Davao Sawmill v.

Castillo
DAVAO SAW MILL vs. APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC. G.R.
No. L-40411 August 7, 1935

Facts: Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the
Philippine Islands. 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. In the contract of lease between the
sawmill company and the owner of the land there appeared the following provision: 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 lessor without any obligation
on its part to pay any amount for said improvements and buildings; which do not include the
machineries and accessories in the improvements.

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; 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

It must be noted also that on number of occasion, Davao Sawmill treated the machinery as personal
property by executing chattel mortgages in favor of third persons. One of such is the appellee by
assignment from the original mortgages.

The lower court rendered decision in favor of the defendants herein. Hence, this instant appeal.

Issue:
whether or not the machineries and equipments were personal in nature.

Ruling/ Rationale:
Yes. The Supreme Court affirmed the decision of the lower court.

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.

BH Berkenkotter vs Cu Unjieng

61 Phil 663
Facts:
T h e M a b a l a c a t S u g a r C o . , I n c . , o w n e r o f t h e sugar central situated in Mabalacat,
Pampanga,o b t a i n e d f r o m C u U n j i e n g e H i j o s , a l o a n secured by a first
mortgage constituted on
twop a r c e l s a n d l a n d " w i t h a l l i t s b u i l d i n g s , improvements, sugar-
cane mill, steel railway,t e l e p h o n e l i n e , a p p a r a t u s , u t e n s i l s a n d w h a
t e v e r f o r m s p a r t o r i s n e c e s s a r y complement of said sugar-
c a n e m i l l , s t e e l r a i l w a y , t e l e p h o n e l i n e , n o w e x i s t i n g o r t h a t may in the future exist
is
said lots.S h o r t l y a f t e r s a i d m o r t g a g e h a d b e e n c o n s t i t u t e d , t h e
M a b a l a c a t S u g a r C o . , I n c . , decided to increase the capacity of its sugarcentr
a l b y b u y i n g a d d i t i o n a l m a c h i n e r y a n d equipment, so that instead of milling 150
tonsdaily, it could produce 250. The estimated
costo f s a i d a d d i t i o n a l m a c h i n e r y a n d e q u i p m e n t was approximately P100,000. In
order to
carryo u t t h i s p l a n , A . G r e e n , p r e s i d e n t o f s a i d c o r p o r a t i o n , p r o p o s e d
t o t h e p l a i n t i f f , B . H . Berkenkotter, to advance the necessary
amountf o r t h e p u r c h a s e o f s a i d m a c h i n e r y a n d equipment.
The president of the Mabalacat Sugar Co., Inc.,applied to Cu Unjieng e Hijos for an
additionall o a n o f P 7 5 , 0 0 0 o f f e r i n g a s s e c u r i t y t h e additional machiner
y and equipment acquiredby said B.A. Green and installed in the
sugarc e n t r a l a f t e r t h e e x e c u t i o n o f t h e o r i g i n a l m o r t g a g e d e e d , o n A p r i l 2 7 ,
1 9 2 7 , t o g e t h e r with whatever additional equipment acquiredwith said loan. B.A. Green failed
to obtain saidloan.
Issues:
W h e t h e r o r n o t , t h e l o w e r c o u r t e r r e d i n declaring that the additional m
achinery ande q u i p m e n t a s i m p r o v e m e n t c a n b e permane
n t l y a t t a c h e d t o a m o r t g a g e o f t h e sugar central.
Held:
T h a t t h e i n s t a l l a t i o n o f a m a c h i n e r y a n d equipment in a mortgaged
sugar central, in lieuof another of less capacity, for the purpose of carrying out the industrial
functions of the lattera n d i n c r e a s i n g p r o d u c t i o n , c o n s t i t u t e s a permanent
improvement on said sugar centraland subjects said machinery and equipment tothe mortgage
constituted thereon

Berkenkotter vs Cu Unjieng 61 Phil 663

Berkenkotter - plaintiff-appellant
CU UNJIENG E HIJOS - defendants-appellees.

Facts: The Mabalacat Sugar Co., Inc., owner of the sugar central, obtained from the defendants, Cu
Unjieng e Hijos, a loan secured two parcels and land "with all its buildings, improvements, etc. and
whatever forms part or is necessary complement of said sugar-cane mill ... now existing or that may
in the future exist is said lots."

Shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc., bought additional
machinery and equipment. Plaintiff, B.H. Berkenkotter, was asked by the company president, B.A.
Green, to advance the necessary amount for the purchase of said machinery and equipment. Plaintiff
was promised to get reimbursement when an additional loan from the mortgagees is obtained. Green
failed to obtain said loan.

Appellant's Contention:
Installation of the machinery and equipment claimed by him in the sugar central was not permanent in
character ... in case Green should fail to obtain an additional loan said machinery and equipment
would become security for the company's debt to him.

Issue: Whether or not the additional machinery and equipment is considered an improvement subject
to the mortgage executed in favor of Mabalacat Sugar Co., Inc. by Cu Unjieng e Hijos.

Held: Yes.
The installation of the machinery and equipment in question in the central converted them into real
property by reason of their purpose. As essential and principal elements of a sugar central, without
them the sugar central would be unable to function or carry on the industrial purpose for which it was
established. Inasmuch as the central is permanent in character, the necessary machinery and
equipment installed for carrying on the sugar industry for which it has been established must
necessarily be permanent.

Case Cited: Bischoff vs. Pomar and Compania General de Tabacos (cited with approval in the case
of Cea vs. Villanueva)

(1) in a mortgage of real estate, the improvements on the same are included; therefore, all objects
permanently attached to a mortgaged building or land, although they may have been placed there
after the mortgage was constituted, are also included.

(2) when it was stated in the mortgage that the improvements, buildings, and machinery that existed
thereon were also comprehended, it is indispensable that the exclusion thereof be stipulated between
the contracting parties.

LOPEZ V. OROSA AND PLAZA THEATRE 103 SCRA 98

FACTS: 1. Lopez was engaged in business under the name Lopez-Castelo Sawmill.
2. Orosa, who lived in the same province as Lopez, one dayapproached Lopez and invited the latter
to make an investment inthe theatre business.
3. Orosa, his family and close friends apparently were forming acorporation named Plaza Theatre.
4. Lopez expressed his unwillingness to invest. Nonetheless, therewas an oral agreement between
Lopez and Orosa that Lopezwould be supplying the lumber for the construction of the theatre.The
terms were the following: one, Orosa would be personallyliable for any account that the said
construction would incur; two,payment would be by demand and not by cash on delivery.
5. Pursuant to the agreement, Lopez delivered the lumber for theconstruction. Lopez was only paid
one-third of the total cost.
6. The land on which the building has been erected was previously owned by Orosa, which was later
on purchased by the corporation.
7. Due to the incessant demands of Lopez, the corporation mortgaged its properties.
8. On an earlier relevant date, the corporation obtained a loan with Luzon Surety Company as surety
and in turn, the corporation executed a mortgage over the land and building. In the registration of the
land under Act 496, such mortgage wasnt revealed.
9. Also due to the demands of Lopez, Orosa issued a deed of assignment over his shares of stock in
the corporation.
10. As there was still an unpaid balance, Lopez filed a case against Orosa and Plaza theatre. He
asked that Orosa and Plaza theatre be held liable solidarily for the unpaid balance; and in case
defendants failed to pay, the land and building should be sold in public auction with the proceeds to
be applied to the balance; or
that the shares of stock be sold in public auction. Lopez also had lis pendens be annotated in the
OCT.
11. The trial court decided that there was joint liability between defendants and that the materialmans
lien was only confined tothe building.
ISSUES:
W/N the materialmens lien for the value of the materials used in the construction of the building
attaches to said structure alone and doesnt extend to the land on which the building is adhered to?

HELD:
The contention that the lien executed in favor of the furnisher of materials used for the construction
and repair of a building is also extended to land on which the building was constructed is without
merit. For while it is true that generally, real estate connotes the land and the building constructed
thereon, it is obvious that the inclusion of the building in the enumeration of what may constitute real
properties could only mean one thingthat a building is by itself an immovable property. Moreover, in
the absence of
any specific provision to the contrary, a building is an immovable property irrespective of whether or
not said structure and the land on which it is adhered to belong to the same owner.
Appelant invoked Article 1923 of the Spanish Civil Code, which providesWith respect to
determinate real property and real rights of the debtor, the following are preferred: xxx Credits for
reflection, not entered or recorded, and only with respect to other credits different from those
mentioned in four next preceding paragraphs. Close examination of the abovementioned provision
reveals that the law gives preference to unregistered refectionary credits only with respect to the real
estate upon which the refectionary or work was made. This being so, the inevitable conclusion must
be that the lien so created attaches merely to the immovable property for the construction or repair of
which the obligation was incurred. Therefore, the lien in favor of appellant for the unpaid value of the
lumber used in the construction of the building attaches only to said structure and to no other property
of the obligors.
Tumalad vs Vicencio et al 41 SCRA 143

Facts: Vicencio and Simeon executed a chattel mortgage in favor of plaintiffs Tumalad over
their house, which was being rented by Madrigal and company. This was executed to
guarantee a loan, payable in one year with an interest of 12% pa.

