FIRST DIVISION

G.R. No. 150000 September 26, 2006

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
TRI-PLUS CORPORATION, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the Decision1 dated September 14, 2001 of the Court of Appeals (CA) in CA-G.R. CV
No. 60671, which affirmed the judgment of the Municipal Trial Court (MTC) of Consolacion,
Metro Cebu in LRC Case No. N-21 granting herein respondent's application for registration of
title to Lots Nos. 1061 and 1062 of the Cadastral Survey of Consolacion, Cebu.

The facts of the case are as follows:

On April 30, 1997 Tri-Plus Corporation2, through its president, Euclid C. Po, filed with the MTC
of Consolacion, Metro Cebu,3 an Application for Registration of Title over two parcels of land
designated as Lots 1061 and 1062 of the cadastral survey of Consolacion, Cebu, containing an
area of 3,939 and 4,796 square meters, respectively, and located at Barangay Tayud,
Consolacion, Cebu.4 In its application, Tri-Plus alleged that it is the owner in fee simple of the
subject parcels of land, including the improvements thereon, having acquired the same through
purchase; and that it is in actual, continuous, public, notorious, exclusive and peaceful possession
of the subject properties in the concept of an owner for more than 30 years, including that of its
predecessors-in-interest.5 The case was docketed as LRC Case No. N-21.6

On September 4, 1997, the trial court received an Opposition to the Application for Registration
filed by the Republic of the Philippines through the Office of the Solicitor General (OSG) on the
grounds that neither the applicant nor its predecessors-in-interest have been in open, continuous,
exclusive and notorious possession and occupation of the land in question since June 12, 1945 or
prior thereto; that the muniments of title submitted by the applicant which consists, among
others, of tax declarations and receipts of tax payments, do not constitute competent and
sufficient evidence of a bona fide acquisition of the land applied for or of its open, continuous,
exclusive and notorious possession and occupation thereof in the concept of owner since June
12, 1945 or prior thereto; that the claim of ownership in fee simple on the basis of a Spanish title
or grant may no longer be availed of by the applicant because it failed to file an appropriate
application for registration in accordance with the provisions of Presidential Decree (P.D.) No.
892; and that the subject parcels of land are portions of the public domain belonging to the
Republic of the Philippines and are not subject to private appropriation.7

On September 19, 1997, Tri-Plus presented documentary evidence to prove compliance with the
jurisdictional requirements of the law. On even date, a Manifestation and Motion was filed by
the heirs of Toribio Pepito praying that they be given a period of 10 days within which to file
their written opposition.8 However, the oppositors failed to file their written opposition on time.
The trial court then commissioned its clerk of court to receive evidence from the applicant and
directed the former to submit a report thereon. Accordingly, a Commissioner's Report was
submitted on the proceedings taken.9

In its Judgment dated February 26, 1998, the MTC made the following finding and conclusion:

The totality of the evidence, both documentary and testimonial, of the applicant clearly
shows that it and its predecessors-in-interest had been in actual, public, exclusive and
continuous possession in concept of owner of the parcels of land above-mentioned for no
less than thirty (30) years prior to the filing of the instant petition for registration of its
imperfect title. This being so, the applicant is entitled that its title be confirmed under the
provisions of the Torrens System of Registration.10

Accordingly, it disposed of the case as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered declaring the

applicant TRI-PLUS LAND CORPORATION the exclusive and absolute owner of Lot
1061 of the Cadastral Survey of Consolacion, Cebu, as shown on plan Ap-07-002362
(Exhibit "J") and described in its corresponding technical description (Exhibit "K"), and
Lot 1062 of the Cadastral Survey of Consolacion, Cebu, as shown on plan Ap-07-002366
(Exhibit "O") and described in its corresponding technical description (Exhibit "P").

Once this decision becomes final, let an Order for the issuance of the decree of
registration for Lots 1061 and 1062, Consolacion Cadastre, be issued in the name of TRI-
PLUS LAND CORPORATION.

SO ORDERED.11

The OSG appealed the trial court's judgment with the CA.12

Subsequently, the Land Registration Authority (LRA), through its Director on Registration,
submitted a Report dated August 6, 1998 to the MTC, pertinent portions of which read as
follows:

1. Two (2) parcels of land described as Lots 1062 and 1061, Cad. 545-D, Consolacion
Cadastre on Plan Ap-07-002366 and Ap-07-002362, both situated in the Barangay of
Tayud, Municipality of Consolacion, Province of Cebu, are being applied for original
registration of title;

2. After examining the afore-said plan discrepancy was noted in the bearings and
distances of line 3-4 and 4-5 of Lot 1061, Ap-07-002362, being S.57 deg. 19'W 8.02m.
and S.52 deg. 10'W 18.24, which do not conform with the bearings and distances (N. 52
deg. 01'E., 18.00m) and (N. 52 deg. 47'E., 17.71m.) along lines 12-13 and 11-12,
 respectively of plan Rs-07-01-000358, lot 1508, Consolacion Cad. 545-D, decreed in
LRA (NALTDRA) Record No. N-60851.

3. That the above discrepancy was brought to the attention of the Regional Technical
Director, DENR, Land Management Services, Region VII, Mandaue City, for verification
and correction in a letter dated 7 July 1998.

4. This Authority is not in a position to verify whether or not the parcels of land subject
of registration are already covered by land patent.13

On September 14, 2001, the CA rendered the presently assailed Decision finding no reversible
error in the appealed judgment, thereby, affirming the same.14

Hence, herein petition based on the following assignments of errors:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT FINDING

THAT THE TRIAL COURT DID NOT ACQUIRE JURISDICTION TO HEAR AND
DECIDE THE CASE, BECAUSE THE IDENTITY OF THE LAND REMAINS
UNCERTAIN.

II

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT FINDING

THAT RESPONDENT FAILED TO DISCHARGE THE BURDEN OF PROVING
THAT THE PROPERTY IS ALIENABLE AND DISPOSABLE.

III

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT FINDING

THAT RESPONDENT IS DISQUALIFIED FROM ACQUIRING LANDS OF THE
PUBLIC DOMAIN.15

As to the first assigned error, petitioner contends that the CA erred in relying on the original
survey plan approved by the Lands Management Services of the Department of Environment and
Natural Resources (DENR) when it ruled that the applicant was able to duly establish the identity
of Lot 1061. This reliance, petitioner argues, is mistaken considering that the Report of the
Director on Registration of the LRA pointed to a discrepancy in the bearings and distances of the
boundaries which separate Lot 1061 from an adjoining land, Lot 1058. This discrepancy,
petitioners submit, casts doubt on the identity of the land subject of the application for
registration. Petitioner then concludes that if there is uncertainty in the metes and bounds of the
property sought to be titled, the trial court cannot acquire jurisdiction over the subject matter of
the case. Hence, the proceedings before the trial court, including its decision granting the
application for registration, are void.
As to the second assignment of error, petitioner argues that the CA erred in holding that the
applicant was able to prove that the subject properties are alienable and disposable lands of the
public domain. Petitioner contends that a mere notation appearing in the survey plans of the
disputed properties showing that the subject lands had been classified as alienable and disposable
on June 25, 1963 is not sufficient to establish the nature and character of these lands. Petitioner
asserts that there should be a positive act on the part of the government, such as a certification
from the DENR, to prove that the said lands are indeed alienable and disposable. Petitioner
further contends that even if the subject properties were classified as alienable and disposable on
June 25, 1963, the law, nonetheless, requires that such classification should have been made on
June 12, 1945 or earlier.

Anent the last assigned error, petitioner contends that since the applicant failed to discharge the
burden of proving that the subject properties are alienable and disposable, there is no basis for
the CA to rule that these properties are private lands.

In its Comment, respondent contends that it was able to prove the identity of Lot 1061 with
certainty. While it admits the discrepancy in the bearings and distances which form the boundary
between Lot 1061 and the adjoining Lot 1058, respondent contends that such discrepancy is
merely technical in nature because Lots 1058 and 1061 remain the same and that there is neither
an increase nor decrease in the area of the subject lot sought to be titled; and that what was
required by the LRA in its Report was for the applicant to correct and adjust the bearings and
distances of Lot 1061 in order to conform to the boundaries of Lot 1058.

Respondent also argues that the notations appearing in the survey plans of the subject properties
serve as sufficient proof that these lands are alienable and disposable. Respondent asserts that the
survey plans were duly approved by the DENR, Lands Management Services whose official acts
are presumed to be in accordance with law.

Lastly, respondent argues that its predecessor-in-interest's continuous, actual, adverse and
peaceful possession of the subject properties in the concept of an owner for a period of more than
30 years, coupled with the fact that they declared these lands in their name, gives a strong
presumption in respondent's favor that the subject properties no longer form part of the public
domain.

Parties filed their respective Memoranda.16

The Court finds the petition meritorious.

At the outset, however, the Court does not agree with petitioner's contention in its first assigned
error that respondent failed to properly identify Lot 1061 which is one of the lots sought to be
titled.

Insofar as the identity of the land subject of an application for original registration is concerned,
this Court has laid down the rule, as follows:
 The submission in evidence of the original tracing cloth plan, duly approved by the
Bureau of Lands, in cases for application of original registration of land is a mandatory
requirement. The reason for this rule is to establish the true identity of the land to ensure
that it does not overlap a parcel of land or a portion thereof already covered by a previous
land registration, and to forestall the possibility that it will be overlapped by a subsequent
registration of any adjoining land. The failure to comply with this requirement is fatal to
petitioner's application for registration.17

However, in Republic of the Philippines v. Court of Appeals18 and in the more recent cases of
Spouses Recto v. Republic of the Philippines19 and Republic of the Philippines v. Hubilla20, the
Court ruled that while the best evidence to identify a piece of land for registration purposes is the
original tracing cloth plan from the Bureau of Lands (now the Lands Management Services of
the DENR), blueprint copies and other evidence could also provide sufficient identification. In
the present case, respondent submitted in evidence a blueprint copy of the Advance Plan of Lot
106121 and a Technical Description22 thereof, both of which had been duly certified and
approved by the Lands Management Services of the DENR. The Court finds these pieces of
evidence as substantial compliance with the legal requirements for the proper identification of
Lot 1061. The discrepancy in the common boundary that separates Lot 1061 from Lot 1058, as
contained in the LRA Report does not cast doubt on the identity of the subject lot. As the CA
correctly held, the discrepancy is not substantial because it does not unduly increase or affect the
total area of the subject lot and at the same time prejudice the adjoining lot owner. It is only
when the discrepancy results to an unexplained increase in the total area of the land sought to be
registered that its identity is made doubtful. Besides, only a portion of the many boundaries of
Lot 1061 has been found to bear a discrepancy in relation to the boundary of one adjoining lot
and the LRA Report simply recommends that the Lands Management Services of the DENR
verify the reported discrepancy and make the necessary corrections, if needed, in order to avoid
duplication in the issuance of titles covering the same parcels of land.

Petitioner's argument that, on the basis of the LRA Report, the MTC should have dismissed
respondent's application for registration for lack of jurisdiction over the subject matter, is without
merit. The MTC could not have possibly done this because said Report was submitted to the trial
court more than five months after the latter rendered its Decision. A copy of the LRA Report
attached to the present petition shows that it is dated August 6, 1998 while the MTC decision
was rendered much earlier on February 26, 1998. In fact, the Office of the Solicitor General
(OSG) perfected its appeal by filing a notice of appeal of the MTC Decision on April 2, 1998,
which is also prior to the submission of the LRA report. Hence, by the time the LRA report was
submitted to the MTC, the latter has already lost jurisdiction over the case, not on the ground
cited by petitioner but because the appeal to the CA was already perfected, vesting jurisdiction
upon the appellate court.

In any case, while the subject lands were properly identified, the Court finds that respondent
failed to comply with the other legal requirements for its application for registration to be
granted.

Applicants for confirmation of imperfect title must prove the following: (a) that the land forms
part of the alienable and disposable agricultural lands of the public domain; and (b) that they
have been in open, continuous, exclusive and notorious possession and occupation of the same
under a bona fide claim of ownership either since time immemorial or since June 12, 1945.23

In the present case, the Court finds merit in petitioner's contention that respondent failed to prove
the first requirement that the properties sought to be titled forms part of the alienable and
disposable agricultural lands of the public domain.

Section 6 of Commonwealth Act No. 141, as amended, provides that the classification and
reclassification of public lands into alienable or disposable, mineral or forest land is the
prerogative of the Executive Department. Under the Regalian doctrine, which is embodied in our
Constitution, all lands of the public domain belong to the State, which is the source of any
asserted right to any ownership of land.24 All lands not appearing to be clearly within private
ownership are presumed to belong to the State.25 Accordingly, public lands not shown to have
been reclassified or released as alienable agricultural land or alienated to a private person by the
State remain part of the inalienable public domain.26

It must be stressed that incontrovertible evidence must be presented to establish that the land
subject of the application is alienable or disposable.27

In the present case, the only evidence to prove the character of the subject lands as required by
law is the notation appearing in the Advance Plan stating in effect that the said properties are
alienable and disposable. However, this is hardly the kind of proof required by law. To prove
that the land subject of an application for registration is alienable, an applicant must establish the
existence of a positive act of the government such as a presidential proclamation or an executive
order, an administrative action, investigation reports of Bureau of Lands investigators, and a
legislative act or statute.28 The applicant may also secure a certification from the Government
that the lands applied for are alienable and disposable.29 In the case at bar, while the Advance
Plan bearing the notation was certified by the Lands Management Services of the DENR, the
certification refers only to the technical correctness of the survey plotted in the said plan and has
nothing to do whatsoever with the nature and character of the property surveyed. Respondents
failed to submit a certification from the proper government agency to prove that the lands subject
for registration are indeed alienable and disposable.

As to the second requirement, testimonial evidence were presented to prove that respondent's
predecessors-in-interest had been in possession of the subject lots in the concept of an owner for
the period required by law. The first witness was Thelma Pilapil who claims to be the daughter
of Constancia Frias from whom respondent bought Lot 1061. Pilapil testified that her family has
been in possession of Lot 1061 since her birth.30 When her testimony was offered on October 7,
1997, she was 40 years old.31 Deducting 40 years from 1997, it means that her family started
possession of Lot 1061 only in 1957. The second witness who was presented was Tomas Frias
from whom respondent bought Lot 1062. Frias testified that he was 67 years old at the time that
his testimony was taken on October 7, 1997.32 He claims that he started owning the subject lot
when he was 17 years old and had been in possession of the same since then.33 Hence, by simple
arithmetic, the testimony of Frias proves that he came to possess Lot 1062 only in 1947. While
he testified that Lot 1062 was previously owned by his father and that he inherited the property
from his parents, no evidence was presented to show that the latter indeed previously owned the
said property and that they had been in possession of the same on or before June 12, 1945.

Moreover, other pieces of evidence presented by respondent to prove the period of its possession
and that of its predecessors-in-interest show that the subject properties were declared for taxation
purposes beginning only in 1961.34 This date may be considered as relatively recent considering
that respondent's predecessors-in-interest claim to have been in possession of the subject
properties as early as 1947. While belated declaration of a property for taxation purposes does
not necessarily negate the fact of possession, tax declarations or realty tax payments of property
are, nevertheless, good indicia of possession in the concept of an owner, for no one in his right
mind would be paying taxes for a property that is not in his actual, or at least, constructive
possession.35 In the present case, respondent failed to explain why, despite the claim of its
predecessors-in interest that they possessed the subject properties in the concept of an owner as
early as 1947, it was only in 1961 that they started to declare the same for purposes of taxation.

From the foregoing, it is clear that respondent and its predecessors-in-interest failed to prove that
they had been in open, continuous, exclusive and notorious possession of the subject properties
under a bona fide claim of ownership since June 12, 1945 or earlier, as required by law.

Well-entrenched is the rule that the burden of proof in land registration cases rests on the
applicant who must show clear, positive and convincing evidence that his alleged possession and
occupation were of the nature and duration required by law.36 In the present case, the Court finds
that respondent failed to prove, by clear and convincing evidence, the legal requirements that the
lands sought to be titled are alienable and disposable and that its predecessors-in-interest were
already in possession of the subject lots since 1945 or earlier.

As to the last assigned error, respondent having failed to prove that the subject properties are
alienable and disposable public lands, the Court agrees with petitioner that there would be no
basis in concluding that these lands have already become private. The presumption remains that
said properties remain part of the inalienable public domain and, therefore, could not become the
subject of confirmation of imperfect title.

Finally, while it is an acknowledged policy of the State to promote the distribution of alienable
public lands as a spur to economic growth and in line with the ideal of social justice, the law
imposes stringent safeguards upon the grant of such resources lest they fall into the wrong hands
to the prejudice of the national patrimony.37 The Court must not, therefore, relax the stringent
safeguards relative to the registration of imperfect titles.

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated
September 14, 2001 in CA-G.R. CV No. 60671 is REVERSED and SET ASIDE. Respondent
Tri-Plus Corporation's application for registration and issuance of title to Lots 1061 and 1062,
Consolacion Cad-545-D, in LRC Case No. N-21 filed with the Municipal Trial Court of
Consolacion, Metro Cebu, is DISMISSED.

SO ORDERED.
Panganiban, C.J., Chairperson, Ynares-Santiago, Callejo, Sr., Chico-Nazario, J.J., concur.

Footnotes
1
Penned by Justice Eriberto U. Rosario, Jr. (now retired) and concurred in by Justices Buenaventura J.
Guerrero (now retired) and Edgardo P. Cruz.
2
Also referred to in the CA rollo and records as Tri-Plus Land Corporation.
3
In its capacity as Cadastral and Land Registration Court by virtue of SC Administrative Circular 6-93-A,
dated November 15, 1995, which was issued pursuant to the provisions of Section 34 of Batas Pambansa
Blg. 129, as amended by R.A. No. 7691 and the Resolution of the Court En Banc in Administrative Matter
No. 93-3-488-0, dated March 25, 1993.
4
Records, p. 1.
5
Id.
6
Id.
7
Id. at 33-34.
8
Id. at 41.
9
Id. at 44-46.
10
Id. at 77-78.
11
Id. at 78.
12
Under Section 34 of B.P. Blg. 129, as amended by R.A. No. 7691, decisions of Metropolitan Trial
Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in their capacity as cadastral and land
registration courts, are appealable in the same manner as decisions of the Regional Trial Courts.
13
Annex "G" to the Petition for Review, rollo, p. 81.
14
CA rollo, pp. 68-81.
15
Rollo, pp. 19-20.
16
Id. at 165 and 192.
17
Del Rosario v. Republic of the Philippines, 432 Phil. 824, 834 (2002).
18
G.R. No. L-62680, November 9, 1988, 167 SCRA 150, 154 citing Republic of the Philippines v.
Intermediate Appellate Court, 229 Phil 20 (1986) and Director of Lands v. Court of Appeals, G.R. No. L-
56613, March 14, 1988, 158 SCRA 568.
19
G.R. No. 160421, October 4, 2004, 440 SCRA 79, 87.
20
G.R. No. 157683, February 11, 2005, 451 SCRA 181, 184-185.
21
Exhibit "J", Records, p. 8.
22
Exhibit "K", id. at 9.
23
Carlos v. Republic of the Philippines, G.R. No. 164823, August 31, 2005, 468 SCRA 709, 714-715.
24
Republic of the Philippines v. Naguiat, G.R. No. 134209, January 24, 2006, 479 SCRA 585, 590.
25
Id.
26
Id. at 590-591.
27
Republic of the Philippines v. Lao, 453 Phil. 189, 198 (2003).
28
Republic of the Philippines v. Court of Appeals, 440 Phil. 697, 710-711 (2002).
29
Zarate v. Director of Lands, G.R. No. 131501, July 14, 2004, 434 SCRA 322, 332.
30
TSN, October 7, 1997, p. 8.
31
Id.
32
Id. at 15.
33
Id. at 17.
34
Exhibits "M" and "Q", records, pp. 56 and 63, respectively.
35
Republic of the Philippines v. Alconaba, G.R. No. 155012, April 14, 2004, 427 SCRA 611, 621.
36
Republic of the Philippines v. Enciso, G.R. No. 160145, November 11, 2005, 474 SCRA 700, 713.
37
Republic of the Philippines v. Kalaw, G.R. No. 155138, June 8, 2004, 431 SCRA 401, 414.
 SECOND DIVISION

G.R. No. 131501 July 14, 2004

FRANCISCO ZARATE, petitioner,

vs.
THE DIRECTOR OF LANDS, PRECIOSA T. DAVILA, REGALADO TORIAGA,
PATRIA TORIAGA, RENATO TORIAGA, ROSALINDA TORIAGA, RYL TORIAGA,
PROBO TORIAGA, JOSE CORPUS, MARCELINITO HONORIO, JOSE MELO,
LOLITO TALAGA, FELIPE VILLANUEVA, DOMINADOR TAGBALAY, MAXIMO
VILLANUEVA, and the DEVELOPMENT BANK OF THE PHILIPPINES, respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-G.R.
CV No. 28241 affirming the Decision2 of the Regional Trial Court of Kalibo, Aklan, Branch 3,
in Land Registration Case No. 273.

The Antecedents

As gleaned from the decision of the Court of Appeals, the factual backdrop and antecedental
proceedings are as follows:

This is an application for registration of title filed by appellant Francisco Zarate on 27

December 1976 to have his three parcels of land brought under the operation of the Land
Registration Act. The subject parcels of land contain a land area of 68.2787 hectares and
10.5135 hectares, located at Dumatiad, Tangalan, Aklan, and of 3.8500 hectares, located
at Afga, Tangalan, Aklan. The said parcels have been subdivided into six (6) lots.

Appellant claims that the first two parcels of land which formed only one parcel of land
consisting of about 78.7922 hectares originally belonged to the spouses Solomon Tirol
and Venancia Hontiveros. When they died in 1905 and 1913, respectively, the said
parcels of land were inherited by their children Gregorio, Ignacio, Lamberto, Eleanor and
Carmen, all surnamed Tirol.

On 26 May 1923, they donated said parcel to Josefino Tirol, son of Gregorio, and
Angeles Arcenas in consideration of their marriage (Exhs. (sic) "Z"). Said land was later
subdivided into two, one with an area of 68.2787 hectares and the other 10.5135 hectares
which was later sold to herein appellant on 7 January 1976 (Exh. "HH"). The third parcel
(with an area of 3.8500 hectares) was inherited by Gregorio Tirol, father of Josefino,
from his ancestors. When Gregorio died, Josefino inherited the same. He later sold the
said land to herein appellant on 11 March 1976.

Applicant claims that he and his predecessors-in-interest have been in peaceful

possession and usufruct of the property for over eighty (80) years, religiously paying the
taxes thereon. Nobody disturbed their possession and usufruct for more than fifty (50)
years, until oppositors Maximo Villanueva, Jose Corpuz, Dominador Tagbalay,
Marcelinito Honorio, Lolito Talaga, Felipe Villanueva and Jose Molo, entered and
occupied portions of the land sometime in 1970.

Oppositors Preciosa Tirol Davila, on the other hand, contends that Lot 1, Plan Psu-06-
000253 with an area of 530,310 sq. meters situated in Tangalan, Aklan, owned by her,
was previously the property of Ignacio Tirol, her father. When Ignacio died, the said lot
was entrusted to Josefino Tirol, who was his lawyer and first cousin. She did not have
any tax declarations because Josefino assured her that he would be responsible for them.
Preciosa denied that the said property was donated by his father to Josefino and that the
signature appearing on the deed of donation was forged.

Oppositor Development Bank of the Philippines gave another version. It claims that the
questioned lots are owned by spouses Valeriano Molo and Lutgarda Molo. The said
parcel which consists of about 190,922 square meters located at Afga, Tangalan, Aklan,
was mortgaged to the bank. When the couple failed to pay their indebtedness, the
mortgage was foreclosed and the land became the property of the bank in whose name
the land is now declared for taxation purposes.

Oppositors Regalado, Patria, Renato, Rosalinda, Ryl and Probo, all surnamed Toriaga,
likewise, contend that the land claimed by them which is about 4 hectares in area and
situated in Afga, Tangalan, Aklan, originally belonged to Eulalio Tanasa, who possessed
it before 1949. When he died, the land was inherited by his daughter Prima who was
married to Probio (sic) Toriaga. Prima continuously resided on the land until her death in
1977. The land passed to her son, Regalado Toriaga, Sr., husband of oppositor Patria and
father of the other oppositors. The said land is declared in the name of the Toriagas.

All the oppositors claim that the land applied for by appellant was unoccupied and
covered with wild trees and cogon. They cleared the land, built their houses and planted
mangoes, casoy, jackfruit, bananas, camote, and cassava. Neither Josefino Tirol nor
Francisco Zarate possessed the land nor enjoyed the products thereof.

Oppositor Republic of the Philippines, for its part, claims that the subject land was
timberland or unclassified forest. In 1970, at the time of oppositors’ occupation, the lands
were covered with wild trees and thickets and was (sic) released as alienable and
disposable under Land Classification Map No. 2779, Project 10-A only on 16 April 1973.

Since there were many claimants, the trial court commissioned a geodetic engineer to
determine the different portions claimed by the applicant and the oppositors. The
commissioner’s report shows the following claims:
 Regalado Toriaga, et al. - 4.1444 hec.

Maximo Villanueva - 4.3572 "

Jose Molo - 3.7575"

Jose Corpuz - 6.3555"

Marcelino (sic) Honorio - 7.5123"

Dominador Tagbalay - 2.6496"

(pp. 1,310-1,313, Vol. IV, Record)

Oppositor DBP also claimed an area of 19.092 hectares while Preciosa Davila is also claiming an
area of 53.0310 hectares of Lot 1.

After the contending parties presented their evidence, the trial court on 26 April 1990 rendered
judgment dismissing the application of title filed by applicant Francisco Zarate, and the claims of
private oppositors.

Not satisfied with the aforesaid decision, applicant filed this appeal assigning the following
errors:

THE LOWER COURT ERRED IN NOT FINDING THAT THE ADVERSE CLAIMS
OF OWNERSHIP OF THE LANDS IN QUESTION OF THE DEVELOPMENT BANK
OF THE PHILIPPINES AND ALL THE OTHER OPPOSITORS ARE FALSE AND
FRAUDULENT WITHOUT BASIS IN FACT AND LAW.

II

THE LOWER COURT ERRED IN NOT HOLDING THAT THE APPLICANT-

APPELLANT, INCLUDING THE POSSESSIONS AND USUFRUCTS OF HIS
PREDECESSORS-IN-INTEREST, HAS BEEN IN POSSESSION AND USUFRUCT
OF THE LANDS SUBJECT MATTER OF THIS PROCEEDING FOR OVER 80
YEARS AND FROM TIME IMMEMORIAL AND HE, THEREFORE, ACQUIRED
VESTED RIGHTS THEREON.

III

THE LOWER COURT ERRED IN NOT APPROVING THE APPLICATION FOR

REGISTRATION OF TITLE TO LAND WHICH THE APPLICANT BROUGHT (sic)
TO HAVE HIS THREE PARCELS OF LAND BROUGHT UNDER THE OPERATION
OF THE LAND REGISTRATION ACT AND TO HAVE THE TITLES THERETO IN
 THE EXCLUSIVE NAME OF THE APPLICANT REGISTERED AND
CONFIRMED.3

On February 18, 1997, the Court of Appeals rendered judgment affirming the decision of the trial
court.

The applicant-appellant, now the petitioner, filed a petition for review contending that:

THE COURT OF APPEALS ERRED IN GIVING FULL CREDENCE TO THE

TESTIMONY OF GEODETIC ENGINEER RONDARIO AND RESPONDENT
(OPPOSITOR) MAXIMO VILLANUEVA AND NOT TO THAT OF THE
PETITIONER (APPLICANT) AND HIS WITNESSES, RELATIVE TO THE TRUE
CLASSIFICATION OF THE SUBJECT PARCELS OF LAND.

II

THE CLAIMS OF THE RESPONDENTS (OPPOSITORS) ARE RIDDLED WITH

INCONSISTENCIES AND IMPROBABILITIES, WHICH INCONSISTENCIES AND
IMPROBABILITIES ONLY STRENGTHEN PETITIONER’S (APPLICANT’S)
CLAIMS.

III

A STRICT APPLICATION OF THE RULE REGARDING THE RELEASE OF

PUBLIC LANDS AS EMBODIED IN THE CASE OF VALLARTA V.
INTERMEDIATE APPELLATE COURT, 151 SCRA 679 (1987), WOULD WORK
SERIOUS AND IRREPARABLE INJUSTICE TO THE PETITIONER APPLICANT).4

The petitioner avers that the Court of Appeals erred in giving credence and probative weight to
the testimony of Geodetic Engineer Jose Rondario and his Certification that the subject property
was within the alienable and disposable area of Tangalan, Aklan, certified and released as such
under Land Classification Map No. 2779, Project 10-A on April 16, 1973. He asserts that the
appellate court should have considered his testimonial and documentary evidence, that the
property subject of his application hardly comes close to being a forest or timberland, and that
there were hardly any big trees on the property. The petitioner and his predecessors-in-interest
even planted bananas, cassava, coconut trees, and camotes on the property.

The petitioner contends that the ruling of this Court in Vallarta vs. Intermediate Appellate
Court,5 should not be applied so as to prejudice his vested rights over the subject property. The
petitioner asserts that for a period of eighty years before 1973, he and his predecessors-in-interest
had been in public, continuous, adverse and exclusive possession of the property. He cites the
ruling of this Court in Ankron vs. Government of the Philippine Islands to fortify his plea.6

On the other hand, the trial court declared that:

 To find out the real nature of the lands, the Court examined the testimony of the
witnesses –

Witness Jose Rondario, for the oppositor Development Bank of the Philippines, and
surveyor of the lands of the applicant, testified as follows:

ATTY. TEJADA:

Q You stated that you have gone over the property that you have surveyed for Valeriano
Molo, can you tell the court what [were the] improvements, if there are (sic) any, during
the survey in 1974?

A When I execute[d] my survey, I found out that there is no(t) any (sic) plant only
kaingin.

xxx

Q When you conducted the survey for Valeriano Molo in 1974, were you approached by
any person?

A There is (sic) nobody questioning me during my survey because actually there was a
(were) people making kaingin there – I think that (sic) was the tenant of Valeriano
Molo." (Tsn, Melgar, November 5, 1987, pp. 7 and 13).

Witness Maximo Villanueva (one of the oppositors) declared:

ATTY. TAPLAC:

Q When you first occupied this land in question, what was the condition of the land?

A Filled with thickets and second group forest.

Q How big are (sic) the trees found when you first occupied this land?

A Some were big trees because we used to get (sic) our materials in building our house.

Q Were there signs of occupation when you first entered the land?

A There was no sign that there was a previous occupation (sic)."

xxx

COURT:

Q What kind of trees were existing on the land when you occupied it?
 A Wild trees not planted by people.

Q There were no coconut trees existing at the time you occupied the land?

A No, Your Honor." (TSN, Peniano, January 31, 1990, pp. 9-10 and 17).

Witness Agustin Bautista, an employee of the Forest Management Sector of the Community
Environment and Natural Resources Office, Kalibo, Aklan, testifying for the oppositor Director
of Lands, averred:

ATTY. TORRE:

Q In this land classification map 10-A, which is described as alienable and disposable,
would you mind informing this Court as to what is the status of this Project No. 10-A
previously classified as alienable and disposable?

A That is timberland. Previously, it is not being classified alienable and disposable.

xxx

Q But previous to April 16, 1973, what is (sic) the status of the land then?

A It is (sic) timberland. It is (sic) not classified as alienable and disposable." (Tsn,

Gonzales, February 1, 1990, pp. 3 and 5).

Evidently, the three parcels of land in question were forest lands. The applicant’s predecessor-in-
interest, Josefino Tirol, and the private oppositors, who claimed possession over the area did not
and could not have acquired ownership over the said lands considering that the area was then
inalienable and non-disposable.

In the present case, the lands applied for title were released as alienable and disposable only on
April 16, 1973 (Exhs. "5-RP" and "6-RP") as per Project No. 10-A, Land Classification Map No.
2779. The application for registration was filed on December 27, 1976. Since the applicant, and
likewise, the private oppositors, possessed the land from the time of release on April 16, 1973,
for only three (3) years and eight (8) months prior to the filing of the application, the thirty (30)
year possession required by law was not complied with.7

Moreover, to warrant registration, proof of possession must be "conclusive" (Municipality of

Santiago vs. Court of Appeals, 120 SCRA 734), or "well-nigh incontrovertible" (Santiago vs. de
los Santos, 61 SCRA 146). The applicant was not able to prove such possession. The bulk of the
evidence submitted revealed numerous occupants on the lands. The survey plan submitted by
Reynaldo Lopez, a geodetic engineer commissioned by the Court to determine the different
portions claimed by the applicant and the oppositors (Records, p. 1,314), showed that of the three
parcels of land with a total area of eighty one (81) hectares, the private oppositors claim the
following:

Regalado Toriaga, et al. - 4.1554 hectares

(Lot A);

Maximo Villanueva - 4.3572 hectares

(Lot B);

Jose Molo - 3.7575 hectares

(Lot C);

Jose Corpus - 6.3556 hectares

(Lot D);

Marcelinito Honorio - 7.5123 hectares

(Lot E); and

Dominador Tagbalay - 2.6496 hectares

(Lot F).

The evidence likewise showed that Valeriano Molo, now substituted by the Development Bank
of the Philippines, claims 19.092 hectares, and oppositor Preciosa Tirol Davila, 53.0310 hectares.
The aforementioned oppositors claim that they are in actual, physical possession of their
respective portions. It is admitted by the applicant in his amended application and in his evidence
presented during the trial that oppositors Maximo Villanueva, Jose Corpus, Marcelinito Honorio,
Joselito Honorio, Dominador Tagbalay, Jose Molo, Valeriano Molo (now substituted by the
Development Bank of the Philippines), and the heirs of Regalado Toriaga, Sr., occupy portions
of the land through "illegal entry, unauthorized squatting or usurpation." More than one-half
(1/2) of the total area applied for registration not being in the possession of the applicant, he
cannot, thus, claim exclusive and notorious possession under claim of ownership, nor can he
support his claim of title through acquisitive prescription.

The Court, therefore, holds that the applicant, as well as the private oppositors, failed to prove by
sufficient evidence that they have complied with the requisites provided by law to warrant
registration of title to the three (3) parcels of land.8

The Court of Appeals concurred in toto with the findings of the trial court and cited the ruling of
this Court in Vallarta vs. Intermediate Appellate Court9 in ruling against the appellants.

We find the petition to be barren of merit.

The decisive issue for resolution is whether or not the Court of Appeals erred in affirming the
appealed decision dismissing the petitioner’s application, on the ground that he failed to prove
ownership of the three parcels of land subject of his application under Section 48(b) of
Commonwealth Act No. 141, as amended.
The question raised by the petitioner, whether the parcels of land subject of his application are
forest lands, and whether the petitioner, by himself, and his predecessors-in-interest were in
open, continuous, exclusive and notorious possession under a bona fide claim of ownership for at
least thirty (30) years immediately preceding his application in 1976, are questions of fact which
the trial court and the Court of Appeals resolved in the negative. Such factual findings are
generally conclusive in this Court and will not be reviewed on appeal.10 This Court is not a trier
of facts in a case appealed to it under Rule 45 of the Rules of Court, as amended. There are, to be
sure, exceptions to this rule. However, we have carefully reviewed the records and find no
justification to deviate from the findings of the trial and appellate courts that the subject property
was, before April 16, 1973, forest land, and that the petitioner failed to prove his claim of title
over the parcels of land subject of his application under Section 48(b) of Commonwealth Act No.
141, as amended, and the legal conclusions based on their findings.

Under the Regalian doctrine, all lands of the public domain belong to the State, and that the State
is the source of any asserted right to ownership of land and charged with the conservation of
such patrimony. The same doctrine also states that all lands not otherwise appearing to be clearly
within private ownership are presumed to belong to the State.11 Consequently, the burden of
proof to overcome the presumption of ownership of lands of the public domain is on the person
applying for registration.12 Unless public land is shown to have been reclassified and alienated
by the State to a private person, it remains part of the inalienable public domain.13

Section 48 of the Public Land Act, as amended by P.D. No. 1073, provides:

SEC. 48. The following described citizens of the Philippines, occupying lands of the
public domain or claiming to own such lands or an interest therein, but whose titles have
not been perfected or completed, may apply to the Court of First Instance of the province
where the land is located for confirmation of their claims and the issuance of a certificate
of title therefor, under the Land Registration Act, to wit:

xxx xxx xxx

(b) Those who by themselves or through their predecessors-in-interest have been in open,
continuous, exclusive, and notorious possession and occupation of agricultural lands of
the public domain, under a bona fide claim of acquisition or ownership, for at least thirty
years immediately preceding the filing of the application for confirmation of title except
when prevented by war or force majeure. These shall be conclusively presumed to have
performed all the conditions essential to a Government grant and shall be entitled to a
certificate of title under the provisions of this chapter.

The petitioner was burdened to prove, by positive and incontrovertible evidence, two legal
requirements: (1) the land applied for was alienable and disposable; and, (2) the applicant and his
predecessors-in-interest had occupied and possessed the land openly, continuously, exclusively,
and adversely for thirty (30) years immediately preceding the filing of his application on
December 26, 1976. One claiming private rights must prove that he has complied with the legal
requirements of Commonwealth Act No. 141, as amended, which prescribes the substantive as
well as procedural requirements for acquisition of public lands.14 When the conditions set forth
by law are complied with, the possessor of the land, by operation of the law, acquires a right to
grant, a government grant, without the necessity of a certificate of title being issued.15

Under Section 6 of Commonwealth Act No. 141, as amended, the classification and
reclassification of public lands into alienable or disposable, mineral or forest land is the
prerogative of the Executive Department.16 In Bracewell vs. Court of Appeals,17 we held that
the rule on the confirmation of imperfect title does not apply unless and until the land classified
as forest land is released in an official proclamation to that effect so that it may form part of the
disposable agricultural lands of the public domain. The applicant must secure a certification from
the Government that the lands applied for by the applicants are alienable and disposable.18

The petitioner failed to discharge his burden.

First. The petitioner failed to adduce in evidence any certification from the Bureau of Lands or
the Bureau of Forestry to the effect that the property is alienable or disposable. On the other
hand, the respondents adduced evidence that the property applied for by the petitioner was
classified by the Director of Forestry as disposable and alienable only under Forestry
Administrative Order No. 4-1295 issued on April 16, 1973, and Land Classification No. 2779
and Project No. 10-A. This is gleaned from the Certification of the Director of Forestry, viz:

I hereby certify that this is the correct map of the areas demarcated as timberlands
pursuant to Section 1816 of the Revised Administrative Code and those set aside as
Alienable or Disposable under Forestry Administrative Order No. 4-1295 dated April 16,
1973. These areas were surveyed and the field notes plotted in accordance with the
standard procedure and mapping instruction of the Bureau of Forestry. Therefore, this
map is hereby approved. The original reports, field notes and computations in connection
herewith are on file in this Office.

Manila, Philippines. April 16, 1973.

NOTE:

FAO No. 4-1295

Approved on (Sgd.) JOSE VIADO

June 19, 1973. Actg. Director of Forestry19

Geodetic Engr. Jose R. Rondario, who was commissioned by the petitioner to prepare the survey
plan for the subject parcels of land certified, thus:

I hereby certify that this area surveyed is within the alienable and disposable area of
Tangalan, Aklan, certified and released as such on April 16, 1973 per L.C. No. 2779 and
Project No. 10-A.

I further certify that this Lot surveyed is outside civil and military reservation.
 (Sgd.) JOSE R. RONDARIO

Geodetic Engineer20

The petitioner cannot denigrate the verisimilitude of the contents of the Certification of Engr.
Rondario because the same was offered as his evidence and is based on the records of the Bureau
of Forestry.

Since the property was reclassified as alienable and disposable only on April 16, 1973 and the
petitioner filed his application only on December 27, 1976, or only less than four years after the
said reclassification. He irrefragably failed to prove his possession of the property for the
requisite thirty (30)-year period. The possession of the land by the applicant and his
predecessors-in-interest, even assuming that his predecessors had been in possession of the
property prior to the reclassification thereof as alienable or disposable, cannot be credited as part
of the thirty (30)-year period required under Section 48(b) of Commonwealth Act No. 141, as
amended.21 Indeed, in Bracewell vs. Court of Appeals,22 we held that:

Clear from the above is the requirement that the applicant must prove that the land is
alienable public land. On this score, we agree with the respondents that the petitioner
failed to show that the parcels of land subject of his application are alienable or
disposable. On the contrary, it was conclusively shown by the government that the same
were only classified as alienable or disposable on March 27, 1972. Thus, even granting
that [the] petitioner and his predecessors-in-interest had occupied the same since 1908, he
still cannot claim title thereto by virtue of such possession since the subject parcels of
land were not yet alienable land at that time nor capable of private appropriation. The
adverse possession which may be the basis of a grant of title or confirmation of an
imperfect title refers only to alienable or disposable portions of the public domain…

Prior to March 27, 1972, when the subject parcels of land were classified as inalienable
or indisposable, therefore, the same could not be the subject of confirmation of imperfect
title. There can be no imperfect title to be confirmed over lands not yet classified as
disposable or alienable. In the absence of such classification, the land remains
unclassified public land until released therefrom and open to disposition. Indeed, it has
been held that the rules on [the] confirmation of imperfect title do not apply unless and
until the land classified as forest land is released in an official proclamation to that effect
so that it may form part of the disposable agricultural lands of the public domain.23

The ruling of the Court in Ankron vs. Government of the Philippine Island24 has no application
in this case because in that case, the Court ruled that the property was "indisputably" agricultural
land. The petitioner’s bare claims, even if true, that no big trees could be found in the property
and that he and his predecessors planted bananas, camotes and other fruit trees on portions of the
property, do not divest the property of its classification as forest land. A similar issue was raised
in Heirs of Jose Amunategui vs. Director of Forestry,25 where we held that:
 A forested area classified as forest land of the public domain does not lose such
classification simply because loggers or settlers may have stripped it of its forest cover.
Parcels of land classified as forest land may actually be covered with grass or planted to
crops by kaingin cultivators or other farmers. "Forest lands" do not have to be on
mountains or in out of the way places. Swampy areas covered by mangrove trees, nipa
palms and other trees growing in brackish or sea water may also be classified as forest
land. The classification is descriptive of its legal nature or status and does not have to be
descriptive of what the land actually looks like. Unless and until the land classified as
"forest" is released in an official proclamation to that effect so that it may form part of the
disposable agricultural lands of the public domain, the rules on confirmation of imperfect
title do not apply.

This Court ruled in the leading case of Director of Forestry v. Muñoz (23 SCRA 1184
[sic]) that possession of forest lands, no matter how long, cannot ripen into private
ownership. And in Republic v. Animas (56 SCRA 499), we granted the petition on the
ground that the area covered by the patent and title was not disposable public land, it
being a part of the forest zone and any patent and title to said area is void ab initio. It
bears emphasizing that a positive act of Government is needed to declassify land which is
classified as forest and to convert it into alienable or disposable land for agricultural or
other purposes.

The findings of the Court of Appeals are particularly well-grounded in the instant
petition.

The fact that no trees enumerated in Section 1821 of the Revised Administrative Code are
found in Lot No. 885 does not divest such land of its being classified as forest land, much
less as land of the public domain. …26

We reject the claim of the petitioner that he had acquired vested rights over the property, on his
assertion that he and his predecessors-in-interest had been in possession of the property for
decades before he filed his application in the trial court. It is a rule of law that possession of
forest lands, however long, cannot ripen into private ownership.27 Such lands are not capable of
private appropriation, and possession thereof, no matter how long, cannot ripen into
ownership.28

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED DUE COURSE for lack of
merit. The Decision of the Court of Appeals in CA-G.R. CV No. 28241 is AFFIRMED. Costs
against the petitioner.

SO ORDERED.

Puno, (Chairman), Quisumbing, Austria-Martinez, and Tinga, JJ., concur.

Footnotes
1 Penned by Associate Justice Antonio M. Martinez (promoted Associate Justice of the Supreme Court)
(retired), with Associate Justices Eduardo G. Montenegro (retired) and Celia Lipana-Reyes (deceased),
concurring.
2 Penned by Judge Sheila Martelino-Cortes.
3 Rollo, pp. 38-41.
4 Id. at 20.
5 151 SCRA 679 (1987).
6 40 Phil. 10 (1919).
7 Rollo, pp. 55-57.
8 Id. at 58-59.
9 Supra.
10 Abapo vs. Court of Appeals, 327 SCRA 180 (2000).
11 Bracewell vs. Court of Appeals, 323 SCRA 193 (2000), citing Director of Lands vs. Intermediate
Appellate Court, 219 SCRA 339 (1993).
12 Ibid.
13 Menguito vs. Republic, 348 SCRA 128 (2000).
14 Public Estates Authority vs. Court of Appeals, 345 SCRA 96 (2000).
15 Republic vs. Daldole, 295 SCRA 359 (1998).
16 Bureau of Forestry vs. Court of Appeals, 153 SCRA 351 (1987).
17 Supra.
18 Director of Lands vs. Buyco, 216 SCRA 78 (1992).
19 Exhibit "5." (Folder of Exhibits)
20 Exhibit "3."
21 Republic of the Philippines vs. Court of Appeals, 154 SCRA 476 (1987).
22 Supra.
23 Id. at 198-199.
24 Supra.
25 126 SCRA 69 (1983).
26 Id. at 75.
27 Director of Lands vs. Muñoz, 23 SCRA 1183 (1968); Bureau of Forestry vs. Court of Appeals, 153
SCRA 351 (1987).
28 Director of Forest Administration, 192 SCRA 121 (1990).

EN BANC

G.R. No. 133250 July 9, 2002

FRANCISCO I. CHAVEZ, petitioner,

vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, respondents.

CARPIO, J.:
This is an original Petition for Mandamus with prayer for a writ of preliminary injunction and a
temporary restraining order. The petition seeks to compel the Public Estates Authority ("PEA"
for brevity) to disclose all facts on PEA's then on-going renegotiations with Amari Coastal Bay
and Development Corporation ("AMARI" for brevity) to reclaim portions of Manila Bay. The
petition further seeks to enjoin PEA from signing a new agreement with AMARI involving such
reclamation.

The Facts

On November 20, 1973, the government, through the Commissioner of Public Highways, signed
a contract with the Construction and Development Corporation of the Philippines ("CDCP" for
brevity) to reclaim certain foreshore and offshore areas of Manila Bay. The contract also
included the construction of Phases I and II of the Manila-Cavite Coastal Road. CDCP obligated
itself to carry out all the works in consideration of fifty percent of the total reclaimed land.

On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree No. 1084
creating PEA. PD No. 1084 tasked PEA "to reclaim land, including foreshore and submerged
areas," and "to develop, improve, acquire, x x x lease and sell any and all kinds of lands."1 On
the same date, then President Marcos issued Presidential Decree No. 1085 transferring to PEA
the "lands reclaimed in the foreshore and offshore of the Manila Bay"2 under the Manila-Cavite
Coastal Road and Reclamation Project (MCCRRP).

On December 29, 1981, then President Marcos issued a memorandum directing PEA to amend
its contract with CDCP, so that "[A]ll future works in MCCRRP x x x shall be funded and owned
by PEA." Accordingly, PEA and CDCP executed a Memorandum of Agreement dated December
29, 1981, which stated:

"(i) CDCP shall undertake all reclamation, construction, and such other works in the
MCCRRP as may be agreed upon by the parties, to be paid according to progress of
works on a unit price/lump sum basis for items of work to be agreed upon, subject to
price escalation, retention and other terms and conditions provided for in Presidential
Decree No. 1594. All the financing required for such works shall be provided by PEA.

xxx

(iii) x x x CDCP shall give up all its development rights and hereby agrees to cede and
transfer in favor of PEA, all of the rights, title, interest and participation of CDCP in and
to all the areas of land reclaimed by CDCP in the MCCRRP as of December 30, 1981
which have not yet been sold, transferred or otherwise disposed of by CDCP as of said
date, which areas consist of approximately Ninety-Nine Thousand Four Hundred Seventy
Three (99,473) square meters in the Financial Center Area covered by land pledge No. 5
and approximately Three Million Three Hundred Eighty Two Thousand Eight Hundred
Eighty Eight (3,382,888) square meters of reclaimed areas at varying elevations above
Mean Low Water Level located outside the Financial Center Area and the First
Neighborhood Unit."3
On January 19, 1988, then President Corazon C. Aquino issued Special Patent No. 3517,
granting and transferring to PEA "the parcels of land so reclaimed under the Manila-Cavite
Coastal Road and Reclamation Project (MCCRRP) containing a total area of one million nine
hundred fifteen thousand eight hundred ninety four (1,915,894) square meters." Subsequently, on
April 9, 1988, the Register of Deeds of the Municipality of Parañaque issued Transfer
Certificates of Title Nos. 7309, 7311, and 7312, in the name of PEA, covering the three
reclaimed islands known as the "Freedom Islands" located at the southern portion of the Manila-
Cavite Coastal Road, Parañaque City. The Freedom Islands have a total land area of One Million
Five Hundred Seventy Eight Thousand Four Hundred and Forty One (1,578,441) square meters
or 157.841 hectares.

On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for brevity) with
AMARI, a private corporation, to develop the Freedom Islands. The JVA also required the
reclamation of an additional 250 hectares of submerged areas surrounding these islands to
complete the configuration in the Master Development Plan of the Southern Reclamation
Project-MCCRRP. PEA and AMARI entered into the JVA through negotiation without public
bidding.4 On April 28, 1995, the Board of Directors of PEA, in its Resolution No. 1245,
confirmed the JVA.5 On June 8, 1995, then President Fidel V. Ramos, through then Executive
Secretary Ruben Torres, approved the JVA.6

On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege speech in
the Senate and denounced the JVA as the "grandmother of all scams." As a result, the Senate
Committee on Government Corporations and Public Enterprises, and the Committee on
Accountability of Public Officers and Investigations, conducted a joint investigation. The Senate
Committees reported the results of their investigation in Senate Committee Report No. 560 dated
September 16, 1997.7 Among the conclusions of their report are: (1) the reclaimed lands PEA
seeks to transfer to AMARI under the JVA are lands of the public domain which the government
has not classified as alienable lands and therefore PEA cannot alienate these lands; (2) the
certificates of title covering the Freedom Islands are thus void, and (3) the JVA itself is illegal.

On December 5, 1997, then President Fidel V. Ramos issued Presidential Administrative Order
No. 365 creating a Legal Task Force to conduct a study on the legality of the JVA in view of
Senate Committee Report No. 560. The members of the Legal Task Force were the Secretary of
Justice,8 the Chief Presidential Legal Counsel,9 and the Government Corporate Counsel.10 The
Legal Task Force upheld the legality of the JVA, contrary to the conclusions reached by the
Senate Committees.11

On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that there
were on-going renegotiations between PEA and AMARI under an order issued by then President
Fidel V. Ramos. According to these reports, PEA Director Nestor Kalaw, PEA Chairman
Arsenio Yulo and retired Navy Officer Sergio Cruz composed the negotiating panel of PEA.

On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition with
Application for the Issuance of a Temporary Restraining Order and Preliminary Injunction
docketed as G.R. No. 132994 seeking to nullify the JVA. The Court dismissed the petition "for
unwarranted disregard of judicial hierarchy, without prejudice to the refiling of the case before
the proper court."12

On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a taxpayer, filed the
instant Petition for Mandamus with Prayer for the Issuance of a Writ of Preliminary Injunction
and Temporary Restraining Order. Petitioner contends the government stands to lose billions of
pesos in the sale by PEA of the reclaimed lands to AMARI. Petitioner prays that PEA publicly
disclose the terms of any renegotiation of the JVA, invoking Section 28, Article II, and Section
7, Article III, of the 1987 Constitution on the right of the people to information on matters of
public concern. Petitioner assails the sale to AMARI of lands of the public domain as a blatant
violation of Section 3, Article XII of the 1987 Constitution prohibiting the sale of alienable lands
of the public domain to private corporations. Finally, petitioner asserts that he seeks to enjoin the
loss of billions of pesos in properties of the State that are of public dominion.

After several motions for extension of time,13 PEA and AMARI filed their Comments on
October 19, 1998 and June 25, 1998, respectively. Meanwhile, on December 28, 1998, petitioner
filed an Omnibus Motion: (a) to require PEA to submit the terms of the renegotiated PEA-
AMARI contract; (b) for issuance of a temporary restraining order; and (c) to set the case for
hearing on oral argument. Petitioner filed a Reiterative Motion for Issuance of a TRO dated May
26, 1999, which the Court denied in a Resolution dated June 22, 1999.

In a Resolution dated March 23, 1999, the Court gave due course to the petition and required the
parties to file their respective memoranda.

On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement
("Amended JVA," for brevity). On May 28, 1999, the Office of the President under the
administration of then President Joseph E. Estrada approved the Amended JVA.

Due to the approval of the Amended JVA by the Office of the President, petitioner now prays
that on "constitutional and statutory grounds the renegotiated contract be declared null and
void."14

The Issues

The issues raised by petitioner, PEA15 and AMARI16 are as follows:

I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE PETITION ARE

MOOT AND ACADEMIC BECAUSE OF SUBSEQUENT EVENTS;

II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO OBSERVE

THE PRINCIPLE GOVERNING THE HIERARCHY OF COURTS;

III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION OF

ADMINISTRATIVE REMEDIES;

IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT;

 V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES
OFFICIAL INFORMATION ON ON-GOING NEGOTIATIONS BEFORE A FINAL
AGREEMENT;

VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE

AGREEMENT FOR THE TRANSFER TO AMARI OF CERTAIN LANDS,
RECLAIMED AND STILL TO BE RECLAIMED, VIOLATE THE 1987
CONSTITUTION; AND

VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE ISSUE
OF WHETHER THE AMENDED JOINT VENTURE AGREEMENT IS GROSSLY
DISADVANTAGEOUS TO THE GOVERNMENT.

The Court's Ruling

First issue: whether the principal reliefs prayed for in the petition are moot and academic
because of subsequent events.

The petition prays that PEA publicly disclose the "terms and conditions of the on-going
negotiations for a new agreement." The petition also prays that the Court enjoin PEA from
"privately entering into, perfecting and/or executing any new agreement with AMARI."

PEA and AMARI claim the petition is now moot and academic because AMARI furnished
petitioner on June 21, 1999 a copy of the signed Amended JVA containing the terms and
conditions agreed upon in the renegotiations. Thus, PEA has satisfied petitioner's prayer for a
public disclosure of the renegotiations. Likewise, petitioner's prayer to enjoin the signing of the
Amended JVA is now moot because PEA and AMARI have already signed the Amended JVA
on March 30, 1999. Moreover, the Office of the President has approved the Amended JVA on
May 28, 1999.

Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply fast-
tracking the signing and approval of the Amended JVA before the Court could act on the issue.
Presidential approval does not resolve the constitutional issue or remove it from the ambit of
judicial review.

We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the
President cannot operate to moot the petition and divest the Court of its jurisdiction. PEA and
AMARI have still to implement the Amended JVA. The prayer to enjoin the signing of the
Amended JVA on constitutional grounds necessarily includes preventing its implementation if in
the meantime PEA and AMARI have signed one in violation of the Constitution. Petitioner's
principal basis in assailing the renegotiation of the JVA is its violation of Section 3, Article XII
of the Constitution, which prohibits the government from alienating lands of the public domain
to private corporations. If the Amended JVA indeed violates the Constitution, it is the duty of the
Court to enjoin its implementation, and if already implemented, to annul the effects of such
unconstitutional contract.
The Amended JVA is not an ordinary commercial contract but one which seeks to transfer title
and ownership to 367.5 hectares of reclaimed lands and submerged areas of Manila Bay to a
single private corporation. It now becomes more compelling for the Court to resolve the issue to
insure the government itself does not violate a provision of the Constitution intended to
safeguard the national patrimony. Supervening events, whether intended or accidental, cannot
prevent the Court from rendering a decision if there is a grave violation of the Constitution. In
the instant case, if the Amended JVA runs counter to the Constitution, the Court can still prevent
the transfer of title and ownership of alienable lands of the public domain in the name of
AMARI. Even in cases where supervening events had made the cases moot, the Court did not
hesitate to resolve the legal or constitutional issues raised to formulate controlling principles to
guide the bench, bar, and the public.17

Also, the instant petition is a case of first impression. All previous decisions of the Court
involving Section 3, Article XII of the 1987 Constitution, or its counterpart provision in the 1973
Constitution,18 covered agricultural lands sold to private corporations which acquired the lands
from private parties. The transferors of the private corporations claimed or could claim the right
to judicial confirmation of their imperfect titles19 under Title II of Commonwealth Act. 141
("CA No. 141" for brevity). In the instant case, AMARI seeks to acquire from PEA, a public
corporation, reclaimed lands and submerged areas for non-agricultural purposes by purchase
under PD No. 1084 (charter of PEA) and Title III of CA No. 141. Certain undertakings by
AMARI under the Amended JVA constitute the consideration for the purchase. Neither AMARI
nor PEA can claim judicial confirmation of their titles because the lands covered by the
Amended JVA are newly reclaimed or still to be reclaimed. Judicial confirmation of imperfect
title requires open, continuous, exclusive and notorious occupation of agricultural lands of the
public domain for at least thirty years since June 12, 1945 or earlier. Besides, the deadline for
filing applications for judicial confirmation of imperfect title expired on December 31, 1987.20

Lastly, there is a need to resolve immediately the constitutional issue raised in this petition
because of the possible transfer at any time by PEA to AMARI of title and ownership to portions
of the reclaimed lands. Under the Amended JVA, PEA is obligated to transfer to AMARI the
latter's seventy percent proportionate share in the reclaimed areas as the reclamation progresses.
The Amended JVA even allows AMARI to mortgage at any time the entire reclaimed area to
raise financing for the reclamation project.21

Second issue: whether the petition merits dismissal for failing to observe the principle
governing the hierarchy of courts.

PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly from
the Court. The principle of hierarchy of courts applies generally to cases involving factual
questions. As it is not a trier of facts, the Court cannot entertain cases involving factual issues.
The instant case, however, raises constitutional issues of transcendental importance to the
public.22 The Court can resolve this case without determining any factual issue related to the
case. Also, the instant case is a petition for mandamus which falls under the original jurisdiction
of the Court under Section 5, Article VIII of the Constitution. We resolve to exercise primary
jurisdiction over the instant case.
 Third issue: whether the petition merits dismissal for non-exhaustion of administrative
remedies.

PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose publicly
certain information without first asking PEA the needed information. PEA claims petitioner's
direct resort to the Court violates the principle of exhaustion of administrative remedies. It also
violates the rule that mandamus may issue only if there is no other plain, speedy and adequate
remedy in the ordinary course of law.

PEA distinguishes the instant case from Tañada v. Tuvera23 where the Court granted the petition
for mandamus even if the petitioners there did not initially demand from the Office of the
President the publication of the presidential decrees. PEA points out that in Tañada, the
Executive Department had an affirmative statutory duty under Article 2 of the Civil Code24 and
Section 1 of Commonwealth Act No. 63825 to publish the presidential decrees. There was,
therefore, no need for the petitioners in Tañada to make an initial demand from the Office of the
President. In the instant case, PEA claims it has no affirmative statutory duty to disclose publicly
information about its renegotiation of the JVA. Thus, PEA asserts that the Court must apply the
principle of exhaustion of administrative remedies to the instant case in view of the failure of
petitioner here to demand initially from PEA the needed information.

The original JVA sought to dispose to AMARI public lands held by PEA, a government
corporation. Under Section 79 of the Government Auditing Code,26 the disposition of
government lands to private parties requires public bidding. PEA was under a positive legal duty
to disclose to the public the terms and conditions for the sale of its lands. The law obligated
PEA to make this public disclosure even without demand from petitioner or from anyone. PEA
failed to make this public disclosure because the original JVA, like the Amended JVA, was the
result of a negotiated contract, not of a public bidding. Considering that PEA had an affirmative
statutory duty to make the public disclosure, and was even in breach of this legal duty, petitioner
had the right to seek direct judicial intervention.

Moreover, and this alone is determinative of this issue, the principle of exhaustion of
administrative remedies does not apply when the issue involved is a purely legal or constitutional
question.27 The principal issue in the instant case is the capacity of AMARI to acquire lands held
by PEA in view of the constitutional ban prohibiting the alienation of lands of the public domain
to private corporations. We rule that the principle of exhaustion of administrative remedies does
not apply in the instant case.

Fourth issue: whether petitioner has locus standi to bring this suit

PEA argues that petitioner has no standing to institute mandamus proceedings to enforce his
constitutional right to information without a showing that PEA refused to perform an affirmative
duty imposed on PEA by the Constitution. PEA also claims that petitioner has not shown that he
will suffer any concrete injury because of the signing or implementation of the Amended JVA.
Thus, there is no actual controversy requiring the exercise of the power of judicial review.
The petitioner has standing to bring this taxpayer's suit because the petition seeks to compel PEA
to comply with its constitutional duties. There are two constitutional issues involved here. First is
the right of citizens to information on matters of public concern. Second is the application of a
constitutional provision intended to insure the equitable distribution of alienable lands of the
public domain among Filipino citizens. The thrust of the first issue is to compel PEA to disclose
publicly information on the sale of government lands worth billions of pesos, information which
the Constitution and statutory law mandate PEA to disclose. The thrust of the second issue is to
prevent PEA from alienating hundreds of hectares of alienable lands of the public domain in
violation of the Constitution, compelling PEA to comply with a constitutional duty to the nation.

Moreover, the petition raises matters of transcendental importance to the public. In Chavez v.
PCGG,28 the Court upheld the right of a citizen to bring a taxpayer's suit on matters of
transcendental importance to the public, thus -

"Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the
Marcoses is an issue of 'transcendental importance to the public.' He asserts that ordinary
taxpayers have a right to initiate and prosecute actions questioning the validity of acts or
orders of government agencies or instrumentalities, if the issues raised are of 'paramount
public interest,' and if they 'immediately affect the social, economic and moral well being
of the people.'

Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest,
when the proceeding involves the assertion of a public right, such as in this case. He
invokes several decisions of this Court which have set aside the procedural matter of
locus standi, when the subject of the case involved public interest.

xxx

In Tañada v. Tuvera, the Court asserted that when the issue concerns a public right and
the object of mandamus is to obtain the enforcement of a public duty, the people are
regarded as the real parties in interest; and because it is sufficient that petitioner is a
citizen and as such is interested in the execution of the laws, he need not show that he has
any legal or special interest in the result of the action. In the aforesaid case, the
petitioners sought to enforce their right to be informed on matters of public concern, a
right then recognized in Section 6, Article IV of the 1973 Constitution, in connection
with the rule that laws in order to be valid and enforceable must be published in the
Official Gazette or otherwise effectively promulgated. In ruling for the petitioners' legal
standing, the Court declared that the right they sought to be enforced 'is a public right
recognized by no less than the fundamental law of the land.'

Legaspi v. Civil Service Commission, while reiterating Tañada, further declared that
'when a mandamus proceeding involves the assertion of a public right, the requirement of
personal interest is satisfied by the mere fact that petitioner is a citizen and, therefore,
part of the general 'public' which possesses the right.'
 Further, in Albano v. Reyes, we said that while expenditure of public funds may not have
been involved under the questioned contract for the development, management and
operation of the Manila International Container Terminal, 'public interest [was] definitely
involved considering the important role [of the subject contract] . . . in the economic
development of the country and the magnitude of the financial consideration involved.'
We concluded that, as a consequence, the disclosure provision in the Constitution would
constitute sufficient authority for upholding the petitioner's standing.

Similarly, the instant petition is anchored on the right of the people to information and
access to official records, documents and papers — a right guaranteed under Section 7,
Article III of the 1987 Constitution. Petitioner, a former solicitor general, is a Filipino
citizen. Because of the satisfaction of the two basic requisites laid down by decisional
law to sustain petitioner's legal standing, i.e. (1) the enforcement of a public right (2)
espoused by a Filipino citizen, we rule that the petition at bar should be allowed."

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

Fifth issue: whether the constitutional right to information includes official information on
on-going negotiations before a final agreement.

Section 7, Article III of the Constitution explains the people's right to information on matters of
public concern in this manner:

"Sec. 7. The right of the people to information on matters of public concern shall be
recognized. Access to official records, and to documents, and papers pertaining to
official acts, transactions, or decisions, as well as to government research data used as
basis for policy development, shall be afforded the citizen, subject to such limitations as
may be provided by law." (Emphasis supplied)

The State policy of full transparency in all transactions involving public interest reinforces the
people's right to information on matters of public concern. This State policy is expressed in
Section 28, Article II of the Constitution, thus:

"Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and
implements a policy of full public disclosure of all its transactions involving public
interest." (Emphasis supplied)

These twin provisions of the Constitution seek to promote transparency in policy-making and in
the operations of the government, as well as provide the people sufficient information to exercise
effectively other constitutional rights. These twin provisions are essential to the exercise of
freedom of expression. If the government does not disclose its official acts, transactions and
decisions to citizens, whatever citizens say, even if expressed without any restraint, will be
speculative and amount to nothing. These twin provisions are also essential to hold public
officials "at all times x x x accountable to the people,"29 for unless citizens have the proper
information, they cannot hold public officials accountable for anything. Armed with the right
information, citizens can participate in public discussions leading to the formulation of
government policies and their effective implementation. An informed citizenry is essential to the
existence and proper functioning of any democracy. As explained by the Court in Valmonte v.
Belmonte, Jr.30 –

"An essential element of these freedoms is to keep open a continuing dialogue or process
of communication between the government and the people. It is in the interest of the State
that the channels for free political discussion be maintained to the end that the
government may perceive and be responsive to the people's will. Yet, this open dialogue
can be effective only to the extent that the citizenry is informed and thus able to
formulate its will intelligently. Only when the participants in the discussion are aware of
the issues and have access to information relating thereto can such bear fruit."

PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations the right to
information is limited to "definite propositions of the government." PEA maintains the right does
not include access to "intra-agency or inter-agency recommendations or communications during
the stage when common assertions are still in the process of being formulated or are in the
'exploratory stage'."

Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage or
before the closing of the transaction. To support its contention, AMARI cites the following
discussion in the 1986 Constitutional Commission:

"Mr. Suarez. And when we say 'transactions' which should be distinguished from
contracts, agreements, or treaties or whatever, does the Gentleman refer to the steps
leading to the consummation of the contract, or does he refer to the contract itself?

Mr. Ople: The 'transactions' used here, I suppose is generic and therefore, it can cover
both steps leading to a contract and already a consummated contract, Mr. Presiding
Officer.

Mr. Suarez: This contemplates inclusion of negotiations leading to the consummation

of the transaction.

Mr. Ople: Yes, subject only to reasonable safeguards on the national interest.

Mr. Suarez: Thank you."32 (Emphasis supplied)

AMARI argues there must first be a consummated contract before petitioner can invoke the
right. Requiring government officials to reveal their deliberations at the pre-decisional stage will
degrade the quality of decision-making in government agencies. Government officials will
hesitate to express their real sentiments during deliberations if there is immediate public
dissemination of their discussions, putting them under all kinds of pressure before they decide.
We must first distinguish between information the law on public bidding requires PEA to
disclose publicly, and information the constitutional right to information requires PEA to release
to the public. Before the consummation of the contract, PEA must, on its own and without
demand from anyone, disclose to the public matters relating to the disposition of its property.
These include the size, location, technical description and nature of the property being disposed
of, the terms and conditions of the disposition, the parties qualified to bid, the minimum price
and similar information. PEA must prepare all these data and disclose them to the public at the
start of the disposition process, long before the consummation of the contract, because the
Government Auditing Code requires public bidding. If PEA fails to make this disclosure, any
citizen can demand from PEA this information at any time during the bidding process.

