Cases on Property 1. Prudential Bank vs.

Panis

EVPB

On November 19, 1971, plaintiffs-spouses Fernando A. Magcale and Teodula Baluyut Magcale secured a loan in the sum of P70,000.00 from the defendant Prudential Bank. To secure payment of this loan, plaintiffs executed in favor of defendant on the aforesaid date a deed of Real Estate Mortgage over the following described properties: l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse spaces containing a total floor area of 263 sq. meters, more or less, generally constructed of mixed hard wood and concrete materials, under a roofing of cor. g. i. sheets; declared and assessed in the name of FERNANDO MAGCALE under Tax Declaration No. 21109, issued by the Assessor of Olongapo City with an assessed value of P35,290.00. This building is the only improvement of the lot. AND IT IS FURTHER AGREED that in the event the Sales Patent on the lot applied for by the Mortgagors as herein stated is released or issued by the Bureau of Lands, the Mortgagors hereby authorize the Register of Deeds to hold the Registration of same until this Mortgage is cancelled, or to annotate this encumbrance on the Title upon authority from the Secretary of Agriculture and Natural Resources, which title with annotation, shall be released in favor of the herein Mortgage. From the aforequoted stipulation, it is obvious that the mortgagee (defendant Prudential Bank) was at the outset aware of the fact that the mortgagors (plaintiffs) have already filed a Miscellaneous Sales Application over the lot, possessory rights over which, were mortgaged to it. On May 2, 1973, plaintiffs secured an additional loan from defendant Prudential Bank in the sum of P20,000.00. To secure payment of this additional loan, plaintiffs executed in favor of the said defendant another deed of Real Estate Mortgage over the same properties previously mortgaged in Exhibit "A." (Exhibit "B;" also Exhibit "2" for defendant). This second deed of Real Estate Mortgage was likewise registered with the Registry of Deeds, this time in Olongapo City, on May 2,1973. For failure of plaintiffs to pay their obligation to defendant Bank after it became due, and upon application of said defendant, the deeds of Real Estate Mortgage (Exhibits "A" and "B") were extrajudicially foreclosed. Consequent to the foreclosure was the sale of the properties therein mortgaged to defendant as the highest bidder in a public auction sale conducted by the defendant City Sheriff on April 12, 1978 (Exhibit "E"). The auction sale aforesaid was held despite written request from plaintiffs through counsel dated March 29, 1978, for the defendant City Sheriff to desist from going with the scheduled public auction sale (Exhibit "D")." (Decision, Civil Case No. 2443-0, Rollo, ppRespondent Court, in a Decision dated November 3, 1978 declared the deeds of Real Estate Mortgage as null and void. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID This petition is impressed with merit. The pivotal issue in this case is whether or not a valid real estate mortgage can be constituted on the building erected on the land belonging to another. In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court ruled that, "it is obvious that the inclusion of "building" separate and distinct from the land, in said provision of law can only mean that a building is by itself an immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb. 28, 1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38, May 30,1958). Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such a mortgage would be still a real estate mortgage for the building would still be considered immovable property even if dealt with separately and apart from the land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). In the same manner, this Court has also established that possessory rights over said properties before title is vested on the grantee, may be validly transferred or conveyed as in a deed of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]). Coming back to the case at bar, the records show, as aforestated that the original mortgage deed on the 2-storey semi-concrete residential building with warehouse and on the right of occupancy on the lot where the building was erected, was executed on November 19, 1971 and registered under the provisions of Act 3344 with the Register of Deeds of Zambales on November 23, 1971. Miscellaneous Sales Patent No. 4776 on the land was issued on April 24, 1972, on the basis of which OCT No. 2554 was issued in the name of private respondent Fernando Magcale on May 15, 1972. It is therefore without question that the original mortgage was executed before the issuance of the final patent and before the government was divested of its title to the land, an event which takes effect only on the issuance of the sales patent and its subsequent registration in the Office of the Register of Deeds (Visayan Realty Inc. vs. Meer, 96 Phil. 515; Director of Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L14702, May 23, 1961; Pena "Law on Natural Resources", p. 49). Under the foregoing considerations, it is evident that the mortgage executed by private respondent on his own building which was erected on the land belonging to the government is to all intents and purposes a valid mortgage. But it is a different matter, as regards the second mortgage executed over the same properties on May 2, 1973 for an additional loan of P20,000.00 which was registered with the Registry of Deeds of Olongapo City on the same date. Relative thereto, it is evident that such mortgage executed after the issuance of the sales patent and of the Original Certificate of Title, falls squarely under the prohibitions stated in Sections 121, 122 and 124 of the Public Land Act and Section 2 of Republic Act 730, and is therefore null and void. 2. Makati Leasing vs. Weareaver Textile It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and Finance Corporation, the private respondent Wearever Textile Mills, Inc., discounted and assigned several receivables with the former under a Receivable Purchase Agreement. To secure the collection of the receivables assigned, private respondent executed a Chattel Mortgage over certain raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering Range. Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the properties mortgage to it. The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private respondent, set aside the Orders of the lower court and ordered the return of the drive motor seized by the sheriff pursuant to said Orders, after ruling that the machinery in suit cannot be the subject of replevin, much less of a chattel mortgage, because it is a real property pursuant to Article 415 of the new Civil Code, the same being attached to the ground by means of bolts and the only way to remove it from

respondent's plant would be to drill out or destroy the concrete floor, the reason why all that the sheriff could do to enfore the writ was to take the main drive motor of said machinery. The contention of private respondent is without merit. Examining the records of the instant case, We find no logical justification to exclude the rule out, as the appellate court did, the present case from the application of the abovequoted pronouncement. If a house of strong materials, like what was involved in the above Tumalad case, may be considered as personal property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated as such. This is really because one who has so agreed is estopped from denying the existence of the chattel mortgage. There is nothing on record to show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same. On the other hand, as pointed out by petitioner and again not refuted by respondent, the latter has indubitably benefited from said contract. Equity dictates that one should not benefit at the expense of another. Private respondent could not now therefore, be allowed to impugn the efficacy of the chattel mortgage after it has benefited therefrom, 3. Davao Sawmill vs. Castillo The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However, the land upon which the business was conducted belonged to another person. On the land the sawmill company erected a building which housed the machinery used by it. Some of the implements thus used were clearly personal property, the conflict concerning machines which were placed and mounted on foundations of cement. That on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by the party of the second part shall pass to the exclusive ownership of the party of the first part without any obligation on its part to pay any amount for said improvements and buildings; also, in the event the party of the second part should leave or abandon the land leased before the time herein stipulated, the improvements and buildings shall likewise pass to the ownership of the party of the first part as though the time agreed upon had expired: Provided, however, That the machineries and accessories are not included in the improvements which will pass to the party of the first part on the expiration or abandonment of the land leased. In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in that action; a writ of execution issued thereon, and the properties now in question were levied upon as personalty by the sheriff. No third party claim was filed for such properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein. Indeed