public; the rest remain patrimonial. Under this norm, to be considered public, it
is enough that the property be held and, devoted for governmental purposes like local
administration, public education, public health, etc. 10
Supporting jurisprudence are found in the following cases: (1) HINUNANGAN V. DIRECTOR OF
LANDS, 11where it was stated that "... where the municipality has occupied lands distinctly for
public purposes, such as for the municipal court house, the public school, the public market, or
other necessary municipal building, we will, in the absence of proof to the contrary, presume a
grant from the States in favor of the municipality; but, as indicated by the wording, that rule may
be invoked only as to property which is used distinctly for public purposes...." (2) VIUDA DE
TANTOCO V. MUNICIPAL COUNCIL OF ILOILO 12 held that municipal properties necessary for
governmental purposes are public in nature. Thus, the auto trucks used by the municipality for
street sprinkling, the police patrol automobile, police stations and concrete structures with the
corresponding lots used as markets were declared exempt from execution and attachment since
they were not patrimonial properties. (3) MUNICIPALITY OF BATANGAS VS. CANTOS 13 held squarely
that a municipal lot which had always been devoted to school purposes is one dedicated to public
use and is not patrimonial property of a municipality.
Following this classification, Republic Act 3039 is valid insofar as it affects the lots used as
capitol site, school sites and its grounds, hospital and leprosarium sites and the high school
playground sites a total of 24 lots since these were held by the former Zamboanga province in
its governmental capacity and therefore are subject to the absolute control of Congress. Said lots
considered as public property are the following:
TCT
Number
2200
2816
3281
3282
3283
3748
5406
5564
5567
5583
6181

Lot Number
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........

Use

..............................
........
..............................
149
........
..............................
1224
........
..............................
1226
........
..............................
1225
........
..............................
434-A-1
........
..............................
171
........
..............................
168
........
157 &
..............................
158
........
..............................
167
........
..............................
(O.C.T.)
........
4-B

Capitol Site
School Site
Hospital Site
Hospital Site
Hospital Site
School Site
School Site
High School Playground
Trade School
High School Playground
Curuan School

11942
11943
11944
5557
5562
5565
5570
5571
5572
5573
5585
5586
5587

..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........

926
927
925
170
180
172-B
171-A
172-C
174
178
171-B
173
172-A

..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........

Leprosarium
Leprosarium
Leprosarium
Burleigh School
Burleigh School
Burleigh
Burleigh
Burleigh
Burleigh
Burleigh
Burleigh
Burleigh
Burleigh

We noticed that the eight Burleigh lots above described are adjoining each other and in turn
are between the two lots wherein the Burleigh schools are built, as per records appearing herein
and in the Bureau of Lands. Hence, there is sufficient basis for holding that said eight lots
constitute the appurtenant grounds of the Burleigh schools, and partake of the nature of the same.
Regarding the several buildings existing on the lots above-mentioned, the records do not
disclose whether they were constructed at the expense of the former Province of Zamboanga.
Considering however the fact that said buildings must have been erected even before 1936 when
Commonwealth Act 39 was enacted and the further fact that provinces then had no power to
authorize construction of buildings such as those in the case at bar at their own expense, 14 it can
be assumed that said buildings were erected by the National Government, using national funds.
Hence, Congress could very well dispose of said buildings in the same manner that it did with the
lots in question.
But even assuming that provincial funds were used, still the buildings constitute mere
accessories to the lands, which are public in nature, and so, they follow the nature of said lands,
i.e., public. Moreover, said buildings, though located in the city, will not be for the exclusive use
and benefit of city residents for they could be availed of also by the provincial residents. The
province then and its successors-in-interest are not really deprived of the benefits thereof.
But Republic Act 3039 cannot be applied to deprive Zamboanga del Norte of its share in the
value of the rest of the 26 remaining lots which are patrimonial properties since they are not being
utilized for distinctly, governmental purposes. Said lots are:

5577
1319
8
5569
5558
5559

TCT Number
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........

177
1270
169
175
188

Lot Number
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........

Use
Mydro,
Magay
San Roque
Burleigh
Vacant
"

15

5560
5561
5563
5566
5568
5574
5575
5576
5578
5579
5580
5581
5582
5584
5588
5589
5590
5591
5592
5593
7379

..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........
..............................
........

..............................
........
..............................
186
........
..............................
191
........
..............................
176
........
..............................
179
........
..............................
196
........
181- ..............................
A
........
181- ..............................
B
........
..............................
182
........
..............................
197
........
..............................
195
........
159- ..............................
B
........
..............................
194
........
..............................
190
........
..............................
184
........
..............................
187
........
..............................
189
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..............................
192
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..............................
193
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..............................
185
........
..............................
4147
........
183

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Moreover, the fact that these 26 lots are registered strengthens the proposition that they are
truly private in nature. On the other hand, that the 24 lots used for governmental purposes are also
registered is of no significance since registration cannot convert public property to private. 16
We are more inclined to uphold this latter view. The controversy here is more along the
domains of the Law of Municipal Corporations State vs. Province than along that of Civil Law.
Moreover, this Court is not inclined to hold that municipal property held and devoted to public
service is in the same category as ordinary private property. The consequences are dire. As
ordinary private properties, they can be levied upon and attached. They can even be acquired thru
adverse possession all these to the detriment of the local community. Lastly, the classification of
properties other than those for public use in the municipalities as patrimonial under Art. 424 of the
Civil Code is "... without prejudice to the provisions of special laws." For purpose of this article,
the principles, obtaining under the Law of Municipal Corporations can be considered as "special
laws". Hence, the classification of municipal property devoted for distinctly governmental purposes
as public should prevail over the Civil Code classification in this particular case.
Defendants' claim that plaintiff and its predecessor-in-interest are "guilty of laches is without
merit. Under Commonwealth Act 39, Sec. 50, the cause of action in favor of the defunct
Zamboanga Province arose only in 1949 after the Auditor General fixed the value of the properties

in question. While in 1951, the Cabinet resolved transfer said properties practically for free to
Zamboanga City, a reconsideration thereof was seasonably sought. In 1952, the old province was
dissolved. As successor-in-interest to more than half of the properties involved, Zamboanga del
Norte was able to get a reconsideration of the Cabinet Resolution in 1959. In fact, partial payments
were effected subsequently and it was only after the passage of Republic Act 3039 in 1961 that the
present controversy arose. Plaintiff brought suit in 1962. All the foregoing, negative laches.
It results then that Zamboanga del Norte is still entitled to collect from the City of
Zamboanga the former's 54.39% share in the 26 properties which are patrimonial in nature, said
share to computed on the basis of the valuation of said 26 properties as contained in Resolution
No. 7, dated March 26, 1949, of the Appraisal Committee formed by the Auditor General.
Plaintiff's share, however, cannot be paid in lump sum, except as to the P43,030.11 already
returned to defendant City. The return of said amount to defendant was without legal basis.
Republic Act 3039 took effect only on June 17, 1961 after a partial payment of P57,373.46 had
already been made. Since the law did not provide for retroactivity, it could not have validly affected
a completed act. Hence, the amount of P43,030.11 should be immediately returned by defendant
City to plaintiff province. The remaining balance, if any, in the amount of plaintiff's 54.39% share in
the 26 lots should then be paid by defendant City in the same manner originally adopted by the
Secretary of Finance and the Commissioner of Internal Revenue, and not in lump sum. Plaintiff's
prayer, particularly pars. 5 and 6, read together with pars. 10 and 11 of the first cause of action
recited in the complaint 17 clearly shows that the relief sought was merely the continuance of the
quarterly payments from the internal revenue allotments of defendant City. Art. 1169 of the Civil
Code on reciprocal obligations invoked by plaintiff to justify lump sum payment is inapplicable
since there has been so far in legal contemplation no complete delivery of the lots in question. The
titles to the registered lots are not yet in the name of defendant Zamboanga City.
WHEREFORE, the decision appealed from is hereby set aside and another judgment is hereby
entered as follows:.
(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del Norte
in lump sum the amount of P43,030.11 which the former took back from the latter out of the sum
of P57,373.46 previously paid to the latter; and
(2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever
balance remains of plaintiff's 54.39% share in the 26 patrimonial properties, after deducting
therefrom the sum of P57,373.46, on the basis of Resolution No. 7 dated March 26, 1949 of the
Appraisal Committee formed by the Auditor General, by way of quarterly payments from the
allotments of defendant City, in the manner originally adopted by the Secretary of Finance and the
Commissioner of Internal Revenue. No costs. So ordered.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ.,
concur.
Concepcion, C.J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 97764 August 10, 1992

LEVY D. MACASIANO, Brigadier General/PNP Superintendent, Metropolitan Traffic
Command, petitioner,
vs.
HONORABLE ROBERTO C. DIOKNO, Presiding Judge, Branch 62, Regional Trial Court of

Makati, Metro Manila, MUNICIPALITY OF PARAAQUE, METRO MANILA, PALANYAG

KILUSANG BAYAN FOR SERVICE,respondents.
Ceferino, Padua Law Office for Palanyag Kilusang Bayan for service.
Manuel de Guia for Municipality of Paraaque.
Civil Law; Property; Properties of the local government which are devoted to public service are
deemed public and are under the absolute control of Congress.Based on the foregoing, J. Gabriel,
G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets are local roads used for public
service and are therefore considered public properties of respondent municipality. Properties of the
local government which are devoted to public service are deemed public and are under the
absolute control of Congress (Province of Zamboanga del Norte v. City of Zamboanga, L-24440,
March 28, 1968, 22 SCRA 1334). Hence, local governments have no authority whatsoever to
control or regulate the use of public properties unless specific authority is vested upon them by
Congress.
Same; Same; Properties of public dominion devoted to public use and made available to the public
in general are outside the commerce of men and cannot be disposed of or leased by the local
government unit to private persons.However, the aforestated legal provision which gives
authority to local government units to close roads and other similar public places should be read
and interpreted in accordance with basic principles already established by law. These basic
principles have the effect of limiting such authority of the province, city or municipality to close a
public street or thoroughfare. Article 424 of the Civil Code lays down the basic principle that
properties of public dominion devoted to public use and made available to the public in general are
outside the commerce of man and cannot be disposed of or leased by the local government unit to
private persons. Aside from the requirement of due process which should be complied with before
closing a road, street or park, the closure should be for the sole purpose of withdrawing the road or
other public property from public use when circumstances show that such property is no longer
intended or necessary for public use or public service. When it is already withdrawn from public
use, the property then becomes patrimonial property of the local government unit concerned
(Article 422, Civil Code; Cebu Oxygen, etc. et al. v. Bercilles, et al., G.R. No. L-40474, August 29,
1975, 66 SCRA 481). It is only then that the respondent municipality can use or convey them for
any purpose for which other real property belonging to the local unit concerned might be lawfully
used or conveyed in accordance with the last sentence of Section 10, Chapter II of Blg. 337,
known as Local Government Code.
Same; Same; Roads and streets which are available to the public in general and ordinarily used for
vehicular traffic are still considered public property devoted to public use.However, those roads
and streets which are available to the public in general and ordinarily used for vehicular traffic are
still considered public property devoted to public use. In such case, the local government has no
power to use it for another purpose or to dispose of or lease it to private persons.
Constitutional Law; Local Government Code; Batas Pambansa Blg. 337 known as Local Government
Code already repealed by Republic Act No. 7160 known as Local Government Code of 1991.The
instant case as well as the Dacanay case, involves an ordinance which is void and illegal for lack of
basis and authority in laws applicable during its time. However, at this point, We find it worthy to
note that Batas Pambansa Blg. 337, known as Local Government Code, has already been repealed
by Republic Act No. 7160 known as Local Government Code of 1991 which took effect on January
1, 1992. Section 5(d) of the new Code provides that rights and obligations existing on the date of
effectivity of the new Code and arising out of contracts or any other source of prestation involving
a local government unit shall be governed by the original terms and conditions of the said
contracts or the law in force at the time such rights were vested. Macasiano vs. Diokno, 212 SCRA
464, G.R. No. 97764 August 10, 1992
MEDIALDEA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of the
decision of the Regional Trial Court of Makati, Branch 62, which granted the writ of preliminary
injunction applied for by respondents Municipality of Paraaque and Palanyag Kilusang Bayan for
Service (Palanyag for brevity) against petitioner herein.
The antecedent facts are as follows:

On June 13, 1990, the respondent municipality passed Ordinance No. 86, Series of 1990 which
authorized the closure of J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena Streets
located at Baclaran, Paraaque, Metro Manila and the establishment of a flea market thereon. The
said ordinance was approved by the municipal council pursuant to MMC Ordinance No. 2, Series of
1979, authorizing and regulating the use of certain city and/or municipal streets, roads and open
spaces within Metropolitan Manila as sites for flea market and/or vending areas, under certain
terms and conditions.
On July 20, 1990, the Metropolitan Manila Authority approved Ordinance No. 86, s. 1990 of the
municipal council of respondent municipality subject to the following conditions:
1. That the aforenamed streets are not used for vehicular traffic, and that the
majority of the residents do not oppose the establishment of the flea
market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area shall be
marked distinctly, and that the 2 meters on both sides of the road shall be used by
pedestrians;
3. That the time during which the vending area is to be used shall be clearly
designated;
4. That the use of the vending areas shall be temporary and shall be closed once
the reclaimed areas are developed and donated by the Public Estate Authority.
On June 20, 1990, the municipal council of Paraaque issued a resolution authorizing Paraaque
Mayor Walfrido N. Ferrer to enter into contract with any service cooperative for the establishment,
operation, maintenance and management of flea markets and/or vending areas.
On August 8, 1990, respondent municipality and respondent Palanyag, a service cooperative,
entered into an agreement whereby the latter shall operate, maintain and manage the flea market
in the aforementioned streets with the obligation to remit dues to the treasury of the municipal
government of Paraaque. Consequently, market stalls were put up by respondent Palanyag on the
said streets.
On September 13, 1990, petitioner Brig. Gen. Macasiano, PNP Superintendent of the Metropolitan
Traffic Command, ordered the destruction and confiscation of stalls along G.G. Cruz and J. Gabriel
St. in Baclaran. These stalls were later returned to respondent Palanyag.
On October 16, 1990, petitioner Brig. General Macasiano wrote a letter to respondent Palanyag
giving the latter ten (10) days to discontinue the flea market; otherwise, the market stalls shall be
dismantled.
Hence, on October 23, 1990, respondents municipality and Palanyag filed with the trial court a joint
petition for prohibition and mandamus with damages and prayer for preliminary injunction, to
which the petitioner filed his memorandum/opposition to the issuance of the writ of preliminary
injunction.
On October 24, 1990, the trial court issued a temporary restraining order to enjoin petitioner from
enforcing his letter-order of October 16, 1990 pending the hearing on the motion for writ of
preliminary injunction.
On December 17, 1990, the trial court issued an order upholding the validity of Ordinance No. 86 s.
1990 of the Municipality' of Paraaque and enjoining petitioner Brig. Gen. Macasiano from
enforcing his letter-order against respondent Palanyag.
Hence, this petition was filed by the petitioner thru the Office of the Solicitor General alleging grave
abuse of discretion tantamount to lack or excess of jurisdiction on the part of the trial judge in
issuing the assailed order.