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

by the bidding or review committee is not immediately accessible under the right to information.
While the evaluation or review is still on-going, there are no "official acts, transactions, or
decisions" on the bids or proposals. However, once the committee makes its official
recommendation, there arises a "definite proposition" on the part of the government. From this
moment, the public's right to information attaches, and any citizen can access all the non-
proprietary information leading to such definite proposition. In Chavez v. PCGG,33 the Court
ruled as follows:

"Considering the intent of the framers of the Constitution, we believe that it is incumbent
upon the PCGG and its officers, as well as other government representatives, to disclose
sufficient public information on any proposed settlement they have decided to take up
with the ostensible owners and holders of ill-gotten wealth. Such information, though,
must pertain to definite propositions of the government, not necessarily to intra-agency
or inter-agency recommendations or communications during the stage when common
assertions are still in the process of being formulated or are in the "exploratory" stage.
There is need, of course, to observe the same restrictions on disclosure of information in
general, as discussed earlier – such as on matters involving national security, diplomatic
or foreign relations, intelligence and other classified information." (Emphasis supplied)

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

understood that the right to information "contemplates inclusion of negotiations leading to the
consummation of the transaction." Certainly, a consummated contract is not a requirement for
the exercise of the right to information. Otherwise, the people can never exercise the right if no
contract is consummated, and if one is consummated, it may be too late for the public to expose
its defects.1âwphi1.nêt

Requiring a consummated contract will keep the public in the dark until the contract, which may
be grossly disadvantageous to the government or even illegal, becomes a fait accompli. This
negates the State policy of full transparency on matters of public concern, a situation which the
framers of the Constitution could not have intended. Such a requirement will prevent the
citizenry from participating in the public discussion of any proposed contract, effectively
truncating a basic right enshrined in the Bill of Rights. We can allow neither an emasculation of
a constitutional right, nor a retreat by the State of its avowed "policy of full disclosure of all its
transactions involving public interest."
The right covers three categories of information which are "matters of public concern," namely:
(1) official records; (2) documents and papers pertaining to official acts, transactions and
decisions; and (3) government research data used in formulating policies. The first category
refers to any document that is part of the public records in the custody of government agencies or
officials. The second category refers to documents and papers recording, evidencing,
establishing, confirming, supporting, justifying or explaining official acts, transactions or
decisions of government agencies or officials. The third category refers to research data, whether
raw, collated or processed, owned by the government and used in formulating government
policies.

The information that petitioner may access on the renegotiation of the JVA includes evaluation
reports, recommendations, legal and expert opinions, minutes of meetings, terms of reference
and other documents attached to such reports or minutes, all relating to the JVA. However, the
right to information does not compel PEA to prepare lists, abstracts, summaries and the like
relating to the renegotiation of the JVA.34 The right only affords access to records, documents
and papers, which means the opportunity to inspect and copy them. One who exercises the right
must copy the records, documents and papers at his expense. The exercise of the right is also
subject to reasonable regulations to protect the integrity of the public records and to minimize
disruption to government operations, like rules specifying when and how to conduct the
inspection and copying.35

The right to information, however, does not extend to matters recognized as privileged
information under the separation of powers.36 The right does not also apply to information on
military and diplomatic secrets, information affecting national security, and information on
investigations of crimes by law enforcement agencies before the prosecution of the accused,
which courts have long recognized as confidential.37 The right may also be subject to other
limitations that Congress may impose by law.

There is no claim by PEA that the information demanded by petitioner is privileged information
rooted in the separation of powers. The information does not cover Presidential conversations,
correspondences, or discussions during closed-door Cabinet meetings which, like internal
deliberations of the Supreme Court and other collegiate courts, or executive sessions of either
house of Congress,38 are recognized as confidential. This kind of information cannot be pried
open by a co-equal branch of government. A frank exchange of exploratory ideas and
assessments, free from the glare of publicity and pressure by interested parties, is essential to
protect the independence of decision-making of those tasked to exercise Presidential, Legislative
and Judicial power.39 This is not the situation in the instant case.

We rule, therefore, that the constitutional right to information includes official information on
on-going negotiations before a final contract. The information, however, must constitute definite
propositions by the government and should not cover recognized exceptions like privileged
information, military and diplomatic secrets and similar matters affecting national security and
public order.40 Congress has also prescribed other limitations on the right to information in
several legislations.41
 Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of lands,
reclaimed or to be reclaimed, violate the Constitution.

The Regalian Doctrine

The ownership of lands reclaimed from foreshore and submerged areas is rooted in the Regalian
doctrine which holds that the State owns all lands and waters of the public domain. Upon the
Spanish conquest of the Philippines, ownership of all "lands, territories and possessions" in the
Philippines passed to the Spanish Crown.42 The King, as the sovereign ruler and representative of
the people, acquired and owned all lands and territories in the Philippines except those he
disposed of by grant or sale to private individuals.

The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting, however, the
State, in lieu of the King, as the owner of all lands and waters of the public domain. The
Regalian doctrine is the foundation of the time-honored principle of land ownership that "all
lands that were not acquired from the Government, either by purchase or by grant, belong to the
public domain."43 Article 339 of the Civil Code of 1889, which is now Article 420 of the Civil
Code of 1950, incorporated the Regalian doctrine.

Ownership and Disposition of Reclaimed Lands

The Spanish Law of Waters of 1866 was the first statutory law governing the ownership and
disposition of reclaimed lands in the Philippines. On May 18, 1907, the Philippine Commission
enacted Act No. 1654 which provided for the lease, but not the sale, of reclaimed lands of the
government to corporations and individuals. Later, on November 29, 1919, the Philippine
Legislature approved Act No. 2874, the Public Land Act, which authorized the lease, but not the
sale, of reclaimed lands of the government to corporations and individuals. On November 7,
1936, the National Assembly passed Commonwealth Act No. 141, also known as the Public
Land Act, which authorized the lease, but not the sale, of reclaimed lands of the government to
corporations and individuals. CA No. 141 continues to this day as the general law governing the
classification and disposition of lands of the public domain.

The Spanish Law of Waters of 1866 and the Civil Code of 1889

Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters within
the maritime zone of the Spanish territory belonged to the public domain for public use.44 The
Spanish Law of Waters of 1866 allowed the reclamation of the sea under Article 5, which
provided as follows:

"Article 5. Lands reclaimed from the sea in consequence of works constructed by the
State, or by the provinces, pueblos or private persons, with proper permission, shall
become the property of the party constructing such works, unless otherwise provided by
the terms of the grant of authority."
Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party undertaking
the reclamation, provided the government issued the necessary permit and did not reserve
ownership of the reclaimed land to the State.

Article 339 of the Civil Code of 1889 defined property of public dominion as follows:

"Art. 339. Property of public dominion is –

1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, riverbanks, shores, roadsteads, and that of a similar character;

2. That belonging exclusively to the State which, without being of general public use, is
employed in some public service, or in the development of the national wealth, such as
walls, fortresses, and other works for the defense of the territory, and mines, until granted
to private individuals."

Property devoted to public use referred to property open for use by the public. In contrast,
property devoted to public service referred to property used for some specific public service and
open only to those authorized to use the property.

Property of public dominion referred not only to property devoted to public use, but also to
property not so used but employed to develop the national wealth. This class of property
constituted property of public dominion although employed for some economic or commercial
activity to increase the national wealth.

Article 341 of the Civil Code of 1889 governed the re-classification of property of public
dominion into private property, to wit:

"Art. 341. Property of public dominion, when no longer devoted to public use or to the
defense of the territory, shall become a part of the private property of the State."

This provision, however, was not self-executing. The legislature, or the executive department
pursuant to law, must declare the property no longer needed for public use or territorial defense
before the government could lease or alienate the property to private parties.45

Act No. 1654 of the Philippine Commission

On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the lease of
reclaimed and foreshore lands. The salient provisions of this law were as follows:

"Section 1. The control and disposition of the foreshore as defined in existing law, and
the title to all Government or public lands made or reclaimed by the Government by
dredging or filling or otherwise throughout the Philippine Islands, shall be retained by
the Government without prejudice to vested rights and without prejudice to rights
conceded to the City of Manila in the Luneta Extension.
 Section 2. (a) The Secretary of the Interior shall cause all Government or public lands
made or reclaimed by the Government by dredging or filling or otherwise to be divided
into lots or blocks, with the necessary streets and alleyways located thereon, and shall
cause plats and plans of such surveys to be prepared and filed with the Bureau of Lands.

(b) Upon completion of such plats and plans the Governor-General shall give notice to
the public that such parts of the lands so made or reclaimed as are not needed for
public purposes will be leased for commercial and business purposes, x x x.

xxx

(e) The leases above provided for shall be disposed of to the highest and best bidder
therefore, subject to such regulations and safeguards as the Governor-General may by
executive order prescribe." (Emphasis supplied)

Act No. 1654 mandated that the government should retain title to all lands reclaimed by the
government. The Act also vested in the government control and disposition of foreshore lands.
Private parties could lease lands reclaimed by the government only if these lands were no longer
needed for public purpose. Act No. 1654 mandated public bidding in the lease of government
reclaimed lands. Act No. 1654 made government reclaimed lands sui generis in that unlike other
public lands which the government could sell to private parties, these reclaimed lands were
available only for lease to private parties.

Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866. Act No.
1654 did not prohibit private parties from reclaiming parts of the sea under Section 5 of the
Spanish Law of Waters. Lands reclaimed from the sea by private parties with government
permission remained private lands.

Act No. 2874 of the Philippine Legislature

On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public Land Act.46
The salient provisions of Act No. 2874, on reclaimed lands, were as follows:

"Sec. 6. The Governor-General, upon the recommendation of the Secretary of

Agriculture and Natural Resources, shall from time to time classify the lands of the
public domain into –

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands, x x x.

Sec. 7. For the purposes of the government and disposition of alienable or disposable
public lands, the Governor-General, upon recommendation by the Secretary of
 Agriculture and Natural Resources, shall from time to time declare what lands are
open to disposition or concession under this Act."

Sec. 8. Only those lands shall be declared open to disposition or concession which have
been officially delimited or classified x x x.

xxx

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

Sec. 56. The lands disposable under this title shall be classified as follows:

(a) Lands reclaimed by the Government by dredging, filling, or other means;

(b) Foreshore;

(c) Marshy lands or lands covered with water bordering upon the shores or banks
of navigable lakes or rivers;

(d) Lands not included in any of the foregoing classes.

x x x.

Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six shall be
disposed of to private parties by lease only and not otherwise, as soon as the Governor-
General, upon recommendation by the Secretary of Agriculture and Natural
Resources, shall declare that the same are not necessary for the public service and are
open to disposition under this chapter. The lands included in class (d) may be disposed
of by sale or lease under the provisions of this Act." (Emphasis supplied)

Section 6 of Act No. 2874 authorized the Governor-General to "classify lands of the public
domain into x x x alienable or disposable"47 lands. Section 7 of the Act empowered the
Governor-General to "declare what lands are open to disposition or concession." Section 8 of the
Act limited alienable or disposable lands only to those lands which have been "officially
delimited and classified."

Section 56 of Act No. 2874 stated that lands "disposable under this title48 shall be classified" as
government reclaimed, foreshore and marshy lands, as well as other lands. All these lands,
however, must be suitable for residential, commercial, industrial or other productive non-
agricultural purposes. These provisions vested upon the Governor-General the power to classify
inalienable lands of the public domain into disposable lands of the public domain. These
provisions also empowered the Governor-General to classify further such disposable lands of the
public domain into government reclaimed, foreshore or marshy lands of the public domain, as
well as other non-agricultural lands.

Section 58 of Act No. 2874 categorically mandated that disposable lands of the public domain
classified as government reclaimed, foreshore and marshy lands "shall be disposed of to private
parties by lease only and not otherwise." The Governor-General, before allowing the lease of
these lands to private parties, must formally declare that the lands were "not necessary for the
public service." Act No. 2874 reiterated the State policy to lease and not to sell government
reclaimed, foreshore and marshy lands of the public domain, a policy first enunciated in 1907 in
Act No. 1654. Government reclaimed, foreshore and marshy lands remained sui generis, as the
only alienable or disposable lands of the public domain that the government could not sell to
private parties.

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

Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore and
marshy lands into other non-agricultural lands under Section 56 (d). Lands falling under Section
56 (d) were the only lands for non-agricultural purposes the government could sell to private
parties. Thus, under Act No. 2874, the government could not sell government reclaimed,
foreshore and marshy lands to private parties, unless the legislature passed a law allowing their
sale.49

Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant to Section
5 of the Spanish Law of Waters of 1866. Lands reclaimed from the sea by private parties with
government permission remained private lands.

Dispositions under the 1935 Constitution

On May 14, 1935, the 1935 Constitution took effect upon its ratification by the Filipino people.
The 1935 Constitution, in adopting the Regalian doctrine, declared in Section 1, Article XIII, that
–

"Section 1. All agricultural, timber, and mineral lands of the public domain, waters,
minerals, coal, petroleum, and other mineral oils, all forces of potential energy and other
natural resources of the Philippines belong to the State, and their disposition,
exploitation, development, or utilization shall be limited to citizens of the Philippines or
to corporations or associations at least sixty per centum of the capital of which is owned
by such citizens, subject to any existing right, grant, lease, or concession at the time of
the inauguration of the Government established under this Constitution. Natural
resources, with the exception of public agricultural land, shall not be alienated, and no
license, concession, or lease for the exploitation, development, or utilization of any of the
natural resources shall be granted for a period exceeding twenty-five years, renewable for
 another twenty-five years, except as to water rights for irrigation, water supply, fisheries,
or industrial uses other than the development of water power, in which cases beneficial
use may be the measure and limit of the grant." (Emphasis supplied)

The 1935 Constitution barred the alienation of all natural resources except public agricultural
lands, which were the only natural resources the State could alienate. Thus, foreshore lands,
considered part of the State's natural resources, became inalienable by constitutional fiat,
available only for lease for 25 years, renewable for another 25 years. The government could
alienate foreshore lands only after these lands were reclaimed and classified as alienable
agricultural lands of the public domain. Government reclaimed and marshy lands of the public
domain, being neither timber nor mineral lands, fell under the classification of public agricultural
lands.50 However, government reclaimed and marshy lands, although subject to classification as
disposable public agricultural lands, could only be leased and not sold to private parties because
of Act No. 2874.

The prohibition on private parties from acquiring ownership of government reclaimed and
marshy lands of the public domain was only a statutory prohibition and the legislature could
therefore remove such prohibition. The 1935 Constitution did not prohibit individuals and
corporations from acquiring government reclaimed and marshy lands of the public domain that
were classified as agricultural lands under existing public land laws. Section 2, Article XIII of
the 1935 Constitution provided as follows:

"Section 2. No private corporation or association may acquire, lease, or hold public

agricultural lands in excess of one thousand and twenty four hectares, nor may any
individual acquire such lands by purchase in excess of one hundred and forty hectares,
or by lease in excess of one thousand and twenty-four hectares, or by homestead in
excess of twenty-four hectares. Lands adapted to grazing, not exceeding two thousand
hectares, may be leased to an individual, private corporation, or association." (Emphasis
supplied)

Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58 of Act
No. 2874 to open for sale to private parties government reclaimed and marshy lands of the public
domain. On the contrary, the legislature continued the long established State policy of retaining
for the government title and ownership of government reclaimed and marshy lands of the public
domain.

Commonwealth Act No. 141 of the Philippine National Assembly

On November 7, 1936, the National Assembly approved Commonwealth Act No. 141, also
known as the Public Land Act, which compiled the then existing laws on lands of the public
domain. CA No. 141, as amended, remains to this day the existing general law governing the
classification and disposition of lands of the public domain other than timber and mineral
lands.51

Section 6 of CA No. 141 empowers the President to classify lands of the public domain into
"alienable or disposable"52 lands of the public domain, which prior to such classification are
inalienable and outside the commerce of man. Section 7 of CA No. 141 authorizes the President
to "declare what lands are open to disposition or concession." Section 8 of CA No. 141 states
that the government can declare open for disposition or concession only lands that are "officially
delimited and classified." Sections 6, 7 and 8 of CA No. 141 read as follows:

"Sec. 6. The President, upon the recommendation of the Secretary of Agriculture and
Commerce, shall from time to time classify the lands of the public domain into –

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands,

and may at any time and in like manner transfer such lands from one class to another,53
for the purpose of their administration and disposition.

Sec. 7. For the purposes of the administration and disposition of alienable or disposable
public lands, the President, upon recommendation by the Secretary of Agriculture and
Commerce, shall from time to time declare what lands are open to disposition or
concession under this Act.

Sec. 8. Only those lands shall be declared open to disposition or concession which have
been officially delimited and classified and, when practicable, surveyed, and which have
not been reserved for public or quasi-public uses, nor appropriated by the Government,
nor in any manner become private property, nor those on which a private right authorized
and recognized by this Act or any other valid law may be claimed, or which, having been
reserved or appropriated, have ceased to be so. x x x."

Thus, before the government could alienate or dispose of lands of the public domain, the
President must first officially classify these lands as alienable or disposable, and then declare
them open to disposition or concession. There must be no law reserving these lands for public or
quasi-public uses.

The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy lands of
the public domain, are as follows:

"Sec. 58. Any tract of land of the public domain which, being neither timber nor
mineral land, is intended to be used for residential purposes or for commercial,
industrial, or other productive purposes other than agricultural, and is open to
disposition or concession, shall be disposed of under the provisions of this chapter and
not otherwise.

Sec. 59. The lands disposable under this title shall be classified as follows:

(a) Lands reclaimed by the Government by dredging, filling, or other means;

 (b) Foreshore;

(c) Marshy lands or lands covered with water bordering upon the shores or banks
of navigable lakes or rivers;

(d) Lands not included in any of the foregoing classes.

Sec. 60. Any tract of land comprised under this title may be leased or sold, as the case
may be, to any person, corporation, or association authorized to purchase or lease public
lands for agricultural purposes. x x x.

Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine shall be
disposed of to private parties by lease only and not otherwise, as soon as the President,
upon recommendation by the Secretary of Agriculture, shall declare that the same are
not necessary for the public service and are open to disposition under this chapter. The
lands included in class (d) may be disposed of by sale or lease under the provisions of
this Act." (Emphasis supplied)

Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution, Section 58 of
Act No. 2874 prohibiting the sale of government reclaimed, foreshore and marshy disposable
lands of the public domain. All these lands are intended for residential, commercial, industrial or
other non-agricultural purposes. As before, Section 61 allowed only the lease of such lands to
private parties. The government could sell to private parties only lands falling under Section 59
(d) of CA No. 141, or those lands for non-agricultural purposes not classified as government
reclaimed, foreshore and marshy disposable lands of the public domain. Foreshore lands,
however, became inalienable under the 1935 Constitution which only allowed the lease of these
lands to qualified private parties.

Section 58 of CA No. 141 expressly states that disposable lands of the public domain intended
for residential, commercial, industrial or other productive purposes other than agricultural "shall
be disposed of under the provisions of this chapter and not otherwise." Under Section 10 of CA
No. 141, the term "disposition" includes lease of the land. Any disposition of government
reclaimed, foreshore and marshy disposable lands for non-agricultural purposes must comply
with Chapter IX, Title III of CA No. 141,54 unless a subsequent law amended or repealed these
provisions.

In his concurring opinion in the landmark case of Republic Real Estate Corporation v. Court of
Appeals,55 Justice Reynato S. Puno summarized succinctly the law on this matter, as follows:

"Foreshore lands are lands of public dominion intended for public use. So too are lands
reclaimed by the government by dredging, filling, or other means. Act 1654 mandated
that the control and disposition of the foreshore and lands under water remained in the
national government. Said law allowed only the 'leasing' of reclaimed land. The Public
Land Acts of 1919 and 1936 also declared that the foreshore and lands reclaimed by the
government were to be "disposed of to private parties by lease only and not otherwise."
Before leasing, however, the Governor-General, upon recommendation of the Secretary
 of Agriculture and Natural Resources, had first to determine that the land reclaimed was
not necessary for the public service. This requisite must have been met before the land
could be disposed of. But even then, the foreshore and lands under water were not to be
alienated and sold to private parties. The disposition of the reclaimed land was only by
lease. The land remained property of the State." (Emphasis supplied)

As observed by Justice Puno in his concurring opinion, "Commonwealth Act No. 141 has
remained in effect at present."

The State policy prohibiting the sale to private parties of government reclaimed, foreshore and
marshy alienable lands of the public domain, first implemented in 1907 was thus reaffirmed in
CA No. 141 after the 1935 Constitution took effect. The prohibition on the sale of foreshore
lands, however, became a constitutional edict under the 1935 Constitution. Foreshore lands
became inalienable as natural resources of the State, unless reclaimed by the government and
classified as agricultural lands of the public domain, in which case they would fall under the
classification of government reclaimed lands.

After the effectivity of the 1935 Constitution, government reclaimed and marshy disposable
lands of the public domain continued to be only leased and not sold to private parties.56 These
lands remained sui generis, as the only alienable or disposable lands of the public domain the
government could not sell to private parties.

Since then and until now, the only way the government can sell to private parties government
reclaimed and marshy disposable lands of the public domain is for the legislature to pass a law
authorizing such sale. CA No. 141 does not authorize the President to reclassify government
reclaimed and marshy lands into other non-agricultural lands under Section 59 (d). Lands
classified under Section 59 (d) are the only alienable or disposable lands for non-agricultural
purposes that the government could sell to private parties.

Moreover, Section 60 of CA No. 141 expressly requires congressional authority before lands
under Section 59 that the government previously transferred to government units or entities
could be sold to private parties. Section 60 of CA No. 141 declares that –

"Sec. 60. x x x The area so leased or sold shall be such as shall, in the judgment of the
Secretary of Agriculture and Natural Resources, be reasonably necessary for the purposes
for which such sale or lease is requested, and shall not exceed one hundred and forty-four
hectares: Provided, however, That this limitation shall not apply to grants, donations, or
transfers made to a province, municipality or branch or subdivision of the Government
for the purposes deemed by said entities conducive to the public interest; but the land so
granted, donated, or transferred to a province, municipality or branch or subdivision of
the Government shall not be alienated, encumbered, or otherwise disposed of in a
manner affecting its title, except when authorized by Congress: x x x." (Emphasis
supplied)

The congressional authority required in Section 60 of CA No. 141 mirrors the legislative
authority required in Section 56 of Act No. 2874.
One reason for the congressional authority is that Section 60 of CA No. 141 exempted
government units and entities from the maximum area of public lands that could be acquired
from the State. These government units and entities should not just turn around and sell these
lands to private parties in violation of constitutional or statutory limitations. Otherwise, the
transfer of lands for non-agricultural purposes to government units and entities could be used to
circumvent constitutional limitations on ownership of alienable or disposable lands of the public
domain. In the same manner, such transfers could also be used to evade the statutory prohibition
in CA No. 141 on the sale of government reclaimed and marshy lands of the public domain to
private parties. Section 60 of CA No. 141 constitutes by operation of law a lien on these lands.57

In case of sale or lease of disposable lands of the public domain falling under Section 59 of CA
No. 141, Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA No. 141 provide
as follows:

"Sec. 63. Whenever it is decided that lands covered by this chapter are not needed for
public purposes, the Director of Lands shall ask the Secretary of Agriculture and
Commerce (now the Secretary of Natural Resources) for authority to dispose of the same.
Upon receipt of such authority, the Director of Lands shall give notice by public
advertisement in the same manner as in the case of leases or sales of agricultural public
land, x x x.

Sec. 67. The lease or sale shall be made by oral bidding; and adjudication shall be
made to the highest bidder. x x x." (Emphasis supplied)

Thus, CA No. 141 mandates the Government to put to public auction all leases or sales of
alienable or disposable lands of the public domain.58

Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the
Spanish Law of Waters of 1866. Private parties could still reclaim portions of the sea with
government permission. However, the reclaimed land could become private land only if
classified as alienable agricultural land of the public domain open to disposition under CA No.
141. The 1935 Constitution prohibited the alienation of all natural resources except public
agricultural lands.

The Civil Code of 1950

The Civil Code of 1950 readopted substantially the definition of property of public dominion
found in the Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950 state that –

"Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth.
 x x x.

Art. 422. Property of public dominion, when no longer intended for public use or for
public service, shall form part of the patrimonial property of the State."

Again, the government must formally declare that the property of public dominion is no longer
needed for public use or public service, before the same could be classified as patrimonial
property of the State.59 In the case of government reclaimed and marshy lands of the public
domain, the declaration of their being disposable, as well as the manner of their disposition, is
governed by the applicable provisions of CA No. 141.

Like the Civil Code of 1889, the Civil Code of 1950 included as property of public dominion
those properties of the State which, without being for public use, are intended for public service
or the "development of the national wealth." Thus, government reclaimed and marshy lands of
the State, even if not employed for public use or public service, if developed to enhance the
national wealth, are classified as property of public dominion.

Dispositions under the 1973 Constitution

The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the Regalian
doctrine. Section 8, Article XIV of the 1973 Constitution stated that –

"Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, wildlife, and other natural resources
of the Philippines belong to the State. With the exception of agricultural, industrial or
commercial, residential, and resettlement lands of the public domain, natural resources
shall not be alienated, and no license, concession, or lease for the exploration,
development, exploitation, or utilization of any of the natural resources shall be granted
for a period exceeding twenty-five years, renewable for not more than twenty-five years,
except as to water rights for irrigation, water supply, fisheries, or industrial uses other
than the development of water power, in which cases, beneficial use may be the measure
and the limit of the grant." (Emphasis supplied)

The 1973 Constitution prohibited the alienation of all natural resources with the exception of
"agricultural, industrial or commercial, residential, and resettlement lands of the public domain."
In contrast, the 1935 Constitution barred the alienation of all natural resources except "public
agricultural lands." However, the term "public agricultural lands" in the 1935 Constitution
encompassed industrial, commercial, residential and resettlement lands of the public domain.60 If
the land of public domain were neither timber nor mineral land, it would fall under the
classification of agricultural land of the public domain. Both the 1935 and 1973 Constitutions,
therefore, prohibited the alienation of all natural resources except agricultural lands of the
public domain.

The 1973 Constitution, however, limited the alienation of lands of the public domain to
individuals who were citizens of the Philippines. Private corporations, even if wholly owned by
Philippine citizens, were no longer allowed to acquire alienable lands of the public domain
unlike in the 1935 Constitution. Section 11, Article XIV of the 1973 Constitution declared that –

"Sec. 11. The Batasang Pambansa, taking into account conservation, ecological, and
development requirements of the natural resources, shall determine by law the size of
land of the public domain which may be developed, held or acquired by, or leased to, any
qualified individual, corporation, or association, and the conditions therefor. No private
corporation or association may hold alienable lands of the public domain except by
lease not to exceed one thousand hectares in area nor may any citizen hold such lands by
lease in excess of five hundred hectares or acquire by purchase, homestead or grant, in
excess of twenty-four hectares. No private corporation or association may hold by lease,
concession, license or permit, timber or forest lands and other timber or forest resources
in excess of one hundred thousand hectares. However, such area may be increased by the
Batasang Pambansa upon recommendation of the National Economic and Development
Authority." (Emphasis supplied)

Thus, under the 1973 Constitution, private corporations could hold alienable lands of the public
domain only through lease. Only individuals could now acquire alienable lands of the public
domain, and private corporations became absolutely barred from acquiring any kind of
alienable land of the public domain. The constitutional ban extended to all kinds of alienable
lands of the public domain, while the statutory ban under CA No. 141 applied only to
government reclaimed, foreshore and marshy alienable lands of the public domain.

PD No. 1084 Creating the Public Estates Authority

On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No. 1084
creating PEA, a wholly government owned and controlled corporation with a special charter.
Sections 4 and 8 of PD No. 1084, vests PEA with the following purposes and powers:

"Sec. 4. Purpose. The Authority is hereby created for the following purposes:

(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or
other means, or to acquire reclaimed land;

(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell
any and all kinds of lands, buildings, estates and other forms of real property, owned,
managed, controlled and/or operated by the government;

(c) To provide for, operate or administer such service as may be necessary for the
efficient, economical and beneficial utilization of the above properties.

Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying out the
purposes for which it is created, have the following powers and functions:

(a)To prescribe its by-laws.

 xxx

(i) To hold lands of the public domain in excess of the area permitted to private
corporations by statute.

(j) To reclaim lands and to construct work across, or otherwise, any stream, watercourse,
canal, ditch, flume x x x.

xxx

(o) To perform such acts and exercise such functions as may be necessary for the
attainment of the purposes and objectives herein specified." (Emphasis supplied)

PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the public
domain. Foreshore areas are those covered and uncovered by the ebb and flow of the tide.61
Submerged areas are those permanently under water regardless of the ebb and flow of the tide.62
Foreshore and submerged areas indisputably belong to the public domain63 and are inalienable
unless reclaimed, classified as alienable lands open to disposition, and further declared no longer
needed for public service.

The ban in the 1973 Constitution on private corporations from acquiring alienable lands of the
public domain did not apply to PEA since it was then, and until today, a fully owned government
corporation. The constitutional ban applied then, as it still applies now, only to "private
corporations and associations." PD No. 1084 expressly empowers PEA "to hold lands of the
public domain" even "in excess of the area permitted to private corporations by statute." Thus,
PEA can hold title to private lands, as well as title to lands of the public domain.

In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the public
domain, there must be legislative authority empowering PEA to sell these lands. This legislative
authority is necessary in view of Section 60 of CA No.141, which states –

"Sec. 60. x x x; but the land so granted, donated or transferred to a province,

municipality, or branch or subdivision of the Government shall not be alienated,
encumbered or otherwise disposed of in a manner affecting its title, except when
authorized by Congress; x x x." (Emphasis supplied)

Without such legislative authority, PEA could not sell but only lease its reclaimed foreshore and
submerged alienable lands of the public domain. Nevertheless, any legislative authority granted
to PEA to sell its reclaimed alienable lands of the public domain would be subject to the
constitutional ban on private corporations from acquiring alienable lands of the public domain.
Hence, such legislative authority could only benefit private individuals.

Dispositions under the 1987 Constitution

The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the Regalian
doctrine. The 1987 Constitution declares that all natural resources are "owned by the State," and
except for alienable agricultural lands of the public domain, natural resources cannot be
alienated. Sections 2 and 3, Article XII of the 1987 Constitution state that –

"Section 2. All lands of the public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and
supervision of the State. x x x.

Section 3. Lands of the public domain are classified into agricultural, forest or timber,
mineral lands, and national parks. Agricultural lands of the public domain may be further
classified by law according to the uses which they may be devoted. Alienable lands of
the public domain shall be limited to agricultural lands. Private corporations or
associations may not hold such alienable lands of the public domain except by lease,
for a period not exceeding twenty-five years, renewable for not more than twenty-five
years, and not to exceed one thousand hectares in area. Citizens of the Philippines may
lease not more than five hundred hectares, or acquire not more than twelve hectares
thereof by purchase, homestead, or grant.

Taking into account the requirements of conservation, ecology, and development, and
subject to the requirements of agrarian reform, the Congress shall determine, by law, the
size of lands of the public domain which may be acquired, developed, held, or leased and
the conditions therefor." (Emphasis supplied)

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

The Rationale behind the Constitutional Ban

The rationale behind the constitutional ban on corporations from acquiring, except through lease,
alienable lands of the public domain is not well understood. During the deliberations of the 1986
Constitutional Commission, the commissioners probed the rationale behind this ban, thus:

"FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5 which
says:

`No private corporation or association may hold alienable lands of the public domain
except by lease, not to exceed one thousand hectares in area.'

If we recall, this provision did not exist under the 1935 Constitution, but this was
introduced in the 1973 Constitution. In effect, it prohibits private corporations from
 acquiring alienable public lands. But it has not been very clear in jurisprudence what
the reason for this is. In some of the cases decided in 1982 and 1983, it was indicated
that the purpose of this is to prevent large landholdings. Is that the intent of this
provision?

MR. VILLEGAS: I think that is the spirit of the provision.

FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were instances
where the Iglesia ni Cristo was not allowed to acquire a mere 313-square meter land
where a chapel stood because the Supreme Court said it would be in violation of this."
(Emphasis supplied)

In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional ban in this way:

"Indeed, one purpose of the constitutional prohibition against purchases of public

agricultural lands by private corporations is to equitably diffuse land ownership or to
encourage 'owner-cultivatorship and the economic family-size farm' and to prevent a
recurrence of cases like the instant case. Huge landholdings by corporations or private
persons had spawned social unrest."

However, if the constitutional intent is to prevent huge landholdings, the Constitution could have
simply limited the size of alienable lands of the public domain that corporations could acquire.
The Constitution could have followed the limitations on individuals, who could acquire not more
than 24 hectares of alienable lands of the public domain under the 1973 Constitution, and not
more than 12 hectares under the 1987 Constitution.

If the constitutional intent is to encourage economic family-size farms, placing the land in the
name of a corporation would be more effective in preventing the break-up of farmlands. If the
farmland is registered in the name of a corporation, upon the death of the owner, his heirs would
inherit shares in the corporation instead of subdivided parcels of the farmland. This would
prevent the continuing break-up of farmlands into smaller and smaller plots from one generation
to the next.

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

The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only
a limited area of alienable land of the public domain to a qualified individual. This constitutional
intent is safeguarded by the provision prohibiting corporations from acquiring alienable lands of
the public domain, since the vehicle to circumvent the constitutional intent is removed. The
available alienable public lands are gradually decreasing in the face of an ever-growing
population. The most effective way to insure faithful adherence to this constitutional intent is to
grant or sell alienable lands of the public domain only to individuals. This, it would seem, is the
practical benefit arising from the constitutional ban.

The Amended Joint Venture Agreement

The subject matter of the Amended JVA, as stated in its second Whereas clause, consists of three
properties, namely:

1. "[T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo
Boulevard in Paranaque and Las Pinas, Metro Manila, with a combined titled area of
1,578,441 square meters;"

2. "[A]nother area of 2,421,559 square meters contiguous to the three islands;" and

3. "[A]t AMARI's option as approved by PEA, an additional 350 hectares more or less to
regularize the configuration of the reclaimed area."65

PEA confirms that the Amended JVA involves "the development of the Freedom Islands and
further reclamation of about 250 hectares x x x," plus an option "granted to AMARI to
subsequently reclaim another 350 hectares x x x."66

In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84 hectares of
the 750-hectare reclamation project have been reclaimed, and the rest of the 592.15 hectares
are still submerged areas forming part of Manila Bay.

Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for PEA's
"actual cost" in partially reclaiming the Freedom Islands. AMARI will also complete, at its own
expense, the reclamation of the Freedom Islands. AMARI will further shoulder all the
reclamation costs of all the other areas, totaling 592.15 hectares, still to be reclaimed. AMARI
and PEA will share, in the proportion of 70 percent and 30 percent, respectively, the total net
usable area which is defined in the Amended JVA as the total reclaimed area less 30 percent
earmarked for common areas. Title to AMARI's share in the net usable area, totaling 367.5
hectares, will be issued in the name of AMARI. Section 5.2 (c) of the Amended JVA provides
that –

"x x x, PEA shall have the duty to execute without delay the necessary deed of transfer or
conveyance of the title pertaining to AMARI's Land share based on the Land Allocation
Plan. PEA, when requested in writing by AMARI, shall then cause the issuance and
delivery of the proper certificates of title covering AMARI's Land Share in the name of
AMARI, x x x; provided, that if more than seventy percent (70%) of the titled area at any
given time pertains to AMARI, PEA shall deliver to AMARI only seventy percent (70%)
of the titles pertaining to AMARI, until such time when a corresponding proportionate
area of additional land pertaining to PEA has been titled." (Emphasis supplied)
Indisputably, under the Amended JVA AMARI will acquire and own a maximum of 367.5
hectares of reclaimed land which will be titled in its name.

To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint
venture PEA's statutory authority, rights and privileges to reclaim foreshore and submerged areas
in Manila Bay. Section 3.2.a of the Amended JVA states that –

"PEA hereby contributes to the joint venture its rights and privileges to perform Rawland
Reclamation and Horizontal Development as well as own the Reclamation Area, thereby
granting the Joint Venture the full and exclusive right, authority and privilege to
undertake the Project in accordance with the Master Development Plan."

The Amended JVA is the product of a renegotiation of the original JVA dated April 25, 1995 and
its supplemental agreement dated August 9, 1995.

The Threshold Issue

The threshold issue is whether AMARI, a private corporation, can acquire and own under the
Amended JVA 367.5 hectares of reclaimed foreshore and submerged areas in Manila Bay in
view of Sections 2 and 3, Article XII of the 1987 Constitution which state that:

"Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. x x x.

xxx

Section 3. x x x Alienable lands of the public domain shall be limited to agricultural

lands. Private corporations or associations may not hold such alienable lands of the
public domain except by lease, x x x."(Emphasis supplied)

Classification of Reclaimed Foreshore and Submerged Areas

PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila Bay are
alienable or disposable lands of the public domain. In its Memorandum,67 PEA admits that –

"Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as
alienable and disposable lands of the public domain:

'Sec. 59. The lands disposable under this title shall be classified as follows:

(a) Lands reclaimed by the government by dredging, filling, or other means;

x x x.'" (Emphasis supplied)

Likewise, the Legal Task Force68 constituted under Presidential Administrative Order No. 365
admitted in its Report and Recommendation to then President Fidel V. Ramos, "[R]eclaimed
lands are classified as alienable and disposable lands of the public domain."69 The Legal Task
Force concluded that –

"D. Conclusion

Reclaimed lands are lands of the public domain. However, by statutory authority, the
rights of ownership and disposition over reclaimed lands have been transferred to PEA,
by virtue of which PEA, as owner, may validly convey the same to any qualified person
without violating the Constitution or any statute.

The constitutional provision prohibiting private corporations from holding public land,
except by lease (Sec. 3, Art. XVII,70 1987 Constitution), does not apply to reclaimed
lands whose ownership has passed on to PEA by statutory grant."

Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of
Manila Bay are part of the "lands of the public domain, waters x x x and other natural resources"
and consequently "owned by the State." As such, foreshore and submerged areas "shall not be
alienated," unless they are classified as "agricultural lands" of the public domain. The mere
reclamation of these areas by PEA does not convert these inalienable natural resources of the
State into alienable or disposable lands of the public domain. There must be a law or presidential
proclamation officially classifying these reclaimed lands as alienable or disposable and open to
disposition or concession. Moreover, these reclaimed lands cannot be classified as alienable or
disposable if the law has reserved them for some public or quasi-public use.71

Section 8 of CA No. 141 provides that "only those lands shall be declared open to disposition or
concession which have been officially delimited and classified."72 The President has the
authority to classify inalienable lands of the public domain into alienable or disposable lands of
the public domain, pursuant to Section 6 of CA No. 141. In Laurel vs. Garcia,73 the Executive
Department attempted to sell the Roppongi property in Tokyo, Japan, which was acquired by the
Philippine Government for use as the Chancery of the Philippine Embassy. Although the
Chancery had transferred to another location thirteen years earlier, the Court still ruled that,
under Article 42274 of the Civil Code, a property of public dominion retains such character until
formally declared otherwise. The Court ruled that –

"The fact that the Roppongi site has not been used for a long time for actual Embassy
service does not automatically convert it to patrimonial property. Any such conversion
happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene
Co. v. Bercilles, 66 SCRA 481 [1975]. A property continues to be part of the public
domain, not available for private appropriation or ownership 'until there is a formal
declaration on the part of the government to withdraw it from being such' (Ignacio v.
Director of Lands, 108 Phil. 335 [1960]." (Emphasis supplied)

PD No. 1085, issued on February 4, 1977, authorized the issuance of special land patents for
lands reclaimed by PEA from the foreshore or submerged areas of Manila Bay. On January 19,
1988 then President Corazon C. Aquino issued Special Patent No. 3517 in the name of PEA for
the 157.84 hectares comprising the partially reclaimed Freedom Islands. Subsequently, on April
9, 1999 the Register of Deeds of the Municipality of Paranaque issued TCT Nos. 7309, 7311 and
7312 in the name of PEA pursuant to Section 103 of PD No. 1529 authorizing the issuance of
certificates of title corresponding to land patents. To this day, these certificates of title are still in
the name of PEA.

PD No. 1085, coupled with President Aquino's actual issuance of a special patent covering the
Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as
alienable or disposable lands of the public domain. PD No. 1085 and President Aquino's issuance
of a land patent also constitute a declaration that the Freedom Islands are no longer needed for
public service. The Freedom Islands are thus alienable or disposable lands of the public
domain, open to disposition or concession to qualified parties.

At the time then President Aquino issued Special Patent No. 3517, PEA had already reclaimed
the Freedom Islands although subsequently there were partial erosions on some areas. The
government had also completed the necessary surveys on these islands. Thus, the Freedom
Islands were no longer part of Manila Bay but part of the land mass. Section 3, Article XII of the
1987 Constitution classifies lands of the public domain into "agricultural, forest or timber,
mineral lands, and national parks." Being neither timber, mineral, nor national park lands, the
reclaimed Freedom Islands necessarily fall under the classification of agricultural lands of the
public domain. Under the 1987 Constitution, agricultural lands of the public domain are the only
natural resources that the State may alienate to qualified private parties. All other natural
resources, such as the seas or bays, are "waters x x x owned by the State" forming part of the
public domain, and are inalienable pursuant to Section 2, Article XII of the 1987 Constitution.

AMARI claims that the Freedom Islands are private lands because CDCP, then a private
corporation, reclaimed the islands under a contract dated November 20, 1973 with the
Commissioner of Public Highways. AMARI, citing Article 5 of the Spanish Law of Waters of
1866, argues that "if the ownership of reclaimed lands may be given to the party constructing the
works, then it cannot be said that reclaimed lands are lands of the public domain which the State
may not alienate."75 Article 5 of the Spanish Law of Waters reads as follows:

"Article 5. Lands reclaimed from the sea in consequence of works constructed by the
State, or by the provinces, pueblos or private persons, with proper permission, shall
become the property of the party constructing such works, unless otherwise provided by
the terms of the grant of authority." (Emphasis supplied)

Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from the sea
only with "proper permission" from the State. Private parties could own the reclaimed land only
if not "otherwise provided by the terms of the grant of authority." This clearly meant that no one
could reclaim from the sea without permission from the State because the sea is property of
public dominion. It also meant that the State could grant or withhold ownership of the reclaimed
land because any reclaimed land, like the sea from which it emerged, belonged to the State.
Thus, a private person reclaiming from the sea without permission from the State could not
acquire ownership of the reclaimed land which would remain property of public dominion like
the sea it replaced.76 Article 5 of the Spanish Law of Waters of 1866 adopted the time-honored
principle of land ownership that "all lands that were not acquired from the government, either by
purchase or by grant, belong to the public domain."77

Article 5 of the Spanish Law of Waters must be read together with laws subsequently enacted on
the disposition of public lands. In particular, CA No. 141 requires that lands of the public domain
must first be classified as alienable or disposable before the government can alienate them. These
lands must not be reserved for public or quasi-public purposes.78 Moreover, the contract between
CDCP and the government was executed after the effectivity of the 1973 Constitution which
barred private corporations from acquiring any kind of alienable land of the public domain. This
contract could not have converted the Freedom Islands into private lands of a private
corporation.

Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing the
reclamation of areas under water and revested solely in the National Government the power to
reclaim lands. Section 1 of PD No. 3-A declared that –

"The provisions of any law to the contrary notwithstanding, the reclamation of areas
under water, whether foreshore or inland, shall be limited to the National Government or
any person authorized by it under a proper contract. (Emphasis supplied)

x x x."

PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because reclamation of
areas under water could now be undertaken only by the National Government or by a person
contracted by the National Government. Private parties may reclaim from the sea only under a
contract with the National Government, and no longer by grant or permission as provided in
Section 5 of the Spanish Law of Waters of 1866.

Executive Order No. 525, issued on February 14, 1979, designated PEA as the National
Government's implementing arm to undertake "all reclamation projects of the government,"
which "shall be undertaken by the PEA or through a proper contract executed by it with any
person or entity." Under such contract, a private party receives compensation for reclamation
services rendered to PEA. Payment to the contractor may be in cash, or in kind consisting of
portions of the reclaimed land, subject to the constitutional ban on private corporations from
acquiring alienable lands of the public domain. The reclaimed land can be used as payment in
kind only if the reclaimed land is first classified as alienable or disposable land open to
disposition, and then declared no longer needed for public service.

The Amended JVA covers not only the Freedom Islands, but also an additional 592.15 hectares
which are still submerged and forming part of Manila Bay. There is no legislative or
Presidential act classifying these submerged areas as alienable or disposable lands of the
public domain open to disposition. These submerged areas are not covered by any patent or
certificate of title. There can be no dispute that these submerged areas form part of the public
domain, and in their present state are inalienable and outside the commerce of man. Until
reclaimed from the sea, these submerged areas are, under the Constitution, "waters x x x owned
by the State," forming part of the public domain and consequently inalienable. Only when
actually reclaimed from the sea can these submerged areas be classified as public agricultural
lands, which under the Constitution are the only natural resources that the State may alienate.
Once reclaimed and transformed into public agricultural lands, the government may then
officially classify these lands as alienable or disposable lands open to disposition. Thereafter, the
government may declare these lands no longer needed for public service. Only then can these
reclaimed lands be considered alienable or disposable lands of the public domain and within the
commerce of man.

The classification of PEA's reclaimed foreshore and submerged lands into alienable or
disposable lands open to disposition is necessary because PEA is tasked under its charter to
undertake public services that require the use of lands of the public domain. Under Section 5 of
PD No. 1084, the functions of PEA include the following: "[T]o own or operate railroads,
tramways and other kinds of land transportation, x x x; [T]o construct, maintain and operate such
systems of sanitary sewers as may be necessary; [T]o construct, maintain and operate such storm
drains as may be necessary." PEA is empowered to issue "rules and regulations as may be
necessary for the proper use by private parties of any or all of the highways, roads, utilities,
buildings and/or any of its properties and to impose or collect fees or tolls for their use." Thus,
part of the reclaimed foreshore and submerged lands held by the PEA would actually be needed
for public use or service since many of the functions imposed on PEA by its charter constitute
essential public services.

Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily
responsible for integrating, directing, and coordinating all reclamation projects for and on behalf
of the National Government." The same section also states that "[A]ll reclamation projects shall
be approved by the President upon recommendation of the PEA, and shall be undertaken by the
PEA or through a proper contract executed by it with any person or entity; x x x." Thus, under
EO No. 525, in relation to PD No. 3-A and PD No.1084, PEA became the primary implementing
agency of the National Government to reclaim foreshore and submerged lands of the public
domain. EO No. 525 recognized PEA as the government entity "to undertake the reclamation of
lands and ensure their maximum utilization in promoting public welfare and interests."79 Since
large portions of these reclaimed lands would obviously be needed for public service, there must
be a formal declaration segregating reclaimed lands no longer needed for public service from
those still needed for public service.1âwphi1.nêt

Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to or be
owned by the PEA," could not automatically operate to classify inalienable lands into alienable
or disposable lands of the public domain. Otherwise, reclaimed foreshore and submerged lands
of the public domain would automatically become alienable once reclaimed by PEA, whether or
not classified as alienable or disposable.

The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No. 525,
vests in the Department of Environment and Natural Resources ("DENR" for brevity) the
following powers and functions:

"Sec. 4. Powers and Functions. The Department shall:

 (1) x x x

xxx

(4) Exercise supervision and control over forest lands, alienable and disposable public
lands, mineral resources and, in the process of exercising such control, impose
appropriate taxes, fees, charges, rentals and any such form of levy and collect such
revenues for the exploration, development, utilization or gathering of such resources;

xxx

(14) Promulgate rules, regulations and guidelines on the issuance of licenses, permits,
concessions, lease agreements and such other privileges concerning the development,
exploration and utilization of the country's marine, freshwater, and brackish water and
over all aquatic resources of the country and shall continue to oversee, supervise and
police our natural resources; cancel or cause to cancel such privileges upon failure, non-
compliance or violations of any regulation, order, and for all other causes which are in
furtherance of the conservation of natural resources and supportive of the national
interest;

(15) Exercise exclusive jurisdiction on the management and disposition of all lands of
the public domain and serve as the sole agency responsible for classification, sub-
classification, surveying and titling of lands in consultation with appropriate agencies."80
(Emphasis supplied)

As manager, conservator and overseer of the natural resources of the State, DENR exercises
"supervision and control over alienable and disposable public lands." DENR also exercises
"exclusive jurisdiction on the management and disposition of all lands of the public domain."
Thus, DENR decides whether areas under water, like foreshore or submerged areas of Manila
Bay, should be reclaimed or not. This means that PEA needs authorization from DENR before
PEA can undertake reclamation projects in Manila Bay, or in any part of the country.

DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain.
Hence, DENR decides whether reclaimed lands of PEA should be classified as alienable under
Sections 681 and 782 of CA No. 141. Once DENR decides that the reclaimed lands should be so
classified, it then recommends to the President the issuance of a proclamation classifying the
lands as alienable or disposable lands of the public domain open to disposition. We note that then
DENR Secretary Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance
with the Revised Administrative Code and Sections 6 and 7 of CA No. 141.

In short, DENR is vested with the power to authorize the reclamation of areas under water, while
PEA is vested with the power to undertake the physical reclamation of areas under water,
whether directly or through private contractors. DENR is also empowered to classify lands of the
public domain into alienable or disposable lands subject to the approval of the President. On the
other hand, PEA is tasked to develop, sell or lease the reclaimed alienable lands of the public
domain.
Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas does not
make the reclaimed lands alienable or disposable lands of the public domain, much less
patrimonial lands of PEA. Likewise, the mere transfer by the National Government of lands of
the public domain to PEA does not make the lands alienable or disposable lands of the public
domain, much less patrimonial lands of PEA.

Absent two official acts – a classification that these lands are alienable or disposable and open to
disposition and a declaration that these lands are not needed for public service, lands reclaimed
by PEA remain inalienable lands of the public domain. Only such an official classification and
formal declaration can convert reclaimed lands into alienable or disposable lands of the public
domain, open to disposition under the Constitution, Title I and Title III83 of CA No. 141 and
other applicable laws.84

PEA's Authority to Sell Reclaimed Lands

PEA, like the Legal Task Force, argues that as alienable or disposable lands of the public
domain, the reclaimed lands shall be disposed of in accordance with CA No. 141, the Public
Land Act. PEA, citing Section 60 of CA No. 141, admits that reclaimed lands transferred to a
branch or subdivision of the government "shall not be alienated, encumbered, or otherwise
disposed of in a manner affecting its title, except when authorized by Congress: x x x."85
(Emphasis by PEA)

In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised Administrative Code of 1987,
which states that –

"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following: x x x."

Thus, the Court concluded that a law is needed to convey any real property belonging to the
Government. The Court declared that -

"It is not for the President to convey real property of the government on his or her own
sole will. Any such conveyance must be authorized and approved by a law enacted by
the Congress. It requires executive and legislative concurrence." (Emphasis supplied)

PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority allowing
PEA to sell its reclaimed lands. PD No. 1085, issued on February 4, 1977, provides that –

"The land reclaimed in the foreshore and offshore area of Manila Bay pursuant to the
contract for the reclamation and construction of the Manila-Cavite Coastal Road Project
between the Republic of the Philippines and the Construction and Development
Corporation of the Philippines dated November 20, 1973 and/or any other contract or
reclamation covering the same area is hereby transferred, conveyed and assigned to the
ownership and administration of the Public Estates Authority established pursuant to
PD No. 1084; Provided, however, That the rights and interests of the Construction and
 Development Corporation of the Philippines pursuant to the aforesaid contract shall be
recognized and respected.

Henceforth, the Public Estates Authority shall exercise the rights and assume the
obligations of the Republic of the Philippines (Department of Public Highways) arising
from, or incident to, the aforesaid contract between the Republic of the Philippines and
the Construction and Development Corporation of the Philippines.

In consideration of the foregoing transfer and assignment, the Public Estates Authority
shall issue in favor of the Republic of the Philippines the corresponding shares of stock in
said entity with an issued value of said shares of stock (which) shall be deemed fully paid
and non-assessable.

The Secretary of Public Highways and the General Manager of the Public Estates
Authority shall execute such contracts or agreements, including appropriate agreements
with the Construction and Development Corporation of the Philippines, as may be
necessary to implement the above.

Special land patent/patents shall be issued by the Secretary of Natural Resources in

favor of the Public Estates Authority without prejudice to the subsequent transfer to
the contractor or his assignees of such portion or portions of the land reclaimed or to
be reclaimed as provided for in the above-mentioned contract. On the basis of such
patents, the Land Registration Commission shall issue the corresponding certificate of
title." (Emphasis supplied)

On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that -

"Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the PEA which
shall be responsible for its administration, development, utilization or disposition in
accordance with the provisions of Presidential Decree No. 1084. Any and all income that
the PEA may derive from the sale, lease or use of reclaimed lands shall be used in
accordance with the provisions of Presidential Decree No. 1084."

There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its
reclaimed lands. PD No. 1085 merely transferred "ownership and administration" of lands
reclaimed from Manila Bay to PEA, while EO No. 525 declared that lands reclaimed by PEA
"shall belong to or be owned by PEA." EO No. 525 expressly states that PEA should dispose of
its reclaimed lands "in accordance with the provisions of Presidential Decree No. 1084," the
charter of PEA.

PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer, deal in,
subdivide, dispose, lease and sell any and all kinds of lands x x x owned, managed, controlled
and/or operated by the government."87 (Emphasis supplied) There is, therefore, legislative
authority granted to PEA to sell its lands, whether patrimonial or alienable lands of the public
domain. PEA may sell to private parties its patrimonial properties in accordance with the PEA
charter free from constitutional limitations. The constitutional ban on private corporations from
acquiring alienable lands of the public domain does not apply to the sale of PEA's patrimonial
lands.

PEA may also sell its alienable or disposable lands of the public domain to private individuals
since, with the legislative authority, there is no longer any statutory prohibition against such sales
and the constitutional ban does not apply to individuals. PEA, however, cannot sell any of its
alienable or disposable lands of the public domain to private corporations since Section 3, Article
XII of the 1987 Constitution expressly prohibits such sales. The legislative authority benefits
only individuals. Private corporations remain barred from acquiring any kind of alienable land of
the public domain, including government reclaimed lands.

The provision in PD No. 1085 stating that portions of the reclaimed lands could be transferred by
PEA to the "contractor or his assignees" (Emphasis supplied) would not apply to private
corporations but only to individuals because of the constitutional ban. Otherwise, the provisions
of PD No. 1085 would violate both the 1973 and 1987 Constitutions.

The requirement of public auction in the sale of reclaimed lands

Assuming the reclaimed lands of PEA are classified as alienable or disposable lands open to
disposition, and further declared no longer needed for public service, PEA would have to
conduct a public bidding in selling or leasing these lands. PEA must observe the provisions of
Sections 63 and 67 of CA No. 141 requiring public auction, in the absence of a law exempting
PEA from holding a public auction.88 Special Patent No. 3517 expressly states that the patent is
issued by authority of the Constitution and PD No. 1084, "supplemented by Commonwealth Act
No. 141, as amended." This is an acknowledgment that the provisions of CA No. 141 apply to
the disposition of reclaimed alienable lands of the public domain unless otherwise provided by
law. Executive Order No. 654,89 which authorizes PEA "to determine the kind and manner of
payment for the transfer" of its assets and properties, does not exempt PEA from the requirement
of public auction. EO No. 654 merely authorizes PEA to decide the mode of payment, whether in
kind and in installment, but does not authorize PEA to dispense with public auction.

Moreover, under Section 79 of PD No. 1445, otherwise known as the Government Auditing
Code, the government is required to sell valuable government property through public bidding.
Section 79 of PD No. 1445 mandates that –

"Section 79. When government property has become unserviceable for any cause, or is
no longer needed, it shall, upon application of the officer accountable therefor, be
inspected by the head of the agency or his duly authorized representative in the presence
of the auditor concerned and, if found to be valueless or unsaleable, it may be destroyed
in their presence. If found to be valuable, it may be sold at public auction to the highest
bidder under the supervision of the proper committee on award or similar body in the
presence of the auditor concerned or other authorized representative of the Commission,
after advertising by printed notice in the Official Gazette, or for not less than three
consecutive days in any newspaper of general circulation, or where the value of the
property does not warrant the expense of publication, by notices posted for a like period
in at least three public places in the locality where the property is to be sold. In the event
 that the public auction fails, the property may be sold at a private sale at such price as
may be fixed by the same committee or body concerned and approved by the
Commission."

It is only when the public auction fails that a negotiated sale is allowed, in which case the
Commission on Audit must approve the selling price.90 The Commission on Audit implements
Section 79 of the Government Auditing Code through Circular No. 89-29691 dated January 27,
1989. This circular emphasizes that government assets must be disposed of only through public
auction, and a negotiated sale can be resorted to only in case of "failure of public auction."

At the public auction sale, only Philippine citizens are qualified to bid for PEA's reclaimed
foreshore and submerged alienable lands of the public domain. Private corporations are barred
from bidding at the auction sale of any kind of alienable land of the public domain.

PEA originally scheduled a public bidding for the Freedom Islands on December 10, 1991. PEA
imposed a condition that the winning bidder should reclaim another 250 hectares of submerged
areas to regularize the shape of the Freedom Islands, under a 60-40 sharing of the additional
reclaimed areas in favor of the winning bidder.92 No one, however, submitted a bid. On
December 23, 1994, the Government Corporate Counsel advised PEA it could sell the Freedom
Islands through negotiation, without need of another public bidding, because of the failure of the
public bidding on December 10, 1991.93

However, the original JVA dated April 25, 1995 covered not only the Freedom Islands and the
additional 250 hectares still to be reclaimed, it also granted an option to AMARI to reclaim
another 350 hectares. The original JVA, a negotiated contract, enlarged the reclamation area to
750 hectares.94 The failure of public bidding on December 10, 1991, involving only 407.84
hectares,95 is not a valid justification for a negotiated sale of 750 hectares, almost double the area
publicly auctioned. Besides, the failure of public bidding happened on December 10, 1991, more
than three years before the signing of the original JVA on April 25, 1995. The economic
situation in the country had greatly improved during the intervening period.

Reclamation under the BOT Law and the Local Government Code

The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is absolute and
clear: "Private corporations or associations may not hold such alienable lands of the public
domain except by lease, x x x." Even Republic Act No. 6957 ("BOT Law," for brevity), cited by
PEA and AMARI as legislative authority to sell reclaimed lands to private parties, recognizes the
constitutional ban. Section 6 of RA No. 6957 states –

"Sec. 6. Repayment Scheme. - For the financing, construction, operation and

maintenance of any infrastructure projects undertaken through the build-operate-and-
transfer arrangement or any of its variations pursuant to the provisions of this Act, the
project proponent x x x may likewise be repaid in the form of a share in the revenue of
the project or other non-monetary payments, such as, but not limited to, the grant of a
portion or percentage of the reclaimed land, subject to the constitutional requirements
with respect to the ownership of the land: x x x." (Emphasis supplied)
A private corporation, even one that undertakes the physical reclamation of a government BOT
project, cannot acquire reclaimed alienable lands of the public domain in view of the
constitutional ban.

Section 302 of the Local Government Code, also mentioned by PEA and AMARI, authorizes
local governments in land reclamation projects to pay the contractor or developer in kind
consisting of a percentage of the reclaimed land, to wit:

"Section 302. Financing, Construction, Maintenance, Operation, and Management of

Infrastructure Projects by the Private Sector. x x x

xxx

In case of land reclamation or construction of industrial estates, the repayment plan may
consist of the grant of a portion or percentage of the reclaimed land or the industrial
estate constructed."

Although Section 302 of the Local Government Code does not contain a proviso similar to that
of the BOT Law, the constitutional restrictions on land ownership automatically apply even
though not expressly mentioned in the Local Government Code.

Thus, under either the BOT Law or the Local Government Code, the contractor or developer, if a
corporate entity, can only be paid with leaseholds on portions of the reclaimed land. If the
contractor or developer is an individual, portions of the reclaimed land, not exceeding 12
hectares96 of non-agricultural lands, may be conveyed to him in ownership in view of the
legislative authority allowing such conveyance. This is the only way these provisions of the BOT
Law and the Local Government Code can avoid a direct collision with Section 3, Article XII of
the 1987 Constitution.

Registration of lands of the public domain

Finally, PEA theorizes that the "act of conveying the ownership of the reclaimed lands to public
respondent PEA transformed such lands of the public domain to private lands." This theory is
echoed by AMARI which maintains that the "issuance of the special patent leading to the
eventual issuance of title takes the subject land away from the land of public domain and
converts the property into patrimonial or private property." In short, PEA and AMARI contend
that with the issuance of Special Patent No. 3517 and the corresponding certificates of titles, the
157.84 hectares comprising the Freedom Islands have become private lands of PEA. In support
of their theory, PEA and AMARI cite the following rulings of the Court:

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

"Once the patent was granted and the corresponding certificate of title was issued, the
land ceased to be part of the public domain and became private property over which the
Director of Lands has neither control nor jurisdiction."
 2. Lee Hong Hok v. David,98 where the Court declared -

"After the registration and issuance of the certificate and duplicate certificate of title
based on a public land patent, the land covered thereby automatically comes under the
operation of Republic Act 496 subject to all the safeguards provided therein."3. Heirs of
Gregorio Tengco v. Heirs of Jose Aliwalas,99 where the Court ruled -

"While the Director of Lands has the power to review homestead patents, he may do so
only so long as the land remains part of the public domain and continues to be under his
exclusive control; but once the patent is registered and a certificate of title is issued, the
land ceases to be part of the public domain and becomes private property over which the
Director of Lands has neither control nor jurisdiction."

4. Manalo v. Intermediate Appellate Court,100 where the Court held –

"When the lots in dispute were certified as disposable on May 19, 1971, and free patents
were issued covering the same in favor of the private respondents, the said lots ceased to
be part of the public domain and, therefore, the Director of Lands lost jurisdiction over
the same."

5.Republic v. Court of Appeals,101 where the Court stated –

"Proclamation No. 350, dated October 9, 1956, of President Magsaysay legally effected a
land grant to the Mindanao Medical Center, Bureau of Medical Services, Department of
Health, of the whole lot, validly sufficient for initial registration under the Land
Registration Act. Such land grant is constitutive of a 'fee simple' title or absolute title in
favor of petitioner Mindanao Medical Center. Thus, Section 122 of the Act, which
governs the registration of grants or patents involving public lands, provides that
'Whenever public lands in the Philippine Islands belonging to the Government of the
United States or to the Government of the Philippines are alienated, granted or conveyed
to persons or to public or private corporations, the same shall be brought forthwith under
the operation of this Act (Land Registration Act, Act 496) and shall become registered
lands.'"

The first four cases cited involve petitions to cancel the land patents and the corresponding
certificates of titles issued to private parties. These four cases uniformly hold that the Director of
Lands has no jurisdiction over private lands or that upon issuance of the certificate of title the
land automatically comes under the Torrens System. The fifth case cited involves the registration
under the Torrens System of a 12.8-hectare public land granted by the National Government to
Mindanao Medical Center, a government unit under the Department of Health. The National
Government transferred the 12.8-hectare public land to serve as the site for the hospital buildings
and other facilities of Mindanao Medical Center, which performed a public service. The Court
affirmed the registration of the 12.8-hectare public land in the name of Mindanao Medical Center
under Section 122 of Act No. 496. This fifth case is an example of a public land being registered
under Act No. 496 without the land losing its character as a property of public dominion.
In the instant case, the only patent and certificates of title issued are those in the name of PEA, a
wholly government owned corporation performing public as well as proprietary functions. No
patent or certificate of title has been issued to any private party. No one is asking the Director of
Lands to cancel PEA's patent or certificates of title. In fact, the thrust of the instant petition is
that PEA's certificates of title should remain with PEA, and the land covered by these
certificates, being alienable lands of the public domain, should not be sold to a private
corporation.

Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant private or
public ownership of the land. Registration is not a mode of acquiring ownership but is merely
evidence of ownership previously conferred by any of the recognized modes of acquiring
ownership. Registration does not give the registrant a better right than what the registrant had
prior to the registration.102 The registration of lands of the public domain under the Torrens
system, by itself, cannot convert public lands into private lands.103

Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the
alienable land of the public domain automatically becomes private land cannot apply to
government units and entities like PEA. The transfer of the Freedom Islands to PEA was made
subject to the provisions of CA No. 141 as expressly stated in Special Patent No. 3517 issued by
then President Aquino, to wit:

"NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the

Philippines and in conformity with the provisions of Presidential Decree No. 1084,
supplemented by Commonwealth Act No. 141, as amended, there are hereby granted and
conveyed unto the Public Estates Authority the aforesaid tracts of land containing a total
area of one million nine hundred fifteen thousand eight hundred ninety four (1,915,894)
square meters; the technical description of which are hereto attached and made an
integral part hereof." (Emphasis supplied)

Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered by PD
No. 1084. Section 60 of CA No. 141 prohibits, "except when authorized by Congress," the sale
of alienable lands of the public domain that are transferred to government units or entities.
Section 60 of CA No. 141 constitutes, under Section 44 of PD No. 1529, a "statutory lien
affecting title" of the registered land even if not annotated on the certificate of title.104 Alienable
lands of the public domain held by government entities under Section 60 of CA No. 141 remain
public lands because they cannot be alienated or encumbered unless Congress passes a law
authorizing their disposition. Congress, however, cannot authorize the sale to private
corporations of reclaimed alienable lands of the public domain because of the constitutional ban.
Only individuals can benefit from such law.

The grant of legislative authority to sell public lands in accordance with Section 60 of CA No.
141 does not automatically convert alienable lands of the public domain into private or
patrimonial lands. The alienable lands of the public domain must be transferred to qualified
private parties, or to government entities not tasked to dispose of public lands, before these lands
can become private or patrimonial lands. Otherwise, the constitutional ban will become illusory
if Congress can declare lands of the public domain as private or patrimonial lands in the hands of
a government agency tasked to dispose of public lands. This will allow private corporations to
acquire directly from government agencies limitless areas of lands which, prior to such law, are
concededly public lands.