the bidder, which was the plaintiff in that action, and the defendant herein having consummated the sale, proceeded to take possession of the machinery and other properties described in the corresponding certificates of sale executed in its favor by the sheriff of Davao. Appellant emphasizes the first paragraph, and appellees the fifth paragraph of Article 415. We entertain no doubt that the trial judge and appellees are right in their appreciation of the legal doctrines flowing from the facts. It was held that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner The point of view of Nevers & Callaghan as a judgment creditor of the Altagracia Company and the rights derived by them from the execution levied on the machinery placed by the corporation in the plant. Following the Code Napoleon, the Porto Rican Code treats as immovable (real) property, not only land and buildings, but also attributes immovability in some cases to property of a movable nature, that is, personal property, because of the destination to which it is applied. "Things," says section 334 of the Porto Rican Code, "may be immovable either by their own nature or by their destination or the object to which they are applicable." Numerous illustrations are given in the fifth subdivision of section 335, which is as follows: "Machinery, vessels, instruments or implements intended by the owner of the tenements for the industrial or works that they may carry on in any building or upon any land and which tend directly to meet the needs of the said industry or works." (See also Code Nap., articles 516, 518 et seq. to and inclusive of article 534, recapitulating the things which, though in themselves movable, may be immobilized.) So far as the subject-matter with which we are dealing machinery placed in the plant it is plain, both under the provisions of the Porto Rican Law and of the Code Napoleon, that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant. Such result would not be accomplished, therefore, by the placing of machinery in a plant by a tenant or a usufructuary or any person having only a temporary right. (Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and decisions quoted in Fuzier-Herman ed. Code Napoleon under articles 522 et seq.) The distinction rests, as pointed out by Demolombe, upon the fact that one only having a temporary right to the possession or enjoyment of property is not presumed by the law to have applied movable property belonging to him so as to deprive him of it by causing it by an act of immobilization to become the property of another. It follows that abstractly speaking the machinery put by the Altagracia Company in the plant belonging to Sanchez did not lose its character of movable property and become immovable by destination. But in the concrete immobilization took place because of the express provisions of the lease under which the Altagracia held, since the lease in substance required the putting in of improved machinery, deprived the tenant of any right to charge against the lessor the cost such machinery, and it was expressly stipulated that the machinery so put in should become a part of the plant belonging to the owner without compensation to the lessee. Under such conditions the tenant in putting in the machinery was acting but as the agent of the owner in compliance with the obligations resting upon him, and the immobilization of the machinery which resulted arose in legal effect from the act of the owner in giving by contract a permanent destination to the machinery. 4. Tumalad vs. Vicencio It appears on the records that on 1 September 1955 defendants-appellants executed a chattel mortgage in favor of plaintiffsappellees over their house of strong materials located at No. 550 Int. 3, Quezon Boulevard, Quiapo, Manila, over Lot Nos. 6-B and 7-B, Block No. 2554, which were being rented from Madrigal & Company, Inc. The mortgage was registered in the Registry of Deeds of Manila on 2 September 1955. The herein mortgage was executed to guarantee a loan of P4,800.00 received from plaintiffs-appellees, payable within one year at 12% per annum. The mode of payment was P150.00 monthly, starting September, 1955, up to July 1956, and the lump sum of P3,150 was payable on or before August, 1956. It was also agreed that

default in the payment of any of the amortizations, would cause the remaining unpaid balance to become immediately due and Payable and When defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed, and on 27 March 1956, the house was sold at public auction pursuant to the said contract. As highest bidder, plaintiffs-appellees were issued the corresponding certificate of sale. 3 Thereafter, on 18 April 1956, plaintiffs-appellant commenced Civil Case No. 43073 in the municipal court of Manila, praying, among other things, that the house be vacated and its possession surrendered to them, and for defendants-appellants to pay rent of P200.00 monthly from 27 March 1956 up to the time the possession is surrendered. 4 Defendants-appellants predicate their theory of nullity of the chattel mortgage on two grounds, which are: (a) that, their signatures on the chattel mortgage were obtained through fraud, deceit, or trickery; and (b) that the subject matter of the mortgage is a house of strong materials, and, being an immovable, it can only be the subject of a real estate mortgage and not a chattel mortgage. Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot to which defendants-appellants merely had a temporary right as lessee, and although this can not in itself alone determine the status of the property, it does so when combined with other factors to sustain the interpretation that the parties, particularly the mortgagors, intended to treat the house as personality. Finally, unlike in the Iya cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery & Williamson, wherein third persons assailed the validity of the chattel mortgage, it is the defendants-appellants themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein defendantsappellants, having treated the subject house as personality. 5. Associated Insurance vs. Isabel Iya Adriano Valino and Lucia A. Valino, husband and wife, were the owners and possessors of a house of strong materials constructed on Lot No. 3, Block No. 80 of the Grace Park Subdivision in Caloocan, Rizal, which they purchased on installment basis from the Philippine Realty Corporation. On November 6, 1951, to enable her to purchase on credit rice from the NARIC, Lucia A. Valino filed a bond in the sum of P11,000.00 (AISCO Bond No. G-971) subscribed by the Associated Insurance and Surety Co., Inc., and as counter-guaranty therefor, the spouses Valino executed an alleged chattel mortgage on the aforementioned house in favor of the surety company, which encumbrance was duly registered with the Chattel Mortgage Register of Rizal on December 6, 1951. It is admitted that at the time said undertaking took place, the parcel of land on which the house is erected was still registered in the name of the Philippine Realty Corporation. Having completed payment on the purchase price of the lot, the Valinos were able to secure on October 18, 1958, a certificate of title in their name (T.C.T. No. 27884). Subsequently, however, or on October 24, 1952, the Valinos, to secure payment of an indebtedness in the amount of P12,000.00, executed a real estate mortgage over the lot and the house in favor of Isabel Iya, which was duly registered and annotated at the back of the certificate of title. On the other hand, as Lucia A. Valino, failed to satisfy her obligation to the NARIC, the surety company was compelled to pay the same pursuant to the undertaking of the bond. As a result thereof, a public sale was conducted by the Provincial Sheriff of Rizal on December 26, 1952, wherein the property was awarded to the surety company for P8,000.00, the highest bid Defendant Isabel Iya filed her answer to the complaint alleging among other things, that in virtue of the real estate mortgage executed by her co-defendants, she acquired a real right over the lot and the house constructed thereon; that the auction sale allegedly conducted by the Provincial Sheriff of Rizal as a result of the foreclosure of the chattel mortgage on the house was null and void for non-compliance with the form required by law. Controversy arise as to which of these encumbrances should receive preference over the other. The decisive factor in resolving the issue presented by this appeal is the determination of the nature of the structure litigated upon, for where it be considered a personality, the foreclosure of the chattel mortgage and the subsequent sale thereof at public auction, made in accordance with the Chattel Mortgage Law would be valid and the right acquired by the surety company therefrom would certainly deserve prior recognition A building certainly cannot be divested of its character of a realty by the fact that the land on which it is constructed belongs to another. To hold it the other way, the possibility is not remote that it would result in confusion, for to cloak the building with an uncertain status made dependent on the ownership of the land, would create a situation where a permanent fixture changes its nature or character as the ownership of the land changes hands. In the case at bar, as personal properties could only be the subject of a chattel mortgage (Section 1, Act 3952) and as obviously the structure in question is not one, the execution of the chattel mortgage covering said building is clearly invalid and a nullity. While it is true that said document was correspondingly registered in the Chattel Mortgage Register of Rizal, this act produced no effect whatsoever for where the interest conveyed is in the nature of a real property, the registration of the document in the registry of chattels is merely a futile act. Thus, the registration of the chattel mortgage of a building of strong materials produce no effect as far as the building is concerned (Leung Yee vs. Strong Machinery Co., 37 Phil., 644). Nor can we give any consideration to the contention of the surety that it has acquired ownership over the property in question by reason of the sale conducted by the Provincial Sheriff of Rizal, for as this Court has aptly pronounced: A mortgage creditor who purchases real properties at an extrajudicial foreclosure sale thereof by virtue of a chattel mortgage constituted in his favor, which mortgage has been declared null and void with respect to said real properties, acquires no right thereto by virtue of said sale (De la Riva vs. Ah Keo, 60 Phil., 899). 