The sole issue to be resolved in this case is whether or not an ordinance or resolution issued by the
municipal council of Paraaque authorizing the lease and use of public streets or thoroughfares as
sites for flea markets is valid.
The Solicitor General, in behalf of petitioner, contends that municipal roads are used for public
service and are therefore public properties; that as such, they cannot be subject to private
appropriation or private contract by any person, even by the respondent Municipality of Paraaque.
Petitioner submits that a property already dedicated to public use cannot be used for another
public purpose and that absent a clear showing that the Municipality of Paraaque has been
granted by the legislature specific authority to convert a property already in public use to another
public use, respondent municipality is, therefore, bereft of any authority to close municipal roads
for the establishment of a flea market. Petitioner also submits that assuming that the respondent
municipality is authorized to close streets, it failed to comply with the conditions set forth by the
Metropolitan Manila Authority for the approval of the ordinance providing for the establishment of
flea markets on public streets. Lastly, petitioner contends that by allowing the municipal streets to
be used by market vendors the municipal council of respondent municipality violated its duty under
the Local Government Code to promote the general welfare of the residents of the municipality.
In upholding the legality of the disputed ordinance, the trial court ruled:
. . . that Chanter II Section 10 of the Local Government Code is a statutory grant of
power given to local government units, the Municipality of Paraaque as such, is
empowered under that law to close its roads, streets or alley subject to limitations
stated therein (i.e., that it is in accordance with existing laws and the provisions of
this code).
xxx xxx xxx
The actuation of the respondent Brig. Gen. Levi Macasiano, though apparently
within its power is in fact an encroachment of power legally vested to the
municipality, precisely because when the municipality enacted the ordinance in
question the authority of the respondent as Police Superintendent ceases to be
operative on the ground that the streets covered by the ordinance ceases to be a
public thoroughfare. (pp. 33-34, Rollo)
We find the petition meritorious. In resolving the question of whether the disputed municipal
ordinance authorizing the flea market on the public streets is valid, it is necessary to examine the
laws in force during the time the said ordinance was enacted, namely, Batas Pambansa Blg. 337,
otherwise known as Local Government Code, in connection with established principles embodied in
the Civil Code an property and settled jurisprudence on the matter.
The property of provinces, cities and municipalities is divided into property for public use and
patrimonial property (Art. 423, Civil Code). As to what consists of property for public use, Article
424 of Civil Code states:
Art. 424. Property for public use, in the provinces, cities and municipalities, consists
of the provincial roads, city streets, the squares, fountains, public waters,
promenades, and public works for public service paid for by said provinces, cities or
municipalities.
All other property possessed by any of them is patrimonial and shall be governed
by this Code, without prejudice to the provisions of special laws.
Based on the foregoing, J. Gabriel G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets are
local roads used for public service and are therefore considered public properties of respondent
municipality. Properties of the local government which are devoted to public service are deemed
public and are under the absolute control of Congress (Province of Zamboanga del Norte v. City of
Zamboanga, L-24440, March 28, 1968, 22 SCRA 1334). Hence, local governments have no
authority whatsoever to control or regulate the use of public properties unless specific authority is
vested upon them by Congress. One such example of this authority given by Congress to the local
governments is the power to close roads as provided in Section 10, Chapter II of the Local
Government Code, which states:

Sec. 10. Closure of roads. A local government unit may likewise, through its head
acting pursuant to a resolution of its sangguniang and in accordance with existing
law and the provisions of this Code, close any barangay, municipal, city or
provincial road, street, alley, park or square. No such way or place or any part of
thereof shall be close without indemnifying any person prejudiced thereby. A
property thus withdrawn from public use may be used or conveyed for any purpose
for which other real property belonging to the local unit concerned might be
lawfully used or conveyed. (Emphasis ours).
However, the aforestated legal provision which gives authority to local government units to close
roads and other similar public places should be read and interpreted in accordance with basic
principles already established by law. These basic principles have the effect of limiting such
authority of the province, city or municipality to close a public street or thoroughfare. Article 424 of
the Civil Code lays down the basic principle that properties of public dominion devoted to public
use and made available to the public in general are outside the commerce of man and cannot be
disposed of or leased by the local government unit to private persons. Aside from the requirement
of due process which should be complied with before closing a road, street or park, the closure
should be for the sole purpose of withdrawing the road or other public property from public use
when circumstances show that such property is no longer intended or necessary for public use or
public service. When it is already withdrawn from public use, the property then becomes
patrimonial property of the local government unit concerned (Article 422, Civil Code; Cebu Oxygen,
etc. et al. v. Bercilles, et al., G.R. No. L-40474, August 29, 1975, 66 SCRA 481). It is only then that
the respondent municipality can "use or convey them for any purpose for which other real property
belonging to the local unit concerned might be lawfully used or conveyed" in accordance with the
last sentence of Section 10, Chapter II of Blg. 337, known as Local Government Code. In one case,
the City Council of Cebu, through a resolution, declared the terminal road of M. Borces Street,
Mabolo, Cebu City as an abandoned road, the same not being included in the City Development
Plan. Thereafter, the City Council passes another resolution authorizing the sale of the said
abandoned road through public bidding. We held therein that the City of Cebu is empowered to
close a city street and to vacate or withdraw the same from public use. Such withdrawn portion
becomes patrimonial property which can be the object of an ordinary contract (Cebu Oxygen and
Acetylene Co., Inc. v. Bercilles, et al., G.R. No.
L-40474, August 29, 1975, 66 SCRA 481). However, those roads and streets which are available to
the public in general and ordinarily used for vehicular traffic are still considered public property
devoted to public use. In such case, the local government has no power to use it for another
purpose or to dispose of or lease it to private persons. This limitation on the authority of the local
government over public properties has been discussed and settled by this Court en banc in
"Francisco V. Dacanay, petitioner v. Mayor Macaria Asistio, Jr., et al., respondents, G.R. No. 93654,
May 6, 1992." This Court ruled:
There is no doubt that the disputed areas from which the private respondents'
market stalls are sought to be evicted are public streets, as found by the trial court
in Civil Case No. C-12921. A public street is property for public use hence outside
the commerce of man (Arts. 420, 424, Civil Code). Being outside the commerce of
man, it may not be the subject of lease or others contract (Villanueva, et al. v.
Castaeda and Macalino, 15 SCRA 142 citing the Municipality of Cavite v. Rojas, 30
SCRA 602; Espiritu v. Municipal Council of Pozorrubio, 102 Phil. 869; And Muyot v.
De la Fuente, 48 O.G. 4860).
As the stallholders pay fees to the City Government for the right to occupy portions
of the public street, the City Government, contrary to law, has been leasing
portions of the streets to them. Such leases or licenses are null and void for being
contrary to law. The right of the public to use the city streets may not be bargained
away through contract. The interests of a few should not prevail over the good of
the greater number in the community whose health, peace, safety, good order and
general welfare, the respondent city officials are under legal obligation to protect.
The Executive Order issued by acting Mayor Robles authorizing the use of Heroes
del '96 Street as a vending area for stallholders who were granted licenses by the
city government contravenes the general law that reserves city streets and roads
for public use. Mayor Robles' Executive Order may not infringe upon the vested
right of the public to use city streets for the purpose they were intended to
serve: i.e., as arteries of travel for vehicles and pedestrians.

Even assuming, in gratia argumenti, that respondent municipality has the authority to pass the
disputed ordinance, the same cannot be validly implemented because it cannot be considered
approved by the Metropolitan Manila Authority due to non-compliance by respondent municipality
of the conditions imposed by the former for the approval of the ordinance, to wit:
1. That the aforenamed streets are not used for vehicular traffic, and that the
majority of the residents do(es) not oppose the establishment of the flea
market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area shall be
marked distinctly, and that the 2 meters on both sides of the road shall be used by
pedestrians;
3. That the time during which the vending area is to be used shall be clearly
designated;
4. That the use of the vending areas shall be temporary and shall be closed once
the reclaimed areas are developed and donated by the Public Estate Authority. (p.
38, Rollo)
Respondent municipality has not shown any iota of proof that it has complied with the foregoing
conditions precedent to the approval of the ordinance. The allegations of respondent municipality
that the closed streets were not used for vehicular traffic and that the majority of the residents do
not oppose the establishment of a flea market on said streets are unsupported by any evidence
that will show that this first condition has been met. Likewise, the designation by respondents of a
time schedule during which the flea market shall operate is absent.
Further, it is of public notice that the streets along Baclaran area are congested with people,
houses and traffic brought about by the proliferation of vendors occupying the streets. To license
and allow the establishment of a flea market along J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia
Extension and Opena streets in Baclaran would not help in solving the problem of congestion. We
take note of the other observations of the Solicitor General when he said:
. . . There have been many instances of emergencies and fires where ambulances
and fire engines, instead of using the roads for a more direct access to the fire
area, have to maneuver and look for other streets which are not occupied by stalls
and vendors thereby losing valuable time which could, otherwise, have been spent
in saving properties and lives.
Along G.G. Cruz Street is a hospital, the St. Rita Hospital. However, its ambulances
and the people rushing their patients to the hospital cannot pass through G.G. Cruz
because of the stalls and the vendors. One can only imagine the tragedy of losing a
life just because of a few seconds delay brought about by the inaccessibility of the
streets leading to the hospital.
The children, too, suffer. In view of the occupancy of the roads by stalls and
vendors, normal transportation flow is disrupted and school children have to get off
at a distance still far from their schools and walk, rain or shine.
Indeed one can only imagine the garbage and litter left by vendors on the streets
at the end of the day. Needless to say, these cause further pollution, sickness and
deterioration of health of the residents therein. (pp. 21-22, Rollo)
Respondents do not refute the truth of the foregoing findings and observations of petitioners.
Instead, respondents want this Court to focus its attention solely on the argument that the use of
public spaces for the establishment of a flea market is well within the powers granted by law to a
local government which should not be interfered with by the courts.
Verily, the powers of a local government unit are not absolute. They are subject to limitations laid
down by toe Constitution and the laws such as our Civil Code. Moreover, the exercise of such
powers should be subservient to paramount considerations of health and well-being of the
members of the community. Every local government unit has the sworn obligation to enact

measures that will enhance the public health, safety and convenience, maintain peace and order,
and promote the general prosperity of the inhabitants of the local units. Based on this objective,
the local government should refrain from acting towards that which might prejudice or adversely
affect the general welfare.
As what we have said in the Dacanay case, the general public have a legal right to demand the
demolition of the illegally constructed stalls in public roads and streets and the officials of
respondent municipality have the corresponding duty arising from public office to clear the city
streets and restore them to their specific public purpose.
The instant case as well as the Dacanay case, involves an ordinance which is void and illegal for
lack of basis and authority in laws applicable during its time. However, at this point, We find it
worthy to note that Batas Pambansa Blg. 337, known as Local Government Lode, has already been
repealed by Republic Act No. 7160 known as Local Government Code of 1991 which took effect on
January 1, 1992. Section 5(d) of the new Code provides that rights and obligations existing on the
date of effectivity of the new Code and arising out of contracts or any other source of prestation
involving a local government unit shall be governed by the original terms and conditions of the said
contracts or the law in force at the time such rights were vested.
ACCORDINGLY, the petition is GRANTED and the decision of the respondent Regional Trial Court
dated December 17, 1990 which granted the writ of preliminary injunction enjoining petitioner as
PNP Superintendent, Metropolitan Traffic Command from enforcing the demolition of market stalls
along J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets is hereby RESERVED
and SET ASIDE.
SO ORDERED.
Narvasa, C.J., Gutierrez, Jr., Cruz, Feliciano, Padilla, Bidin, Grio-Aquino, Regalado, Davide, Jr.,
Romero, Nocon and Bellosillo, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-61311 September 2l, 1987
FELICIDAD VILLANUEVA, FERNANDO CAISIP, ANTONIO LIANG, FELINA MIRANDA, RICARDO
PUNO, FLORENCIO LAXA, and RENE OCAMPO, petitioners,
vs.
HON. MARIANO CASTAEDA, JR., Presiding Judge of the Court of First Instance of
Pampanga, Branch III, VICENTE A. MACALINO, Officer-in-Charge, Office of the Mayor, San
Fernando, Pampanga, respondents.
Property; Place occupied by petitioner found to be a public plaza.There is no question that the
place occupied by the peti tioners and from which they are sought to be evicted is a public plaza,
as found by the trial court in Civil Case No. 2040. This finding was made after consideration of the
antecedent facts as especially established by the testimony of former San Fernando Mayor Rodolfo
Hizon, who later became governor of Pampanga, that the National Planning Commission had
reserved the area for a public plaza as early as 1951. This intention was reiterated in 1964 through
the adoption of Resolution No. 29.
Same; Same; Lease; It is elementary that a public plaza is beyond the commerce of man, lease
thereon is null and voidA public plaza is beyond the commerce of man and so cannot be the
subject of lease or any other contractual undertaking. This is elementary. Indeed, this point was
settled as early as in Municipality of Cavite v. Rojas, decided in 1915, where the Court declared as
null and void the lease of a public plaza of the said municipality in favor of a private person.

Same; Same; Same; Same; Petitioners had no right to occupy the disputed premises by invoking
lease contracts.Applying this wellsettled doctrine, we rule that the petitioners had no right in the
first place to occupy the disputed premises and cannot insist in remaining there now on the
strength of their alleged lease contracts. They should have realized and accepted this earlier,
considering that even before Civil Case No. 2040 was decided, the municipal council of San
Fernando had already adopted Resolution No. 29, series of 1964, declaring the area as the parking
place and public plaza of the municipality.
Same; Same; Same; Same; Same; Mayor has duty to clear the area and restore it as a parking
place and public plaza; No whimsical action was taken in the demolition of the stalls.It is the
decision in Civil Case No. 2040 and the said resolution of the municipal council of San Fernando
that respondent Macalino was seeking to enforce when he ordered the demolition of the stalls
constructed in the disputed area. As officer-in-charge of the office of the mayor, he had the duty to
clear the area and restore it to its intended use as a parking place and public plaza of the
municipality of San Fernando, conformably to the aforementioned orders from the court and the
council. It is, therefore, not correct to say that he had acted without authority or taken the law into
his hands in issuing his order. Neither can it be said that he acted whimsically in exercising his
authority for it has been established that he directed the demolition of the stalls only after, upon
his instructions, the municipal attorney had conducted an investigation, to look into the complaint
filed by the Association of Concerned Citizens and Consumers of San Fernando. There is evidence
that the petitioners were notified of this hearing, which they chose to disregard. Photographs of the
disputed area, which does look congested and ugly, show that the complaint was valid and that the
area really needed to be cleared, as recommended by the municipal attorney. The Court observes
that even without such investigation and recommendation, the respondent mayor was justified in
ordering the area cleared on the strength alone of its status as a public plaza as declared by the
judicial and legislative authorities. In calling first for the investigation (which the petitioner saw fit
to boycott), he was just scrupulously paying deference to the requirements of due process, to
remove all taint of arbitrariness in the action he was called upon to take.
Constitutional Law; Police Power was validly exercised in this case.The problems caused by the
usurpation of the place by the petitioners are covered by the police power as delegated to the
municipality under the general welfare clause. This authorizes the municipal council "to enact such
ordinances and make such regulations, not repugnant to law, as may be necessary to carry into
effect and discharge the powers and duties conferred upon it by law and such as shall seem
necessary and proper to provide for the health and safety, promote the prosperity, improve the
morals, peace, good order, comfort, and convenience of the municipality and the inhabitants
thereof, and for the protection of property therein." This authority was validly exercised in this case
through the adoption of Resolution No. 29, series of 1964, by the municipal council of San
Fernando.
Same; Same; Rule that police power cannot be surrendered or bargained away through the
medium of a contract is settledEven assuming a valid lease of the property in dispute, the
resolution could have effectively terminated the agreement for it is settled that the police power
cannot be surrendered or bargained away through the medium of a contract. In fact, every contract
affecting the public interest suffers a congenital infirmity in that it contains an implied reservation
of the police power as a postulate of the existing legal order. This power can be activated at any
time to change the provisions of the contract, or even abrogate it entirely, for the promotion or
protection of the general welfare. Such an act will not militate against the impairment clause,
which is subject to and limited by the paramount police power. Villanueva vs. Castaeda, Jr., 154
SCRA 142, No. L-61311 September 21, 1987
CRUZ, J.:
There is in the vicinity of the public market of San Fernando, Pampanga, along Mercado Street, a
strip of land measuring 12 by 77 meters on which stands a conglomeration of vendors stalls
together forming what is commonly known as a talipapa. This is the subject of the herein petition.
The petitioners claim they have a right to remain in and conduct business in this area by virtue of a
previous authorization granted to them by the municipal government. The respondents deny this
and justify the demolition of their stalls as illegal constructions on public property. At the
petitioners' behest, we have issued a temporary restraining order to preserve the status
quobetween the parties pending our decision. 1 Now we shall rule on the merits.
This dispute goes back to November 7, 1961, when the municipal council of San Fernando adopted
Resolution No. 218 authorizing some 24 members of the Fernandino United Merchants and Traders

Association to construct permanent stags and sell in the above-mentioned place. 2 The action was
protested on November 10, 1961, in Civil Case No. 2040, where the Court of First Instance of
Pampanga, Branch 2, issued a writ of preliminary injunction that prevented the defendants from
constructing the said stalls until final resolution of the controversy. 3 On January 18, 1964, while
this case was pending, the municipal council of San Fernando adopted Resolution G.R. No. 29,
which declared the subject area as "the parking place and as the public plaza of the
municipality, 4 thereby impliedly revoking Resolution No. 218, series of 1961. Four years later, on
November 2, 1968, Judge Andres C. Aguilar decided the aforesaid case and held that the land
occupied by the petitioners, being public in nature, was beyond the commerce of man and
therefore could not be the subject of private occupancy. 5 The writ of preliminary injunction was
made permanent. 6
The decision was apparently not enforced, for the petitioners were not evicted from the place; in
fact, according to then they and the 128 other persons were in 1971 assigned specific areas or
space allotments therein for which they paid daily fees to the municipal government. 7 The problem
appears to have festered for some more years under a presumably uneasy truce among the
protagonists, none of whom made any move, for some reason that does not appear in the record.
Then, on January 12, 1982, the Association of Concerned Citizens and Consumers of San Fernando
filed a petition for the immediate implementation of Resolution No. 29, to restore the subject
property "to its original and customary use as a public plaza. 8
Acting thereon after an investigation conducted by the municipal attorney, 9 respondent Vicente A.
Macalino, as officer-in-charge of the office of the mayor of San Fernando, issued on June 14, 1982, a
resolution requiring the municipal treasurer and the municipal engineer to demolish the stalls in
the subject place beginning July 1, 1982. 10 The reaction of the petitioners was to file a petition for
prohibition with the Court of First Instance of Pampanga, docketed as Civil Case No. 6470, on June
26, 1982. The respondent judge denied the petition on July 19, 1982, 11 and the motion for
reconsideration on August 5, 1982, 12 prompting the petitioners to come to this Court
on certiorari to challenge his decision. 13
As required, respondent Macalino filed his comment 14 on the petition, and the petitioners
countered with their reply. 15 In compliance with our resolution of February 2, 1983, the petitioners
submitted their memorandum 16 and respondent Macalino, for his part, asked that his comment
be considered his memorandum. 17 On July 28, 1986, the new officer-in-charge of the office of the
mayor of San Fernando, Paterno S. Guevarra, was impleaded in lieu of Virgilio Sanchez, who had
himself earlier replaced the original respondent Macalino. 18
After considering the issues and the arguments raised by the parties in their respective pleadings,
we rule for the respondents. The petition must be dismissed.
There is no question that the place occupied by the petitioners and from which they are sought to
be evicted is a public plaza, as found by the trial court in Civil Case No. 2040. This finding was
made after consideration of the antecedent facts as especially established by the testimony of
former San Fernando Mayor Rodolfo Hizon, who later became governor of Pampanga, that the
National Planning Commission had reserved the area for a public plaza as early as 1951. This
intention was reiterated in 1964 through the adoption of Resolution No. 29. 19
It does not appear that the decision in this case was appealed or has been reversed. In Civil Case
G.R. No. 6740, which is the subject of this petition, the respondent judge saw no reason to disturb
the finding in Civil Case No. 2040 and indeed used it as a basis for his own decision sustaining the
questioned order. 20
The basic contention of the petitioners is that the disputed area is under lease to them by virtue of
contracts they had entered into with the municipal government, first in 1961 insofar as the original
occupants were concerned, and later with them and the other petitioners by virtue of the space
allocations made in their favor in 1971 for which they saw they are paying daily fees. 21 The
municipal government has denied making such agreements. In any case, they argue, since the fees
were collected daily, the leases, assuming their validity, could be terminated at will, or any day, as
the claimed rentals indicated that the period of the leases was from day to day. 22
The parties belabor this argument needlessly.