Under EO No. 525, PEA became the central implementing agency of the National Government
to reclaim foreshore and submerged areas of the public domain. Thus, EO No. 525 declares that
–

"EXECUTIVE ORDER NO. 525

Designating the Public Estates Authority as the Agency Primarily Responsible for all
Reclamation Projects

Whereas, there are several reclamation projects which are ongoing or being proposed to
be undertaken in various parts of the country which need to be evaluated for consistency
with national programs;

Whereas, there is a need to give further institutional support to the Government's declared
policy to provide for a coordinated, economical and efficient reclamation of lands;

Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall be
limited to the National Government or any person authorized by it under proper contract;

Whereas, a central authority is needed to act on behalf of the National Government

which shall ensure a coordinated and integrated approach in the reclamation of lands;

Whereas, Presidential Decree No. 1084 creates the Public Estates Authority as a
government corporation to undertake reclamation of lands and ensure their maximum
utilization in promoting public welfare and interests; and

Whereas, Presidential Decree No. 1416 provides the President with continuing authority
to reorganize the national government including the transfer, abolition, or merger of
functions and offices.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by

virtue of the powers vested in me by the Constitution and pursuant to Presidential Decree
No. 1416, do hereby order and direct the following:

Section 1. The Public Estates Authority (PEA) shall be primarily responsible for
integrating, directing, and coordinating all reclamation projects for and on behalf of
the National Government. All reclamation projects shall be approved by the President
upon recommendation of the PEA, and shall be undertaken by the PEA or through a
proper contract executed by it with any person or entity; Provided, that, reclamation
projects of any national government agency or entity authorized under its charter shall be
undertaken in consultation with the PEA upon approval of the President.
 x x x ."

As the central implementing agency tasked to undertake reclamation projects nationwide, with
authority to sell reclaimed lands, PEA took the place of DENR as the government agency
charged with leasing or selling reclaimed lands of the public domain. The reclaimed lands being
leased or sold by PEA are not private lands, in the same manner that DENR, when it disposes of
other alienable lands, does not dispose of private lands but alienable lands of the public domain.
Only when qualified private parties acquire these lands will the lands become private lands. In
the hands of the government agency tasked and authorized to dispose of alienable of
disposable lands of the public domain, these lands are still public, not private lands.

Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as
well as "any and all kinds of lands." PEA can hold both lands of the public domain and private
lands. Thus, the mere fact that alienable lands of the public domain like the Freedom Islands are
transferred to PEA and issued land patents or certificates of title in PEA's name does not
automatically make such lands private.

To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private
lands will sanction a gross violation of the constitutional ban on private corporations from
acquiring any kind of alienable land of the public domain. PEA will simply turn around, as PEA
has now done under the Amended JVA, and transfer several hundreds of hectares of these
reclaimed and still to be reclaimed lands to a single private corporation in only one transaction.
This scheme will effectively nullify the constitutional ban in Section 3, Article XII of the 1987
Constitution which was intended to diffuse equitably the ownership of alienable lands of the
public domain among Filipinos, now numbering over 80 million strong.

This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain
since PEA can "acquire x x x any and all kinds of lands." This will open the floodgates to
corporations and even individuals acquiring hundreds of hectares of alienable lands of the public
domain under the guise that in the hands of PEA these lands are private lands. This will result in
corporations amassing huge landholdings never before seen in this country - creating the very
evil that the constitutional ban was designed to prevent. This will completely reverse the clear
direction of constitutional development in this country. The 1935 Constitution allowed private
corporations to acquire not more than 1,024 hectares of public lands.105 The 1973 Constitution
prohibited private corporations from acquiring any kind of public land, and the 1987 Constitution
has unequivocally reiterated this prohibition.

The contention of PEA and AMARI that public lands, once registered under Act No. 496 or PD
No. 1529, automatically become private lands is contrary to existing laws. Several laws authorize
lands of the public domain to be registered under the Torrens System or Act No. 496, now PD
No. 1529, without losing their character as public lands. Section 122 of Act No. 496, and Section
103 of PD No. 1529, respectively, provide as follows:

Act No. 496

 "Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x
Government of the Philippine Islands are alienated, granted, or conveyed to persons or
the public or private corporations, the same shall be brought forthwith under the
operation of this Act and shall become registered lands."

PD No. 1529

"Sec. 103. Certificate of Title to Patents. Whenever public land is by the Government
alienated, granted or conveyed to any person, the same shall be brought forthwith under
the operation of this Decree." (Emphasis supplied)

Based on its legislative history, the phrase "conveyed to any person" in Section 103 of PD No.
1529 includes conveyances of public lands to public corporations.

Alienable lands of the public domain "granted, donated, or transferred to a province,

municipality, or branch or subdivision of the Government," as provided in Section 60 of CA No.
141, may be registered under the Torrens System pursuant to Section 103 of PD No. 1529. Such
registration, however, is expressly subject to the condition in Section 60 of CA No. 141 that the
land "shall not be alienated, encumbered or otherwise disposed of in a manner affecting its title,
except when authorized by Congress." This provision refers to government reclaimed, foreshore
and marshy lands of the public domain that have been titled but still cannot be alienated or
encumbered unless expressly authorized by Congress. The need for legislative authority prevents
the registered land of the public domain from becoming private land that can be disposed of to
qualified private parties.

The Revised Administrative Code of 1987 also recognizes that lands of the public domain may
be registered under the Torrens System. Section 48, Chapter 12, Book I of the Code states –

"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following:

(1) x x x

(2) For property belonging to the Republic of the Philippines, but titled in the name of
any political subdivision or of any corporate agency or instrumentality, by the
executive head of the agency or instrumentality." (Emphasis supplied)

Thus, private property purchased by the National Government for expansion of a public wharf
may be titled in the name of a government corporation regulating port operations in the country.
Private property purchased by the National Government for expansion of an airport may also be
titled in the name of the government agency tasked to administer the airport. Private property
donated to a municipality for use as a town plaza or public school site may likewise be titled in
the name of the municipality.106 All these properties become properties of the public domain, and
if already registered under Act No. 496 or PD No. 1529, remain registered land. There is no
requirement or provision in any existing law for the de-registration of land from the Torrens
System.

Private lands taken by the Government for public use under its power of eminent domain become
unquestionably part of the public domain. Nevertheless, Section 85 of PD No. 1529 authorizes
the Register of Deeds to issue in the name of the National Government new certificates of title
covering such expropriated lands. Section 85 of PD No. 1529 states –

"Sec. 85. Land taken by eminent domain. Whenever any registered land, or interest
therein, is expropriated or taken by eminent domain, the National Government, province,
city or municipality, or any other agency or instrumentality exercising such right shall file
for registration in the proper Registry a certified copy of the judgment which shall state
definitely by an adequate description, the particular property or interest expropriated, the
number of the certificate of title, and the nature of the public use. A memorandum of the
right or interest taken shall be made on each certificate of title by the Register of Deeds,
and where the fee simple is taken, a new certificate shall be issued in favor of the
National Government, province, city, municipality, or any other agency or
instrumentality exercising such right for the land so taken. The legal expenses incident to
the memorandum of registration or issuance of a new certificate of title shall be for the
account of the authority taking the land or interest therein." (Emphasis supplied)

Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively private or
patrimonial lands. Lands of the public domain may also be registered pursuant to existing laws.

AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the Freedom
Islands or of the lands to be reclaimed from submerged areas of Manila Bay. In the words of
AMARI, the Amended JVA "is not a sale but a joint venture with a stipulation for
reimbursement of the original cost incurred by PEA for the earlier reclamation and construction
works performed by the CDCP under its 1973 contract with the Republic." Whether the
Amended JVA is a sale or a joint venture, the fact remains that the Amended JVA requires PEA
to "cause the issuance and delivery of the certificates of title conveying AMARI's Land Share in
the name of AMARI."107

This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which provides
that private corporations "shall not hold such alienable lands of the public domain except by
lease." The transfer of title and ownership to AMARI clearly means that AMARI will "hold" the
reclaimed lands other than by lease. The transfer of title and ownership is a "disposition" of the
reclaimed lands, a transaction considered a sale or alienation under CA No. 141,108 the
Government Auditing Code,109 and Section 3, Article XII of the 1987 Constitution.

The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas
form part of the public domain and are inalienable. Lands reclaimed from foreshore and
submerged areas also form part of the public domain and are also inalienable, unless converted
pursuant to law into alienable or disposable lands of the public domain. Historically, lands
reclaimed by the government are sui generis, not available for sale to private parties unlike other
alienable public lands. Reclaimed lands retain their inherent potential as areas for public use or
public service. Alienable lands of the public domain, increasingly becoming scarce natural
resources, are to be distributed equitably among our ever-growing population. To insure such
equitable distribution, the 1973 and 1987 Constitutions have barred private corporations from
acquiring any kind of alienable land of the public domain. Those who attempt to dispose of
inalienable natural resources of the State, or seek to circumvent the constitutional ban on
alienation of lands of the public domain to private corporations, do so at their own risk.

We can now summarize our conclusions as follows:

1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered
by certificates of title in the name of PEA, are alienable lands of the public domain.
PEA may lease these lands to private corporations but may not sell or transfer ownership
of these lands to private corporations. PEA may only sell these lands to Philippine
citizens, subject to the ownership limitations in the 1987 Constitution and existing laws.

2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural
resources of the public domain until classified as alienable or disposable lands open to
disposition and declared no longer needed for public service. The government can make
such classification and declaration only after PEA has reclaimed these submerged areas.
Only then can these lands qualify as agricultural lands of the public domain, which are
the only natural resources the government can alienate. In their present state, the 592.15
hectares of submerged areas are inalienable and outside the commerce of man.

3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership
of 77.34 hectares110 of the Freedom Islands, such transfer is void for being contrary to
Section 3, Article XII of the 1987 Constitution which prohibits private corporations from
acquiring any kind of alienable land of the public domain.

4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156
hectares111 of still submerged areas of Manila Bay, such transfer is void for being
contrary to Section 2, Article XII of the 1987 Constitution which prohibits the alienation
of natural resources other than agricultural lands of the public domain. PEA may reclaim
these submerged areas. Thereafter, the government can classify the reclaimed lands as
alienable or disposable, and further declare them no longer needed for public service.
Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will
be void in view of Section 3, Article XII of the 1987 Constitution which prohibits private
corporations from acquiring any kind of alienable land of the public domain.

Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987
Constitution. Under Article 1409112 of the Civil Code, contracts whose "object or purpose is
contrary to law," or whose "object is outside the commerce of men," are "inexistent and void
from the beginning." The Court must perform its duty to defend and uphold the Constitution, and
therefore declares the Amended JVA null and void ab initio.

Seventh issue: whether the Court is the proper forum to raise the issue of whether the
Amended JVA is grossly disadvantageous to the government.
Considering that the Amended JVA is null and void ab initio, there is no necessity to rule on this
last issue. Besides, the Court is not a trier of facts, and this last issue involves a determination of
factual matters.

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

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Ynares-
Santiago, Sandoval-Gutierrez, Austria-Martinez, and Corona, JJ., concur.

Footnote
1
Section 4 of PD No. 1084.
2
PEA's Memorandum dated August 4, 1999, p. 3.
3
PEA's Memorandum, supra note 2 at 7. PEA's Memorandum quoted extensively, in its Statement of Facts
and the Case, the Statement of Facts in Senate Committee Report No. 560 dated September 16, 1997.
4
In Opinion No. 330 dated December 23, 1994, the Government Corporate Counsel, citing COA Audit
Circular No. 89-296, advised PEA that PEA could negotiate the sale of the 157.84-hectare Freedom Islands
in view of the failure of the public bidding held on December 10, 1991 where there was not a single bidder.
See also Senate Committee Report No. 560, p. 12.
5
PEA's Memorandum, supra note 2 at 9.
6
Ibid.
7
The existence of this report is a matter of judicial notice pursuant to Section 1, Rule 129 of the Rules of
Court which provides, "A court shall take judicial notice, without the introduction of evidence, of x x x the
official acts of the legislature x x x."
8
Teofisto Guingona, Jr.
9
Renato Cayetano.
10
Virgilio C. Abejo.
11
Report and Recommendation of the Legal Task Force, Annex "C", AMARI's Memorandum dated June
19, 1999.
12
AMARI's Comment dated June 24, 1998, p. 3; Rollo, p. 68.
13
AMARI filed three motions for extension of time to file comment (Rollo, pp. 32, 38, 48), while PEA
filed nine motions for extension of time (Rollo, pp. 127, 139).
14
Petitioner's Memorandum dated July 6, 1999, p. 42.
15
Represented by the Office of the Solicitor General, with Solicitor General Ricardo P. Galvez, Assistant
Solicitor General Azucena R. Balanon-Corpuz, and Associate Solicitor Raymund I. Rigodon signing PEA's
Memorandum.
16
Represented by Azcuna Yorac Arroyo & Chua Law Offices, and Romulo Mabanta Sayoc & De los
Angeles Law Offices.
17
Salonga v. Paño, 134 SCRA 438 (1985); Gonzales v. Marcos, 65 SCRA 624 (1975 ); Aquino v. Enrile,
59 SCRA 183 (1974 ); Dela Camara v. Enage, 41 SCRA 1 (1971 ).
18
Section 11, Article XIV.
19
Manila Electric Co. v. Judge F. Castro-Bartolome, 114 SCRA 799 (1982); Republic v. CA and Iglesia,
and Republic v. Cendana and Iglesia ni Cristo, 119 SCRA 449 (1982); Republic v. Villanueva and Iglesia
ni Cristo, 114 SCRA 875 (1982); Director of Lands v. Lood, 124 SCRA 460 (1983); Republic v. Iglesia ni
Cristo, 128 SCRA 44 (1984); Director of Lands v. Hermanos y Hermanas de Sta. Cruz de Mayo, Inc., 141
SCRA 21 (1986); Director of Lands v. IAC and Acme Plywood & Veneer Co., 146 SCRA 509 (1986);
Republic v. IAC and Roman Catholic Bishop of Lucena, 168 SCRA 165 (1988); Natividad v. CA, 202
SCRA 493 (1991); Villaflor v. CA and Nasipit Lumber Co., 280 SCRA 297 (1997). In Ayog v. Cusi, 118
SCRA 492 (1982), the Court did not apply the constitutional ban in the 1973 Constitution because the
applicant corporation, Biñan Development Co., Inc., had fully complied with all its obligations and even
paid the full purchase price before the effectivity of the 1973 Constitution, although the sales patent was
issued after the 1973 Constitution took effect.
20
PD No. 1073.
21
Annex "B", AMARI's Memorandum dated June 19, 1999, Section 5.2 (c) and (e) of the Amended JVA,
pp. 16-17.
22
Chavez v. PCGG, 299 SCRA 744 (1998).
23
136 SCRA 27 (1985).
24
Article 2 of the Civil Code (prior to its amendment by EO No. 200) provided as follows: "Laws shall take
effect after fifteen days following the completion of their publication in the Official Gazette, unless it is
provided otherwise, x x x."
25
Section 1 of CA No. 638 provides as follows: "There shall be published in the Official Gazette all
important legislative acts and resolutions of the Congress of the Philippines; all executive and
administrative orders and proclamations, except such as have no general applicability; x x x."
26
Section 79 of the Government Auditing Codes provides as follows: "When government property has
become unserviceable for any cause, or is no longer needed, it shall, upon application of the officer
accountable therefor, be inspected by the head of the agency or his duly authorized representative in the
presence of the auditor concerned and, if found to be valueless or unsaleable, it may be destroyed in their
presence. If found to be valuable, it may be sold at public auction to the highest bidder under the
supervision of the proper committee on award or similar body in the presence of the auditor concerned or
other authorized representative of the Commission, after advertising by printed notice in the Official
Gazette, or for not less than three consecutive days in any newspaper of general circulation, or where the
value of the property does not warrant the expense of publication, by notices posted for a like period in at
least three public places in the locality where the property is to be sold. In the event that the public auction
fails, the property may be sold at a private sale at such price as may be fixed by the same committee or
body concerned and approved by the Commission."
27
Paat v. Court of Appeals, 266 SCRA 167 (1997); Quisumbing v. Judge Gumban, 193 SCRA 520 (1991);
Valmonte v. Belmonte, Jr., 170 SCRA 256 (1989).
28
See note 22.
29
Section 1, Article XI of the 1987 Constitution states as follows: "Public office is a public trust. Public
officers and employees must at all times be accountable to the people, serve them with utmost
responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead modest lives."
30
170 SCRA 256 (1989).
31
See note 22.
32
Record of the Constitutional Commission, Vol. V, pp. 24-25, (1986).
33
Supra, Note 22.
34
Ibid.
35
Legaspi v. Civil Service Commission, 150 SCRA 530 (1987).
36
Almonte v. Vasquez, 244 SCRA 286 (1995).
37
See Note 22.
38
Chavez v. PCGG, see note 22; Aquino-Sarmiento v. Morato, 203 SCRA 515 (1991).
39
Almonte v. Vasquez, see note 36.
40
People's Movement for Press Freedom, et al. v. Hon. Raul Manglapus, G.R. No. 84642, En Banc
Resolution dated April 13, 1988; Chavez v. PCGG, see note 22.
41
Section 270 of the National Internal Revenue Code punishes any officer or employee of the Bureau of
Internal Revenue who divulges to any person, except as allowed by law, information regarding the
business, income, or estate of any taxpayer, the secrets, operation, style of work, or apparatus of any
manufacturer or producer, or confidential information regarding the business of any taxpayer, knowledge of
which was acquired by him in the discharge of his official duties. Section 14 of R.A. No. 8800 (Safeguard
Measures Act) prohibits the release to the public of confidential information submitted in evidence to the
Tariff Commission. Section 3 (n) of R.A. No. 8504 (Philippine AIDS Prevention and Control Act)
classifies as confidential the medical records of HIV patients. Section 6 (j) of R.A. No. 8043 (Inter-Country
Adoption Act) classifies as confidential the records of the adopted child, adopting parents, and natural
parents. Section 94 (f) of R.A. No. 7942 (Philippine Mining Act) requires the Department of Environment
and Natural Resources to maintain the confidentiality of confidential information supplied by contractors
who are parties to mineral agreements or financial and technical assistance agreements.
42
The Recopilacion de Leyes de las Indias declared that: "We, having acquired full sovereignty over the
Indies, and all lands, territories, and possessions not heretofore ceded away by our royal predecessors, or by
us, or in our name, still pertaining to the royal crown and patrimony, it is our will that all lands which are
held without proper and true deeds of grant be restored to us according as they belong to us, in order that
after reserving before all what to us or to our viceroys, audiencias, and governors may seem necessary for
public squares, ways, pastures, and commons in those places which are peopled, taking into consideration
not only their present condition, but also their future and their probable increase, and after distributing to
the natives what may be necessary for tillage and pasturage, confirming them in what they now have and
giving them more if necessary, all the rest of said lands may remain free and unencumbered for us to
dispose of as we may wish." See concurring opinion of Justice Reynato S. Puno in Republic Real Estate
Corporation v. Court of Appeals, 299 SCRA 199 (1998).
43
Cariño v. Insular Government, 41 Phil. 935 (1909). The exception mentioned in Cariño, referring to
lands in the possession of an occupant and of his predecessors-in-interest, since time immemorial, is
actually a species of a grant by the State. The United States Supreme Court, speaking through Justice
Oliver Wendell Holmes, Jr., declared in Cariño: "Prescription is mentioned again in the royal cedula of
October 15, 1754, cited in 3 Philippine, 546; 'Where such possessors shall not be able to produce title
deeds, it shall be sufficient if they shall show that ancient possession, as a valid title by prescription.' It may
be that this means possession from before 1700; but, at all events, the principle is admitted. As prescription,
even against the Crown lands, was recognized by the laws of Spain, we see no sufficient reason for
hesitating to admit that it was recognized in the Philippines in regard to lands over which Spain had only a
paper sovereignty." See also Republic v. Lee, 197 SCRA 13 (1991).
44
Article 1 of the Spanish Law of Waters of 1866.
45
Ignacio v. Director of Lands, 108 Phil. 335 (1960); Joven v. Director of Lands, 93 Phil. 134 (1953);
Laurel v. Garcia, 187 SCRA 797 (1990). See concurring opinion of Justice Reynato S. Puno in Republic
Real Estate Corporation v. Court of Appeals, 299 SCRA 199 (1998).
46
Act No. 926, enacted on October 7, 1903, was also titled the Public Land Act. This Act, however, did not
cover reclaimed lands. Nevertheless, Section 23 of this Act provided as follows: "x x x In no case may
lands leased under the provisions of this chapter be taken so as to gain control of adjacent land, water,
stream, shore line, way, roadstead, or other valuable right which in the opinion of the Chief of the Bureau
of Public Lands would be prejudicial to the interests of the public."
47
Section 10 of Act No. 2874 provided as follows: "The words "alienation," "disposition," or "concession"
as used in this Act, shall mean any of the methods authorized by this Act for the acquisition, lease, use, or
benefit of the lands of the public domain other than timber or mineral lands."
48
Title II of Act No. 2874 governed alienable lands of the public domain for agricultural purposes, while
Title III of the same Act governed alienable lands of the public domain for non-agricultural purposes.
49
Section 57 of Act No. 2874 provided as follows: "x x x; but the land so granted, donated, or transferred
to a province, municipality, or branch or subdivision of the Government shall not be alienated, encumbered,
or otherwise disposed of in a manner affecting its title, except when authorized by the legislature; x x x."
50
Krivenko v. Register of Deeds, 79 Phil. 461 (1947).
51
Section 2 of CA No. 141 states as follows: "The provisions of this Act shall apply to the lands of the
public domain; but timber and mineral lands shall be governed by special laws and nothing in this Act
provided shall be understood or construed to change or modify the administration and disposition of the
lands commonly called "friar lands" and those which, being privately owned, have reverted to or become
the property of the Commonwealth of the Philippines, which administration and disposition shall be
governed by the laws at present in force or which may hereafter be enacted."
52
Like Act No. 2874, Section 10 of CA No. 141 defined the terms "alienation" and "disposition" as
follows: "The words "alienation," "disposition," or "concession" as used in this Act, shall mean any of the
methods authorized by this Act for the acquisition, lease, use, or benefit of the lands of the public domain
other than timber or mineral lands."
53
R.A. No. 6657 has suspended the authority of the President to reclassify forest or mineral lands into
agricultural lands. Section 4 (a) of RA No. 6657 (Comprehensive Agrarian Reform Law of 1988) states,
"No reclassification of forest or mineral lands to agricultural lands shall be undertaken after the approval of
this Act until Congress, taking into account ecological, developmental and equity considerations, shall have
delimited by law, the specific limits of the public domain."
54
Covering Sections 58 to 68 of CA No. 141.
55
299 SCRA 199 (1998).
56
Section 1, Article XIII of the 1935 Constitution limited the disposition and utilization of public
agricultural lands to Philippine citizens or to corporations at least sixty percent owned by Philippine
citizens. This was, however, subject to the original Ordinance appended to the 1935 Constitution stating,
among others, that until the withdrawal of United States sovereignty in the Philippines, "Citizens and
corporations of the United States shall enjoy in the Commonwealth of the Philippines all the civil rights of
the citizens and corporations, respectively, thereof."
57
Section 44 of PD No. 1529 (previously Section 39 of Act No. 496) provides that "liens, claims or rights
arising or existing under the laws and the Constitution of the Philippines which are not by law required to
appear of record in the Registry of Deeds in order to be valid against subsequent purchasers or
encumbrancers of record" constitute statutory liens affecting the title.1âwphi1.nêt
58
RA No. 730, which took effect on June 18, 1952, authorized the private sale of home lots to actual
occupants of public lands not needed for public service. Section 1 of RA No. 730 provided as follows:
"Notwithstanding the provisions of Sections 61 and 67 of Commonwealth Act No. 141, as amended by RA
No. 293, any Filipino citizen of legal age who is not the owner of a home lot in the municipality or city in
which he resides and who had in good faith established his residence on a parcel of land of the Republic of
the Philippines which is not needed for public service, shall be given preference to purchase at a private
sale of which reasonable notice shall be given to him, not more than one thousand square meters at a price
to be fixed by the Director of Lands with the approval of the Secretary of Agriculture and Natural
Resources. x x x." In addition, on June 16, 1948, Congress enacted R.A. No. 293 allowing the private sale
of marshy alienable or disposable lands of the public domain to lessees who have improved and utilized the
same as farms, fishponds or other similar purposes for at least five years from the date of the lease contract
with the government. R.A. No. 293, however, did not apply to marshy lands under Section 56 (c), Title III
of CA No. 141 which refers to marshy lands leased for residential, commercial, industrial or other non-
agricultural purposes.
59
See note 49.
60
See note 60.
61
Republic Real Estate Corporation v. Court of Appeals, see note 56.
62
Ibid.
63
Insular Government v. Aldecoa, 19 Phil. 505 (1911); Government v. Cabangis, 53 Phil. 112 (1929).
64
118 SCRA 492 (1982).
65
Annex "B", AMARI's Memorandum, see note 2 at 1 & 2.
66
PEA's Memorandum, see note 6.
67
Ibid., p. 44.
68
See notes 9, 10 & 11.
69
Annex "C", p. 3, AMARI's Memorandum, see note 12 at 3.
70
This should read Article XII.
71
Section 8 of CA No. 141.
72
Emphasis supplied.
73
187 SCRA 797 (1990).
74
Article 422 of the Civil Code states as follows: "Property of public dominion, when no longer needed for
public use or public service, shall form part of the patrimonial property of the State."
75
AMARI's Comment dated June 24, 1998, p. 20; Rollo, p. 85.
76
Dizon v. Rodriguez, 13 SCRA 705 (1965); Republic v. Lat Vda. de Castillo, 163 SCRA 286 (1988).
77
Cariño v. Insular Government, 41 Phil. 935 (1909).
78
Proclamation No. 41, issued by President Ramon Magsaysay on July 5, 1954, reserved for "National
Park purposes" 464.66 hectares of the public domain in Manila Bay "situated in the cities of Manila and
Pasay and the municipality of Paranaque, Province of Rizal, Island of Luzon," which area, as described in
detail in the Proclamation, is "B]ounded on the North, by Manila Bay; on the East, by Dewey Boulevard;
and on the south and west, by Manila Bay." See concurring opinion of Justice Reynato S. Puno in Republic
Real Estate Corporation v. Court of Appeals, 299 SCRA 1999 (1998). Under Sections 2 and 3, Article XII
of the 1987 Constitution, "national parks" are inalienable natural resources of the State.
79
Fifth Whereas clause of EO No. 525.
80
Section 4, Chapter I, Title XIV, Book IV.
81
Section 6 of CA No 141 provides as follows: "The President, upon the recommendation of the Secretary
of Agriculture and Commerce, shall from time to time classify the lands of the public domain into – (a)
Alienable or disposable, x x x."
82
Section 7 of CA No. 141 provides as follows: "For purposes of the administration and disposition of
alienable or disposable public lands, the President, upon recommendation by the Secretary of Agriculture
and Commerce, shall from time to time declare what lands are open to disposition or concession under this
Act."
83
On "Lands for Residential, Commercial, or Industrial and other Similar Purposes."
84
RA No. 293, enacted on June 16, 1948, authorized the sale of marshy lands under certain conditions.
Section 1 of RA No. 293 provided as follows: "The provisions of section sixty-one of Commonwealth Act
Numbered One hundred and forty-one to the contrary notwithstanding, marshy lands and lands under water
bordering on shores or banks or navigable lakes or rivers which are covered by subsisting leases or leases
which may hereafter be duly granted under the provisions of the said Act and are already improved and
have been utilized for farming, fishpond, or similar purposes for at least five years from the date of the
contract of lease, may be sold to the lessees thereof under the provisions of Chapter Five of the said Act as
soon as the President, upon recommendation of the Secretary of Agriculture and Natural Resources, shall
declare that the same are not necessary for the public service."
85
PEA's Memorandum, see note 2 at 45.
86
See note 73.
87
Section 4 (b) of PD No. 1084
88
R.A. No. 730 allows the private sale of home lots to actual occupants of public lands. See note 63.
89
Issued on February 26, 1981.
90
While PEA claims there was a failure of public bidding on December 10, 1991, there is no showing that
the Commission on Audit approved the price or consideration stipulated in the negotiated Amended JVA as
required by Section 79 of the Government Auditing Code. Senate Committee Report No. 560 did not
discuss this issue.
91
Paragraph 2 (a) of COA Circular No. 89-296, on "Sale Thru Negotiation," states that disposal through
negotiated sale may be resorted to if "[T]here was a failure of public auction."
92
Senate Committee Report No. 560, Statement of Facts, p. 7, citing PEA Board Resolution No. 835, as
appearing in the Minutes of the PEA Board of Directors Meeting held on May 30, 1991, per Certification
of Jaime T. De Veyra, Corporate Secretary, dated June 11, 1991.
93
Opinion No. 330, citing COA Audit Circular No. 89-296. See note 5.
94
PEA's Memorandum, see note 2.
95
Senate Committee Report No. 560, pp. 7-8, citing the Minutes of Meeting of the PEA Board of Directors
held on December 19, 1991.
96
Section 3, Article XII of the 1987 Constitution provides as follows: "x x x Citizens of the Philippines
may x x x acquire not more than twelve hectares thereof by purchase, homestead or grant." However,
Section 6 of R.A. No. 6657 (Comprehensive Agrarian Reform Law) limits the ownership of "public or
private agricultural land" to a maximum of five hectares per person.
97
96 Phil. 946 (1955).
98
48 SCRA 372 (1977).
99
168 SCRA 198 (1988).
100
172 SCRA 795 (1989).
101
73 SCRA 146 (1976).
102
Avila v. Tapucar, 201 SCRA 148 (1991).
103
Republic v. Ayala Cia, et al., 14 SCRA 259 (1965); Dizon v. Rodriguez, 13 SCRA 705 (1965).
104
Section 44 of PD No. 1529 states as follows: "Every registered owner receiving a certificate of title in
pursuance of a decree of registration, and every subsequent purchaser of registered land taking a certificate
of title for value and in good faith, shall hold the same free from all encumbrances except those noted on
said certificate and any of the following encumbrances which may be subsisting, namely: First. Liens,
claims or rights arising or existing under the laws and Constitution of the Philippines which are not by
law required to appear of record in the Registry of Deeds in order to be valid against subsequent
purchasers or encumbrancers of record. x x x." Under Section 103 of PD No. 1529, Section 44 applies to
certificates of title issued pursuant to a land patent granted by the government.
105
Section 2, Article XIII of the 1935 Constitution.
106
Harty v. Municipality of Victoria, 13 Phil. 152 (1909).
107
Annex "B", AMARI's Memorandum, see note 21 at 16, Section 5.2 (c) of the Amended JVA.
 108
Section 10 of CA No. 141 provides as follows: "Sec. 10. The words "alienation," "disposition," or
"concession" as used in this Act, shall mean any of the methods authorized by this Act for the acquisition,
lease, use, or benefit of the lands of the public domain other than timber or mineral lands."
109
Section 79 of the Government Auditing Code, which requires public auction in the sale of government
assets, includes all kinds of disposal or divestment of government assets. Thus, COA Audit Circular No.
86-264 dated October 16, 1986 speaks of "guidelines (which) shall govern the general procedures on the
divestment or disposal of assets of government-owned and/or controlled corporations and their
subsidiaries." Likewise, COA Audit Circular No. 89-296 dated January 27, speaks of "guidelines (which)
shall be observed and adhered to in the divestment or disposal of property and other assets of all
government entities/instrumentalities" and that "divestment shall refer to the manner or scheme of taking
away, depriving, withdrawing of an authority, power or title." These COA Circulars implement Section 79
of the Government Auditing Code.
110
The share of AMARI in the Freedom Islands is 77.34 hectares, which is 70 percent of the net usable area
of 110.49 hectares. The net usable area is the total land area of the Freedom Islands less 30 percent
allocated for common areas.
111
The share of AMARI in the submerged areas for reclamation is 290.129 hectares, which is 70 percent of
the net usable area of 414.47 hectares.
112
Article 1409 of the Civil Code provides as follows: "The following contracts are inexistent and void
from the beginning: (1) Those whose cause, object or purpose is contrary to law; x x x; (4) Those whose
object is outside the commerce of men; x x x."

SECOND DIVISION

G.R. No. 164024 January 29, 2009

LUIS B. MANESE, ANTONIA ELLA, HEIRS OF ROSARIO M. ORDOñEZ, represented

by CESAR ORDOñEZ, SESINANDO PINEDA and AURORA CASTRO, Petitioners,
vs.
SPOUSES DIOSCORO VELASCO and GLICERIA SULIT, MILDRED CHRISTINE L.
FLORES TANTOCO and SYLVIA L. FLORES, Respondents.

DECISION

QUISUMBING, J.:

For review on certiorari are the Decision1 dated April 28, 2004 and the Resolution2 dated June
22, 2004 of the Court of Appeals in CA-G.R. CV No. 68934. The appellate court had affirmed
the Order3 dated June 15, 2000 of the Regional Trial Court (RTC) of Lucena City, Branch 59, in
Civil Case No. 99-129, dismissing the petitioners’ complaint for annulment of title and damages
against the respondents.

The subject matter of the controversy is the alleged foreshore land with an area of about 85,521
square meters, fronting Tayabas Bay in Guisguis, Sariaya, Quezon.4

On October 13, 1971, respondent Dioscoro Velasco was issued Original Certificate of Title No.
P-167835 covering said property by the Register of Deeds of Quezon Province, based on
Homestead Patent No. 133300. On March 22, 1977, Velasco sold the property to respondent
Sylvia Flores, and Transfer Certificate of Title (TCT) No. T-1609236 was issued in her name. On
January 4, 1981, the property was sold by Flores to Mildred Christine Flores-Tantoco and TCT
No. T-1777357 was issued in the latter’s name. Later, the property was divided into seven lots
and TCT Nos. T-177777, T-177778, T-177779, T-177780, T-177781, T-177782, and T-177783
were issued in the name of Mildred Christine Flores-Tantoco. On January 18, 1992, the lots
covered by TCT Nos. T-1777808 and T-1777819 were sold back to Flores such that TCT No. T-
27811210 and TCT No. 27811011 were issued in her name.

Adjacent and contiguous to the alleged foreshore land is the agricultural land owned by
petitioners.

On August 31, 1999, the petitioners filed a Complaint12 for Annulment of Title and Damages
against respondents before the RTC of Lucena City. They alleged that the issuance of the
homestead patent and the series of transfers involving the same property were null and void.
They further alleged that they applied for lease of the foreshore land and the government had
approved in their favor Foreshore, Reclaimed Land or Miscellaneous Lease Application.
Petitioners claimed that they were in open, continuous, exclusive and notorious possession and
use of said foreshore land since 1961. They stated that they had introduced improvements
thereon and planted coconut seedlings (which had grown up into coconut trees) as well as other
fruit-bearing trees and plants. They added that they had subleased the land to several tenants.

Petitioners averred that Dioscoro Velasco was not qualified to become a grantee of a homestead
patent since he never occupied any portion nor introduced any improvements on the land. They
claimed that Velasco was issued a homestead patent because he committed fraud,
misrepresentation, and falsification in connivance with employees of the Bureau of Lands. They
argued that the sale between Velasco and Flores was invalid because it was not approved by the
Secretary of Agriculture and Natural Resources as required under Commonwealth Act No. 141,
otherwise known as "The Public Land Act."13 Hence, they claimed that the sale by Flores to
Tantoco was likewise invalid.

On December 2, 1999, respondents moved to dismiss14 the complaint on the following grounds:
(1) petitioners do not have the legal personality to file the complaint since the property forms
part of the public domain and only the Solicitor General could bring an action for reversion or
any action which may have the effect of canceling a free patent and the corresponding certificate
of title issued on the basis of the patent; (2) the sale of the property by Velasco to Flores is valid
even without approval of the Secretary of Agriculture and Natural Resources as the required
approval may be obtained after the sale had been consummated; (3) the certificate of title issued
to Velasco can no longer be reviewed on the ground of fraud since a homestead patent registered
in conformity with the provisions of Act No. 49615 partakes of the nature of a certificate issued in
a judicial proceeding and becomes indefeasible and incontrovertible upon the expiration of one
year from its issuance; and (4) petitioners’ action is barred by laches since for almost 28 years,
they failed to assert their alleged right over said property.

On June 15, 2000, the RTC granted the Motion to Dismiss and ruled that petitioners do not have
the legal personality to file the complaint. It held that the government, not petitioners, is the real
party in interest and, therefore, only the Solicitor General may bring the action in court. The
dispositive portion of the RTC’s Order states:

WHEREFORE, the instant Motion is granted and the plaintiffs[’] complaint dismissed.

SO ORDERED.16

The Court of Appeals affirmed the RTC’s Order, disposing as follows:

WHEREFORE, premises considered, the appeal is DISMISSED for lack of merit. The Order
dated June 15, 2000 of the Regional Trial Court (RTC), Branch 59, Lucena City dismissing
plaintiffs-appellants’ complaint for annulment of title with damages is AFFIRMED and
UPHELD.

SO ORDERED.17

Hence, this petition.

Petitioners raise the following issue for our resolution:

[WHETHER OR NOT] THE COURT OF APPEALS ERRED IN DISMISSING THE APPEAL

AND IN AFFIRMING AND UPHOLDING THE ORDER OF DISMISSAL OF THE
REGIONAL TRIAL COURT OF LUCENA, BRANCH 59 THAT THE PETITIONERS DO
NOT HAVE THE LEGAL PERSONALITY TO INSTITUTE THE COMPLAINT FOR
CANCELLATION OF OCT NO. P-16789 ISSUED PURSUANT TO HOMESTEAD PATENT
NO. 133300 IN THE NAME OF DIOSCORO VELASCO AND THE TRANSFER
CERTIFICATES OF TITLES SUBSEQUENTLY ISSUED IN FAVOR OF S[Y]LVIA L.
FLORES AND MILDRED CHRISTINE FLORES-TANTOCO.18

Stated simply, the sole issue in this case is whether or not petitioners are real parties in interest
with authority to file a complaint for annulment of title of foreshore land.

Petitioners concede that under Section 101 of Commonwealth Act No. 141,19 only the Solicitor
General or the officer acting in his stead may institute all actions for reversion in the proper
courts. However, they invoke the principle of equity, arguing that equity and social justice
demand that they be deemed real parties in interest and given a right to present evidence showing
that the land titles of respondents are void.20 Respondents, on the other hand, reiterate that
petitioners are not real parties in interest because they do not represent the State.21

After due consideration of the submissions and arguments of the parties, we are in agreement
that the instant petition lacks merit.

Section 2, Rule 3 of the 1997 Rules of Civil Procedure provides:

SEC. 2. Parties in interest. - A real party in interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless
otherwise authorized by law or these Rules, every action must be prosecuted or defended in
the name of the real party in interest. (Emphasis supplied.)

It is admitted by both parties that the subject matter of controversy is foreshore land, which is
defined as that strip of land that lies between the high and low water marks and is alternatively
wet and dry according to the flow of the tides. It is that part of the land adjacent to the sea, which
is alternately covered and left dry by the ordinary flow of tides. It is part of the alienable land of
the public domain and may be disposed of only by lease and not otherwise. Foreshore land
remains part of the public domain and is outside the commerce of man. It is not capable of
private appropriation.22

Section 101 of Commonwealth Act No. 141 provides:

All actions for the reversion to the Government of lands of the public domain or improvements
thereon shall be instituted by the Solicitor General or the officer acting in his stead, in the proper
courts, in the name of the Republic of the Philippines.

In all actions for the reversion to the Government of lands of the public domain or improvements
thereon, the Republic of the Philippines is the real party in interest. The action shall be instituted
by the Solicitor General or the officer acting in his stead, in behalf of the Republic of the
Philippines.23 Moreover, such action does not prescribe. Prescription and laches will not bar
actions filed by the State to recover its property acquired through fraud by private individuals.24

Based on the foregoing, we rule that petitioners are not the real parties in interest in this case. We
therefore affirm the dismissal by the trial court of the complaint and the ruling of the Court of
Appeals that petitioners must first lodge their complaint with the Bureau of Lands in order that
an administrative investigation may be conducted under Section 9125 of The Public Land Act.

As to petitioners’ contention that they should be deemed real parties in interest based on the
principle of equity, we rule otherwise. Equity, which has been aptly described as "justice outside
legality," is applied only in the absence of, and never against, statutory law or judicial rules of
procedure. Positive rules prevail over all abstract arguments based on equity contra legem.26

WHEREFORE, the petition is DENIED. The assailed Decision dated April 28, 2004 and the
Resolution dated June 22, 2004 of the Court of Appeals in CA-G.R. CV No. 68934 are
AFFIRMED.

Costs against petitioners.

SO ORDERED.

LEONARDO A. QUISUMBING
Acting Chief Justice

WE CONCUR:
CONCHITA CARPIO MORALES
Associate Justice
 DANTE O. TINGA RENATO C. CORONA*
Associate Justice Associate Justice
MINITA V. CHICO-NAZARIO**
Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
LEONARDO A. QUISUMBING
Acting Chief Justice

Footnotes
* Additional member in lieu of Associate Justice Presbitero J. Velasco, Jr. who is abroad on official
business.
** Additional member in lieu of Associate Justice Arturo D. Brion who is on leave.
1
Rollo, pp. 37-42. Penned by Associate Justice Sergio L. Pestaño, with Associate Justices Roberto A.
Barrios and Vicente Q. Roxas concurring.
2
Id. at 44. Penned by Associate Justice Vicente Q. Roxas, with Associate Justices Roberto A. Barrios and
Aurora S. Lagman concurring.
3
Id. at 45-50.
4
Id. at 37.
5
Records, pp. 11-12.
6
Id. at 14.
7
Id. at 17.
8
Id. at 18.
9
Id. at 19.
10
Id. at 22.
11
Id. at 23.
12
Id. at 1-10.
13
An Act to Amend and Compile the Laws Relative to Lands of the Public Domain, approved on
November 7, 1936.
14
Records, pp. 35-37.
15
An Act to Provide for the Adjudication and Registration of Titles to Lands in the Philippine Islands,
enacted on November 6, 1902 and took effect on January 1, 1903.
16
Rollo, p. 49.
17
Id. at 42.
18
Id. at 103.
19
SEC. 101. All actions for the reversion to the Government of lands of the public domain or
improvements thereon shall be instituted by the Solicitor General or the officer acting in his stead, in the
proper courts, in the name of the Republic of the Philippines.
20
Rollo, p. 31.
21
Id. at 118.
22
Republic v. Court of Appeals, G.R. No. 126316, June 25, 2004, 432 SCRA 593, 598-599.
23
Ortigas & Company, Limited Partnership v. Ruiz, No. L-33952, March 9, 1987, 148 SCRA 326, 339-
340, citing The Director of Lands v. Lim, et al., 91 Phil. 912 (1952).
24
Republic v. Heirs of Felipe Alejaga, Sr., G.R. No. 146030, December 3, 2002, 393 SCRA 361, 374.
25
SEC. 91. The statements made in the application shall be considered as essential conditions and parts of
any concession, title, or permit issued on the basis of such application, and any false statement therein or
omission of facts altering, changing, or modifying the consideration of the facts set forth in such
statements, and any subsequent modification, alteration, or change of the material facts set forth in the
application shall ipso facto produce the cancellation of the concession, title, or permit granted. It shall be
the duty of the Director of Lands, from time to time and whenever he may deem it advisable, to make the
necessary investigations for the purpose of ascertaining whether the material facts set out in the application
are true, or whether they continue to exist and are maintained and preserved in good faith, and for the
purposes of such investigation, the Director of Lands is hereby empowered to issue subpoenas and
 subpoenas duces tecum and, if necessary, to obtain compulsory process from the courts. In every
investigation made in accordance with this section, the existence of bad faith, fraud, concealment, or
fraudulent and illegal modification of essential facts shall be presumed if the grantee or possessor of the
land shall refuse or fail to obey a subpoena or subpoena duces tecum lawfully issued by the Director of
Lands or his authorized delegates or agents, or shall refuse or fail to give direct and specific answers to
pertinent questions, and on the basis of such presumption, an order of cancellation may issue out further
proceedings.
26
Republic v. Court of Appeals, G.R. No. 100709, November 14, 1997, 281 SCRA 639, 649, citing
Causapin v. Court of Appeals, G.R. No. 107432, July 4, 1994, 233 SCRA 615, 625; Zabat, Jr. v. Court of
Appeals, No. L-36958, July 10, 1986, 142 SCRA 587, 591.

THIRD DIVISION

G.R. No. 92161 March 18, 1991

SIMPLICIO BINALAY, PONCIANO GANNABAN, NICANOR MACUTAY, DOMINGO

ROSALES, GREGORIO ARGONZA, EUSTAQUIO BAUA, FLORENTINO ROSALES,
TEODORO MABBORANG, PATRICIO MABBORANG and FULGENCIO MORA,
petitioners
vs.
GUILLERMO MANALO and COURT OF APPEALS, respondents.

Josefin De Alban Law Office for Petitioners.

FELICIANO, J.:

The late Judge Taccad originally owned a parcel of land situated in Tumauini, Isabela having an
estimated area of twenty (20) hectares. The western portion of this land bordering on the
Cagayan River has an elevation lower than that of the eastern portion which borders on the
national road. Through the years, the western portion would periodically go under the waters of
the Cagayan River as those waters swelled with the coming of the rains. The submerged portion,
however, would re-appear during the dry season from January to August. It would remain under
water for the rest of the year, that is, from September to December during the rainy season.

The ownership of the landholding eventually moved from one person to another. On 9 May
1959, respondent Guillermo Manalo acquired 8.65 hectares thereof from Faustina Taccad,
daughter of Judge Juan Taccad. The land sold was described in the Deed of Absolute Sale1 as
follows:

. . . a parcel of agricultural land in Balug, Tumauini, Isabela, containing an area of 8.6500

hectares, more or less; bounded on the North by Francisco Forto on the East by National
Road; on South by Julian Tumolva and on the West by Cagayan River; declared for
taxation under Tax Declaration No. 12681 in the name of Faustina Taccad, and assessed
at P 750.00. . . .
Later in 1964, respondent Manalo purchased another 1.80 hectares from Gregorio Taguba who
had earlier acquired the same from Judge Juan Taccad. The second purchase brought the total
acquisition of respondent Manalo to 10.45 hectares. The second piece of property was more
particularly described as follows:

. . . a piece of agricultural land consisting of tobacco land, and containing an area of

18,000 square meters, more or less, bounded on the North by Balug Creek; on the South,
by Faustina Taccad (now Guillermo R. Manalo); on the East, by a Provincial Road; and
on the West, by Cagayan River assessed at P 440.00, as tax Declaration No. 3152. . . .2

During the cadastral survey conducted at Balug, Tumauini, Isabela on 21 October 1969, the two
(2) parcels of land belonging to respondent Manalo were surveyed and consolidated into one lot,
designated as Lot No. 307, Pls-964. Lot 307 which contains 4.6489 hectares includes: (a) the
whole of the 1.80 hectares acquired from Gregorio Taguba; and (b) 2.8489 hectares out of the
8.65 hectares purchased from Faustina Taccad. As the survey was conducted on a rainy month, a
portion of the land bought from Faustina Taccad then under water was left unsurveyed and was
not included in Lot 307.

The Sketch Plan3 submitted during the trial of this case and which was identified by respondent
Manalo shows that the Cagayan River running from south to north, forks at a certain point to
form two (2) branches—the western and the eastern branches—and then unites at the other end,
further north, to form a narrow strip of land. The eastern branch of the river cuts through the land
of respondent Manalo and is inundated with water only during the rainy season. The bed of the
eastern branch is the submerged or the unsurveyed portion of the land belonging to respondent
Manalo. For about eight (8) months of the year when the level of water at the point where the
Cagayan River forks is at its ordinary depth, river water does not flow into the eastern branch.
While this condition persists, the eastern bed is dry and is susceptible to cultivation.

Considering that water flowed through the eastern branch of the Cagayan River when the
cadastral survey was conducted, the elongated strip of land formed by the western and the
eastern branches of the Cagayan River looked very much like an island. This strip of land was
surveyed on 12 December 1969.4

It was found to have a total area of 22.7209 hectares and was designated as Lot 821 and Lot 822.
The area of Lot 822 is 10.8122 hectares while Lot 821 has an area of 11.9087 hectares. Lot 821
is located directly opposite Lot 307 and is separated from the latter only by the eastern branch of
the Cagayan River during the rainy season and, during the dry season, by the exposed, dry river
bed, being a portion of the land bought from Faustina Taccad. Respondent Manalo claims that
Lot 821 also belongs to him by way of accretion to the submerged portion of the property to
which it is adjacent.

Petitioners who are in possession of Lot 821, upon the other hand, insist that they own Lot 821.
They occupy the outer edges of Lot 821 along the river banks, i.e., the fertile portions on which
they plant tobacco and other agricultural products. They also cultivate the western strip of the
unsurveyed portion during summer.5 This situation compelled respondent Manalo to file a case
for forcible entry against petitioners on 20 May 1969. The case was dismissed by the Municipal
Court of Tumauini, Isabela for failure of both parties to appear. On 15 December 1972,
respondent Manalo again filed a case for forcible entry against petitioners. The latter case was
similarly dismissed for lack of jurisdiction by the Municipal Court of Tumauini, Isabela.

On 24 July 1974, respondent Manalo filed a complaints6 before the then Court of First Instance
of Isabela, Branch 3 for quieting of title, possession and damages against petitioners. He alleged
ownership of the two (2) parcels of land he bought separately from Faustina Taccad and
Gregorio Taguba for which reason he prayed that judgment be entered ordering petitioners to
vacate the western strip of the unsurveyed portion. Respondent Manalo likewise prayed that
judgment be entered declaring him as owner of Lot 821 on which he had laid his claim during
the survey.

Petitioners filed their answer denying the material allegations of the complaint. The case was
then set for trial for failure of the parties to reach an amicable agreement or to enter into a
stipulation of facts.7 On 10 November 1982, the trial court rendered a decision with the
following dispositive portion:

WHEREFORE, in the light of the foregoing premises, the Court renders judgment against
the defendants and in favor of the plaintiff and orders:

1. That plaintiff, Guillermo Manalo, is declared the lawful owner of the land in question,
Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more particularly described in
paragraph 2-b of the Complaint;

2. That the defendants are hereby ordered to vacate the premises of the land in question,
Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more particularly described in
paragraph 2-b of the Complaint;

3. That the defendants are being restrained from entering the premises of the land in
question, Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more particularly
described in paragraph 2-b of the Complaint; and

4. That there is no pronouncement as to attorney's fees and costs.

SO ORDERED.8

Petitioners appealed to the Court of Appeals which, however, affirmed the decision of the trial
court. They filed a motion for reconsideration, without success.

While petitioners insist that Lot 821 is part of an island surrounded by the two (2) branches of
the Cagayan River, the Court of Appeals found otherwise. The Court of Appeals concurred with
the finding of the trial court that Lot 821 cannot be considered separate and distinct from Lot 307
since the eastern branch of the Cagayan River substantially dries up for the most part of the year
such that when this happens, Lot 821 becomes physically (i.e., by land) connected with the dried
up bed owned by respondent Manalo. Both courts below in effect rejected the assertion of
petitioners that the depression on the earth's surface which separates Lot 307 and Lot 821 is,
during part of the year, the bed of the eastern branch of the Cagayan River.

It is a familiar rule that the findings of facts of the trial court are entitled to great respect, and that
they carry even more weight when affirmed by the Court of Appeals.9 This is in recognition of
the peculiar advantage on the part of the trial court of being able to observe first-hand the
deportment of the witnesses while testifying. Jurisprudence is likewise settled that the Court of
Appeals is the final arbiter of questions of fact.10 But whether a conclusion drawn from such
findings of facts is correct, is a question of law cognizable by this Court.11

In the instant case, the conclusion reached by both courts below apparently collides with their
findings that periodically at the onset of and during the rainy season, river water flows through
the eastern bed of the Cagayan River. The trial court held:

The Court believes that the land in controversy is of the nature and character of alluvion
(Accretion), for it appears that during the dry season, the body of water separating the
same land in controversy (Lot No. 821, Pls-964) and the two (2) parcels of land which the
plaintiff purchased from Gregorio Taguba and Justina Taccad Cayaba becomes a marshy
land and is only six (6) inches deep and twelve (12) meters in width at its widest in the
northern tip (Exhs. "W", "W-l", "W-2", "W-3" and "W-4"), It has been held by our
Supreme Court that "the owner of the riparian land which receives the gradual deposits of
alluvion, does not have to make an express act of possession. The law does not require it,
and the deposit created by the current of the water becomes manifest" (Roxas vs. Tuazon,
6 Phil. 408).12

The Court of Appeals adhered substantially to the conclusion reached by the trial court, thus:

As found by the trial court, the disputed property is not an island in the strict sense of the
word since the eastern portion of the said property claimed by appellants to be part of the
Cagayan River dries up during summer. Admittedly, it is the action of the heavy rains
which comes during rainy season especially from September to November which
increases the water level of the Cagayan river. As the river becomes swollen due to heavy
rains, the lower portion of the said strip of land located at its southernmost point would
be inundated with water. This is where the water of the Cagayan river gains its entry.
Consequently, if the water level is high the whole strip of land would be under water.

In Government of the Philippine Islands vs. Colegio de San Jose, it was held that —

According to the foregoing definition of the words "ordinary" and "extra-ordinary," the
highest depth of the waters of Laguna de Bay during the dry season is the ordinary one,
and the highest depth they attain during the extra-ordinary one (sic); inasmuch as the
former is the one which is regular, common, natural, which occurs always or most of the
time during the year, while the latter is uncommon, transcends the general rule, order and
measure, and goes beyond that which is the ordinary depth. If according to the definition
given by Article 74 of the Law of Waters quoted above, the natural bed or basin of the
lakes is the ground covered by their waters when at their highest ordinary depth, the
 natural bed or basin of Laguna de Bay is the ground covered by its waters when at their
highest depth during the dry season, that is up to the northeastern boundary of the two
parcels of land in question.

We find the foregoing ruling to be analogous to the case at bar. The highest ordinary level of the
waters of the Cagayan River is that attained during the dry season which is confined only on the
west side of Lot [821] and Lot [822]. This is the natural Cagayan river itself. The small residual
of water between Lot [821] and 307 is part of the small stream already in existence when the
whole of the late Judge Juan Taccad's property was still susceptible to cultivation and
uneroded.13

The Court is unable to agree with the Court of Appeals that Government of the Philippine Islands
vs. Colegio de San Jose 14 is applicable to the present case. That case involved Laguna de Bay;
since Laguna de Bay is a lake, the Court applied the legal provisions governing the ownership
and use of lakes and their beds and shores, in order to determine the character and ownership of
the disputed property. Specifically, the Court applied the definition of the natural bed or basin of
lakes found in Article 74 of the Law of Waters of 3 August 1866. Upon the other hand, what is
involved in the instant case is the eastern bed of the Cagayan River.

We believe and so hold that Article 70 of the Law of Waters of 3 August 1866 is the law
applicable to the case at bar:

Art. 70. The natural bed or channel of a creek or river is the ground covered by its waters
during the highest floods. (Emphasis supplied)

We note that Article 70 defines the natural bed or channel of a creek or river as the ground
covered by its waters during the highest floods. The highest floods in the eastern branch of the
Cagayan River occur with the annual coming of the rains as the river waters in their onward
course cover the entire depressed portion. Though the eastern bed substantially dries up for the
most part of the year (i.e., from January to August), we cannot ignore the periodical swelling of
the waters ( i.e., from September to December) causing the eastern bed to be covered with
flowing river waters.

The conclusion of this Court that the depressed portion is a river bed rests upon evidence of
record.1âwphi1 Firstly, respondent Manalo admitted in open court that the entire area he bought
from Gregorio Taguba was included in Lot 307.15 If the 1.80 hectares purchased from Gregorio
Taguba was included in Lot 307, then the Cagayan River referred to as the western boundary in
the Deed of Sale transferring the land from Gregorio Taguba to respondent Manalo as well as the
Deed of Sale signed by Faustina Taccad, must refer to the dried up bed (during the dry months)
or the eastern branch of the river (during the rainy months). In the Sketch Plan attached to the
records of the case, Lot 307 is separated from the western branch of the Cagayan River by a
large tract of land which includes not only Lot 821 but also what this Court characterizes as the
eastern branch of the Cagayan River.

Secondly, the pictures identified by respondent Manalo during his direct examination depict the
depressed portion as a river bed. The pictures, marked as Exhibits "W" to "W-4", were taken in
July 1973 or at a time when the eastern bed becomes visible.16 Thus, Exhibit "W-2" which
according to respondent Manalo was taken facing the east and Exhibit "W-3" which was taken
facing the west both show that the visible, dried up portion has a markedly lower elevation than
Lot 307 and Lot 821. It has dike-like slopes on both sides connecting it to Lot 307 and Lot 821
that are vertical upward and very prominent. This topographic feature is compatible with the fact
that a huge volume of water passes through the eastern bed regularly during the rainy season. In
addition, petitioner Ponciano Gannaban testified that one had to go down what he called a "cliff"
from the surveyed portion of the land of respondent Manalo to the depressed portion. The cliff,
as related by petitioner Gannaban, has a height of eight (8) meters.17

The records do not show when the Cagayan River began to carve its eastern channel on the
surface of the earth. However, Exhibit "E"18 for the prosecution which was the Declaration of
Real Property standing in the name of Faustina Taccad indicates that the eastern bed already
existed even before the sale to respondent Manalo. The words "old bed" enclosed in
parentheses—perhaps written to make legitimate the claim of private ownership over the
submerged portion—is an implied admission of the existence of the river bed. In the Declaration
of Real Property made by respondent Manalo, the depressed portion assumed the name Rio
Muerte de Cagayan. Indeed, the steep dike-like slopes on either side of the eastern bed could
have been formed only after a prolonged period of time.

Now, then, pursuant to Article 420 of the Civil Code, respondent Manalo did not acquire private
ownership of the bed of the eastern branch of the river even if it was included in the deeds of
absolute sale executed by Gregorio Taguba and Faustina Taccad in his favor. These vendors
could not have validly sold land that constituted property of public dominion. Article 420 of the
Civil Code states:

The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks, shores, roadsteads, and others of similar
character;

(2) Those which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth. (Emphasis supplied)

Although Article 420 speaks only of rivers and banks, "rivers" is a composite term which
includes: (1) the running waters, (2) the bed, and (3) the banks.19 Manresa, in commenting upon
Article 339 of the Spanish Civil Code of 1889 from which Article 420 of the Philippine Civil
Code was taken, stressed the public ownership of river beds:

La naturaleza especial de los rios, en punto a su disfrute general, hace que sea necesario
considerar en su relacion de dominio algo mas que sus aguas corrientes. En efecto en
todo rio es preciso distinguir 1. esta agua corriente; 2. el alveo o cauce, y 3. las riberas.
Ahora bien: son estas dos ultimas cosas siempre de dominio publico, como las aguas?
 Realmente no puede imaginarse un rio sin alveo y sin ribera; de suerte que al decir el
Codigo civil que los rios son de dominio publico, parece que debe ir implicito el dominio
publico de aquellos tres elementos que integran el rio. Por otra parte, en cuanto a los
alveos o cauces tenemos la declaracion del art. 407, num 1, donde dice: son de dominion
publico . . . los rios y sus cauces naturales; declaracion que concuerda con lo que dispone
el art. 34 de la ley de [Aguas], segun el cual, son de dominion publico: 1. los alveos o
cauces de los arroyos que no se hallen comprendidos en el art. 33, y 2. los alveos o
cauces naturales de los rios en la extension que cubran sus aguas en las mayores crecidas
ordinarias.20 (Emphasis supplied)

The claim of ownership of respondent Manalo over the submerged portion is bereft of basis even
if it were alleged and proved that the Cagayan River first began to encroach on his property after
the purchase from Gregorio Taguba and Faustina Taccad. Article 462 of the Civil Code would
then apply divesting, by operation of law, respondent Manalo of private ownership over the new
river bed. The intrusion of the eastern branch of the Cagayan River into his landholding
obviously prejudiced respondent Manalo but this is a common occurrence since estates bordering
on rivers are exposed to floods and other evils produced by the destructive force of the waters.
That loss is compensated by, inter alia, the right of accretion acknowledged by Article 457 of the
Civil Code.21 It so happened that instead of increasing the size of Lot 307, the eastern branch of
the Cagayan River had carved a channel on it.

We turn next to the issue of accretion. After examining the records of the case, the Court
considers that there was no evidence to prove that Lot 821 is an increment to Lot 307 and the bed
of the eastern branch of the river. Accretion as a mode of acquiring property under Article 457 of
the Civil Code requires the concurrence of three (3) requisites: (a) that the deposition of soil or
sediment be gradual and imperceptible; (b) that it be the result of the action of the waters of the
river (or sea); and (c) that the land where accretion takes place is adjacent to the banks of rivers
(or the sea coast).22 The Court notes that the parcels of land bought by respondent Manalo
border on the eastern branch of the Cagayan River. Any accretion formed by this eastern branch
which respondent Manalo may claim must be deposited on or attached to Lot 307. As it is, the
claimed accretion (Lot 821) lies on the bank of the river not adjacent to Lot 307 but directly
opposite Lot 307 across the river.

Assuming (arguendo only) that the Cagayan River referred to in the Deeds of Sale transferring
ownership of the land to respondent Manalo is the western branch, the decision of the Court of
Appeals and of the trial court are bare of factual findings to the effect that the land purchased by
respondent Manalo received alluvium from the action of the aver in a slow and gradual manner.
On the contrary, the decision of the lower court made mention of several floods that caused the
land to reappear making it susceptible to cultivation. A sudden and forceful action like that of
flooding is hardly the alluvial process contemplated under Article 457 of the Civil Code. It is the
slow and hardly perceptible accumulation of soil deposits that the law grants to the riparian
owner.

Besides, it is important to note that Lot 821 has an area of 11.91 hectares. Lot 821 is the northern
portion of the strip of land having a total area of 22.72 hectares. We find it difficult to suppose
that such a sizable area as Lot 821 resulted from slow accretion to another lot of almost equal
size. The total landholding purchased by respondent Manalo is 10.45 hectares (8.65 hectares
from Faustina Taccad and 1.80 hectares from Gregorio Taguba in 1959 and 1964, respectively),
in fact even smaller than Lot 821 which he claims by way of accretion. The cadastral survey
showing that Lot 821 has an area of 11.91 hectares was conducted in 1969. If respondent
Manalo's contention were accepted, it would mean that in a span of only ten (10) years, he had
more than doubled his landholding by what the Court of Appeals and the trial court considered as
accretion. As already noted, there are steep vertical dike-like slopes separating the depressed
portion or river bed and Lot 821 and Lot 307. This topography of the land, among other things,
precludes a reasonable conclusion that Lot 821 is an increment to the depressed portion by
reason of the slow and constant action of the waters of either the western or the eastern branches
of the Cagayan River.

We turn finally to the issue of ownership of Lot 821. Respondent Manalo's claim over Lot 821
rests on accretion coupled with alleged prior possession. He alleged that the parcels of land he
bought separately from Gregorio Taguba and Faustina Taccad were formerly owned by Judge
Juan Taccad who was in possession thereof through his (Judge Taccad's) tenants. When
ownership was transferred to him, respondent Manalo took over the cultivation of the property
and had it declared for taxation purposes in his name. When petitioners forcibly entered into his
property, he twice instituted the appropriate action before the Municipal Trial Court of
Tumauini, Isabela. Against respondent Manalo's allegation of prior possession, petitioners
presented tax declarations standing in their respective names. They claimed lawful, peaceful and
adverse possession of Lot 821 since 1955.

If respondent Manalo had proved prior possession, it was limited physically to Lot 307 and the
depressed portion or the eastern river bed. The testimony of Dominga Malana who was a tenant
for Justina Taccad did not indicate that she was also cultivating Lot 821. In fact, the complaints
for forcible entry lodged before the Municipal Trial Court of Tumauini, Isabela pertained only to
Lot 307 and the depressed portion or river bed and not to Lot 821. In the same manner, the tax
declarations presented by petitioners conflict with those of respondent Manalo. Under Article
477 of the Civil Code, the plaintiff in an action for quieting of title must at least have equitable
title to or interest in the real property which is the subject matter of the action. The evidence of
record on this point is less than satisfactory and the Court feels compelled to refrain from
determining the ownership and possession of Lot 821, adjudging neither petitioners nor
respondent Manalo as owner(s) thereof.

WHEREFORE, the Decision and Resolution of the Court of Appeals in CA-GR CV No. 04892
are hereby SET ASIDE. Respondent Manalo is hereby declared the owner of Lot 307. The
regularly submerged portion or the eastern bed of the Cagayan River is hereby DECLARED to
be property of public dominion. The ownership of Lot 821 shall be determined in an appropriate
action that may be instituted by the interested parties inter se. No pronouncement as to costs.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur.

Footnotes
 1 Records, p. 123.
2 Id., p. 120.
3 Id., p. 209.
4 Id., p. 210.
5 Exhibits "1-C. " "1-D" and "1-E" for the Prosecution. Records, p. 209.
6 Records, pp. 1-6.
7 Id., p. 24.
8 Court of First Instance Decision, p. 40; Rollo, p. 98.
9 Go Ong vs. Court of Appeals, 154 SCRA 270 (1987).
10 Sese vs. Intermediate Appellate Court, 152 SCRA 585 (1987).
11 Pilar Development Corporation vs. Intermediate Appellate Court, 146 SCRA 215 (1986).
12 Court of First Instance Decision, p. 39; Rollo, p. 97.
13 Court of Appeals Decision, pp. 5-6; citation omitted.
14 53 Phil. 423.(1929).
15 TSN, 7 October 1975, pp. 4-6.
16 TSN, 13 October 1975, pp. 9-10.
17 TSN, 3 November 1976, p. 3.
18 Records, p. 122.
19 Hilario vs. City of Manila, 126 Phil. 128 (1967).
20 3 Manresa, Comentarios al Codigo Civil Español (6a ed., 1934), p. 75.
21 Cortes vs. City of Manila, 10 Phil. 567 (1908). See also Article 461, Civil Code.
22 Republic vs. Court of Appeals, 132 SCRA 514 (1984).

THIRD DIVISION

G.R. No. 136438 November 11, 2004

TEOFILO C. VILLARICO, petitioner,

vs.
VIVENCIO SARMIENTO, SPOUSES BESSIE SARMIENTO-DEL MUNDO & BETH
DEL MUNDO, ANDOK’S LITSON CORPORATION and MARITES’ CARINDERIA,
respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals dated
December 7, 1998 in CA-G.R. CV No. 54883, affirming in toto the Decision2 of the Regional
Trial Court (RTC) of Parañaque City, Branch 259, dated November 14, 1996, in Civil Case No.
95-044.

The facts of this case, as gleaned from the findings of the Court of Appeals, are:
Teofilo C. Villarico, petitioner, is the owner of a lot in La Huerta, Parañaque City, Metro Manila
with an area of sixty-six (66) square meters and covered by Transfer Certificate of Title (T.C.T.)
No. 95453 issued by the Registry of Deeds, same city.

Petitioner’s lot is separated from the Ninoy Aquino Avenue (highway) by a strip of land
belonging to the government. As this highway was elevated by four (4) meters and therefore
higher than the adjoining areas, the Department of Public Works and Highways (DPWH)
constructed stairways at several portions of this strip of public land to enable the people to have
access to the highway.

Sometime in 1991, Vivencio Sarmiento, his daughter Bessie Sarmiento and her husband Beth
Del Mundo, respondents herein, had a building constructed on a portion of said government land.
In November that same year, a part thereof was occupied by Andok’s Litson Corporation and
Marites’ Carinderia, also impleaded as respondents.

In 1993, by means of a Deed of Exchange of Real Property, petitioner acquired a 74.30 square
meter portion of the same area owned by the government. The property was registered in his
name as T.C.T. No. 74430 in the Registry of Deeds of Parañaque City.