6. Mindanao Bus vs. City Assessors Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-mentioned equipment. Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not realty. The Board of Tax Appeals of the City sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of the assessment. The following are the stipulated facts: 1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by motor trucks, over its authorized lines in the Island of Mindanao, collecting rates approved by the Public Service Commission; 3. That the machineries sought to be assessed by the respondent as real properties are the following: (a) Hobart Electric Welder Machine, appearing in the attached photograph, marked Annex "A";

(b) Storm Boring Machine, appearing in the attached photograph, marked Annex "B"; (c) Lathe machine with motor, appearing in the attached photograph, marked Annex "C"; (d) Black and Decker Grinder, appearing in the attached photograph, marked Annex "D"; (e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex "E"; (f) Battery charger (Tungar charge machine) appearing in the attached photograph, marked Annex "F"; and (g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex "G". 2. That these machineries are sitting on cement or wooden platforms as may be seen in the attached photographs which form part of this agreed stipulation of facts; 3. That petitioner is the owner of the land where it maintains and operates a garage for its TPU motor trucks; a repair shop; blacksmith and carpentry shops, and with these machineries which are placed therein, its TPU trucks are made; body constructed; and same are repaired in a condition to be serviceable in the TPU land transportation business it operates; 4. That these machineries have never been or were never used as industrial equipments to produce finished products for sale, nor to repair machineries, parts and the like offered to the general public indiscriminately for business or commercial purposes for which petitioner has never engaged in, to date.1awphl.nt Whether or not the said machineries are immovable by destination by virtue of article 415 of the civil code to be assessed of real property taxes. So that movable equipments to be immobilized in contemplation of the law must first be "essential and principal elements" of an industry or works without which such industry or works would be "unable to function or carry on the industrial purpose for which it was established." We may here distinguish, therefore, those movable which become immobilized by destination because they are essential and principal elements in the industry for those which may not be so considered immobilized because they are merely incidental, not essential and principal. Thus, cash registers, typewriters, etc., usually found and used in hotels, restaurants, theaters, etc. are merely incidentals and are not and should not be considered immobilized by destination, for these businesses can continue or carry on their functions without these equity comments. Airline companies use forklifts, jeep-wagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus retain their movable nature. On the other hand, machineries of breweries used in the manufacture of liquor and soft drinks, though movable in nature, are immobilized because they are essential to said industries; but the delivery trucks and adding machines which they usually own and use and are found within their industrial compounds are merely incidental and retain their movable nature. Similarly, the tools and equipments in question in this instant case are, by their nature, not essential and principle municipal elements of petitioner's business of transporting passengers and cargoes by motor trucks. They are merely incidentals acquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipments, its business may be carried on, as petitioner has carried on, without such equipments, before the war. The transportation business could be carried on without the repair or service shop if its rolling equipment is repaired or serviced in another shop belonging to another. 7. Santos Evangelista vs. Alto Surety Briefly, the facts are: On June 4, 1949, petitioner herein, Santos Evangelista, instituted Civil Case No. 8235 of the Court of First, Instance of Manila entitled " Santos Evangelista vs. Ricardo Rivera," for a sum of money. On the same date, he obtained a writ of attachment, which levied upon a house, built by Rivera on a land situated in Manila and leased to him, by filing copy of said writ and the corresponding notice of attachment with the Office of the Register of Deeds of Manila, on June 8, 1949. In due course, judgment was rendered in favor of Evangelista, who, on October 8, 1951, bought the house at public auction held in compliance with the writ of execution issued in said case. The corresponding definite deed of sale was issued to him on October 22, 1952, upon expiration of the period of redemption. When Evangelista sought to take possession of the house, Rivera refused to surrender it, upon the ground that he had leased the property from the Alto Surety & Insurance Co., Inc. respondent herein and that the latter is now the true owner of said property. It appears that on May 10, 1952, a definite deed of sale of the same house had been issued to respondent, as the highest bidder at an auction sale held, on September 29, 1950, in compliance with a writ of execution issued in Civil Case No. 6268 of the same court, entitled "Alto Surety & Insurance Co., Inc. vs. Maximo Quiambao, Rosario Guevara and Ricardo Rivera," in which judgment, for the sum of money, had been rendered in favor respondent herein, as plaintiff therein. Hence, on June 13, 1953, Evangelista instituted the present action against respondent and Ricardo Rivera, for the purpose of establishing his (Evangelista) title over said house, securing possession thereof, apart from recovering damages. The question now before us, however, is: Does the fact that the parties entering into a contract regarding a house gave said property the consideration of personal property in their contract, bind the sheriff in advertising the property's sale at public auction as personal property? It is to be remembered that in the case at bar the action was to collect a loan secured by a chattel mortgage on the house. It is also to be remembered that in practice it is the judgment creditor who points out to the sheriff the properties that the sheriff is to levy upon in execution, and the judgment creditor in the case at bar is the party in whose favor the owner of the house had conveyed it by way of chattel mortgage and, therefore, knew its consideration as personal property. These considerations notwithstanding, we hold that the rules on execution do not allow, and, we should not interpret them in such a way as to allow, the special consideration that parties to a contract may have desired to impart to real estate, for example, as personal property, when they are, not ordinarily so. Sales on execution affect the public and third persons. The regulation governing sales on execution are for public officials to follow. The form of proceedings prescribed for each kind of property is suited to its character, not to the character, which the parties have given to it or desire to give it. When the rules speak of personal property, property which is ordinarily so considered is meant; and when real property is spoken of, it means property which is generally known as real property. The regulations were never intended to suit the consideration that parties may have privately given to the property levied upon. Enforcement of regulations would be difficult were the convenience or agreement of private parties to determine or govern the nature of the proceedings. We therefore hold that the mere fact that a house was the subject of the chattel mortgage and was considered as personal property by the parties does not make said house personal property for purposes of the notice to be given for its sale of public auction. This ruling is demanded by the need for a definite, orderly and well defined regulation for official and public guidance and would prevent confusion and misunderstanding.