A public plaza is beyond the commerce of man and so cannot be the subject of lease or any other
contractual undertaking. This is elementary. Indeed, this point was settled as early as
in Municipality of Cavite vs. Rojas, 23decided in 1915, where the Court declared as null and void the
lease of a public plaza of the said municipality in favor of a private person.
Justice Torres said in that case:
According to article 344 of the Civil Code: "Property for public use in provinces and
in towns comprises the provincial and town roads, the squares, streets, fountains,
and public waters, the promenades, and public works of general service supported
by said towns or provinces.
The said Plaza Soledad being a promenade for public use, the municipal council of
Cavite could not in 1907 withdraw or exclude from public use a portion thereof in
order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a
portion of said plaza or public place to the defendant for private use the plaintiff
municipality exceeded its authority in the exercise of its powers by executing a
contract over a thing of which it could not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not outside the
commerce of man may be the object of a contract, and plazas and streets are
outside of this commerce, as was decided by the supreme court of Spain in its
decision of February 12, 1895, which says: "communal things that cannot be sold
because they are by their very nature outside of commerce are those for public
use, such as the plazas, streets, common lands, rivers, fountains, etc."
Therefore, it must be concluded that the contract, Exhibit C, whereby the
municipality of Cavite leased to Hilaria Rojas a portion of the Plaza Soledad is null
and void and of no force or effect, because it is contrary to the law and the thing
leased cannot be the object of a was held that the City of contract.
In Muyot vs. de la Fuente, 24 it was held that the City of Manila could not lease a portion of a public
sidewalk on Plaza Sta. Cruz, being likewise beyond the commerce of man.
Echoing Rojas, the decision said:
Appellants claim that they had obtained permit from the present of the City of
Manila, to connect booths Nos. 1 and 2, along the premises in question, and for the
use of spaces where the booths were constructed, they had paid and continued
paying the corresponding rentals. Granting this claim to be true, one should not
entertain any doubt that such permit was not legal, because the City of Manila
does not have any power or authority at all to lease a portion of a public sidewalk.
The sidewalk in question, forming part of the public plaza of Sta. Cruz, could not be
a proper subject matter of the contract, as it was not within the commerce of man
(Article 1347, new Civil Code, and article 1271, old Civil Code). Any contract
entered into by the City of Manila in connection with the sidewalk, is ipso facto null
and ultra vires. (Municipality of Cavite vs. Roxas, et a1, 30 Phil. 603.) The sidewalk
in question was intended for and was used by the public, in going from one place to
another. "The streets and public places of the city shall be kept free and clear for
the use of the public, and the sidewalks and crossings for the pedestrians, and the
same shall only be used or occupied for other purpose as provided by ordinance or
regulation; ..." (Sec. 1119, Revised Ordinances of the City of Manila.) The booths in
question served as fruit stands for their owners and often, if not always, blocked
the fire passage of pedestrians who had to take the plaza itself which used to be
clogged with vehicular traffic.
Exactly in point is Espiritu vs. Municipal Council of Pozorrubio,
declared:

25

where the Supreme Court

There is absolutely no question that the town plaza cannot be used for the
construction of market stalls, specially of residences, and that such structures
constitute a nuisance subject to abatement according to law. Town plazas are
properties of public dominion, to be devoted to public use and to be made available

to the public in general They are outside the common of man and cannot be
disposed of or even leased by the municipality to private parties.
Applying this well-settled doctrine, we rule that the petitioners had no right in the first place to
occupy the disputed premises and cannot insist in remaining there now on the strength of their
alleged lease contracts. They should have realized and accepted this earlier, considering that even
before Civil Case No. 2040 was decided, the municipalcouncil of San Fernando had already adopted
Resolution No. 29, series of 1964, declaring the area as the parking place and public plaza of the
municipality.
It is the decision in Civil Case No. 2040 and the said resolution of the municipal council of San
Fernando that respondent Macalino was seeking to enforce when he ordered the demolition of the
stags constructed in the disputed area. As officer-in-charge of the office of the mayor, he had the
duty to clear the area and restore it to its intended use as a parking place and public plaza of the
municipality of San Fernando, conformably to the aforementioned orders from the court and the
council. It is, therefore, not correct to say that he had acted without authority or taken the law into
his hands in issuing his order.
Neither can it be said that he acted whimsically in exercising his authority for it has been
established that he directed the demolition of the stalls only after, upon his instructions, the
municipal attorney had conducted an investigation, to look into the complaint filed by the
Association of Concerned Citizens and Consumers of San Fernando. 26 There is evidence that the
petitioners were notified of this hearing, 27which they chose to disregard. Photographs of the
disputed area, 28 which does look congested and ugly, show that the complaint was valid and that
the area really needed to be cleared, as recommended by the municipal attorney.
The Court observes that even without such investigation and recommendation, the respondent
mayor was justified in ordering the area cleared on the strength alone of its status as a public plaza
as declared by the judicial and legislative authorities. In calling first for the investigation (which the
petitioner saw fit to boycott), he was just scrupulously paying deference to the requirements of due
process, to remove an taint of arbitrariness in the action he was caged upon to take.
Since the occupation of the place in question in 1961 by the original 24 stallholders (whose number
later ballooned to almost 200), it has deteriorated increasingly to the great prejudice of the
community in general. The proliferation of stags therein, most of them makeshift and of flammable
materials, has converted it into a veritable fire trap, which, added to the fact that it obstructs
access to and from the public market itself, has seriously endangered public safety. The filthy
condition of the talipapa, where fish and other wet items are sold, has aggravated health and
sanitation problems, besides pervading the place with a foul odor that has spread into the
surrounding areas. The entire place is unsightly, to the dismay and embarrassment of the
inhabitants, who want it converted into a showcase of the town of which they can all be proud. The
vendors in the talipapa have also spilled into the street and obstruct the flow of traffic, thereby
impairing the convenience of motorists and pedestrians alike. The regular stallholders in the public
market, who pay substantial rentals to the municipality, are deprived of a sizable volume of
business from prospective customers who are intercepted by the talipapa vendors before they can
reach the market proper. On top of all these, the people are denied the proper use of the place as a
public plaza, where they may spend their leisure in a relaxed and even beautiful environment and
civic and other communal activities of the town can be held.
The problems caused by the usurpation of the place by the petitioners are covered by the police
power as delegated to the municipality under the general welfare clause. 29 This authorizes the
municipal council "to enact such ordinances and make such regulations, not repugnant to law, as
may be necessary to carry into effect and discharge the powers and duties conferred upon it by law
and such as shall seem necessary and proper to provide for the health and safety, promote the
prosperity, improve the morals, peace, good order, comfort, and convenience of the municipality
and the inhabitants thereof, and for the protection of property therein." This authority was validly
exercised in this casethrough the adoption of Resolution No. 29, series of 1964, by the municipal
council of San Fernando.
Even assuming a valid lease of the property in dispute, the resolution could have effectively
terminated the agreement for it is settled that the police power cannot be surrendered or
bargained away through the medium of a contract. 30 In fact, every contract affecting the public
interest suffers a congenital infirmity in that it contains an implied reservation of the police power
as a postulate of the existing legal order. 31 This power can be activated at any time to change the

provisions of the contract, or even abrogate it entirely, for the promotion or protection of the
general welfare. Such an act will not militate against the impairment clause, which is subject to and
limited by the paramount police power. 32
We hold that the respondent judge did not commit grave abuse of discretion in denying the petition
for prohibition. On the contrary, he acted correctly in sustaining the right and responsibility of the
mayor to evict the petitioners from the disputed area and clear it of an the structures illegally
constructed therein.
The Court feels that it would have been far more amiable if the petitioners themselves, recognizing
their own civic duty, had at the outset desisted from their original stance and withdrawn in good
grace from the disputed area to permit its peaceful restoration as a public plaza and parking place
for the benefit of the whole municipality. They owned this little sacrifice to the community in
general which has suffered all these many years because of their intransigence. Regrettably, they
have refused to recognize that in the truly democratic society, the interests of the few should yield
to those of the greater number in deference to the principles that the welfare of the people is the
supreme law and overriding purpose. We do not see any altruism here. The traditional ties of
sharing are absent here. What we find, sad to say, is a cynical disdaining of the spirit of
"bayanihan," a selfish rejection of the cordial virtues of "pakikisama " and "pagbibigayan" which
are the hallmarks of our people.
WHEREFORE, the petition is DISMISSED. The decision dated July 19, 1982, and the order-dated
August 5, 1982, are AFFIRMED. The temporary restraining order dated August 9, 1982, is LIFTED.
This decision is immediately executory. Costs against the petitioners.
SO ORDERED.
Teehankee, C.J., Narvasa and Paras, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 179987

September 3, 2013

HEIRS OF MARIO MALABANAN, (Represented by Sally A. Malabanan), Petitioners,

vs.
REPUBLIC OF THE PHILIPPINES, Respondent.
Land Registration Act; Public Lands Act; Notwithstanding the passage of the Property Registration
Decree and the inclusion of Section 14(1) therein, the Public Land Act has remained in effect. Both
laws commonly refer to persons or their predecessors-in-interest who 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.
Notwithstanding the passage of the Property Registration Decree and the inclusion of Section 14(1)
therein, the Public Land Act has remained in effect. Both laws commonly refer to persons or their
predecessors-in-interest who 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. That circumstance may have led to the impression that
one or the other is a redundancy, or that Section 48(b) of the Public Land Act has somehow been
repealed or mooted. That is not the case.
Same; Same; Section 48 of the Public Land Act is more descriptive of the nature of the right
enjoyed by the possessor than Section 14 of the Property Registration Decree, which seems to
presume the pre-existence of the right, rather than establishing the right itself for the first time.It
is clear that Section 48 of the Public Land Act is more descriptive of the nature of the right enjoyed
by the possessor than Section 14 of the Property Registration Decree, which seems to presume the
pre-existence of the right, rather than establishing the right itself for the first time. It is proper to

assert that it is the Public Land Act, as amended by P.D. No. 1073 effective 25 January 1977, that
has primarily established the right of a Filipino citizen who has 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 acquisition of ownership, since June 12, 1945 to perfect or
complete his title by applying with the proper court for the confirmation of his ownership claim and
the issuance of the corresponding certificate of title.
Civil Law; Prescription; Under the Civil Code that where lands of the public domain are patrimonial
in character, they are susceptible to acquisitive prescription.It is clear under the Civil Code that
where lands of the public domain are patrimonial in character, they are susceptible to acquisitive
prescription. On the other hand, among the public domain lands that are not susceptible to
acquisitive prescription are timber lands and mineral lands. The Constitution itself proscribes
private ownership of timber or mineral lands.
Same; Land Registration Act; Prescription; Alienable and disposable lands are expressly declared by
the State to be no longer intended for public service or for the development of the national wealth
that the period of acquisitive prescription can begin to run. Such declaration shall be in the form of
a law duly enacted by Congress or a Presidential Proclamation in cases where the President is duly
authorized by law.There must be an express declaration by the State that the public dominion
property is no longer intended for public service or the development of the national wealth or that
the property has been converted into patrimonial. Without such express declaration, the property,
even if classified as alienable or disposable, remains property of the public dominion, pursuant to
Article 420(2), and thus incapable of acquisition by prescription. It is only when such alienable and
disposable lands are expressly declared by the State to be no longer intended for public service or
for the development of the national wealth that the period of acquisitive prescription can begin to
run. Such declaration shall be in the form of a law duly enacted by Congress or a Presidential
Proclamation in cases where the President is duly authorized by law.
Land Registration Act; Prescription; Public Land Act; If a public land is declared patrimonial by law
or proclamation, can the period of possession prior to such conversion be reckoned in counting the
period of prescription? No.The limitation imposed by Article 1113 dissuades us from ruling that
the period of possession before the public domain land becomes patrimonial may be counted for
the purpose of completing the prescriptive period. Possession of public dominion property before it
becomes patrimonial cannot be the object of prescription according to the Civil Code. As the
application for registration under Section 14(2) falls wholly within the framework of prescription
under the Civil Code, there is no way that possession during the time that the land was still
classified as public dominion property can be counted to meet the requisites of acquisitive
prescription and justify registration. Are we being inconsistent in applying divergent rules for
Section 14(1) and Section 14(2)? There is no inconsistency. Section 14(1) mandates registration on
the basis of possession, while Section 14(2) entitles registration on the basis of prescription.
Registration under Section 14(1) is extended under the aegis of the Property Registration Decree
and the Public Land Act while registration under Section 14(2) is made available both by the
Property Registration Decree and the Civil Code. Heirs of Mario Malabanan vs. Republic, 587 SCRA
172, G.R. No. 179987 April 29, 2009
RESOLUTION
BERSAMIN, J.:
For our consideration and resolution are the motions for reconsideration of the parties who both
assail the decision promulgated on April 29, 2009, whereby we upheld the ruling of the Court of
Appeals (CA) denying the application of the petitioners for the registration of a parcel of land
situated in Barangay Tibig, Silang, Cavite on the ground that they had not established by sufficient
evidence their right to the registration in accordance with either Section 14(1) or Section 14(2) of
Presidential Decree No. 1529 (Property Registration Decree).
Antecedents
The property subject of the application for registration is a parcel of land situated in Barangay
Tibig, Silang Cavite, more particularly identified as Lot 9864-A, Cad-452-D, with an area of 71,324square meters. On February 20, 1998, applicant Mario Malabanan, who had purchased the property
from Eduardo Velazco, filed an application for land registration covering the property in the
Regional Trial Court (RTC) in Tagaytay City, Cavite, claiming that the property formed part of the