In 1995, petitioner filed with the RTC, Branch 259, Parañaque City, a complaint for accion
publiciana against respondents, docketed as Civil Case No. 95-044. He alleged inter alia that
respondents’ structures on the government land closed his "right of way" to the Ninoy Aquino
Avenue; and encroached on a portion of his lot covered by T.C.T. No. 74430.

Respondents, in their answer, specifically denied petitioner’s allegations, claiming that they have
been issued licenses and permits by Parañaque City to construct their buildings on the area; and
that petitioner has no right over the subject property as it belongs to the government.

After trial, the RTC rendered its Decision, the dispositive portion of which reads:

"WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring the defendants to have a better right of possession over the subject
land except the portion thereof covered by Transfer Certificate of Title No. 74430
of the Register of Deeds of Parañaque;

2. Ordering the defendants to vacate the portion of the subject premises described
in Transfer Certificate of Title No. 74430 and gives its possession to plaintiff; and

3. Dismissing the claim for damages of the plaintiff against the defendants, and
likewise dismissing the claim for attorney’s fees of the latter against the former.

Without pronouncement as to costs.

SO ORDERED."3
The trial court found that petitioner has never been in possession of any portion of the public
land in question. On the contrary, the defendants are the ones who have been in actual possession
of the area. According to the trial court, petitioner was not deprived of his "right of way" as he
could use the Kapitan Tinoy Street as passageway to the highway.

On appeal by petitioner, the Court of Appeals issued its Decision affirming the trial court’s
Decision in toto, thus:

"WHEREFORE, the judgment hereby appealed from is hereby AFFIRMED in toto, with
costs against the plaintiff-appellant.

SO ORDERED."4

In this petition, petitioner ascribes to the Court of Appeals the following assignments of error:

"I

THE FINDINGS OF FACT OF THE HON. COURT OF APPEALS CONTAINED A

CONCLUSION WITHOUT CITATION OF SPECIFIC EVIDENCE ON WHICH THE
SAME WAS BASED.

II

THE HON. COURT OF APPEALS ERRED IN CONSIDERING THAT THE ONLY

ISSUE IN THIS CASE IS WHETHER OR NOT THE PLAINTIFF-APPELLANT HAS
ACQUIRED A RIGHT OF WAY OVER THE LAND OF THE GOVERNMENT
WHICH IS BETWEEN HIS PROPERTY AND THE NINOY AQUINO AVENUE.

III

THE HON. COURT OF APPEALS ERRED IN CONCLUDING THAT ACCION

PUBLICIANA IS NOT THE PROPER REMEDY IN THE CASE AT BAR.

IV

THE HON. COURT OF APPEALS ERRED IN CONCLUDING THAT THE

EXISTENCE OF THE PLAINTIFF-APPELLANT’S RIGHT OF WAY DOES NOT
CARRY POSSESSION OVER THE SAME.

THE HON. COURT OF APPEALS ERRED IN NOT RESOLVING THE ISSUE OF

WHO HAS THE BETTER RIGHT OF POSSESSION OVER THE SUBJECT LAND
BETWEEN THE PLAINTIFF-APPELLANT AND THE DEFENDANT-
APPELLEES."5
In their comment, respondents maintain that the Court of Appeals did not err in ruling that
petitioner’s action for accion publiciana is not the proper remedy in asserting his "right of way"
on a lot owned by the government.

Here, petitioner claims that respondents, by constructing their buildings on the lot in question,
have deprived him of his "right of way" and his right of possession over a considerable portion
of the same lot, which portion is covered by his T.C.T. No. 74430 he acquired by means of
exchange of real property.

It is not disputed that the lot on which petitioner’s alleged "right of way" exists belongs to the
state or property of public dominion. Property of public dominion is defined by Article 420 of
the Civil Code as follows:

"ART. 420. The following things are property of public dominion:

(1) Those intended for public use such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and other of similar character.

(2) Those which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth."

Public use is "use that is not confined to privileged individuals, but is open to the indefinite
public."6 Records show that the lot on which the stairways were built is for the use of the people
as passageway to the highway. Consequently, it is a property of public dominion.

Property of public dominion is outside the commerce of man and hence it: (1) cannot be
alienated or leased or otherwise be the subject matter of contracts; (2) cannot be acquired by
prescription against the State; (3) is not subject to attachment and execution; and (4) cannot be
burdened by any voluntary easement.7

Considering that the lot on which the stairways were constructed is a property of public
dominion, it can not be burdened by a voluntary easement of right of way in favor of herein
petitioner. In fact, its use by the public is by mere tolerance of the government through the
DPWH. Petitioner cannot appropriate it for himself. Verily, he can not claim any right of
possession over it. This is clear from Article 530 of the Civil Code which provides:

"ART. 530. Only things and rights which are susceptible of being appropriated may be
the object of possession."

Accordingly, both the trial court and the Court of Appeals erred in ruling that respondents have
better right of possession over the subject lot.

However, the trial court and the Court of Appeals found that defendants’ buildings were
constructed on the portion of the same lot now covered by T.C.T. No. 74430 in petitioner’s
name. Being its owner, he is entitled to its possession.
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated
December 7, 1998 in CA-G.R. CV No. 54883 is AFFIRMED with MODIFICATION in the
sense that neither petitioner nor respondents have a right of possession over the disputed lot
where the stairways were built as it is a property of public dominion. Costs against petitioner.

SO ORDERED.

Panganiban, (Chairman), Carpio Morales and Garcia, JJ., concur.

Corona, J., on leave.

Footnotes
1 CA Rollo, pp. 81-85. Penned by Associate Justice Hector L. Hofileña (ret.) and concurred in by Associate
Justices Jorge B. Imperial (now deceased) and Omar U. Amin (ret.).
2 Id. at 45-50.
3 Id. at 49-50.
4 Id. at 84.
5 Rollo at 10.
6 US vs. Tan Piaco, 40 Phil. 853, 856 (1920).
7 Tolentino II, Civil Code (1992 ed.), 31-32.

FIRST DIVISION

G.R. No. 149145 March 31, 2006

ROMAN CATHOLIC BISHOP OF KALIBO, AKLAN, represented by BISHOP JUAN N.

NILMAR, Petitioner,
vs.
MUNICIPALITY OF BURUANGA, AKLAN, represented by the HON. PROTACIO S.
OBRIQUE, Respondent.

DECISION

CALLEJO, SR., J.:

Before the Court is the petition for review on certiorari filed by the Roman Catholic Bishop1 of
Kalibo, Aklan, seeking the partial review of the Decision2 dated January 31, 2001 of the Court of
Appeals in CA-G.R. CV No. 52626. Likewise sought to be reviewed is the Resolution dated July
18, 2001 of the appellate court denying the petitioner’s motion for partial reconsideration.

Factual and Procedural Antecedents

Some time in 1990, the Roman Catholic Bishop of Kalibo, Aklan, filed with the Regional Trial
Court (RTC) thereof a complaint for declaration of ownership and quieting of title to land with
prayer for preliminary injunction against the Municipality of Buruanga, Aklan. The case was
docketed as Civil Case No. 4164 and raffled to Branch 1 of the said RTC.

The complaint alleged, among others, that the Roman Catholic Bishop of Kalibo is the lawful
owner and possessor of a parcel of residential and commercial land (Cadastral Lot No. 138)
located at the poblacion of the Municipality of Buruanga, Aklan. The said lot, with an area of
9,545 square meters, is a block bounded by four streets on all sides. It is more particularly
described as follows:

A parcel of commercial and residential land known as Cadastral Lot No. 138, GSS-06-00012,
located at Poblacion, Buruanga, Aklan, containing an area of NINE THOUSAND FIVE
HUNDRED FORTY- FIVE (9,545) SQUARE METERS, more or less. Bounded on the North by
Viven Ostan Street; on the East by the Provincial Road; on the South by Nitoy Sualog Street; and
on the West by Emilio Ostan Street, and declared for taxation purposes in the name of the
Roman Catholic Church, Buruanga, Aklan, under Tax Declaration No. 6339 (1985) and assessed
at P23,850.00, including the improvements thereon.3

In 1894, the Roman Catholic Church was built in the middle portion of the said lot and has been
in existence since then up to the present.

The complaint further alleged that some time in 1978,4 the Municipality of Buruanga constructed
its municipal building on the northeastern portion of the subject lot after it obtained the
permission of Fr. Jesus Patiño, then parish priest of Buruanga. The municipality promised to

remove all the improvements it constructed thereon if and when the Roman Catholic Bishop of
Kalibo needed the said land.

In October 1989, the said municipal building was razed by fire allegedly perpetrated by members
of the New People’s Army. On November 25, 1989, the Roman Catholic Bishop of Kalibo,
through its counsel, wrote to the Municipal Mayor of Buruanga requesting the officials of the
said municipality to refrain from constructing its new building on the same site because it is the
property of the church. Further, it needed the said land for its social action projects. The letter
reads in part:

I am writing you on behalf of my client THE ROMAN CATHOLIC BISHOP OF KALIBO,

AKLAN, a corporation sole and represented by Bishop Juan N. Nilmar requesting you and the
Honorable Members of the Municipal Council (Sangguniang Bayan) to refrain from constructing
your new Municipal Building on the same site where your old Municipal Building was burned
down because it is constructed on the property of the Church.

Please be informed that the land of the Church is needed for its social action projects and
additional building, hence, kindly relocate your New Municipal Building in your own land
located along Emilio Ostan Street, known as Cadastral Lot No. 87.

With respect to your other public buildings such as the Rural Hospital, Buruanga Community
Medicare Hospital, the Basketball Court and the Grandstand which are all occupying the Church
property, you can continue using the same land subject to your recognition of the true ownership
of the property of the Church – The Roman Catholic Church – of Buruanga, Aklan, under the
Roman Catholic Bishop of Kalibo, Aklan, the lawful administrator of all church properties in the
Province of Aklan.5

On March 12, 1990, the Roman Catholic Bishop of Kalibo wrote the Department of Public
Works and Highways of the said province requesting the said office not to issue any building
permit to the Municipal Mayor and/or the Municipality of Buruanga in connection with the
construction of its municipal building on the land owned by the Roman Catholic Bishop of
Kalibo.6

These letters went unheeded as the construction of the new municipal building on the same site
proceeded. Consequently, the Roman Catholic Bishop of Kalibo filed the complaint a quo and
prayed that it be declared the lawful owner and possessor of Lot 138. It likewise prayed that a
temporary restraining order be issued to enjoin the said municipality and its authorized
representatives from constructing the new municipal building thereon and that the latter be
directed to pay damages to the Roman Catholic Bishop of Kalibo.

In its Answer,7 the Municipality of Buruanga, represented by Mayor Protacio Obrique, denied
that the Roman Catholic Bishop of Kalibo ever acquired ownership and possession over the land
subject of the complaint. It raised as affirmative defenses that the said lot was surveyed as
property of the municipality on February 3, 1909 in accordance with Section 58 of Act 926 by
A.W. Bushell and approved by the Bureau of Lands on May 15, 1909.8 Thereafter, a decree was
issued on March 14, 1919 in favor of the Municipality of Buruanga under Case No. 12871 of
then Court of Land Registration, Bureau of Lands.

It was further alleged that the said land was again surveyed in the name of the Municipality of
Buruanga under Act No. 2259 and denominated as Lot No. 138 GSS-06-00012 from the
approved cadastral map and that the said municipality alone had possessed the said land under
the claim of title exclusively for over fifty (50) years, exclusive of all other rights and adverse to
all other claimants.

The Municipality of Buruanga urged the court a quo to dismiss the complaint and, instead,
declare it the absolute and exclusive owner of the disputed lot.

On November 29, 1990, the court a quo issued the Order9 appointing Geodetic Engineer Rodrigo
Santiago of the Bureau of Lands as

Commissioner and directing him to identify and delineate the lot in question.

In compliance therewith, Engr. Santiago submitted the Commissioner’s Report and Sketch
stating in part:

That as per order of the court dated November 29, 1990 to delineate the land[in] question, the
undersigned court commissioner notified both parties and the schedule of survey was January 12,
1991 but it was postponed and moved to January 15 as requested by the representative from the
Municipality of Buruanga.

That the land in question involved was pointed to me by the Honorable Mayor of the
Municipality of Buruanga, identified on the plan as [L]ot 138 located at Poblacion Buruanga
with survey no. GSS-06-00012 approved by the Director Lands last February 19, 1985, listed as
Public Plaza on file in the CENR Office Land Management Sector, Kalibo, Aklan.

That the Honorable Mayor of the Municipality of Buruanga pointed also the boundary between
the Public Plaza and the Roman Catholic Church.

The Technical Descriptions are as follows:

Lot 138-A (Public Plaza)

corner 1-2 S86 - 03E 65.54 m.
2-3 S03 - 17E 32.36 m.
3-4 N88 - 54W 71.31 m
4-1 N06 - 33E 35.68 m.
containing an area of 2,319 square meters
Lot 138-B (Roman Catholic Church)
1-2 S86 - 03E 65.54 m.
2-3 S03 - 17E 32.36 m.
3-4 N88 - 54W 71.31 m.
4-1 N06 - 33E 35.68 m.
containing an area of 3,836 square meters
Lot 138-C (Public Plaza)
1-2 N81 - 19W 87.70 m.
2-3 N06 - 33E 38.90 m.
3-4 S83 - 17E 80.35 m.
4-1 S03 - 17E 42.57 m.
containing an area of 3,389 square meters10

Consistent with the above technical description, the sketch submitted by Engr. Santiago showed
the delineation of Lot 138 into three parts: Lots 138-A, 138-B and 138-C. The municipal
building stood on Lot 138-A; the Roman Catholic Church stood on Lot 138-B and the municipal
health center and the Buruanga Community Medicare building stood on Lot 138-C. It also
showed that portions of Lots 138-A and 138-C were being used as public plaza.

At the pre-trial, the parties stipulated on the following facts:

1. The identity of the lot in question which is Lot 138 consisting of Lots 138-A, 138-B
and 138-C as reflected in the commissioner’s sketch with an area of 9,544 square meters
and subdivided as follows:

Lot 138-A 2,319 square meters

Lot 138-B 3,836 square meters

Lot 138-C 3,389 square meters

2. Lot 138-B is the present site of the Roman Catholic Church of Buruanga.11

The parties also agreed that the sole issue for resolution is who between the Roman Catholic
Bishop of Kalibo and the Municipality of Buruanga is the owner of Lot 138.

After due trial, the court a quo rendered its Decision dated October 30, 1995 declaring the
Roman Catholic Bishop of Kalibo as the lawful owner and possessor of Lot 138-B and the
Municipality of Buruanga as the lawful owner and possessor of Lots 138-A and 138-C, the said
lots being public plaza for public use.

The court a quo found that of the various tax declarations12 presented by the Roman Catholic
Bishop of Kalibo to support its claim, only one referred to a portion of Lot 138. Said tax
declaration13 covered the church site and the parish house situated within Lot 138-B. The other
pieces of evidence14 could not be relied upon because they contained hearsay information
relating to the disputed lot that occurred before the affiants were born. The affidavit executed by
Fr. Jesus Patiño15 stating that he was the one who gave verbal permission to then Municipal
Mayor Pedro Omugtong to construct the municipal building on the vacant lot owned by the
church was not accorded any evidentiary value because he (Fr. Patiño) did not testify during the
trial.

On the other hand, the court a quo did not give credence to the Municipality of Buruanga’s
Exhibit "1," a microfilm enlargement of a plan showing that the land consisting of 12,615 square
meters was subject of Land Registration Case No. 12871. The plan showed that the survey was
approved on May 15, 1909 and the notations therein indicated that a decree was issued on March
14, 1919. But no such decree was shown. It was further found by the court a quo that the plan
was requested from the Bureau of Lands Survey Division on December 22, 1976. However, the
same was not duly certified by the issuing government agency. Even assuming that the disputed
lot was indeed subject of a land registration proceeding and a decree had been issued therefor in
March 1919, the Municipality of Buruanga, despite lapse of decades, failed to take the necessary
judicial steps for the issuance of a title in its name based on the decree. Neither did it take any
other course of action that would render its title thereto indefeasible.
The court a quo, however, gave probative weight to the testimony of Manuel Sualog, Chief of
the Lands Management Section of the Department of Environment and National Resources, who
was presented by the Municipality of Buruanga. Sualog testified that the disputed lot was the
public plaza of the said municipality. Standing thereon are the Roman Catholic Church and its
parish house, the new municipal hall, the rural health center, the barangay community hospital
and a basketball court.

During the court a quo’s ocular inspection conducted on May 7, 1992, the town was celebrating
its town fiesta. It observed that the public was using the whole plaza (in Lots 138-A and 138-C)
for the festivities. Also, the existence of the health centers, basketball court and the municipal
hall showed that portions of the disputed lot were being used by the public.

Upon inspection of the church, the court a quo further observed that it was indeed an old stone
structure and probably built in 1894, the year carved on its left side entrance. It described the
church as "vintage turn-of-the century colonial Filipino church architecture. Moss and ficus grow
out of its wall crevices. The age of the church shows that it has been occupying that particular
space for almost one hundred (100) years long enough for the plaintiff to have possessed it in the
concept of owner continuously, adversely and publicly against the whole world."16

The court a quo held that the facts of the present case were similar to those in Harty v.
Municipality of Victoria,17 where the Court ruled that:

For the above reasons, x x x it should be held, as we do hereby hold, that the whole of the land
not occupied by the church of the town of Victoria and its parish house, is a public plaza of said
town, of public use and that in consequence thereof, the defendant is absolved of the complaint
without any special ruling as to the costs of both instances.18

The dispositive portion of the court a quo’s decision reads:

WHEREFORE, judgment is hereby rendered as follows:

1. The Roman Catholic Bishop of Kalibo, Aklan, is declared the lawful owner and
possessor of Lot 138-B with an area of 3,836 square meters in the Commissioner’s
Report as against the defendant;

2. Defendant Municipality of Buruanga is declared the lawful owner and possessor of Lot
138-A with an area of 2,319 square meters and Lot 138-C with an area of 3,389 square
meters in the Commissioner’s Report, said lots being public plaza destined for public
use.19

The Roman Catholic Bishop of Kalibo seasonably filed its appeal with the Court of Appeals. It
sought the reversal of that portion of the court a quo’s judgment adjudicating the ownership of
Lots 138-A and 138-C to the Municipality of Buruanga.

During the pendency of the case in the appellate court, the Roman Catholic Bishop of Kalibo
moved to submit additional evidence to support its claim of ownership over the entire Lot 138.
The additional evidence consisted of affidavits of old residents of Buruanga stating that the
municipal building was constructed on the disputed lot only in the late 1950’s. Prior thereto, the
municipal building stood at a place called Sunset Park, a block totally different from the disputed
lot. The said motion was denied by the appellate court on the ground that the Roman Catholic
Bishop of Kalibo had already been accorded full opportunity to present its evidence in the court a
quo.

The Municipality of Buruanga did not file its appellee’s brief with the CA. On January 31, 2001,
the appellate court rendered the assailed Decision affirming with modification the decision of the
court a quo. The CA affirmed the ownership of the Roman Catholic Bishop of Kalibo over Lot
138-B but reversed the court a quo’s ruling relative to the ownership of Lots 138-A and 138-C.
The appellate court declared the said lots property of public dominion, hence, not owned by
either of the parties.

The CA stated that the court a quo correctly relied on the ruling in Harty, which was reiterated in
Bishop of Calbayog v. Director of Lands,20 where the Court held that the public plaza and public
thoroughfare were not subject to registration by the church. In the latter case, it was ruled that
since neither the Church nor the municipality presented positive proof of ownership or exclusive
possession for an appreciable period of time, and the only indubitable fact was the free and
continuous use of the lot in question by the residents of the town, which had no other public
plaza to speak of other than the disputed lot, there was a strong presumption that the same had
been segregated as a public plaza upon the founding of the municipality therein.

As mentioned earlier, the appellate court reversed that portion of the court a quo’s judgment
declaring the Municipality of Buruanga as the owner of Lots 138-A and 138-C which form part
of the public plaza. Citing Articles 41921 and 42022 of the Civil Code, the appellate court
classified these lots as property of public dominion; hence, not susceptible to private ownership
by the Municipality of Buruanga. The said lots are merely under its jurisdiction and
administration. Being intended for the common and public welfare, they could not be
appropriated either by the State or by private persons.

The dispositive portion of the assailed CA decision reads:

WHEREFORE, upon the premises, the appealed decision is AFFIRMED with the
MODIFICATION that Lots 138-A and 138-C are declared property of public dominion not
owned by either of the parties.23

The Roman Catholic Bishop of Kalibo moved for a partial reconsideration of the appellate
court’s ruling that Lots 138-A and 138-C, being the public plaza, are property of public
dominion. The Roman Catholic Bishop of Kalibo averred that the appellate court erred in
affirming the finding of the court a quo that these lots comprise the public plaza. It maintained
that it owned the entire Lot 138.

The appellate court denied the motion for partial reconsideration, hence, the recourse to this
Court by the Roman Catholic Bishop of Kalibo (the petitioner).
The Petitioner’s Arguments

The present petition for review on certiorari alleges that:

I. THE COURT OF APPEALS GRIEVOUSLY ERRED IN RELYING UPON THE

CASES OF HARTY V. MUNICIPALITY OF VICTORIA, TARLAC (13 Phil. 152
[1909]) and BISHOP OF CALBAYOG V. DIRECTOR OF LANDS (45 SCRA 418
[1972]) TO SUPPORT ITS CONCLUSION THAT THE PETITIONER IS NOT THE
OWNER OF LOTS 138-A AND 138-C.

II. THE COURT OF APPEALS GRIEVOUSLY ERRED IN FINDING THAT LOTS

138-A AND 138-C [WHICH ARE WITHIN THE ORIGINAL LOT 138] ARE
PROPERTIES OF THE PUBLIC [DOMAIN] AND NOT SUSCEPTIBLE TO PRIVATE
OWNERSHIP BY THE PETITIONER.

III. THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT REFUSED TO

RECOGNIZE THAT PETITIONER’S OWNERSHIP OF THE ENTIRE LOT 138 WAS
GRANTED AND RECOGNIZED UNDER SPANISH LAW, AND AFFIRMED IN THE
TREATY OF PARIS.24

The petitioner clarifies that it is seeking a partial review of the appellate court’s Decision dated
January 31, 2001 classifying Lots 138-A and 138-C as property of public dominion and not
susceptible to private ownership and that the petitioner is not entitled to the possession and
ownership thereof. It is not contesting the portion of the CA decision upholding its ownership
over Lot 138-B.

The petitioner opines that the case of Harty, relied upon by the court a quo and the CA to hold
that Lots 138-A and 138-C comprise the public plaza, are inapplicable because the facts therein
are not similar to those of the present case. The petitioner points out that the public plaza referred
to in Harty was the lot across the street from the church lot. It was not referring to the land
surrounding the Catholic church and the convent of the town of Victoria, which was bounded by
streets on each of its four sides. Thus, when the Court in Harty limited the ownership of the
church to the land "occupied by the church of the town of Victoria and its parish house," it was
not confining the ownership to a portion of the lot on which the church and parish house were
situated. Rather, the Court in Harty referred to the entire lot or block (bounded by a street on
each of the four sides) on which the church and its parish house were erected.

The petitioner asserts that the following facts that have been established support its claim of
ownership over the entire Lot 138 as against the claim of the Municipality of Buruanga
(respondent municipality):

[a] The church is built in the middle of Lot 138 (which is now Lot 138-B). It was built
therein in 1894. The church was almost 100 years old (at the time the case was instituted
with the trial court in 1990). x x x
[b] The Municipality of Buruanga is an old municipality constituted or created during the
colonial period, when the Philippine Islands was under the Spanish sovereignty. x x x

[c] No building was built on Lot 138 earlier than or at about the same time as the church.
No municipal building was built around the church for many decades after 1894. x x x

[d] The municipal hall of Buruanga was built on what is now Lot 138-A only in the late
1950’s. x x x

[e] It was not controverted by the private respondent that then Mayor Omugtong of
Buruanga sought and obtained the permission of the then parish priest, Fr. Jesus Patino,
to allow the municipal government to build its municipal hall on Lot 138-A in the late
1950’s only. x x x

[f] No evidence was adduced by private respondent that it had obtained title of Lot 138-A
or 138-C from the church (the owner of these lots) or that its possession of any portion of
Lot 138 was adverse to that of the church. x x x

[g] When the municipal hall was burned down by the NPA rebels in 1989 the church
asked the municipal government to relocate the municipal hall elsewhere since it (church)
needed the lot for itself.

[h] Because the municipal government resisted and for the first time exhibited a
possession adverse to the church, the petitioner promptly filed the instant suit before the
lower court for quieting of title to the subject lot (the entire Lot 138) and to be declared
the owner of such property.

[i] The church has been in continuous, open, adverse, notorious possession of the entire
Lot 138 in the concept of owner since at least 1894 until the late 1950’s. x x x

[j] No evidence has been shown that Lots 138-A and 138-C were devoted for public use
or for use as a public plaza before 1894 or even at about the time the church was built on
Lot 138. x x x

{k] The only evidence as to the supposed character of Lot 138-C as a public plaza is a
survey plan allegedly approved on 15 May 1909 denominated as [GSS]-06-00012,
Buruanga Settlement Project, approved only in 1984. Petitioner was not notified of this
survey. x x x

[l] The real property tax declaration presented by private respondent to establish its
supposed possession (Exhs. 4, 4-a, and 4-b, Record, pages 45-47) covered the year 1992
only.

[m] Witness Jaime S. Prado, Sr. (who was born on 17 December 1905 and coming to the
age of reason when he was about 10 years old) testified that as far as he can remember
(since he was grade 1) he was brought to mass by his elders at the church of Buruanga,
 which was the very same church as of the time he testified in 1992, and was active in
church activities in that church (e.g., tsn, 9 January 1992, pages 5, 16); that the property
of the church was bounded on all four sides by the very same streets that bounded it at the
time he testified (ibid., at page 6-8).

[n] Private respondent indirectly judicially admitted that it has no title (Torrens or
otherwise) to the subject properties when its star witness (the incumbent Mayor Protacio
Obrique of Buruanga) testified that the properties in the poblacion of Buruanga are not
covered by any title (tsn, 27 July 1992, page 5).25

The petitioner contends that the pronouncement in Bishop of Calbayog, cited by the appellate
court, does not support its decision. Instead, it actually supports the petitioner’s claim of
ownership over Lot 138, including Lots 138-A and 138-C. In the said case, the lot (Lot 2) that
was declared by the Court as plaza was a separate and distinct lot separated from the church lot
(Lot 1) by a provincial road. Lot 1, held to be owned by the church in the said case, included not
only the space occupied by the church, belfry, convent, parish school and nuns’ residence, but
also the empty space which only had concrete benches as improvements thereon and which was
used as a public playground.

The petitioner also cites Roman Catholic Bishop of Jaro v. Director of Lands,26 where the Court
recognized that under the Laws of the Indies (Leyes de las Indias), the law in force in the
Philippine Islands during the Spanish regime, the property of the church in the pueblos consisted
of one parcel of land which meant "not only the two buildings but also the land adjacent and
contiguous to said buildings, that is, the parcel which by itself constitutes one whole piece of
land bounded on its four sides by streets, and within which said buildings, the church and the
convent, are situated."27

According to the petitioner, the appellate court erred in affirming the finding of the court a quo
that Lots 138-A and 138-C comprise the public plaza. Unlike in Harty, no evidence was
allegedly adduced to show that from the time respondent municipality was created these two lots
had been set aside for the public.

Harty is not applicable, the petitioner expounds, because it was indubitably established therein
that the "plaza was used without let or hindrance by the public and the residents of Victoria ever
since its creation." In contrast, in the present case, there was allegedly no evidence to show that
Lots 138-A and 138-C were set aside as the public plaza, or for any public purpose, when the
Municipality of Buruanga was created during the Spanish period. The evidence, in fact, show
that the entire Lot 138, bounded on all its four sides by streets, belonged to the church and it had
continuous use and occupation thereof since 1894 when it constructed its church in the middle of
Lot 138. No such use of Lot 138-A and 138-C as the public plaza for the same length of time or
from 1894 had been shown.

The petitioner assails the reliance by the appellate court on the court a quo’s statement during its
ocular inspection on Lot 138 in 1992 that it observed that the property was occupied by the
Roman Catholic Church, a parish house, the municipal hall and three of its municipal edifices,
and a basketball court. Based on this observation, the court a quo concluded, and the appellate
court affirmed, that Lots 138-A and 138-C comprise the public plaza. The petitioner objects to
this conclusion stating that the same cannot overcome the evidence in favor of the church as to
its ownership over these lots traced back to 1894 when it constructed the church in the middle of
Lot 138 or what is now Lot 138-B.

It reiterates that under the Laws of the Indies, when a municipality was created, the church was
assigned a property consisting of a parcel of land bounded on all its four sides by streets, and that
the public plaza was situated not on the same parcel of land assigned to the church but on a
distinct lot separated by a street from that assigned to the church.

The petitioner likewise argues that even if it, as the owner of the entire Lot 138, allowed
respondent municipality to build its municipal hall on what is now Lot 138-A in the late 1950’s
by mere tolerance of the parish priest, it does not necessarily follow that Lot 138-A had become
property of public dominion. It does not allegedly lose its possession or ownership over the
property if the possession or use by another of the same is by mere tolerance.

Respondent municipality, through its Mayor Protacio Obrique during his testimony, allegedly
admitted that respondent municipality’s lot was located in a portion designated as Lot 2 in its
Exhibit "1." The said lot was along the beach and separated from Lot 138 by Emilio Ostan
Street. The alleged import of this admission is that the entire Lot 138 (designated as Lot 1 in
Exhibit "1") was assigned solely to the church since a different lot was assigned to respondent
municipality.

The petitioner avers that Buruanga is an ancient Spanish town and that when it was created the
Spanish authorities assigned a distinct and separate lot for its municipal government or pueblo
where it could build its municipal hall or casa real. It could thus be assumed that the casa real of
respondent municipality would be built at about the same time as the church or around 1894. The
petitioner contends that nothing in the evidence suggests that the casa real was built on Lot 138
during the said period. It was only in the late 1950’s that the municipal hall was built thereon
upon the permission granted by the parish priest.

Refuting respondent municipality’s view that it is unthinkable that the church would be given a
bigger property than the municipal government, the petitioner submits that such notion is not far
fetched considering that the primary aim of the Spaniards at the time was to spread the Catholic
faith to the colonies.

That the entire Lot 138 belonged to the petitioner is allegedly supported by the practice during
the Spanish period, as shown by the layout of the church convent and church plaza in practically
all the old towns in the Philippines and the early cases28 decided by the Court, to invariably
provide the church with spacious grounds bounded by the four principal streets of the town.

Even without any document or certificate of title thereto, the petitioner bases its claim of
ownership over Lot 138 under the Spanish Law as recognized and affirmed under the Treaty of
Paris. It cites Roman Catholic Apostolic Church v. Municipality of Placer29 where the Court
recognized that the church is entitled not only to possession of its properties but to ownership
thereof. Bishop of Jaro was again invoked by the petitioner as the Court explained therein that it
did not find it strange that the church was unable to exhibit a written title to its property since the
Laws of the Indies in force during the Spanish regime dictated the layout of the towns and
assigned the locations of the church, square and government administration buildings. The
provisions of the Laws of the Indies pertaining thereto were held to be sufficient to secure the
registration in the name of the church of its land.

The petitioner asserts that even granting arguendo that Lot 138 was not assigned to it during the
Spanish regime or is not owned by it pursuant to the Laws of the Indies, still, it had acquired ipso
jure or by operation of law a government grant, a vested title, to the disputed lot by virtue of its
open, continuous, exclusive and notorious possession and occupation thereof since 1894. In
support of this contention, the petitioner cites Subsection 6 of

Section 54 of Act No. 926, which became effective on July 26, 1904, and which provided that:

6. All persons who by themselves or their predecessors in interest have been in the open,
continuous, exclusive and notorious possession and occupation of agricultural public lands, as
defined by said Act of Congress of July first, nineteen hundred and two, under a bona fide claim
of ownership except as against the Government, for a period of ten years next preceding the
taking effect of this Act, except when prevented by war or force majeure, shall be conclusively
presumed to have performed all the conditions essential to a government grant and to have
received the same, and shall be entitled to a certificate of title to such land under the provisions
of this chapter.

It is allegedly clear that as early as July 26, 1904, when Act No. 926 took effect, the petitioner
had already acquired a government grant, a vested title, to Lot 138.

Subsection b of Section 45 of Act No. 2874, approved on November 9, 1919, which amended
Act No. 926, is similarly cited by the petitioner. It provided that:

(b) Those who by themselves or their predecessors in interest have been in the open, continuous,
exclusive and notorious possession and occupation of agricultural lands of the public domain,
under a bona fide claim of acquisition of ownership, except as against the Government, since
July twenty-sixth, eighteen hundred and ninety-four, except when prevented by war or force
majeure. These shall be conclusively presumed to have performed all the conditions essential to
a government grant and shall be entitled to a certificate of title under the provisions of this
chapter.

On the basis of the foregoing provisions, a land registration proceeding instituted would,
according to the petitioner, "in truth be little more than a formality, at the most limited to
ascertaining whether the possession claimed is of the required character and length of time, and
registration thereunder would not confer title, but simply recognize a title already vested."

In addition to its arguments on the merits of the case, the petitioner assails the appellate court’s
denial of its motion to submit additional evidence which would have showed that the casa real of
respondent municipality, together with its plaza (Sunset Park Plaza), was located on a distinct lot
(Lot 2) separated from Lot 138 by Emilio Ostan Street.
The petitioner urges the Court to reverse and set aside the portion of the appellate court’s
decision declaring Lots 138-A and 138-C as property of public dominion and to declare the
petitioner the absolute owner of the entire Lot 138. In the alternative, the petitioner prays that it
be allowed to submit additional evidence of its ownership over Lots 138-A and 138-C.

Respondent Municipality’s Counter-arguments

For its part, respondent municipality contends that, except for the figures 1894 etched on the left
wall of the church, the petitioner has not presented any evidence to show that it had continuous
possession of the entire Lot 138 since the turn of the twentieth century. The petitioner is
allegedly of the mistaken belief that because it possessed Lot 138-B, it must have likewise
possessed Lots 138-A and 138-C. Respondent municipality claims that it is the one that has been
exercising acts of exclusive ownership over the disputed lot.

The petitioner has allegedly misread Harty and Bishop of Calbayog in claiming that in cases
involving the church, the lot adjudicated to it invariably consisted of the entire block, bounded
by a street on each of the four sides, and the public plazas were situated in separate blocks. While
it may true that many church properties occupy an entire block in certain municipalities, it is
allegedly equally true that other church properties occupy only portions thereof depending on the
exigencies of the locality at the time when the church was being established.

In those instances that the Court allegedly adjudicated an open space in favor of the church, the
local government was not shown to have exercised dominion over the property and the church
has consistently established some control over it, like the putting up of a religious monument
thereon. On the other hand, in the present case, respondent municipality insists that it has laid
adverse claim over Lot 138 as early as 1909 when it applied for title over it and was even issued
a decree over the said lot. Respondent municipality places its actual, public and adverse
possession of Lot 138 at the latest in 1958 when it built its old municipal hall on the said site. Its
occupation prior thereto could also be allegedly presumed from its actual possession thereof.

The petitioner has allegedly failed to establish that the construction of the old municipal building
in 1958 was by mere tolerance on its part. Respondent municipality harps on the failure of the
petitioner to present as its witness Fr. Patiño, the parish priest who supposedly gave respondent
municipality permission to construct its municipal building on the disputed lot. Respondent
municipality denies ever seeking such permission. Further, the tax declaration (Exhibit "B") of
the petitioner only pertained to Lot 138-B proving that its ownership was limited to the said lot
and did not extend to Lots 138-A and 138-C.

Respondent municipality avers that it is already contented with the decision of the appellate court
although the latter allegedly erred in concluding that Lots 138-A and 138-C are property of
public dominion without taking into consideration that respondent municipality applied for the
issuance of title covering the disputed lot and was issued a decree thereto in 1919. The admission
of Mayor Obrique, during his testimony, that respondent municipality owned the lot along the
beach (Lot 2) and situated across the street from Lot 138 could not be allegedly taken to mean
that the Mayor was disclaiming ownership over Lot 138.
Respondent municipality theorizes that in those cases30 that the Court upheld the ownership of
the church over a subject property, the same have ever since remained the property of the church
and have been in its peaceful possession. Further, there were no adverse claimants and the
primary issue being resolved was whether, despite non-compliance with procedural
requirements, title may be granted in favor of the church.

Respondent municipality distinguishes the present case from those cases in that there is an open
contest over the ownership and possession of Lots 138-A and 138-C and respondent municipality
has in its favor actual and adverse possession thereof. It emphasizes that there is nothing in fact
and in law that would support the petitioner’s bare claim of ownership and possession over Lots
138-A and 138-C. On the contrary, there is allegedly strong evidence showing respondent
municipality’s exercise of proprietary and governmental rights over the said lots where it has
constructed permanent structures, e.g., municipal building, community hospital, health center,
social hall/basketball court, and where public functions are openly conducted.

Respondent municipality urges the Court to dismiss the petition and, instead, to affirm the
decision of the court a quo declaring it the lawful owner and possessor of Lots 138-A and 138-C.

Issue

The substantive issue to be resolved is whether the appellate court correctly declared Lots 138-A
and 138-C as property of public dominion, hence, not susceptible to ownership by either the
petitioner and respondent municipality.

Since respondent municipality no longer sought the review of the assailed decision of the
appellate court, the Court shall mainly resolve the merits of the petitioner’s claim of ownership
over Lots 138-A and 138-C vis-à-vis the appellate court’s holding that they are of public
dominion, hence, not susceptible to private ownership.

The Court’s Ruling

The petition is denied.

The Laws of the Indies and the cases cited

by the petitioner do not support its claim

of ownership over Lots 138-A and 138-C

The petitioner anchors its claim of ownership over Lots 138-A and 138-C on its theory that the
entire Lot 138, bounded on all its four sides by streets, was assigned to it as far back as 1894
when the church was built in the middle of the said lot. The cases it cited allegedly stand for the
proposition that "under the Laws of the Indies, when a municipality was created, the church was
assigned a property consisting of a parcel of land bounded on all its (four) sides by streets, and
that the public plaza was situated not on the same parcel of land assigned to the church but on a
distinct parcel of land separated from the parcel of land assigned to the church by a street."31
This allegation fails to persuade. The pertinent provision of the Laws of the Indies relating to the
designation of a parcel of land for the church upon the establishment of a town or pueblo during
the Spanish regime reads:

Ley viij. Que se fabriquen el Templo principal en el sitio, y disposicion, que se ordena, y otras
Iglesias, y Monasterios.

En lugares Mediterráneos no se fabrique el Templo en la plaza, sino algo distante de ella, donde
esté separado de otro qualquier edificio, que no pertenezca á su comodidad y ordenato, y porque
de todas partes sea visto, y mejor venerado, esté algo levantado de suelo, de forma que se haya
de entrar por gradas, y entre la plaza mayor, y Templo se edifiquen las Casas Reales, Cabildo, ó
Concejo, Aduana, y Atarazana, en tal distancia, que autoricen al Templo, y no le embaracen, y en
caso de necesidad se puedan socorrer, y si la poblacion fuere en Costa, dispóngase de forma que
en saliendo de Mar sea visto, y su fábrica como defensa del Puerto, señalando solares cerca de él,
y no á su continuacion, en que se fabriquen Casas Reales, y tiendas en la plaza para propios,
imponiendo algun

moderado tributo en las mercaderίas: y asίmismo sitios en otras plazas menores para Iglesias
Parroquiales, y Monasterios donde sean convenientes.32

The above provision prescribed that the church be built at some distance from the square,
separate from other buildings in order that it may be better seen and venerated, and raised from
the ground with steps leading to it. It decreed that government administration buildings,
including casas reales, be built between the main square and the church and at such distance as
not to shut the church from view. In cases of coastal towns, the church was to be constructed in
such location as to be seen by those coming from the sea and serve for the defense of the port.

The other provisions of the Laws of the Indies on the establishment of new towns or pueblos in
the archipelago, including the designation of lands for the church, casa reales (municipal
buildings) and public squares, had been discussed by the Court in this wise:

xxx

The executive authorities and other officials who then represented the Spanish Government in
these Islands were obliged to adjust their procedure, in the fulfillment of their duties with regard
to the establishment and laying out of new towns, to the Laws of the Indies, which determined
the course that they were to pursue for such purposes, as may be seen by the following:

Law 6, title 5, book 4, of the Recompilation of the Laws of the Indies, provides, among other
things:

"That within the boundaries which may be assigned to it, there must be at least thirty residents,
and each one of them must have a house," etc.

Law 7 of the same title and book contains this provision:

"Whoever wishes to undertake to establish a new town in the manner provided for, of not more
than thirty nor less than ten residents, shall be granted the time and territory necessary for the
purpose and under the same conditions."

It may be affirmed that years afterwards all the modern pueblos of the Archipelago were formed
by taking as a basis for their establishment the barrios already populated by a large number of
residents who, under the agreement to build the church of the new pueblo, the court-house and
afterwards the schoolhouse, obtained from the General Government the administrative separation
of their barrio from the pueblo on which it depended and in whose territory it was previously
comprised. In such cases procedure analogous to that prescribed by the Laws of the Indies was
observed.

For the establishment, then, of new pueblos, the administrative authority of the province, in
representation of the Governor-General, designated the territory for their location and extension
and the metes and bounds of the same; and before the allotting the lands among the new settlers,
a special demarcation was made of the places which were to serve as the public square of the
pueblo, for the erection of the church, and as sites for the public buildings, among others, the
municipal building or the casa real, as well as of the lands which were to constitute the
commons, pastures, and propios of the municipality and the streets and roads which were to
intersect the new town were laid out, as may be seen by the following laws:

Law 7, title 7, book 4, of the Recompilation of the Laws of the Indies, provides:

"The district or territory to be given for settlement by composition shall be allotted in the
following manner: There shall first be set apart the portion required for the lots of the pueblo, the
exido or public lands, and pastures amply sufficient for the stock which the residents may have,
and as much more as propios del lugar or common lands of the locality; the rest of the territory
and district shall be divided into four parts — one of them, of his choice, shall be for him who
takes upon himself the obligation to found the pueblo, and the other three shall be apportioned
equally among the settlers."

Law 8, of the same title and book, prescribes, among other things:

"That, between the main square and the church, there shall be constructed the casas reales or
municipal buildings, the cabildo, concejo, customs buildings," etc.

Law 14 of the said title and book, also directs among other things:

"That the viceroys shall have set aside such lands as to them appear suitable as the common
lands (propios) of the pueblos that have none, therewith to assist in the payment of the salaries of
the corregidores, and sufficient public lands (exidos) and pasture lands as provided for and
prescribed by law."

Law 1, title 13 of the aforesaid book, provides the following:

"Such viceroys and governors as have due authority shall designate to each villa and lugar newly
founded and settled the lands and lots which they may need and may be given to them, without
detriment to a third party, as propios, and a statement shall be sent to us of what was designated
and given to each, in order that we may have such action approved."33

Nowhere in the above provisions was it stated that the parcel of land designated for the church of
the town or pueblo was, in all cases, to be an entire block or bounded on all its four sides by
streets. The petitioner thus erroneously asseverates that the said ancient laws sustain its claim of
ownership over the entire Lot 138.

Neither can it find support in the cases that it cited. A careful review of these cases reveal that, in
those instances where the Court upheld the claim of the church over a parcel of land vis-à-vis
that of the municipality or national government, the ownership and possession by the church of
the same had been indubitably established by its exclusive exercise thereon of proprietary acts or
acts of dominion.

For example, in Bishop of Calbayog v. Director of Lands,34 which according to the petitioner
supports its case, the Court adjudicated in favor of the church the ownership of Lot 1 (except the
portion thereof occupied by a public thoroughfare) including not only the space occupied by the
church, belfry, convent, parish school and nuns’ residence, but also the empty space which only
had concrete benches as improvements thereon.

With respect to the empty space (eastern portion of Lot 1), the Court noted the following:

x x x The eastern portion of Lot 1, the area in contention, is an empty space except for concrete
benches along the perimeter. A partly cemented path runs across this lot from east to west
leading up to the front or entrance of the church and appears to be an extension of Anunciacion
St., which runs from the bank of the Catarman river up to Mendiola St. In the middle of this path,
half-way between Mendiola St. and the church, is a statue of the Sacred Heart of Jesus.

xxx

x x x The Roman Catholic Church had made no improvements on this eastern portion of Lot 1,
which at present is being used as a public playground, although a bandstand stood there for about
three years after it was constructed in 1926 by the members of an orchestra which was organized
by a Fr. Ranera and which used to give musical performances on the bandstand. On the feast of
Corpus Christi the parishioners would construct an altar on this lot and hold the procession
there.35

It is apparent that the Court adjudicated to the church the ownership of Lot 1 (except a portion
thereof which was a public thoroughfare) because the latter was able to establish that it had
exercised acts of possession or ownership over the same including over its empty space. In
particular, the empty space was used for religious functions, such as the Feast of Corpus Christi
and the procession held on the occasion and the church did not ask for any permit from the local
authorities whenever it used the said space for such activities.
In the present case, the petitioner has not shown that, at one time after the church was built in
1894 in the middle of Lot 138 (now Lot 138-B), it exercised acts of ownership or possession
over Lots 138-A and 138-C as well.

It must be emphasized that the petitioner’s allegation that it merely tolerated the construction of
not only the municipal building but also the other improvements thereon, e.g., the rural health
center, Buruanga community Medicare hospital, basketball court, Rizal monument and
grandstand, has remained unsubstantiated. The affidavit of Fr. Patiño was correctly not given any
credence since he was not presented on the witness stand; thus, considered hearsay. Hearsay
evidence is generally excluded because the party against whom it is presented is deprived of his
right and opportunity to cross-examine the person to whom the statement or writing is
attributed.36

The testimony of Mr. Jaime S. Prado, Sr., an octogenarian and resident of Buruanga, cannot
likewise be given any credence because it consisted only of a bare assertion that the church
building and the land on which it was built, bounded by streets on all its four sides, were the
petitioner’s property.37 He based this statement on the fact that as a child he heard masses at the
church with his parents. This assertion, without more or without any corroborative evidence, is
not sufficient to establish the petitioner’s ownership over Lots 138-A and 138-C especially in
light of the fact that Mr. Prado is not competent to testify on the matter because he had no actual
personal knowledge with respect to any transactions involving Lot 138:

FISCAL DEL ROSARIO:

Q Now, when you were President of the Parish Council, have you access of any documents
relating to church properties in Buruanga, Aklan?

A Never.

Q Now, you have stated that the boundaries of the property of the[R]oman [C]atholic [C]hurch in
Buruanga, Aklan has previous names thus, the present name of Viven Ostan, Nitoy Sualog and
Emilio Ostan is at present now. My question is, what was the previous names of these roads?

A Of Nitoy Sualog, that was Malilipayon Street. The Provincial road street, before that was
Kaaganhon street, West, Emilio Ostan, before that was Kahaponanon Street and instead of Viven
Ostan, that was Kabulakan Street.

Q So, you will agree with me Mr. Witness so, that previous names is not in any way related to
the names of former parish priest[s] of Buruanga, Aklan or saints, am I right?

A No, sir.

Q You know very well Rev. Jesus Patinio and Mayor Pedro Omugtong?

A Yes, sir.
Q Now, do you remember if there was any transaction of them during your lifetime?

A This Padre Patinio and I were close friends. Mr. Omugtong met Patinio [,] talked together
about the land they agreed [,] and I don’t know what is there (sic) agreement but the building
was constructed then.

Q Were you present during the talked (sic) of Rev. Jesus Patinio and Mayor Pedro Omugtong?

A No, sir.

Q You identified in this Exhibit "F" as Municipal Hall, Rural Health Unit Hospital, the Buruanga
Community Hospital, Basketball Court and the Grandstand. Now, my question is, are these
buildings constructed by the [R]oman [C]atholic [C]hurch?

A Not one.38

Even the affidavits of the other residents of Buruanga, which were also properly considered
hearsay, made no mention of any instance where the petitioner exercised acts of dominion over
Lots 138-A and 138-C. These affidavits uniformly stated:

That we have been residing in this Municipality since birth and that we have full knowledge of
the site where the church now stands;

That during the Pre-Spanish time, the site of the town proper was swampy, fishermen used to
fish in the swamp, trees of different kinds grows (sic) along the beach;

That when the Spaniards arrived in our town, they introduced education and religion;

That because there was no site for the church, the Spaniards forced the inhabitants to work for
the filling up of the swamp, men are hauling stones[,] and women [,] sand and gravel;

That after so many years of hard labor the swamp was filled up and then the friars build a church
in the center of the town;

That as far as we are concerned the site where the church now stand and the surrounding area
and the site where the present Municipal building now stands is even the part of the property of
the church and not the property of the municipality as allege (sic) by the Mayor;

That we execute this affidavit with our own free act and voluntary deed.39

The information proffered by these affidavits could not have been based on the personal
knowledge of the affiants because they obviously were not yet born when the events they
narrated took place.40

Like in Bishop of Calbayog, the Court in Hacbang v. Director of Lands41 adjudicated to the
church the ownership of two parcels of land, designated as Lots 1 and 2 despite the opposition of
the Director of Lands who claimed that a portion on the eastern part of Lot 1 and the entire Lot 2
were public plazas. The Court affirmed the ownership of the church over these lots upon the
following findings:

It is inferred from the foregoing facts which are held to have been indisputably established by the
evidence, that the disputed portion of lot No. 1 as well as the entire lot No. 2 belongs to the
Roman Catholic Apostolic Church of the Diocese of Samar and Leyte. It cannot be denied that
said church, for more than half a century, was in the possession of said lands together with the
church, belfry and convent which existed first on lot No. 1 and later provisionally on lot No. 2.
The fact that the catholic cemetery was located on lot No. 2 and that the stone posts and pillars
were later erected thereon, thereby converting it into a place for the celebration of the Way of the
Cross, conclusively proves that the property belonged to the church and that the latter's
possession has constantly been under claim of ownership.

x x x [I]t must be presumed upon these facts that said portion formed part of the parcels of land
assigned and adjudicated by the authorities to the Roman Catholic Apostolic Church in said town
for the erection of the church, belfry, convent and cemetery, all of which, as everybody knows,
are necessary for the practice and celebration of the cults of said religion.42

The proprietary acts exercised by the church over the disputed lots consisted of the construction
thereon of the church, belfry, convent and cemetery. Moreover, it conducted thereon the Way of
the Cross and other religious celebrations.

Unlike in the Bishop of Calbayog and Hacbang, in the present case, the petitioner has not shown
that it exercised proprietary acts or acts of dominion over Lots 138-A and 138-C, to the
exclusion of others, to buttress its claim of ownership over these lots.

Neither can the petitioner rely on Roman Catholic Bishop of Jaro v. Director of Lands43 where
the Court categorically made the finding that the lot in question (Lot 3) had been in the
possession of the church, as owner, for a time sufficiently long for purposes of prescription. In a
prior case44 involving the said lot, the Court adjudged that the church was "entitled to the
possession of the following property situated in the Municipality of Sibalom: The Church of
Sibalom, the convent, contiguous to the same, and the land occupied by these two buildings."

The Court interpreted the phrase "land occupied by the church … and its convent" to mean "not
only the two buildings, but also the land adjacent and contiguous to said buildings, that is, the
parcel which by itself constitutes one whole piece of land bounded on its four sides by streets,
and within which said buildings, the church and the convent, are situated."45

Significantly, the parcel of land that was adjudicated in favor of the church was the "land
adjacent and contiguous to said buildings," i.e., church and convent. The word "adjacent" has
been defined as follows:

The word "adjacent" is of Latin derivation. An examination of its original use clearly indicates
that in order that things shall be adjacent they shall be thrown near together.
Webster in his International Dictionary defines "adjacent" as "lying near, close or contiguous;
neighboring; bordering upon;" and gives as synonyms the words "adjoining, contiguous, near."

Roque Barcia in his "Diccionario General Etimológico de la Lengua Española," in defining the
word "adjacent," uses as synonyms "inmediato, junto, próximo." Things cannot be "inmediatas,
juntas, próximas" where other objects intervene.

Vicente Salva in his "Nuevo Diccionario Francés-Español" defines the word "adjacent as "qui est
situé aupres, aux environs."

Black in his Law Dictionary defines "adjacent" as "lying near or close to; contiguous. The
difference between adjacent and adjoining seems to be that the former implies that two objects
are not widely separated, though they may not actually touch."

Harpers’ Latin Dictionary as revised by Lewis and Short, in defining the word "ad-jaceo," which
is equivalent to the English word "adjacent," says it means "to lie at or near, to be contiguous to,
to border upon."

The Universal Encyclopedia defines an adjacent angle as "an angle contiguous to another, so that
one side is common to both angles."

In the case of Miller v. Cabell (81 Ky., 184) it was held that where a change of venue was taken
to an adjacent county it must be taken to an adjoining county.

In the case of Camp Hill Borough (142 Penn. State, 517), it was held that the word "adjacent"
meant adjoining or contiguous.

In the case of In re Municipality, etc. (7 La. Ann., 76), the court said: "We think the word
‘adjacent,’ applied to lots, is synonymous with the word "contiguous.’"

In the case of the People v. Schemerhorne (19 Barber [N.Y.], 576), the court said: "The
interpretations given to the ‘adjacent’ by Walker are ‘lying close, bordering upon something.’"46

Black’s Law Dictionary defines "contiguous" as "in close proximity; neighboring; adjoining;
near in succession; in actual close contact; touching in at a point or along a boundary; bounded
or traversed by."47

Applying the foregoing definitions, the "land adjacent and contiguous" to the church and the
parish house in the present case is the land comprising Lot 138-B. On the other hand, Lots 138-A
and 138-C are the lands adjacent and contiguous to the municipal building, rural health center,
Buruanga community Medicare hospital, basketball court, Rizal monument and grandstand
thereon.

Roman Catholic Bishop of Jaro therefore is not squarely applicable to the present case because
of significant factual differences. Specifically, in the former, the buildings or structures on the
disputed land all belonged to the church; hence, this fact was construed by the Court in favor of
the church as constituting its exercise of acts of dominion over the land adjacent and contiguous
to these buildings. On the other hand, the municipal building, rural health center, Buruanga
community Medicare hospital, basketball court, Rizal monument and grandstand, all standing on
Lots 138-A and 138-C, are not owned by the petitioner. Moreover, the petitioner has not shown
that it had, at any time, exercised acts of dominion over these lots. Consequently, given its
tenuous claim of ownership, Lots 138-A and 138-C,

the lands adjacent and contiguous to the buildings and improvements which admittedly do not
belong to the petitioner, cannot be adjudicated to the latter under the circumstances.

Seminary of San Carlos v. Municipality of Cebu,48 cited in Roman Catholic Bishop of Jaro, is
also unavailing to the petitioner because the Court, among others, simply explained therein that
the word "church" refers to the land upon which the church stands, and not to the church building
itself. In the present case, the petitioner’s ownership has not been limited by the court a quo and
the appellate court to the church structure itself but also as including Lot 138-B, on which it
stands.

In Roman Catholic Apostolic Church v. Municipality of Placer,49 the Court definitively

recognized the juridical personality and proprietary rights of the church citing the Treaty of
Paris50 and other pertinent Spanish laws. It held therein that the church not only was entitled to
the possession of the church, convent and cemetery of Placer but was also the lawful owner
thereof.

It bears stressing that the crux in the foregoing cases, particularly Bishop of Calbayog, Hacbang
and Jaro, is that the church had indubitably established its exercise of exclusive proprietary acts
on the lots that were subject of the controversy. The same cannot be said with respect to the
petitioner in relation to Lots 138-A and 138-C. In fact, not one of the enumeration ([a] to ([n])
made by the petitioner in its Petition for Review as allegedly showing its ownership over Lots
138-A and 138-C categorically establishes that it exercised thereon exclusive proprietary acts or
acts of dominion.

The ruling in Harty v. Municipality of

Victoria is applicable to the present case

Contrary to the stance taken by the petitioner, the ruling in Harty v. Municipality of Victoria51 is
applicable to the present case. The said case involved the dispute between the church and the
Municipality of Victoria over the parcel of land that surrounded the parish church of the said
town, and which was called the public plaza of the same. The Court therein held that "the whole
of the land not occupied by the church of the town of Victoria and its parish house, is a public
plaza of the said town, of public use." It justified its conclusion, thus:

xxx

From the evidence presented by both parties it appears that the town of Victoria, which was
formerly only a barrio of the town of Tarlac and known as Canarum, was converted into a town
in 1855, and named Victoria; to this end they must have laid out the streets and the plaza of the
town, in the center of which were situated the church and parish house from the commencement,
and at the expiration of about twelve years the parish of said town was constituted and the priest,
who was to perform the office of curate, was appointed; that from the very beginning, the large
tract of land that surrounds the church and the parish house was known as a public plaza,
destined to the use of all the residents of the recently founded town; public performances and
religious processions were held thereon without hindrance either on the part of the local
authorities or of the curate of said town.

It must be assumed that the principal residents of the old barrio, being interested in the
conversion of the barrio into a civil town, arranged in such a way that the barrio, as the center of
the future town which was subsequently called Victoria, should have streets and a public plaza
with its church and parish house, and also a tribunal or building destined for the use of the
municipality and the local official at the time called the gobernadorcillo and later on capitan
municipal, as has occurred in the foundation of all the towns in these Islands, under the old
administrative laws.

It may be true that the father of the witness Casimiro Tañedo, who owned the space of land
where the church and parish house were erected, had voluntarily donated it to the Catholic
Church, the only one known at the time, but proper proof is lacking that the donation affirmed by
the said Tañedo comprehended the whole of the large tract which at the present time constitutes
the plaza of the town.

It was a custom observed by all the towns established administratively in these Islands under the
old Laws of the Indies, that on their creation, a certain amount of land was always reserved for
plazas, commons, and special and communal property, and as it is unquestionable that the said
large space of land was left vacant in the center of the town of Victoria when it was constituted
as a civil town, more than twelve years prior to the appointment of a permanent curate therein,
there are good grounds to suppose that the late Vicente Tañedo donated the land now occupied
by the church and parish house in said municipality for religious purposes, or to the church, but
not to the parish curate, because at the time there was no curate at the new town of Victoria.

Even though all the remaining space of land which now forms the great plaza of the town of
Victoria had been owned by the said Tañedo, it must be presumed that he waived his right
thereto for the benefit of the townspeople, since from the creation or establishment of the town,
down to the present day, all the residents, including the curate of said town, have enjoyed the
free use of said plaza; it has not been satisfactorily shown that the municipality or the principales
of the town of Victoria had donated the whole of said land to the curate of Victoria or to the
Catholic Church, as alleged, nor could it have been so donated, it being a public plaza destined to
public use and was not private ownership, or patrimony of the town of Victoria, or of the
Province of Tarlac.

It should be noted that, among other things, plazas destined to the public use are not subject to
prescription. (Art. 1936, Civil Code.) That both the curates and the gobernadorcillos of the said
town procured fruit trees and plants to be set out in the plaza, does not constitute an act of private
ownership, but evidences the public use thereof, or perhaps the intention to improve and
embellish the said plaza for the benefit of the townspeople.

Certain it is that the plaintiff has not proven that the Catholic Church or the parish of Victoria
was the owner or proprietor of the said extensive piece of land which now forms the public plaza
of said town, nor that it was in possession thereof under the form and conditions required by law,
inasmuch as it has been fully proven that said plaza has been used without let or hindrance by the
public and the residents of the town of Victoria ever since its creation. For the above reasons, it
is our opinion that the judgment appealed from should be reversed, and that it should be held, as
we do hereby hold, that the whole of the land not occupied by the church of the town of Victoria
and its parish house, is a public plaza of the said town, of public use, and that in consequence
thereof, the defendant is absolved of the complaint without any special ruling as to the costs of
both instances.52

The petitioner argues against the applicability of Harty as it makes much of the fact that the
disputed lot therein was situated across the street from the church lot. When the Court therein
limited the ownership of the church to the land "occupied by the church of the town of Victoria
and its

parish house," it did not allegedly confine its ownership to a portion of the lot on which the
church and parish house were situated but to the block occupied by these structures.

To the Court’s mind, however, whether the disputed lot was on the same block as the church or
separated therefrom by a street was not the crucial factor which constrained the Court in Harty to
rule against the church’s claim of ownership over the said property. Rather, it was the fact that
the church was not able to prove its ownership or possession thereof. The ruling on this point is
reiterated below:

Certain it is that the plaintiff has not proven that the Catholic Church or the parish of Victoria
was the owner or proprietor of the said extensive piece of land which now forms the public plaza
of said town, nor that it was in possession thereof under the form and conditions required by law,
x x x53

As applied to the present case, that Lots 138-A and 138-C are on the same block as the lot on
which the church and its parish house stand do not necessarily make them (Lots 138-A and 138-
C) also the property of the petitioner absent any evidence that its ownership or possession
extended to these lots and under the conditions required by law.

Contrary to its submission, the petitioner had

not acquired ipso jure or by operation of law

a government grant or title to the entire Lot 138

The petitioner submits that even granting arguendo that the entire Lot 138 was not assigned to it
during the Spanish regime or it is not the owner thereof pursuant to the Laws of the Indies, its
open, continuous, exclusive and notorious possession and occupation of Lot 138 since 1894 and
for many decades thereafter vests ipso jure or by operation of law upon the petitioner a
government grant, a vested title, to the subject property. It cites Subsection 6 of Section 54 of
Act No. 92654 and Subsection b of Section 45 of Act No. 2874.55

This contention is likewise not persuasive.

One of the important requisites for the application of the pertinent provisions of Act No. 926 and
Act No. 2874 is the "open, continuous, exclusive and notorious possession and occupation" of
the land by the applicant. Actual possession of land consists in the manifestation of acts of
dominion over it of such a nature as a party would naturally exercise over his own property.56
The phrase "possession and occupation" was explained as follows:

It must be underscored that the law speaks of "possession and occupation." Since these words are
separated by the conjunction and, the clear intention of the law is not to make one synonymous
with the order [sic]. Possession is broader than occupation because it includes constructive
possession. When, therefore, the law adds the word occupation, it seeks to delimit the all-
encompassing effect of constructive possession. Taken together with the words open, continuous,
exclusive and notorious, the word occupation serves to highlight the fact that for one to qualify
under paragraph (b) of the aforesaid section, his possession of the land must not be mere fiction.
As this Court stated, through then Mr. Justice Jose P. Laurel, in Lasam v. The Director of Lands:

x x x Counsel for the applicant invokes the doctrine laid down by us in Ramos v. Director of
Lands. But it should be observed that the application of the doctrine of constructive possession in
that case is subject to certain qualifications, and this court was careful to observe that among
these qualifications is "one particularly relating to the size of the tract in controversy with
reference to the portion actually in possession of the claimant." While, therefore, "possession in
the eyes of the law does not mean that a man has to have his feet on every square meter of
ground before it can be said that he is in possession," possession under paragraph 6 of section 54
of Act No. 926, as amended by paragraph (b) of section 45 of Act No. 2874, is not gained by
mere nominal claim. The mere planting of a sign or symbol of possession cannot justify a
Magellan-like claim of dominion over an immense tract of territory. Possession as a means of
acquiring ownership, while it may be constructive, is not a mere fiction. x x x

xxx

Possession is open when it is patent, visible, apparent, notorious and not clandestine. It is
continuous when uninterrupted, unbroken and not intermittent or occasional; exclusive when the
adverse possessor can show exclusive dominion over the land and an appropriation of it to his
own use and benefit; and notorious when it is so conspicuous that it is generally known and
talked of by the public or the people in the neighborhood.

Use of land is adverse when it is open and notorious.57

Indisputably, the petitioner has been in open, continuous, exclusive and notorious possession and
occupation of Lot 138-B since 1894 as evidenced by the church structure built thereon. However,
the record is bereft of any evidence that would tend to show that such possession and occupation
extended to Lots 138-A and 138-C beginning the same period. No single instance of the exercise
by the petitioner of proprietary acts or acts of dominion over these lots was established. Its
unsubstantiated claim that the construction of the municipal building as well as the subsequent
improvements thereon, e.g., the rural health center, Buruanga community Medicare hospital,
basketball court, Rizal monument and grandstand, was by its tolerance does not constitute proof
of possession and occupation on its (the petitioner’s) part.

Absent the important requisite of open, continuous, exclusive and notorious possession and
occupation thereon since 1894, no government grant or title to Lots 138-A and 138-C had vested
upon the petitioner ipso jure or by operation of law. Possession under paragraph 6 of section 54
of Act No. 926, as amended by paragraph (b) of section 45 of Act No. 2874, is not gained by
mere nominal claim.58

Lots 138-A and 138-C comprise the public

plaza and are property of public dominion;

hence, not susceptible to private ownership

by the petitioner or respondent municipality

The appellate court correctly declared that Lots 138-A and 138-C comprise the public plaza and
are property of public dominion; hence, may not be the object of appropriation either by the
petitioner or respondent municipality. In support thereof, it cited Bishop of Calbayog
ratiocinating:

This ruling [referring to Harty] was, in fact, reiterated in Bishop of Calbayog v. Director of
Lands (45 SCRA 418) involving the same question of ownership of the land which surrounded
the parish church of the town. The Supreme Court therein declared that the public plaza and
public thoroughfare are not subject to registration by the church; that since neither the Church
nor the municipality presented positive proof of ownership or exclusive possession for an
appreciable period of time, and the only indubitable fact is the free and continuous use of Lot 2
by residents of Catarman, and the town had no public plaza to speak of other than the disputed
parcel of land, there was a strong presumption that the same had been segregated as a public
plaza upon the founding of the municipality of Catarman. x x x59

As can be gleaned, the above discussion principally pertained to Lot 2, a public plaza the
ownership of which was disputed by the Bishop of Calbayog and the Municipality of Catarman.

The appellate court correctly cited Bishop of Calabayog. However, the ruling therein pertaining
to a portion of Lot 1 occupied by a public thoroughfare is more apropos to the present case. To
recall, in the said case, the application of the Bishop of Calabayog as to the eastern portion of Lot
1 was also being opposed by the Municipality of Catarman on the ground that it was part of the
public plaza. As mentioned earlier, the Court upheld the ownership of the church over Lot 1
including not only the space occupied by the church, belfry, convent, parish school and nuns’
residence, but also the empty space which only had some benches as improvements thereon.
Significantly, the portion of Lot 1 occupied by a public thoroughfare (Nalazon Street) was
ordered excluded from the application for registration filed by the church. The Court therein
made the following findings with respect to the public thoroughfare:

Admittedly Nalazon St. was originally merely a trail used by the parishioners in going to and
from the church. But since 1910, when it was opened and improved as a public thoroughfare by
the municipality, it had been continuously used as such by the townspeople of Catarman without
objection from the Church authorities. The acacia trees along both sides of the street were
planted by the municipality in 1920, although these trees

were cut down recently upon order of the priest. There is no proof that the Church merely
tolerated and limited the use of this street for the benefit of its parishioners, considering that the
street traverses the entire length of the poblacion from south to north and that Lot 1, on which the
church stands, is located almost at the center of the poblacion. The street does not stop on Lot 1
but extends north toward the sea, passing along the lot occupied by the Central Elementary
School and the Northern Samar General Hospital. Thus, it is clear that Nalazon St. inside Lot 1 is
used by the residents not only in going to the church but to the public school and the general
hospital north of Lot 1.60

In the present case, the following improvements now stand on Lots 138-A and 138-C: the
municipal building, rural health center, Buruanga community Medicare hospital, basketball
court, Rizal monument and grandstand. Except for the construction of the municipal building, the
other improvements were made on Lots 138-A and 138-C, and continuously used by the public
without the petitioner’s objection. Further, there is no proof that the petitioner merely tolerated
the construction of these improvements. On the other hand, the free and continuous use by the
public of Lots 138-A and 138-C, as found by the court a quo and affirmed by the appellate court,
incontrovertibly establishes that they are property for public use.