We, therefore, declare that the house of mixed materials levied upon on execution, although subject of a contract of chattel mortgage between the owner and a third person, is real property within the purview of Rule 39, section 16, of the Rules of Court as it has become a permanent fixture of the land, which, is real property. (42 Am. Jur. 199-200; Leung Yee vs. Strong Machinery Co., 37 Phil., 644; Republic vs. Ceniza, et al., 90 Phil., 544; Ladera,, et al. vs. Hodges, et al., [C.A.] Off. Gaz. 5374.)" (Emphasis ours. 8. Navarro vs. Pineda On December 14, 1959, defendants Rufino G. Pineda and his mother Juana Gonzales (married to Gregorio Pineda), borrowed from plaintiff Conrado P. Navarro, the sum of P2,500.00, payable 6 months after said date or on June 14, 1959. To secure the indebtedness, Rufino executed a document captioned "DEED OF REAL ESTATE and CHATTEL MORTGAGES", whereby Juana Gonzales, by way of Real Estate Mortgage hypothecated a parcel of land, belonging to her, registered with the Register of Deeds of Tarlac, under Transfer Certificate of Title No. 25776, and Rufino G. Pineda, by way of Chattel Mortgage, mortgaged his two-story residential house, having a floor area of 912 square meters, erected on a lot belonging to Atty. Vicente Castro, located at Bo. San Roque, Tarlac, Tarlac; and one motor truck, registered in his name, under Motor Vehicle Registration Certificate No. A-171806. Both mortgages were contained in one instrument, which was registered in both the Office of the Register of Deeds and the Motor Vehicles Office of Tarlac. When the mortgage debt became due and payable, the defendants, after demands made on them, failed to pay. They, however, asked and were granted extension up to June 30, 1960, within which to pay. Came June 30, defendants again failed to pay and, for the second time, asked for another extension, which was given, up to July 30, 1960. In the second extension, defendant Pineda in a document entitled "Promise", categorically stated that in the remote event he should fail to make good the obligation on such date (July 30, 1960), the defendant would no longer ask for further extension and there would be no need for any formal demand, and plaintiff could proceed to take whatever action he might desire to enforce his rights, under the said mortgage contract. In spite of said promise, defendants, failed and refused to pay the obligation. On August 10, 1960, plaintiff filed a complaint for foreclosure of the mortgage and for damages, which consisted of liquidated damages in the sum of P500.00 and 12% per annum interest on the principal, effective on the date of maturity, until fully paid. The above judgment was directly appealed to this Court, the defendants therein assigning only a single error, allegedly committed by the lower court, to wit In holding that the deed of real estate and chattel mortgages appended to the complaint is valid, notwithstanding the fact that the house of the defendant Rufino G. Pineda was made the subject of the chattel mortgage, for the reason that it is erected on a land that belongs to a third person. Appellants argue that since only movables can be the subject of a chattel mortgage (sec. 1, Act No. 3952) then the mortgage in question which is the basis of the present action, cannot give rise to an action for foreclosure, because it is nullity. The trial court did not predicate its decision declaring the deed of chattel mortgage valid solely on the ground that the house mortgaged was erected on the land which belonged to a third person, but also and principally on the doctrine of estoppel, in that "the parties have so expressly agreed" in the mortgage to consider the house as chattel "for its smallness and mixed materials of sawali and wood". In construing arts. 334 and 335 of the Spanish Civil Code (corresponding to arts. 415 and 416, N.C.C.), for purposes of the application of the Chattel Mortgage Law, it was held that under certain conditions, "a property may have a character different from that imputed to it in said articles. It is undeniable that the parties to a contract may by agreement, treat as personal property that which by nature would be real property" (Standard Oil Co. of N.Y. v. Jaranillo, 44 Phil. 632-633)."There can not be any question that a building of mixed materials may be the subject of a chattel mortgage, in which case, it is considered as between the parties as personal property. ... The matter depends on the circumstances and the intention of the parties". "Personal property may retain its character as such where it is so agreed by the parties interested even though annexed to the realty ...". (42 Am. Jur. 209-210, cited in Manarang, et al. v. Ofilada, et al., G.R. No. L-8133, May 18, 1956; 52 O.G. No. 8, p. 3954.) The view that parties to a deed of chattel mortgagee may agree to consider a house as personal property for the purposes of said contract, "is good only insofar as the contracting parties are concerned. It is based partly, upon the principles of estoppel ..." (Evangelista v. Alto Surety, No. L-11139, Apr. 23, 1958). In a case, a mortgage house built on a rented land, was held to be a personal property, not only because the deed of mortgage considered it as such, but also because it did not form part of the land (Evangelista v. Abad [CA];36 O.G. 2913), for it is now well settled that an object placed on land by one who has only a temporary right to the same, such as a lessee or usufructuary, does not become immobilized by attachment (Valdez v. Central Altagracia, 222 U.S. 58, cited in Davao Sawmill Co., Inc. v. Castillo, et al., 61 Phil. 709). Hence, if a house belonging to a person stands on a rented land belonging to another person, it may be mortgaged as a personal property is so stipulated in the document of mortgage. (Evangelista v. Abad, supra.) It should be noted, however, that the principle is predicated on statements by the owner declaring his house to be a chattel, a conduct that may conceivably estop him from subsequently claiming otherwise (Ladera, et al.. v. C. N. Hodges, et al., [CA]; 48 O.G. 5374). The doctrine, therefore, gathered from these cases is that although in some instances, a house of mixed materials has been considered as a chattel between them, has been recognized, it has been a constant criterion nevertheless that, with respect to third persons, who are not parties to the contract, and specially in execution proceedings, the house is considered as an immovable property (Art. 1431, New Civil Code). In the case at bar, the house in question was treated as personal or movable property, by the parties to the contract themselves. In the deed of chattel mortgage, appellant Rufino G. Pineda conveyed by way of "Chattel Mortgage" "my personal properties", a residential house and a truck. The mortgagor himself grouped the house with the truck, which is, inherently a movable property. The house which was not even declared for taxation purposes was small and made of light construction materials: G.I. sheets roofing, sawali and wooden walls and wooden posts; built on land belonging to another. 9. Sibal vs. Valdez The action was commenced in the Court of First Instance of the Province of Tarlac on the 14th day of December 1924. The facts are about as conflicting as it is possible for facts to be, in the trial causes. As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga, attached and sold to the defendant Emiliano J.