When defendants-appellants defaulted in paying, the mortgage was extrajudicially foreclosed. The
house was sold at a public auction and the plaintiffs were the highest bidder. Thereafter, the
plaintiffs filed an action for ejectment against the defendants, praying that the latter vacate the house
as they were the proper owners.

Defendants-appellants, questioned the legality of the chattel mortgage. They maintained the nullity of
the chattel mortgage based on two grounds:
(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.

Issue: Whether or not the property in question can be the subject matter of a chattel mortgage.

Held: Yes. Certain deviations have been allowed from the general doctrine that buildings are
immovable property such as when through stipulation, parties may agree to treat as personal
property those by their nature would be real property. This is partly based on the principle of
estoppel wherein the principle is predicated on statements by the owner declaring his house as
chattel, a conduct that may conceivably estop him from subsequently claiming otherwise.
In the case at bar, though there be no specific statement referring to the subject house as personal
property, yet by ceding, selling or transferring a property through chattel mortgage could only have
meant that defendant conveys or intends to treat the house as chattel, 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 defendats-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 personalty.

Furthermore, unlike the cases of Lopez vs. Orosa and Leung Yee vs. F. L. Strong Machinery,
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 defendants-appellants, having treated
the subject house as personalty.

ASSOCIATED INSURANCE AND SURETY COMPANY V. IYA, ET. AL 103 SCRA 972

FACTS: Spouses Valino were the owners of a house, payable on installments from Philippine Realty
Corporation. To be able to purchase on credit rice from NARIC, they filed a surety bond subscribed
by petitioner and therefor, they executed an alleged chattel mortgage on the house in favor of the
surety company. The spouses didnt own yet the land on which the house was constructed
on at the time of the undertaking. After being able to purchase the land, to be able to
secure payment for indebtedness, the spouses executed a real estate mortgage in favor of Iya.

The spouses were not able to satisfy obligation with NARIC, petitioner was compelled to pay. The
spouses werent able to pay the surety company despite demands and thus, the company
foreclosed the chattel mortgage. It later learned of the real estate mortgage over the house and lot
secured
by the spouses. This prompted the company to file an action against the spouses. Also, Iya filed
another civil action against the spouses, asserting that she has a better right over the property. The
trial court heard the two cases jointly and it held that the surety company had a preferred right over
the building as since when the chattel mortgage was secured, the land wasnt owned yet by
the spouses making the building then a chattel and not a real property.
HELD:
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 ownership of the land, would create a situation where apermanent fixture changes its nature
or character as the ownership of the land changes hands. In the case at bar, as personal properties
may be the only subjects of a chattel mortgage, the execution of the chattel mortgage covering said
building is null and void.