On this point, Articles 420, quoted anew below, and 424 of the Civil Code are applicable:

Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;

Art. 424. Property for public use, in the provinces, cities, and municipalities, consist 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.

Property for public use of provinces and towns are governed by the same principles as property
of public dominion of the same character.61 The ownership of such property, which has the
special characteristics of a collective ownership for the general use and enjoyment, by virtue of
their application to the satisfaction of the collective needs, is in the social group, whether
national, provincial, or municipal.62 Their purpose is not to serve the State as a juridical person,
but the citizens; they are intended for the common and public welfare, and so they cannot be the
object of appropriation, either by the State or by private persons.63

The appellate court committed no reversible

error in denying the petitioner’s motion for

reception of evidence

In denying the petitioner’s motion for reception evidence, the appellate court reasoned that based
on the records, the petitioner was already accorded the full opportunity to present its evidence in
the court a quo and that the evidence to be introduced in the desired hearing would not directly
establish its ownership of the disputed lots.64

The petitioner’s motion for reception of evidence filed with the appellate court stated that the
additional evidence that it sought to submit consisted of affidavits of old residents of Buruanga
attesting to the fact that "the old municipal building was in fact at a place called Sunset Park
prior to its transfer to the present site."65 These affidavits would allegedly establish that
respondent municipality could not be the owner of Lots 138-A and 138-C which it had neither
possessed nor occupied.66

The appellate court did not err in denying the petitioner’s motion for reception of evidence.
Indeed, the petitioner was already given full opportunity during the trial in the court a quo to
adduce any and all relevant evidence to substantiate its claim of ownership over the entire Lot
138. In no sense, therefore, may it be argued that it was denied due process of law.67

With the reality that those documents were never presented and formally offered during the trial
in the court a quo, their belated admission for purposes of having them duly considered in the
resolution of the case on appeal would certainly collide with Section 34, Rule 132 of the Rules of
Court which reads:

SECTION 34. Offer of Evidence. – The court shall consider no evidence which has not been
formally offered. The purpose for which the evidence is offered must be specified.68

In any case, as correctly stated by the appellate court, these affidavits would not directly
establish the petitioner’s ownership over Lots 138-A and 138-C.

WHEREFORE, premises considered, the petition is DENIED. The Decision dated January 31,
2001 of the Court of Appeals and its Resolution dated July 18, 2001 in CA-G.R. CV No. 52626
are AFFIRMED in toto.

SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson

CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Asscociate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions
in the above decision were reached in consultation before the case was assigned to the writer of
the opinion of the Court’s Division.

ARTEMIO V. PANGANIBAN
Chief Justice

Footnotes
1
Represented by Bishop Juan N. Nilmar.
2
Penned by Associate Justice Portia Aliño-Hormachuelos, with Associate Justices Fermin A. Martin, Jr.
and Mercedes Gozo-Dadole concurring; rollo, pp. 43-52.
3
Records, p. 1.
4
Subsequent pleadings of the Roman Catholic Bishop of Kalibo, however, placed the commencement of
the construction of the municipal building on the disputed lot some time in 1958.
5
Exhibit "H," folder of exhibits, p. 32.
6
Folder of exhibits, p. 31.
7
Records, p. 11.
8
As appearing in the Plan of Property of Municipality of Buruanga, Exhibit "1" of the said municipality.
9
Records, p. 26.
10
Id. at 31.
11
Id. at 47.
12
Exhibits "A," "B," "K," "L" and "M," folder of exhibits, pp. 1, 2, 37-39.
13
Exhibit "B," id. at 2.
14
Exhibits "C" (pastoral letter), id. at 3; "D" (petition signed by residents of Buruanga), id. at 4-28 and; "N"
to "Q" (affidavits), id. at 40-43.
15
Exhibit "P," id. at 42.
16
Records, p. 173.
17
13 Phil. 152 (1909).
18
Id. at 157.
19
Records, p. 174.
20
150-A Phil. 806 (1972).
21
The provision reads:
Art. 419. Property is either of public dominion or of private ownership.
22
The provision reads in part:
 Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character.
xxx
23
Rollo, p. 51.
24
Rollo, p. 16.
25
Rollo, pp. 252-259.
26
54 Phil. 538 (1930).
27
The Petitioner’s Memorandum, pp. 24-25, citing Roman Catholic Bishop of Jaro v. Director of Lands, id.
at 540-541.
28
Roman Catholic Bishop of Jaro v. Director of Lands, supra note 26; Municipality of Catbalogan v.
Director of Lands, 17 Phil. 216 (1910); Hacbang v. Director of Lands, 61 Phil. 669 (1935).
29
11 Phil. 315 (1908).
30
Citing, among others, Roman Catholic Apostolic Church v. Municipality of Placer, supra note 29. and;
Roman Catholic Bishop of Jaro v. Director of Lands, supra note 26.
31
Memorandum of the Petitioner, p. 31; Rollo, p. 269.
32
Law VIII, Title VII, Book IV, Recopilación de Leyes de los Reynos de las Indias. Translated as follows
in Roman Catholic Bishop of Jaro v. Director of Lands, supra:
In inland places, the church is not to be built on the square, but at some distance from it, where it
will be separate from every other building not ministering to its comfort and ornamentation; and in
order that it may from all points be seen and the better venerated, let it be somewhat raised from
the ground, with steps leading up to it; and, between the main square and the church shall be
constructed the government administration buildings (Casas Reales, Cabildos o Concejo, Aduana
y Atarazana) at such distance as not to shut the church from view, nor to interfere with it, and in
case of necessity to be able to render assistance, and if the town be on the coast, let the church be
so placed as to meet the eye of one coming from the sea, and be so constructed as to serve for the
defense of the port, with residential lots close to it and booths on the square for burghers, imposing
a moderate tax upon the merchandise; and let it be thus also in smaller localities in the matter of
parish churches and monasteries, wherever convenient.
33
Municipality of Catbalogan v. Director of Lands, 17 Phil. 216, 219-221 (1910); Municipality of Tacloban
v. Director of Lands, 17 Phil. 428, 431-433 (1910).
34
Supra note 20.
35
Id. at 809-810.
36
REGALADO, II REMEDIAL LAW COMPENDIUM 619 (2000 ed.).
37
TSN, Direct testimony of Mr. Prado, Sr., January 9, 1992, p. 6.
38
Id. at 14-15.
39
Supra note 12.
40
For example, the oldest affiant, Rita Prado, was 79 years old at the time of the execution of her affidavit
on February 11, 1978. She was therefore born some time in 1899. The church of Buruanga was purportedly
built in 1894. Hence, Rita Prado, as well as the other affiants who were younger than she was, could not
have any personal knowledge as to the construction of the said church as well as the events that took place
prior thereto because they were not as yet born during the said period.
41
Supra note 28.
42
Id. at 672-673. (Citations omitted).
43
Supra note 26.
44
10 Phil. 744 (1908).
45
Citing Director of Lands v. Aboc, G.R. No. 15695, 28 October 1926. Unreported.
46
Dissenting Opinion of Justice Johnson in Catholic Church v. Hastings, et al., 5 Phil. 701-717 (1906).
47
Citing Ehle v. Tenney Trading Co., 107 P.2d 210, 212.
48
19 Phil. 32 (1911).
49
Supra note 29.
50
Article VIII thereof stated:
And it is hereby declared that the relinquishment or cession, as the case may be, to which the
preceding paragraph refers, can not in any respect impair the property or rights which by law
belongs to the peaceful possession of property of all kinds, of provinces, municipalities, public or
private establishments, ecclesiastical or civic bodies, or any other associations having legal
 capacity to acquire and possess property in the aforesaid territories, renounced or ceded, or of
private individuals of whatever nationality such individuals may be.
51
Supra note 17.
52
Id. at 155-157.
53
Id. at 157.
54
Supra.
55
Supra.
56
Ramos v. Director of Lands, 39 Phil. 175 (1918).
57
Director of Lands v. Intermediate Appellate Court, G.R. No. 68946, May 22, 1992, 209 SCRA 214, 222-
224.
58
Id.
59
CA Decision, p. 7; Rollo, p. 49.
60
Bishop of Calbayog v. Director of Lands, supra note 20, at 813.
61
TOLENTINO, II CIVIL CODE OF THE PHILIPPINES 38 citing 3 MANRESA 111.
62
Id.
63
Id.
64
CA Resolution dated August 4, 1998; CA rollo, p. 91.
65
CA rollo, p. 79.
66
Id. at 80.
67
Ragudo v. Fabella Estate Tenants Association, Inc., G.R. No. 146823, August 9, 2005, 466 SCRA 136,
147.
68
Id. at 148.

EN BANC

G.R. No. 93654 May 6, 1992

FRANCISCO U. DACANAY, petitioner,

vs.
MAYOR MACARIO ASISTIO, JR., CITY ENGR. LUCIANO SARNE, JR. of Kalookan City, Metro Manila, MILA PASTRANA AND/OR
RODOLFO TEOFE, STALLHOLDERS AND REPRESENTING CO-STALLHOLDERS, respondents.

David D. Advincula, Jr. for petitioner.

Juan P. Banaga for private respondents.

GRIÑO-AQUINO, J.:

May public streets or thoroughfares be leased or licensed to market stallholders by virtue of a city ordinance or resolution of the Metro Manila
Commission? This issue is posed by the petitioner, an aggrieved Caloocan City resident who filed a special civil action of mandamus against
the incumbent city mayor and city engineer, to compel these city officials to remove the market stalls from certain city streets which the
aforementioned city officials have designated as flea markets, and the private respondents (stallholders) to vacate the streets.

On January 5, 1979, MMC Ordinance No. 79-02 was enacted by the Metropolitan Manila Commission, designating certain city and municipal
streets, roads and open spaces as sites for flea markets. Pursuant, thereto, the Caloocan City mayor opened up seven (7) flea markets in
that city. One of those streets was the "Heroes del '96" where the petitioner lives. Upon application of vendors Rodolfo Teope, Mila Pastrana,
Carmen Barbosa, Merle Castillo, Bienvenido Menes, Nancy Bugarin, Jose Manuel, Crisaldo Paguirigan, Alejandro Castron, Ruben Araneta,
Juanita and Rafael Malibaran, and others, the respondents city mayor and city engineer, issued them licenses to conduct vending activities
on said street.

In 1987, Antonio Martinez, as OIC city mayor of Caloocan City, caused the demolition of the market stalls on Heroes del '96, V. Gozon and
Gonzales streets. To stop Mayor Martinez' efforts to clear the city streets, Rodolfo Teope, Mila Pastrana and other stallowners filed an action
for prohibition against the City of Caloocan, the OIC City Mayor and the City Engineer and/or their deputies (Civil Case No. C-12921) in the
Regional Trial Court of Caloocan City, Branch 122, praying the court to issue a writ of preliminary injunction ordering these city officials to
discontinue the demolition of their stalls during the pendency of the action.

The court issued the writ prayed for. However, on December 20, 1987, it dismissed the petition and lifted the writ of preliminary injunction
which it had earlier issued. The trial court observed that:

A perusal of Ordinance 2, series of 1979 of the Metropolitan Manila Commission will show on the title itself that it is an
ordinance ––

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, subject to the approval of the Metropolitan Manila Commission, and for other
purposes

which is further amplified in Section 2 of the said ordinance, quoted hereunder:

Sec. 2. The streets, roads and open spaces to be used as sites for flea markets (tiangge) or vending areas; the design,
measurement or specification of the structures, equipment and apparatuses to be used or put up; the allowable
distances; the days and time allowed for the conduct of the businesses and/or activities herein authorized; the rates or
fees or charges to be imposed, levied and collected; the kinds of merchandise, goods and commodities sold and
services rendered; and other matters and activities related to the establishment, maintenance and management and
operation of flea markets and vending areas, shall be determined and prescribed by the mayors of the cities and
municipalities in the Metropolitan Manila where the same are located, subject to the approval of the Metropolitan Manila
Commission and consistent with the guidelines hereby prescribed.

Further, it is so provided in the guidelines under the said Ordinance No. 2 of the MMC that —

Sec. 6. In the establishment, operation, maintenance and management of flea markets and vending areas, the
following guidelines, among others, shall be observed:

xxx xxx xxx

(m) That the permittee shall remove the equipment, facilities and other appurtenances used by him in the conduct of
his business after the close or termination of business hours. (Emphasis ours; pp. 15-16, Rollo.)

The trial court found that Heroes del '96, Gozon and Gonzales streets are of public dominion, hence, outside the commerce of man:

The Heroes del '96 street, V. Gozon street and Gonzales street, being of public dominion must, therefore, be outside of
the commerce of man. Considering the nature of the subject premises, the following jurisprudence co/principles are
applicable on the matter:

1) They cannot be alienated or leased or otherwise be the subject matter of contracts.

(Municipality of Cavite vs. Rojas, 30 Phil. 602);

2) They cannot be acquired by prescription against the state (Insular Government vs. Aldecoa, 19
Phil. 505). Even municipalities can not acquire them for use as communal lands against the state
(City of Manila vs. Insular Government, 10 Phil. 327);

3) They are not subject to attachment and execution (Tan Toco vs. Municipal Council of Iloilo, 49
Phil. 52);

4) They cannot be burdened by any voluntary easement (2-II Colin & Capitant 520) (Tolentino,
Civil Code of the Phils., Vol. II, 1983 Ed. pp. 29-30).

In the aforecited case of Municipality of Cavite vs. Rojas, it was held that properties for public use
may not be leased to private individuals. Such a lease is null and void for the reason that a
municipal council cannot withdraw part of the plaza from public use. If possession has already
been given, the lessee must restore possession by vacating it and the municipality must
thereupon restore to him any sums it may have collected as rent.

In the case of City of Manila vs. Gerardo Garcia, 19 SCRA 413, the Supreme Court held:
 The property being a public one, the Manila Mayors did not have the
authority to give permits, written or oral, to the squatters, and that the
permits granted are therefore considered null and void.

This doctrine was reiterated in the case of Baguio Citizens Action Inc. vs.
The City Council, 121 SCRA 368, where it was held that:

An ordinance legalizing the occupancy by squatters of public land is null

and void.

The authority of respondent Municipality of Makati to demolish the shanties of the petitioner's
members is mandated by
P.D. 772, and Sec. 1 of Letter of Instruction No. 19 orders certain public officials, one of whom is
the Municipal Mayor to remove all illegal constructions including buildings on and along esteros
and river banks, those along railroad tracks and those built without permits on public or private
property (Zansibarian Residents Association vs. Mun. of Makati, 135 SCRA 235). The City
Engineer is also among those required to comply with said Letter of Instruction.

The occupation and use of private individuals of sidewalks and other public places devoted for
public use constitute both public and private nuisances and nuisance per se, and this applies to
even case involving the use or lease of public places under permits and licenses issued by
competent authority, upon the theory that such holders could not take advantage of their unlawful
permits and license and claim that the land in question is a part of a public street or a public place
devoted to public use, hence, beyond the commerce of man. (Padilla, Civil Code Annotated, Vol.
II, p. 59, 6th Ed., citing Umali vs. Aquino, IC. A. Rep. 339.)

From the aforequoted jurisprudence/principles, the Court opines that defendants have the right to demolish the subject
stalls of the plaintiffs, more so when Section 185, par. 4 of Batas Pambansa Blg. 337, otherwise known as the Local
Government Code provides that the City Engineer shall:

(4) . . .

(c) Prevent the encroachment of private buildings and fences on the streets
and public places;

xxx xxx xxx

(j) Inspect and supervise the construction, repair, removal and safety of
private buildings;

xxx xxx xxx

(k) With the previous approval of the City Mayor in each case, order the
removal of materials employed in the construction or repair of any building
or structures made in violation of law or ordinance, and cause buildings and
structures dangerous to the public to made secure or torn down;

xxx xxx xxx

Further, the Charter of the City of Caloocan, Republic Act No. 5502, Art. VII, Sec. 27, par. g, 1 and m, grants the City
Engineer similar powers. (Emphasis supplied; pp. 17-20, Rollo.)

However, shortly after the decision came out, the city administration in Caloocan City changed hands. City Mayor Macario Asistio, Jr., as
successor of Mayor Martinez, did not pursue the latter's policy of clearing and cleaning up the city streets.

Invoking the trial court's decision in Civil Case No. C-12921, Francisco U. Dacanay, a concerned citizen, taxpayer and registered voter of
Barangay 74, Zone 7, District II of Caloocan City, who resides on Heroes del '96 Street, one of the affected streets, wrote a letter dated
March 7, 1988 to Mayor Asistio, Jr., calling his attention to the illegally-constructed stalls on Heroes del '96 Street and asked for their
demolition.

Dacanay followed up that letter with another one dated April 7, 1988 addressed to the mayor and the city engineer, Luciano Sarne, Jr. (who
replaced Engineer Arturo Samonte), inviting their attention to the Regional Trial Court's decision in Civil Case No. 12921. There was still no
response.
Dacanay sought President Corazon C. Aquino's intervention by writing her a letter on the matter. His letter was referred to the city mayor for
appropriate action. The acting Caloocan City secretary, Asuncion Manalo, in a letter dated August 1, 1988, informed the Presidential Staff
Director that the city officials were still studying the issue of whether or not to proceed with the demolition of the market stalls.

Dacanay filed a complaint against Mayor Asistio and Engineer Sarne (OMB-0-89-0146) in the Office of the OMBUDSMAN. In their letter-
comment dated April 3, 1989, said city officials explained that in view of the huge number of stallholders involved, not to mention their
dependents, it would be harsh and inhuman to eject them from the area in question, for their relocation would not be an easy task.

In reply, Dacanay maintained that respondents have been derelict in the performance of their duties and through manifest partiality
constituting a violation of Section 3(e) of R.A. 3019, have caused undue injury to the Government and given unwarranted benefits to the
stallholders.

After conducting a preliminary investigation, the OMBUDSMAN rendered a final evaluation and report on August 28, 1989, finding that the
respondents' inaction is purely motivated by their perceived moral and social responsibility toward their constituents, but "the fact remains
that there is an omission of an act which ought to be performed, in clear violation of Sections 3(e) and (f) of Republic Act 3019." (pp. 83-84,
Rollo.) The OMBUDSMAN recommended the filing of the corresponding information in court.

As the stallholders continued to occupy Heroes del '96 Street, through the tolerance of the public respondents, and in clear violation of the
decision it Civil Case No. C-12921, Dacanay filed the present petition for mandamus on June 19, 1990, praying that the public respondents
be ordered to enforce the final decision in Civil Case No. C-12921 which upheld the city mayor's authority to order the demolition of market
stalls on V. Gozon, Gonzales and Heroes del '96 Streets and to enforce P.D. No. 772 and other pertinent laws.

On August 16, 1990, the public respondents, through the City Legal Officer, filed their Comment' on the petition. The Office of the Solicitor
General asked to be excused from filing a separate Comment in behalf of the public respondents. The City Legal Officer alleged that the
vending area was transferred to Heroes del '96 Street to decongest Malonzo Street, which is comparatively a busier thoroughfare; that the
transfer was made by virtue of Barangay Resolution No. 30 s'78 dated January 15, 1978; that while the resolution was awaiting approval by
the Metropolitan Manila Commission, the latter passed Ordinance No. 79-2, authorizing the use of certain streets and open spaces as sites
for flea markets and/or vending areas; that pursuant thereto, Acting MMC Mayor Virgilio P. Robles issued Executive Order No. 135 dated
January 10, 1979, ordering the establishment and operation of flea markets in specified areas and created the Caloocan City Flea Market
Authority as a regulatory body; and that among the sites chosen and approved by the Metro Manila Commission, Heroes del '96 Street has
considered "most viable and progressive, lessening unemployment in the city and servicing the residents with affordable basic necessities."

The petition for mandamus is meritorious.

There is no doubt that the disputed areas from which the private respondents' market stalls are sought to be evicted are public streets, as
found by the trial court in Civil Case No. C-12921. A public street is property for public use hence outside the commerce of man (Arts. 420,
424, Civil Code). Being outside the commerce of man, it may not be the subject of lease or other contract (Villanueva et al. vs. Castañeda
and Macalino, 15 SCRA 142, citing the Municipality of Cavite vs. Rojas, 30 SCRA 602; Espiritu vs. Municipal Council of Pozorrubio, 102 Phil.
869; and Muyot vs. De la Fuente, 48 O.G. 4860).

As the stallholders pay fees to the City Government for the right to occupy portions of the public street, the City Government, contrary to law,
has been leasing portions of the streets to them. Such leases or licenses are null and void for being contrary to law. The right of the public to
use the city streets may not be bargained away through contract. The interests of a few should not prevail over the good of the greater
number in the community whose health, peace, safety, good order and general welfare, the respondent city officials are under legal
obligation to protect.

The Executive Order issued by Acting Mayor Robles authorizing the use of Heroes del '96 Street as a vending area for stallholders who were
granted licenses by the city government contravenes the general law that reserves city streets and roads for public use. Mayor Robles'
Executive Order may not infringe upon the vested right of the public to use city streets for the purpose they were intended to serve: i.e., as
arteries of travel for vehicles and pedestrians. As early as 1989, the public respondents bad started to look for feasible alternative sites for
flea markets. They have had more than ample time to relocate the street vendors.

WHEREFORE, it having been established that the petitioner and the general public have a legal right to the relief demanded and that the
public respondents have the corresponding duty, arising from public office, to clear the city streets and restore them to their specific public
purpose (Enriquez vs. Bidin, 47 SCRA 183; City of Manila vs. Garcia et al., 19 SCRA, 413 citing Unson vs. Lacson, 100 Phil. 695), the
respondents City Mayor and City Engineer of Caloocan City or their successors in office are hereby ordered to immediately enforce and
implement the decision in Civil Case No. C-1292 declaring that Heroes del '96, V. Gozon, and Gonzales Streets are public streets for public
use, and they are ordered to remove or demolish, or cause to be removed or demolished, the market stalls occupying said city streets with
utmost dispatch within thirty (30)days from notice of this decision. This decision is immediately executory.

SO ORDERED.

Narvasa, C.J., Melecio-Herrera, Gutierrez, Jr. Cruz, Paras, Feliciano, Padilla, Bidin, Medialdea, Regalado, Davide, Jr., Romero and Nocon,
JJ., concur.

Bellosillo, J., took no part.

 THIRD DIVISION

G.R. No. 182913 November 20, 2013

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
ANTONIO, FELIZA, NEMESIO, ALBERTO, FELICIDAD, RICARDO, MILAGROS
AND CIPRIANO, ALL SURNAMED BACAS; EMILIANA CHABON, SATURNINO
ABDON, ESTELA, CHABON, LACSASA DEMON, PDERITA CHABON, FORTUNATA
EMBALSADO, MINDA J. CASTILLO, PABLO CASTILLO, ARTURO P. LEGASPI, and
JESSIE I. LEGASPI, Respondents.

DECISION

MENDOZA, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to review,
reverse and set aside the November 12, 2007 Decision1 and the May 15, 2008 Resolution2 of the
Court of Appeals (CA) in CA-G.R. CV No. 64142, upholding the decision of the Regional Trial
Court, Branch 17, Cagayan de Oro City (RTC) , which dismissed the consolidated cases of Civil
Case No. 3494, entitled Republic of the Philippines v. Antonio, et al. and Civil Case No. 5918,
entitled Republic of the Philippines v. Emiliana Chabon , et al. Said civil cases were filed by the
Republic of the Philippines (Republic) for the cancellation and annulment of Original Certificate
of Title (OCT) No. 0-358 and OCT No. O-669, covering certain parcels of land occupied and
utilized as part of the Camp Evangelista Military Reservation, Misamis Oriental, presently the
home of the 4th Infantry Division of the Philippine Army.

The Antecedents:

In 1938, Commonwealth President Manuel Luis Quezon (Pres. Quezon) issued Presidential
Proclamation No. 265, which took effect on March 31, 1938, reserving for the use of the
Philippine Army three (3) parcels of the public domain situated in the barrios of Bulua and
Carmen, then Municipality of Cagayan, Misamis Oriental. The parcels of land were withdrawn
from sale or settlement and reserved for military purposes, "subject to private rights, if any there
be."

Land Registration Case No. N-275

[Antonio, Feliza, Nemesio, Roberto, and Felicidad, all surnamed Bacas, and the Heirs of Jesus
Bacas, Applicants (The Bacases)]

The Bacases filed their Application for Registration3 on November 12, 1964 covering a parcel of
land, together with all the improvements found thereon, located in Patag, Cagayan de Oro City,
more particularly described and bounded as follows:
A parcel of land, Lot No. 4354 of the Cadastral Survey of Cagayan, L.R.C. Record No. 1612,
situated at Barrio Carmen, Municipality of Cagayan, Province of Misamis Oriental. Bounded on
the SE., along lines 1-2-3-4, by Lot 4357; and alongline 4-5, by Lot 3862; on the S., along line 5-
6, by Lot 3892; on the W. and NW., along lines 6-7-8, by Lot 4318; on the NE., along line 8-9,
by Lot 4319, along line 9-10, by Lot 4353 and long line 10-11, by Lot 4359; and on the SE.,
along line 11-1, by Lot 4356, all of Cagayan Cadastre; containing an area of THREE
HUNDRED FIFTY FOUR THOUSAND THREE HUNDRED SEVENTY SEVEN (354,377)
square meters, more or less, under Tax Declaration No. 35436 and assessed at ₱3,540.00.4

They alleged ownership in fee simple of the property and indicated in their application the names
and addresses of the adjoining owners, as well as a statement that the Philippine Army (Fourth
Military Area) recently occupied a portion of the land by their mere tolerance.5

The Director of the Bureau of Lands, thru its Special Counsel, Benito S. Urcia (Urcia) ,
registered its written Opposition6 against the application. Later, Urcia, assisted by the District
Land Officer of Cagayan de Oro City, thru the Third Assistant Provincial Fiscal of Misamis
Oriental, Pedro R. Luspo (Luspo) , filed an Amended Opposition.7

On April 10, 1968, based on the evidence presented by the Bacases, the Land Registration Court
(LRC) rendered a decision8 holding that the applicants had conclusively established their
ownership in fee simple over the subject land and that their possession, including that of their
predecessor-in-interest, had been open, adverse, peaceful, uninterrupted, and in concept of
owners for more than forty (40) years.

No appeal was interposed by the Republic from the decision of the LRC. Thus, the decision
became final and executory, resulting in the issuance of a decree and the corresponding
certificate of title over the subject property.

Land Registration Case No. N-521 [Emiliana Chabon, Estela Chabon and Pedrita Chabon,
Applicants (The Chabons)]

The Chabons filed their Application for Registration9 on May 8, 1974 covering a parcel of land
located in Carmen-District, Cagayan de Oro City, known as Lot 4357, Cagayan Cadastre,
bounded and described as:

A parcel of land (Lot 4357, Cagayan Cadastre, plan Ap-12445), situated in the District of
Carmen, City of Cagayan de Oro. Bounded on the NE. by property of Potenciano Abrogan vs.
Republic of the Philippines (Public Land); on the SE. by properties of Geronimo Wabe and
Teofilo Batifona or Batipura; on the SW. by property of Teofilo Batifona or Batipura; and on the
NW. by property of Felipe Bacao or Bacas vs. Republic of the Philippines (Public Land). Point
"1" is N. 10 deg. 39’W., 379.88 M. from B.L.L.M. 14, Cagayan Cadastre. Area SIXTY NINE
THOUSAND SIX HUNDRED THIRTY TWO (69,632) SQUARE METERS, more or less.10

They alleged ownership in fee simple over the property and indicated therein the names and
addresses of the adjoining owners, but no mention was made with respect to the occupation, if
any, by the Philippine Army. The Chabons likewise alleged that, to the best of their knowledge,
no mortgage or encumbrance of any kind affecting said land with the exception of 18,957 square
meters sold to Minda J. Castillo and 1,000 square meters sold and conveyed to Atty. Arturo R.
Legaspi.11

On February 18, 1976, there being no opposition made, even from the government, hearing on
the application ensued. The LRC then rendered a decision12 holding that Chabons’ evidence
established their ownership in fee simple over the subject property and that their possession,
including that of their predecessor-in-interest, had been actual, open, public, peaceful, adverse,
continuous, and in concept of owners for more than thirty (30) years.

The decision then became final and executory. Thus, an order13 for the issuance of a decree and
the corresponding certificate of title was issued.

The present cases

As a consequence of the LRC decisions in both applications for registration, the Republic filed a
complaint for annulment of titles against the Bacases and the Chabons before the RTC. More
specifically, on September 7, 1970 or one (1) year and ten (10) months from the issuance of OCT
No. 0-358, a civil case for annulment, cancellation of original certificate of title, reconveyance of
lot or damages was filed by the Republic against the Bacases, which was docketed as Civil Case
No. 3494. On the other hand, on April 21, 1978 or two (2) years and seven (7) months after
issuance of OCT No. 0-669, the Republic filed a civil case for annulment of title and reversion
against the Chabons, docketed as Civil Case No. 5918.

Civil Case No. 3494 against the Bacases

The Republic claimed in its petition for annulment before the RTC14 that the certificate of title
issued in favor of the Bacases was null and void because they fraudulently omitted to name the
military camp as the actual occupant in their application for registration. Specifically, the
Republic, through the Fourth Military Area, was the actual occupant of Lot No. 4354 and also
the owner and possessor of the adjoining Lots Nos. 431815 and 4357. Further, the Bacases failed
to likewise state that Lot No. 4354 was part of Camp Evangelista. These omissions constituted
fraud which vitiated the decree and certificate of title issued.

Also, the Republic averred that the subject land had long been reserved in 1938 for military
purposes at the time it was applied for and, so, it was no longer disposable and subject to
registration.16

Civil Case No. 5918 against the Chabons

In this case, the Republic claimed that it was the absolute owner and possessor of Lot No. 4357.
The said lot, together with Lots 431817 and 4354, formed part of the military reservation known
as Camp Evangelista in Cagayan de Oro City, which was set aside and reserved under
Presidential Proclamation No. 265 issued by President Quezon on March 31, 1938.18
In its petition for annulment before the RTC,19 the Republic alleged that OCT No. 0-669 issued
in favor of the Chabons and all transfer certificates of titles, if any, proceeding therefrom, were
null and void for having been vitiated by fraud and/or lack of jurisdiction.20 The Chabons
concealed that the fact that Lot 4357 was part of Camp Evangelista and that the Republic,
through the Armed Forces of the Philippines, was its actual occupant and possessor.21 Further,
Lot 4357 was a military reservation, established as such as early as March 31, 1938 and, thus,
could not be the subject of registration or private appropriation.22 As a military reservation, it
was beyond the commerce of man and the registration court did not have any jurisdiction to
adjudicate the same as private property.23

Decision of the Regional Trial Court

As the facts and issues in both cases were substantially the same and identical, and the pieces of
evidence adduced were applicable to both, the cases were consolidated and jointly tried.
Thereafter, a joint decision dismissing the two complaints of the Republic was rendered.

In dismissing the complaints, the RTC explained that the stated fact of occupancy by Camp
Evangelista over certain portions of the subject lands in the applications for registration by the
respondents was a substantial compliance with the requirements of the law.24 It would have
been absurd to state Camp Evangelista as an adjoining owner when it was alleged that it was an
occupant of the land.25 Thus, the RTC ruled that the respondents did not commit fraud in filing
their applications for registration.

Moreover, the RTC was of the view that the Republic was then given all the opportunity to be
heard as it filed its opposition to the applications, appeared and participated in the proceedings. It
was, thus, estopped from contesting the proceedings.

The RTC further reasoned out that assuming arguendo that respondents were guilty of fraud, the
Republic lost its right to a relief for its failure to file a petition for review on the ground of fraud
within one (1) year after the date of entry of the decree of registration.26 Consequently, it would
now be barred by prior judgment to contest the findings of the LRC.27

Finally, the RTC agreed with the respondents that the subject parcels of land were exempted
from the operation and effect of the Presidential Proclamation No. 265 pursuant to a proviso
therein that the same would not apply to lands with existing "private rights." The presidential
proclamation did not, and should not, apply to the respondents because they did not apply to
acquire the parcels of land in question from the government, but simply for confirmation and
affirmation of their rights to the properties so that the titles over them could be issued in their
favor.28 What the proclamation prohibited was the sale or disposal of the parcels of land
involved to private persons as a means of acquiring ownership of the same, through the modes
provided by law for the acquisition of disposable public lands.29

The Republic filed its Notice of Appeal before the RTC on July 5, 1991. On the other hand, the
Bacases and the Chabons filed an Ex-Parte Motion for the Issuance of the Writ of Execution and
Possession on July 16, 1991. An amended motion was filed on July 31, 1991. The RTC then
issued the Order,30 dated February 24, 1992, disapproving the Republic’s appeal for failure to
perfect it as it failed to notify the Bacases and granting the writ of execution.

Action of the Court of Appeals and the Court regarding the Republic’s Appeal

The Republic filed a Notice of Appeal on April 1, 1992 from the February 24, 1992 of the RTC.
The same was denied in the RTC Order,31 dated April 23, 1992. The Republic moved for its
reconsideration but the RTC was still denied it on July 8, 1992.32

Not satisfied, the Republic filed a petition before the CA, docketed as CA-G.R. SP No. 28647,
entitled Republic vs. Hon. Cesar M. Ybañez,33 questioning the February 24, 1992 Order of the
RTC denying its appeal in Civil Case No. 3494. The CA sustained the government and,
accordingly, annulled the said RTC order.

The respondents appealed to the Court, which later found no commission of a reversible error on
the part of the CA. Accordingly, the Court dismissed the appeal as well as the subsequent
motions for reconsideration. An entry of judgment was then issued on February 16, 1995.34

Ruling of the Court of Appeals

The appeal allowed, the CA docketed the case as CA G.R. CV No. 64142.

On November 12, 2007, the CA affirmed the ruling of the RTC. It explained that once a decree
of registration was issued under the Torrens system and the reglementary period had passed
within which the decree may be questioned, the title was perfected and could not be collaterally
questioned later on.35 Even assuming that an action for the nullification of the original
certificate of title may still be instituted, the review of a decree of registration under Section 38
of Act No. 496 [Section 32 of Presidential Decree (P.D.) No. 1529] would only prosper upon
proof that the registration was procured through actual fraud,36 which proceeded from an
intentional deception perpetrated through the misrepresentation or the concealment of a material
fact.37 The CA stressed that "[t]he fraud must be actual and extrinsic, not merely constructive or
intrinsic; the evidence thereof must be clear, convincing and more than merely preponderant,
because the proceedings which are assailed as having been fraudulent are judicial proceedings
which by law, are presumed to have been fair and regular."38

Citing the rule that "[t]he fraud is extrinsic if it is employed to deprive parties of their day in
court and, thus, prevent them from asserting their right to the property registered in the name of
the applicant,"39 the CA found that there was none. The CA agreed with the RTC that there was
substantial compliance with the requirement of the law. The allegation of the respondent that
Camp Evangelista occupied portions of their property negated the complaint that they committed
misrepresentation or concealment amounting to fraud.40

As regards the issue of exemption from the proclamation, the CA deemed that a discussion was
unnecessary because the LRC already resolved it. The CA stressed that the proceeding was one
in rem, thereby binding everyone to the legal effects of the same and that a decree of registration
that had become final should be deemed conclusive not only on the questions actually contested
and determined, but also upon all matters that might be litigated or decided in the land
registration proceeding.41

Not in conformity, the Republic filed a motion for reconsideration which was denied on May 15,
2008 for lack of merit.

Hence, this petition.

GROUNDS RELIED UPON

WARRANTING REVIEW OF THE
PETITION

1. THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING

THAT THE LAND REGISTRATION COURT HAD JURISDICTION OVER THE
APPLICATION FOR REGISTRATION FILED BY RESPONDENTS DESPITE THE
LATTER’S FAILURE TO COMPLY WITH THE MANDATORY REQUIREMENT OF
INDICATING ALL THE ADJOINING OWNERS OF THE PARCELS OF LAND
SUBJECT OF THE APPLICATION.

2. THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING

THAT RESPONDENTS HAVE A REGISTRABLE RIGHT OVER THE SUBJECT
PARCELS OF LAND WHICH ARE WITHIN THE CAMP EVANGELISTA
MILITARY RESERVATION.

3. IN G.R. NO. 157306 ENTITLED "REPUBLIC OF THE PHILIPPINES VS.

ANATALIA ACTUB TIU ESTONILO, ET AL.," WHICH INVOLVES PRIVATE
INDIVIDUALS CLAIMING RIGHTS OVER PORTIONS OF THE CAMP
EVANGELISTA MILITARY RESERVATION, THIS HONORABLE COURT HELD
THAT THESE INDIVIDUALS COULD NOT HAVE VALIDLY OCCUPIED THEIR
CLAIMED LOTS BECAUSE THE SAME WERE CONSIDERED INALIENABLE
FROM THE TIME OF THEIR RESERVATION IN 1938. HERE, THE CERTIFICATES
OF TITLE BEING SUSTAINED BY THE COURT OF APPEALS WERE ISSUED
PURSUANT TO THE DECISIONS OF THE LAND REGISTRATION COURT IN
APPLICATIONS FOR REGISTRATION FILED IN 1964 AND 1974. VERILY, THE
COURT OF APPEALS, IN ISSUING THE HEREIN ASSAILED DECISION DATED
NOVEMBER 15, 2007 AND RESOLUTION DATED MAY 15, 2008, HAS DECIDED
THAT INSTANT CONTROVERSY IN A MANNER THAT IS CONTRARY TO LAW
AND JURISPRUDENCE.42

Position of the Republic

In advocacy of its position, the Republic principally argues that (1) the CA erred in holding that
the LRC acquired jurisdiction over the applications for registration of the reserved public lands
filed by the respondents; and (2) the respondents do not have a registrable right over the subject
parcels of land which are within the Camp Evangelista Military Reservation.
With respect to the first argument, the Republic cites Section 15 of P.D. No. 1529, which
requires that applicants for land registration must disclose the names of the occupants of the land
and the names and addresses of the owners of the adjoining properties. The respondents did not
comply with that requirement which was mandatory and jurisdictional. Citing Pinza v.
Aldovino,43 it asserts that the LRC had no jurisdiction to take cognizance of the case. Moreover,
such omission constituted fraud or willful misrepresentation. The respondents cannot invoke the
indefeasibility of the titles issued since a "grant tainted with fraud and secured through
misrepresentation is null and void and of no effect whatsoever."44

On the second argument, the Republic points out that Presidential Proclamation No. 265 reserved
for the use of the Philippine Army certain parcels of land which included Lot No. 4354 and Lot
No. 4357. Both lots were, however, allowed to be registered. Lot No. 4354 was registered as
OCT No. 0-0358 and Lot No. 4357 as OCT No. O-669.

The Republic asserts that being part of the military reservation, these lots are inalienable and
cannot be the subject of private ownership. Being so, the respondents do not have registrable
rights over them. Their possession of the land, however long, could not ripen into ownership, and
they have not shown proof that they were entitled to the land before the proclamation or that the
said lots were segregated and withdrawn as part thereof.

Position of the Respondents

The Bacases

The Bacases anchor their opposition to the postures of the Republic on three principal
arguments:

First, there was no extrinsic fraud committed by the Bacases in their failure to indicate Camp
Evangelista as an adjoining lot owner as their application for registration substantially complied
with the legal requirements. More importantly, the Republic was not prejudiced and deprived of
its day in court.

Second, the LRC had jurisdiction to adjudicate whether the Bacases had "private rights" over Lot
No. 4354 in accordance with, and therefore exempt from the coverage of, Presidential
Proclamation No. 265, as well as to determine whether such private rights constituted registrable
title under the land registration law.

Third, the issue of the registrability of the title of the Bacases over Lot No. 4354 is res judicata
and cannot now be subject to a re-litigation or reopening in the annulment proceedings.45

Regarding the first ground, the Bacases stress that there was no extrinsic fraud because their
application substantially complied with the requirements when they indicated that Camp
Evangelista was an occupant by mere tolerance of Lot No. 4354. Also, the Republic filed its
opposition to the respondents’ application and actively participated in the land registration
proceedings by presenting evidence, through the Director of Lands, who was represented by the
Solicitor General. The Republic, therefore, was not deprived of its day in court or prevented from
presenting its case. Its insistence that the non-compliance with the requirements of Section 15 of
P.D. No. 1529 is an argument that is at once both empty and dangerous.46

On jurisdiction, the Bacases assert that even in the case of Republic v. Estonilo,47 it was
recognized in Presidential Proclamation No. 265 that the reservation was subject to private
rights. In other words, the LRC had authority to hear and adjudicate their application for
registration of title over Lot No. 4354 if they would be able to prove that their private rights
under the presidential proclamation constituted registrable title over the said lot. They claim that
there is completely no basis for the Republic to argue that the LRC had no jurisdiction to hear
and adjudicate their application for registration of their title to Lot No. 4354 just because the
proclamation withdrew the subject land from sale and settlement and reserved the same for
military purposes. They cited the RTC statement that "the parcels of land they applied for in
those registration proceedings and for which certificates of title were issued in their favor are
precisely exempted from the operation and effect of said presidential proclamation when the very
same proclamation in itself made a proviso that the same will not apply to lands with existing
‘private rights’ therein."48

The Bacases claim that the issue of registrability is no longer an issue as what is only to be
resolved is the question on whether there was extrinsic or collateral fraud during the land
registration proceedings. There would be no end to litigation on the registrability of their title if
questions of facts or law, such as, whether or not Lot No. 4354 was alienable and disposable land
of the public domain prior to its withdrawal from sale and settlement and reservation for military
purposes under Presidential Proclamation No. 265; whether or not their predecessors-in-interest
had prior possession of the lot long before the issuance of the proclamation or the establishment
of Camp Evangelista in the late 1930’s; whether or not such possession was held in the concept
of an owner to constitute recognizable "private rights" under the presidential proclamation; and
whether or not such private rights constitute registrable title to the lot in accordance with the land
registration law, which had all been settled and duly adjudicated by the LRC in favor of the
Bacases, would be re-examined under this annulment case.49

The issue of registrability of the Bacases’ title had long been settled by the LRC and is

res judicata between the Republic and the respondents. The findings of the LRC became final
when the Republic did not appeal its decision within the period to appeal or file a petition to
reopen or review the decree of registration within one year from entry thereof.50

To question the findings of the court regarding the registrability of then title over the land would
be an attempt to reopen issues already barred by res judicata. As correctly held by the RTC, it is
estopped and barred by prior judgment to contest the findings of the LRC.51

The Chabons

In traversing the position of the Republic, the Chabons insist that the CA was correct when it
stated that there was substantial compliance52 with the requirements of the P.D. No. 1529
because they expressly stated in their application that Camp Evangelista was occupying a portion
of it. It is contrary to reason or common sense to state that Camp Evangelista is an adjoining
owner when it is occupying a portion thereof.

And as to the decision, it was a consequence of a proceeding in rem and, therefore, the decree of
registration is binding and conclusive against all persons including the Republic who did not
appeal the same. It is now barred forever to question the validity of the title issued. Besides, res
judicata has set in because there is identity of parties, subject matter and cause of action.53

The Chabons also assailed the proclamation because when it was issued, they were already the
private owners of the subject parcels of land and entitled to protection under the Constitution.
The taking of their property in the guise of a presidential proclamation is not only oppressive and
arbitrary but downright confiscatory.54

The Issues

The ultimate issues to be resolved are: 1) whether or not the decisions of the LRC over the
subject lands can still be questioned; and 2) whether or not the applications for registration of the
subject parcels of land should be allowed.

The Court’s Ruling

The Republic can question even final and executory judgment when there was fraud.

The governing rule in the application for registration of lands at that time was Section 21 of Act
49655 which provided for the form and content of an application for registration, and it reads:

Section 21. The application shall be in writing, signed and sworn to by applicant, or by some
person duly authorized in his behalf. x x x It shall also state the name in full and the address of
the applicant, and also the names and addresses of all adjoining owners and occupants, if known;
and, if not known, it shall state what search has been made to find them. x x x

The reason behind the law was explained in the case of Fewkes vs. Vasquez,56 where it was
written:

Under Section 21 of the Land Registration Act an application for registration of land is required
to contain, among others, a description of the land subject of the proceeding, the name, status and
address of the applicant, as well as the names and addresses of all occupants of the land and of
all adjoining owners, if known, or if unknown, of the steps taken to locate them. When the
application is set by the court for initial hearing, it is then that notice (of the hearing), addressed
to all persons appearing to have an interest in the lot being registered and the adjoining owners,
and indicating the location, boundaries and technical description of the land being registered,
shall be published in the Official Gazette for two consecutive times. It is this publication of the
notice of hearing that is considered one of the essential bases of the jurisdiction of the court in
land registration cases, for the proceedings being in rem, it is only when there is constructive
seizure of the land, effected by the publication and notice, that jurisdiction over the res is vested
on the court. Furthermore, it is such notice and publication of the hearing that would enable all
persons concerned, who may have any rights or interests in the property, to come forward and
show to the court why the application for registration thereof is not to be granted.

Here, the Chabons did not make any mention of the ownership or occupancy by the Philippine
Army. They also did not indicate any efforts or searches they had exerted in determining other
occupants of the land. Such omission constituted fraud and deprived the Republic of its day in
court. Not being notified, the Republic was not able to file its opposition to the application and,
naturally, it was not able to file an appeal either.

The Republic can also question a final and executory judgment when the LRC had no
jurisdiction over the land in question

With respect to the Bacases, although the lower courts might have been correct in ruling that
there was substantial compliance with the requirements of law when they alleged that Camp
Evangelista was an occupant, the Republic is not precluded and estopped from questioning the
validity of the title.

The success of the annulment of title does not solely depend on the existence of actual and
extrinsic fraud, but also on the fact that a judgment decreeing registration is null and void. In
Collado v. Court of Appeals and the Republic,57 the Court declared that any title to an
inalienable public land is void ab initio. Any procedural infirmities attending the filing of the
petition for annulment of judgment are immaterial since the LRC never acquired jurisdiction
over the property. All proceedings of the LRC involving the property are null and void and,
hence, did not create any legal effect. A judgment by a court without jurisdiction can never attain
finality.58 In Collado, the Court made the following citation:

The Land Registration Court has no jurisdiction over non-registrable properties, such as public
navigable rivers which are parts of the public domain, and cannot validly adjudge the registration
of title in favor of private applicant. Hence, the judgment of the Court of First Instance of
Pampanga as regards the Lot No. 2 of certificate of Title No. 15856 in the name of petitioners
may be attacked at any time, either directly or collaterally, by the State which is not bound by
any prescriptive period provided for by the Statute of Limitations.59

Prescription or estoppel cannot lie against the government

In denying the petition of the Republic, the CA reasoned out that 1) once a decree of registration
is issued under the Torrens system and the reglementary period has passed within which the
decree may be questioned, the title is perfected and cannot be collaterally questioned later on;60
2) there was no commission of extrinsic fraud because the Bacases’ allegation of Camp
Evangelista’s occupancy of their property negated the argument that they committed
misrepresentation or concealment amounting to fraud;61 and 3) the Republic did not appeal the
decision and because the proceeding was one in rem, it was bound to the legal effects of the
decision.

Granting that the persons representing the government was negligent, the doctrine of estoppel
cannot be taken against the Republic. It is a well-settled rule that the Republic or its government
is not estopped by mistake or error on the part of its officials or agents. In Republic v. Court of
Appeals,62 it was written:

In any case, even granting that the said official was negligent, the doctrine of estoppel cannot
operate against the State . "It is a well-settled rule in our jurisdiction that the Republic or its
government is usually not estopped by mistake or error on the part of its officials or agents
(Manila Lodge No. 761 vs. CA, 73 SCRA 166, 186; Republic vs. Marcos, 52 SCRA 238, 244;
Luciano vs. Estrella, 34 SCRA 769).

Consequently, the State may still seek the cancellation of the title issued to Perpetuo Alpuerto
and his successors-interest pursuant to Section 101 of the Public Land Act. Such title has not
become indefeasible, for prescription cannot be invoked against the State (Republic vs. Animas,
supra).

The subject lands, being part of a military reservation, are inalienable and cannot be the subjects
of land registration proceedings

The application of the Bacases and the Chabons were filed on November 12, 1964 and May 8,
1974, respectively. Accordingly, the law governing the applications was Commonwealth Act
(C.A.) No. 141,63 as amended by RA 1942,64 particularly Sec. 48(b) which provided that:

Those who by themselves or through their predecessors in interest have been in open,
continuous, exclusive and notorious possession and occupation of agricultural lands of the public
domain, under a bona fide claim of acquisition of ownership, for at least thirty years immediately
preceding the filing of the application for confirmation of title except when prevented by war or
force majeure. These shall be conclusively presumed to have performed all the conditions
essential to a Government grant and shall be entitled to a certificate of title under the provisions
of this chapter.

As can be gleaned therefrom, the necessary requirements for the grant of an application for land
registration are the following:

1. The applicant must, by himself or through his predecessors-in-interest, have been in

possession and occupation of the subject land;

2. The possession and occupation must be open, continuous, exclusive and notorious;

3. The possession and occupation must be under a bona fide claim of ownership for at
least thirty years immediately preceding the filing of the application; and

4. The subject land must be an agricultural land of the public domain. As earlier stated, in
1938, President Quezon issued Presidential Proclamation No. 265, which took effect on
March 31, 1938, reserving for the use of the Philippine Army parcels of the public
domain situated in the barrios of Bulua and Carmen, then Municipality of Cagayan,
Misamis Oriental. The subject parcels of land were withdrawn from sale or settlement or
reserved for military purposes, "subject to private rights, if any there be."65
Such power of the President to segregate lands was provided for in Section 64(e) of the old
Revised Administrative Code and C.A. No. 141 or the Public Land Act. Later, the power of the
President was restated in Section 14, Chapter 4, Book III of the 1987 Administrative Code.
When a property is officially declared a military reservation, it becomes inalienable and outside
the commerce of man.66 It may not be the subject of a contract or of a compromise
agreement.67 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.68 In the case of Republic v. Court of Appeals and De Jesus,69 it
was even stated that

Lands covered by reservation are not subject to entry, and no lawful settlement on them can be
acquired.1âwphi1 The claims 0f persons who have settled on, occupied, and improved a parcel
of public land which is later included in a reservation are considered worthy of protection and are
usually respected, but where the President, as authorized by law, issues a proclamation reserving
certain lands and warning all persons to depart therefrom, this terminates any rights previously
acquired in such lands by a person who was settled thereon in order to obtain a preferential right
of purchase. And patents for lands which have been previously granted, reserved from sale, or
appropriate, are void.

Regarding the subject lots, there was a reservation respecting "private rights." In Republic v.
Estonilo,70 where the Court earlier declared that Lot No. 4318 was part of the Camp Evangelista
Military Reservation and, therefore, not registrable, it noted the proviso in Presidential
Proclamation No. 265 requiring the reservation to be subject to private rights as meaning that
persons claiming rights over the reserved land were not precluded from proving their claims.
Stated differently, the said proviso did not preclude the LRC from determining whether or not
the respondents indeed had registrable rights over the property.

As there has been no showing that the subject parcels of land had been segregated from the
military reservation, the respondents had to prove that the subject properties were alienable and
disposable land of the public domain prior to its withdrawal from sale and settlement and
reservation for military purposes under Presidential Proclamation No. 265. The question is of
primordial importance because it is determinative if the land can in fact be subject to acquisitive
prescription and, thus, registrable under the Torrens system. Without first determining the nature
and character of the land, all the other requirements such as the length and nature of possession
and occupation over such land do not come into play. The required length of possession does not
operate when the land is part of the public domain.

In this case, however, the respondents miserably failed to prove that, before the proclamation, the
subject lands were already private lands. They merely relied on such "recognition" of possible
private rights. In their application, they alleged that at the time of their application,71 they had
been in open, continuous, exclusive, and notorious possession of the subject parcels of land for at
least thirty (30) years and became its owners by prescription. There was, however, no allegation
or showing that the government had earlier declared it open for sale or settlement, or that it was
already pronounced as inalienable and disposable.
It is well-settled that land of the public domain is not ipso facto converted into a patrimonial or
private property by the mere possession and occupation by an individual over a long period of
time. In the case of Diaz v. Republic,72 it was written:

But even assuming that the land in question was alienable land before it was established as a
military reservation, there was nevertheless still a dearth of evidence with respect to its
occupation by petitioner and her predecessors-in-interest for more than 30 years. x x x.

x x x.

A mere casual cultivation of portions of the land by the claimant, and the raising thereon of
cattle, do not constitute possession under claim of ownership. In that sense, possession is not
exclusive and notorious as to give rise to a presumptive grant from the State. While grazing
livestock over land is of course to be considered with other acts of dominion to show possession,
the mere occupancy of land by grazing livestock upon it, without substantial enclosures, or other
permanent improvements, is not sufficient to support a claim of title thru acquisitive prescription.
The possession of public land, however long the period may have extended, never confers title
thereto upon the possessor because the statute of limitations with regard to public land does not
operate against the State unless the occupant can prove possession and occupation of the same
under claim of ownership for the required number of years to constitute a grant from the State.
[Emphases supplied]

In the recent case of Heirs of Mario Malabanan vs. Republic of the Philippines,73 the Court
emphasized that fundamental is the rule that lands of the public domain, unless declared
otherwise by virtue of a statute or law, are inalienable and can never be acquired by prescription.
No amount of time of possession or occupation can ripen into ownership over lands of the public
domain. All lands of the public domain presumably belong to the State and are inalienable.
Lands that are not clearly under private ownership are also presumed to belong to the State and,
therefore, may not be alienated or disposed.74

Another recent case, Diaz v. Republic,75 also held that possession even for more than 30 years
cannot ripen into ownership.76 Possession is of no moment if applicants fail to sufficiently and
satisfactorily show that the subject lands over which an application was applied for was indeed
an alienable and disposable agricultural land of the public domain. It would not matter even if
they declared it for tax purposes. In Republic v. Heirs of Juan Fabio,77 the rule was reiterated.
Thus:

Well-entrenched is the rule that unless a land is reclassified and declared alienable and
disposable, occupation in the concept of an owner, no matter how long, cannot ripen into
ownership and be registered as a title. Consequently, respondents could not have occupied the
Lot in the concept of an owner in 1947 and subsequent years when respondents declared the Lot
for taxation purposes, or even earlier when respondents' predecessors-in-interest possessed the
Lot, because the Lot was considered inalienable from the time of its declaration as a military
reservation in 1904. Therefore, respondents failed to prove, by clear and convincing evidence,
that the Lot is alienable and disposable.
Public lands not shown to have been classified as alienable and disposable land remain part of
the inalienable public domain. In view of the lack of sufficient evidence showing that the Lot
was already classified as alienable and disposable, the Lot applied for by respondents is
inalienable land of the public domain, not subject to registration under Section 14(1) of PD 1529
and Section 48(b) of CA 141, as amended by PD 1073. Hence, there is no need to discuss the
other requisites dealing with respondents' occupation and possession of the Lot in the concept of
an owner.

While it is an acknowledged policy of the State to promote the distribution of alienable public
lands to spur economic growth and in line with the ideal of social justice, the law imposes
stringent safeguards upon the grant of such resources lest they fall into the wrong hands to the
prejudice of the national patrimony. We must not, therefore, relax the stringent safeguards
relative to the registration of imperfect titles. [Emphases Supplied]

In Estonilo,78 where the Court ruled that persons claiming the protection of "private rights" in
order to exclude their lands from military reservations must show by clear and convincing
evidence that the properties in question had been acquired by a legal method of acquiring public
lands, the respondents therein failed to clearly prove that the lands over which they lay a claim
were alienable and disposable so that the same belonged and continued to belong to the State and
could not be subject to the commerce of man or registration. Specifically, the Court wrote:

Land that has not been acquired from the government, either by purchase or by grant, belongs to
the State as part of the public domain. For this reason, imperfect titles to agricultural lands are
subjected to rigorous scrutiny before judicial confirmation is granted. In the same manner,
persons claiming the protection of "private rights" in order to exclude their lands from military
reservations must show by clear and convincing evidence that the pieces of property in question
have been acquired by a legal method of acquiring public lands.

In granting respondents judicial confirmation of their imperfect title, the trial and the appellate
courts gave much weight to the tax declarations presented by the former. However, while the tax
declarations were issued under the names of respondents’ predecessors-in-interest, the earliest
one presented was issued only in 1954.19 The Director, Lands Management Bureau v. CA20
held thus:

"x x x. Tax receipts and tax declarations are not incontrovertible evidence of ownership.1âwphi1
They are mere indicia of [a] claim of ownership. In Director of Lands vs. Santiago:

‘x x x [I]f it is true that the original owner and possessor, Generosa Santiago, had been in
possession since 1925, why were the subject lands declared for taxation purposes for the first
time only in 1968, and in the names of Garcia and Obdin? For although tax receipts and
declarations of ownership for taxation purposes are not incontrovertible evidence of ownership,
they constitute at least proof that the holder had a claim of title over the property.’"

In addition, the lower courts credited the alleged prior possession by Calixto and Rosendo Bacas,
from whom respondents’ predecessors had purportedly bought the property. This alleged prior
possession, though, was totally devoid of any supporting evidence on record. Respondents’
evidence hardly supported the conclusion that their predecessors-in-interest had been in
possession of the land since "time immemorial."

Moreover, as correctly observed by the Office of the Solicitor General, the evidence on record
merely established the transfer of the property from Calixto Bacas to Nazaria Bombeo . The
evidence did not show the nature and the period of the alleged possession by Calixto and
Rosendo Bacas. It is important that applicants for judicial confirmation of imperfect titles must
present specific acts of ownership to substantiate their claims; they cannot simply offer general
statements that are mere conclusions of law rather than factual evidence of possession.

It must be stressed that respondents, as applicants, have the burden of proving that they have an
imperfect title to Lot 4318. Even the absence of opposition from the government does not relieve
them of this burden. Thus, it was erroneous for the trial and the appellate courts to hold that the
failure of the government to dislodge respondents, judicially or extrajudicially, from the subject
land since 1954 already amounted to a title. [Emphases supplied]

The ruling reiterated the long standing rule in the case of Director Lands Management Bureau v.
Court of Appeals,79

x x x. The petitioner is not necessarily entitled to have the land registered under the Torrens
system simply because no one appears to oppose his title and to oppose the registration of his
land. He must show, even though there is no opposition to the satisfaction of the court, that he is
the absolute owner, in fee simple. Courts are not justified in registering property under the
Torrens system, simply because there is no opposition offered. Courts may, even in the absence
of any opposition, deny the registration of the land under the Torrens system, upon the ground
that the facts presented did not show that the petitioner is the owner, in fee simple, of the land
which he is attempting to have registered.

The Court is not unmindful of the principle of immutability of judgments that nothing is more
settled in law than that once a judgment attains finality it thereby becomes immutable and
unalterable.80 Such principle, however, must yield to the basic rule that a decision which is null
and void for want of jurisdiction of the trial court is not a decision m contemplation of law and
can never become final and executory.81

Had the LRC given primary importance on the status of the land and not merely relied on the
testimonial evidence of the respondents without other proof of the alienability of the land, the
litigation would have already been ended and finally settled in accordance with law and
jurisprudence a long time ago.

WHEREFORE, the petition is GRANTED. The November 12, 2007 Decision and the May 15,
2008 Resolution of the Court of Appeals in CA G.R. CV No. 64142 are hereby REVERSED
and SET ASIDE. Judgment is rendered declaring the proceedings in the Land Registration Court
as NULL and VOID for lack of jurisdiction. Accordingly, Original Certificate of Title Nos. 0-
358 and 0-669 issued by the Registry of Deeds of Cagayan de Oro City are CANCELLED. Lot
No. 4354 and Lot No. 4357 are ordered reverted to the public domain.
SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

DIOSDADO M. PERALTA ROBERTO A. ABAD

Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

ATTESTATION

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13 Article VIII of the Constitution and the Division Chairperson s
Attestation I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes
1 Rollo, pp. 45-60. Penned by Associate Justice Rodrigo F. Lim, Jr., with Associate Justices Teresita Dy-
Liacco Flores and Michael P. Elbinias, concurring.
2 Id. at 61-62. Penned by Associate Justice Rodrigo F. Lim, Jr., with Associate Justices Michael P. Elbinias
and Mario V. Lopez, concurring.
3 RTC records, Vol. I, pp. 453-455.
4 Id. at 453-455.
5 Id. at 458.
6 Id. at 458-459.
7 Id. at 460-462.
8 Id. at 463-466.
9 RTC records, Vol. II, pp. 782-783.
10 Id. at 786.
11 Id. at 782-782A.
12 Id. at 788-790.
13 Id. at 791.
14 RTC records, Vol. I, pp. 1-9.
15 Adjudged as part of Camp Evangelista in Republic v. Estonilo, 512 Phil. 644 (2005).
16 RTC records, Vol. I, p. 4.
17 Adjudged as part of Camp Evangelista in Republic v. Estonilo, supra note 15.
18 RTC records, Vol. II, p. 4.
19 Id. at 2-12.
20 Id. at 6.
21 Id. at 7.
22 Id. at 6.
23 Id. at 7.
24 Rollo, p. 71.
25 Id.
26 Id.; Sec. 38, Act 495, The Land Registration Act.
27 Rollo, p. 73.
28 Id. at 74-75.
29 Id. at 74.
30 RTC records, Vol. I, pp. 620-625.
31 Id. at 645-647.
32 Id. at 680.
33 CA rollo, p. 00184.
34 Id.
35 Rollo, p. 50.
36 Id. at 51.
37 Id.
38 Id.
39 Id.
40 Id. at 55.
41 Id. at 59.
42 Id. at 16-17.
43 134 Phil. 217 (1968).
44 Citing Director of Lands v. Abanilla, 209 Phil. 294, 304 (1983).
45 Rollo, pp. 254-266.
46 Id.
47 512 Phil. 694 (2005) (where Lot 4318 was adjudged as part of Camp Evangelista).
48 Rollo, p. 261.
49 Id. at 254-266.
50 Id.
51 Id.
52 Id. at 240 to 251.
53 Id. at 240 to 251.
54 Id.
55 An act to provide for the adjudication and registration of titles to lands in the Philippine Islands (The
Land Registration Act).
56 148-A Phil. 448, 452-453 (1971).
57 439 Phil. 149 (2002), citing Martinez vs. Court of Appeals, 155 Phil. 591 (1974).
58 Padre v. Badillo, et al., G.R. No. 165423, January 19, 2011, 640 SCRA 50, 66.
59 Martinez v. Court of Appeals, 155 Phil. 591 (1974).
60 Rollo, p. 50.
61 Id. at 55.
62 188 Phil. 142 (1980).
63 Public Land Act (1936).
64 An act to amend subsection (b) of section forty-eight of commonwealth act numbered one hundred
forty-one, otherwise known as the Public Land Act (1957).
65 Republic v. Estonilo, 512 Phil. 644 (2005).
66 Republic v. Southside Homeowners Association, 534 Phil. 8 (2006).
67 Id.
 68 Laurel v. Garcia, G.R. No. 92013, July 25, 1990, 187 SCRA 797, 808.
69 165 Phil. 142 (1976).
70 Supra note 65.
71 On November 12, 1964, in the case of the Bacases and May 8, 1974, in the case of the Chabons.
72 G.R. No. 181502, February 2, 2010, 611 SCRA 403, 419.
73 G.R. No. 179987, September 3, 2013 (Resolution denying Motion for Reconsideration).
74 Heirs of Mario Malabanan v. Republic, G.R. No. 179987, September 3, 2013.
75 G.R. No. 181502, February 2, 2010, 611 SCRA 403.
76 Id.
77 G.R. No. 159589, December 23, 2008, 575 SCRA 51.
78 Republic v. Estonilo, supra note 65, [where the Court adjudged Lot 4318 as part of Camp Evangelista].
79 381 Phil. 761 2000), citing Director of Lands v. Agustin 42 Phil. 227. 229 (1921).
80 Serrano v. Ambassador Hotel Inc. G.R. No. 197003, February 11, 2013, 690 SCRA 226.
81 Lagunilla v. Velasco, G.R. No. 169276, June 16, 2009, 589 SCRA 224, 231.

SECOND DIVISION

G.R. No. 185023 August 24, 2011

CITY OF PASIG, REPRESENTED BY THE CITY TREASURER and THE CITY

ASSESSOR, Petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE PRESIDENTIAL
COMMISSION ON GOOD GOVERNMENT, Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition1 for review on certiorari under Rule 45 of the Rules of Court. The petition
challenges the 17 October 2008 Decision2 of the Court of Appeals in CA-G.R. SP No. 97498,
affirming the 6 November 2006 Decision3 of the Regional Trial Court (RTC), National Capital
Judicial Region, Pasig City, Branch 155, in SCA No. 2901.

The Facts

Mid-Pasig Land Development Corporation (MPLDC) owned two parcels of land, with a total
area of 18.4891 hectares, situated in Pasig City. The properties are covered by Transfer
Certificate of Title (TCT) Nos. 337158 and 469702 and Tax Declaration Nos. E-030-01185 and
E-030-01186 under the name of MPLDC. Portions of the properties are leased to different
business establishments.

In 1986, the registered owner of MPLDC, Jose Y. Campos (Campos), voluntarily surrendered
MPLDC to the Republic of the Philippines.
On 30 September 2002, the Pasig City Assessor’s Office sent MPLDC two notices of tax
delinquency for its failure to pay real property tax on the properties for the period 1979 to 2001
totaling ₱256,858,555.86. In a letter dated 29 October 2002, Independent Realty Corporation
(IRC) President Ernesto R. Jalandoni (Jalandoni) and Treasurer Rosario Razon informed the
Pasig City Treasurer that the tax for the period 1979 to 1986 had been paid, and that the
properties were exempt from tax beginning 1987.

In letters dated 10 July 2003 and 8 January 2004, the Pasig City Treasurer informed MPLDC and
IRC that the properties were not exempt from tax. In a letter dated 16 February 2004, MPLDC
General Manager Antonio Merelos (Merelos) and Jalandoni again informed the Pasig City
Treasurer that the properties were exempt from tax. In a letter dated 11 March 2004, the Pasig
City Treasurer again informed Merelos that the properties were not exempt from tax.

On 20 October 2005, the Pasig City Assessor’s Office sent MPLDC a notice of final demand for
payment of tax for the period 1987 to 2005 totaling ₱389,027,814.48. On the same day, MPLDC
paid ₱2,000,000 partial payment under protest.

On 9 November 2005, MPLDC received two warrants of levy on the properties. On 1 December
2005, respondent Republic of the Philippines, through the Presidential Commission on Good
Government (PCGG), filed with the RTC a petition for prohibition with prayer for issuance of a
temporary restraining order or writ of preliminary injunction to enjoin petitioner Pasig City from
auctioning the properties and from collecting real property tax.