Valdez the sugar cane planted by the plaintiff and his tenants on seven parcels of land described in the complaint in the third paragraph of the first cause of action; that within one year from the date of the attachment and sale the plaintiff offered to redeem said sugar cane and tendered to the defendant Valdez the amount sufficient to cover the price paid by the latter, the interest thereon and any assessments or taxes which he may have paid thereon after the purchase, and the interest corresponding thereto and that Valdez refused to accept the money and to return the sugar cane to the plaintiff. As a second cause of action, the plaintiff alleged that the defendant Emiliano J. Valdez was attempting to harvest the palay planted in four of the seven parcels mentioned in the first cause of action; that he had harvested and taken possession of the palay in one of said seven parcels and in another parcel described in the second cause of action, amounting to 300 cavans; and that all of said palay belonged to the plaintiff. Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J. Valdez his attorneys and agents, restraining them (1) from distributing him in the possession of the parcels of land described in the complaint; (2) from taking possession of, or harvesting the sugar cane in question; and (3) from taking possession, or harvesting the palay in said parcels of land. Plaintiff also prayed that a judgment be rendered in his favor and against the defendants ordering them to consent to the redemption of the sugar cane in question, and that the defendant Valdez be condemned to pay to the plaintiff the sum of P1,056 the value of palay harvested by him in the two parcels above-mentioned ,with interest and costs. The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically each and every allegation of the complaint and step up the following defenses: (a) That the sugar cane in question had the nature of personal property and was not, therefore, subject to redemption; The first question raised by the appeal is, whether the sugar cane in question is personal or real property The Supreme Court of Louisiana having occasion to interpret that provision, held that in some cases "standing crops" may be considered and dealt with as personal property. In the case of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the Civil Code it is provided that 'standing crops and the fruits of trees not gathered and trees before they are cut down . . . are considered as part of the land to which they are attached, but the immovability provided for is only one in abstracto and without reference to rights on or to the crop acquired by others than the owners of the property to which the crop is attached. . . . The existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired therein. Our jurisprudence recognizes the possible mobilization of the growing crop." article 466 declares that the fruits of an immovable gathered or produced while it is under seizure are considered as making part thereof, and incurred to the benefit of the person making the seizure. But the evident meaning of these articles, is where the crops belong to the owner of the plantation they form part of the immovable, and where it is seized, the fruits gathered or produced inure to the benefit of the seizing creditor. A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee, and may be sold by him, whether it be gathered or not, and it may be sold by his judgment creditors. If it necessarily forms part of the leased premises the result would be that it could not be sold under execution separate and apart from the land. If a lessee obtain supplies to make his crop, the factor's lien would not attach to the crop as a separate thing belonging to his debtor, but the land belonging to the lessor would be affected with the recorded privilege. The law cannot be construed so as to result in such absurd consequences. Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops are personal property. Section 2 of said Act provides: "All personal property shall be subject to mortgage, agreeably to the provisions of this Act, and a mortgage executed in pursuance thereof shall be termed a chattel mortgage." Section 7 in part provides: "If growing crops be mortgaged the mortgage may contain an agreement stipulating that the mortgagor binds himself properly to tend, care for and protect the crop while growing. We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure and by Act No. 1508, in the sense that, for the purpose of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property. The lower court, therefore, committed no error in holding that the sugar cane in question was personal property and, as such, was not subject to redemption. 10. Board of Assessment vs. Meralco Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna and is transmitted to the City of Manila by means of electric transmission wires, running from the province of Laguna to the said City. These electric transmission wires which carry high voltage current, are fastened to insulators attached on steel towers constructed by respondent at intervals, from its hydro-electric plant in the province of Laguna to the City of Manila. The respondent Meralco has constructed 40 of these steel towers within Quezon City, on land belonging to it. A photograph of one of these steel towers is attached to the petition for review, marked Annex A. Three steel towers were inspected by the lower court and parties and the following were the descriptions given there of by said court: On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid steel towers for real property tax under Tax declaration Nos. 31992 and 15549. After denying respondent's petition to cancel these declarations, an appeal was taken by respondent to the Board of Assessment Appeals of Quezon City, which required respondent to pay the amount of P11,651.86 as real property tax on the said steel towers for the years 1952 to 1956. Respondent paid the amount under protest, and filed a petition for review in the Court of Tax Appeals (CTA for short) which rendered a decision on December 29, 1958, ordering the cancellation of the said tax declarations and the petitioner City Treasurer of Quezon City to refund to the respondent the sum of P11,651.86. The motion for reconsideration having been denied, on April 22, 1959, the instant petition for review was filed. In upholding the cause of respondents, the CTA held that: (1) the steel towers come within the term "poles" which are declared exempt from taxes under part II paragraph 9 of respondent's franchise; (2) the steel towers are personal properties and are not subject to real property tax; and (3) the City Treasurer of Quezon City is held responsible for the refund of the amount paid. These are assigned as errors by the petitioner in the brief. PAR 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not including poles, wires, transformers, and insulators), machinery and personal property as other persons are or may be hereafter required by law to pay ... Said percentage shall be due and payable at the time stated in paragraph nineteen of Part One hereof, ... and shall be in lieu of all taxes and assessments of whatsoever nature and by whatsoever authority upon the privileges, earnings, income, franchise, and poles, wires, transformers, and insulators of the grantee from which taxes and assessments the grantee is hereby expressly exempted.

It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the petitioner's franchise, should not be given a restrictive and narrow interpretation, as to defeat the very object for which the franchise was granted. The poles as contemplated thereon, should be understood and taken as a part of the electric power system of the respondent Meralco, for the conveyance of electric current from the source thereof to its consumers. If the respondent would be required to employ "wooden poles", or "rounded poles" as it used to do fifty years back, then one should admit that the Philippines is one century behind the age of space. It should also be conceded by now that steel towers, like the ones in question, for obvious reasons, can better effectuate the purpose for which the respondent's franchise was granted. The steel towers or supports in question, do not come within the objects mentioned in paragraph 1, because they do not constitute buildings or constructions adhered to the soil. They are not construction analogous to buildings nor adhering to the soil. As per description, given by the lower court, they are removable and merely attached to a square metal frame by means of bolts, which when unscrewed could easily be dismantled and moved from place to place. They can not be included under paragraph 3, as they are not attached to an immovable in a fixed manner, and they can be separated without breaking the material or causing deterioration upon the object to which they are attached. Each of these steel towers or supports consists of steel bars or metal strips, joined together by means of bolts, which can be disassembled by unscrewing the bolts and reassembled by screwing the same. These steel towers or supports do not also fall under paragraph 5, for they are not machineries, receptacles, instruments or implements, and even if they were, they are not intended for industry or works on the land. Petitioner is not engaged in an industry or works in the land in which the steel supports or towers are constructed. 