alienable and disposable land of the public domain, and that he and his predecessors-in-interest
had been in open, continuous, uninterrupted, public and adverse possession and occupation of the
land for more than 30 years, thereby entitling him to the judicial confirmation of his title. 1
To prove that the property was an alienable and disposable land of the public domain, Malabanan
presented during trial a certification dated June 11, 2001 issued by the Community Environment
and Natural Resources Office (CENRO) of the Department of Environment and Natural Resources
(DENR), which reads:
This is to certify that the parcel of land designated as Lot No. 9864 Cad 452-D, Silang Cadastre as
surveyed for Mr. Virgilio Velasco located at Barangay Tibig, Silang, Cavite containing an area of
249,734 sq. meters as shown and described on the Plan Ap-04-00952 is verified to be within the
Alienable or Disposable land per Land Classification Map No. 3013 established under Project No. 20A and approved as such under FAO 4-1656 on March 15, 1982. 2
After trial, on December 3, 2002, the RTC rendered judgment granting Malabanans application for
land registration, disposing thusly:
WHEREFORE, this Court hereby approves this application for registration and thus places under the
operation of Act 141, Act 496 and/or P.D. 1529, otherwise known as Property Registration Law, the
lands described in Plan Csd-04-0173123-D, Lot 9864-A and containing an area of Seventy One
Thousand Three Hundred Twenty Four (71,324) Square Meters, as supported by its technical
description now forming part of the record of this case, in addition to other proofs adduced in the
name of MARIO MALABANAN, who is of legal age, Filipino, widower, and with residence at Munting
Ilog, Silang, Cavite.
Once this Decision becomes final and executory, the corresponding decree of registration shall
forthwith issue.
SO ORDERED.3
The Office of the Solicitor General (OSG) appealed the judgment to the CA, arguing that Malabanan
had failed to prove that the property belonged to the alienable and disposable land of the public
domain, and that the RTC erred in finding that he had been in possession of the property in the
manner and for the length of time required by law for confirmation of imperfect title.
On February 23, 2007, the CA promulgated its decision reversing the RTC and dismissing the
application for registration of Malabanan. Citing the ruling in Republic v. Herbieto (Herbieto), 4 the
CA declared that under Section 14(1) of the Property Registration Decree, any period of possession
prior to the classification of the land as alienable and disposable was inconsequential and should
be excluded from the computation of the period of possession. Noting that the CENRO-DENR
certification stated that the property had been declared alienable and disposable only on March 15,
1982, Velazcos possession prior to March 15, 1982 could not be tacked for purposes of computing
Malabanans period of possession.
Due to Malabanans intervening demise during the appeal in the CA, his heirs elevated the CAs
decision of February 23, 2007 to this Court through a petition for review on certiorari.
The petitioners assert that the ruling in Republic v. Court of Appeals and Corazon Naguit 5 (Naguit)
remains the controlling doctrine especially if the property involved is agricultural land. In this
regard, Naguit ruled that any possession of agricultural land prior to its declaration as alienable
and disposable could be counted in the reckoning of the period of possession to perfect title under
the Public Land Act (Commonwealth Act No. 141) and the Property Registration Decree. They point
out that the ruling in Herbieto, to the effect that the declaration of the land subject of the
application for registration as alienable and disposable should also date back to June 12, 1945 or
earlier, was a mere obiter dictum considering that the land registration proceedings therein were in
fact found and declared void ab initio for lack of publication of the notice of initial hearing.
The petitioners also rely on the ruling in Republic v. T.A.N. Properties, Inc. 6 to support their
argument that the property had been ipso jure converted into private property by reason of the
open, continuous, exclusive and notorious possession by their predecessors-in-interest of an
alienable land of the public domain for more than 30 years. According to them, what was essential

was that the property had been "converted" into private property through prescription at the time
of the application without regard to whether the property sought to be registered was previously
classified as agricultural land of the public domain.
As earlier stated, we denied the petition for review on certiorari because Malabanan failed to
establish by sufficient evidence possession and occupation of the property on his part and on the
part of his predecessors-in interest since June 12, 1945, or earlier.
Petitioners Motion for Reconsideration
In their motion for reconsideration, the petitioners submit that the mere classification of the land as
alienable or disposable should be deemed sufficient to convert it into patrimonial property of the
State. Relying on the rulings in Spouses De Ocampo v. Arlos, 7 Menguito v. Republic8 and Republic v.
T.A.N. Properties, Inc.,9 they argue that the reclassification of the land as alienable or disposable
opened it to acquisitive prescription under the Civil Code; that Malabanan had purchased the
property from Eduardo Velazco believing in good faith that Velazco and his predecessors-in-interest
had been the real owners of the land with the right to validly transmit title and ownership thereof;
that consequently, the ten-year period prescribed by Article 1134 of the Civil Code, in relation to
Section 14(2) of the Property Registration Decree, applied in their favor; and that when Malabanan
filed the application for registration on February 20, 1998, he had already been in possession of the
land for almost 16 years reckoned from 1982, the time when the land was declared alienable and
disposable by the State.
The Republics Motion for Partial Reconsideration
The Republic seeks the partial reconsideration in order to obtain a clarification with reference to the
application of the rulings in Naguit and Herbieto.
Chiefly citing the dissents, the Republic contends that the decision has enlarged, by implication,
the interpretation of Section 14(1) of the Property Registration Decree through judicial legislation. It
reiterates its view that an applicant is entitled to registration only when the land subject of the
application had been declared alienable and disposable since June 12, 1945 or earlier.
Ruling
We deny the motions for reconsideration.
In reviewing the assailed decision, we consider to be imperative to discuss the different
classifications of land in relation to the existing applicable land registration laws of the Philippines.
Classifications of land according to ownership
Land, which is an immovable property, 10 may be classified as either of public dominion or of private
ownership.11Land is considered of public dominion if it either: (a) is intended for public use; or (b)
belongs to the State, without being for public use, and is intended for some public service or for the
development of the national wealth.12 Land belonging to the State that is not of such character, or
although of such character but no longer intended for public use or for public service forms part of
the patrimonial property of the State. 13 Land that is other than part of the patrimonial property of
the State, provinces, cities and municipalities is of private ownership if it belongs to a private
individual.
Pursuant to the Regalian Doctrine (Jura Regalia), a legal concept first introduced into the country
from the West by Spain through the Laws of the Indies and the Royal Cedulas, 14 all lands of the
public domain belong to the State. 15 This means that the State is the source of any asserted right
to ownership of land, and is charged with the conservation of such patrimony. 16
All lands not appearing to be clearly under private ownership are presumed to belong to the State.
Also, public lands remain part of the inalienable land of the public domain unless the State is
shown to have reclassified or alienated them to private persons. 17

Classifications of public lands

according to alienability
Whether or not land of the public domain is alienable and disposable primarily rests on the
classification of public lands made under the Constitution. Under the 1935 Constitution, 18 lands of
the public domain were classified into three, namely, agricultural, timber and mineral. 19 Section 10,
Article XIV of the 1973 Constitution classified lands of the public domain into seven, specifically,
agricultural, industrial or commercial, residential, resettlement, mineral, timber or forest, and
grazing land, with the reservation that the law might provide other classifications. The 1987
Constitution adopted the classification under the 1935 Constitution into agricultural, forest or
timber, and mineral, but added national parks.20 Agricultural lands may be further classified by law
according to the uses to which they may be devoted. 21 The identification of lands according to their
legal classification is done exclusively by and through a positive act of the Executive Department. 22
Based on the foregoing, the Constitution places a limit on the type of public land that may be
alienated. Under Section 2, Article XII of the 1987 Constitution, only agricultural lands of the public
domain may be alienated; all other natural resources may not be.
Alienable and disposable lands of the State fall into two categories, to wit: (a) patrimonial lands of
the State, or those classified as lands of private ownership under Article 425 of the Civil
Code,23 without limitation; and (b) lands of the public domain, or the public lands as provided by
the Constitution, but with the limitation that the lands must only be agricultural. Consequently,
lands classified as forest or timber, mineral, or national parks are not susceptible of alienation or
disposition unless they are reclassified as agricultural. 24 A positive act of the Government is
necessary to enable such reclassification, 25 and the exclusive prerogative to classify public lands
under existing laws is vested in the Executive Department, not in the courts. 26 If, however, public
land will be classified as neither agricultural, forest or timber, mineral or national park, or when
public land is no longer intended for public service or for the development of the national wealth,
thereby effectively removing the land from the ambit of public dominion, a declaration of such
conversion must be made in the form of a law duly enacted by Congress or by a Presidential
proclamation in cases where the President is duly authorized by law to that effect. 27 Thus, until the
Executive Department exercises its prerogative to classify or reclassify lands, or until Congress or
the President declares that the State no longer intends the land to be used for public service or for
the development of national wealth, the Regalian Doctrine is applicable.
Disposition of alienable public lands
Section 11 of the Public Land Act (CA No. 141) provides the manner by which alienable and
disposable lands of the public domain, i.e., agricultural lands, can be disposed of, to wit:
Section 11. Public lands suitable for agricultural purposes can be disposed of only as follows, and
not otherwise:
(1) For homestead settlement;
(2) By sale;
(3) By lease; and
(4) By confirmation of imperfect or incomplete titles;
(a) By judicial legalization; or
(b) By administrative legalization (free patent).
The core of the controversy herein lies in the proper interpretation of Section 11(4), in relation to
Section 48(b) of the Public Land Act, which expressly requires possession by a Filipino citizen of the
land since June 12, 1945, or earlier, viz:
Section 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 thereafter, under
the Land Registration Act, to wit:
xxxx
(b) 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 acquisition of ownership, since June 12, 1945, or
earlier, immediately preceding the filing of the applications 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. (Bold emphasis supplied)
Note that Section 48(b) of the Public Land Act used the words "lands of the public domain" or
"alienable and disposable lands of the public domain" to clearly signify that lands otherwise
classified, i.e., mineral, forest or timber, or national parks, and lands of patrimonial or private
ownership, are outside the coverage of the Public Land Act. What the law does not include, it
excludes. The use of the descriptive phrase "alienable and disposable" further limits the coverage
of Section 48(b) to only the agricultural lands of the public domain as set forth in Article XII, Section
2 of the 1987 Constitution. Bearing in mind such limitations under the Public Land Act, the
applicant must satisfy the following requirements in order for his application to come under Section
14(1) of the Property Registration Decree, 28 to wit:
1. The applicant, by himself or through his predecessor-in-interest, has been in possession
and occupation of the property subject of the application;
2. The possession and occupation must be open, continuous, exclusive, and notorious;
3. The possession and occupation must be under a bona fide claim of acquisition of
ownership;
4. The possession and occupation must have taken place since June 12, 1945, or earlier;
and
5. The property subject of the application must be an agricultural land of the public
domain.
Taking into consideration that the Executive Department is vested with the authority to classify
lands of the public domain, Section 48(b) of the Public Land Act, in relation to Section 14(1) of the
Property Registration Decree, presupposes that the land subject of the application for registration
must have been already classified as agricultural land of the public domain in order for the
provision to apply. Thus, absent proof that the land is already classified as agricultural land of the
public domain, the Regalian Doctrine applies, and overcomes the presumption that the land is
alienable and disposable as laid down in Section 48(b) of the Public Land Act. However, emphasis is
placed on the requirement that the classification required by Section 48(b) of the Public Land Act is
classification or reclassification of a public land as agricultural.
The dissent stresses that the classification or reclassification of the land as alienable and
disposable agricultural land should likewise have been made on June 12, 1945 or earlier, because
any possession of the land prior to such classification or reclassification produced no legal effects.
It observes that the fixed date of June 12, 1945 could not be minimized or glossed over by mere
judicial interpretation or by judicial social policy concerns, and insisted that the full legislative
intent be respected.
We find, however, that the choice of June 12, 1945 as the reckoning point of the requisite
possession and occupation was the sole prerogative of Congress, the determination of which
should best be left to the wisdom of the lawmakers. Except that said date qualified the period of
possession and occupation, no other legislative intent appears to be associated with the fixing of
the date of June 12, 1945. Accordingly, the Court should interpret only the plain and literal meaning
of the law as written by the legislators.

Moreover, an examination of Section 48(b) of the Public Land Act indicates that Congress
prescribed no requirement that the land subject of the registration should have been classified as
agricultural since June 12, 1945, or earlier. As such, the applicants imperfect or incomplete title is
derived only from possession and occupation since June 12, 1945, or earlier. This means that the
character of the property subject of the application as alienable and disposable agricultural land of
the public domain determines its eligibility for land registration, not the ownership or title over it.
Alienable public land held by a possessor, either personally or through his predecessors-in-interest,
openly, continuously and exclusively during the prescribed statutory period is converted to private
property by the mere lapse or completion of the period. 29 In fact, by virtue of this doctrine,
corporations may now acquire lands of the public domain for as long as the lands were already
converted to private ownership, by operation of law, as a result of satisfying the requisite period of
possession prescribed by the Public Land Act.30 It is for this reason that the property subject of the
application of Malabanan need not be classified as alienable and disposable agricultural land of the
public domain for the entire duration of the requisite period of possession.
To be clear, then, the requirement that the land should have been classified as alienable and
disposable agricultural land at the time of the application for registration is necessary only to
dispute the presumption that the land is inalienable.
The declaration that land is alienable and disposable also serves to determine the point at which
prescription may run against the State. The imperfect or incomplete title being confirmed under
Section 48(b) of the Public Land Act is title that is acquired by reason of the applicants possession
and occupation of the alienable and disposable agricultural land of the public domain. Where all
the necessary requirements for a grant by the Government are complied with through actual
physical, open, continuous, exclusive and public possession of an alienable and disposable land of
the public domain, the possessor is deemed to have acquired by operation of law not only a right
to a grant, but a grant by the Government, because it is not necessary that a certificate of title be
issued in order that such a grant be sanctioned by the courts. 31
If one follows the dissent, the clear objective of the Public Land Act to adjudicate and quiet titles to
unregistered lands in favor of qualified Filipino citizens by reason of their occupation and cultivation
thereof for the number of years prescribed by law32 will be defeated. Indeed, we should always
bear in mind that such objective still prevails, as a fairly recent legislative development bears out,
when Congress enacted legislation (Republic Act No. 10023) 33 in order to liberalize stringent
requirements and procedures in the adjudication of alienable public land to qualified applicants,
particularly residential lands, subject to area limitations. 34
On the other hand, if a public land is classified as no longer intended for public use or for the
development of national wealth by declaration of Congress or the President, thereby converting
such land into patrimonial or private land of the State, the applicable provision concerning
disposition and registration is no longer Section 48(b) of the Public Land Act but the Civil Code, in
conjunction with Section 14(2) of the Property Registration Decree. 35 As such, prescription can now
run against the State.
To sum up, we now observe the following rules relative to the disposition of public land or lands of
the public domain, namely:
(1) As a general rule and pursuant to the Regalian Doctrine, all lands of the public domain
belong to the State and are inalienable. Lands that are not clearly under private ownership
are also presumed to belong to the State and, therefore, may not be alienated or disposed;
(2) The following are excepted from the general rule, to wit:
(a) Agricultural lands of the public domain are rendered alienable and disposable
through any of the exclusive modes enumerated under Section 11 of the Public
Land Act. If the mode is judicial confirmation of imperfect title under Section 48(b)
of the Public Land Act, the agricultural land subject of the application needs only to
be classified as alienable and disposable as of the time of the application, provided
the applicants possession and occupation of the land dated back to June 12, 1945,
or earlier. Thereby, a conclusive presumption that the applicant has performed all
the conditions essential to a government grant arises, 36 and the applicant becomes
the owner of the land by virtue of an imperfect or incomplete title. By legal fiction,

the land has already ceased to be part of the public domain and has become
private property.37
(b) Lands of the public domain subsequently classified or declared as no longer
intended for public use or for the development of national wealth are removed from
the sphere of public dominion and are considered converted into patrimonial lands
or lands of private ownership that may be alienated or disposed through any of the
modes of acquiring ownership under the Civil Code. If the mode of acquisition is
prescription, whether ordinary or extraordinary, proof that the land has been
already converted to private ownership prior to the requisite acquisitive
prescriptive period is a condition sine qua non in observance of the law (Article
1113, Civil Code) that property of the State not patrimonial in character shall not
be the object of prescription.
To reiterate, then, the petitioners failed to present sufficient evidence to establish that they and
their predecessors-in-interest had been in possession of the land since June 12, 1945. Without
satisfying the requisite character and period of possession - possession and occupation that is
open, continuous, exclusive, and notorious since June 12, 1945, or earlier - the land cannot be
considered ipso jure converted to private property even upon the subsequent declaration of it as
alienable and disposable. Prescription never began to run against the State, such that the land has
remained ineligible for registration under Section 14(1) of the Property Registration Decree.
Likewise, the land continues to be ineligible for land registration under Section 14(2) of the
Property Registration Decree unless Congress enacts a law or the President issues a proclamation
declaring the land as no longer intended for public service or for the development of the national
wealth.1wphi1
WHEREFORE, the Court DENIES the petitioners' Motion for Reconsideration and the respondent's
Partial Motion for Reconsideration for their lack of merit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
WE CONCUR:

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-9069

March 31, 1915

THE MUNICIPALITY OF CAVITE, plaintiff-appellant,

vs.
HILARIA ROJAS and her husband TIUNG SIUKO, alias SIWA, defendants-appellees.
Attorney-General Villamor for appellant.
J. Y. Pinzon for appellees.
.MUNICIPALITIES; LEASES OF PUBLIC PROPERTY BY.A municipal council cannot sell or lease
communal or public property, such as plazas, streets, common lands, rivers, bridges, etc., because
they are outside the commerce of man; and if it has done so by leasing part of a plaza the lease is
null and void, for it is contrary to the law, and the thing leased cannot be the object of a contract.
(Civil Code, arts. 344, 1271.)
2.ID.; ID.; RESTORATION BY LESSEE.On the hypothesis that such a lease is null and void for the
reason that a municipal council cannot withdraw part of a plaza from public use, the lessee must

restore possession of the land by vacating it and the municipality must thereupon restore to him
any sums it may have collected as rent. (Civil Code, art. 1303.) Municipality of Cavite vs. Rojas and
Tiung Siuko., 30 Phil. 602, No. 9069 March 31, 1915
TORRES, J.:
Appeal filed through bill of exceptions by the Attorney-General, representing the plaintiff
municipality of Cavite, from the judgment of March 27, 1913, whereby the Honorable Herbert D.
Gale, judge, dismissed the complaint with costs against the plaintiff party, declaring that the said
municipality had no right to require that the defendants vacate the land in question.
By an instrument dated December 5, 1911, afterwards amended on March 14, 1912, the provincial
fiscal of Cavite, representing the municipality of that name, filed a complaint in the Court of First
Instance of said province alleging that the plaintiff municipal corporation, duly organized and
constituted in accordance with Act No. 82, and as the successor to the rights s aid entity had under
the late Spanish government, and by virtue of Act No. 1039, had exclusive right, control and
administration over the streets, lanes, plazas, and public places of the municipality of Cavite; that
the defendants, by virtue of a lease secured from the plaintiff municipality, occupy a parcel of land
93 square meters in area that forms part o the public plaza known under the name of Soledad,
belonging to the municipality of Cavite, the defendants having constructed thereon a house,
through payment to the plaintiff for occupation thereof of a rental of P5,58 a quarter in advance,
said defendants being furthermore obligated to vacate the leased land within sixty days
subsequent to plaintiff's demand to that effect; that the defendants have been required by the
municipality to vacate and deliver possession of the said land, but more than the sixty days within
which they having done so to date; that the lease secured from the municipality of Cavite, by
virtue whereof the defendants occupy the land that is the subject matter of the complaint, is ultra
vires and therefore ipso factonull and void and of no force or effect, for the said land is an integral
portion of a public plaza of public domain and use, and the municipal council of Cavite has never at
any time had any power or authority to withdraw it from public use, and to lease it to a private
party for his own use, and so the defendants have never had any right or occupy or to retain the
said land under leasehold, or in any other way, their occupation of the parcel being furthermore
illegal; and therefore prayed that judgment be rendered declaring that possession of the sad land
lies with the plaintiff and ordering the defendants to vacate the land and deliver possession thereof
to said plaintiff, with the costs against the defendants.
The demurrer filed to the foregoing complaint having been overruled, with exception on the part of
the defendants, in their answer of April 10, 1912, they admitted some of the allegations contained
in the complaint but denied that the parcel of land which they occupy and to which the complaint
refers forms and integral part of Plaza Soledad, or that the lease secured by them from the
municipality of Cavite was null and void and ultra vires, stating if they refused to vacate said land it
was because they had acquired the right of possession thereof. As a special defense they alleged
that, according to the lease, they could only be ordered to vacate the land leased when the plaintiff
municipality might need it for decoration or other public use, which does not apply in the present
case; and in a cross-complaint they alleged that on the land which is the subject matter of the
complaint the defendants have erected a house of strong materials, assessed at P3,000, which was
constructed under a license secured from the plaintiff municipality; that if they should be ordered
to vacate the said land they would suffer damages to the extent of P3,000, wherefore they prayed
that they be absolved from the complaint, or in the contrary case that the plaintiff be sentenced to
indemnify them in the sum of P3,000 as damages, and to pay the costs.
After hearing of the case, wherein both parties submitted parol and documentary evidence, the
court rendered the judgment that he been mentioned, whereto counsel for the municipality
excepted and in writing asked for a reopening of the case and the holding of a new trial. This
motion was denied, with exception on the part of the appellant, and the forwarded to the clerk of
this court.
It is duly proven in the record that, upon presentation of an application by Hilaria Rojas, he
municipal council of Cavite by resolution No. 10, dated July 3, 107, Exhibit C, leased to the said
Rojas some 70 or 80 square meters of Plaza Soledad, on condition that she pay rent quarterly in
advance according to the schedule fixed in Ordinance No. 43, land within sixty days subsequent to
notification to that effect. The record shows (receipts, Exhibit 1) that she has paid the land tax on
the house erected on the lot.

The boundary line between the properties of the municipality of Cavite and the naval reservation,
as fixed in Act No. 1039 of the Philippine Commission, appears in the plan prepared by a naval
engineer and submitted as evidence by the plaintiff, Exhibit C of civil case No. 274 of the Cavite
court and registered in this court as No. 9071. According to said plan, defendant's house is erected
on a plat of ground that forms part of the promenade called Plaza Soledad, and this was also so
proven by the testimony of the plaintiff's witnesses.
By section 3 of the said Act No. 1039, passed January 12, 1904, the Philippine Commission granted
to the municipality of Cavite all the land included in the tract called Plaza Soledad. In the case of
Nicolas vs. Jose (6 Phil. Rep., 589), wherein the municipality of Cavite, represented by its president
Catalino Nicolas, sought inscription in its name of the land comprised in the said Palza Soledad,
with objection on the part of Maria Jose et al. who is sought that inscription be decreed in their
name of the parcels of land in this plaza occupied by them, this court decided that neither the
municipality nor the objectors were entitled to inscription, for with respect to the objectors said
plaza belonged to the municipality of Cavite and with respect to the latter the said Plaza Soledad
was not transferable property of that municipality to be inscribed in its name, because he intention
of Act No. 1039 was that the said plaza and other places therein enumerated should be kept open
for public transit; herefore there can be no doubt that the defendant has no right to continue to
occupy the land of the municipality leased by her, for it is an integral portion of Plaza Soledad,
which if for public use and is reserved for the common benefit.
According to article 344 of the Civil Code: "Property for public use in provinces and in towns
comprises the provincial and town roads, the squares, streets, fountains, and public waters, the
promenades, and public works of general service supported by said towns or provinces."
The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not
in 1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole
benefit of the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the
defendant for private use the plaintiff municipality exceeded its authority in the exercise of its
powers by executing a contract over a thing of which it could not dispose, nor is it empowered so
to do.
The Civil Code, articles 1271, prescribes that everything which is not outside he commerce of man
may be the object of a contract, and plazas and streets are outside of this commerce, as was
decided by the supreme court of Spain in its decision of February 12, 195, which says: "Communal
things that cannot be soud because they are by their very nature outside of commerce are those
for public use, such as the plazas, streets, common lands, rivers, fountains, etc."
Therefore, it must be concluded that the contract, Exhibit C, whereby he municipality of Cavite
leased to Hilaria Rojas a portion of the Plaza Soledad is null and void and of no force or effect,
because it is contrary to the law and the thing leased cannot be the object of a contract. On the
hyphotesis that the said lease is null and void in accordance with the provisions of article 1303 of
the Civil Code, the defendant must restore and deliver possession of the land described in the
complaint to the municipality of Cavite, which in its turn must restore to the said defendant all the
sums it may have received from her in the nature of rentals just as soon as she restores the land
improperly leased. For the same reasons as have been set forth, and as said contract is null and
void in its origin, it can produce no effect and consequently the defendant is not entitled to claim
that the plaintiff municipality indemnity her for the damages she may suffer by the removal of her
house from the said land.
For all the foregoing reasons we must reverse the judgment appealed from and declare, as we do
declare, that the land occupied by Hilaria Rojas forms part of the public plaza called Soledad, and
as the lease of said parcel of land is null and void, we order the defendant to vacate it and release
the land in question within thirty days, leaving it cleared as it was before hr occupation. There is no
ground for the indemnity sought in the nature of damages, but the municipality must in its turn to
the defendant the rentals collected; without finding as to the costs. So ordered.
Arellano, C.J., Johnson and Araullo, JJ., concur.
Moreland, J., concurs in the result.

epublic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-17635

March 30, 1963

EDUARDO SANCHEZ, GREGORIO NUEZ, SULPICIO BANAAG, LINO BASA and RODOLPO
FERNANDEZ,petitioners-appellants,
vs.
MUNICIPALITY OF ASINGAN, Province of Pangasinan, respondent-appellee.
Castillo, Diaz, Tayabas and Torres for petitioners-appellants.
Guillermo, Navarro, Rame and Venture for respondent-appellee.
Pleading and practice; Appeal; Factual conclusion not re-viewable.The specific finding of the court
a quo that the land in question is owned by appellee municipality is a factual conclusion that is no
longer open to review on appeal.
Municipal corporations; Lease of patrimonial property; Reimbursement of rents.The implied
agreement of lease of land not included in any of the categories of municipal properties for public
use, is not null and void, although terminable upon notice. That being so, there is no ground on
which reimbursement of the rents may be ordered.
Same; Lease of land devoted to public use; Right of lessee to reimbursement of rents; Case at bar.
Even granting that the land in question is for public use and therefore the appellee municipality
could not legally lease it to private parties, there is no justification for the stand maintained by
appellants that after having occupied said land and derived benefits therefrom they should still be
entitled to recover what they have paid as a condition for their ejectment. That would be to enrich
them unduly to the prejudice of the municipality. Sanchez vs. Municipality of Asigan, Pngasinan, 7
SCRA 559, No. L-17635 March 30, 1963
MAKALINTAL, J.:
This case is before us on appeal by the plaintiffs from the decision of the Court of First Instance of
Pangasinan.
The facts as found by the trial court are as follows: The defendant municipality, appellee herein, is
the owner of a triangular strip of land situated between the site of the municipal school building
and the provincial road, measuring 42 x 26-1/2 x 46 meters. On that land appellants, with the
knowledge and implied consent of the municipality, constructed temporary stores and buildings of
light materials shortly after the end of the last war. Between 1952 and 1959 they paid rents to
appellee. When a new local administration took over after the elections of November 1959 the
municipal council passed a resolution notifying the occupants of the land that the same was
needed for certain public purposes, such as parking space, expansion of school grounds, widening
of the road and waiting area for pedestrians. Appellants were therefore advised to vacate on or
before May 15, 1960, some five (5) months after the date of notice. Instead of moving, however,
appellants filed a petition for prohibition with the court a quo on May 10, 1960 to prevent the
municipality from ejecting them from the land, with the alternative prayer that should they be
ejected, appellee be ordered to reimburse to them the rents which they had paid, in the total sum
of P1,178.20. There was also a demand for damages and attorney's fees. After trial, the court
dismissed the petition and ordered appellants to vacate the land, with costs.
Appellants' first contention here is that the land in question belongs to the Province of Pangasinan
and therefore appellee has no right to order their ejectment. The premise of the contention is
incorrect, for the clear and specific finding of the court a quo is that the said land is owned by the
Municipality of Asingan. This is a factual conclusion that is no longer open to review in the present
appeal. The additional statement by the court "that it is part of the broad shoulder of the provincial
road" does not make the land provincial property, such statement being merely descriptive of its
location and not indicative of its ownership..

The next issue raised by appellants is with reference to the sum of P1,178.20 paid by them as rents
from 1952 to 1959. They claim the right to be reimbursed in case they should be ejected, and cite
the case of Rojas v. Municipality of Cavite, 30 Phil. 607, where this Court, after declaring null and
void the lease of a public plaza belonging to the said municipality and ordering the lessee to vacate
the same, ordered the municipality to reimburse the rentals collected. It should be noted that while
the property involved in that case was clearly devoted to public use, and therefore outside the
commerce of man, and could not under any circumstance have been the object of a valid contract
of lease, appellee's position herein is that the land in question is patrimonial character, not being
included in any of the categories of municipal properties for public use enumerated in Article 424
of the Civil Code, namely: "municipal streets, squares, fountains, public waters, promenades and
public works for public service in said municipality." There is indeed nothing in the decision
appealed from or in the briefs of the parties to show that the land was devoted to any of those
purposes when appellants began their occupancy. Consequently, the implied agreement of lease
with them was not null and void, although terminable upon the notice as appellee herein elected to
terminate it. That being so, there is no ground on which reimbursement of the rents may be
ordered.
In any event, even granting that the land in question is for public use and therefore the
municipality of Asingan could not legally lease it to private parties, we see no justification for the
stand maintained by appellants that after having occupied said land and derived benefits
therefrom they should still be entitled to recover what they have paid as a condition for their
ejectment. That would be to enrich them unduly to the prejudice of appellee. Besides, it may be
said that when they built their temporary structures on the land with the latter's knowledge and
implied consent they both treated it as municipal patrimonial property. Insofar as the rents already
paid by them are concerned appellants are estopped from claiming otherwise in order to obtain a
recovery.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to
prove their case not covered by this stipulation of facts. 1wph1.t
The judgment appealed from is affirmed, with cost against appellants.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon
and Regala, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-26337

December 17, 1926

CELSO LEDESMA, plaintiff-appellant,

vs.
THE MUNICIPALITY OF ILOILO, CONCEPCION LOPEZ, MAXIMO M. KALAW, and wife, and
JULIO LEDESMA, defendants-appellees.
Juan Ledesma for appellant.
Provincial Fiscal Borromeo Veloso for the appellee municipality.
Santos and Benitez for the other appellees.
LAND, REGISTRATION OF, UNDER THE TORRENS SYSTEM.The simple possession of a certificate of
title, under the Torrens system, does not necessarily make the possessor a true owner of all the
property described therein. If a person obtains title, under the Torrens system, which includes, by
mistake or oversight, lands which cannot be registered under the Torrens system, he does not, by
virtue of said certificate alone, become the owner of the land illegally included. The inclusion of
public highways in the certificate of title, under the Torrens system, does not thereby give to the

holder of such certificate said public highways. Ledesma vs. Municipality of Iloilo, 49 Phil. 769, No.
26337 December 17, 1926
JOHNSON, J.:
This action was commenced in the Court of First Instance of the Province of Iloilo. Its purpose was
to recover of the defendant the municipality of Iloilo the sum of P15,780 as the value of the two
lots Nos. 537 and 703 which, the plaintiff claimed, the defendant municipality had illegally
appropriated, together with the sum of P5,000 as damages and costs. The recovery of said sums
was opposed by the defendants upon the ground that the plaintiff and appellant was not and never
had been the owner of said lots Nos. 537 and 703. The municipality of Iloilo contended that it had
purchased said lots from Concepcion Lopez on the 9th day of March, 1925, for the purpose of
widening the adjoining streets and had paid therefore the sum of P25,000. The other defendants
answered the petition and supported the contention of the municipality. After hearing the evidence
upon the issue presented, the Honorable Leopoldo Rovira reached the conclusion that a
preponderance of the evidence supported the contention of the defendants, and rendered a
judgment absolving them from all liability under the complaint, without any finding as to costs.
From that judgment the plaintiff appealed.
In order that the facts in the present cause may be more clearly understood, reference to the
following map may be made:

It appears from the documentary evidence found in the record that prior to the 9th day of March,
1915, Concepcion Lopez was the owner of lots 228-A, 228-B, 537 and 703 as seen in said map, and
that on the 9th day of March, 1915, all of said lots constituted lot No. 228. On the 9th day of March,
1915, Concepcion Lopez sold to the City of Iloilo a part of said lot, now numbered 537 and 703 for
the sum of P25,000. The City of Iloilo promised to pay to Concepcion Lopez the said sum of P25,000
within a period of ten years (Exhibit 1). On the 10th day of November, 1915, after the presentation
of a petition for registration of lot 228, a certificate of title (No. 464) was issued in favor of
Concepcion for said lot 228, including lots 537 and 703. The inclusion of said lots (537 and 703) in
said certificate of title was evidently an error on the part of someone connected with the office of
the registrar of titles under the Torrens system.