On 2 December 2005, the Pasig City Treasurer offered the properties for sale at public auction.
Since there was no other bidder, Pasig City bought the properties and was issued the
corresponding certificates of sale.

On 19 December 2005, PCGG filed with the RTC an amended petition for certiorari, prohibition
and mandamus against Pasig City. PCGG prayed that: (1) the assessments for the payment of
real property tax and penalty be declared void; (2) the warrants of levy on the properties be
declared void; (3) the public auction be declared void; (4) the issuance of certificates of sale be
declared void; (5) Pasig City be prohibited from assessing MPLDC real property tax and penalty;
(6) Pasig City be prohibited from collecting real property tax and penalty from MPLDC; (7)
Pasig City be ordered to assess the actual occupants of the properties real property tax and
penalty; and (8) Pasig City be ordered to collect real property tax and penalty from the actual
occupants of the properties.

The RTC’s Ruling

In its 6 November 2006 Decision, the RTC granted the petition for certiorari, prohibition and
mandamus. The RTC held:

The primordial issue to be resolved in the present case is whether or not respondent City of
Pasig, through the City Treasurer and the City Assessor, acted with grave abuse of discretion
amounting to lack or excess of jurisdiction when it assessed, levied and sold in public auction the
"payanig" properties for non-payment of real property taxes.
However, before dwelling on the merits of the main issue, certain matters need to be addressed
by the Court, to wit:

1. Does the Court have jurisdiction over the instant petition?

2. Who owns the so-called "payanig" properties that were subjected to payment of real
property taxes by respondent?

The Court maintains that it is not precluded from assuming jurisdiction over the instant amended
petition which involves the legality of the assailed actions by respondent in assessing and
collecting real property tax on the properties owned by the Republic of the Philippines. It is a
jurisprudential doctrine that the issue is purely legal when the authority of the respondent to
assess and collect real property taxes on the subject properties is being questioned (Ty vs.
Trampe, 250 SCRA 500).

xxxx

In the instant proceeding, there is no dispute that the properties are surrendered ill-gotten wealth
of former President Marcos. As such, the same assumes [sic] a public character and thus belongs
[sic] to the Republic of the Philippines. x x x

xxxx

Hence, upon the voluntary surrender by Jose Y. Campos, the controlling owner of Mid-Pasig and
Independent Realty Corporation, of the "payanig" properties to PCGG, a clear admission that
these properties were part of the ill-gotten wealth of former President Marcos was already
evident. As such, there was already constructive reconveyance to the State, which immediately
placed these reconveyed properties under the control and stewardship of the PCGG as
representative of the Republic of the Philippines. Under such special circumstance, these
voluntary surrendered properties had already belonged to the State.

xxxx

Premised on the foregoing, the "payanig" properties, being part of the recovered ill-gotten wealth
of President Marcos, and therefore are owned by the State itself, are exempt from payment of
real property taxes. It is only when the beneficial use of said properties has been granted to a
taxable person that the same may be subject to imposition of real property tax.

Furthermore, in real estate taxation, the unpaid tax attaches to the property and is chargeable
against the taxable person who had actual or beneficial use and possession of it regardless of
whether or not he is the owner (Testate Estate of Concordia T. Lim vs. City of Manila, 182
SCRA 482).

In the instant case, the taxable persons being referred to are the lessees occupying and/or doing
business therein and have beneficial use over portions within the "payanig" properties.
xxxx

Consequently, there can be no iota of doubt that respondent City of Pasig abused its discretion by
committing the acts sought to be annulled herein despite knowledge of the fact that ownership
over the subject properties belong to petitioner. But what is more appalling in the instant action
is that such abuse was capriciously committed by respondent City of Pasig against the sovereign
State itself from where that atxing local government unit derives its very existence. The spring
cannot rise higher than its source.

xxxx

In sum, the acts of respondent in assessing real property taxes on properties owned and
controlled by the Republic of the Philippines, in collecting taxes from Mid-Pasig in lieu of the
actual occupants or beneficial users of certain portions thereof, and in auctioning said properties
in favor of respondent, followed by the corresponding certificate of sale, are all unequivocally
tainted with grave abuse of discretion amounting to lack or excess of jurisdiction.

WHEREFORE, in the light of the foregoing, the instant Amended Petition is hereby GRANTED.

Accordingly, the following acts of respondent are hereby ANNULLED and SET ASIDE.

1. the assessment dated September 30, 2002 for the payment of real property taxes and
penalties made by the City of Pasig on two (2) parcels of land covered by TCT No.
337158 and TCT No. 469702 registered under the name of Mid-Pasig;

2. the warrants of levy dated November 8, 2005 issued thereon by the City of Pasig;

3. the subsequent public auction sale of subject properties held on December 2, 2005
followed by the issuance of the corresponding Certificate of Sale;

FURTHER, the City of Pasig is hereby PROHIBITED from further:

1. Assessing real property taxes and penalties charges [sic] on the said properties;

2. Collecting said taxes and penalty charges from the State;

3. Disposing or encumbering the subject properties or any portion thereof;

FURTHER, the City of Pasig is hereby COMMANDED:

1. To return or effect the refund of the amount of Two Million Pesos (Php 2,000,000.00)
paid under protest by Mid-Pasig Land Development Corporation on October 20, 2005, or
credit the same amount to any outstanding tax liability that said corporation may have
with the City of Pasig; and
 2. To assess and collect from the actual occupants or beneficial users of the subject
properties, and not from the State, whatever real property taxes and penalties that may be
due on the respective areas occupied by them.

SO ORDERED.4

Pasig City appealed to the Court of Appeals.

The Court of Appeals’ Ruling

In its 31 March 2008 Decision,5 the Court of Appeals set aside the RTC’s 6 November 2006
Decision. The Court of Appeals held:

We find nothing in PCGG’s petition that supports its claim regarding Pasig City’s alleged grave
abuse of discretion. It is undisputed that the subject parcels of land are registered in the name of
Mid-Pasig, a private entity. Although the government, through the PCGG have [sic] sequestered
Mid-Pasig and all its assets including the subject parcels of land, the sequestration per se, did not
operate to convert Mid-Pasig and its properties to public property. "The power of the PCGG to
sequester property claimed to be ‘ill-gotten’ means to place or cause to be placed under its
possession or control said property, or any building or office wherein any such property and any
records pertaining thereto may be found, including ‘business enterprises and entities’ — for the
purpose of preventing the destruction, concealment or dissipation of, and otherwise conserving
and preserving the same — until it can be determined, through appropriate judicial proceedings,
whether the property was in truth ‘ill-gotten,’ i.e., acquired through or as a result of improper or
illegal use of or the conversion of funds belonging to the Government or any of its branches,
instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of
official position, authority, relationship, connection or influence, resulting in unjust enrichment
of the ostensible owner and great damage and prejudice to the State." x x x As such, prior to a
valid court declaration the "PCGG cannot perform acts of strict ownership of [sic] sequestered
property. It is a mere conservator." In view thereof and the fact that Mid-Pasig and its properties
have not been validly declared by the Sandiganbayan as "ill-gotten" wealth, the same are not yet
public properties. The PCGG even admitted that the transfer certificates of title covering the
subject parcels of land in the name of Mid-Pasig have not been cancelled due to an order of the
Sandiganbayan. The trial court also found that the subject parcels of land are the subject of
litigation between Ortigas and Company Limited Partnership and the PCGG in Civil Case No.
0093 pending before the Sandiganbayan. These facts clearly show that the Sandiganbayan has
not validly declared yet that the subject parcels of land are "ill-gotten" wealth. If so, they cannot
be claimed yet as properties of the State: they remain properties of a private entity. Thus, Pasig
City through its City Assessor and City Treasurer did not act with grave abuse of discretion when
it issued real property tax assessment on the subject parcels of land.

Even admitting that the subject parcels of land are already owned by the State, we still see no
grave abuse of discretion on the part of Pasig City when it issued the challenged tax assessment,
for it is well settled that the test of exemptions from taxation is the use of the property for
purposes mentioned in the Constitution. The owner of the property does not matter. Even if he is
not a tax-exempt entity, as long as the property is being used for religious, charitable or
educational purposes, the property is exempt from tax. Conversely, even if the government owns
the property, if the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person, the property is subject to tax. Here, the PCGG admitted that portions of the
subject properties were leased to private entities engaged in commercial dealings. As well, the
trial court found that lessees occupy different areas of the subject parcels of land beginning 1992
until 2005. Therefore, considering that portions of the subject parcels of land are used for
commercial purposes, the duty imposed by law to owners and administrators of real property to
declare the same for tax purposes and the fact that the tax declarations over the subject parcels of
land are in the name of Mid-Pasig, again, Pasig City did not act with grave abuse of discretion
when it issued the challenged tax assessment.

The foregoing snowball to one conclusion — the allegations in PCGG’s petition imputing grave
abuse of discretion on the part of Pasig City, acting through the City Assessor and City
Treasurer, in the assessment and collection of the taxes were made in order to justify the filing of
the petition for certiorari, prohibition and mandamus with the trial court.

The extraordinary remedies of certiorari, prohibition and mandamus may be resorted to only
when there is no other plain, available, speedy and adequate remedy in the course of law. Where
administrative remedies are available, petitions for the issuance of these peremptory writs do not
lie in order to give the administrative body the opportunity to decide the matter by itself correctly
and to prevent unnecessary and premature resort to courts.

Republic Act No. 7160 or the Local Government Code of 1991, clearly sets forth the
administrative remedies available to a taxpayer or real property owner who is not satisfied with
the assessment or reasonableness of the real property tax sought to be collected. The Supreme
Court outlined said remedies, to wit:

Should the taxpayer/real property owner question the excessiveness or reasonableness of the
assessment, Section 252 directs that the taxpayer should first pay the tax due before his protest
can be entertained. There shall be annotated on the tax receipts the words "paid under protest."
It is only after the taxpayer has paid the tax due that he may file a protest in writing within thirty
days from payment of the tax to the Provincial, City or Municipal Treasurer, who shall decide
the protest within sixty days from receipt. In no case is the local treasurer obliged to entertain
the protest unless the tax due has been paid.

If the local treasurer denies the protest or fails to act upon it within the 60-day period provided
for in Section 252, the taxpayer/real property owner may then appeal or directly file a verified
petition with the LBAA within sixty days from denial of the protest or receipt of the notice of
assessment, as provided in Section 226 of R.A. No. 7160[.]

And, if the taxpayer is not satisfied with the decision of the LBAA, he may elevate the same to the
CBAA, which exercises exclusive jurisdiction to hear and decide all appeals from the decisions,
orders and resolutions of the Local Boards involving contested assessments of real properties,
claims for tax refund and/or tax credits or overpayments of taxes. An appeal may be taken to the
CBAA by filing a notice of appeal within thirty days from receipt thereof.
From the Central Board Assessment Appeals, the dispute may then be taken to the Court of Tax
Appeals by filing a verified petition for review under Rule 42 of the Revised Rules of Court; to
the Court of tax Appeals en banc; and finally to the Supreme Court via a petition for review on
certiorari pursuant to Rule 45 of the Revised Rules of Court.

We are not convinced with PCGG’s stance that their recourse of filing the petition for certiorari,
prohibition and mandamus before the trial court is proper as they are questioning not merely the
correctness of the tax assessment but the actions of Pasig City, through its City Assessor and
City Treasurer, which were done in grave abuse of discretion amounting to lack or excess of
jurisdiction.

The well-established rule is that allegations in the complaint and the character of the relief
sought determine the nature of an action. A perusal of the petition before the trial court plainly
shows that what is actually being assailed is the correctness of the assessments made by the City
Assessor of Pasig City on the subject parcels of land. PCGG claims, among others, that: 1) the
subject parcels of land are exempt from real property taxation as they are public property; 2)
even if the subject parcels of land are subject to tax, as the beneficial use thereof was granted to
private persons and entities, only the portion thereof used for commerce is subject to tax and the
users thereof are the ones liable to pay the tax; and 3) the right of Pasig City to collect the real
property taxes pertaining to 1987 to 1998 has already prescribed. These claims essentially
involve questions of fact, which are improper in a petition for certiorari, prohibition and
mandamus; hence, the petition should have been brought, at the very first instance, to the Local
Board Assessment Appeals, which has authority to rule on the objections of any interested party
who is not satisfied with the action of the assessor. Under the doctrine of primacy of
administrative remedies, an error in the assessment must be administratively pursued to the
exclusion of ordinary courts whose decisions would be void for lack of jurisdiction.

Granting that the assessor’s authority and the legality of the assessment are indeed an issue, the
proper remedy is a suit for the refund of the real property tax after paying the same under protest.
It must be pointed out that in order for the trial court to resolve the instant petition, the issues of
the correctness of the tax assessment and collection must also necessarily be dealt with; hence, a
petition for certiorari, prohibition and mandamus is not the proper remedy. x x x [T]he resolution
of the issues raised in the instant case involve examination and determination of relevant and
material facts, i.e. facts relating to the ownership of the subject parcels of land, the portion of the
subject parcel of land used for commercial purposes and the identities of the lessees and the users
thereof. Since resolution of factual issues is not allowed in a petition for certiorari, prohibition
and mandamus, the trial court is precluded from entertaining the petition.

Finally, Section 252 of the R.A. No. 7160 requires payment under protest in assailing real
property tax assessment. Even an appeal shall not suspend the collection of the atx assessed
without prejudice to a later adjustment pending the outcome of the appeal. This principle is
consistent with the time-honored principle that taxes are the lifeblood of the nation. But the
PCGG failed to pay the tax assessment prior to questioning it before the trial court; hence, the
trial court should have dismissed PCGG’s petition in line with the Supreme Court
pronouncement that a trial court has no jurisdiction to entertain a similar petition absent payment
under protest.
In conclusion and taking all the foregoing into account, we hold that the trial court had no
jurisdiction to take cognizance and decide PCGG petition for certiorari, prohibition and
mandamus; the trial court should have dismissed the petition.6

PCGG filed a motion for reconsideration. In its 17 October 2008 Decision, the Court of Appeals
reversed itself. The Court of Appeals held:

At the outset, although as a rule, administrative remedies must first be exhausted before ersort to
judicial action can prosper, there is a well-settled exception in cases where the controversy does
not involve questions of fact but only of law. We find that the Republic has shown a cause for
the application of the foregoing exception. Essentially, the Republic has raised a pure question of
law — whether or not the City of Pasig has the power to impose real property tax on the subject
properties, which are owned by the State. It bears stressing that the Republic did not raise any
question concerning the amount of the real property tax or the determination thereof. Thus,
having no plain, speedy, and adequate remedy in law, the Republic correctly resorted to judicial
action via the petition for certiorari, prohibition, and mandamus, to seek redress.

We are convinced that the subject properties were not sequestered by the government so as to
amount to a deprivation of property without due process of law; instead, they were voluntarily
surrendered to the State by Campos, a self-admitted crony of the then President Marcos. The
relinquishment of the subject properties to the State as ill-gotten wealth of Marcos, as recognized
by the Supreme Court, makes a judicial declaration that the same were ill-gotten unnecessary. By
virtue of said relinquishment, the State correctly exercised dominion over the subject properties.
Indubitably, the subject properties, being ill-gotten wealth, belong to the State. x x x By its
nature, ill-gotten wealth is owned by the State. As a matter of fact, the Republic continues to
exercise dominion over the subject properties.7

Hence, the present petition.

Issues

Pasig City raises as issues that the lower courts erred in granting PCGG’s petition for certiorari,
prohibition and mandamus and in ordering Pasig City to assess and collect real property tax from
the lessees of the properties.

The Court’s Ruling

The petition is partly meritorious.

As correctly found by the RTC and the Court of Appeals, the Republic of the Philippines owns
the properties. Campos voluntarily surrendered MPLDC, which owned the properties, to the
Republic of the Philippines. In Republic of the Philippines v. Sandiganbayan,8 the Court stated:

x x x Jose Y. Campos, "a confessed crony of former President Ferdinand E. Marcos," voluntarily
surrendered or turned over to the PCGG the properties, assets and corporations he held in trust
for the deposed President. Among the corporations he surrendered were the Independent Realty
Corporation and the Mid-Pasig Land Development Corporation.9

In Republic of the Philippines v. Sandiganbayan,10 the Court stated:

The antecedent facts are stated by the Solicitor General as follows:

xxxx

"3. Sometime in the later part of August 1987, defendant Jose D. Campos, Jr., having been
served with summons on August 5, 1987, filed with the respondent Court an undated
‘Manifestation and Motion to Dismiss Complaint with Respect to Jose D. Campos’ praying that
he be removed as party defendant from the complaint on the grounds that he had ‘voluntarily
surrendered or turned over any share in his name on [sic] any of the corporations referred to,
aside from disclaiming any interest, ownership or right thereon to the Government of the
Republic of the Philippines’ and that he was ‘entitled to the immunity granted by the Presidential
Commission on Good Government pursuant to Executive Order No. 14, under the Commission’s
Resolution dated May 28, 1986 to Mr. Jose Y. Campos and his family’ he ‘being a member of
the immediate family of Jose Y. Campos.’

xxxx

In the instant case, the PCGG issued a resolution dated May 28, 1986, granting immunity from
both civil and criminal prosecutions to Jose Y. Campos and his family. The pertinent provisions
of the resolution read as follows:

"3.0. In consideration of the full cooperation of Mr. Jose Y. Campos to this Commission, his
voluntary surrender of the properties and assets disclosed and declared by him to belong to
deposed President Ferdinand E. Marcos to the Government of the Republic of the Philippines,
his full, complete and truthful disclosures, and his commitment to pay a sum of money as
determined by the Philippine Government, this Commission has decided and agreed:

xxxx

Undoubtedly, this resolution embodies a compromise agreement between the PCGG on one hand
and Jose Y. Campos on the other. Hence, in exchange for the voluntary surrender of the ill-
gotten properties acquired by the then President Ferdinand E. Marcos and his family which were
in Jose Campos’ control, the latter and his family were given full immunity in both civil and
criminal prosecutions. x x x

xxxx

By virtue of the PCGG’s May 28, 1986 resolution, Jose Campos, Jr. was given full immunity
from both civil and criminal prosecutions in exchange for the "full cooperation of Mr. Jose Y.
Campos to this Commission, his voluntary surrender of the properties and assets disclosed and
declared by him to belong to deposed President Ferdinand E. Marcos to the Government of the
Republic of the Philippines, his full, complete and truthful disclosures, and his commitment to
pay a sum of money as determined by the Philippine Government." In addition, Campos, Jr. had
already waived and surrendered to the Republic his registered equity interest in the
Marcos/Romualdez corporations involved in the civil case.11

Even as the Republic of the Philippines is now the owner of the properties in view of the
voluntary surrender of MPLDC by its former registered owner, Campos, to the State, such
transfer does not prevent a third party with a better right from claiming such properties in the
proper forum. In the meantime, the Republic of the Philippines is the presumptive owner of the
properties for taxation purposes.

Section 234(a) of Republic Act No. 7160 states that properties owned by the Republic of the
Philippines are exempt from real property tax "except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person." Thus, the portions of the
properties not leased to taxable entities are exempt from real estate tax while the portions of the
properties leased to taxable entities are subject to real estate tax. The law imposes the liability to
pay real estate tax on the Republic of the Philippines for the portions of the properties leased to
taxable entities. It is, of course, assumed that the Republic of the Philippines passes on the real
estate tax as part of the rent to the lessees.

In Philippine Fisheries Development Authority v. Central Board of Assessment Appeals,12 the

Court held:

In the 2007 case of Philippine Fisheries Development Authority v. Court of Appeals, the Court
resolved the issue of whether the PFDA is a government-owned or controlled corporation or an
instrumentality of the national government. In that case, the City of Iloilo assessed real
property taxes on the Iloilo Fishing Port Complex (IFPC), which was managed and
operated by PFDA. The Court held that PFDA is an instrumentality of the government and
is thus exempt from the payment of real property tax, thus:

The Court rules that the Authority is not a GOCC but an instrumentality of the national
government which is generally exempt from payment of real property tax. However, said
exemption does not apply to the portions of the IFPC which the Authority leased to private
entities. With respect to these properties, the Authority is liable to pay property tax.
Nonetheless, the IFPC, being a property of public dominion cannot be sold at public auction to
satisfy the tax delinquency.

xxxx

This ruling was affirmed by the Court in a subsequent PFDA case involving the Navotas Fishing
Port Complex, which is also managed and operated by the PFDA. In consonance with the
previous ruling, the Court held in the subsequent PFDA case that the PFDA is a government
instrumentality not subject to real property tax except those portions of the Navotas
Fishing Port Complex that were leased to taxable or private persons and entities for their
beneficial use.
Similarly, we hold that as a government instrumentality, the PFDA is exempt from real property
tax imposed on the Lucena Fishing Port Complex, except those portions which are leased to
private persons or entities.13 (Emphasis supplied)

In Government Service Insurance System v. City Treasurer of the City of Manila,14 the Court
held:

x x x The tax exemption the property of the Republic or its instrumentalities carries ceases
only if, as stated in Sec. 234(a) of the LGC of 1991, "beneficial use thereof has been
granted, for a consideration or otherwise, to a taxable person." GSIS, as a government
instrumentality, is not a taxable juridical person under Sec. 133(o) of the LGC. GSIS, however,
lost in a sense that status with respect to the Katigbak property when it contracted its
beneficial use to MHC, doubtless a taxable person. Thus, the real estate tax assessment of
Php 54,826,599.37 covering 1992 to 2002 over the subject Katigbak property is valid
insofar as said tax delinquency is concerned as assessed over said property.15 (Emphasis
supplied)

In Manila International Airport Authority v. Court of Appeals,16 the Court held:

x x x Section 234(a) of the Local Government Code states that real property owned by the
Republic loses its tax exemption only if the "beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person." MIAA, as a government instrumentality, is
not a taxable person under Section 133(o) of the local Government Code. Thus, even if we
assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and
Buildings, such fact does not make these real properties subject to real estate tax.

However, portions of the Airport Lands and Buildings that MIAA leases to private entities
are not exempt from real estate tax. For example, the land area occupied by hangars that
MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has
granted the beneficial use of such land area for a consideration to a taxable person and
therefore such land area is subject to real estate tax.17 (Emphasis supplied)

In Lung Center of the Philippines v. Quezon City,18 the Court held:

x x x While portions of the hospital are used for the treatment of patients and the dispensation of
medical services to them, whether paying or non-paying, other portions thereof are being leased
to private individuals for their clinics and a canteen. Further, a portion of the land is being leased
to a private individual for her business enterprise under the business name "Elliptical Orchids
and Garden Center." Indeed, the petitioner’s evidence shows that it collected ₱1,136,483.45 as
rentals in 1991 and ₱1,679,999.28 for 1992 from the said lessees.

Accordingly, we hold that the portions of the land leased to private entities as well as those
parts of the hospital leased to private individuals are not exempt from such taxes. On the
other hand, the portions of the land occupied by the hospital and portions of the hospital used for
its patients, whether paying or non-paying, are exempt from real property taxes.19 (Emphasis
supplied)
Article 420 of the Civil Code classifies as properties of public dominion those that are "intended
for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
banks, shores, roadsteads" and those that "are intended for some public service or for the
development of the national wealth." Properties of public dominion are not only exempt from
real estate tax, they are exempt from sale at public auction. In Heirs of Mario Malabanan v.
Republic,20 the Court held that, "It is clear that property of public dominion, which generally
includes property belonging to the State, cannot be x x x subject of the commerce of man."21

In Philippine Fisheries Development Authority v. Court of Appeals,22 the Court held:

x x x [T]he real property tax assessments issued by the City of Iloilo should be upheld only with
respect to the portions leased to private persons. In case the Authority fails to pay the real
property taxes due thereon, said portions cannot be sold at public auction to satisfy the tax
delinquency. In Chavez v. Public Estates Authority it was held that reclaimed lands are lands
of the public dominion and cannot, without Congressional fiat, be subject of a sale, public
or private x x x.

In the same vein, the port built by the State in the Iloilo fishing complex is a property of the
public dominion and cannot therefore be sold at public auction. Article 420 of the Civil
Code, provides:

"Article 420. The following things are property of public dominion:

1. Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;

2. Those which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth."

The Iloilo fishing port which was constructed by the State for public use and/or public
service falls within the term "port" in the aforecited provision. Being a property of public
dominion the same cannot be subject to execution or foreclosure sale. In like manner, the
reclaimed land on which the IFPC is built cannot be the object of a private or public sale without
Congressional authorization.23 (Emphasis supplied)

In Manila International Airport Authority,24 the Court held:

x x x [T]he Airport Lands and Buildings of MIAA are properties devoted to public use and thus
are properties of public dominion. Properties of public dominion are owned by the State or the
Republic. Article 420 of the Civil Code provides:

Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;
 (2) Those which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth.

The term "ports x x x constructed by the Sate" includes airports and seaports. The Airport Lands
and Buildings of MIAA are intended for public use, and at the very least intended for public
service. Whether intended for public use or public service, the Airport Lands and Buildings are
properties of public dominion. As properties of public dominion, the the Airport lands and
Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a)
of the Local Government Code.

xxxx

Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted
to public use, are properties of public dominion and thus owned by the State or the Republic of
the Philippines. Article 420 specifically mentions "ports x x x constructed by the State," which
includes public airports and seaports, as properties of public dominion and owned by the
Republic. As properties of public dominion owned by the Republic, there is no doubt whatsoever
that the Airport Lands and Buildings are expressly exempt from real estate tax under Section
234(a) of the local Government Code. This Court has also repeatedly ruled that properties of
public dominion are not subject to execution or foreclosure sale.25 (Emphasis
supplied)lawphi1

In the present case, the parcels of land are not properties of public dominion because they are not
"intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by
the State, banks, shores, roadsteads." Neither are they "intended for some public service or for
the development of the national wealth." MPLDC leases portions of the properties to different
business establishments. Thus, the portions of the properties leased to taxable entities are not
only subject to real estate tax, they can also be sold at public auction to satisfy the tax
delinquency.

In sum, only those portions of the properties leased to taxable entities are subject to real estate
tax for the period of such leases. Pasig City must, therefore, issue to respondent new real
property tax assessments covering the portions of the properties leased to taxable entities. If the
Republic of the Philippines fails to pay the real property tax on the portions of the properties
leased to taxable entities, then such portions may be sold at public auction to satisfy the tax
delinquency.

WHEREFORE, the petition is PARTIALLY GRANTED. The Court SETS ASIDE the 17
October 2008 Decision of the Court of Appeals in CA-G.R. SP No. 97498 and declares VOID
the 30 September 2002 real property tax assessment issued by Pasig City on the subject
properties of Mid-Pasig Land Development Corporation, the 8 November 2005 warrants of levy
on the properties, and the 2 December 2005 auction sale. Pasig City is DIRECTED to issue to
respondent new real property tax assessments covering only the portions of the properties
actually leased to taxable entities, and only for the period of such leases. Interests and penalties
on such new real property tax assessment shall accrue only after receipt of such new assessment
by respondent.
SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

ARTURO D. BRION
Associate Justice

DIOSDADO M. PERALTA* JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

JOSE C. MENDOZA**
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s
Attestation, I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

Footnotes
* Designated Acting Member per Special Order No. 1067 dated 23 August 2011.
** Designated Acting Member per Special Order No. 1066 dated 23 August 2011.
1
Rollo, pp. 9-38.
2
Id. at 41-48. Penned by Associate Justice Marlene Gonzales-Sison, with Associate Justices Amelita G.
Tolentino and Celia C. Librea-Leagogo concurring.
3
Id. at 49-60. Penned by Judge Luis R. Tongco.
4
Id. at 51-60.
5
Id. at 62-74.
6
Id. at 67-73.
7
Id. at 44-45.
8
499 Phil. 138 (2005).
9
Id. at 141.
 10
G.R. No. 84895, 4 May 1989, 173 SCRA 72.
11
Id. at 76-85.
12
G.R. No. 178030, 15 December 2010, 638 SCRA 644.
13
Id. at 650-651.
14
G.R. No. 186242, 23 December 2009, 609 SCRA 330.
15
Id. at 350.
16
G.R. No. 155650, 20 July 2006, 495 SCRA 591.
17
Id. at 629-630.
18
G.R. No. 144104, 29 June 2004, 433 SCRA 119.
19
Id. at 138.
20
G.R. No. 179987, 29 April 2009, 587 SCRA 172.
21
Id. at 202.
22
G.R. No. 169836, 31 July 2007, 528 SCRA 706.
23
Id. at 716-718.
24
Supra note 16.
25
Id. at 644-646.

EN BANC

G.R. No. L-23481 June 29, 1972

BISHOP OF CALBAYOG, Mons. Miguel F. Acebedo, applicant-appellant,

vs.
THE DIRECTOR OF LANDS and THE MUNICIPALITY OF CATARMAN, SAMAR,
oppositors-appellees.

Padilla Law Office for applicant-appellant.

Provincial Fiscal Eliseo de Veyra and Assistant Provincial Fiscal Espiridion R. Lim of
Samar for oppositors-appellees.

MAKALINTAL, J.:p

This is an appeal from the decision of the Court of First Instance of Samar in Land
Registration Case No. 3448 involving three parcels of land located in Catarman, Samar
(denominated as Lots 1, 2 and 3), titles to which were sought to be confirmed and
registered in favor of the Bishop of Calbayog. The lower court adjudicated Lot 2 in favor
of the Municipality of Catarman and declared the eastern portion of Lot 1, and the
portions of Nalazon street and Anunciacion street traversing said Lot 1 and Lot 2, as
public plaza and public thoroughfares, respectively, and hence not subject to
registration.

The petition for registration was filed by the Bishop of Calbayog, as a corporation sole,
on March 27, 1953, alleging open, continuous, exclusive and notorious possession,
since the Spanish regime, of three parcels of land known as Lot 1 and 2 in the survey
plan Exhibit D, dated September 14-15, 1951, and Lot 3 in the survey plan Exhibit E,
the first two lots situated in the poblacion of Catarman, Samar, and the third in barrio
Cawayan.

Opposition to the application was filed by the Director of Lands with respect to the three
lots on October 1, 1953, and by the Municipality of Catarman with respect to Lot 2
during the survey thereof.

On October 15, 1955 the lower court issued an order of general default except as
against the aforementioned oppositors. In the same order the Municipality of Catarman
was given 5 days from notice within which to submit in proper form its opposition with
respect to Lot 2. Copy of the order of general default was received by the municipal
secretary on October 18, 1955, and on October 21 the Municipality of Catarman filed its
formal opposition as ordered. On November 28, 1956 it filed an amended opposition,
including therein the eastern portion of Lot 1 and portions of Nalazon street and
Anunciacion street traversing said Lot 1. A second amended opposition was filed on
June 15, 1957, particularly describing Lot 1 and Lot 2 and alleging that the eastern
portion of Lot 1, being a municipal plaza, was registrable in favor of the municipality.

After initial hearing the lower court, in an order dated June 15, 1957, denied the
amendment on the ground that the proper procedure, which was by means of petition
for relief from the order of general default, had not been resorted to.

After trial on the merits the lower court rendered its decision on April 18, 1964 (1)
ordering the applicant to segregate from Lot I Nalazon street and Anunciacion street as
public thoroughfares and the eastern portion of Lot 1, beginning from Nalazon street up
to Mendiola street, as public plaza of the Municipality of Catarman; (2) confirming the
imperfect title of the applicant over the remaining portion of Lot 1, with all the
improvements existing thereon, and ordering that the same be registered in the name of
the Bishop of Calbayog as a corporation sole; (3) adjudicating Lot 2, together with all
the improvements existing thereon, except the portion of Nalazon street along the
eastern boundary of the lot, in favor of the Municipality of Catarman; and (4) confirming
the applicant's title over Lot 3 and ordering that the same be registered in the name of
the Bishop of Calbayog.

The Bishop of Calbayog appealed.

The evidence discloses the following pertinent facts: The survey plan presented by the
applicant as Exhibit D, which was executed on September 14-15, 1951, shows that the
entire area of Lot 1 is 17,571 square meters, more o less. It is bounded on the north by
a provincial road (now Rizal St.), on the east by Mendiola St., on the south by Bonifacio
St., and on the west by a national road (Trece Martires del 1900 St.). Opposite Lot 1 to
the northwest is Lot 2, which has an area of approximately 4,707 square meters. It is
bounded by the provincial road (Rizal St.) on the south, on the west by the national road
(Trece Martires del 1900 St.), on the north by Blumentrit St. and on the east by a
municipal lot.

The survey plan does not contain any other information or markings. But from the
undisputed actual observation by the lower court as well as from the description given
by the witnesses for both parties, Nalazon St., which traverses the entire length of the
poblacion from south to north, crosses Jacinto and Real streets and cuts across Lot 1
from Bonifacio St. to Rizal St., passing immediately in front of the church and the
convent. It extends across Lot 2 along its eastern boundary from Rizal St. to Blumentrit
St. Thus, from actual observation Lot 2 appears bounded on the east by Nalazon St.
and not by the municipal lot as described in the survey plan. With respect to Lot 1,
Nalazon St. divides the lot into the western portion, which forms about 2/3 of the entire
area, and the eastern portion which comprises the other 1/3. All the permanent
improvements on Lot 1, which include the Roman Catholic church, the belfry and
convent, the St. Michael Academy building and a nun's residence, are found on the
western portion. Lot 2 has no permanent improvements. The eastern portion of Lot 1,
the area in contention, is an empty space except for concrete benches along the
perimeter. A partly cemented path runs across this lot from east to west leading up to
the front or entrance of the church and appears to be an extension of Anunciacion St.,
which runs from the bank of the Catarman river up to Mendiola St. In the middle of this
path, half-way between Mendiola St. and the church, is a statue of the Sacred Heart of
Jesus.

The Roman Catholic Church relies on the testimony of its witnesses to prove its
ownership. Mariano Singzon, 59 years old and one-time municipal councilor of
Catarman and also counsel in this case for the applicant, was the principal witness. The
following is his testimony: Prior to 1910 the portions of Nalazon and Anunciacion streets
traversing Lot 1 and Lot 2 were merely trails used by the parishioners in going to and
from the church. A retracing (Exhibit M) of a survey plan of the poblacion of Catarman
executed in 1909 shows that Anunciacion St. stopped at Calle Garfil (now Mendiola St.)
and that there was no other street traversing Lot 1. According to Atty. Singzon, Nalazon
St. was opened and improved by the municipality sometime in 1910 or 1911.
Anunciacion St. was opened only about 2 years before the trial of the case. In 1920, the
municipality planted acacia trees on both sides of Nalazon St. inside Lot 1 and along
Mendiola St. bordering Lot 1 but these trees were recently cut down upon order of the
priest, Fr. Ricalde, and all that remain are stumps. The statue of the Sacred Heart found
in the middle of Anunciacion St. was put up in 1927, but the base of the statue had been
standing on that site even before 1905. The Roman Catholic Church had made no
improvements on this eastern portion of Lot 1, which at present is being used as a
public playground, although a bandstand stood there for about three years after it was
constructed in 1926 by the members of an orchestra which was organized by a Fr.
Ranera and which used to give musical performances on the bandstand. On the feast of
Corpus Christi the parishioners would construct an altar on this lot and hold the
procession there.
With respect to Lot 2, although the Church had made no improvements thereon, around
the turn of the century there were camarins on this lot which were used as stables for
the horses and cows owned by a Fr. Troquillo. In 1933 the municipal council passed a
resolution (Exhibit G) asking the Bishop of Calbayog, then Mons. Hacbang, to donate a
small portion of this lot for the construction of a monument in honor of the Trece
Martires del 1900, but this request was denied by the Bishop. Gonzalo Olmedo, the
municipal secretary of Catarman in 1933 whose signature appears on Exhibit G,
testified as to the authenticity of the resolution and even pointed to the western portion
of Lot 2 as the subject matter of the request. Mons. Desoloc, who acted as private
secretary to the Bishop at that time, testified that the writing on the lower right hand
corner of Exhibit G, which reads "cont. negativ" is the handwriting of the Bishop and
was meant to impart an order that the request contained in the resolution be denied. In
1949 Mayor Eusebio Moore of Catarman and Fr. Ortega asked him, Atty. Singzon, to
draft a contract of exchange between Lot 2 and a lot owned by the municipality, but the
exchange did not materialize because the lot intended to be bartered by the municipality
had no title, although he (the witness) found a copy of a tax declaration (Exhibit F) for
Lot 2 dated May 8, 1948 in the name of the Roman Catholic Church. This tax
declaration describes Lot 2 as being bounded by Trece Martires del 1900 on the west,
Nalazon St. (instead of the municipal lot as described in Exhibit D) on the east,
Blumentrit St. on the north and Rizal St. on the south.

The testimony of Atty. Singzon was corroborated by Candido Franzuela, a 63 year-old

resident of Catarman and brother of Fr. Franzuela of the same municipality as well as
Salvadora Olmedo, an 82 year-old local resident, who died after giving her direct
testimony. Franzuela confirmed the existence on Lot 2 of camarins used as stables for
the cattle owned by the church. He remembered that sometime in 1927 a group of
Chinese asked permission from the parish priest to use the lot as a football ground,
which they did for 2 years. On cross-examination he admitted that before Nalazon St.
was extended there was no visible boundary between Lot 2 claimed by the Church and
the municipal lot on which a public school building used to stand. Salvadora Olmedo
also testified that when she was yet schooling a certain Fr. Troquillo had camarins on
Lot 2 which he used as stables for his cows and horses and that whenever she and her
classmates wanted to gather flowers on this lot they asked permission from the priest.

The case for oppositors was presented by the following witnesses:

1. Martin Evangelista, 65 years old and former municipal treasurer of Catarman,

declared that as property custodian of the municipality before his retirement, he knew
that Lot 2 was owned by the municipality. This lot was fenced by the municipality first
with bamboos and then with barbed wire because the municipal prisoners were planting
camotes on this lot. On February 21, 1952 Fr. Franquela personally handed to him a
letter (Exhibit 1) asking that he be allowed to use a portion of Lot 2 as playground for
the students of St. Michael Academy. He endorsed the letter to the municipal council of
Catarman, which passed Resolution No. 19 (Exhibit 3), declaring Lot 2 as temporary
public playground until such time that the municipality was ready to construct a
permanent improvement thereon.
2. Eusebio Moore, 54, mayor of Catarman since 1948, declared that Lot 2 was owned
by the municipality because when he was in the elementary grades he attended classes
in a public school building located on the municipal lot next to Lot 2 and did school
gardening on Lot 2. When he was in Grade 6, as leader of the school football team he
invited the Chinese team to play and he was the one who asked permission from the
municipal president to use Lot 2 as their football ground. When he assumed office in
1948 he had the lot fenced and planted to fruit trees and during fiestas temporary sheds
would be put up for rent to itinerant merchants. It was Fr. Ortega who went to see him in
1949 regarding the fencing of Lot 2 by the municipality and together they discussed the
matter with Atty. Singzon, the lawyer for the Church, and the latter suggested to him
that Lot 2 be exchanged with another lot owned by the municipality and he replied that it
was up to the municipal council to decide. In 1950 he had the lot declared for taxation
purposes. The tax declaration (Exhibit 5) covers the entire area of Lot 2 claimed by the
applicant as well as the uncontested municipal lot, from Trece Martires del 1900 on the
west to Mendiola St. on the east, Blumentrit St. on the north and Rizal St. on the south.
This tax declaration was marked on the reverse side as newly issued because
according to him the old tax declaration could not be located as the public records had
been destroyed during the war. Mayor Moore denied the authenticity of Resolution No.
19 (Exh. G) sent by the municipal council to the Bishop in 1933 on the ground that the
document is in Spanish, language not spoken either by the municipal secretary who
certified as to the correctness of the resolution or by the municipal president, who
supposedly dictated its text. The witness produced the affidavits of Pelayo Saldo,
municipal councilor in 1933 and one of those listed as present when the resolution was
taken up, to the effect that Lot 2 is owned by the municipality. He also produced a
similar affidavit executed by Antonio Oladive, a former municipal president of Catarman.
To further buttress the municipality's position the mayor produced a letter dated
February 29, 1952 by Matias Rodriguez, representing the Northern Samar Academy,
requesting that Lot 2 be used as playground for the school. The mayor disclosed that
he, the mayor, had been president of the Northern Samar Academy. Nalazon St. and
Anunciacion St., according to Mayor Moore, are cleaned and maintained by the
municipality. With respect to the eastern portion of Lot 1 the same had always been
regarded as owned by the municipality because the municipal building used to face this
lot, although when he assumed the office of Mayor he had the backyard of the municipal
building improved and the stairway transferred there.

3. Gaudencio Camposano, a 75 year-old resident of Catarman, testified that a

bandstand was constructed on the eastern portion of Lot 1 in 1905 and it was not only
the orchestra organized by Fr. Ranera that used to play there but also the municipal
band. He also testified that when he was attending school in 1905 the school garden
was located inside Lot 2, which he believed to be in the possession of the municipality
because nobody owned it and when he became acting mayor he required the prisoners
to clear Lot 2 and had it planted to camotes and bananas.

The conclusion that may be drawn from the evidence on record is that Lot 2, called the
"town plaza" by oppositor, is a public plaza and that Nalazon St., traversing Lot I and
Lot 2, is a public thoroughfare and should therefore be excluded from the application for
registration filed by the Church.

Admittedly Nalazon St. was originally merely a trail used by the parishioners in going to
and from the church. But since 1910, when it was opened and improved as a public
thoroughfare by the municipality, it had been continuously used as such by the
townspeople of Catarman without objection from the Church authorities. The acacia
trees along both sides of the street were planted by the municipality in 1920, although
these trees were cut down recently upon order of the priest. There is no proof that the
Church merely tolerated and limited the use of this street for the benefit of its
parishioners, considering that the street traverses the entire length of the poblacion from
south to north and that Lot 1, on which the church stands, is located almost at the
center of the poblacion. The street does not stop on Lot I but extends north toward the
sea, passing along the lot occupied by the Central Elementary School and the Northern
Samar General Hospital. Thus it is clear that Nalazon St. inside Lot 1 is used by the
residents not only in going to the church but to the public school and the general
hospital north of Lot 1.

With respect to Lot 2, there is no evidence that either the Church or the municipality
exercised clear acts of ownership or of exclusive possession over this lot. It is true that
there were witnesses who testified that around the turn of the century there were
camarins inside this lot used as stables for the horses and cows owned by a Fr.
Troquillo. But these witnesses likewise testified that this lot had been used also as a
playground as well as a school garden by the students of the public school located on
the adjoining municipal lot. This lot still serves as a public playground up to the present.
The municipality also makes use of this lot during town fiestas by constructing
temporary sheds which are rented to itinerant vendors. In 1949 the municipality
constructed a fence around this lot because the prisoners planted it to camotes. The
Church, however, objected to the putting up of the fence.

All these facts only show that neither the Church nor the municipality possessed Lot 2
exclusively. While it may be true that as late as 1933 the municipality acknowledged the
ownership of the Church over Lot 2 and in 1949 the Church declared this lot for tax
purposes, the continuous use thereof enjoyed by the residents of Catarman is admitted
by all the witnesses. Thus, even the witness for the applicant testified that the Church
had made no improvements on Lot 2 and that the same had been used primarily as
playground for schoolchildren. The municipality stands on the same footing as the
Church. The tax declaration in its name was issued only in 1950, when the present
dispute was already imminent. The letters of Fr. Franzuela and Mr. Matias Rodriguez
asking permission to use this lot as a playground are not proof of municipal ownership,
since after all the municipal government may be considered the administrator of public
property, that is, property for public use.

In the case of Harty vs. Municipality of Victoria, 13 Phil. 152, involving the question as to
the ownership of a parcel of land which surrounded the parish church of the town, this
Court said:
 Even though all the remaining space of land which now forms the great
plaza of the town of Victoria had been owned by the said Tañedo, it must
be presumed that he waived his right thereto for the benefit of the
townspeople, since from the creation or establishment of the town, down
to the present day, all the residents, including the curate of said town,
have enjoyed the free use of said plaza.

xxx xxx xxx

That both the curates and the gobernadorcillos of said town procured fruit
trees and plants to be set out in the plaza, does not constitute an act of
private ownership, but evidences the public use thereof, or perhaps the
intention to improve or embellish the said plaza for the benefit of the
townspeople.

xxx xxx xxx

Certain it is that the plaintiff has not proven that the Catholic Church or the
parish of Victoria was the owner or proprietor of the said extensive piece
of land which now forms the public plaza of said town, nor that it was in
possession thereof under the form and conditions required by law,
inasmuch as it has been fully proven that said plaza has been used
without let or hindrance by the public and the residents of the town of
Victoria ever since its creation.

Since neither the Church nor the municipality could present positive proof of ownership
or exclusive possession for an appreciable period of time and the only indubitable fact is
the free and continuous use of Lot 2 by the residents of Catarman, coupled with the fact
that the town has no public plaza to speak of other than this disputed parcel of land,
there is a strong presumption that the same was segregated as a public plaza upon the
founding of the municipality of Catarman.

The municipality, as has been heretofore noted, was declared in default with respect to
Lot 1, and the default was never lifted. Indeed the amended opposition of the
municipality which purported to include the eastern portion of said lot, was denied by the
lower court. In any event, the municipality failed to establish its allegation with respect to
the said portion of Lot 1 and to the portion of Anunciacion St. within this lot. This portion
is only a path which is cemented from the corner of Mendiola St. to the monument of the
Sacred Heart, and asphalted from the monument to the front of the church. There is no
evidence that this path was planted to acacia trees, unlike Nalazo St. and Mendiola St.,
where acacia stumps were observed by the lower court. The explanation offered by
Mayor Moore as to the presence of this religious monument in the middle of a public
thoroughfare — that the residents of Catarman are religious — is not convincing. The
statue was enthroned only in 1927, when the separation of church and state was
already a confirmed legal principle. The statue was even recently improved with the
construction of a platform beneath it. Its location shows that the path leading to it and to
the front of the church is not an extension of Anunciacion St. but was opened mainly for
the benefit of the parishioners. The eastern portion of Lot 1 itself is used for religious
functions, such as the feast of Corpus Christi and the procession held on the occasion.
It is admitted by the municipality that the Church does not ask for a permit whenever it
uses this lot for such activities.

On the other hand, there is no evidence that the municipality uses this lot for its official
activities to support its claim that this lot is a municipal plaza. The circumstance that the
municipal band used to perform weekly on the "kiosko" found on this lot sometime in
1927 does not constitute an act of exclusive possession which could be the basis of a
title. Moreover, the "kiosko" stood only for three years and the municipality has not
adduced any evidence that it continued to use the lot after the "kiosko" was demolished.

For the foregoing reasons, the appealed decision is hereby modified in the sense that
Lot 2, being a public plaza, and Nalazon St., traversing Lot 1 and Lot 2, being a public
thoroughfare, are not subject to registration; and that the title of the Bishop of Calbayog
with respect to the entire area of Lot 1, except the portion covered by Nalazon St., and
to Lot 3, is confirmed and ordered registered in his name, as corporation sole. In all
other respects the decision appealed from is affirmed. No pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro, Fernando, Teehankee, Barredo,

Makasiar and Antonio, JJ., concur.

SECOND DIVISION

G.R. No. L40474 August 29, 1975

CEBU OXYGEN & ACETYLENE CO., INC., petitioner,

vs.
HON. PASCUAL A. BERCILLES Presiding Judge, Branch XV, 14th Judicial
District, and JOSE L. ESPELETA, Assistant Provincial Fiscal, Province of Cebu,
representing the Solicitor General's Office and the Bureau of Lands, respondents.

Jose Antonio R Conde for petitioner.

Office of the Acting Solicitor General Hugo E. Gutierrez, Jr., Assistant Solicitor General
Octavio R. Ramirez and Trial Attorney David R. Hilario for respondents. .

CONCEPCION, Jr., J.:

This is a petition for the review of the order of the Court of First Instance of Cebu
dismissing petitioner's application for registration of title over a parcel of land situated in
the City of Cebu.

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

After hearing the parties, on October 11, 1974 the trial court issued an order dismissing
the petitioner's application for registration of title.6 Hence, the instant petition for review.

For the resolution of this case, the petitioner poses the following questions:

(1) Does the City Charter of Cebu City (Republic Act No. 3857) under
Section 31, paragraph 34, give the City of Cebu the valid right to declare a
road as abandoned? and

(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:

Section 31. Legislative Powers. Any provision of law and executive order
to the contrary notwithstanding, the City Council shall have the following
legislative powers:

xxx xxx xxx

(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.

From the foregoing, it is undoubtedly clear that the City of Cebu is empowered to close
a city road or street. In the case of Favis vs. City of Baguio,7 where the power of the city
Council of Baguio City to close city streets and to vacate or withdraw the same from
public use was similarly assailed, this court said:

5. So it is, that appellant may not challenge the city council's act of
withdrawing a strip of Lapu-Lapu Street at its dead end from public use
and converting the remainder thereof into an alley. These are acts well
within the ambit of the power to close a city street. The city council, it
would seem to us, is the authority competent to determine whether or not
a certain property is still necessary for public use.

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 registerable 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.

SO ORDERED.

Makalintal, C.J, Fernando, Barredo and Aquino, JJ., concur.

Footnotes
1 Annex A, p. 11, rollo.
2 Annex B, p. 12, rollo.
3 Annex C, p. 13, rollo.
4 Annex D, p. 15, rollo.
5 Annex E. p. 18, rollo.
6 Annex F. P. 20, rollo.
7 G.R. No. L-29910, April 25, 1969; SCRA 1060.

EN BANC

G.R. No. 179987 September 3, 2013

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

vs.
REPUBLIC OF THE PHILIPPINES, Respondent.

RESOLUTION

BERSAMIN, J.:

For our consideration and resolution are the motions for reconsideration of the parties who both
assail the decision promulgated on April 29, 2009, whereby we upheld the ruling of the Court of
Appeals (CA) denying the application of the petitioners for the registration of a parcel of land
situated in Barangay Tibig, Silang, Cavite on the ground that they had not established by
sufficient evidence their right to the registration in accordance with either Section 14(1) or
Section 14(2) of Presidential Decree No. 1529 (Property Registration Decree).

Antecedents

The property subject of the application for registration is a parcel of land situated in Barangay
Tibig, Silang Cavite, more particularly identified as Lot 9864-A, Cad-452-D, with an area of
71,324-square meters. On February 20, 1998, applicant Mario Malabanan, who had purchased
the property from Eduardo Velazco, filed an application for land registration covering the
property in the Regional Trial Court (RTC) in Tagaytay City, Cavite, claiming that the property
formed part of the alienable and disposable land of the public domain, and that he and his
predecessors-in-interest had been in open, continuous, uninterrupted, public and adverse
possession and occupation of the land for more than 30 years, thereby entitling him to the
judicial confirmation of his title.1

To prove that the property was an alienable and disposable land of the public domain, Malabanan
presented during trial a certification dated June 11, 2001 issued by the Community Environment
and Natural Resources Office (CENRO) of the Department of Environment and Natural
Resources (DENR), which reads:

This is to certify that the parcel of land designated as Lot No. 9864 Cad 452-D, Silang Cadastre
as surveyed for Mr. Virgilio Velasco located at Barangay Tibig, Silang, Cavite containing an
area of 249,734 sq. meters as shown and described on the Plan Ap-04-00952 is verified to be
within the Alienable or Disposable land per Land Classification Map No. 3013 established under
Project No. 20-A and approved as such under FAO 4-1656 on March 15, 1982.2

After trial, on December 3, 2002, the RTC rendered judgment granting Malabanan’s application
for land registration, disposing thusly:

WHEREFORE, this Court hereby approves this application for registration and thus places under
the operation of Act 141, Act 496 and/or P.D. 1529, otherwise known as Property Registration
Law, the lands described in Plan Csd-04-0173123-D, Lot 9864-A and containing an area of
Seventy One Thousand Three Hundred Twenty Four (71,324) Square Meters, as supported by its
technical description now forming part of the record of this case, in addition to other proofs
adduced in the name of MARIO MALABANAN, who is of legal age, Filipino, widower, and
with residence at Munting Ilog, Silang, Cavite.

Once this Decision becomes final and executory, the corresponding decree of registration shall
forthwith issue.

SO ORDERED.3

The Office of the Solicitor General (OSG) appealed the judgment to the CA, arguing that
Malabanan had failed to prove that the property belonged to the alienable and disposable land of
the public domain, and that the RTC erred in finding that he had been in possession of the
property in the manner and for the length of time required by law for confirmation of imperfect
title.

On February 23, 2007, the CA promulgated its decision reversing the RTC and dismissing the
application for registration of Malabanan. Citing the ruling in Republic v. Herbieto (Herbieto),4
the CA declared that under Section 14(1) of the Property Registration Decree, any period of
possession prior to the classification of the land as alienable and disposable was inconsequential
and should be excluded from the computation of the period of possession. Noting that the
CENRO-DENR certification stated that the property had been declared alienable and disposable
only on March 15, 1982, Velazco’s possession prior to March 15, 1982 could not be tacked for
purposes of computing Malabanan’s period of possession.

Due to Malabanan’s intervening demise during the appeal in the CA, his heirs elevated the CA’s
decision of February 23, 2007 to this Court through a petition for review on certiorari.

The petitioners assert that the ruling in Republic v. Court of Appeals and Corazon Naguit5
(Naguit) remains the controlling doctrine especially if the property involved is agricultural land.
In this regard, Naguit ruled that any possession of agricultural land prior to its declaration as
alienable and disposable could be counted in the reckoning of the period of possession to perfect
title under the Public Land Act (Commonwealth Act No. 141) and the Property Registration
Decree. They point out that the ruling in Herbieto, to the effect that the declaration of the land
subject of the application for registration as alienable and disposable should also date back to
June 12, 1945 or earlier, was a mere obiter dictum considering that the land registration
proceedings therein were in fact found and declared void ab initio for lack of publication of the
notice of initial hearing.

The petitioners also rely on the ruling in Republic v. T.A.N. Properties, Inc.6 to support their
argument that the property had been ipso jure converted into private property by reason of the
open, continuous, exclusive and notorious possession by their predecessors-in-interest of an
alienable land of the public domain for more than 30 years. According to them, what was
essential was that the property had been "converted" into private property through prescription at
the time of the application without regard to whether the property sought to be registered was
previously classified as agricultural land of the public domain.

As earlier stated, we denied the petition for review on certiorari because Malabanan failed to
establish by sufficient evidence possession and occupation of the property on his part and on the
part of his predecessors-in interest since June 12, 1945, or earlier.

Petitioners’ Motion for Reconsideration

In their motion for reconsideration, the petitioners submit that the mere classification of the land
as alienable or disposable should be deemed sufficient to convert it into patrimonial property of
the State. Relying on the rulings in Spouses De Ocampo v. Arlos,7 Menguito v. Republic8 and
Republic v. T.A.N. Properties, Inc.,9 they argue that the reclassification of the land as alienable
or disposable opened it to acquisitive prescription under the Civil Code; that Malabanan had
purchased the property from Eduardo Velazco believing in good faith that Velazco and his
predecessors-in-interest had been the real owners of the land with the right to validly transmit
title and ownership thereof; that consequently, the ten-year period prescribed by Article 1134 of
the Civil Code, in relation to Section 14(2) of the Property Registration Decree, applied in their
favor; and that when Malabanan filed the application for registration on February 20, 1998, he
had already been in possession of the land for almost 16 years reckoned from 1982, the time
when the land was declared alienable and disposable by the State.

The Republic’s Motion for Partial Reconsideration

The Republic seeks the partial reconsideration in order to obtain a clarification with reference to
the application of the rulings in Naguit and Herbieto.

Chiefly citing the dissents, the Republic contends that the decision has enlarged, by implication,
the interpretation of Section 14(1) of the Property Registration Decree through judicial
legislation. It reiterates its view that an applicant is entitled to registration only when the land
subject of the application had been declared alienable and disposable since June 12, 1945 or
earlier.

Ruling

We deny the motions for reconsideration.

In reviewing the assailed decision, we consider to be imperative to discuss the different
classifications of land in relation to the existing applicable land registration laws of the
Philippines.

Classifications of land according to ownership

Land, which is an immovable property,10 may be classified as either of public dominion or of

private ownership.11 Land is considered of public dominion if it either: (a) is intended for public
use; or (b) belongs to the State, without being for public use, and is intended for some public
service or for the development of the national wealth.12 Land belonging to the State that is not of
such character, or although of such character but no longer intended for public use or for public
service forms part of the patrimonial property of the State.13 Land that is other than part of the
patrimonial property of the State, provinces, cities and municipalities is of private ownership if it
belongs to a private individual.

Pursuant to the Regalian Doctrine (Jura Regalia), a legal concept first introduced into the country
from the West by Spain through the Laws of the Indies and the Royal Cedulas,14 all lands of the
public domain belong to the State.15 This means that the State is the source of any asserted right
to ownership of land, and is charged with the conservation of such patrimony.16

All lands not appearing to be clearly under private ownership are presumed to belong to the
State. Also, public lands remain part of the inalienable land of the public domain unless the State
is shown to have reclassified or alienated them to private persons.17

Classifications of public lands

according to alienability

Whether or not land of the public domain is alienable and disposable primarily rests on the
classification of public lands made under the Constitution. Under the 1935 Constitution,18 lands
of the public domain were classified into three, namely, agricultural, timber and mineral.19
Section 10, Article XIV of the 1973 Constitution classified lands of the public domain into
seven, specifically, agricultural, industrial or commercial, residential, resettlement, mineral,
timber or forest, and grazing land, with the reservation that the law might provide other
classifications. The 1987 Constitution adopted the classification under the 1935 Constitution into
agricultural, forest or timber, and mineral, but added national parks.20 Agricultural lands may be
further classified by law according to the uses to which they may be devoted.21 The identification
of lands according to their legal classification is done exclusively by and through a positive act
of the Executive Department.22

Based on the foregoing, the Constitution places a limit on the type of public land that may be
alienated. Under Section 2, Article XII of the 1987 Constitution, only agricultural lands of the
public domain may be alienated; all other natural resources may not be.

Alienable and disposable lands of the State fall into two categories, to wit: (a) patrimonial lands
of the State, or those classified as lands of private ownership under Article 425 of the Civil
Code,23 without limitation; and (b) lands of the public domain, or the public lands as provided by
the Constitution, but with the limitation that the lands must only be agricultural. Consequently,
lands classified as forest or timber, mineral, or national parks are not susceptible of alienation or
disposition unless they are reclassified as agricultural.24 A positive act of the Government is
necessary to enable such reclassification,25 and the exclusive prerogative to classify public lands
under existing laws is vested in the Executive Department, not in the courts.26 If, however, public
land will be classified as neither agricultural, forest or timber, mineral or national park, or when
public land is no longer intended for public service or for the development of the national wealth,
thereby effectively removing the land from the ambit of public dominion, a declaration of such
conversion must be made in the form of a law duly enacted by Congress or by a Presidential
proclamation in cases where the President is duly authorized by law to that effect.27 Thus, until
the Executive Department exercises its prerogative to classify or reclassify lands, or until
Congress or the President declares that the State no longer intends the land to be used for public
service or for the development of national wealth, the Regalian Doctrine is applicable.

Disposition of alienable public lands

Section 11 of the Public Land Act (CA No. 141) provides the manner by which alienable and
disposable lands of the public domain, i.e., agricultural lands, can be disposed of, to wit:

Section 11. Public lands suitable for agricultural purposes can be disposed of only as follows,
and not otherwise:

(1) For homestead settlement;

(2) By sale;

(3) By lease; and

(4) By confirmation of imperfect or incomplete titles;

(a) By judicial legalization; or

(b) By administrative legalization (free patent).

The core of the controversy herein lies in the proper interpretation of Section 11(4), in relation to
Section 48(b) of the Public Land Act, which expressly requires possession by a Filipino citizen
of the land since June 12, 1945, or earlier, viz:

Section 48. The following-described citizens of the Philippines, occupying lands of the public
domain or claiming to own any such lands or an interest therein, but whose titles have not been
perfected or completed, may apply to the Court of First Instance of the province where the land
is located for confirmation of their claims and the issuance of a certificate of title thereafter,
under the Land Registration Act, to wit:

xxxx
(b) Those who by themselves or through their predecessors-in-interest have been in open,
continuous, exclusive, and notorious possession and occupation of alienable and disposable lands
of the public domain, under a bona fide claim of acquisition of ownership, since June 12, 1945,
or earlier, immediately preceding the filing of the applications for confirmation of title, except
when prevented by war or force majeure. These shall be conclusively presumed to have
performed all the conditions essential to a Government grant and shall be entitled to a certificate
of title under the provisions of this chapter. (Bold emphasis supplied)

Note that Section 48(b) of the Public Land Act used the words "lands of the public domain" or
"alienable and disposable lands of the public domain" to clearly signify that lands otherwise
classified, i.e., mineral, forest or timber, or national parks, and lands of patrimonial or private
ownership, are outside the coverage of the Public Land Act. What the law does not include, it
excludes. The use of the descriptive phrase "alienable and disposable" further limits the coverage
of Section 48(b) to only the agricultural lands of the public domain as set forth in Article XII,
Section 2 of the 1987 Constitution. Bearing in mind such limitations under the Public Land Act,
the applicant must satisfy the following requirements in order for his application to come under
Section 14(1) of the Property Registration Decree,28 to wit:

1. The applicant, by himself or through his predecessor-in-interest, has been in possession

and occupation of the property subject of the application;

2. The possession and occupation must be open, continuous, exclusive, and notorious;

3. The possession and occupation must be under a bona fide claim of acquisition of
ownership;

4. The possession and occupation must have taken place since June 12, 1945, or earlier;
and

5. The property subject of the application must be an agricultural land of the public
domain.

Taking into consideration that the Executive Department is vested with the authority to classify
lands of the public domain, Section 48(b) of the Public Land Act, in relation to Section 14(1) of
the Property Registration Decree, presupposes that the land subject of the application for
registration must have been already classified as agricultural land of the public domain in order
for the provision to apply. Thus, absent proof that the land is already classified as agricultural
land of the public domain, the Regalian Doctrine applies, and overcomes the presumption that
the land is alienable and disposable as laid down in Section 48(b) of the Public Land Act.
However, emphasis is placed on the requirement that the classification required by Section 48(b)
of the Public Land Act is classification or reclassification of a public land as agricultural.

The dissent stresses that the classification or reclassification of the land as alienable and
disposable agricultural land should likewise have been made on June 12, 1945 or earlier, because
any possession of the land prior to such classification or reclassification produced no legal
effects. It observes that the fixed date of June 12, 1945 could not be minimized or glossed over
by mere judicial interpretation or by judicial social policy concerns, and insisted that the full
legislative intent be respected.

We find, however, that the choice of June 12, 1945 as the reckoning point of the requisite
possession and occupation was the sole prerogative of Congress, the determination of which
should best be left to the wisdom of the lawmakers. Except that said date qualified the period of
possession and occupation, no other legislative intent appears to be associated with the fixing of
the date of June 12, 1945. Accordingly, the Court should interpret only the plain and literal
meaning of the law as written by the legislators.

Moreover, an examination of Section 48(b) of the Public Land Act indicates that Congress
prescribed no requirement that the land subject of the registration should have been classified as
agricultural since June 12, 1945, or earlier. As such, the applicant’s imperfect or incomplete title
is derived only from possession and occupation since June 12, 1945, or earlier. This means that
the character of the property subject of the application as alienable and disposable agricultural
land of the public domain determines its eligibility for land registration, not the ownership or title
over it.

Alienable public land held by a possessor, either personally or through his predecessors-in-
interest, openly, continuously and exclusively during the prescribed statutory period is converted
to private property by the mere lapse or completion of the period.29 In fact, by virtue of this
doctrine, corporations may now acquire lands of the public domain for as long as the lands were
already converted to private ownership, by operation of law, as a result of satisfying the requisite
period of possession prescribed by the Public Land Act.30 It is for this reason that the property
subject of the application of Malabanan need not be classified as alienable and disposable
agricultural land of the public domain for the entire duration of the requisite period of
possession.

To be clear, then, the requirement that the land should have been classified as alienable and
disposable agricultural land at the time of the application for registration is necessary only to
dispute the presumption that the land is inalienable.

The declaration that land is alienable and disposable also serves to determine the point at which
prescription may run against the State. The imperfect or incomplete title being confirmed under
Section 48(b) of the Public Land Act is title that is acquired by reason of the applicant’s
possession and occupation of the alienable and disposable agricultural land of the public domain.
Where all the necessary requirements for a grant by the Government are complied with through
actual physical, open, continuous, exclusive and public possession of an alienable and disposable
land of the public domain, the possessor is deemed to have acquired by operation of law not only
a right to a grant, but a grant by the Government, because it is not necessary that a certificate of
title be issued in order that such a grant be sanctioned by the courts.31

If one follows the dissent, the clear objective of the Public Land Act to adjudicate and quiet titles
to unregistered lands in favor of qualified Filipino citizens by reason of their occupation and
cultivation thereof for the number of years prescribed by law32 will be defeated. Indeed, we
should always bear in mind that such objective still prevails, as a fairly recent legislative
development bears out, when Congress enacted legislation (Republic Act No. 10023)33 in order
to liberalize stringent requirements and procedures in the adjudication of alienable public land to
qualified applicants, particularly residential lands, subject to area limitations.34

On the other hand, if a public land is classified as no longer intended for public use or for the
development of national wealth by declaration of Congress or the President, thereby converting
such land into patrimonial or private land of the State, the applicable provision concerning
disposition and registration is no longer Section 48(b) of the Public Land Act but the Civil Code,
in conjunction with Section 14(2) of the Property Registration Decree.35 As such, prescription
can now run against the State.

To sum up, we now observe the following rules relative to the disposition of public land or lands
of the public domain, namely:

(1) As a general rule and pursuant to the Regalian Doctrine, all lands of the public
domain belong to the State and are inalienable. Lands that are not clearly under private
ownership are also presumed to belong to the State and, therefore, may not be alienated
or disposed;

(2) The following are excepted from the general rule, to wit:

(a) Agricultural lands of the public domain are rendered alienable and disposable
through any of the exclusive modes enumerated under Section 11 of the Public
Land Act. If the mode is judicial confirmation of imperfect title under Section
48(b) of the Public Land Act, the agricultural land subject of the application needs
only to be classified as alienable and disposable as of the time of the application,
provided the applicant’s possession and occupation of the land dated back to June
12, 1945, or earlier. Thereby, a conclusive presumption that the applicant has
performed all the conditions essential to a government grant arises,36 and the
applicant becomes the owner of the land by virtue of an imperfect or incomplete
title. By legal fiction, the land has already ceased to be part of the public domain
and has become private property.37

(b) Lands of the public domain subsequently classified or declared as no longer

intended for public use or for the development of national wealth are removed
from the sphere of public dominion and are considered converted into patrimonial
lands or lands of private ownership that may be alienated or disposed through any
of the modes of acquiring ownership under the Civil Code. If the mode of
acquisition is prescription, whether ordinary or extraordinary, proof that the land
has been already converted to private ownership prior to the requisite acquisitive
prescriptive period is a condition sine qua non in observance of the law (Article
1113, Civil Code) that property of the State not patrimonial in character shall not
be the object of prescription.