11. Chavez vs. Public Estates Authority This Court is asked to legitimize a government contract that conveyed to a private entity 157.84 hectares of reclaimed public lands along Roxas Boulevard in Metro Manila at the negotiated price of P1,200 per square meter. However, published reports place the market price of land near that area at that time at a high of P90,000 per square meter.1 The difference in price is a staggering P140.16 billion, equivalent to the budget of the entire Judiciary for seventeen years and more than three times the Marcos Swiss deposits that this Court forfeited in favor of the government. PEA, under the JVA, obligated itself to convey title and possession over the Property, consisting of approximately One Million Five Hundred Seventy Eight Thousand Four Hundred Forty One (1,578,441) Square Meters for a total consideration of One Billion Eight Hundred Ninety Four Million One Hundred Twenty Nine Thousand Two Hundred (P1,894,129,200.00) Pesos, or a price of One Thousand Two Hundred (P1,200.00) Pesos per square meter. According to the zonal valuation of the Bureau of Internal Revenue, the value of the Property is Seven Thousand Eight Hundred Pesos (P7,800.00) per square meter. The Municipal Assessor of Paraaque, Metro Manila, where the Property is located, pegs the market value of the Property at Six Thousand Pesos (P6,000.00) per square meter. Based on these alone, the price at which PEA agreed to convey the property is a pittance. And PEA cannot claim ignorance of these valuations, at least not those of the Municipal Assessors office, since it has been trying to convince the Office of the Municipal Assessor of Paraaque to reduce the valuation of various reclaimed properties thereat in order for PEA to save on accrued real property taxes. In addition, AMARI agreed to pay huge commissions and bonuses to various persons, amounting to P1,596,863,050.00 (P1,754,707,150.00 if the bonus is included), as will be discussed fully below, which indicate that AMARI itself believed the market value to be much higher than the agreed purchase price. If such commissions are added to the purchase price, AMARIs acquisition cost for the Property will add-up to P3,490,992,250.00 (excluding the bonus). If AMARI was willing to pay such amount for the Property, why was PEA willing to sell for only P1,894,129,200.00, making the Government stand to lose approximately P1,596,863,050.00? Despite these revolting anomalies unearthed by the Senate Committees, the fatal flaw of this contract is that it glaringly violates provisions of the Constitution expressly prohibiting the alienation of lands of the public domain. Thus, we now come to the resolution of the second Motions for Reconsideration7 filed by public respondent Public Estates Authority ("PEA") and private respondent Amari Coastal Bay Development Corporation ("Amari"). As correctly pointed out by petitioner Francisco I. Chavez in his Consolidated Comment,8 the second Motions for Reconsideration raise no new issues. Submerged lands, like the waters (sea or bay) above them, are part of the States inalienable natural resources. Submerged lands are property of public dominion, absolutely inalienable and outside the commerce of man.10 This is also true with respect to foreshore lands. Any sale of submerged or foreshore lands is void being contrary to the Constitution.11 In the instant case, the bulk of the lands subject of the Amended JVA are still submerged lands even to this very day, and therefore inalienable and outside the commerce of man. Of the 750 hectares subject of the Amended JVA, 592.15 hectares or 78% of the total area are still submerged, permanently under the waters of Manila Bay. Under the Amended JVA, the PEA conveyed to Amari the submerged lands even before their actual reclamation, although the documentation of the deed of transfer and issuance of the certificates of title would be made only after actual reclamation. Finally, the Ponce Cases were decided under the 1935 Constitution which allowed private corporations to acquire alienable lands of the public domain. However, the 1973 Constitution prohibited private corporations from acquiring alienable lands of the public domain, and the 1987 Constitution reiterated this prohibition. Obviously, the Ponce Cases cannot serve as authority for a private corporation to acquire alienable public lands, much less submerged lands, since under the present Constitution a private corporation like Amari is barred from acquiring alienable lands of the public domain. 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 PEAs patent or certificates of title. In fact, the thrust of the instant petition is that PEAs 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. First, as Justice Bellosillo himself states in his supplement to his dissent, the Ponce Cases admit that "submerged lands still belong to the National Government."9 The correct formulation, however, is that submerged lands are owned by the State and are inalienable. Section 2, Article XII of the 1987 Constitution provides: 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. (Emphasis supplied)

Submerged lands, like the waters (sea or bay) above them, are part of the States inalienable natural resources. Submerged lands are property of public dominion, absolutely inalienable and outside the commerce of man.10 This is also true with respect to foreshore lands. Any sale of submerged or foreshore lands is void being contrary to the Constitution.11 12. Manila lodge no. 761 vs. Court of Appeals On June 26, 1905 the Philippine Commission enacted Act No. l360 which authorized the City of Manila to reclaim a portion of Manila Bay. The reclaimed area was to form part of the Luneta extension. The Act provided that the reclaimed area "Shall be the property of the City of Manila" and that "the City of Manila is hereby authorized to set aside a tract of the reclaimed land formed by the Luneta extension x x x at the north end not to exceed five hundred feet by six hundred feet in size, for a hotel site, and to lease the same, with the approval of the Governor General, to a responsible person or corporation for a term not exceed ninetynine years." Subsequently, the Philippine Commission passed on May 18, 1907 Act No. 1657, amending Act No. 1360, so as to authorize the City of' Manila either to lease or to sell the portion set aside as a hotel site. On July 13, 1911 the City of Manila, affirming a prior sale dated January 16, 1909 cancelled 5,543.07 square meters of the reclaimed area to the Manila Lodge No. 761, Benevolent and Protective Order of Elks of the U.S.A. (BPOE, for short) on the basis of which TCT No. 2195 2 was issued Manila Lodge No. 761, BPOE, subsequently sold the said 5,543.07 square meters to the Elks Club, Inc., to which was issued TCT No. 67488. 4 The registered owner, "The Elks Club, Inc.," was later changed by court oder to "Manila Lodge No. 761, Benevolent and Protective Order of Elks, Inc." In January 1963 the BPOE. petitioned the Court of First Instance of Manila, Branch IV, for the cancellation of the right of the City of Manila to repurchase the property This petition was granted on February 15, 1963. On November 19, 1963 the BPOE sold for the sum of P4,700,000 the land together with all the improvements thereon to the Tarlac Development Corporation (TDC, for short) which paid P1,700.000 as down payment and mortgaged to the vendor the same realty to secure the payment of the balance to be paid in quarterly installments.5 At the time of the sale,, there was no annotation of any subsisting lien on the title to the property. On December 12, 1963 TCT No. 73444 was issued to TDC over the subject In June 1964 the City of Manila filed with the Court of First Instance of Manila a petition for the reannotation of its right to repurchase; the court, after haering, issued an order, dated November 19, 1964, directing the Register of Deeds of the City of Manila to reannotate in toto the entry regarind the right of the City of Manila to repurchase the property after fifty years. From this order TDC and BPOE appealed to this Court which on July 31, 1968 affirmed in G.R. Nos. L-24557 and L-24469 the trial court's order of reannotation, but reserved to TDC the right to bring another action for the clarification of its rights. As a consequence of such reservation, TDC filed on April 28, 1971 against the City of Manila and the Manila Lodge No. 761, BPOE, a complaint, docketed as Civil Case No. 83009 of the Court of First Instance of Manila, containing three causes of action and praying (1) In finding that the property in question is or was a public park and in consequently nullifying the sale thereof by the City of Manila to BPOE; Firstly, if the reclaimed area was granted to the City of Manila as its patrimonial property, the City could, by virtue of its ownership, dispose of the whole reclaimed area without need of authorization to do so from the lawmaking body. Thus Article 348 of the Civil Code of Spain provides that "ownership is the right to enjoy and dispose of a thing without further limitations than those established by law." 36 The right to dispose (jus disponendi) of one's property is an attribute of ownership. Act No. 1360, as amended, however, provides by necessary implication, that the City of Manila could not dispose of the reclaimed area without being authorized by the lawmaking body. Thus the statute provides that "the City of Manila is hereby authorized to set aside a tract ... at the north end, for a hotel site, and to lease the same ... should the municipal board ... deem it advisable, it is hereby authorized ...to sell said tract of land ... " (Sec. 5). If the reclaimed area were patrimonial property of the City, the latter could dispose of it without need of the authorization provided by the statute, and the authorization to set aside ... lease ... or sell ... given by the statute would indeed be superfluous. To so construe the statute s to render the term "authorize," which is repeatedly used by the statute, superfluous would violate the elementary rule of legal hermeneutics that effect must be given to every word, clause, and sentence of the statute and that a statute should be so interpreted that no part thereof becomes inoperative or superfluous. 37 To authorize means to empower, to give a right to act. 38 Act No. 1360 furthermore qualifies the verb it authorize" with the adverb "hereby," which means "by means of this statue or section," Hence without the authorization expressly given by Act No. 1360, the City of Manila could not lease or sell even the northern portion; much less could it dispose of the whole reclaimed area. Consequently, the reclaimed area was granted to the City of Manila, not as its patrimonial property. At most, only the northern portion reserved as a hotel site could be said to be patrimonial property for, by express statutory provision it could be disposed of, and the title thereto would revert to the City should the grantee fail to comply with the terms provided by the statute. Secondly, the reclaimed area is an "extension to the Luneta in the City of Manila." 40 If the reclaimed area is an extension of the Luneta, then it is of the same nature or character as the old Luneta. Anent this matter, it has been said that a power to extend (or continue an act or business) cannot authorize a transaction that is totally distinct. 41 It is not disputed that the old Luneta is a public park or plaza and it is so considered by Section 859 of the Revised Ordinances of the City of Manila. 