Later and on the 27th day of April, 1918, Concepcion Lopez sold to Maximo M. Kalaw and wife said
lot 228, including lots 537 and 703 evidently by mistake (see transfer certificate No. 617 and
Exhibit B and 6). It is said that the inclusion of said lots 537 and 703 was a mistake because
Concepcion Lopez as well as Maximo M. Kalaw and wife were ignorant of the fact that said lots
were included in that transfer of certificate of title. Later and on the 11th day of August, 1919,
Concepcion Lopez, representing Maximo M. Kalaw, sold said lots (228, 537 and 703) to Julio
Ledesma, which sale was ratified by Maximo M. Kalaw and his wife on the 15th day of August, 1919
(see Exhibit D.) Later a transfer certificate of title No. 908 was issued in favor of Julio Ledesma
(Exhibit H). According to the admissions of Julio Ledesma lots 537 and 703 were included by
mistake.
On the 15th day of September, 1919, Julio Ledesma sold a portion of lot No. 228 was made into two
lots 228-A and 228-B. Lot 228-A remained the property of Julio Ledesma (see transfer certificate of
title No. 1131, Exhibit I). Said lots 537 and 703, according to said transfer certificate, remained the
property of Julio Ledesma.1awphil.net
On the 2nd day of August, 1922, Julio Ledesma sold to the appellant herein lots Nos. 228-A, 537,
and 703 (see transfer certificate 1989 in favor of Celso Ledesma, Exhibit J). Again, according to
Julio Ledesma, lots 537 and 703 were included in the transfer of lot No. 228-A to Celso Ledesma by
mistake.
The theory of the appellant is that, by reason of the fact that said lots 537 and 703 had been
included in the registered title (title No. 464) of Concepcion Lopez in November, 1915, and
Concepcion included in each succeeding transfer of title to him said lots, that he was the
indisputable owner thereof, and because the City of Iloilo had appropriated said lots, that he was
entitled to recover the value of said lots together with damages.
With reference to the theory of the appellant, an examination of the records shows that as early as
April, 1915, said lots had been turned over by Concepcion Lopez to the City of Iloilo under a
contract of sale for street purposes. That fact was well known. The said lots had been included as a
part of the streets in the City of Iloilo. They had been segregated from the lot formerly owned by
Concepcion Lopez. Said lots 537 and 703 had become a part of a public highway established by
law. The same were therefore illegally included, in accordance with the provisions of section 39 of
Act No. 496, in the certificate of title issued to Concepcion Lopez on the 10th day of November,
1915. That fact was recognized by Concepcion Lopez as well as by each of the subsequent
purchasers of said lots. The simple possession of a certificate of title, under the Torrens system,
does not necessarily make the possessor a true owner of all the property described therein. If a
person obtains a title, under the Torrens system, which include by mistake or oversight land which
cannot be registered under the Torrens system, he does not, by virtue of said certificate alone,
becomes the owner of the lands illegally included. (Legarda and Prieto vs. Saleeby, 31 Phil., 590.)
The inclusion of public highways in a certificate of title does not thereby necessarily give to the
holder of such certificate said public highways. The appellant, therefore, even though a part of said
streets (lots 537 and 703) had been included in the original certificate of title and in the
subsequent transfer of title, did not become the owner of said lots and is not therefore entitled to
recover their value from the City of Iloilo nor the damages prayed for.
For all of the foregoing reasons, the judgment of the lower court is hereby affirmed, with costs. So
ordered.
Avancea, C. J., Street, Villamor, Johns, Romualdez and Villa-Real, JJ., concur.
Malcolm and Ostrand, JJ., concur in the result.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-34672 March 30,1988

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

HOSPITAL,petitioner,
vs.
HON. JUDGE ALEJANDRO E. SEBASTIAN, as Presiding Judge of the CFI of Davao del Norte,
and MELENCIO B. DELENA and MAURO GEMENTIZA as Co-Executors of the Testate Estate
of DAVID, Jacobson, respondents.
Civil Law; Legacy; Constitutional Law; The rule is that if land is invalidly transferred to an alien who
subsequently becomes a citizen or transfer it to a citizen, the flaw in the original transaction is
considered cured and the title of the transferee is rendered valid.Even on the assumption that
the UCBWM was really the owner of the Hospital at the time of the effectivity of the will and that
the devise was for that reason unenforceable, the defect in the will should be deemed rectified by
the subsequent transfer of the property to the Brokenshire Memorial Hospital, Inc. Our consistent
ruling on this matter is that if land is invalidly transferred to an alien who subsequently becomes a
citizen or transfers it to a citizen, the flaw in the original transaction is considered cured and the
title of the transferee is rendered valid.
Same; Same; Same; Same.Thus, in Sarsosa vda. de Barsobia v. Cuenco, where a Filipino citizen
sold her land to an alien who later sold it to a Filipino, we held that the invalidity of the initial
transfer to the alien was corrected by the subsequent transfer of the property to a citizen. A similar
ruling was made in Godinez v, Fong Pak Luen, involving a similar set of facts, where we also cited
Vasquez v, Li Seng Giap, and Herrera v. Luy King Guan. In Yap v. Maravillas, we validated the sale of
agricultural land to an alien who, after the purchase, was naturalized as a Filipino and so became
qualified to acquire it The facts were slightly different in De Castro v. Teng, where, upon the death
of an alien who had purchased a residential lot, his heirs entered into an extrajudicial partition of
his estate and transferred the land to one of his sons who was a naturalized Filipino, We also
sustained the sale. United Church Board for World Ministries vs. Sebastian, 159 SCRA 446, No. L34672 March 30, 1988
CRUZ, J.:
This case is unusual because it arose not out of greed but of generosity. The only question to be
resolved is the Identity and eligibility of the beneficiary in the light of the pertinent constitutional
provisions and the evidence of record.
David Jacobson was an American citizen who had been a resident of the Philippines for more than
thirty years and up to the time of his death in 1970. 1 He left a will in which he "devised and
bequeathed" to the Brokenshire Memorial Hospital 60% of his shares of stocks in the Tagdangua
Plantation Co., inc. which was incorporated under Philippine law in 1948. 2 This corporation was the
registered owner of a tract of land in Pantuhan Davao del Norte, with a total area of about 445
hectares acquired by virtue of a sales patent issued to it in 11953 . 3
In Special Proceeding No. 1695 of the Court of First Instance of Davao del Norte, Judge Alejandro E.
Sebastian disallowed the above-described legacy on the ground that it was in effect an alienation
of private agricultural land in favor of a transferee which was not qualified under the Constitution of
1935. 4 The finding was that the Brokenshire Memorial Hospital was owned by the United Church
Board for World Ministries (UCBWM) ,the herein petitioner, which was a non-stock corporation
organized in the United States by virtue of a charter granted by the state legislature of
Massachussets . 5
The basis of this ruling was Article XII, Sections I and 5 of the 1935 Constitution, which barred
foreigners, including Americans, from acquiring agricultural lands in this country except only by
hereditary succession. The court directed that a copy of its order be sent to the Solicitor General so
he could take the proper action, in view of the invalidity of the transfer, for the escheat of the
subject property to the State. 6
Its motion for reconsideration having been denied, the petitioner came to this Court, contending
that the above-cited constitutional provisions were not applicable because the object of the legacy
was not land but shares of stocks. Moreover, even assuming that what was really involved was a
transfer of land, the petitioner was nonetheless qualified to acquire it under the provisions of the
Parity Amendment and the Laurel-Langley Agreement.

The Solicitor General disagreed at first, insisting that the legacy was prohibited by the 1935
Constitution and did not come under any of the allowed exceptions. During the protracted
exchange of pleadings among the parties, however, certain events transpired to considerably
change the original situation and, consequently, also the position of government.
It now appears from the voluminous documents submitted in this case that at the time the will was
executed in 1966, the land on which the Brokenshire Memorial Hospital was situated was already
registered in the name of the Mindanao District Conference, an affiliate of the United Church of
Christ in the Philippines (PUCC). 7 It was this non-stock corporation, organized in 1949 under
Philippine law with a 100% Filipino membership, that owned and was operating the Hospital at the
time of Jacobson's death. 8 Later, the Brokenshire Memorial Hospital was itself incorporated as a
charitable institution, with Filipinos constituting the majority of its membership, 9 and on December
16,1970, became the successor-in-interest of the UCCP to the devised parcel of land. 10
In proof of these circumstances, the new counsel for Brokenshire presented, among many other
documents, the articles of incorporation of the UCCP and the Hospital and their corresponding
certificates of registration issued by the Securities and Exchange Commission, the licenses issued
by the Board of Medical Sciences for the operation of the Hospital to the UCCP from 1968 to 1972
and to the Brokenshire Memorial Hospital, Inc. from 1973 to 1974, and the certificate of title over
the subject land in the name of the "Mindanao District Conference, commonly known as the
Brokenshire Memorial Hospital." 11
These facts were not brought earlier to the attention of the probate court by the former counsel of
the Hospital, Atty. Juan V. Faune for reasons that do not appear in the record. It was for such
omission (the new counsel would call it "misrepresentation") that Atty. Faune was replaced by Atty.
Rodolfo D. de la Cruz, who disavowed his predecessor's representations. At any rate, the abovestated documents have now made it clear that the United Church for Christ in the Philippines and
not the United Church Board for World Ministries was the owner of the Hospital at the time of the
execution of the win in 1966 and of the testator's death in 1970. It is also not disputed that such
ownership passed to the Brokenshire Memorial Hospital itself upon its incorporation in 1970 when it
thus became the proper party-in-interest to claim the property directly devised by Jacobson to it.
That the United Church Board for World Ministries no longer claims the subject property (if indeed it
really did claim it before), is manifest in its sur rejoinder to the rejoinder of the movant Brokenshire
Memorial Hospital, Inc., which had asked to be substituted for the former as petitioner in this case.
The body of this pleading is reproduced in full as follows:
PETITIONER, by the Undersigned Counsel, to this Honorable Court most respectfully
states:
l. That upon its organization in 1948 the United Church of Christ in the Philippines
succeeded to the religious work, service and mission of the United Church Board
for World Ministries and other religion boards in the United States of America;
2. It was the intention, following the independence of the Philippines from the
U.S.A. the constitution of an independent and autonomous United Church of Christ
in the Philippines, to eventually transfer all properties, schools, and hospitals
established by said mission boards, to the United Church of Christ in the
Philippines;
3. That the United Church Board for World Ministries had, in fact, transferred the
ownership of most of its properties in the Philippines to the United Church of Christ
in the Philippines, its religious organizations and/or instrumentalities;
4. That when the Brokenshire Memorial Hospital was destroyed by fire in 1964,
reconstruction efforts and responsibilities was assumed by the United Church of
Christ in the Philippines, it was the intention of the United Church Board for World
Ministries to relinquish the rights, interests and ownership to the Brokenshire
Memorial Hospital, now Brokenshire Memorial Hospital, Inc. and considered it so
relinquished, with continuing funding assistance from the United Church Board for
World Ministries and other mission boards overseas;

5. The United Church Board for World Ministries continues to this date, with its
fraternal and cooperative relationship with the United Church of Christ in the
Philippines;
6. That as has already been stated, the United Church Board for World Ministries
does not intend to take, possess, or enjoy the legacy of David Jacobson and has
manifested and mandated that all properties that may be derived therefrom shall
be used entirely and exclusively for the work of the Brokenshire Memorial Hospital
and its School of Nursing in accordance with the wishes of David Jacobson;
7. Considering the clear intention of David Jacobson to support the life and work of
Brokenshire Memorial Hospital and its School of Nursing, and further considering
that what was bequeathed are shares of stocks in a corporation,, there exists no
legal and moral impediment for the legacy to be delivered to the Brokenshire
Memorial Hospital, Inc., an instrumentality of the United Church of Christ in the
Philippines, that has succeeded to the ownership of and the humanitarian, and
charitable service of said Hospital.
Respectfully submitted.
September 3, 1983, Davao City, Philippines.
(Sg
d.)
JUA
N V.
FAU
NE
Cou
nsel
for
Peti
tion
er
Unit
ed
Chu
rch
Boa
rd
for
Wor
ld
Mini
stri
es
185
-B
And
a
Stre
et,
Dav
ao
City
WITH OUR CONCURRENCE:

UNITED CHURCH BOARD FOR

WORLD MINISTRIES
by:
(Sgd.) BYRON W. CLARK
Treasurer
NO OBJECTION TO THE DELIVERY
OF THE LEGACY TO BROKENSHIRE
MEMORIAL HOSPITAL, INC.
(Sgd.) MELENCIO B. DELENA (Sgd.) DARIO C. RAMA
Executor-Respondent Counsel for the Estate
and Respondents
Melencio Delena
and
the late Mauro
Gementiza
(deceasedExecutor)
Security Bank Bldg.
Magsaysay Ave.,
Davao City
(Sgd.) DEAN CLAIR (Sgd.) ROSALINO D. ISIDRO
Executor Counsel for the Estate
and Executor Dean
Clair
205 Aldavinco
Bldg.,
C.M. Recto Ave.,
Davao City 12
Parenthetically, it should be observed, in fairness to Judge Sebastian, that he was unaware of these
circumstances when he declared the legacy invalid to enforce the nationalistic provisions of Article
XIII of the 1935 Constitution. For his vigilance in the protection of the national patrimony, he should
be, as he is hereby, commenced.
Even on the assumption that the UCBWN was really the owner of the Hospital at the time of the
effectivity of the will and that the devise was for that reason unenforceable, the defect in the will
should be deemed rectified by the subsequent transfer of the property to the Brokenshire Memorial

Hospital, Inc. Our consistent ruling on this matter is that if land is invalidly transferred to an alien
who subsequently becomes a citizen or transfers it to a ctitizen, the flaw in the original transaction
is considered cured and the title of the transferee is rendered valid.
Thus, in Sarsosa vda. de Barsobia v. Cuenco, 13 where a Filipino citizen sold her land to an alien who
later sold it to a Filipino, we held that the invalidity of the initial transfer to the alien was corrected
by the subsequent transfer of the property to a citizen. A similar ruling was made in Godinez v.
Fong Pak Luen, 14 involving a similar set of facts, where we also cited Vasquez v. Li Seng
Giap, 15 and Herrera v. Luy King Guan. 16 In Yap v. Maravillas, 17we validated the sale of agricultural
land to an alien who, after the purchase, was naturalized as a Filipino and so became qualified to
acquire it. The facts were slightly different in De Castro v. Teng, 18 where, upon the death of an
alien who had purchased a residential lot, his heirs entered into an extrajudicial partition of his
estate and transferred the land to one of his sons who was a naturalized Filipino. We also sustained
the sale.
This action has been pending for quite some time now because of the confusion regarding the
status of the Brokenshire Memorial Hospital as the ultimate beneficiary of the challenged legacy.
The curious thing is that this case was mired in factual and legal complications caused by needless
misunderstanding among the parties which, it now appears, were never in any substantial
disagreement over the ownership of the Hospital. Their common concern for its welfare, in line with
the charitable spirit and purposes of the testator, should have avoided all this tedious and
acrimonious dispute.
WHEREFORE, the Brokenshire Memorial Hospital, Inc. is hereby substituted for the United Church
Board for World Ministries as petitioner in this case and DECLARED to be qualified to accept the
legacy of the late David Jacobson. The petition as thus modified is GRANTED. The order of the
respondent judge dated December 9, 1971, and his Resolution dated December 9, 1971, are SET
ASIDE. This decision is immediately executory. No costs.
SO ORDERED.
Teehankee, C.J., Narvasa, Gancayco and Grio-Aquino, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SPECIAL FIRST DIVISION
G.R. No. 124293

January 31, 2005

J.G. SUMMIT HOLDINGS, INC., petitioner,

vs.
COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its Chairman and Members; ASSET
PRIVATIZATION TRUST; and PHILYARDS HOLDINGS, INC., respondents.
Courts; Supreme Court; The Supreme Court En Banc is not an Appellate Court to which decisions or
resolutions of a Division may be appealed.Supreme Court Circular No. 2-89 dated 7 February
1989 provides, among others that: * * * 2. A decision or resolution of a Division of the Court, when
concurred in by a majority of its Members who actually took part in the deliberations on the issues
in a case and voted thereon, and in no case without the concurrence of at least three of such
Members, is a decision or resolution of the Supreme Court (Section 4[3], Article VIII, 1987
Constitution). 3. The Court en banc is not an Appellate Court to which decisions or resolutions of a
Division may be appealed. x x x x x x x x x 5. A resolution of the Division denying a partys motion
for referral to the Court en banc of any Division case, shall be final and not appealable to the Court
en banc. 6. When a decision or resolution is referred by a Division to the Court en banc, the latter
may, in the absence of sufficiently important reasons, decline to take cognizance of the same, in
which case, the decision or resolution shall be returned to the referring Division. 7. No motion for
reconsideration of the action of the Court en banc declining to take cognizance of a referral by a
Division, shall be entertained.