Makati Leasing and Finance Corp., vs Wearever Textile Mills, Inc.,

FACTS Wearever Textile Mills, Inc. executed a chattel mortgage contract in favor of Makati Leasing
and Finance Corporation covering certain raw materials and machinery. Upon default, Makati Leasing
fi led a petition for judicial foreclosure of the properties mortgaged. Acting on Makati Leasings
application for replevin, the lower court issued a writ of seizure. Pursuant thereto, the sheriff enforcing
the seizure order seized the machinery subject matter of the mortgage. In a petition for certiorari and
prohibition, the Court of Appeals ordered the return of the machinery on the ground that the same
can-not be the subject of replevin because it is a real property pursuant to Article415 of the new Civil
Code, the same being attached to the ground by means of bolts and the only way to remove it from
Wearever textiles plant would be to drill out or destroy the concrete fl oor. When the motion for
reconsideration of Makati Leasing was denied by the Court of Appeals, Makati Leasing elevated the
matter to the Supreme Court.
ISSUE
Whether the machinery in suit is real or personal property from the point of view of the parties.
HELD
There is no logical justification to exclude the rule out the present case from the application of the
pronouncement in Tumalad v Vicencio, 41 SCRA 143. If a house of strong materials, like what was
involved in the 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 becomesimmobilized only by destination or purpose, may not be likewise
treated as such. This is really because one who has so agreed is estopped from the denying the
existence of the chattel mortgage.
In rejecting petitioners assertion on the applicability of the Tumalad doctrine, the CA lays stress on
the fact that the house involved therein was built on a land that did not belong to the owner of such
house. But the law makes no distinction with respect to the ownership of the land on which the
house is built and We should not lay down distinctions not contemplated by law.
It must be pointed out that the characterization by the private respondent is indicative of the
intention and impresses upon the property the character determined by the parties. As stated
in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is undeniable that the parties to a
contract may, by agreement, treat as personal property that which by nature would be a real
property as long as no interest of third parties would be prejudiced thereby.
The status of the subject matter as movable or immovable property was not raised as an issue before
the lower court and the CA, except in a supplemental memorandum in support of the petition filed in
the appellate court. There is no record showing that the mortgage has been annulled, or that steps
were taken to nullify the same. On the other hand, respondent has benefited from the said contract.

Equity dictates that one should not benefit at the expense of another.
As such, private respondent could no longer be allowed to impugn the efficacy of the chattel
mortgage after it has benefited therefrom.

Therefore, the questioned machinery should be considered as personal property.

Board of Assessment Appeals, Q.C. vs Meralco
10 SCRA 68
FACTS On November 15, 1955, the QC City Assessor declared the MERALCO's steel towers subject
to real property tax. After the denial of MERALCO's petition to cancel these declarations, an appeal
was taken to the QC Board of Assessment Appeals, which required respondent to pay P11,651.86 as
real property tax on the said steel towers for the years 1952 to 1956.
MERALCO paid the amount under protest, and filed a petition for review in the Court of Tax Appeals
(CTA) which rendered a decision ordering the cancellation of the said tax declarations and the
refunding to MERALCO by the QC City Treasurer of P11,651.86.
ISSUE
Are the steel towers or poles of the MERALCO considered real or personal properties?
HELD Pole long, comparatively slender, usually cylindrical piece of wood, timber, object of metal or
the like; an upright standard to the top of which something is affixed or by which something is
supported.
MERALCO's steel supports consists of a framework of 4 steel bars/strips which are bound by steel
cross-arms atop of which are cross-arms supporting 5 high-voltage transmission wires, and their sole
function is to support/carry such wires. The exemption granted to poles as quoted from Part II,
Par.9 of respondent's franchise is determined by the use to which such poles are dedicated.
It is evident 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 should be taken and understood as part of MERALCO's
electric power system for the conveyance of electric current to its consumers.
Art. 415 of the NCC classifies the following as immovable property:
(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be
separated therefrom without breaking the material or deterioration of the object;

(5) Machinery, receptacles, instruments or implements intended by the owner pf the tenement
for an industry ot works which may be carried on in a building or on a piece of land, and which
tend directly to meet the needs of the said industry or works;

Following these classifications, MERALCO's steel towers should be considered personal property. It
should be noted that the steel towers:
(a) are neither buildings or constructions adhered to the soil;

(b) are not attached to an immovable in a fixed manner they can be separated without
breaking the material or deterioration of the object;
 are not machineries, receptacles or instruments, and even if they are, they are not intended
for an industry to be carried on in the premises.

MANILA ELECTRIC CO. V. CENTRAL BOARD OF ASSESSMENT APPEALS

114 SCRA 273

FACTS: Petitioner owns two oil storage tanks, made of steel plates wielded and assembled
on the spot. Their bottoms rest on a foundation consisted of compacted earth, sand pad as
immediate layer, and asphalt stratum as top layer. The tanks merely sit on its foundation.

The municipal treasurer of Batangas made an assessment for realty tax on the two tanks, based on
the report of the Board of Assessors. MERALCO wished to oppose this assessment as they averred
that the tanks are not real properties.

HELD: While the two storage tanks are not embodied in the land, they may nevertheless be
considered as improvements in the land, enhancing its utility and rendering it useful to the oil
industry.

For purposes of taxation, the term real property may include things, which should generally be
considered as personal property. it is familiar phenomenon to see things classified as real
property for purposes of taxation which on general principle may be considered as personal
property.