42 Hence the "extension to the Luneta" must be also a public park or plaza and for public use. TDC, however, contends that the subject property cannot be considered an extension of the old Luneta because it is outside of the limits of the old Luneta when extended to the sea. This is a strained interpretation of the term "extension," for an "extension," it has been held, "signifies enlargement in any direction in length, breadth, or circumstance." 43 Thirdly, the reclaimed area was formerly a part of the manila Bay. A bay is nothing more than an inlet of the sea. Pursuant to Article 1 of the Law of Waters of 1866, bays, roadsteads, coast sea, inlets and shores are parts of the national domain open to public use. These are also property of public ownership devoted to public use, according to Article 339 of the Civil Code of Spain. When the shore or part of the bay is reclaimed, it does not lose its character of being property for public use, according to Government of the Philippine Islands vs. Cabangis. 44 The predecessor of the claimants in this case was the owner of a big tract of land including the lots in question. From 1896 said land began to wear away due to the action of the waters of Manila Bay. In 1901 the lots in question became completely submerged in water in ordinary tides. It remained in such a state until 1912 when the Government undertook the dredging of the Vitas estuary and dumped the Sand and - silt from estuary on the low lands completely Submerged in water thereby gradually forming the lots in question. Tomas Cabangis took possession thereof as soon as they were reclaimed hence, the claimants, his successors in interest, claimed that the lots belonged to them. The trial

court found for the claimants and the Government appealed. This Court held that when the lots became a part of the shore. As they remained in that condition until reclaimed by the filling done by the Government, they belonged to the public domain. for public use .4' Hence, a part of the shore, and for that purpose a part of the bay, did not lose its character of being for public use after it was reclaimed. It is not necessary, therefore, that a plaza be already constructed of- laid out as a plaza in order that it be considered property for public use. It is sufficient that it be intended to be such In the case at bar, it has been shown that the intention of the lawmaking body in giving to the City of Manila the extension to the Luneta was not a grant to it of patrimonial property but a grant for public use as a plaza 13. Cebu Oxygen vs. Bercilles The parcel of land sought to be registered was only a portion of M. Borces Street, Mabolo, Cebu City. On September 23, 1968, the City Council of Cebu, through Resolution No. 2193, approved on October 3, 1968, declared the terminal portion of M. Borces Street, Mabolo, Cebu City, as an abandoned road, the same not being included in the City Development Plan. 1 Subsequently, on December 19, 1968, the City Council of Cebu passed Resolution No. 2755, authorizing the Acting City Mayor to sell the land through a public bidding. 2 Pursuant thereto, the lot was awarded to the herein petitioner being the highest bidder and on March 3, 1969, the City of Cebu, through the Acting City Mayor, executed a deed of absolute sale to the herein petitioner for a total consideration of P10,800.00. 3 By virtue of the aforesaid deed of absolute sale, the petitioner filed an application with the Court of First instance of Cebu to have its title to the land registered. 4 On June 26, 1974, the Assistant Provincial Fiscal of Cebu filed a motion to dismiss the application on the ground that the property sought to be registered being a public road intended for public use is considered part of the public domain and therefore outside the commerce of man. Consequently, it cannot be subject to registration by any private individual. 5 (2) Does the declaration of the road, as abandoned, make it the patrimonial property of the City of Cebu which may be the object of a common contract? (1) The pertinent portions of the Revised Charter of Cebu City provides (34) ...; to close any city road, street or alley, boulevard, avenue, park or square. Property thus withdrawn from public servitude may be used or conveyed for any purpose for which other real property belonging to the City may be lawfully used or conveyed. Such power to vacate a street or alley is discretionary. And the discretion will not ordinarily be controlled or interfered with by the courts, absent a plain case of abuse or fraud or collusion. Faithfulness to the public trust will be presumed. So the fact that some private interests may be served incidentally will not invalidate the vacation ordinance. (2) Since that portion of the city street subject of petitioner's application for registration of title was withdrawn from public use, it follows that such withdrawn portion becomes patrimonial property which can be the object of an ordinary contract. Article 422 of the Civil Code expressly provides that "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." Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and unequivocal terms, states that: "Property thus withdrawn from public servitude may be used or conveyed for any purpose for which other real property belonging to the City may be lawfully used or conveyed." Accordingly, the withdrawal of the property in question from public use and its subsequent sale to the petitioner is valid. Hence, the petitioner has a registrable title over the lot in question. WHEREFORE, the order dated October 11, 1974, rendered by the respondent court in Land Reg. Case No. N-948, LRC Rec. No. N-44531 is hereby set aside, and the respondent court is hereby ordered to proceed with the hearing of the petitioner's application for registration of title. 14. Roponggi Cases 15. Laurel vs. Garcia 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 prays 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 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. 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 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. Can the Roppongi property and others of its kind be alienated by the Philippine Government?; and 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. 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: 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. 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. 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. 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. 16. Province of Zamboanga vs. City of Zamboanga 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. 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. 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). 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; 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 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 the ejusdem 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. 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. 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 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. 17. Salas vs. Jarencio On February 24, 1919, the 4th Branch of the Court of First Instance of Manila, acting as a land registration court, rendered judgment in Case No. 18, G.L.R.O. Record No. 111, declaring the City of Manila the owner in fee simple of a parcel of land known as Lot No. 1, Block 557 of the Cadastral Survey of the City of Manila, containing an area of 9,689.8 square meters, more or less. Pursuant to said judgment the Register of Deeds of Manila on August 21, 1920, issued in favor of the City of Manila, Original Certificate of Title No. 4329 covering the aforementioned parcel of land. On various dates in 1924, the City of Manila sold portions of the aforementioned parcel of land in favor of Pura Villanueva. As a consequence of the transactions Original Certificate of Title No. 4329 was cancelled and transfer certificates of title were issued in favor of Pura Villanueva for the portions purchased by her. When the last sale to Pura Villanueva was effected on August 22, 1924, Transfer Certificate of Title No. 21974 in the name of the City of Manila was cancelled and in lieu thereof Transfer Certificate of Title (TCT) No. 22547 covering the residue thereof known as Lot 1-B-2-B of Block 557, with an area of 7,490.10 square meters, was issued in the name of the City of Manila. On September 21, 1960, the Municipal Board of Manila, presided by then Vice-Mayor Antono J. Villegas, adopted a resolution requesting His Excellency, the President of the Philippines to consider the feasibility of declaring the City property bounded by Florida, San Andres, and Nebraska Streets, under Transfer Certificate of Title Nos. 25545 and 22547, containing a total area of 7,450 square meters as a patrimonial property of the City of Manila for the purpose of reselling these lots to the actual occupants thereof. 2 The said resolution of the Municipal Board of the City of Manila was officially transmitted to the President of the Philippines by then Vice-Mayor Antonio J. Villegas on September 21, 1960, with the information that the same resolution was, on the same date, transmitted to the Senate and House of Representatives of the Congress of the Philippines. 3 The bill was passed by the Senate, approved by the President on June 20, 1964, and became Republic Act No. 4118. With the presentation of Transfer Certificate of Title No. 22547, which had been yielded as above stated by the, City authorities to the Land Authority, Transfer Certificate of Title (T.C.T. No. 22547) was cancelled by the Register of Deeds of Manila and in lieu thereof Transfer Certificate of Title No. 80876 was issued in the name of the Land Tenure Administration (now Land Authority) pursuant to the provisions of Republic Act No. 4118. 9 But due to reasons which do not appear in the record, the City of Manila made a complete turn-about, for on December 20, 1966, Antonio J. Villegas, in his capacity as the City Mayor of Manila and the City of Manila as a duly organized public corporation, brought an action for injunction and/or prohibition with preliminary injunction to restrain, prohibit and enjoin the herein appellants, particularly the Governor of the Land Authority and the Register of Deeds of Manila, from further implementing Republic Act No. 4118, and praying for the declaration of Republic Act No. 4118 as unconstitutional. I. Is the property involved private or patrimonial property of the City of Manila?