Same; Same; Commercial Law; Estoppel; Right of First Refusal; Contractual obligations arising from
rights of first refusal are not new in this jurisdiction and have been recognized in numerous cases,
and estoppel is too known a civil law concept to require an elongated discussion.We reject
petitioners argument that the present case may be considered under the Supreme Court
Resolution dated February 23, 1984 which included among en banc cases those involving a novel
question of law and those where a doctrine or principle laid down by the court en banc or in
division may be modified or reversed. The case was resolved based on basic principles of the right
of first refusal in commercial law and estoppel in civil law. Contractual obligations arising from
rights of first refusal are not new in this jurisdiction and have been recognized in numerous cases.
Estoppel is too known a civil law concept to require an elongated discussion. Fundamental
principles on public bidding were likewise used to resolve the issues raised by the petitioner. To be
sure, petitioner leans on the right to top in a public bidding in arguing that the case at bar involves
a novel issue. We are not swayed. The right to top was merely a condition or a reservation made in
the bidding rules which was fully disclosed to all bidding parties.
Same; Same; Separation of Powers; There is no executive interference in the functions of the
Supreme Court by the mere filing of a memorandum by the Secretary of Finance, which
memorandum was merely noted to acknowledge its filingit had no further legal significance.
There is no executive interference in the functions of this Court by the mere filing of a
memorandum by Secretary of Finance Jose Isidro Camacho. The memorandum was merely noted
to acknowledge its filing. It had no further legal significance. Notably too, the assailed Resolution
dated September 24, 2003 was decided unanimously by the Special First Division in favor of the
respondents.
Bids and Bidding; Infrastructure Projects; There is nothing inherently illegal on a corporations act in
seeking funding from parties who were losing biddersthis is a purely commercial decision over
which the State should not interfere absent any legal infirmity; A case involving the disposition of
shares in a corporation which the government seeks to privatize, in which the persons with whom it
desires to enter into business with in order to raise funds to purchase the shares are basically its
business, differs from a case involving a contract for the operation or construction of a government
infrastructure where the identity of the buyer/bidder or financier constitutes an important
consideration.We see no inherent illegality on PHILYARDS act in seeking funding from parties
who were losing bidders. This is a purely commercial decision over which the State should not
interfere absent any legal infirmity. It is emphasized that the case at bar involves the disposition of
shares in a corporation which the government sought to privatize. As such, the persons with whom
PHILYARDS desired to enter into business with in order to raise funds to purchase the shares are
basically its business. This is in contrast to a case involving a contract for the operation of or
construction of a government infrastructure where the identity of the buyer/bidder or financier
constitutes an important consideration. In such cases, the government would have to take utmost
precaution to protect public interest by ensuring that the parties with which it is contracting have
the ability to satisfactorily construct or operate the infrastructure.
Same; Right of First Refusal; The agreement of co-shareholders to mutually grant the right of first
refusal to each other, by itself, does not constitute a violation of the provisions of the Constitution
limiting land ownership to Filipinos and Filipino corporations; If the foreign shareholdings of a
landholding corporation exceeds 40%, it is not the foreign stockholders ownership of the shares
which is adversely affected but the capacity of the corporation to own landthat is, the corporation
becomes disqualified to own land. We uphold the validity of the mutual rights of first refusal under
the JVA between KAWASAKI and NIDC. First of all, the right of first refusal is a property right of
PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA. This right allows them
to purchase the shares of their co-shareholder before they are offered to a third party. The
agreement of co-shareholders to mutually grant this right to each other, by itself, does not
constitute a violation of the provisions of the Constitution limiting land ownership to Filipinos and
Filipino corporations. As PHILYARDS correctly puts it, if PHILSECO still owns land, the right of first
refusal can be validly assigned to a qualified Filipino entity in order to maintain the 60%-40% ratio.
This transfer, by itself, does not amount to a violation of the Anti-Dummy Laws, absent proof of any
fraudulent intent. The transfer could be made either to a nominee or such other party which the
holder of the right of first refusal feels it can comfortably do business with. Alternatively, PHILSECO
may divest of its landholdings, in which case KAWASAKI, in exercising its right of first refusal, can
exceed 40% of PHILSECOs equity. In fact, it can even be said that if the foreign shareholdings of a
landholding corporation exceeds 40%, it is not the foreign stockholders ownership of the shares
which is adversely affected but the capacity of the corporation to own landthat is, the corporation
becomes disqualified to own land. This finds support under the basic corporate law principle that
the corporation and its stockholders are separate juridical entities. In this vein, the right of first
refusal over shares pertains to the shareholders whereas the capacity to own land pertains to the

corporation. Hence, the fact that PHILSECO owns land cannot deprive stockholders of their right of
first refusal. No law disqualifies a person from purchasing shares in a landholding corporation even
if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from
owning land.
Constitutional Law; National Economy and Patrimony; Statutory Construction; The prohibition under
Section 7, Article XII of the Constitution applies only to ownership of landit does not extend to
immovable or real property as defined under Article 415 of the Civil Code.As correctly observed
by the public respondents, the prohibition in the Constitution applies only to ownership of land. It
does not extend to immovable or real property as defined under Article 415 of the Civil Code.
Otherwise, we would have a strange situation where the ownership of immovable property such as
trees, plants and growing fruit attached to the land would be limited to Filipinos and Filipino
corporations only. J.G. Summit Holdings, Inc. vs. Court of Appeals, 450 SCRA 169, G.R. No. 124293
January 31, 2005
RESOLUTION
PUNO, J.:
For resolution before this Court are two motions filed by the petitioner, J.G. Summit Holdings, Inc.
for reconsideration of our Resolution dated September 24, 2003 and to elevate this case to the
Court En Banc. The petitioner questions the Resolution which reversed our Decision of November
20, 2000, which in turn reversed and set aside a Decision of the Court of Appeals promulgated on
July 18, 1995.
I. Facts
The undisputed facts of the case, as set forth in our Resolution of September 24, 2003, are as
follows:
On January 27, 1997, 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, the NIDC and KAWASAKI will contribute P330 million for the
capitalization of PHILSECO in the proportion of 60%-40% respectively. One of its salient features is
the grant to the parties of the right of first refusal should either of them decide to sell, assign or
transfer its interest in the joint venture, viz:
1.4 Neither party shall sell, transfer or assign all or any part of its interest in SNS [PHILSECO] 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.
On November 25, 1986, NIDC transferred all its rights, title and interest in PHILSECO to the
Philippine National Bank (PNB). Such interests were subsequently transferred to the National
Government pursuant to Administrative Order No. 14. 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 nonperforming assets of the National Government. Thereafter, on February 27, 1987, a trust
agreement was entered into between the National Government and the APT wherein the latter was
named the trustee of the National Government's share in PHILSECO. In 1989, as a result of a quasireorganization 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%.
In the interest of the national economy and the government, the COP and the APT deemed it best
to sell the National Government's share in PHILSECO to private entities. After a series of
negotiations between the APT and KAWASAKI, 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 the 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)1 would exercise its right to top.

At the pre-bidding conference held on September 18, 1993, interested bidders were given copies of
the JVA between NIDC and KAWASAKI, and of the Asset Specific Bidding Rules (ASBR) drafted for
the National Government's 87.6% equity share in PHILSECO. The provisions of the ASBR were
explained to the interested bidders who were notified that the bidding would be held on December
2, 1993. A portion of the ASBR reads:
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.
xxx xxx xxx
2.0 The highest bid, as well as the buyer, shall be subject to the final approval of both the APT
Board of Trustees and the Committee on Privatization (COP).
2.1 APT reserves the right in its sole discretion, to reject any or all bids.
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).
xxx xxx xxx
6.0 The highest qualified bid will be submitted to the APT Board of Trustees at its regular meeting
following the bidding, for the purpose of determining whether or not it should be endorsed by the
APT Board of Trustees to the COP, and the latter approves the same. The APT shall advise Kawasaki
Heavy Industries, Inc. and/or its nominee, [PHILYARDS] Holdings, Inc., that the highest bid is
acceptable to the National Government. Kawasaki Heavy Industries, Inc. and/or [PHILYARDS]
Holdings, Inc. shall then have a period of thirty (30) calendar days from the date of receipt of such
advice from APT within which to exercise their "Option to Top the Highest Bid" by offering a bid
equivalent to the highest bid plus five (5%) percent thereof.
6.1 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. exercise their "Option
to Top the Highest Bid," they shall so notify the APT about such exercise of their option and deposit
with APT the amount equivalent to ten percent (10%) of the highest bid plus five percent (5%)
thereof within the thirty (30)-day period mentioned in paragraph 6.0 above. APT will then serve
notice upon Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. declaring them as
the preferred bidder and they shall have a period of ninety (90) days from the receipt of the APT's
notice within which to pay the balance of their bid price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. fail to exercise their
"Option to Top the Highest Bid" within the thirty (30)-day period, APT will declare the highest bidder
as the winning bidder.
xxx xxx xxx
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. . . .
At the public bidding on the said date, petitioner J.G. Summit Holdings, Inc. 2 submitted a bid of Two
Billion and Thirty Million Pesos (P2,030,000,000.00) with an acknowledgment of KAWASAKI/
[PHILYARDS'] right to top, viz:
4. I/We understand that the Committee on Privatization (COP) has up to thirty (30) days to act on
APT's recommendation based on the result of this bidding. Should the COP approve the highest bid,
APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee, [PHILYARDS] Holdings, Inc.
that the highest bid is acceptable to the National Government. Kawasaki Heavy Industries, Inc.

and/or [PHILYARDS] Holdings, Inc. shall then have a period of thirty (30) calendar days from the
date of receipt of such advice from APT within which to exercise their "Option to Top the Highest
Bid" by offering a bid equivalent to the highest bid plus five (5%) percent thereof.
As petitioner was declared the highest bidder, the COP approved the sale on December 3, 1993
"subject to the right of Kawasaki Heavy Industries, Inc./[PHILYARDS] Holdings, Inc. to top JGSMI's
bid by 5% as specified in the bidding rules."
On December 29, 1993, petitioner informed 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 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.
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. On July 18, 1995, the Court of Appeals denied
the same for lack of merit. It ruled that the petition for mandamus was not the proper remedy 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." The Court of Appeals further
ruled that the right of first refusal and the right to top are prima facie legal and that the petitioner,
"by participating in the public bidding, with full knowledge of the right to top granted to KAWASAKI/
[PHILYARDS] isestopped 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." Petitioner filed a Motion for Reconsideration of said Decision which was
denied on March 15, 1996. Petitioner thus filed a Petition for Certiorari with this Court alleging
grave abuse of discretion on the part of the appellate court.
On November 20, 2000, this Court rendered x x x [a] Decision ruling among others that the Court
of Appeals erred when it dismissed the petition on the sole ground of the impropriety of the special
civil action of mandamus because the petition was also one of certiorari. It further ruled that a
shipyard like PHILSECO is a public utility whose capitalization must be sixty percent (60%) Filipinoowned. Consequently, the right to top granted to KAWASAKI under the Asset Specific Bidding Rules
(ASBR) drafted for the sale of the 87.67% equity of the National Government in PHILSECO is illegal
not only because it violates the rules on competitive bidding but more so, because it allows
foreign corporations to own more than 40% equity in the shipyard. It also held that "although the
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."
Thus, this Court voided the transfer of the national government's 87.67% share in PHILSECO to
Philyard[s] Holdings, Inc., and upheld the right of JG Summit, as the highest bidder, to take title to
the said shares, viz:
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:
(a) accept the 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 87.6%
of PHILSECO's total capitalization;

(d) return to private respondent PHGI 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.
In separate Motions for Reconsideration, respondents submit[ted] three basic issues for x x x
resolution: (1) Whether PHILSECO is a public utility; (2) Whether under the 1977 JVA, KAWASAKI can
exercise its right of first refusal only up to 40% of the total capitalization of PHILSECO; and (3)
Whether the right to top granted to KAWASAKI violates the principles of competitive
bidding.3 (citations omitted)
In a Resolution dated September 24, 2003, this Court ruled in favor of the respondents. On the first
issue, we held that Philippine Shipyard and Engineering Corporation (PHILSECO) is not a public
utility, as by nature, a shipyard is not a public utility 4 and that no law declares a shipyard to be a
public utility.5 On the second issue, we found nothing in the 1977 Joint Venture Agreement (JVA)
which prevents Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) from acquiring more
than 40% of PHILSECOs total capitalization. 6 On the final issue, we held that the right to top
granted to KAWASAKI in exchange for its right of first refusal did not violate the principles of
competitive bidding.7
On October 20, 2003, the petitioner filed a Motion for Reconsideration 8 and a Motion to Elevate This
Case to the Court En Banc.9 Public respondents Committee on Privatization (COP) and Asset
Privatization Trust (APT), and private respondent Philyards Holdings, Inc. (PHILYARDS) filed their
Comments on J.G. Summit Holdings, Inc.s (JG Summits) Motion for Reconsideration and Motion to
Elevate This Case to the Court En Banc on January 29, 2004 and February 3, 2004, respectively.
II. Issues
Based on the foregoing, the relevant issues to resolve to end this litigation are the following:
1. Whether there are sufficient bases to elevate the case at bar to the Court en banc.
2. Whether the motion for reconsideration raises any new matter or cogent reason to
warrant a reconsideration of this Courts Resolution of September 24, 2003.
Motion to Elevate this Case to the
Court En Banc
The petitioner prays for the elevation of the case to the Court en banc on the following grounds:
1. The main issue of the propriety of the bidding process involved in the present case has
been confused with the policy issue of the supposed fate of the shipping industry which has
never been an issue that is determinative of this case. 10
2. The present case may be considered under the Supreme Court Resolution dated
February 23, 1984 which included among en banc cases those involving a novel question of
law and those where a doctrine or principle laid down by the Court en banc or in division
may be modified or reversed.11
3. There was clear executive interference in the judicial functions of the Court when the
Honorable Jose Isidro Camacho, Secretary of Finance, forwarded to Chief Justice Davide, a
memorandum dated November 5, 2001, attaching a copy of the Foreign Chambers Report
dated October 17, 2001, which matter was placed in the agenda of the Court and noted by
it in a formal resolution dated November 28, 2001.12
Opposing J.G. Summits motion to elevate the case en banc, PHILYARDS points out the petitioners
inconsistency in previously opposing PHILYARDS Motion to Refer the Case to the Court En
Banc. PHILYARDS contends that J.G. Summit should now be estopped from asking that the case be

referred to the Court en banc. PHILYARDS further contends that the Supreme Court en banc is not
an appellate court to which decisions or resolutions of its divisions may be appealed citing
Supreme Court Circular No. 2-89 dated February 7, 1989.13 PHILYARDS also alleges that there is no
novel question of law involved in the present case as the assailed Resolution was based on wellsettled jurisprudence. Likewise, PHILYARDS stresses that the Resolution was merely an outcome of
the motions for reconsideration filed by it and the COP and APT and is "consistent with the inherent
power of courts to amend and control its process and orders so as to make them conformable to
law and justice. (Rule 135, sec. 5)" 14 Private respondent belittles the petitioners allegations
regarding the change in ponente and the alleged executive interference as shown by former
Secretary of Finance Jose Isidro Camachos memorandum dated November 5, 2001 arguing that
these do not justify a referral of the present case to the Court en banc.
In insisting that its Motion to Elevate This Case to the Court En Banc should be granted, J.G.
Summit further argued that: its Opposition to the Office of the Solicitor Generals Motion to Refer is
different from its own Motion to Elevate; different grounds are invoked by the two motions; there
was unwarranted "executive interference"; and the change in ponente is merely noted in asserting
that this case should be decided by the Court en banc.15
We find no merit in petitioners contention that the propriety of the bidding process involved in the
present case has been confused with the policy issue of the fate of the shipping industry which,
petitioner maintains, has never been an issue that is determinative of this case. The Courts
Resolution of September 24, 2003 reveals a clear and definitive ruling on the propriety of the
bidding process. In discussing whether the right to top granted to KAWASAKI in exchange for its
right of first refusal violates the principles of competitive bidding, we made an exhaustive
discourse on the rules and principles of public bidding and whether they were complied with in the
case at bar.16 This Court categorically ruled on the petitioners argument that PHILSECO, as a
shipyard, is a public utility which should maintain a 60%-40% Filipino-foreign equity ratio, as it was
a pivotal issue. In doing so, we recognized the impact of our ruling on the shipbuilding industry
which was beyond avoidance.17
We reject petitioners argument that the present case may be considered under the Supreme Court
Resolution dated February 23, 1984 which included among en banc cases those involving a novel
question of law and those where a doctrine or principle laid down by the court en banc or in
division may be modified or reversed. The case was resolved based on basic principles of the right
of first refusal in commercial law and estoppel in civil law. Contractual obligations arising from
rights of first refusal are not new in this jurisdiction and have been recognized in numerous
cases.18 Estoppel is too known a civil law concept to require an elongated discussion. Fundamental
principles on public bidding were likewise used to resolve the issues raised by the petitioner. To be
sure, petitioner leans on the right to top in a public bidding in arguing that the case at bar involves
a novel issue. We are not swayed. The right to top was merely a condition or a reservation made in
the bidding rules which was fully disclosed to all bidding parties. In Bureau Veritas, represented
by Theodor H. Hunermann v. Office of the President, et al., 19 we dealt with this
conditionality, viz:
x x x It must be stressed, as held in the case of A.C. Esguerra & Sons v. Aytona, et al., (L-18751, 28
April 1962, 4 SCRA 1245), that in an "invitation to bid, there is a condition imposed upon the
bidders to the effect that the bidding shall be subject to the right of the government to
reject any and all bids subject to its discretion. In the case at bar, the government has
made its choice and unless an unfairness or injustice is shown, the losing bidders have
no cause to complain nor right to dispute that choice. This is a well-settled doctrine in
this jurisdiction and elsewhere."
The discretion to accept or reject a bid and award contracts is vested in the Government agencies
entrusted with that function. The discretion given to the authorities on this matter is of such wide
latitude that the Courts will not interfere therewith, unless it is apparent that it is used as a shield
to a fraudulent award (Jalandoni v. NARRA, 108 Phil. 486 [1960]). x x x The exercise of this
discretion is a policy decision that necessitates prior inquiry, investigation, comparison, evaluation,
and deliberation. This task can best be discharged by the Government agencies concerned, not by
the Courts. The role of the Courts is to ascertain whether a branch or instrumentality of the
Government has transgressed its constitutional boundaries. But the Courts will not interfere with
executive or legislative discretion exercised within those boundaries. Otherwise, it strays into the
realm of policy decision-making.