CALTEX PHILS. V. CENTRAL BOARD OF ASSESSMENT APPEALS 114 SCRA 296

FACTS: The City Assessor characterized the items in gas stations of petitioner as taxable realty.
These items included underground tanks, elevated tank, elevated water tanks, water tanks,
gasoline pumps, computing pumps, etc. These items are not owned by the lessor of the land
wherein the
equipment are installed. Upon expiration of the lease agreement, the equipment should be
returned in good condition.

HELD: The equipment and machinery as appurtenances to the gas station building or shed owned by
Caltex and which fixtures are necessary to the operation of the gas station, for without them the gas
station would be useless, and which have been attached and fixed permanently to the gas station site
or embedded therein, are taxable improvements and machinery within the meaning of the
Assessment Law and the Real Property Tax Code.

LA BUGAL BLAAN TRIBAL ASSOCIATION INC vs RAMOS Case Digest

FACTS: RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the effectivity of RA
7942, or on March 30, 1995, the President signed a Financial and Technical Assistance Agreement
(FTAA) with WMCP, a corporation organized under Philippine laws, covering close to 100,000
hectares of land in South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato. On August
15, 1995, the Environment Secretary Victor Ramos issued DENR Administrative Order 95-23, which
was later repealed by DENR Administrative Order 96-40, adopted on December 20, 1996.

Petitioners prayed that RA 7942, its implementing rules, and the FTAA between the government and
WMCP be declared unconstitutional on ground that they allow fully foreign owned corporations like
WMCP to exploit, explore and develop Philippine mineral resources in contravention of Article XII
Section 2 paragraphs 2 and 4 of the Charter.

In January 2001, WMC - a publicly listed Australian mining and exploration company - sold its whole
stake in WMCP to Sagittarius Mines, 60% of which is owned by Filipinos while 40% of which is owned
by Indophil Resources, an Australian company. DENR approved the transfer and registration of the
FTAA in Sagittarius name but Lepanto Consolidated assailed the same. The latter case is still
pending before the Court of Appeals.

EO 279, issued by former President Aquino on July 25, 1987, authorizes the DENR to accept,
consider and evaluate proposals from foreign owned corporations or foreign investors for contracts or
agreements involving wither technical or financial assistance for large scale exploration, development
and utilization of minerals which upon appropriate recommendation of the (DENR) Secretary, the
President may execute with the foreign proponent. WMCP likewise contended that the annulment of
the FTAA would violate a treaty between the Philippines and Australia which provides for the
protection of Australian investments.

ISSUES:
Whether or not the Philippine Mining Act is unconstitutional for allowing fully foreign-owned
corporations to exploit the Philippine mineral resources.
Whether or not the FTAA between the government and WMCP is a service contract that permits
fully foreign owned companies to exploit the Philippine mineral resources.
HELD:

First Issue: RA 7942 is Unconstitutional

RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting fully foreign owned
corporations to exploit the Philippine natural resources.

Article XII Section 2 of the 1987 Constitution retained the Regalian Doctrine which states that All
lands of the public domain, waters, minerals, coal, petroleum, and other 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. The same section also states that, the
exploration and development and utilization of natural resources shall be under the full control and
supervision of the State.

Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitution authorizing the
State to grant licenses, concessions, or leases for the exploration, exploitation, development, or
utilization of natural resources. By such omission, the utilization of inalienable lands of the public
domain through license, concession or lease is no longer allowed under the 1987 Constitution.

Under the concession system, the concessionaire makes a direct equity investment for the purpose of
exploiting a particular natural resource within a given area. The concession amounts to complete
control by the concessionaire over the countrys natural resource, for it is given exclusive and plenary
rights to exploit a particular resource at the point of extraction.
The 1987 Constitution, moreover, has deleted the phrase management or other forms of
assistance in the 1973 Charter. The present Constitution now allows only technical and financial
assistance. The management and the operation of the mining activities by foreign contractors, the
primary feature of the service contracts was precisely the evil the drafters of the 1987 Constitution
sought to avoid.

The constitutional provision allowing the President to enter into FTAAs is an exception to the rule that
participation in the nations natural resources is reserved exclusively to Filipinos. Accordingly, such
provision must be construed strictly against their enjoyment by non-Filipinos. Therefore, RA 7942 is
invalid insofar as the said act authorizes service contracts. Although the statute employs the phrase
financial and technical agreements in accordance with the 1987 Constitution, its pertinent
provisions actually treat these agreements as service contracts that grant beneficial ownership to
foreign contractors contrary to the fundamental law.