As regards the first issue, appellants maintain that the land involved is a communal land or "legua comunal" which is a portion of the public domain owned by the State; that it came into existence as such when the City of Manila, or any pueblo or town in the Philippines for that matter, was founded under the laws of Spain, the former sovereign; that upon the establishment of a pueblo, the administrative authority was required to allot and set aside portions of the public domain for a public plaza, a church site, a site for public buildings, lands to serve as common pastures and for streets and roads; that in assigning these lands some lots were earmarked for strictly public purposes, and ownership of these lots (for public purposes) immediately passed to the new municipality; that in the case of common lands or "legua comunal", there was no such immediate acquisition of ownership by the pueblo, and the land though administered thereby, did not automatically become its property in the absence of an express grant from the Central Government, and that the reason for this arrangement is that this class of land was not absolutely needed for the discharge of the municipality's governmental functions.

There is one outstanding factor that should be borne in mind in resolving the character of the land involved, and it is that the City of Manila, although declared by the Cadastral Court as owner in fee simple, has not shown by any shred of evidence in what manner it acquired said land as its private or patrimonial property. It is true that the City of Manila as well as its predecessor, the Ayuntamiento de Manila, could validly acquire property in its corporate or private capacity, following the accepted doctrine on the dual character public and private of a municipal corporation. And when it acquires property in its private capacity, it acts like an ordinary person capable of entering into contracts or making transactions for the transmission of title or other real rights. When it comes to acquisition of land, it must have done so under any of the modes established by law for the acquisition of ownership and other real rights. In the absence of a title deed to any land claimed by the City of Manila as its own, showing that it was acquired with its private or corporate funds, the presumption is that such land came from the State upon the creation of the municipality (Unson vs. Lacson, et al., 100 Phil. 695). Originally the municipality owned no patrimonial property except those that were granted by the State not for its public but for private use. Other properties it owns are acquired in the course of the exercise of its corporate powers as a juridical entity to which category a municipal corporation pertains. Republic Act No. 4118 was never intended to expropriate the property involved but merely to confirm its character as communal land of the State and to make it available for disposition by the National Government: And this was done at the instance or upon the request of the City of Manila itself. The subdivision of the land and conveyance of the resulting subdivision lots to the occupants by Congressional authorization does not operate as an exercise of the power of eminent domain without just compensation in violation of Section 1, subsection (2), Article III of the Constitution, but simply as a manifestation of its right and power to deal with state property. It should be emphasized that the law assailed was enacted upon formal written petition of the Municipal Board of Manila in the form of a legally approved resolution. The certificate of title over the property in the name of the City of Manila was accordingly cancelled and another issued to the Land Tenure Administration after the voluntary surrender of the City's duplicate certificate of title by the City Treasurer with the knowledge and consent of the City Mayor. To implement the provisions of Republic Act No. 4118, the then Deputy Governor of the Land Authority sent a letter, dated February 18, 1965, to the City Mayor furnishing him with a copy of the "proposed subdivision plan of the said lot as prepared for the Republic of the Philippines for subdivision and resale by the Land Authority to bona fide applicants." On March 2, 1965, the Mayor of Manila, through his Executive and Technical Adviser, acknowledged receipt of the subdivision plan and informed the Land Authority that his Office "will interpose no objection to the implementation of said law provided that its provisions are strictly complied with." The foregoing sequence of events, clearly indicate a pattern of regularity and observance of due process in the reversion of the property to the National Government. All such acts were done in recognition by the City of Manila of the right and power of the Congress to dispose of the land involved. Consequently, the City of Manila was not deprived of anything it owns, either under the due process clause or under the eminent domain provisions of the Constitution. If it failed to get from the Congress the concession it sought of having the land involved given to it as its patrimonial property, the Courts possess no power to grant that relief. Republic Act No. 4118 does not, therefore, suffer from any constitutional infirmity. 18. Republic vs. Villegas The Court herein upholds the constitutionality of Republic Act 3120 on the strength of the established doctrine that the subdivision of communal land of the State (although titled in the name of the municipal corporation) and conveyance of the resulting subdivision lots by sale on installment basis to bona fide occupants by Congressional authorization and disposition does not constitute infringements of the due process clause or the eminent domain provisions of the Constitution but operates simply as a manifestation of the legislature's right of control and power to deal with State property. The origin and background of the cases at bar which deal with the decisive issue of constitutionality of Republic Act 3120 enacted on June 17, 1961, as raised by respondent mayor of Manila in resisting petitioners' pleas that respondent mayor not only lacks the authority to demolish their houses or eject them as tenants and bona fide occupants of a parcel of land in San Andres, Malate 2 but is also expressly prohibited from doing so by section 2 of the Act, may be summarized from the Court of Appeals' 3 certification of resolution of May 31, 1965 as follows: Whether or not the subject lots in R.A. 3120 are public lands of the state or private lands owned by the City of Manila The defense of the respondents Mayor and City Engineer of Manila to arguments 2 and 3 is the invalidity of the said Republic Act 3120 for being in violation of the Constitutional prohibition against the deprivation of property without due process of law and without just compensation. Respondents city officials' contention that the Act must be stricken down as unconstitutional for depriving the city of Manila of the lots in question and providing for their sale in subdivided small lots to bona fide occupants or tenants without payment of just compensation is untenable and without basis, since the lots in question are manifestly owned by the city in its public and governmental capacity and are therefore public property over which Congress had absolute control as distinguished from patrimonial property owned by it in its private or proprietary capacity of which it could not be deprived without due process and without just compensation. 7 Here, Republic Act 3120 expressly declared that the properties were "reserved as communal property" and ordered their conversion into "disposable and alienable lands of the State" for sale in small lots to the bona fide occupants thereof. It is established doctrine that the act of classifying State property calls for the exercise of wide discretionary legislative power which will not be interfered with by the courts. The Court therein reaffirmed the established general rule that "regardless of the source or classification of land in the possession of a municipality, excepting those acquired with its own funds in its private or corporate capacity, such property is held in trust for the State for the benefit of its inhabitants, whether it be for governmental or proprietary purposes. It holds such lands subject to the paramount power of the legislature to dispose of the same, for after all it owes its creation to it as an agent for the performance of a part of its public work, the municipality being but a subdivision or instrumentality thereof for purposes of local administration. Accordingly, the legal situation is the same as if the State itself holds the property and puts it to a different use" 9 and stressed that "the property, as has been previously shown, was not acquired by the City of Manila with its own funds in its private or proprietary capacity. That it has in its name a registered title is not questioned, but this title should be deemed to be held in trust for the State as the land covered thereby was part of the territory of the City of Manila granted by the sovereign upon its creation." 10

There as here, the Court holds that the Acts in question (Republic Acts 4118 in Salas and Republic Act 3120 in the case at bar) were intended to implement the social justice policy of the Constitution and the government program of land for the landless and that they were not "intended to expropriate the property involved but merely to confirm its character as communal land of the State and to make it available for disposition by the National Government: ... The subdivision of the land and conveyane of the resulting subdivision lots to the occupants by Congressional authorization does not operate as an exercise of the power of eminent domain without just compensation in violation of Section 1, subsection (2), Article III of the Constitution, 11 but simply as a manifestation of its right and power to deal with state property." 12 19. Macasiano vs. Diokno 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 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 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. 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. We find the petition meritorious. 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. 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. 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 20. Santos vs. Moreno 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 crisscrossing the hacienda. In the meantime, the Secretary of Commerce and Communications1 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. 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. 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. 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. 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. We next consider the issue of whether under pertinent laws, the streams in question are public or private 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. 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. 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. 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.