It is only upon a clear showing of grave abuse of discretion that the Courts will set aside the award
of a contract made by a government entity. Grave abuse of discretion implies a capricious,
arbitrary and whimsical exercise of power (Filinvest Credit Corp. v. Intermediate Appellate Court,
No. 65935, 30 September 1988, 166 SCRA 155). The abuse of discretion must be so patent and
gross as to amount to an evasion of positive duty or to a virtual refusal to perform a duty enjoined
by law, as to act at all in contemplation of law, where the power is exercised in an arbitrary and
despotic manner by reason of passion or hostility (Litton Mills, Inc. v. Galleon Trader, Inc., et al[.], L40867, 26 July 1988, 163 SCRA 489).
The facts in this case do not indicate any such grave abuse of discretion on the part of public
respondents when they awarded the CISS contract to Respondent SGS. In the "Invitation to
Prequalify and Bid" (Annex "C," supra), the CISS Committee made an express reservation of
the right of the Government to "reject any or all bids or any part thereof or waive any
defects contained thereon and accept an offer most advantageous to the Government."
It is a well-settled rule that where such reservation is made in an Invitation to Bid, the
highest or lowest bidder, as the case may be, is not entitled to an award as a matter of
right (C & C Commercial Corp. v. Menor, L-28360, 27 January 1983, 120 SCRA 112). Even the
lowest Bid or any Bid may be rejected or, in the exercise of sound discretion, the award may be
made to another than the lowest bidder (A.C. Esguerra & Sons v. Aytona, supra, citing 43 Am. Jur.,
788). (emphases supplied)1awphi1.nt
Like the condition in the Bureau Veritas case, the right to top was a condition imposed by the
government in the bidding rules which was made known to all parties. It was a condition
imposed on all bidders equally, based on the APTs exercise of its discretion in deciding
on how best to privatize the governments shares in PHILSECO. It was not a whimsical or
arbitrary condition plucked from the ether and inserted in the bidding rules but a condition which
the APT approved as the best way the government could comply with its contractual obligations to
KAWASAKI under the JVA and its mandate of getting the most advantageous deal for the
government. The right to top had its history in the mutual right of first refusal in the JVA and was
reached by agreement of the government and KAWASAKI.
Further, there is no "executive interference" in the functions of this Court by the mere filing of a
memorandum by Secretary of Finance Jose Isidro Camacho. The memorandum was merely "noted"
to acknowledge its filing. It had no further legal significance. Notably too, the assailed
Resolution dated September 24, 2003 was decided unanimously by the Special First
Division in favor of the respondents.
Again, we emphasize that a decision or resolution of a Division is that of the Supreme Court 20 and
the Court en banc is not an appellate court to which decisions or resolutions of a Division may be
appealed.21
For all the foregoing reasons, we find no basis to elevate this case to the Court en banc.
Motion for Reconsideration
Three principal arguments were raised in the petitioners Motion for Reconsideration. First, that a
fair resolution of the case should be based on contract law, not on policy considerations; the
contracts do not authorize the right to top to be derived from the right of first refusal. 22 Second,
that neither the right of first refusal nor the right to top can be legally exercised by the consortium
which is not the proper party granted such right under either the JVA or the Asset Specific Bidding
Rules (ASBR).23 Third, that the maintenance of the 60%-40% relationship between the National
Investment and Development Corporation (NIDC) and KAWASAKI arises from contract and from the
Constitution because PHILSECO is a landholding corporation and need not be a public utility to be
bound by the 60%-40% constitutional limitation.24
On the other hand, private respondent PHILYARDS asserts that J.G. Summit has not been able to
show compelling reasons to warrant a reconsideration of the Decision of the Court. 25 PHILYARDS
denies that the Decision is based mainly on policy considerations and points out that it is premised
on principles governing obligations and contracts and corporate law such as the rule requiring
respect for contractual stipulations, upholding rights of first refusal, and recognizing the assignable
nature of contracts rights.26 Also, the ruling that shipyards are not public utilities relies on
established case law and fundamental rules of statutory construction. PHILYARDS stresses that
KAWASAKIs right of first refusal or even the right to top is not limited to the 40% equity of the

latter.27 On the landholding issue raised by J.G. Summit, PHILYARDS emphasizes that this is a nonissue and even involves a question of fact. Even assuming that this Court can take cognizance of
such question of fact even without the benefit of a trial, PHILYARDS opines that landholding by
PHILSECO at the time of the bidding is irrelevant because what is essential is that ultimately a
qualified entity would eventually hold PHILSECOs real estate properties. 28 Further, given the
assignable nature of the right of first refusal, any applicable nationality restrictions, including
landholding limitations, would not affect the right of first refusal itself, but only the manner of its
exercise.29 Also, PHILYARDS argues that if this Court takes cognizance of J.G. Summits allegations
of fact regarding PHILSECOs landholding, it must also recognize PHILYARDS assertions that
PHILSECOs landholdings were sold to another corporation. 30 As regards the right of first refusal,
private respondent explains that KAWASAKIs reduced shareholdings (from 40% to 2.59%) did not
translate to a deprivation or loss of its contractually granted right of first refusal. 31 Also, the bidding
was valid because PHILYARDS exercised the right to top and it was of no moment that losing
bidders later joined PHILYARDS in raising the purchase price. 32
In cadence with the private respondent PHILYARDS, public respondents COP and APT contend:
1. The conversion of the right of first refusal into a right to top by 5% does not violate any
provision in the JVA between NIDC and KAWASAKI.
2. PHILSECO is not a public utility and therefore not governed by the constitutional
restriction on foreign ownership.
3. The petitioner is legally estopped from assailing the validity of the proceedings of the
public bidding as it voluntarily submitted itself to the terms of the ASBR which included the
provision on the right to top.
4. The right to top was exercised by PHILYARDS as the nominee of KAWASAKI and the fact
that PHILYARDS formed a consortium to raise the required amount to exercise the right to
top the highest bid by 5% does not violate the JVA or the ASBR.
5. The 60%-40% Filipino-foreign constitutional requirement for the acquisition of lands does
not apply to PHILSECO because as admitted by petitioner itself, PHILSECO no longer owns
real property.
6. Petitioners motion to elevate the case to the Court en banc is baseless and would only
delay the termination of this case. 33
In a Consolidated Comment dated March 8, 2004, J.G. Summit countered the arguments of the
public and private respondents in this wise:
1. The award by the APT of 87.67% shares of PHILSECO to PHILYARDS with losing bidders
through the exercise of a right to top, which is contrary to law and the constitution is null
and void for being violative of substantive due process and the abuse of right provision in
the Civil Code.
a. The bidders[] right to top was actually exercised by losing bidders.
b. The right to top or the right of first refusal cannot co-exist with a genuine
competitive bidding.
c. The benefits derived from the right to top were unwarranted.
2. The landholding issue has been a legitimate issue since the start of this case but is
shamelessly ignored by the respondents.
a. The landholding issue is not a non-issue.
b. The landholding issue does not pose questions of fact.

c. That PHILSECO owned land at the time that the right of first refusal was agreed
upon and at the time of the bidding are most relevant.
d. Whether a shipyard is a public utility is not the core issue in this case.
3. Fraud and bad faith attend the alleged conversion of an inexistent right of first refusal to
the right to top.
a. The history behind the birth of the right to top shows fraud and bad faith.
b. The right of first refusal was, indeed, "effectively useless."
4. Petitioner is not legally estopped to challenge the right to top in this case.
a. Estoppel is unavailing as it would stamp validity to an act that is prohibited by
law or against public policy.
b. Deception was patent; the right to top was an attractive nuisance.
c. The 10% bid deposit was placed in escrow.
J.G. Summits insistence that the right to top cannot be sourced from the right of first refusal is not
new and we have already ruled on the issue in our Resolution of September 24, 2003. We upheld
the mutual right of first refusal in the JVA.34 We also ruled that nothing in the JVA prevents
KAWASAKI from acquiring more than 40% of PHILSECOs total capitalization. 35 Likewise, nothing in
the JVA or ASBR bars the conversion of the right of first refusal to the right to top. In sum, nothing
new and of significance in the petitioners pleading warrants a reconsideration of our ruling.
Likewise, we already disposed of the argument that neither the right of first refusal nor the right to
top can legally be exercised by the consortium which is not the proper party granted such right
under either the JVA or the ASBR. Thus, we held:
The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM Group, Insular Life
Assurance, Mitsui and ICTSI), has joined PHILYARDS in the latter's effort to raise P2.131 billion
necessary in exercising the right to top is not contrary to law, public policy or public morals. There
is nothing in the ASBR that bars the losing bidders from joining either the winning bidder (should
the right to top is not exercised) or KAWASAKI/PHI (should it exercise its right to top as it did), to
raise the purchase price. The petitioner did not allege, nor was it shown by competent evidence,
that the participation of the losing bidders in the public bidding was done with fraudulent intent.
Absent any proof of fraud, the formation by [PHILYARDS] of a consortium is legitimate in a free
enterprise system. The appellate court is thus correct in holding the petitioner estopped from
questioning the validity of the transfer of the National Government's shares in PHILSECO to
respondent.36
Further, we see no inherent illegality on PHILYARDS act in seeking funding from parties who were
losing bidders. This is a purely commercial decision over which the State should not interfere
absent any legal infirmity. It is emphasized that the case at bar involves the disposition of shares in
a corporation which the government sought to privatize. As such, the persons with whom
PHILYARDS desired to enter into business with in order to raise funds to purchase the shares are
basically its business. This is in contrast to a case involving a contract for the operation of or
construction of a government infrastructure where the identity of the buyer/bidder or financier
constitutes an important consideration. In such cases, the government would have to take utmost
precaution to protect public interest by ensuring that the parties with which it is contracting have
the ability to satisfactorily construct or operate the infrastructure.
On the landholding issue, J.G. Summit submits that since PHILSECO is a landholding company,
KAWASAKI could exercise its right of first refusal only up to 40% of the shares of PHILSECO due to
the constitutional prohibition on landholding by corporations with more than 40% foreign-owned
equity. It further argues that since KAWASAKI already held at least 40% equity in PHILSECO, the
right of first refusal was inutile and as such, could not subsequently be converted into the right to
top. 37 Petitioner also asserts that, at present, PHILSECO continues to violate the constitutional
provision on landholdings as its shares are more than 40% foreign-owned. 38 PHILYARDS admits that

it may have previously held land but had already divested such landholdings. 39 It contends,
however, that even if PHILSECO owned land, this would not affect the right of first refusal but only
the exercise thereof. If the land is retained, the right of first refusal, being a property right, could be
assigned to a qualified party. In the alternative, the land could be divested before the exercise of
the right of first refusal. In the case at bar, respondents assert that since the right of first refusal
was validly converted into a right to top, which was exercised not by KAWASAKI, but by PHILYARDS
which is a Filipino corporation (i.e., 60% of its shares are owned by Filipinos), then there is no
violation of the Constitution.40 At first, it would seem that questions of fact beyond cognizance by
this Court were involved in the issue. However, the records show that PHILYARDS admits it had
owned land up until the time of the bidding.41 Hence, the only issue is whether
KAWASAKI had a valid right of first refusal over PHILSECO shares under the JVA
considering that PHILSECO owned land until the time of the bidding and KAWASAKI
already held 40% of PHILSECOs equity.
We uphold the validity of the mutual rights of first refusal under the JVA between KAWASAKI and
NIDC. First of all, the right of first refusal is a property right of PHILSECO shareholders, KAWASAKI
and NIDC, under the terms of their JVA. This right allows them to purchase the shares of their coshareholder before they are offered to a third party. The agreement of co-shareholders to
mutually grant this right to each other, by itself, does not constitute a violation of the
provisions of the Constitution limiting land ownership to Filipinos and Filipino
corporations. As PHILYARDS correctly puts it, if PHILSECO still owns land, the right of first refusal
can be validly assigned to a qualified Filipino entity in order to maintain the 60%-40% ratio. This
transfer, by itself, does not amount to a violation of the Anti-Dummy Laws, absent proof of any
fraudulent intent. The transfer could be made either to a nominee or such other party which the
holder of the right of first refusal feels it can comfortably do business with. Alternatively, PHILSECO
may divest of its landholdings, in which case KAWASAKI, in exercising its right of first refusal, can
exceed 40% of PHILSECOs equity. In fact, it can even be said that if the foreign
shareholdings of a landholding corporation exceeds 40%, it is not the foreign
stockholders ownership of the shares which is adversely affected but the capacity of
the corporation to own land that is, the corporation becomes disqualified to own land. This
finds support under the basic corporate law principle that the corporation and its stockholders are
separate juridical entities. In this vein, the right of first refusal over shares pertains to the
shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that
PHILSECO owns land cannot deprive stockholders of their right of first refusal. No law disqualifies
a person from purchasing shares in a landholding corporation even if the latter will
exceed the allowed foreign equity, what the law disqualifies is the corporation from
owning land. This is the clear import of the following provisions in the Constitution:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils,
all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and utilization of natural resources
shall be under the full control and supervision of the State. The State may directly undertake such
activities, or it may enter into co-production, joint venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at least sixty per centum of whose
capital is owned by such citizens. Such agreements may be for a period not exceeding twentyfive 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.
xxx xxx xxx
Section 7. Save in cases of hereditary succession, no private lands shall be transferred or
conveyed except to individuals, corporations, or associations qualified to acquire or
hold lands of the public domain.42(emphases supplied)
The petitioner further argues that "an option to buy land is void in itself (Philippine Banking
Corporation v. Lui She, 21 SCRA 52 [1967]). The right of first refusal granted to KAWASAKI, a
Japanese corporation, is similarly void. Hence, the right to top, sourced from the right of first
refusal, is also void."43 Contrary to the contention of petitioner, the case of Lui She did not that say
"an option to buy land is void in itself," for we ruled as follows:

x x x To be sure, a lease to an alien for a reasonable period is valid. So is an option

giving an alien the right to buy real property on condition that he is granted Philippine
citizenship. As this Court said in Krivenko vs. Register of Deeds:
[A]liens are not completely excluded by the Constitution from the use of lands for residential
purposes. Since their residence in the Philippines is temporary, they may be granted temporary
rights such as a lease contract which is not forbidden by the Constitution. Should they desire to
remain here forever and share our fortunes and misfortunes, Filipino citizenship is not impossible to
acquire.
But if an alien is given not only a lease of, but also an option to buy, a piece of land, by
virtue of which the Filipino owner cannot sell or otherwise dispose of his property, this
to last for 50 years, then it becomes clear that the arrangement is a virtual transfer of
ownership whereby the owner divests himself in stages not only of the right to enjoy
the land (jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of the right
to dispose of it (jus disponendi) rights the sum total of which make up ownership. It
is just as if today the possession is transferred, tomorrow, the use, the next day, the
disposition, and so on, until ultimately all the rights of which ownership is made up are
consolidated in an alien. And yet this is just exactly what the parties in this case did within this
pace of one year, with the result that Justina Santos'[s] ownership of her property was reduced to a
hollow concept. If this can be done, then the Constitutional ban against alien landholding in the
Philippines, as announced in Krivenko vs. Register of Deeds, is indeed in grave
peril.44 (emphases supplied; Citations omitted)
In Lui She, the option to buy was invalidated because it amounted to a virtual transfer of
ownership as the owner could not sell or dispose of his properties. The contract in Lui
She prohibited the owner of the land from selling, donating, mortgaging, or encumbering the
property during the 50-year period of the option to buy. This is not so in the case at bar where the
mutual right of first refusal in favor of NIDC and KAWASAKI does not amount to a virtual transfer of
land to a non-Filipino. In fact, the case at bar involves a right of first refusal over shares of
stock while the Lui She case involves an option to buy the land itself. As discussed earlier,
there is a distinction between the shareholders ownership of shares and the corporations
ownership of land arising from the separate juridical personalities of the corporation and its
shareholders.
We note that in its Motion for Reconsideration, J.G. Summit alleges that PHILSECO continues to
violate the Constitution as its foreign equity is above 40% and yet owns long-term leasehold
rights which are real rights.45 It cites Article 415 of the Civil Code which includes in the
definition of immovable property, "contracts for public works, and servitudes and other real rights
over immovable property."46 Any existing landholding, however, is denied by PHILYARDS citing its
recent financial statements.47 First, these are questions of fact, the veracity of which would require
introduction of evidence. The Court needs to validate these factual allegations based on competent
and reliable evidence. As such, the Court cannot resolve the questions they pose. Second, J.G.
Summit misreads the provisions of the Constitution cited in its own pleadings, to wit:
29.2 Petitioner has consistently pointed out in the past that private respondent is not a 60%-40%
corporation, and this violates the Constitution x x x The violation continues to this day because
under the law, it continues to own real property
xxx xxx xxx
32. To review the constitutional provisions involved, Section 14, Article XIV of the 1973 Constitution
(the JVA was signed in 1977), provided:
"Save in cases of hereditary succession, no private lands shall be transferred or conveyed except
to individuals, corporations, or associations qualified to acquire or hold lands of the public domain."
32.1 This provision is the same as Section 7, Article XII of the 1987 Constitution.
32.2 Under the Public Land Act, corporations qualified to acquire or hold lands of the public
domain are corporations at least 60% of which is owned by Filipino citizens (Sec. 22,
Commonwealth Act 141, as amended). (emphases supplied)

As correctly observed by the public respondents, the prohibition in the Constitution applies only to
ownership of land.48 It does not extend to immovable or real property as defined under
Article 415 of the Civil Code.Otherwise, we would have a strange situation where the ownership
of immovable property such as trees, plants and growing fruit attached to the land 49 would be
limited to Filipinos and Filipino corporations only.

III.
WHEREFORE, in view of the foregoing, the petitioners Motion for Reconsideration is DENIED WITH
FINALITY and the decision appealed from is AFFIRMED. The Motion to Elevate This Case to the
Court En Banc is likewise DENIED for lack of merit.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Corona, and Tinga, JJ., concur.