To reiterate, then, the petitioners failed to present sufficient evidence to establish that they and
their predecessors-in-interest had been in possession of the land since June 12, 1945. Without
satisfying the requisite character and period of possession - possession and occupation that is
open, continuous, exclusive, and notorious since June 12, 1945, or earlier - the land cannot be
considered ipso jure converted to private property even upon the subsequent declaration of it as
alienable and disposable. Prescription never began to run against the State, such that the land has
remained ineligible for registration under Section 14(1) of the Property Registration Decree.
Likewise, the land continues to be ineligible for land registration under Section 14(2) of the
Property Registration Decree unless Congress enacts a law or the President issues a proclamation
declaring the land as no longer intended for public service or for the development of the national
wealth.1âwphi1

WHEREFORE, the Court DENIES the petitioners' Motion for Reconsideration and the
respondent's Partial Motion for Reconsideration for their lack of merit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice

ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

I submitted my vote joining the

Separate Opinion of Justice Brion In the Result: See Separate Opinion
TERESITA J. LEONARDO-DE ARTURO D. BRION
CASTRO Associate Justice
Associate Justice

DIOSDADO M. PERLATA MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA

Associate Justice Associate Justice

BIENVENIDO L. REYES ESTELA M. PERLAS-BERNABE

Associate Justice Associate Justice
 See separate concurring and dissenting opinion
MARVIC MARIO VICTOR F. LEONEN
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the
above Resolution had been reached in consultation before the case was assigned to the writer of
the opinion of the court.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes
1
Rollo, pp. 16-17.
2
Id. at 37-38.
3
Id. at 87.
4
G.R. No. 156117, May 26, 2005, 459 SCRA 183.
5
G.R. No. 144057, January 17, 2005, 448 SCRA 442.
6
G.R. No. 154953, June 26, 2008, 555 SCRA 477.
7
G.R. No. 135527, October 19, 2000, 343 SCRA 716.
8
G.R. No. 134308, December 14, 2000, 348 SCRA 128.
9
Supra note 6.
10
Article 415(1), Civil Code.
11
Article 419, Civil Code.
12
Article 420, Civil Code.
13
Article 421, Civil Code.
14
Cruz v. Secretary of Environment and Natural Resources, G.R. No. 135385, December 6, 2000, 347
SCRA 128, 165.
15
Section 2, Art. XII, 1987 Constitution.
16
Republic v. Intermediate Appellate Court, No. L-71285, November 5, 1987, 155 SCRA 412, 419.
17
Republic v. Lao, G.R. No. 150413, July 1, 2003, 405 SCRA 291, 298.
18
1935 Constitution, Art. XIII, Sec. 1.
19
Krivenko v. Register of Deeds of Manila, 79 Phil. 461, 468 (1947). 20 Section 3 of Article XII, 1987
Constitution states:
Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral
lands, and national parks. Agricultural lands of the public domain may be further classified by law
according to the uses which they may be devoted. Alienable lands of the public domain shall be
limited to agricultural lands. Private corporations or associations may not hold such alienable
lands of the public domain except by lease, for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and not to exceed one thousand hectares in area.
Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more
than twelve hectares thereof by purchase, homestead, or grant.
Taking into account the requirements of conservation, ecology, and development, and subject to
the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the
public domain which may be acquired, developed, held, or leased and the conditions therefor. 21
Id.
22
See Bernas, The 1987 Constitution, 2009 Ed., pp. 1188-1189.
23
Article 425. Property of private ownership, besides the patrimonial property of the State, provinces,
cities, and municipalities, consists of all property belonging to private persons, either individually or
collectively. (345a)
24
Director of Forestry v. Villareal, G.R. No. 32266, February 27, 1989, 170 SCRA 598, 608-609.
 25
Heirs of Jose Amunategui v. Director of Forestry, No. L-27873, November 29, 1983, 126 SCRA 69, 75.
26
Director of Lands v. Court of Appeals, No. L-58867, June 22, 1984, 129 SCRA 689, 692.
27
Republic v. Court of Appeals, G.R. No. 127060, November 19, 2002, 392 SCRA 190, 201.
28
Section 14. Who may apply. – The following persons may file in the proper Court of First Instance an
application for registration of title to land, whether personally or through their duly authorized
representatives:
(1) Those who by themselves or through their predecessors-in-interest have been in open,
continuous, exclusive and notorious possession and occupation of alienable and disposable lands
of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier.
xxxx
29
Director of Lands v. Intermediate Appellate Court, No. L-73002, December 29, 1986, 146 SCRA 509,
518. See also the dissenting opinion of Justice Teehankee in Manila Electric Company v. Judge Castro-
Bartolome, No. L-49623, June 29, 1982, 114 SCRA 799, 813.
30
Director of Lands v. Intermediate Appellate Court, No. L-73002, December 29, 1986, 146 SCRA 509,
521.
31
Susi v. Razon and Director of Lands, 48 Phil. 424, 428 (1925); Santos v. Court of Appeals, G.R. No.
90380, September 13, 1990, 189 SCRA 550, 560; Cruz v. Navarro, No. L-27644, November 29, 1973, 54
SCRA 109, 115.
32
x x x WHEREAS, it has always been the policy of the State to hasten the settlement, adjudication and
quieting of titles to unregistered lands including alienable and disposable lands of the public domain in
favor of qualified Filipino citizens who have acquired inchoate, imperfect and incomplete titles thereto by
reason of their open, continuous, exclusive and notorious occupation and cultivation thereof under bonafide
claim of acquisition of ownership for a number of years prescribed by law; x x x (Presidential Decree 1073)
33
An Act Authorizing the Issuance of Free Patents to Residential Lands (Approved on March 9, 2010).
34
Republic Act No. 10023 reduces the period of eligibility for titling from 30 years to 10 years of untitled
public alienable and disposable lands which have been zoned as residential; and enables the applicant to
apply with the Community Environment and Natural Resources Office of the Department of Environment
and Natural Resources having jurisdiction over the parcel subject of the application, provided the land
subject of the application should not exceed 200 square meters if it is in a highly urbanized city, 500 meters
in other cities, 750 meters in first-class and second-class municipalities, and 1,000 meters in third-class
municipalities.
35
Section 14. Who may apply. – The following persons may file in the proper Court of First Instance an
application for registration of title to land, whether personally or through their duly authorized
representatives:
xxxx
(2) Those who have acquired ownership of private lands by prescription under the provisions of
existing laws.
36
Republic v. Intermediate Appellate Court, No. L-75042, November 29, 1988, 168 SCRA 165, 174.
37
Dissenting opinion of Justice Teehankee in Manila Electric Company v. Castro-Bartolome, supra,

EN BANC

G.R. No. L-16351 June 30, 1964

CALAPAN LUMBER COMPANY, INC., plaintiff-appellee,

vs.
COMMUNITY SAWMILL COMPANY, ET AL., defendants-appellants.

Ferdinand E. Marcos for plaintiff-appellee.

Salvador H. Laurel and Exequiel S. Consulta for defendants-appellants.
PADILLA, J.:

This is an action for injunction, prohibition against defendant public officers, compensatory,
exemplary and nominal damages, attorney's fees and costs.

All the defendants prayed in their respective answers for the dismissal of the second amended
complaint, in addition to their counterclaim.

After trial, the Court of First Instance of Oriental Mindoro rendered judgment, the dispositive
part of which reads:

WHEREFORE, this Court renders judgment:

1. Finding:

(a) That the road and bridge in question, known as the Biga-Communal-Goob
(from Km. 12.38 to 15.88) was constructed during the period from 1950 to 1952
by the plaintiff at its exclusive expense with the knowledge and consent of the
Provincial Board of Oriental Mindoro;

(b) That before actual construction of said road and bridge the personnel of the
Office of the District Engineer surveyed the lay-out of the road to be constructed,
also at the expense of the plaintiff;

(c) That before the actual construction of the road in question the plaintiff secured
and used road-right-of-way agreements (Exhs. Y, Y-1 to Y-7 and Z-AA),
executed in favor of the plaintiff by the owners of the several portions of land
traversed by said road;

(d) That from the completion of the road up to the present the plaintiff has been
contributing to the repair and maintenance of the said road such as stones, gravel,
sand and lumber at its own expense;

(e) That since the completion of the road in question (to) the same has been used
by the public without any restriction with the written consent of the plaintiff as
embodied in Resolutions Nos. 222 (Exh. A) and 119 (Exh. B), with the exception
of logging and lumber concerns who might use the road with the permission of
the plaintiff;

(f) That Lao Kee (alias Lu Pong), Lee Cok Tan Hong, Tan Kian, Co Giac, Tan
Hong Chian Hian, Tan Tak Tiao, Kick Chia and the Community Sawmill
Company had used the road and bridge in question sometime before April 6,
1953, until the issuance of the writ of preliminary injunction of June 25, 1953,
manifest bad faith;

2. Declaring:
 (a) That Resolution No. 186, series of 1953, marked Exh. C, is valid insofar as it
repealed Resolution No. 222, series of 1953; marked Exh. "A", and Resolution
No. 119, series of 1953, marked Exh. B;

(b) That Resolution No. 186, series of 1953, marked Exh. C. insofar as it declared
that the road and bridge in question, public is null and void the same being in
violation of Sec. 2131 of the Revised Administrative Code;

(c) That the road and bridge in question are of private ownership belonging to the
plaintiff;

(d) That the said defendant Lao Kee (alias Lu Pong), Lee Cok, Tan Hong, Tan
Kian, Co Giac, Tan Hong, Chia Hian, Tan Tak Tiao, Kiok Chia and Community
Sawmill did not have the right to use the road and bridge in question;

3. Ordering:

(a) That the writ of preliminary injunction issued against the Community Sawmill
Company be made permanent, perpetually restraining the said defendants Lao
Kee (alias Lu Pong), Lee Cok, Tan Hong, Tan Kian, Co Giac, Tan Hong Chia
Hian, Tan Tak Tiao, Kiok Chia and Community Sawmill Company, their agents,
attorneys, or other persons or entities from acting on their behalf;

(b) The same defendants named in the immediately preceding paragraph to pay
jointly and severally to the plaintiff the sum of P10,000.00 as attorney's fees and
to pay the costs;

4. Absolving from the third amended complaint the defendants Marciano Roque, Pablo
Lorenzo, Isaias Fernando, Francisco Infantado, Bernabe Jamilla and Cenon C. Laurena;

5. Dismissing all the counterclaims filed by the defendants for lack of sufficient merits.
(Civil Case No. R-542)

From the judgment thus rendered, the defendants Lao Kee (alias Lu Pong), Lee Cok Tan Hong,
Tan Kian, Co Giac, Chia Hian, Tan Tak Tiao, Kiok Chia, all acting under the name and style of
Community Sawmill Company, appealed to this Court. They claim that the trial court committed
the following errors:

1. The lower court erred in holding that the road in question is a private road and that,
therefore, plaintiff could legally deny its use to herein appellants.

2. The lower court erred in ordering herein appellants to pay plaintiff attorney's fees.

3. The lower court erred in holding that plaintiff can recover expenses of litigation under
article 2208 of the Civil Code.
 4. The lower court erred in not dismissing the complaint and finding for herein appellants
on their counterclaim.

At the trial, the parties submitted to the Court a stipulation of facts which reads:

1. That the parties agree to the existence and authenticity of the following resolutions
which were passed by the Provincial Board of Oriental Mindoro, as follows:

(a) Resolution No. 222, Series of 1950 (Annex "A" of the Third Amended
Complaint), but not its regularity and validity, which must be proven;

(b) Resolution No. 119, Series of 1953 (Annex "B" of the Third Amended
Complaint);

(c) Resolution No. 186, Series of 1955, revoking Resolutions Nos. 222, Series of
1950 and 119, Series of 1953, of the Provincial Board, granting the Calapan
Lumber Company the exclusive right under certain conditions to use the Biga-
Communal-Goob road for a period of twenty (20) years, and declaring said road
as a toll road.

2. That the parties agree as to the existence and authenticity of the following official
communications, indorsements and letters re the Biga-Communal-Goob road:

(a) letter dated March 20, 1953 addressed to the Hon. Executive Secretary, signed
by Rodolfo Naguit and Joe Ong, both representatives of the Community Sawmill
Company:

(b) 1st Indorsement of Assistant Executive Secretary Lucas Madamba, dated

March 21, 1953 (Annex "C", Third Amended Complaint);

(c) 2nd Indorsement of Governor Infantado dated March 23, 1953;

(d) 3rd Indorsement of District Engineer C. C. Laurena dated March 26, 1953;

(e) 4th Indorsement of Governor Infantado dated March 28, 1953;

(f) Letter of Rodolfo G. Naguit, representative of the Community Sawmill

Company, dated May 4, 1953 and addressed to the Assistant Executive Secretary,
Office of the President;

(g) Letter of Atty. Ferdinand E. Marcos, counsel for the plaintiff company
addressed to Executive Secretary Marciano Roque, dated May 21, 1953 (Annex
"F", Third Amended Complaint);

(h) 7th Indorsement of Director of Public Works, Isaias Fernando, dated April 20,
1953 (Annex "D", Third Amended Complaint);
 (i) 8th Indorsement of Undersecretary Vicente Orosa, dated April 25, 1953;

(j) 9th Indorsement of Executive Secretary Marciano Roque dated May 11, 1953
(Annex "E", Third Amended Complaint);

(k) 3rd Indorsement of Acting Executive Secretary Marciano Roque, dated July 8,
1953 and the 4th Indorsement of Undersecretary Vicente Orosa, dated July 16,
1953;

(l) 1st Indorsement of Acting Executive Secretary Marciano Roque, dated July 17,
1953.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted
and approved by this Honorable Court, without prejudice to the parties adducing other
evidence to prove their case not covered by this stipulation of facts. 1äwphï1.ñët

xxx xxx xxx

Resolution No. 222, adopted 4 December 1950, reads:

Whereas, there is at present an unfinished provincial road in the barrio of Viga, of the
municipality of Calapan, known as the Viga-Communal-Goob Road, the construction of
which could not be undertaken by the province due to insufficiency of funds;

Whereas, the Calapan Lumber Co., Inc., through its President, Mr. D. M. Gotauco, in a
letter addressed to the Governor of this province has made representations to undertake
the construction of said road under certain conditions; and

Whereas, the province is willing to accede to the request of the Calapan Lumber Co., Inc.
and to give it the sole right for its use, provided that after a period of twenty (20) years,
said company shall donate to the province the road it had constructed, provided further
that during the said period of 20 years other concerns dealing in logs and/or lumber may
use the same road upon permission granted to them by the said Calapan Lumber Co.,
Inc.; and provided finally that said road is open to all non-logging concerns or individuals
during the said period of 20 years. Now, therefore, be it

RESOLVED, That the Provincial Board of Oriental Mindoro grants, as hereby is

granting, the Calapan Lumber Co., Inc. to undertake the construction of the unfinished
provincial road in the barrio of Viga, municipality of Calapan, known as the Viga-
Communal-Goob Road, subject to the stipulations stated above; and

RESOLVED FURTHER, That copies of this resolution be furnished the District Engineer
and the Calapan Lumber Co., Inc., through its President, Mr. D. M. Gotauco, for their
information.

xxx xxx xxx

Resolution No. 119, adopted 6 April 1953, reads:

Whereas, under Resolution No. 222, series of 1950, the Provincial Board of Oriental
Mindoro under the former administration, granted the Calapan Lumber Co., Inc. the right
to undertake the construction of the unfinished Viga-Communal-Goob provincial road the
sole right for its use, under the following conditions:

(1) That after a period of twenty (20) years, said company shall donate to the
province the road it had constructed;

(2) That during the said period of 20 years other concerns dealing in logs and/or
lumber may use the same road upon permission granted to them by the Calapan
Lumber Co.; and

(3) That said road is open to all non-logging concerns or individuals during the
said period of 20 years.

Whereas, according to the records of the Provincial Board the said resolution has not
been amended or modified up to the present, and, therefore, the same is still in force and
binding as per agreement stipulated therein;

Whereas, this Board has received reliable information to the effect that another certain
lumber company is attempting to use, or has actually used the same road, by allowing to
pass thru it its heavy trucks and tractors without securing any permission from the
Calapan Lumber Co., Inc., to the detriment and prejudice of the interests of the latter
lumber company which shouldered the cost of its completion in accordance with the
rights granted to it by the province; and

Whereas, after a careful consideration of the matter this Board is of the opinion that the
right of the Calapan Lumber Co., Inc. over the said road as stipulated in the condition set
forth in the resolution must be upheld for obvious reasons; Now, therefore, be it

RESOLVED by the Provincial Board of Oriental Mindoro to authorize, as it hereby

authorizes, the Calapan Lumber Company, Inc., to prohibit the use of the Viga-
Communal-Goob provincial road, from point Km. 12.38 up to Km. 15.88 of said road, by
any other concern or company dealing in logs and/or lumber, without the permission or
consent of the said Calapan Lumber Co., Inc. in accordance with one of the stipulations
or conditions agreed upon in Resolution No. 222, series of 1950, of the Provincial Board;
and

RESOLVED, FURTHER, That the District Engineer and the Calapan Lumber Co., Inc.
be furnished with copies of this resolution, for their information.

xxx xxx xxx

Resolution No. 186, adopted 19 June 1953, reads:

REVOKING RESOLUTIONS NOS. 222, SERIES OF 1950, AND 119, SERIES OF
1953, OF THE PROVINCIAL BOARD, GRANTING THE CALAPAN LUMBER
COMPANY THE EXCLUSIVE RIGHT UNDER CERTAIN CONDITIONS TO USE
THE VIGA-COMMUNAL-GOOB PROVINCIAL ROAD FOR A PERIOD OF
TWENTY (20) YEARS.

Whereas, under Resolution No. 222, series of 1950, the Provincial Board of Oriental
Mindoro, under the former provincial administration, granted the Calapan Lumber Co.,
Inc. an authority to undertake the construction of the unfinished Viga-Goob provincial
road from Point Km. 12.38 to Km. 15.88, and the exclusive right for its use, under certain
conditions;

Whereas, on April 6, 1953, this Board passed another resolution (119) maintaining the
right of the Calapan Lumber Co., Inc. over the said road under the conditions stipulated
in the above-cited resolution No. 222, and forthwith authorized the said company to
prohibit the use of the portion of said road constructed at its expense by any other
concern or company dealing in logs or lumber without its permission;

Whereas, in a 9th Indorsement dated May 11, 1953, the pertinent parts of which are
quoted hereunder, the Honorable, the Executive Secretary to whom the case regarding
this matter was appealed for decision, and upon the recommendation of the Director of
Public Works and with the concurrence of the Undersecretary of Public Works and
Communications, ruled that provincial roads are considered as properties for public use
and the Provincial Board may not therefore grant the exclusive use thereof to any private
individual or entity which would discriminate against or exclude the general public from
a reasonable use thereof, and therefore, the resolution in question should be revoked.

In this connection, it should be stated that Provincial roads are properties for
public use and the provincial board may not grant the exclusive use thereof to any
private individual or entitle or enter into a contract or agreement which would
tend to discriminate against or exclude the general public from a reasonable use
thereof. Resolutions Nos. 222, series of 1950, and 119, series of 1953, of the
Provincial Board, granting the Calapan Lumber Company an exclusive right to
use the said road for a period of twenty (20) year and to prohibit lumber or
logging concerns from using the road in question without the company's
permission, should therefore be revoked. In consonance with the policy of the
law, and as correctly the suggested by the Director of Public Works and the
Undersecretary of Public Works and Communications the portion of the Viga-
Communal Road from Km. 12.38 to 15.89, having a length of 3.5 kilometers,
should be declared a toll road in order to raise funds for its maintenance and with
which to reimburse the Calapan Lumber Company for the expenses the latter had
incurred in the construction of this portion of the road.

Whereas, in view of the said ruling, this Board has been requested to take immediate
action on the matter to declare the above-said portion of the Viga-Communal-Goob
provincial road as a toll road; and,
 Whereas, according to an estimate made by the office of the District Engineer the
Calapan Lumber Company has spent for the construction of the portion of the road in
question having a length of 3.5 kilometers, the amount of P25,000.00 more or less; Now,
therefore, be it —

RESOLVED, That Resolutions Nos. 222, series of 1950, and 119, series of 1953, of the
Provincial Board, which grant the Calapan Lumber Co., Inc., the exclusive right to use
the Viga-Communal-Goob provincial road for a period of 20 years, under certain
conditions, be, and hereby are, revoked;

RESOLVED, FURTHER, That the portion of said Viga-Communal-Goob provincial

road, from Point Km. 12.38 up to Km. 15.88 thereof, be and hereby is, declared
PROVINCIAL TOLL ROAD, under the provisions of section 2131 of the Revised
Administrative Code;

RESOLVED, FURTHERMORE, That the following toll rates to be paid by any motor
vehicle for the use of the provincial road be, and hereby are, fixed, effective today, June
19, 1953, the proceeds from which shall be used for the maintenance of the said road and
the balance thereof for the reimbursement to the said company for the expenses it had
incurred in the construction for said portion of the road:

For every truck, one way P1.00

For every weapon carrier, one way .60
For every jeepney .30

PROVIDED, however, that the portion of the road declared herein as provincial toll road
shall continue to be so up to and until the amount spent by the Calapan Lumber Company
for its construction shall have been covered by reimbursement to said company; and

RESOLVED, FINALLY, That copies of this resolution be forwarded to His Excellency,

the President of the Philippines, thru the Director of Public Works and the Honorable, the
Secretary of Public Works and Communications, Manila.

xxx xxx xxx

Resolution No. 169, adopted 21 April 1956, revoked Resolution No. 186 in so far as it declared
Provincial Toll Road that part of the road invoked in this case.

There seems to be no doubt that Resolutions Nos. 222 and 119, adopted by the Provincial Board
of Oriental Mindoro quoted above, mere ultra vires, because sections 2067 (f) and (g) on powers
of the provinces as political bodies corporate; 2102 (g) on powers of the provincial boards; 2106
(f) on powers of the provincial boards to be exercised with the approval of the Department Head;
and 2113 (a) on road and bridge fund, of the Revised Administrative Code, do not authorize the
Provincial Board of Oriental Mindoro to pass and adopt said resolutions. The contention that the
Provincial Board of Oriental Mindoro under section 2106 (g) invoked by the appellee is
authorized to pass those resolutions Nos. 222 and 199 quoted above, is untenable because said
paragraph of the section authorizes the Provincial Board "to permit, upon favorable
recommendation by the Secretary of Public Works and Communications, and subject to such
conditions as may properly protect the public interests, the construction and maintenance, for
private use of railways, conduits, and telephone lines across public thoroughfares, streets, roads,
or other public property and in the province: Provided, That such construction and private use
shall not prevent or obstruct the public use of such thoroughfares, streets, roads or other public
property and that the permit granted shall at all times be subject to revocation by the Secretary of
the Interior, if, in the judgment of that official, the public interest requires it." Consequently,
Resolution No. 186 revoking the two previous resolutions was in order.

The road known as the Viga-Communal-Goob connecting two finished or completed parts of the
provincial road, from kilometer 12.38 to 15.88, as laid out by the personnel of the office of the
District Engineer was planned or intended to be laid out and constructed by the Provincial
Government of Oriental Mindoro to complete said road. The fact that the survey, lay-out and
actual construction of the unfinished part of the road were done at the appellee's expense, does
not convert said road after construction into a private road, for it does not appear that the parts of
the land where the road was laid out and constructed belong to or are owned by the appellee. The
evidence shows that the owners of such parts of land ceded their parts of the land owned by them
without any consideration because of their desire to have the road completed or to connect the
ends of two completed parts of the road. It may be conceded that the appellee built the road in
question in good faith; and such being the case, it may be argued that the appellee is entitled to
keep or have possession of the road until after it shall have been reimbursed of the expenses it
had incurred in constructing and maintaining the road in good condition. The provisions of the
Civil Code on the right of a builder in good faith on a private land1 cannot be invoked and
applied to the road in question, because public interest is involved and the people living in that
part of the province are entitled to use the road.

It is true that that part of the Resolution No. 186 above quoted converting the road in question
into toll road contravenes section 2131 of the Revised Administrative Code, because in the case
of road the recommendation of the Secretary of Public Works and Communications and the
authorization of the president of the Philippines had to be secured and such recommendation and
authorization had not been obtained.

Upon the foregoing considerations, this Court is of the opinion, and so holds, that the road
involved in this case cannot be declared private property, and for that reason the Provincial
Board of Oriental Mindoro may elect between paying the appellee the total cost of the
construction of the road together with lawful interest from the date of actual disbursement by the
appellee to the date of payment by the Province of Oriental Mindoro within a reasonable period
not to exceed one year from the date this judgment shall become final; or upon securing the
recommendation of the Secretary of Public Works and Communications and authorization of the
President of the Philippines to designate such road an toll road, to raise the necessary fund to
reimburse the appellee of the total cost of construction of the road, together with lawful interest
from the date of actual disbursement by the appellee to the date of payment by the Province of
Oriental Mindoro, and the latter is ordered to refund the amount paid for tolls by, the appellee
during the enforcement of Resolution No. 186 which, as above stated, was unauthorized. The
judgment appealed from making final the preliminary writ of injunction and ordering the
appellants to pay the appellee the sum of P10,000 as attorney's fees, are reversed and set aside.
The rest of the judgment appealed from not inconsistent with this opinion is affirmed, without
pronouncement as to costs.

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Parades, Regala and
Makalintal, JJ., concur.
Barrera and Dizon, JJ., took no part.

Footnotes
1
Articles 448 and 546, Civil Code.

EN BANC

G.R. No. L-7054 January 20, 1913

MUNICIPALITY OF HINUNANGAN, plaintiff-appellee,

vs.
THE DIRECTOR OF LANDS, defendant-appellant.

Attorney-General Villamor, for appellant.

Provincial Fiscal De la Rama, for appellee.

MORELAND, J.:

This is an appeal from the judgment of the Court of Land Registration, ordering the registration
of the title of the petitioner to the lands described in the petition. The appeal is taken by the
Insular Government from the registration of the title of one of the parcels of land only. It is
situated in the municipality of Hinunangan, Province of Leyte, and contains an area of 10,328.8
square meters. It is bounded on the northeast by the maritime zone; on the southeast by North
America Street; on the southwest by Manilili Street, and on the northwest by San Isidro Labrador
Street. Upon this lot is built a stone fort which has stood there from time immemorial and was in
times past used as a defense against the invasion of the Moros.

Formerly, as now, the defense of the national territory against invasion by foreign enemies rested
upon the state and not upon the towns and villages and for this reason all of the defenses were
constructed by the National Government. In volume 2, book 3, title 7, law 1 of the Laws of the
Indies appears the following:

We command that all the ground roundabout the castles and fortresses be clear and
unoccupied, and if any building is erected within 300 paces of the wall or other building
so strong that even at a greater distance it would prejudice the defenses, it shall be torn
down, and the owner of the same shall be paid from the Royal Treasury for the damages
caused him.

Book 4, title 7, law 12, reads as follows:

 We order that, for the security and defense of the cities as is now assured by the castles
and fortresses, no building shall be erected within 300 paces of the walls or stockades of
the new cities.

Article 339 of the Civil Code is as follows, in part:

ART. 339. The following are public property:

xxx xxx xxx

2. That which belongs privately to the state, which is not for public use and which is
destined for the public good or to increase the national riches, such as walls, fortresses
and other constructions for the defense of the country, and the mines as long as no
concession in regard to them is made.

Article 341 of the Civil Code provides:

ART. 341. Public property, when it ceases to be used for the public good or for the
necessities of the defense of the country, becomes a part of the property of the state.

From these provisions it seems clear that the fortress in question was erected for the national
defense and was a part of the property of the state destined and used for that purpose. As a
necessary result, the land upon which it stands must also have been dedicated to that purpose.

The fact that said fortress may not have been used for many years for the purposes for which it
was originally built does not of necessity deprive the state of its ownership therein. As we have
seen, the Civil Code provides that, when the fortress ceases to be used for the purposes for which
it was constructed, it becomes the property of the state in what may be called the private sense.
That the municipality may have exercised within recent years acts of ownership over the land by
permitting it to be occupied and consenting to the erection of private houses thereon does not
determine necessarily that the land has become the property of the municipality. We have held in
several cases that, where the municipality has occupied lands distinctly for public purposes, such
as for the municipal court house, the public school, the public market, or other necessary
municipal building, we will, in the absence of proof to the contrary, presume a grant from the
state in favor of the municipality; but, as indicated by the wording, that rule may be invoked only
as to property which is used distinctly for public purposes. It cannot be applied against the state
when occupied for any other purpose.

The evidence does not disclose that the municipality has used the land for purposes distinctly
public.

The judgment in relation to the parcel of land heretofore described is reversed and the petition as
to that parcel dismissed. In all other respects the judgment is affirmed. So ordered.

Arellano, C.J., Torres, Mapa, Johnson, and Trent, JJ., concur.

 EN BANC

G.R. No. 92013 July 25, 1990

SALVADOR H. LAUREL, petitioner,

vs.
RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS,
as Secretary of Foreign Affairs, and CATALINO MACARAIG, as Executive
Secretary, respondents.

G.R. No. 92047 July 25, 1990

DIONISIO S. OJEDA, petitioner,

vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST
CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as
members of the PRINCIPAL AND BIDDING COMMITTEES ON THE
UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT
PROPERTIES IN JAPAN, respondents.

Arturo M. Tolentino for petitioner in 92013.

GUTIERREZ, JR., J.:

These are two petitions for prohibition seeking to enjoin respondents, their
representatives and agents from proceeding with the bidding for the sale of the
3,179 square meters of land at 306 Roppongi, 5-Chome Minato-ku Tokyo, Japan
scheduled on February 21, 1990. We granted the prayer for a temporary
restraining order effective February 20, 1990. One of the petitioners (in G.R. No.
92047) likewise prayes for a writ of mandamus to compel the respondents to fully
disclose to the public the basis of their decision to push through with the sale of
the Roppongi property inspire of strong public opposition and to explain the
proceedings which effectively prevent the participation of Filipino citizens and
entities in the bidding process.

The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the
Court on March 13, 1990. After G.R. No. 92047, Ojeda v. Secretary Macaraig, et al.
was filed, the respondents were required to file a comment by the Court's
resolution dated February 22, 1990. The two petitions were consolidated on
March 27, 1990 when the memoranda of the parties in the Laurel case were
deliberated upon.
The Court could not act on these cases immediately because the respondents
filed a motion for an extension of thirty (30) days to file comment in G.R. No.
92047, followed by a second motion for an extension of another thirty (30) days
which we granted on May 8, 1990, a third motion for extension of time granted on
May 24, 1990 and a fourth motion for extension of time which we granted on June
5, 1990 but calling the attention of the respondents to the length of time the
petitions have been pending. After the comment was filed, the petitioner in G.R.
No. 92047 asked for thirty (30) days to file a reply. We noted his motion and
resolved to decide the two (2) cases.

The subject property in this case is one of the four (4) properties in Japan
acquired by the Philippine government under the Reparations Agreement entered
into with Japan on May 9, 1956, the other lots being:

(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which

has an area of approximately 2,489.96 square meters, and is at present the site of
the Philippine Embassy Chancery;

(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of

around 764.72 square meters and categorized as a commercial lot now being
used as a warehouse and parking lot for the consulate staff; and

(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-

ku, Kobe, a residential lot which is now vacant.

The properties and the capital goods and services procured from the Japanese
government for national development projects are part of the indemnification to
the Filipino people for their losses in life and property and their suffering during
World War II.

The Reparations Agreement provides that reparations valued at $550 million

would be payable in twenty (20) years in accordance with annual schedules of
procurements to be fixed by the Philippine and Japanese governments (Article 2,
Reparations Agreement). Rep. Act No. 1789, the Reparations Law, prescribes the
national policy on procurement and utilization of reparations and development
loans. The procurements are divided into those for use by the government sector
and those for private parties in projects as the then National Economic Council
shall determine. Those intended for the private sector shall be made available by
sale to Filipino citizens or to one hundred (100%) percent Filipino-owned entities
in national development projects.

The Roppongi property was acquired from the Japanese government under the
Second Year Schedule and listed under the heading "Government Sector",
through Reparations Contract No. 300 dated June 27, 1958. The Roppongi
property consists of the land and building "for the Chancery of the Philippine
Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As intended, it
became the site of the Philippine Embassy until the latter was transferred to
Nampeidai on July 22, 1976 when the Roppongi building needed major repairs.
Due to the failure of our government to provide necessary funds, the Roppongi
property has remained undeveloped since that time.

A proposal was presented to President Corazon C. Aquino by former Philippine

Ambassador to Japan, Carlos J. Valdez, to make the property the subject of a
lease agreement with a Japanese firm - Kajima Corporation — which shall
construct two (2) buildings in Roppongi and one (1) building in Nampeidai and
renovate the present Philippine Chancery in Nampeidai. The consideration of the
construction would be the lease to the foreign corporation of one (1) of the
buildings to be constructed in Roppongi and the two (2) buildings in Nampeidai.
The other building in Roppongi shall then be used as the Philippine Embassy
Chancery. At the end of the lease period, all the three leased buildings shall be
occupied and used by the Philippine government. No change of ownership or title
shall occur. (See Annex "B" to Reply to Comment) The Philippine government
retains the title all throughout the lease period and thereafter. However, the
government has not acted favorably on this proposal which is pending approval
and ratification between the parties. Instead, on August 11, 1986, President
Aquino created a committee to study the disposition/utilization of Philippine
government properties in Tokyo and Kobe, Japan through Administrative Order
No. 3, followed by Administrative Orders Numbered 3-A, B, C and D.

On July 25, 1987, the President issued Executive Order No. 296 entitling non-
Filipino citizens or entities to avail of separations' capital goods and services in
the event of sale, lease or disposition. The four properties in Japan including the
Roppongi were specifically mentioned in the first "Whereas" clause.

Amidst opposition by various sectors, the Executive branch of the government

has been pushing, with great vigor, its decision to sell the reparations properties
starting with the Roppongi lot. The property has twice been set for bidding at a
minimum floor price of $225 million. The first bidding was a failure since only one
bidder qualified. The second one, after postponements, has not yet materialized.
The last scheduled bidding on February 21, 1990 was restrained by his Court.
Later, the rules on bidding were changed such that the $225 million floor price
became merely a suggested floor price.

The Court finds that each of the herein petitions raises distinct issues. The
petitioner in G.R. No. 92013 objects to the alienation of the Roppongi property to
anyone while the petitioner in G.R. No. 92047 adds as a principal objection the
alleged unjustified bias of the Philippine government in favor of selling the
property to non-Filipino citizens and entities. These petitions have been
consolidated and are resolved at the same time for the objective is the same - to
stop the sale of the Roppongi property.
The petitioner in G.R. No. 92013 raises the following issues:

(1) Can the Roppongi property and others of its kind be alienated by the
Philippine Government?; and

(2) Does the Chief Executive, her officers and agents, have the authority and
jurisdiction, to sell the Roppongi property?

Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority
of the government to alienate the Roppongi property assails the constitutionality
of Executive Order No. 296 in making the property available for sale to non-
Filipino citizens and entities. He also questions the bidding procedures of the
Committee on the Utilization or Disposition of Philippine Government Properties
in Japan for being discriminatory against Filipino citizens and Filipino-owned
entities by denying them the right to be informed about the bidding requirements.

II

In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the
related lots were acquired as part of the reparations from the Japanese
government for diplomatic and consular use by the Philippine government. Vice-
President Laurel states that the Roppongi property is classified as one of public
dominion, and not of private ownership under Article 420 of the Civil Code (See
infra).

The petitioner submits that the Roppongi property comes under "property
intended for public service" in paragraph 2 of the above provision. He states that
being one of public dominion, no ownership by any one can attach to it, not even
by the State. The Roppongi and related properties were acquired for "sites for
chancery, diplomatic, and consular quarters, buildings and other improvements"
(Second Year Reparations Schedule). The petitioner states that they continue to
be intended for a necessary service. They are held by the State in anticipation of
an opportune use. (Citing 3 Manresa 65-66). Hence, it cannot be appropriated, is
outside the commerce of man, or to put it in more simple terms, it cannot be
alienated nor be the subject matter of contracts (Citing Municipality of Cavite v.
Rojas, 30 Phil. 20 [1915]). Noting the non-use of the Roppongi property at the
moment, the petitioner avers that the same remains property of public dominion
so long as the government has not used it for other purposes nor adopted any
measure constituting a removal of its original purpose or use.

The respondents, for their part, refute the petitioner's contention by saying that
the subject property is not governed by our Civil Code but by the laws of Japan
where the property is located. They rely upon the rule of lex situs which is used in
determining the applicable law regarding the acquisition, transfer and devolution
of the title to a property. They also invoke Opinion No. 21, Series of 1988, dated
January 27, 1988 of the Secretary of Justice which used the lex situs in explaining
the inapplicability of Philippine law regarding a property situated in Japan.

The respondents add that even assuming for the sake of argument that the Civil
Code is applicable, the Roppongi property has ceased to become property of
public dominion. It has become patrimonial property because it has not been
used for public service or for diplomatic purposes for over thirteen (13) years
now (Citing Article 422, Civil Code) and because the intention by the Executive
Department and the Congress to convert it to private use has been manifested by
overt acts, such as, among others: (1) the transfer of the Philippine Embassy to
Nampeidai (2) the issuance of administrative orders for the possibility of
alienating the four government properties in Japan; (3) the issuance of Executive
Order No. 296; (4) the enactment by the Congress of Rep. Act No. 6657 [the
Comprehensive Agrarian Reform Law] on June 10, 1988 which contains a
provision stating that funds may be taken from the sale of Philippine properties in
foreign countries; (5) the holding of the public bidding of the Roppongi property
but which failed; (6) the deferment by the Senate in Resolution No. 55 of the
bidding to a future date; thus an acknowledgment by the Senate of the
government's intention to remove the Roppongi property from the public service
purpose; and (7) the resolution of this Court dismissing the petition in Ojeda v.
Bidding Committee, et al., G.R. No. 87478 which sought to enjoin the second
bidding of the Roppongi property scheduled on March 30, 1989.

III

In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the
constitutionality of Executive Order No. 296. He had earlier filed a petition in G.R.
No. 87478 which the Court dismissed on August 1, 1989. He now avers that the
executive order contravenes the constitutional mandate to conserve and develop
the national patrimony stated in the Preamble of the 1987 Constitution. It also
allegedly violates:

(1) The reservation of the ownership and acquisition of alienable lands of the
public domain to Filipino citizens. (Sections 2 and 3, Article XII, Constitution;
Sections 22 and 23 of Commonwealth Act 141).i•t•c-aüsl

(2) The preference for Filipino citizens in the grant of rights, privileges and
concessions covering the national economy and patrimony (Section 10, Article
VI, Constitution);

(3) The protection given to Filipino enterprises against unfair competition and
trade practices;

(4) The guarantee of the right of the people to information on all matters of public
concern (Section 7, Article III, Constitution);
(5) The prohibition against the sale to non-Filipino citizens or entities not wholly
owned by Filipino citizens of capital goods received by the Philippines under the
Reparations Act (Sections 2 and 12 of Rep. Act No. 1789); and

(6) The declaration of the state policy of full public disclosure of all transactions
involving public interest (Section 28, Article III, Constitution).

Petitioner Ojeda warns that the use of public funds in the execution of an
unconstitutional executive order is a misapplication of public funds He states that
since the details of the bidding for the Roppongi property were never publicly
disclosed until February 15, 1990 (or a few days before the scheduled bidding),
the bidding guidelines are available only in Tokyo, and the accomplishment of
requirements and the selection of qualified bidders should be done in Tokyo,
interested Filipino citizens or entities owned by them did not have the chance to
comply with Purchase Offer Requirements on the Roppongi. Worse, the
Roppongi shall be sold for a minimum price of $225 million from which price
capital gains tax under Japanese law of about 50 to 70% of the floor price would
still be deducted.

IV

The petitioners and respondents in both cases do not dispute the fact that the
Roppongi site and the three related properties were through reparations
agreements, that these were assigned to the government sector and that the
Roppongi property itself was specifically designated under the Reparations
Agreement to house the Philippine Embassy.

The nature of the Roppongi lot as property for public service is expressly spelled
out. It is dictated by the terms of the Reparations Agreement and the
corresponding contract of procurement which bind both the Philippine
government and the Japanese government.

There can be no doubt that it is of public dominion unless it is convincingly

shown that the property has become patrimonial. This, the respondents have
failed to do.

As property of public dominion, the Roppongi lot is outside the commerce of

man. It cannot be alienated. Its ownership is a special collective ownership for
general use and enjoyment, an application to the satisfaction of collective needs,
and resides in the social group. The purpose is not to serve the State as a
juridical person, but the citizens; it is intended for the common and public welfare
and cannot be the object of appropration. (Taken from 3 Manresa, 66-69; cited in
Tolentino, Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol.
II, p. 26).

The applicable provisions of the Civil Code are:

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

ART. 420. The following things are property of public dominion

(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks shores
roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use,
and are intended for some public service or for the development of
the national wealth.

ART. 421. All other property of the State, which is not of the
character stated in the preceding article, is patrimonial property.

The Roppongi property is correctly classified under paragraph 2 of Article 420 of

the Civil Code as property belonging to the State and intended for some public
service.

Has the intention of the government regarding the use of the property been
changed because the lot has been Idle for some years? Has it become
patrimonial?

The fact that the Roppongi site has not been used for a long time for actual
Embassy service does not automatically convert it to patrimonial property. Any
such conversion happens only if the property is withdrawn from public use (Cebu
Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A property
continues to be part of the public domain, not available for private appropriation
or ownership until there is a formal declaration on the part of the government to
withdraw it from being such (Ignacio v. Director of Lands, 108 Phil. 335 [1960]).

The respondents enumerate various pronouncements by concerned public

officials insinuating a change of intention. We emphasize, however, that an
abandonment of the intention to use the Roppongi property for public service and
to make it patrimonial property under Article 422 of the Civil Code must be
definite Abandonment cannot be inferred from the non-use alone specially if the
non-use was attributable not to the government's own deliberate and indubitable
will but to a lack of financial support to repair and improve the property (See
Heirs of Felino Santiago v. Lazaro, 166 SCRA 368 [1988]). Abandonment must be
a certain and positive act based on correct legal premises.

A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not

relinquishment of the Roppongi property's original purpose. Even the failure by
the government to repair the building in Roppongi is not abandonment since as
earlier stated, there simply was a shortage of government funds. The recent
Administrative Orders authorizing a study of the status and conditions of
government properties in Japan were merely directives for investigation but did
not in any way signify a clear intention to dispose of the properties.

Executive Order No. 296, though its title declares an "authority to sell", does not
have a provision in its text expressly authorizing the sale of the four properties
procured from Japan for the government sector. The executive order does not
declare that the properties lost their public character. It merely intends to make
the properties available to foreigners and not to Filipinos alone in case of a sale,
lease or other disposition. It merely eliminates the restriction under Rep. Act No.
1789 that reparations goods may be sold only to Filipino citizens and one
hundred (100%) percent Filipino-owned entities. The text of Executive Order No.
296 provides:

Section 1. The provisions of Republic Act No. 1789, as amended, and

of other laws to the contrary notwithstanding, the above-mentioned
properties can be made available for sale, lease or any other manner
of disposition to non-Filipino citizens or to entities owned by non-
Filipino citizens.

Executive Order No. 296 is based on the wrong premise or assumption that the
Roppongi and the three other properties were earlier converted into alienable real
properties. As earlier stated, Rep. Act No. 1789 differentiates the procurements
for the government sector and the private sector (Sections 2 and 12, Rep. Act No.
1789). Only the private sector properties can be sold to end-users who must be
Filipinos or entities owned by Filipinos. It is this nationality provision which was
amended by Executive Order No. 296.

Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the
sources of funds for its implementation, the proceeds of the disposition of the
properties of the Government in foreign countries, did not withdraw the Roppongi
property from being classified as one of public dominion when it mentions
Philippine properties abroad. Section 63 (c) refers to properties which are
alienable and not to those reserved for public use or service. Rep Act No. 6657,
therefore, does not authorize the Executive Department to sell the Roppongi
property. It merely enumerates possible sources of future funding to augment (as
and when needed) the Agrarian Reform Fund created under Executive Order No.
299. Obviously any property outside of the commerce of man cannot be tapped
as a source of funds.

The respondents try to get around the public dominion character of the Roppongi
property by insisting that Japanese law and not our Civil Code should apply.

It is exceedingly strange why our top government officials, of all people, should
be the ones to insist that in the sale of extremely valuable government property,
Japanese law and not Philippine law should prevail. The Japanese law - its
coverage and effects, when enacted, and exceptions to its provision — is not
presented to the Court It is simply asserted that the lex loci rei sitae or Japanese
law should apply without stating what that law provides. It is a ed on faith that
Japanese law would allow the sale.

We see no reason why a conflict of law rule should apply when no conflict of law
situation exists. A conflict of law situation arises only when: (1) There is a dispute
over the title or ownership of an immovable, such that the capacity to take and
transfer immovables, the formalities of conveyance, the essential validity and
effect of the transfer, or the interpretation and effect of a conveyance, are to be
determined (See Salonga, Private International Law, 1981 ed., pp. 377-383); and
(2) A foreign law on land ownership and its conveyance is asserted to conflict
with a domestic law on the same matters. Hence, the need to determine which law
should apply.

In the instant case, none of the above elements exists.

The issues are not concerned with validity of ownership or title. There is no
question that the property belongs to the Philippines. The issue is the authority of
the respondent officials to validly dispose of property belonging to the State. And
the validity of the procedures adopted to effect its sale. This is governed by
Philippine Law. The rule of lex situs does not apply.

The assertion that the opinion of the Secretary of Justice sheds light on the
relevance of the lex situs rule is misplaced. The opinion does not tackle the
alienability of the real properties procured through reparations nor the existence
in what body of the authority to sell them. In discussing who are capable of
acquiring the lots, the Secretary merely explains that it is the foreign law which
should determine who can acquire the properties so that the constitutional
limitation on acquisition of lands of the public domain to Filipino citizens and
entities wholly owned by Filipinos is inapplicable. We see no point in belaboring
whether or not this opinion is correct. Why should we discuss who can acquire
the Roppongi lot when there is no showing that it can be sold?

The subsequent approval on October 4, 1988 by President Aquino of the

recommendation by the investigating committee to sell the Roppongi property
was premature or, at the very least, conditioned on a valid change in the public
character of the Roppongi property. Moreover, the approval does not have the
force and effect of law since the President already lost her legislative powers. The
Congress had already convened for more than a year.

Assuming for the sake of argument, however, that the Roppongi property is no
longer of public dominion, there is another obstacle to its sale by the
respondents.

There is no law authorizing its conveyance.

Section 79 (f) of the Revised Administrative Code of 1917 provides

Section 79 (f ) Conveyances and contracts to which the Government

is a party. — In cases in which the Government of the Republic of the
Philippines is a party to any deed or other instrument conveying the
title to real estate or to any other property the value of which is in
excess of one hundred thousand pesos, the respective Department
Secretary shall prepare the necessary papers which, together with
the proper recommendations, shall be submitted to the Congress of
the Philippines for approval by the same. Such deed, instrument, or
contract shall be executed and signed by the President of the
Philippines on behalf of the Government of the Philippines unless
the Government of the Philippines unless the authority therefor be
expressly vested by law in another officer. (Emphasis supplied)

The requirement has been retained in Section 48, Book I of the Administrative
Code of 1987 (Executive Order No. 292).

SEC. 48. Official Authorized to Convey Real Property. — Whenever

real property of the Government is authorized by law to be conveyed,
the deed of conveyance shall be executed in behalf of the
government by the following:

(1) For property belonging to and titled in the name of the Republic of
the Philippines, by the President, unless the authority therefor is
expressly vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but

titled in the name of any political subdivision or of any corporate
agency or instrumentality, by the executive head of the agency or
instrumentality. (Emphasis supplied)

It is not for the President to convey valuable real property of the government on
his or her own sole will. Any such conveyance must be authorized and approved
by a law enacted by the Congress. It requires executive and legislative
concurrence.

Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of
the sale of the Roppongi property does not withdraw the property from public
domain much less authorize its sale. It is a mere resolution; it is not a formal
declaration abandoning the public character of the Roppongi property. In fact, the
Senate Committee on Foreign Relations is conducting hearings on Senate
Resolution No. 734 which raises serious policy considerations and calls for a
fact-finding investigation of the circumstances behind the decision to sell the
Philippine government properties in Japan.
The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not
pass upon the constitutionality of Executive Order No. 296. Contrary to
respondents' assertion, we did not uphold the authority of the President to sell
the Roppongi property. The Court stated that the constitutionality of the
executive order was not the real issue and that resolving the constitutional
question was "neither necessary nor finally determinative of the case." The Court
noted that "[W]hat petitioner ultimately questions is the use of the proceeds of
the disposition of the Roppongi property." In emphasizing that "the decision of
the Executive to dispose of the Roppongi property to finance the CARP ... cannot
be questioned" in view of Section 63 (c) of Rep. Act No. 6657, the Court did not
acknowledge the fact that the property became alienable nor did it indicate that
the President was authorized to dispose of the Roppongi property. The resolution
should be read to mean that in case the Roppongi property is re-classified to be
patrimonial and alienable by authority of law, the proceeds of a sale may be used
for national economic development projects including the CARP.

Moreover, the sale in 1989 did not materialize. The petitions before us question
the proposed 1990 sale of the Roppongi property. We are resolving the issues
raised in these petitions, not the issues raised in 1989.

Having declared a need for a law or formal declaration to withdraw the Roppongi
property from public domain to make it alienable and a need for legislative
authority to allow the sale of the property, we see no compelling reason to tackle
the constitutional issues raised by petitioner Ojeda.

The Court does not ordinarily pass upon constitutional questions unless these
questions are properly raised in appropriate cases and their resolution is
necessary for the determination of the case (People v. Vera, 65 Phil. 56 [1937]).
The Court will not pass upon a constitutional question although properly
presented by the record if the case can be disposed of on some other ground
such as the application of a statute or general law (Siler v. Louisville and
Nashville R. Co., 213 U.S. 175, [1909], Railroad Commission v. Pullman Co., 312
U.S. 496 [1941]).

The petitioner in G.R. No. 92013 states why the Roppongi property should not be
sold:

The Roppongi property is not just like any piece of property. It was
given to the Filipino people in reparation for the lives and blood of
Filipinos who died and suffered during the Japanese military
occupation, for the suffering of widows and orphans who lost their
loved ones and kindred, for the homes and other properties lost by
countless Filipinos during the war. The Tokyo properties are a
monument to the bravery and sacrifice of the Filipino people in the
face of an invader; like the monuments of Rizal, Quezon, and other
Filipino heroes, we do not expect economic or financial benefits from
 them. But who would think of selling these monuments? Filipino
honor and national dignity dictate that we keep our properties in
Japan as memorials to the countless Filipinos who died and
suffered. Even if we should become paupers we should not think of
selling them. For it would be as if we sold the lives and blood and
tears of our countrymen. (Rollo- G.R. No. 92013, p.147)

The petitioner in G.R. No. 92047 also states:

Roppongi is no ordinary property. It is one ceded by the Japanese

government in atonement for its past belligerence for the valiant
sacrifice of life and limb and for deaths, physical dislocation and
economic devastation the whole Filipino people endured in World
War II.

It is for what it stands for, and for what it could never bring back to
life, that its significance today remains undimmed, inspire of the
lapse of 45 years since the war ended, inspire of the passage of 32
years since the property passed on to the Philippine government.

Roppongi is a reminder that cannot — should not — be dissipated ...

(Rollo-92047, p. 9)

It is indeed true that the Roppongi property is valuable not so much because of
the inflated prices fetched by real property in Tokyo but more so because of its
symbolic value to all Filipinos — veterans and civilians alike. Whether or not the
Roppongi and related properties will eventually be sold is a policy determination
where both the President and Congress must concur. Considering the properties'
importance and value, the laws on conversion and disposition of property of
public dominion must be faithfully followed.

WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ

of prohibition is issued enjoining the respondents from proceeding with the sale
of the Roppongi property in Tokyo, Japan. The February 20, 1990 Temporary
Restraining Order is made PERMANENT.

SO ORDERED.

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

Separate Opinions

CRUZ, J., concurring:

I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add the following
observations only for emphasis.

It is clear that the respondents have failed to show the President's legal authority to sell the Roppongi
property. When asked to do so at the hearing on these petitions, the Solicitor General was at best
ambiguous, although I must add in fairness that this was not his fault. The fact is that there is -no such
authority. Legal expertise alone cannot conjure that statutory permission out of thin air.

Exec. Order No. 296, which reads like so much legislative, double talk, does not contain such authority.
Neither does Rep. Act No. 6657, which simply allows the proceeds of the sale of our properties abroad to
be used for the comprehensive agrarian reform program. Senate Res. No. 55 was a mere request for the
deferment of the scheduled sale of tile Roppongi property, possibly to stop the transaction altogether; and
ill any case it is not a law. The sale of the said property may be authorized only by Congress through a
duly enacted statute, and there is no such law.

Once again, we have affirmed the principle that ours is a government of laws and not of men, where
every public official, from the lowest to the highest, can act only by virtue of a valid authorization. I am
happy to note that in the several cases where this Court has ruled against her, the President of the
Philippines has submitted to this principle with becoming grace.

PADILLA, J., concurring:

I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few observations
which could help in further clarifying the issues.

Under our tripartite system of government ordained by the Constitution, it is Congress that lays down or
determines policies. The President executes such policies. The policies determined by Congress are
embodied in legislative enactments that have to be approved by the President to become law. The
President, of course, recommends to Congress the approval of policies but, in the final analysis, it is
Congress that is the policy - determining branch of government.

The judiciary interprets the laws and, in appropriate cases, determines whether the laws enacted by
Congress and approved by the President, and presidential acts implementing such laws, are in
accordance with the Constitution.

The Roppongi property was acquired by the Philippine government pursuant to the reparations
agreement between the Philippine and Japanese governments. Under such agreement, this property was
acquired by the Philippine government for a specific purpose, namely, to serve as the site of the
Philippine Embassy in Tokyo, Japan. Consequently, Roppongi is a property of public dominion and
intended for public service, squarely falling within that class of property under Art. 420 of the Civil Code,
which provides:

Art. 420. The following things are property of public dominion :

(1) ...

(2) Those which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth. (339a)

Public dominion property intended for public service cannot be alienated unless the property is first
transformed into private property of the state otherwise known as patrimonial property of the state. 1 The
transformation of public dominion property to state patrimonial property involves, to my mind, a policy
decision. It is a policy decision because the treatment of the property varies according to its classification.
Consequently, it is Congress which can decide and declare the conversion of Roppongi from a public
dominion property to a state patrimonial property. Congress has made no such decision or declaration.

Moreover, the sale of public property (once converted from public dominion to state patrimonial property)
must be approved by Congress, for this again is a matter of policy (i.e. to keep or dispose of the
property). Sec. 48, Book 1 of the Administrative Code of 1987 provides:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the
Philippines, by the President, unless the authority therefor is expressly
vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in
the name of any political subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or instrumentality.
(Emphasis supplied)

But the record is bare of any congressional decision or approval to sell Roppongi. The record is likewise
bare of any congressional authority extended to the President to sell Roppongi thru public bidding or
otherwise.

It is therefore, clear that the President cannot sell or order the sale of Roppongi thru public bidding or
otherwise without a prior congressional approval, first, converting Roppongi from a public dominion
property to a state patrimonial property, and, second, authorizing the President to sell the same.

ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the temporary restraining
order earlier issued by this Court.

SARMIENTO, J., concurring:

The central question, as I see it, is whether or not the so-called "Roppongi property' has lost its nature as
property of public dominion, and hence, has become patrimonial property of the State. I understand that
the parties are agreed that it was property intended for "public service" within the contemplation of
paragraph (2), of Article 430, of the Civil Code, and accordingly, land of State dominion, and beyond
human commerce. The lone issue is, in the light of supervening developments, that is non-user thereof by
the National Government (for diplomatic purposes) for the last thirteen years; the issuance of Executive
Order No. 296 making it available for sale to any interested buyer; the promulgation of Republic Act No.
6657, the Comprehensive Agrarian Reform Law, making available for the program's financing, State
assets sold; the approval by the President of the recommendation of the investigating committee formed
to study the property's utilization; and the issuance of Resolution No. 55 of the Philippine Senate
requesting for the deferment of its disposition it, "Roppongi", is still property of the public dominion, and if
it is not, how it lost that character.

When land of the public dominion ceases to be one, or when the change takes place, is a question our
courts have debated early. In a 1906 decision, 1 it was held that property of the public dominion, a public
plaza in this instance, becomes patrimonial upon use thereof for purposes other than a plaza. In a later
case, 2 this ruling was reiterated. Likewise, it has been held that land, originally private property, has
become of public dominion upon its donation to the town and its conversion and use as a public plaza. 3
It is notable that under these three cases, the character of the property, and any change occurring
therein, depends on the actual use to which it is dedicated. 4

Much later, however, the Court held that "until a formal declaration on the part of the Government,
through the executive department or the Legislative, to the effect that the land . . . is no longer needed for
[public] service- for public use or for special industries, [it] continue[s] to be part of the public [dominion],
not available for private expropriation or ownership." 5 So also, it was ruled that a political subdivision (the
City of Cebu in this case) alone may declare (under its charter) a city road abandoned and thereafter, to
dispose of it. 6

In holding that there is "a need for a law or formal declaration to withdraw the Roppongi property from
public domain to make it alienable and a land for legislative authority to allow the sale of the property" 7
the majority lays stress to the fact that: (1) An affirmative act — executive or legislative — is necessary to
reclassify property of the public dominion, and (2) a legislative decree is required to make it alienable. It
also clears the uncertainties brought about by earlier interpretations that the nature of property-whether
public or patrimonial is predicated on the manner it is actually used, or not used, and in the same breath,
repudiates the Government's position that the continuous non-use of "Roppongi", among other
arguments, for "diplomatic purposes", has turned it into State patrimonial property.

I feel that this view corresponds to existing pronouncements of this Court, among other things, that: (1)
Property is presumed to be State property in the absence of any showing to the contrary; 8 (2) With
respect to forest lands, the same continue to be lands of the public dominion unless and until reclassified
by the Executive Branch of the Government; 9 and (3) All natural resources, under the Constitution, and
subject to exceptional cases, belong to the State. 10

I am elated that the Court has banished previous uncertainties.

FELICIANO, J., dissenting

With regret, I find myself unable to share the conclusions reached by Mr. Justice Hugo E. Gutierrez, Jr.

For purposes of this separate opinion, I assume that the piece of land located in 306 Roppongi, 5-Chome,
Minato-ku Tokyo, Japan (hereinafter referred to as the "Roppongi property") may be characterized as
property of public dominion, within the meaning of Article 420 (2) of the Civil Code:

[Property] which belong[s] to the State, without being for public use, and are intended for
some public service -.

It might not be amiss however, to note that the appropriateness of trying to bring within the confines of the
simple threefold classification found in Article 420 of the Civil Code ("property for public use property
"intended for some public service" and property intended "for the development of the national wealth") all
property owned by the Republic of the Philippines whether found within the territorial boundaries of the
Republic or located within the territory of another sovereign State, is not self-evident. The first item of the
classification property intended for public use — can scarcely be properly applied to property belonging to
the Republic but found within the territory of another State. The third item of the classification property
intended for the development of the national wealth is illustrated, in Article 339 of the Spanish Civil Code
of 1889, by mines or mineral properties. Again, mineral lands owned by a sovereign State are rarely, if
ever, found within the territorial base of another sovereign State. The task of examining in detail the
applicability of the classification set out in Article 420 of our Civil Code to property that the Philippines
happens to own outside its own boundaries must, however, be left to academicians.
For present purposes, too, I agree that there is no question of conflict of laws that is, at the present time,
before this Court. The issues before us relate essentially to authority to sell the Roppongi property so far
as Philippine law is concerned.

The majority opinion raises two (2) issues: (a) whether or not the Roppongi property has been converted
into patrimonial property or property of the private domain of the State; and (b) assuming an affirmative
answer to (a), whether or not there is legal authority to dispose of the Roppongi property.

Addressing the first issue of conversion of property of public dominion intended for some public service,
into property of the private domain of the Republic, it should be noted that the Civil Code does not
address the question of who has authority to effect such conversion. Neither does the Civil Code set out
or refer to any procedure for such conversion.

Our case law, however, contains some fairly explicit pronouncements on this point, as Justice Sarmiento
has pointed out in his concurring opinion. In Ignacio v. Director of Lands (108 Phils. 335 [1960]), petitioner
Ignacio argued that if the land in question formed part of the public domain, the trial court should have
declared the same no longer necessary for public use or public purposes and which would, therefore,
have become disposable and available for private ownership. Mr. Justice Montemayor, speaking for the
Court, said:

Article 4 of the Law of Waters of 1866 provides that when a portion of the shore is no
longer washed by the waters of the sea and is not necessary for purposes of public utility,
or for the establishment of special industries, or for coast-guard service, the government
shall declare it to be the property of the owners of the estates adjacent thereto and as an
increment thereof. We believe that only the executive and possibly the legislative
departments have the authority and the power to make the declaration that any land so
gained by the sea, is not necessary for purposes of public utility, or for the establishment
of special industries, or for coast-guard service. If no such declaration has been made by
said departments, the lot in question forms part of the public domain. (Natividad v.
Director of Lands, supra.)

The reason for this pronouncement, according to this Tribunal in the case of Vicente
Joven y Monteverde v. Director of Lands, 93 Phil., 134 (cited in Velayo's Digest, Vol. 1, p.
52).

... is undoubtedly that the courts are neither primarily called upon, nor indeed in a position
to determine whether any public land are to be used for the purposes specified in Article
4 of the Law of Waters. Consequently, until a formal declaration on the part of the
Government, through the executive department or the Legislature, to the effect that the
land in question is no longer needed for coast-guard service, for public use or for special
industries, they continue to be part of the public domain not available for private
appropriation or ownership. (108 Phil. at 338-339; emphasis supplied)

Thus, under Ignacio, either the Executive Department or the Legislative Department may convert property
of the State of public dominion into patrimonial property of the State. No particular formula or procedure of
conversion is specified either in statute law or in case law. Article 422 of the Civil Code simply states 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". I respectfully submit, therefore, that the only requirement which is
legitimately imposable is that the intent to convert must be reasonably clear from a consideration of the
acts or acts of the Executive Department or of the Legislative Department which are said to have effected
such conversion.
The same legal situation exists in respect of conversion of property of public dominion belonging to
municipal corporations, i.e., local governmental units, into patrimonial property of such entities. In Cebu
Oxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City Council of Cebu by resolution declared a
certain portion of an existing street as an abandoned road, "the same not being included in the city
development plan". Subsequently, by another resolution, the City Council of Cebu authorized the acting
City Mayor to sell the land through public bidding. Although there was no formal and explicit declaration of
conversion of property for public use into patrimonial property, the Supreme Court said:

xxx xxx xxx

(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 of 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. (66 SCRA at 484-; emphasis supplied)

Thus, again as pointed out by Sarmiento J., in his separate opinion, in the case of property owned by
municipal corporations simple non-use or the actual dedication of public property to some use other than
"public use" or some "public service", was sufficient legally to convert such property into patrimonial
property (Municipality of Oas v. Roa, 7 Phil. 20 [1906]- Municipality of Hinunganan v. Director of Lands 24
Phil. 124 [1913]; Province of Zamboanga del Norte v. City of Zamboanga, 22 SCRA 1334 (1968).

I would also add that such was the case not only in respect of' property of municipal corporations but also
in respect of property of the State itself. Manresa in commenting on Article 341 of the 1889 Spanish Civil
Code which has been carried over verbatim into our Civil Code by Article 422 thereof, wrote:

La dificultad mayor en todo esto estriba, naturalmente, en fijar el momento en que los
bienes de dominio publico dejan de serlo. Si la Administracion o la autoridad competente
legislative realizan qun acto en virtud del cual cesa el destino o uso publico de los bienes
de que se trata naturalmente la dificultad queda desde el primer momento resuelta. Hay
un punto de partida cierto para iniciar las relaciones juridicas a que pudiera haber lugar
Pero puede ocurrir que no haya taldeclaracion expresa, legislativa or administrativa, y,
sin embargo, cesar de hecho el destino publico de los bienes; ahora bien, en este caso,
y para los efectos juridicos que resultan de entrar la cosa en el comercio de los
hombres,' se entedera que se ha verificado la conversion de los bienes patrimoniales?

El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por la afirmativa, y
por nuestra parte creemos que tal debe ser la soluciion. El destino de las cosas no
depende tanto de una declaracion expresa como del uso publico de las mismas, y
cuanda el uso publico cese con respecto de determinados bienes, cesa tambien su
situacion en el dominio publico. Si una fortaleza en ruina se abandona y no se repara, si
un trozo de la via publica se abandona tambien por constituir otro nuevo an mejores
condiciones....ambos bienes cesan de estar Codigo, y leyes especiales mas o memos
 administrativas. (3 Manresa, Comentarios al Codigo Civil Espanol, p. 128 [7a ed.; 1952)
(Emphasis supplied)

The majority opinion says that none of the executive acts pointed to by the Government purported,
expressly or definitely, to convert the Roppongi property into patrimonial property — of the Republic.
Assuming that to be the case, it is respectfully submitted that cumulative effect of the executive acts here
involved was to convert property originally intended for and devoted to public service into patrimonial
property of the State, that is, property susceptible of disposition to and appropration by private persons.
These executive acts, in their totality if not each individual act, make crystal clear the intent of the
Executive Department to effect such conversion. These executive acts include:

(a) Administrative Order No. 3 dated 11 August 1985, which created a Committee to study the
disposition/utilization of the Government's property in Japan, The Committee was composed of officials of
the Executive Department: the Executive Secretary; the Philippine Ambassador to Japan; and
representatives of the Department of Foreign Affairs and the Asset Privatization Trust. On 19 September
1988, the Committee recommended to the President the sale of one of the lots (the lot specifically in
Roppongi) through public bidding. On 4 October 1988, the President approved the recommendation of
the Committee.

On 14 December 1988, the Philippine Government by diplomatic note informed the Japanese Ministry of
Foreign Affairs of the Republic's intention to dispose of the property in Roppongi. The Japanese
Government through its Ministry of Foreign Affairs replied that it interposed no objection to such
disposition by the Republic. Subsequently, the President and the Committee informed the leaders of the
House of Representatives and of the Senate of the Philippines of the proposed disposition of the
Roppongi property.

(b) Executive Order No. 296, which was issued by the President on 25 July 1987. Assuming that the
majority opinion is right in saying that Executive Order No. 296 is insufficient to authorize the sale of the
Roppongi property, it is here submitted with respect that Executive Order No. 296 is more than sufficient
to indicate an intention to convert the property previously devoted to public service into patrimonial
property that is capable of being sold or otherwise disposed of

(c) Non-use of the Roppongi lot for fourteen (14) years for diplomatic or for any other public purposes.
Assuming (but only arguendo) that non-use does not, by itself, automatically convert the property into
patrimonial property. I respectfully urge that prolonged non-use, conjoined with the other factors here
listed, was legally effective to convert the lot in Roppongi into patrimonial property of the State. Actually,
as already pointed out, case law involving property of municipal corporations is to the effect that simple
non-use or the actual dedication of public property to some use other than public use or public service,
was sufficient to convert such property into patrimonial property of the local governmental entity
concerned. Also as pointed out above, Manresa reached the same conclusion in respect of conversion of
property of the public domain of the State into property of the private domain of the State.