The underlying assumption in the provisions of the law is that the foreign contractor manages the
mineral resources just like the foreign contractor in a service contract. By allowing foreign contractors
to manage or operate all the aspects of the mining operation, RA 7942 has, in effect, conveyed
beneficial ownership over the nations mineral resources to these contractors, leaving the State with
nothing but bare title thereto.

The same provisions, whether by design or inadvertence, permit a circumvention of the

constitutionally ordained 60-40% capitalization requirement for corporations or associations engaged
in the exploitation, development and utilization of Philippine natural resources.

When parts of a statute are so mutually dependent and connected as conditions, considerations,
inducements or compensations for each other as to warrant a belief that the legislature intended them
as a whole, then if some parts are unconstitutional, all provisions that are thus dependent, conditional
or connected, must fail with them.

Under Article XII Section 2 of the 1987 Charter, foreign owned corporations are limited only to merely
technical or financial assistance to the State for large scale exploration, development and utilization of
minerals, petroleum and other mineral oils.

Second Issue: RP Government-WMCP FTAA is a Service Contract

The FTAA between he WMCP and the Philippine government is likewise unconstitutional since the
agreement itself is a service contract.

Section 1.3 of the FTAA grants WMCP a fully foreign owned corporation, the exclusive right to
explore, exploit, utilize and dispose of all minerals and by-products that may be produced from the
contract area. Section 1.2 of the same agreement provides that EMCP shall provide all financing,
technology, management, and personnel necessary for the Mining Operations.

These contractual stipulations and related provisions in the FTAA taken together, grant WMCP
beneficial ownership over natural resources that properly belong to the State and are intended for the
benefit of its citizens. These stipulations are abhorrent to the 1987 Constitution. They are precisely
the vices that the fundamental law seeks to avoid, the evils that it aims to suppress. Consequently,
the contract from which they spring must be struck down.
CHAVEZ V. PUBLIC ESTATES AUTHORITY 384 SCRA 152

FACTS:

President Marcos through a presidential decree created PEA, which was tasked with the
development, improvement, and acquisition, lease, and sale of all kinds of lands. The then
president also transferred to PEA the foreshore and offshore lands of Manila Bay under the Manila-
Cavite Coastal
Road and Reclamation Project.

Thereafter, PEA was granted patent to the reclaimed areas of land and then, years later, PEA
entered into a JVA with AMARI for the development of the Freedom Islands. These two entered
into a joint venture in the absence of any public bidding.

Later, a privilege speech was given by Senator President Maceda denouncing the JVA as
the grandmother of all scams. An investigation was conducted and it was concluded that the lands
that PEA was conveying to AMARI were lands of the public domain; the certificates of title
over the
Freedom Islands were void; and the JVA itself was illegal. This prompted Ramos to form an
investigatory committee on the legality of the JVA.

Petitioner now comes and contends that the government stands to lose billions by the
conveyance or sale of the reclaimed areas to AMARI. He also asked for the full disclosure of
the renegotiations happening between the parties.
ISSUE: W/N stipulations in the amended JVA for the transfer to AMARI of the lands,
reclaimed or to be reclaimed, violate the Constitution.

HELD: The ownership of lands reclaimed from foreshore and submerged areas is rooted in the
Regalian doctrine, which holds that the State owns all lands and waters of the public domain.

The 1987 Constitution recognizes the Regalian doctrine. It declares that all natural resources are
owned by the State and except for alienable agricultural lands of the public domain, natural
resources cannot be alienated.

The Amended JVA covers a reclamation area of 750 hectares. Only 157.84 hectares of the 750
hectare reclamation project have been reclaimed, and the rest of the area are still submerged areas
forming part of Manila Bay. Further, it is provided that AMARI will reimburse the actual costs
in reclaiming the areas of land and it will shoulder the other reclamation costs to be incurred.

The foreshore and submerged areas of Manila Bay are part of the lands of the public domain,
waters and other natural resources and consequently owned by the State. As such, foreshore
and submerged areas shall not be alienable unless they are classified as agricultural lands of
the public domain. The mere reclamation of these areas by the PEA doesnt convert these
inalienable natural resources of the State into alienable and disposable lands of the public
domain. There must be a law or presidential
proclamation officially classifying these reclaimed lands as alienable and disposable if the law
has reserved them for some public or quasi-public use.