The majority opinion states that "abandonment cannot be inferred from the non-use alone especially if the
non-use was attributable not to the Government's own deliberate and indubitable will but to lack of
financial support to repair and improve the property" (Majority Opinion, p. 13). With respect, it may be
stressed that there is no abandonment involved here, certainly no abandonment of property or of property
rights. What is involved is the charge of the classification of the property from property of the public
domain into property of the private domain of the State. Moreover, if for fourteen (14) years, the
Government did not see fit to appropriate whatever funds were necessary to maintain the property in
Roppongi in a condition suitable for diplomatic representation purposes, such circumstance may, with
equal logic, be construed as a manifestation of the crystalizing intent to change the character of the
property.
(d) On 30 March 1989, a public bidding was in fact held by the Executive Department for the sale of the
lot in Roppongi. The circumstance that this bidding was not successful certainly does not argue against
an intent to convert the property involved into property that is disposable by bidding.

The above set of events and circumstances makes no sense at all if it does not, as a whole, show at least
the intent on the part of the Executive Department (with the knowledge of the Legislative Department) to
convert the property involved into patrimonial property that is susceptible of being sold.

II

Having reached an affirmative answer in respect of the first issue, it is necessary to address the second
issue of whether or not there exists legal authority for the sale or disposition of the Roppongi property.

The majority opinion refers to Section 79(f) of the Revised Administrative Code of 1917 which reads as
follows:

SEC. 79 (f). Conveyances and contracts to which the Government is a party. — In cases
in which the Government of the Republic of the Philippines is a party to any deed or other
instrument conveying the title to real estate or to any other property the value of which is
in excess of one hundred thousand pesos, the respective Department Secretary shall
prepare the necessary papers which, together with the proper recommendations, shall be
submitted to the Congress of the Philippines for approval by the same. Such deed,
instrument, or contract shall be executed and signed by the President of the Philippines
on behalf of the Government of the Philippines unless the authority therefor be expressly
vested by law in another officer. (Emphasis supplied)

The majority opinion then goes on to state that: "[T]he requirement has been retained in Section 4, Book I
of the Administrative Code of 1987 (Executive Order No. 292)" which reads:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines, by
the President, unless the authority therefor is expressly vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in the name of any
political subdivision or of any corporate agency or instrumentality, by the executive head
of the agency or instrumentality. (Emphasis supplied)

Two points need to be made in this connection. Firstly, the requirement of obtaining specific approval of
Congress when the price of the real property being disposed of is in excess of One Hundred Thousand
Pesos (P100,000.00) under the Revised Administrative Code of 1917, has been deleted from Section 48
of the 1987 Administrative Code. What Section 48 of the present Administrative Code refers to is
authorization by law for the conveyance. Section 48 does not purport to be itself a source of legal
authority for conveyance of real property of the Government. For Section 48 merely specifies the official
authorized to execute and sign on behalf of the Government the deed of conveyance in case of such a
conveyance.

Secondly, examination of our statute books shows that authorization by law for disposition of real property
of the private domain of the Government, has been granted by Congress both in the form of (a) a general,
standing authorization for disposition of patrimonial property of the Government; and (b) specific
legislation authorizing the disposition of particular pieces of the Government's patrimonial property.
Standing legislative authority for the disposition of land of the private domain of the Philippines is provided
by Act No. 3038, entitled "An Act Authorizing the Secretary of Agriculture and Natural Resources to Sell
or Lease Land of the Private Domain of the Government of the Philippine Islands (now Republic of the
Philippines)", enacted on 9 March 1922. The full text of this statute is as follows:

Be it enacted by the Senate and House of Representatives of the Philippines in

Legislature assembled and by the authority of the same:

SECTION 1. The Secretary of Agriculture and Natural Resources (now Secretary of the
Environment and Natural Resources) is hereby authorized to sell or lease land of the
private domain of the Government of the Philippine Islands, or any part thereof, to such
persons, corporations or associations as are, under the provisions of Act Numbered
Twenty-eight hundred and seventy-four, (now Commonwealth Act No. 141, as amended)
known as the Public Land Act, entitled to apply for the purchase or lease or agricultural
public land.

SECTION 2. The sale of the land referred to in the preceding section shall, if such land is
agricultural, be made in the manner and subject to the limitations prescribed in chapters
five and six, respectively, of said Public Land Act, and if it be classified differently, in
conformity with the provisions of chapter nine of said Act: Provided, however, That the
land necessary for the public service shall be exempt from the provisions of this Act.

SECTION 3. This Act shall take effect on its approval.

Approved, March 9, 1922. (Emphasis supplied)

Lest it be assumed that Act No. 3038 refers only to agricultural lands of the private domain of the State, it
must be noted that Chapter 9 of the old Public Land Act (Act No. 2874) is now Chapter 9 of the present
Public Land Act (Commonwealth Act No. 141, as amended) and that both statutes refer to: "any tract of
land of the public domain which being neither timber nor mineral land, is intended to be used for
residential purposes or for commercial or industrial purposes other than agricultural" (Emphasis
supplied).i•t•c-aüsl In other words, the statute covers the sale or lease or residential, commercial or
industrial land of the private domain of the State.

Implementing regulations have been issued for the carrying out of the provisions of Act No. 3038. On 21
December 1954, the then Secretary of Agriculture and Natural Resources promulgated Lands
Administrative Orders Nos. 7-6 and 7-7 which were entitled, respectively: "Supplementary Regulations
Governing the Sale of the Lands of the Private Domain of the Republic of the Philippines"; and
"Supplementary Regulations Governing the Lease of Lands of Private Domain of the Republic of the
Philippines" (text in 51 O.G. 28-29 [1955]).

It is perhaps well to add that Act No. 3038, although now sixty-eight (68) years old, is still in effect and
has not been repealed. 1

Specific legislative authorization for disposition of particular patrimonial properties of the State is
illustrated by certain earlier statutes. The first of these was Act No. 1120, enacted on 26 April 1904, which
provided for the disposition of the friar lands, purchased by the Government from the Roman Catholic
Church, to bona fide settlers and occupants thereof or to other persons. In Jacinto v. Director of Lands
(49 Phil. 853 [1926]), these friar lands were held to be private and patrimonial properties of the State. Act
No. 2360, enacted on -28 February 1914, authorized the sale of the San Lazaro Estate located in the City
of Manila, which had also been purchased by the Government from the Roman Catholic Church. In
January 1916, Act No. 2555 amended Act No. 2360 by including therein all lands and buildings owned by
the Hospital and the Foundation of San Lazaro theretofor leased by private persons, and which were also
acquired by the Philippine Government.
After the enactment in 1922 of Act No. 3038, there appears, to my knowledge, to be only one statute
authorizing the President to dispose of a specific piece of property. This statute is Republic Act No. 905,
enacted on 20 June 1953, which authorized the

President to sell an Identified parcel of land of the private domain of the National Government to the
National Press Club of the Philippines, and to other recognized national associations of professionals with
academic standing, for the nominal price of P1.00. It appears relevant to note that Republic Act No. 905
was not an outright disposition in perpetuity of the property involved- it provided for reversion of the
property to the National Government in case the National Press Club stopped using it for its
headquarters. What Republic Act No. 905 authorized was really a donation, and not a sale.

The basic submission here made is that Act No. 3038 provides standing legislative authorization for
disposition of the Roppongi property which, in my view, has been converted into patrimonial property of
the Republic. 2

To some, the submission that Act No. 3038 applies not only to lands of the private domain of the State
located in the Philippines but also to patrimonial property found outside the Philippines, may appear
strange or unusual. I respectfully submit that such position is not any more unusual or strange than the
assumption that Article 420 of the Civil Code applies not only to property of the Republic located within
Philippine territory but also to property found outside the boundaries of the Republic.

It remains to note that under the well-settled doctrine that heads of Executive Departments are alter egos
of the President (Villena v. Secretary of the Interior, 67 Phil. 451 [1939]), and in view of the constitutional
power of control exercised by the President over department heads (Article VII, Section 17,1987
Constitution), the President herself may carry out the function or duty that is specifically lodged in the
Secretary of the Department of Environment and Natural Resources (Araneta v. Gatmaitan 101 Phil. 328
[1957]). At the very least, the President retains the power to approve or disapprove the exercise of that
function or duty when done by the Secretary of Environment and Natural Resources.

It is hardly necessary to add that the foregoing analyses and submissions relate only to the austere
question of existence of legal power or authority. They have nothing to do with much debated questions
of wisdom or propriety or relative desirability either of the proposed disposition itself or of the proposed
utilization of the anticipated proceeds of the property involved. These latter types of considerations He
within the sphere of responsibility of the political departments of government the Executive and the
Legislative authorities.

For all the foregoing, I vote to dismiss the Petitions for Prohibition in both G.R. Nos. 92013 and 92047.

Fernan, C.J., Narvasa, Gancayco, Cortes and Medialdea, JJ., concurring.

Separate Opinions

CRUZ, J., concurring:

I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add the following observations only for emphasis.

It is clear that the respondents have failed to show the President's legal authority to sell the Roppongi property. When asked to do so at the
hearing on these petitions, the Solicitor General was at best ambiguous, although I must add in fairness that this was not his fault. The fact is
that there is -no such authority. Legal expertise alone cannot conjure that statutory permission out of thin air.
Exec. Order No. 296, which reads like so much legislative, double talk, does not contain such authority. Neither does Rep. Act No. 6657,
which simply allows the proceeds of the sale of our properties abroad to be used for the comprehensive agrarian reform program. Senate
Res. No. 55 was a mere request for the deferment of the scheduled sale of tile Roppongi property, possibly to stop the transaction
altogether; and ill any case it is not a law. The sale of the said property may be authorized only by Congress through a duly enacted statute,
and there is no such law.

Once again, we have affirmed the principle that ours is a government of laws and not of men, where every public official, from the lowest to
the highest, can act only by virtue of a valid authorization. I am happy to note that in the several cases where this Court has ruled against
her, the President of the Philippines has submitted to this principle with becoming grace.

PADILLA, J., concurring:

I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few observations which could help in further clarifying the
issues.

Under our tripartite system of government ordained by the Constitution, it is Congress that lays down or determines policies. The President
executes such policies. The policies determined by Congress are embodied in legislative enactments that have to be approved by the
President to become law. The President, of course, recommends to Congress the approval of policies but, in the final analysis, it is Congress
that is the policy - determining branch of government.

The judiciary interprets the laws and, in appropriate cases, determines whether the laws enacted by Congress and approved by the
President, and presidential acts implementing such laws, are in accordance with the Constitution.

The Roppongi property was acquired by the Philippine government pursuant to the reparations agreement between the Philippine and
Japanese governments. Under such agreement, this property was acquired by the Philippine government for a specific purpose, namely, to
serve as the site of the Philippine Embassy in Tokyo, Japan. Consequently, Roppongi is a property of public dominion and intended for
public service, squarely falling within that class of property under Art. 420 of the Civil Code, which provides:

Art. 420. The following things are property of public dominion :

(1) ...

(2) Those which belong to the State, without being for public use, and are intended for some public service or for the
development of the national wealth. (339a)

Public dominion property intended for public service cannot be alienated unless the property is first transformed into private property of the
state otherwise known as patrimonial property of the state. 1 The transformation of public dominion property to state patrimonial property
involves, to my mind, a policy decision. It is a policy decision because the treatment of the property varies according to its classification.
Consequently, it is Congress which can decide and declare the conversion of Roppongi from a public dominion property to a state
patrimonial property. Congress has made no such decision or declaration.

Moreover, the sale of public property (once converted from public dominion to state patrimonial property) must be approved by Congress, for
this again is a matter of policy (i.e. to keep or dispose of the property). Sec. 48, Book 1 of the Administrative Code of 1987 provides:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the Government is authorized by
law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines, by the
President, unless the authority therefor is expressly vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in the name of any political
subdivision or of any corporate agency or instrumentality, by the executive head of the agency or
instrumentality. (Emphasis supplied)

But the record is bare of any congressional decision or approval to sell Roppongi. The record is likewise bare of any congressional authority
extended to the President to sell Roppongi thru public bidding or otherwise.

It is therefore, clear that the President cannot sell or order the sale of Roppongi thru public bidding or otherwise without a prior congressional
approval, first, converting Roppongi from a public dominion property to a state patrimonial property, and, second, authorizing the President to
sell the same.
ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the temporary restraining order earlier issued by this Court.

SARMIENTO, J., concurring:

The central question, as I see it, is whether or not the so-called "Roppongi property' has lost its nature as property of public dominion, and
hence, has become patrimonial property of the State. I understand that the parties are agreed that it was property intended for "public
service" within the contemplation of paragraph (2), of Article 430, of the Civil Code, and accordingly, land of State dominion, and beyond
human commerce. The lone issue is, in the light of supervening developments, that is non-user thereof by the National Government (for
diplomatic purposes) for the last thirteen years; the issuance of Executive Order No. 296 making it available for sale to any interested buyer;
the promulgation of Republic Act No. 6657, the Comprehensive Agrarian Reform Law, making available for the program's financing, State
assets sold; the approval by the President of the recommendation of the investigating committee formed to study the property's utilization;
and the issuance of Resolution No. 55 of the Philippine Senate requesting for the deferment of its disposition it, "Roppongi", is still property of
the public dominion, and if it is not, how it lost that character.

When land of the public dominion ceases to be one, or when the change takes place, is a question our courts have debated early. In a 1906
decision, 1 it was held that property of the public dominion, a public plaza in this instance, becomes patrimonial upon use thereof for
purposes other than a plaza. In a later case, 2 this ruling was reiterated. Likewise, it has been held that land, originally private property, has
become of public dominion upon its donation to the town and its conversion and use as a public plaza. 3 It is notable that under these three
cases, the character of the property, and any change occurring therein, depends on the actual use to which it is dedicated. 4

Much later, however, the Court held that "until a formal declaration on the part of the Government, through the executive department or the
Legislative, to the effect that the land . . . is no longer needed for [public] service- for public use or for special industries, [it] continue[s] to be
part of the public [dominion], not available for private expropriation or ownership." 5 So also, it was ruled that a political subdivision (the City
of Cebu in this case) alone may declare (under its charter) a city road abandoned and thereafter, to dispose of it. 6

In holding that there is "a need for a law or formal declaration to withdraw the Roppongi property from public domain to make it alienable and
a land for legislative authority to allow the sale of the property" 7 the majority lays stress to the fact that: (1) An affirmative act — executive or
legislative — is necessary to reclassify property of the public dominion, and (2) a legislative decree is required to make it alienable. It also
clears the uncertainties brought about by earlier interpretations that the nature of property-whether public or patrimonial is predicated on the
manner it is actually used, or not used, and in the same breath, repudiates the Government's position that the continuous non-use of
"Roppongi", among other arguments, for "diplomatic purposes", has turned it into State patrimonial property.

I feel that this view corresponds to existing pronouncements of this Court, among other things, that: (1) Property is presumed to be State
property in the absence of any showing to the contrary; 8 (2) With respect to forest lands, the same continue to be lands of the public
dominion unless and until reclassified by the Executive Branch of the Government; 9 and (3) All natural resources, under the Constitution,
and subject to exceptional cases, belong to the State. 10

I am elated that the Court has banished previous uncertainties.

FELICIANO, J., dissenting

With regret, I find myself unable to share the conclusions reached by Mr. Justice Hugo E. Gutierrez, Jr.

For purposes of this separate opinion, I assume that the piece of land located in 306 Roppongi, 5-Chome, Minato-ku Tokyo, Japan
(hereinafter referred to as the "Roppongi property") may be characterized as property of public dominion, within the meaning of Article 420
(2) of the Civil Code:

[Property] which belong[s] to the State, without being for public use, and are intended for some public service -.

It might not be amiss however, to note that the appropriateness of trying to bring within the confines of the simple threefold classification
found in Article 420 of the Civil Code ("property for public use property "intended for some public service" and property intended "for the
development of the national wealth") all property owned by the Republic of the Philippines whether found within the territorial boundaries of
the Republic or located within the territory of another sovereign State, is not self-evident. The first item of the classification property intended
for public use — can scarcely be properly applied to property belonging to the Republic but found within the territory of another State. The
third item of the classification property intended for the development of the national wealth is illustrated, in Article 339 of the Spanish Civil
Code of 1889, by mines or mineral properties. Again, mineral lands owned by a sovereign State are rarely, if ever, found within the territorial
base of another sovereign State. The task of examining in detail the applicability of the classification set out in Article 420 of our Civil Code to
property that the Philippines happens to own outside its own boundaries must, however, be left to academicians.

For present purposes, too, I agree that there is no question of conflict of laws that is, at the present time, before this Court. The issues before
us relate essentially to authority to sell the Roppongi property so far as Philippine law is concerned.
The majority opinion raises two (2) issues: (a) whether or not the Roppongi property has been converted into patrimonial property or property
of the private domain of the State; and (b) assuming an affirmative answer to (a), whether or not there is legal authority to dispose of the
Roppongi property.

Addressing the first issue of conversion of property of public dominion intended for some public service, into property of the private domain of
the Republic, it should be noted that the Civil Code does not address the question of who has authority to effect such conversion. Neither
does the Civil Code set out or refer to any procedure for such conversion.

Our case law, however, contains some fairly explicit pronouncements on this point, as Justice Sarmiento has pointed out in his concurring
opinion. In Ignacio v. Director of Lands (108 Phils. 335 [1960]), petitioner Ignacio argued that if the land in question formed part of the public
domain, the trial court should have declared the same no longer necessary for public use or public purposes and which would, therefore,
have become disposable and available for private ownership. Mr. Justice Montemayor, speaking for the Court, said:

Article 4 of the Law of Waters of 1866 provides that when a portion of the shore is no longer washed by the waters of
the sea and is not necessary for purposes of public utility, or for the establishment of special industries, or for coast-
guard service, the government shall declare it to be the property of the owners of the estates adjacent thereto and as
an increment thereof. We believe that only the executive and possibly the legislative departments have the authority
and the power to make the declaration that any land so gained by the sea, is not necessary for purposes of public
utility, or for the establishment of special industries, or for coast-guard service. If no such declaration has been made
by said departments, the lot in question forms part of the public domain. (Natividad v. Director of Lands, supra.)

The reason for this pronouncement, according to this Tribunal in the case of Vicente Joven y Monteverde v. Director of
Lands, 93 Phil., 134 (cited in Velayo's Digest, Vol. 1, p. 52).

... is undoubtedly that the courts are neither primarily called upon, nor indeed in a position to determine whether any
public land are to be used for the purposes specified in Article 4 of the Law of Waters. Consequently, until a formal
declaration on the part of the Government, through the executive department or the Legislature, to the effect that the
land in question is no longer needed for coast-guard service, for public use or for special industries, they continue to be
part of the public domain not available for private appropriation or ownership. (108 Phil. at 338-339; emphasis supplied)

Thus, under Ignacio, either the Executive Department or the Legislative Department may convert property of the State of public dominion into
patrimonial property of the State. No particular formula or procedure of conversion is specified either in statute law or in case law. Article 422
of the Civil Code simply states 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". I respectfully submit, therefore, that the only requirement which is legitimately imposable is that the
intent to convert must be reasonably clear from a consideration of the acts or acts of the Executive Department or of the Legislative
Department which are said to have effected such conversion.

The same legal situation exists in respect of conversion of property of public dominion belonging to municipal corporations, i.e., local
governmental units, into patrimonial property of such entities. In Cebu Oxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City Council
of Cebu by resolution declared a certain portion of an existing street as an abandoned road, "the same not being included in the city
development plan". Subsequently, by another resolution, the City Council of Cebu authorized the acting City Mayor to sell the land through
public bidding. Although there was no formal and explicit declaration of conversion of property for public use into patrimonial property, the
Supreme Court said:

xxx xxx xxx

(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 of 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. (66 SCRA at 484-; emphasis supplied)

Thus, again as pointed out by Sarmiento J., in his separate opinion, in the case of property owned by municipal corporations simple non-use
or the actual dedication of public property to some use other than "public use" or some "public service", was sufficient legally to convert such
property into patrimonial property (Municipality of Oas v. Roa, 7 Phil. 20 [1906]- Municipality of Hinunganan v. Director of Lands 24 Phil. 124
[1913]; Province of Zamboanga del Norte v. City of Zamboanga, 22 SCRA 1334 (1968).
I would also add that such was the case not only in respect of' property of municipal corporations but also in respect of property of the State
itself. Manresa in commenting on Article 341 of the 1889 Spanish Civil Code which has been carried over verbatim into our Civil Code by
Article 422 thereof, wrote:

La dificultad mayor en todo esto estriba, naturalmente, en fijar el momento en que los bienes de dominio publico dejan
de serlo. Si la Administracion o la autoridad competente legislative realizan qun acto en virtud del cual cesa el destino
o uso publico de los bienes de que se trata naturalmente la dificultad queda desde el primer momento resuelta. Hay un
punto de partida cierto para iniciar las relaciones juridicas a que pudiera haber lugar Pero puede ocurrir que no haya
taldeclaracion expresa, legislativa or administrativa, y, sin embargo, cesar de hecho el destino publico de los bienes;
ahora bien, en este caso, y para los efectos juridicos que resultan de entrar la cosa en el comercio de los hombres,' se
entedera que se ha verificado la conversion de los bienes patrimoniales?

El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por la afirmativa, y por nuestra parte creemos que
tal debe ser la soluciion. El destino de las cosas no depende tanto de una declaracion expresa como del uso publico
de las mismas, y cuanda el uso publico cese con respecto de determinados bienes, cesa tambien su situacion en el
dominio publico. Si una fortaleza en ruina se abandona y no se repara, si un trozo de la via publica se abandona
tambien por constituir otro nuevo an mejores condiciones....ambos bienes cesan de estar Codigo, y leyes especiales
mas o memos administrativas. (3 Manresa, Comentarios al Codigo Civil Espanol, p. 128 [7a ed.; 1952) (Emphasis
supplied)

The majority opinion says that none of the executive acts pointed to by the Government purported, expressly or definitely, to convert the
Roppongi property into patrimonial property — of the Republic. Assuming that to be the case, it is respectfully submitted that cumulative
effect of the executive acts here involved was to convert property originally intended for and devoted to public service into patrimonial
property of the State, that is, property susceptible of disposition to and appropration by private persons. These executive acts, in their totality
if not each individual act, make crystal clear the intent of the Executive Department to effect such conversion. These executive acts include:

(a) Administrative Order No. 3 dated 11 August 1985, which created a Committee to study the disposition/utilization of the Government's
property in Japan, The Committee was composed of officials of the Executive Department: the Executive Secretary; the Philippine
Ambassador to Japan; and representatives of the Department of Foreign Affairs and the Asset Privatization Trust. On 19 September 1988,
the Committee recommended to the President the sale of one of the lots (the lot specifically in Roppongi) through public bidding. On 4
October 1988, the President approved the recommendation of the Committee.

On 14 December 1988, the Philippine Government by diplomatic note informed the Japanese Ministry of Foreign Affairs of the Republic's
intention to dispose of the property in Roppongi. The Japanese Government through its Ministry of Foreign Affairs replied that it interposed
no objection to such disposition by the Republic. Subsequently, the President and the Committee informed the leaders of the House of
Representatives and of the Senate of the Philippines of the proposed disposition of the Roppongi property.

(b) Executive Order No. 296, which was issued by the President on 25 July 1987. Assuming that the majority opinion is right in saying that
Executive Order No. 296 is insufficient to authorize the sale of the Roppongi property, it is here submitted with respect that Executive Order
No. 296 is more than sufficient to indicate an intention to convert the property previously devoted to public service into patrimonial property
that is capable of being sold or otherwise disposed of

(c) Non-use of the Roppongi lot for fourteen (14) years for diplomatic or for any other public purposes. Assuming (but only arguendo) that
non-use does not, by itself, automatically convert the property into patrimonial property. I respectfully urge that prolonged non-use, conjoined
with the other factors here listed, was legally effective to convert the lot in Roppongi into patrimonial property of the State. Actually, as
already pointed out, case law involving property of municipal corporations is to the effect that simple non-use or the actual dedication of
public property to some use other than public use or public service, was sufficient to convert such property into patrimonial property of the
local governmental entity concerned. Also as pointed out above, Manresa reached the same conclusion in respect of conversion of property
of the public domain of the State into property of the private domain of the State.

The majority opinion states that "abandonment cannot be inferred from the non-use alone especially if the non-use was attributable not to the
Government's own deliberate and indubitable will but to lack of financial support to repair and improve the property" (Majority Opinion, p. 13).
With respect, it may be stressed that there is no abandonment involved here, certainly no abandonment of property or of property rights.
What is involved is the charge of the classification of the property from property of the public domain into property of the private domain of
the State. Moreover, if for fourteen (14) years, the Government did not see fit to appropriate whatever funds were necessary to maintain the
property in Roppongi in a condition suitable for diplomatic representation purposes, such circumstance may, with equal logic, be construed
as a manifestation of the crystalizing intent to change the character of the property.

(d) On 30 March 1989, a public bidding was in fact held by the Executive Department for the sale of the lot in Roppongi. The circumstance
that this bidding was not successful certainly does not argue against an intent to convert the property involved into property that is disposable
by bidding.

The above set of events and circumstances makes no sense at all if it does not, as a whole, show at least the intent on the part of the
Executive Department (with the knowledge of the Legislative Department) to convert the property involved into patrimonial property that is
susceptible of being sold.

II
Having reached an affirmative answer in respect of the first issue, it is necessary to address the second issue of whether or not there exists
legal authority for the sale or disposition of the Roppongi property.

The majority opinion refers to Section 79(f) of the Revised Administrative Code of 1917 which reads as follows:

SEC. 79 (f). Conveyances and contracts to which the Government is a party. — In cases in which the Government of
the Republic of the Philippines is a party to any deed or other instrument conveying the title to real estate or to any
other property the value of which is in excess of one hundred thousand pesos, the respective Department Secretary
shall prepare the necessary papers which, together with the proper recommendations, shall be submitted to the
Congress of the Philippines for approval by the same. Such deed, instrument, or contract shall be executed and signed
by the President of the Philippines on behalf of the Government of the Philippines unless the authority therefor be
expressly vested by law in another officer. (Emphasis supplied)

The majority opinion then goes on to state that: "[T]he requirement has been retained in Section 4, Book I of the Administrative Code of 1987
(Executive Order No. 292)" which reads:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the Government is authorized by
law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines, by the President, unless the
authority therefor is expressly vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any
corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)

Two points need to be made in this connection. Firstly, the requirement of obtaining specific approval of Congress when the price of the real
property being disposed of is in excess of One Hundred Thousand Pesos (P100,000.00) under the Revised Administrative Code of 1917,
has been deleted from Section 48 of the 1987 Administrative Code. What Section 48 of the present Administrative Code refers to is
authorization by law for the conveyance. Section 48 does not purport to be itself a source of legal authority for conveyance of real property of
the Government. For Section 48 merely specifies the official authorized to execute and sign on behalf of the Government the deed of
conveyance in case of such a conveyance.

Secondly, examination of our statute books shows that authorization by law for disposition of real property of the private domain of the
Government, has been granted by Congress both in the form of (a) a general, standing authorization for disposition of patrimonial property of
the Government; and (b) specific legislation authorizing the disposition of particular pieces of the Government's patrimonial property.

Standing legislative authority for the disposition of land of the private domain of the Philippines is provided by Act No. 3038, entitled "An Act
Authorizing the Secretary of Agriculture and Natural Resources to Sell or Lease Land of the Private Domain of the Government of the
Philippine Islands (now Republic of the Philippines)", enacted on 9 March 1922. The full text of this statute is as follows:

Be it enacted by the Senate and House of Representatives of the Philippines in Legislature assembled and by the
authority of the same:

SECTION 1. The Secretary of Agriculture and Natural Resources (now Secretary of the Environment and Natural
Resources) is hereby authorized to sell or lease land of the private domain of the Government of the Philippine Islands,
or any part thereof, to such persons, corporations or associations as are, under the provisions of Act Numbered
Twenty-eight hundred and seventy-four, (now Commonwealth Act No. 141, as amended) known as the Public Land
Act, entitled to apply for the purchase or lease or agricultural public land.

SECTION 2. The sale of the land referred to in the preceding section shall, if such land is agricultural, be made in the
manner and subject to the limitations prescribed in chapters five and six, respectively, of said Public Land Act, and if it
be classified differently, in conformity with the provisions of chapter nine of said Act: Provided, however, That the land
necessary for the public service shall be exempt from the provisions of this Act.

SECTION 3. This Act shall take effect on its approval.

Approved, March 9, 1922. (Emphasis supplied)

Lest it be assumed that Act No. 3038 refers only to agricultural lands of the private domain of the State, it must be noted that Chapter 9 of the
old Public Land Act (Act No. 2874) is now Chapter 9 of the present Public Land Act (Commonwealth Act No. 141, as amended) and that both
statutes refer to: "any tract of land of the public domain which being neither timber nor mineral land, is intended to be used for residential
purposes or for commercial or industrial purposes other than agricultural" (Emphasis supplied). In other words, the statute covers the sale or
lease or residential, commercial or industrial land of the private domain of the State.
Implementing regulations have been issued for the carrying out of the provisions of Act No. 3038. On 21 December 1954, the then Secretary
of Agriculture and Natural Resources promulgated Lands Administrative Orders Nos. 7-6 and 7-7 which were entitled, respectively:
"Supplementary Regulations Governing the Sale of the Lands of the Private Domain of the Republic of the Philippines"; and "Supplementary
Regulations Governing the Lease of Lands of Private Domain of the Republic of the Philippines" (text in 51 O.G. 28-29 [1955]).

It is perhaps well to add that Act No. 3038, although now sixty-eight (68) years old, is still in effect and has not been repealed. 1

Specific legislative authorization for disposition of particular patrimonial properties of the State is illustrated by certain earlier statutes. The
first of these was Act No. 1120, enacted on 26 April 1904, which provided for the disposition of the friar lands, purchased by the Government
from the Roman Catholic Church, to bona fide settlers and occupants thereof or to other persons. In Jacinto v. Director of Lands (49 Phil. 853
[1926]), these friar lands were held to be private and patrimonial properties of the State. Act No. 2360, enacted on -28 February 1914,
authorized the sale of the San Lazaro Estate located in the City of Manila, which had also been purchased by the Government from the
Roman Catholic Church. In January 1916, Act No. 2555 amended Act No. 2360 by including therein all lands and buildings owned by the
Hospital and the Foundation of San Lazaro theretofor leased by private persons, and which were also acquired by the Philippine
Government.

After the enactment in 1922 of Act No. 3038, there appears, to my knowledge, to be only one statute authorizing the President to dispose of
a specific piece of property. This statute is Republic Act No. 905, enacted on 20 June 1953, which authorized the

President to sell an Identified parcel of land of the private domain of the National Government to the National Press Club of the Philippines,
and to other recognized national associations of professionals with academic standing, for the nominal price of P1.00. It appears relevant to
note that Republic Act No. 905 was not an outright disposition in perpetuity of the property involved- it provided for reversion of the property
to the National Government in case the National Press Club stopped using it for its headquarters. What Republic Act No. 905 authorized was
really a donation, and not a sale.

The basic submission here made is that Act No. 3038 provides standing legislative authorization for disposition of the Roppongi property
which, in my view, has been converted into patrimonial property of the Republic. 2

To some, the submission that Act No. 3038 applies not only to lands of the private domain of the State located in the Philippines but also to
patrimonial property found outside the Philippines, may appear strange or unusual. I respectfully submit that such position is not any more
unusual or strange than the assumption that Article 420 of the Civil Code applies not only to property of the Republic located within Philippine
territory but also to property found outside the boundaries of the Republic.

It remains to note that under the well-settled doctrine that heads of Executive Departments are alter egos of the President (Villena v.
Secretary of the Interior, 67 Phil. 451 [1939]), and in view of the constitutional power of control exercised by the President over department
heads (Article VII, Section 17,1987 Constitution), the President herself may carry out the function or duty that is specifically lodged in the
Secretary of the Department of Environment and Natural Resources (Araneta v. Gatmaitan 101 Phil. 328 [1957]). At the very least, the
President retains the power to approve or disapprove the exercise of that function or duty when done by the Secretary of Environment and
Natural Resources.

It is hardly necessary to add that the foregoing analyses and submissions relate only to the austere question of existence of legal power or
authority. They have nothing to do with much debated questions of wisdom or propriety or relative desirability either of the proposed
disposition itself or of the proposed utilization of the anticipated proceeds of the property involved. These latter types of considerations He
within the sphere of responsibility of the political departments of government the Executive and the Legislative authorities.

For all the foregoing, I vote to dismiss the Petitions for Prohibition in both G.R. Nos. 92013 and 92047.

Fernan, C.J., Narvasa, Gancayco, Cortes and Medialdea, JJ., concurring.

Footnotes
Padilla, J.
1 Art. 422 of the Civil Code provides:
"Property of public dominion, when no longer intended for public use or public service, shall form part of the patrimonial
property of the State. (341a)
Sarmiento, J.
1 Municipality of Oas v. Roa, 7 Phil. 20 (1906).
2 Municipality of Hinunangan v. Director of Lands, 24 Phil. 124 (11913). The property involved here was a fortress.
3 Harty v. Municipality of Victoria, 13 Phil. 152 (1909).
4 See also II TOLENTINO, CIVIL CODE OF THE PHILIPPINES 39 (1972 ed.), citing 3 Manresa III. See also Province
of Zamboanga del Norte v. City of Zamboanga, No. L-24440, March 28, 1968, 22 SCRA 1334.
5 Ignacio v. Director of Lands, 108 Phil. 335, 339 (1960).
6 Cebu Oxygen & Acetylene Co., Inc. vs. Bercilles, No. L-40474, August 29, 1975, 66 SCRA 481.
7 G.R. Nos. 92013 & 92047, 21.
8 Salas v. Jarencio, No. L-29788, August 30, 1972, 46 SCRA 734; Rabuco v. Villegas, No.
L-24916, February 28, 1974, 55 SCRA 658.
9 See Lianga Bay Logging Co., Inc. v. Lopez Enage, No. L-30637, July 16, 1987, 152 SCRA 80.
10 CONST., art. XII, sec. 2.
Feliciano, J.
 1 We are orally advised by the Office of the Director of Lands that Act No. 3038 is very much in effect and that the
Bureau of Lands continues to date to act under it. See also, in this connection, Sections 2 and 4 of Republic Act No.
477, enacted 9 June 1950 and as last amended by B.P. Blg 233. This statute government the disposition of lands of
the public domain and of the private domain of the State, including lands previously vested in the United States Alien
Property Custodian and transferred to the Republic of the Philippines.
2 Since Act No. 3038 established certain qualifications for applicants for purchase or lease of land of private domain of
the government, it is relevant to note that Executive Order No. 296, promulgated at a time when the President was still
exercising legislative authority, provides as follows:
"Sec. 1. The provisions of Republic Act No. 1789, as amended, and of other laws, to the contrary notwithstanding, the
above mentioned properties can be made available for sale, lease or any other manner of disposition to non-Filipino
citizens." (Emphasis supplied)

EN BANC

[G.R. No. 97764. August 10, 1992.]

LEVY D. MACASIANO, Brigadier General/PNP Superintendent, Metropolitan Traffic

Command, Petitioner, v. HONORABLE ROBERTO C. DIOKNO, Presiding Judge,
Branch, 62, Regional Trial Court of Makati, Metro Manila, MUNICIPALITY OF
PARAÑAQUE, METRO MANILA, PALANYAG KILUSANG BAYAN FOR SERVICE,
Respondents.

Ceferino, Padua Law Office for Palanyag Kilusang Bayan for service.

Manuel de Guia for Municipality of Parañaque.

SYLLABUS

1. POLITICAL LAW; PUBLIC CORPORATION; MUNICIPAL ORDINANCE; RESOLVING

ITS VALIDITY; LAWS IN FORCE AT ITS ENACTMENT CONTROL. — In resolving the
question of whether the disputed municipal ordinance authorizing the flea market on the public
streets is valid, it is necessary to examine the laws in force during the time the said ordinance
was enacted, namely, Batas Pambansa Blg. 337, otherwise known as Local Government Code,
‘in connection with established principles embodied in the Civil Code on property and settled
jurisprudence on the matter.

2. PROPERTY OF PROVINCES, CITIES, AND MUNICIPALITIES; CLASSIFICATION;

PROPERTY FOR PUBLIC USE. — 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. 24. 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."cralaw virtua1aw library

3. PROPERTY OF LOCAL GOVERNMENT DEVOTED TO PUBLIC SERVICE; DEEMED

PUBLIC; UNDER THE ABSOLUTE CONTROL OF CONGRESS; LOCAL GOVERNMENTS
HAVE NO AUTHORITY TO CONTROL OR REGULATE THEM UNLESS SPECIFIC
AUTHORITY IS VESTED UPON THEM BY CONGRESS; AUTHORITY TO BE
INTERPRETED ACCORDING TO BASIC PRINCIPLES OF LAW; ART. 424 OF THE CIVIL
CODE. — Properties of the local government which are devoted to public service are deemed
public and are under the absolute control of Congress (Province of Zamboanga del Norte v. City
of Zamboanga, L-24440, March 28, 1968, 22 SCRA 1334). Hence, local governments have no
authority whatsoever to control or regulate the use of public properties unless specific authority
is vested upon them by Congress. One such example of this authority given by Congress to the
local governments is the power to close roads as provided in Section 10, Chapter II of the Local
Government Code, which states: "SEC. 10. Closure of roads. — A local government unit may
likewise, through its head acting pursuant to a resolution of its sangguniang and in accordance
with existing law and the provisions of this Code, close any barangay, municipal, city or
provincial road, street, alley, park or square. No such way or place or any part thereof shall be
closed without indemnifying any person prejudiced thereby. A property thus withdrawn from
public use may be used or conveyed for any purpose for which other real property belonging to
the local unit concerned might be lawfully used or conveyed." 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.

4. ROADS AND STREETS ORDINARILY USED FOR VEHICULAR TRAFFIC

CONSIDERED PUBLIC PROPERTY; LOCAL GOVERNMENT HAS NO POWER TO USE
IT FOR ANOTHER PURPOSE OR TO DISPOSE OF OR LEASE IT TO PRIVATE
PERSONS. — However, those roads and streets which are available to the public in general and
ordinarily used for vehicular traffic are still considered public property devoted to public use. In
such case, the local government has no power to use it for another purpose or to dispose of or
lease it to private persons.

5. PROPERTY WITHDRAWN FROM PUBLIC USE; BECOMES PATRIMONIAL

PROPERTY OF THE LOCAL GOVERNMENT UNIT; CAN BE OBJECT OF ORDINARY
CONTRACT. — When it is already withdrawn from public use, the property then becomes
patrimonial property of the local government unit concerned (Article 422, Civil Code; Cebu
Oxygen, etc. Et. Al. v. Bercilles, Et Al., G.R. No. L-40474, August 29, 1975, 66 SCRA 481). It
is only then that the respondent municipality can "use or convey them for any purpose for which
other real property belonging to the local unit concerned might be lawfully used or conveyed" in
accordance with the last sentence of Section 10, Chapter II of Blg. 333, known as Local
Government Code. Such withdrawn portion becomes patrimonial property which can be the
object of an ordinary contract (Cebu Oxygen and Acetylene Co., Inc. v. Bercilles, Et Al., G.R.
No. L-40474, August 29, 1975, 66 SCRA 481).

6. POWERS OF LOCAL GOVERNMENT UNIT; NOT ABSOLUTE; SUBJECT TO

LIMITATION SET BY THE CONSTITUTION AND THE LAWS. — Verily, the powers of a
local government unit are not absolute. They are subject to limitations laid down by the
Constitution and the laws such as our Civil Code. Moreover, the exercise of such powers should
be subservient to paramount considerations of health and well-being of the members of the
community.

7. LEGAL RIGHT OF GENERAL PUBLIC TO DEMAND THE DEMOLITION OF

ILLEGALLY CONSTRUCTED STALLS IN PUBLIC ROADS AND STREETS. — As what
we have said in the Dacanay case, the general public have a legal right to demand the demolition
of the illegally constructed stalls in public roads and streets and the officials of respondent
municipality have the corresponding duty arising from public office to clear the city streets and
restore them to their specific public purpose.

8. BATAS PAMBANSA BLG. 337 (LOCAL GOVERNMENT CODE); REPEALED BY R.A.

NO. 7160 (LOCAL GOVERNMENT CODE OF 1991); SECTION 5(D) THEREOF. —
However, at this point, We find it worthy to note that Batas Pambansa Blg. 337, known as Local
Government Code, has already been repealed by Republic Act No. 7160 known as Local
Government Code of 1991 which took effect on January 1, 1992. Section 5(d) of the new Code
provides that rights and obligations existing on the date of effectivity of the new Code and
arising out of contracts or any other source of prestation involving a local government unit shall
be governed by the original terms and conditions of the said contracts or the law in force at the
time such rights were vested.

DECISION

MEDIALDEA, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of the
decision of the Regional Trial Court of Makati, Branch 62, which granted the writ of preliminary
injunction applied for by respondents Municipality of Parañaque and Palanyag Kilusang Bayan
for Service (Palanyag for brevity) against petitioner herein. chanrobles virtua l lawlibrary

The antecedent facts are as follows: chanrob1es virtual 1aw library

On June 13, 1990, the respondent municipality passed Ordinance No. 86, Series of 1990 which
authorized the closure of J. Gabrielle, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena
Streets located at Baclaran, Parañaque, Metro Manila and the establishment of a flea market
thereon. The said ordinance was approved by the municipal council pursuant to MCC 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: chanrob1es virtual 1aw library
1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the
residents do not oppose the establishment of the flea market/vending areas thereon;

2. That the 2-meter middle road to be used as flea market/vending area shall be marked
distinctly, and that the 2 meters on both sides of the road shall be used by pedestrians;

3. That the time during which the vending area is to be used shall be clearly designated;

4. That the use of the vending areas shall be temporary and shall be closed once the reclaimed
areas are developed and donated by the Public Estate Authority.

On June 20, 1990, the municipal council of Parañaque issued a resolution authorizing Parañaque
Mayor Walfrido N. Ferrer to enter into contract with any service cooperative for the
establishment, operation, maintenance and management of flea markets and/or vending areas. chanrobles lawlibrary : rednad

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 Parañaque. 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. Gabrielle St. in Baclaran. These stalls were later returned to respondent Palanyag.

On October 16, 1990, petitioner Brig. General Macasiano wrote a letter to respondent Palanyag
giving the latter ten (10) days to discontinue the flea market; otherwise, the market stalls shall be
dismantled.

Hence, on October 23, 1990, respondents municipality and Palanyag filed with the trial court a
joint petition for prohibition and mandamus with damages and prayer for preliminary injunction,
to which the petitioner filed his memorandum/opposition to the issuance of the writ of
preliminary injunction. chanrobles virtual lawlibrary

On October 24, 1990, the trial court issued a temporary restraining order to enjoin petitioner
from enforcing his letter-order of October 16, 1990 pending the hearing on the motion for writ of
preliminary injunction.

On December 17, 1990, the trial court issued an order upholding the validity of Ordinance No.
86 s. 1990 of the Municipality of Parañaque and enjoining petitioner Brig. Gen. Macasiano from
enforcing his letter-order against petitioner Palanyag.

Hence, this petition was filed by the petitioner thru the Office of the Solicitor General alleging
grave abuse of discretion tantamount to lack or excess of jurisdiction on the part of the trial judge
in issuing the assailed order.
The sole issue to be resolved in this case is whether or not an ordinance or resolution issued by
the municipal council of Parañaque authorizing the lease and use of public streets or
thoroughfares as sites for flea markets is valid.

The Solicitor General, in behalf of petitioner, contends that municipal roads are used for public
service and are therefore public properties; that as such, they cannot be subject to private
appropriation or private contract by any person, even by the respondent Municipality of
Parañaque. Petitioner submits that a property already dedicated to public use cannot be used for
another public purpose and that absent a clear showing that the Municipality of Parañaque has
been granted by the legislature a specific authority to convert a property already in public use to
another public use, respondent municipality is, therefore, bereft of any authority to close
municipal roads for the establishment of a flea market. Petitioner also submits that assuming that
the respondent municipality is authorized to close streets, it failed to comply with the conditions
set forth by the Metropolitan Manila Authority for the approval of the ordinance providing for
the establishment of flea markets on public streets. Lastly, petitioner contends that by allowing
the municipal streets to be used by market vendors, the municipal council of respondent
municipality violated its duty under the Local Government Code to promote the general welfare
of the residents of the municipality.

In upholding the legality of the disputed ordinance, the trial court ruled: jgc:chanrobles.com.ph

". . . that Chapter II Section 10 of the Local Government Code is a statutory grant of power given
to local government units, the Municipality of Parañaque as such, is empowered under that law
to close its roads, streets or alley subject to limitations stated therein (i.e. that it is in accordance
with existing laws and the provisions of this code).

x x x

"The actuation of the respondent Brig. Gen. Levi Macasiano, though apparently within its power
is in fact an encroachment of power legally vested to the municipality, precisely because when
the municipality enacted the ordinance in question — the authority of the respondent as Police
Superintendent ceases to be operative on the ground that the streets covered by the ordinance
ceases to be a public thoroughfare." (pp. 33-34, Rollo)

We find the petition meritorious. In resolving the question of whether the disputed municipal
ordinance authorizing the flea market on the public streets is valid, it is necessary to examine the
laws in force during the time the said ordinance was enacted, namely, Batas Pambansa Blg. 337,
otherwise known as Local Government Code, ‘in connection with established principles
embodied in the Civil Code on property and settled jurisprudence on the matter.

The property of provinces, cities and municipalities is divided into property for public use and
patrimonial property (Art. 423, Civil Code). As to what consists of property for public use,
Article 424 of Civil Code states: jgc:chanrobles.com.ph

"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. chanroblesvirtual|awlibrary

"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."cralaw virtua1aw library

Based on the foregoing, J. Gabrielle G.G. Cruz, Bayanihan, Lt. Gacia Extension and Opena
streets are local roads used for public service and are therefore considered public properties of
respondent municipality. Properties of the local government which are devoted to public service
are deemed public and are under the absolute control of Congress (Province of Zamboanga del
Norte v. City of Zamboanga, L-24440, March 28, 1968, 22 SCRA 1334). Hence, local
governments have no authority whatsoever to control or regulate the use of public properties
unless specific authority is vested upon them by Congress. One such example of this authority
given by Congress to the local governments is the power to close roads as provided in Section
10, Chapter II of the Local Government Code, which states: chanrobles.com.ph : virtual law library

"SEC. 10. Closure of roads. — A local government unit may likewise, through its head acting
pursuant to a resolution of its sangguniang and in accordance with existing law and the
provisions of this Code, close any barangay, municipal, city or provincial road, street, alley, park
or square. No such way or place or any part thereof shall be closed without indemnifying any
person prejudiced thereby. A property thus withdrawn from public use may be used or conveyed
for any purpose for which other real property belonging to the local unit concerned might be
lawfully used or conveyed." (Emphasis ours)

However, the aforestated legal provision which gives authority to local government units to close
roads and other similar public places should be read and interpreted in accordance with basic
principles already established by law. These basic principles have the effect of limiting such
authority of the province, city or municipality to close a public street or thoroughfare. Article
424 of the Civil Code lays down the basic principle that properties of public dominion devoted to
public use and made available to the public in general are outside the commerce of man and
cannot be disposed of or leased by the local government unit to private persons. Aside from the
requirement of due process which should be complied with before closing a road, street or park,
the closure should be for the sole purpose of withdrawing the road or other public property from
public use when circumstances show that such property is no longer intended or necessary for
public use or public service. When it is already withdrawn from public use, the property then
becomes patrimonial property of the local government unit concerned (Article 422, Civil Code;
Cebu Oxygen, etc. Et. Al. v. Bercilles, Et Al., G.R. No. L-40474, August 29, 1975, 66 SCRA
481). It is only then that the respondent municipality can "use or convey them for any purpose
for which other real property belonging to the local unit concerned might be lawfully used or
conveyed" in accordance with the last sentence of Section 10, Chapter II of Blg. 333, known as
Local Government Code. In one case, the City Council of Cebu, through a resolution, declared
the terminal road of M. Borces Street, Mabolo, Cebu City as an abandoned road, the same not
being included in the City Development Plan. Thereafter, the City Council passed another
resolution authorizing the sale of the said abandoned road through public bidding. We held
therein that the City of Cebu is empowered to close a city street and to vacate or withdraw the
same from public use. Such withdrawn portion becomes patrimonial property which can be the
object of an ordinary contract (Cebu Oxygen and Acetylene Co., Inc. v. Bercilles, Et Al., G.R.
No. L-40474, August 29, 1975, 66 SCRA 481). However, those roads and streets which are
available to the public in general and ordinarily used for vehicular traffic are still considered
public property devoted to public use. In such case, the local government has no power to use it
for another purpose or to dispose of or lease it to private persons. This limitation on the authority
of the local government over public properties has been discussed and settled by this Court en
banc in "Francisco v. Dacanay, petitioner v. Mayor Macario Asistio, Jr., Et Al., Respondents.,
G.R. No. 93654, May 6, 1992." This Court ruled: jgc:chanrobles.com.ph

"There is no doubt that the disputed areas from which the private respondents’ market stalls are
sought to be evicted are public streets, as found by the trial court in Civil Case No. C-12921. A
public street is property for public use hence outside the commerce of man (Arts. 420, 424, Civil
Code). Being outside the commerce of man, it may not be the subject of lease or other contract
(Villanueva, Et. Al. v. Castañeda and Macalino, 15 SCRA 142 citing the Municipality of Cavite
v. Rojas, 30 SCRA 602; Espiritu v. Municipal Council of Pozorrubio, 102 Phil. 869; and Muyot
v. De la Fuente, 48 O.G. 4860).

"As the stallholders pay fees to the City Government for the right to occupy portions of the
public street, the City Government, contrary to law, has been leasing portions of the streets to
them. Such leases or licenses are null and void for being contrary to law. The right of the public
to use the city streets may not be bargained away through contract. The interests of a few should
not prevail over the good of the greater number in the community whose health, peace, safety,
good order and general welfare, the respondent city officials are under legal obligation to
protect.
chanrobles law library

"The Executive Order issued by acting Mayor Robles authorizing the use of Heroes del ‘96
Street as a vending area for stallholders who were granted licenses by the city government
contravenes the general law that reserves city streets and roads for public use. Mayor Robles’
Executive Order may not infringe upon the vested right of the public to use city streets for the
purpose they were intended to serve: i.e., as arteries of travel for vehicles and pedestrians."
cralaw virtua1aw library

Even assuming, in gratia argumenti, that respondent municipality has the authority to pass the
disputed ordinance, the same cannot be validly implemented because it cannot be considered
approved by the Metropolitan Manila Authority due to non-compliance by respondent
municipality of the conditions imposed by the former for the approval of the ordinance, to wit: cralawnad

1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the
residents do(es) not oppose the establishment of the flea market/vending areas thereon;

2. That the 2-meter middle road to be used as flea market/vending area shall be marked
distinctly, and that the 2 meters on both sides of the road shall be used by pedestrians;

3. That the time during which the vending area is to be used shall be clearly designated;

4. That the use of the vending areas shall be temporary and shall be closed once the reclaimed
areas are developed and donated by the Public Estate Authority. (p. 38, Rollo)
Respondent municipality has not shown any iota of proof that it has complied with the foregoing
conditions precedent to the approval of the ordinance. The allegations of respondent municipality
that the closed streets were not used for vehicular traffic and that the majority of the residents do
not oppose the establishment of a flea market on said streets are unsupported by any evidence
that will show that this first condition has been met. Likewise, the designation by respondents of
a time schedule during which the flea market shall operate is absent.

Further, it is of public notice that the streets along Baclaran area are congested with people,
houses and traffic brought about by the proliferation of vendors occupying the streets. To license
and allow the establishment of a flea market along J. Gabrielle, G.G. Cruz, Bayanihan, Lt. Garcia
Extension and Opena streets in Baclaran would not help in solving the problem of congestion.
We take note of the other observations of the Solicitor General when he said: jgc:chanrobles.com.ph

". . . . There have been many instances of emergencies and fires where ambulances and fire
engines, instead of using the roads for a more direct access to the fire area, have to maneuver and
look for other streets which are not occupied by stalls and vendors thereby losing valuable time
which could, otherwise, have been spent in saving properties and lives.

"Along G.G. Cruz Street is a hospital, the St. Rita Hospital. However, its ambulances and the
people rushing their patients to the hospital cannot pass through G.G. Cruz because of the stalls
and the vendors. Once can only imagine the tragedy of losing a life just because of a few seconds
delay brought about by the inaccessibility of the streets leading to the hospital.

"The children, too, suffer. In view of the occupancy of the roads by stalls and vendors, normal
transportation flow is disrupted and school children have to get off at a distance still far from
their schools and walk, rain or shine.

"Indeed one can only imagine the garbage and litter left by vendors on the streets at the end of
the day. Needless to say, these cause further pollution, sickness and deterioration of health of the
residents therein." (pp. 21-22, Rollo)

Respondents do not refute the truth of the foregoing findings and observations of petitioners.
Instead, respondents want this Court to focus its attention solely on the argument that the use of
public spaces for the establishment of a flea market is well within the powers granted by law to a
local government which should not be interfered with by the courts.

Verily, the powers of a local government unit are not absolute. They are subject to limitations
laid down by the Constitution and the laws such as our Civil Code. Moreover, the exercise of
such powers should be subservient to paramount considerations of health and well-being of the
members of the community. Every local government unit has the sworn obligation to enact
measures that will enhance the public health, safety and convenience, maintain peace and order,
and promote the general prosperity of the inhabitants of the local units. Based on this objective,
the local government should refrain from acting towards that which might prejudice or adversely
affect the general welfare.

As what we have said in the Dacanay case, the general public have a legal right to demand the
demolition of the illegally constructed stalls in public roads and streets and the officials of
respondent municipality have the corresponding duty arising from public office to clear the city
streets and restore them to their specific public purpose.
chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

The instant case as well as the Dacanay case, involves an ordinance which is void and illegal for
lack of basis and authority in laws applicable during its time. However, at this point, We find it
worthy to note that Batas Pambansa Blg. 337, known as Local Government Code, has already
been repealed by Republic Act No. 7160 known as Local Government Code of 1991 which took
effect on January 1, 1992. Section 5(d) of the new Code provides that rights and obligations
existing on the date of effectivity of the new Code and arising out of contracts or any other
source of prestation involving a local government unit shall be governed by the original terms
and conditions of the said contracts or the law in force at the time such rights were vested.

ACCORDINGLY, the petition is GRANTED and the decision of the respondent Regional Trial
Court dated December 17, 1990 which granted the writ of preliminary injunction enjoining
petitioner as PNP Superintendent, Metropolitan Traffic Command from enforcing the demolition
of market stalls along J. Gabrielle, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena
streets is hereby REVERSED and SET ASIDE.

SO ORDERED.

Narvasa, C.J., Gutierrez, Jr ., Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Regalado, Davide,
Jr., Romero, Nocon and Bellosillo, JJ., concur.

FIRST DIVISION

[G.R. No. L-29788. August 30, 1972.]

RAFAEL S. SALAS, in his capacity as Executive Secretary; CONRADO F. ESTRELLA, in

his capacity as Governor of the Land Authority; and LORENZO GELLA, in his capacity
as Register of Deeds of Manila, Petitioners-Appellants, v. HON. HILARION U.
JARENCIO, as Presiding Judge of Branch XXIII, Court of First Instance of Manila;
ANTONIO J. VILLEGAS, in his capacity as Mayor of the City of Manila; and the CITY
OF MANILA, Respondents-Appellees.

Solicitor General Felix V. Makasiar, Assistant Solicitor General Antonio A. Torres,

Solicitor Raul I. Goco and Magno B. Pablo & Cipriano A. Tan, Legal Staff, Land
Authority for Petitioners-Appellants.

Gregorio A. Ejercito and Felix C. Chavez for Respondents-Appellees.

SYLLABUS
1. POLITICAL LAW; MUNICIPAL CORPORATIONS; POWER OF THE CITY OF MANILA
AS A MUNICIPAL CORPORATION; ACQUISITION OF PROPERTY IN PRIVATE
CAPACITY. — The City of 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.

2. ID.; ID.; ID.; ID.; IF THERE IS NO SHOWING THAT LAND WAS ACQUIRED WITH
PRIVATE FUNDS, PRESUMPTION IS THAT STATE IS SOURCE. — 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.

3. ID.; ID.; CLASSIFICATION OF PROPERTY IN ITS POSSESSION. — 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.

4. ID.; ID.; ID.; CONCEPT OF LEGUA COMUNAL EXPLAINED. — Comunal lands or

"legua comunal" came into existence when a town or pueblo was established in this country
under the laws of Spain. The municipalities of the Philippines were not entitled, as a matter of
right, to any part of the public domain for use as communal lands. The Spanish law provided that
the usufruct of a portion of the public domain adjoining municipal territory might be granted by
the Government for communal purposes, upon proper petition, but, until granted, no right therein
passed to the municipalities, and. in any event, the ultimate title remained in the Sovereign.

5. ID.; ID.; ID.; GENERAL RULE ON THE NATURE OF THE POSSESSION OF LAND BY
THE MUNICIPAL CORPORATION. — It may be laid down as a 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.

6. ID.; ID.; ID.; LEGISLATIVE CONTROL OVER PROPERTY OF MUNICIPAL

CORPORATION; POWER OF LEGISLATURE OVER LANDS HELD BY MUNICIPALITY
IN TRUST FOR THE STATE. — Legislative control over a municipal corporation is not
absolute even when it comes to its property devoted to public use, for such control must not be
exercised to the extent of depriving persons of their property or rights without due process of
law, or in a manner impairing the obligations of contracts. Nevertheless, when it comes to
property of the municipality which it did not acquire in its private or corporate capacity with its
own funds, the legislature can transfer its administration and disposition to an agency of the
National Government to be disposed of according to its discretion. Here it did so in obedience to
the constitutional mandate of promoting social justice to insure the well-being and economic
security of the people.

7. ID.; ID.; ID.; LEGISLATIVE HAS WIDE DISCRETIONARY POWERS IN CLASSIFYING

STATE PROPERTY. — The act of classifying State property calls for the exercise of wide
discretionary legislative power and it should not be interfered with by the courts.

8. ID.; ID.; ID.; PROPERTY IN CASE AT BAR IS HELD IN TRUST FOR THE STATE. —
The property subject of the litigation in the case at bar was shown not to have been 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. That the National Government, through the Director of Lands,
represented by the Solicitor General, in the cadastral proceedings did not contest the claim of the
City of Manila that the land is its property, does not detract from its character as State property
and in no way divests the legislature of its power to deal with it as such, the State not being
bound by the mistakes and/or negligence of its officers.

9. ID.; ID.; ID.; ALLEGED PATRIMONIAL CHARACTER OF LAND IN INSTANT CASE

DISPROVED BY CITY’S OFFICIAL ACT. — The alleged patrimonial character of the land
under the ownership of the City of Manila is totally belied by the City’s own official act, which
is fatal to its claim since the Congress did not do as bidden. If it were its patrimonial property
why should the City of Manila be requesting the President to make representation to the
legislature to declare it as such so it can be disposed of in favor of the actual occupants? There
could be no more blatant recognition of the fact that said land belongs to the State and was
simply granted in usufruct to the City of Manila for municipal purposes.

10. STATUTES; PRESUMPTION IS ALWAYS IN FAVOR OF CONSTITUTIONALITY OF

A STATUTE. — It is now well established that the presumption is always in favor of the
constitutionality of a law. To declare a law unconstitutional, the repugnancy of that law to the
Constitution must be clear and unequivocal for even if a law is aimed at the attainment of some
public good, no infringement of constitutional rights is allowed. To strike down a law there must
be a clear showing that what the fundamental law condemns or prohibits, the statute allows it to
be done.

11. ID., REPUBLIC ACT 4118 DOES NOT OPERATE AS AN EXERCISE OF THE POWER
OF EMINENT DOMAIN WITHOUT JUST COMPENSATION. — Republic Act 4118 which
"seeks to convert one parcel of land in the district of Malate, Manila, which is reserved as
communal property into disposable or alienable property of the State and to provide its
subdivision and sale to bona fide occupants or tenants," 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 111 of the Constitution, but simply as a manifestation of its right and
power to deal with state property.

12. ID.; ID.; NO VIOLATION OF DUE PROCESS CLAUSE IN THE ENACTMENT OF THE
STATUTE. — 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 indicates 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.

DECISION

ESGUERRA, J.:

This is a petition for review of the decision of the Court of First Instance of Manila, Branch
XXIII, in Civil Case No. 67946, dated September 23, 1968, the dispositive portion of which is as
follows:jgc:chanrobles.com.ph

"WHEREFORE, the Court renders judgment declaring Republic Act No. 4118 unconstitutional
and invalid in that it deprived the City of Manila of its property without due process and payment
of just compensation. Respondent Executive Secretary and Governor of the Land Authority are
hereby restrained and enjoined from implementing the provisions of said law. Respondent
Register of Deeds of the City of Manila is ordered to cancel Transfer Certificate of Title No.
80876 which he had issued in the name of the Land Tenure Administration and reinstate Transfer
Certificate of Title No. 22547 in the name of the City of Manila which he cancelled, if that is
feasible, or issue a new certificate of title for the same parcel of land in the name of the City of
Manila." 1

The facts necessary for a clear understanding of this case are as follows: chanrob1es v irtual 1aw library

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 (T.C.T.) 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 Antonio
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

During the First Session of the Fifth Congress of the Philippines, House Bill No. 191 was filed in
the House of Representatives by then Congressman Bartolome Cabangbang seeking to declare
the property in question as patrimonial property of the City of Manila, and for other purposes.
The explanatory note of the Bill gave the grounds for its enactment, to wit: jgc:chanrobles.com.ph

"In the particular case of the property subject of this bill, the City of Manila does not seem to
have use thereof as a public communal property. As a matter of fact, a resolution was adopted by
the Municipal Board of Manila at its regular session held on September 21, 1960, to request the
feasibility of declaring the city property bounded by Florida, San Andres and Nebraska Streets as
a patrimonial property of the City of Manila for the purpose of reselling these lots to the actual
occupants thereof. Therefore, it will be to the best interest of society that the said property be
used in one way or another. Since this property has been occupied for a long time by the present
occupants thereof and since said occupants have expressed their willingness to buy the said
property, it is but proper that the same be sold to them." 4

Subsequently, a revised version of the Bill was introduced in the House of Representatives by
Congressmen Manuel Cases, Antonio Raquiza and Nicanor Yñiguez as House Bill No. 1453,
with the following explanatory note: jgc:chanrobles.com.ph

"The accompanying bill seeks to convert one (1) parcel of land in the district of Malate, which is
reserved as communal property into a disposable or alienable property of the State and to provide
its subdivision and sale to bona fide occupants or tenants.

"This parcel of land in question was originally an aggregate part of a piece of land with an area
of 9,689.8 square meters, more or less. . . . On September 21, 1960, the Municipal Board of
Manila in its regular session unanimously adopted a resolution requesting the President of the
Philippines and Congress of the Philippines the feasibility of declaring this property into
disposable or alienable property of the State. There is therefore a precedent that this parcel of
land could be subdivided and sold to bona fide occupants. This parcel of land will not serve any
useful public project because it is bounded on all sides by private properties which were formerly
parts of this lot in question.

"Approval of this bill will implement the policy of the Administration of land for the landless
and the Fifth Declaration of Principles of the Constitution, which states that the promotion of
Social Justice to insure the well-being and economic security of all people should be the concern
of the State. We are ready and willing to enact legislation promoting the social and economic
well-being of the people whenever an opportunity for enacting such kind of legislation arises.

In view of the foregoing consideration and to insure fairness and justice to the present bona fide
occupants thereof, approval of this Bill is strongly urged." 5

The Bill having been passed by the House of Representatives, the same was thereafter sent to the
Senate where it was thoroughly discussed, as evidenced by the Congressional Records for May
20, 1964, pertinent portion of which is as follows: jgc:chanrobles.com.ph

"SENATOR FERNANDEZ: Mr. President, it will be recalled that when the late Mayor Lacson
was still alive, we approved a similar bill. But afterwards, the late Mayor Lacson came here and
protested against the approval, and the approval was reconsidered. May I know whether the
defect in the bill which we approved, has already been eliminated in this present bill?

"SENATOR TOLENTINO: I understand Mr. President, that has already been eliminated, and
that is why the City of Manila has no more objection to this bill.

"SENATOR FERNANDEZ: Mr. President, in view of that manifestation and considering that
Mayor Villegas and Congressman Albert of the Fourth District of Manila are in favor of the bill.
I would not want to pretend to know more what is good for the City of Manila.

"SENATOR TOLENTINO: Mr. President, there being no objection, I move that we approve this
bill on second reading.

"PRESIDENT PRO-TEMPORE: The bill is approved on second reading after several Senators
said aye and nobody said nay." cralaw virtua1aw library

The bill was passed by the Senate, approved by the President on June 20, 1964, and became
Republic Act No. 4118. It reads as follows: chanrob1es vir tual 1aw library

Lot 1-B-2-B op Block 557 of the cadastral survey of the City of Manila, situated in the District
of Malate. City of Manila, which is reserved as communal property, is hereby converted into
disposal or alienable land of the State, to be placed under the disposal of the Land Tenure
Administration. The Land Tenure Administration shall subdivide the property into small lots,
none of which shall exceed one hundred and twenty square meters in area and sell the same on
installment basis to the tenants or bona fide occupants thereof and to individuals, in the order
mentioned: Provided, That no down payment shall be required of tenants or bona fide occupants
who cannot afford to pay such down payment: Provided, further, That no person can purchase
more than one lot: Provided, furthermore, That if the tenant or bona fide occupant of any given
lot is not able to purchase the same, he shall be given a lease from month to month until such
time that he is able to purchase the lot: Provided, still further, That in the event of lease the
rentals which may be charged shall not exceed eight per cent per annum of the assessed value of
the property leased: And provided, finally, That in fixing the price of each lot, which shall not
exceed twenty pesos per square meter, the cost of subdivision and survey shall not be included.

"Sec. 2. Upon approval of this Act no ejectment proceedings against any tenant or bona fide
occupant of the above lots shall be instituted and any ejectment proceedings pending in court
against any such tenant or bona fide occupant shall be dismissed upon motion of the defendant:
Provided, That any demolition order directed against any tenant or bona fide occupant shall be
lifted.

"Sec. 3. Upon approval of this Act, if the tenant or bona fide occupant is in arrears in the
payment of any rentals, the amount legally due shall be liquidated and shall be payable in
twenty-four equal monthly installments from the date of liquidation.

"Sec. 4. No property acquired by virtue of this Act shall be transferred, sold, mortgaged, or
otherwise disposed of within a period of five years from the date full ownership thereof has been
vested in the purchaser without the consent of the Land Tenure Administration.

"Sec. 5. In the event of the death of the purchaser prior to the complete payment of the price of
the lot purchased by him, his widow and children shall succeed in all his rights and obligations
with respect to his lot.

"Sec. 6. The Chairman of the Land Tenure Administration shall implement and issue such rules
and regulations as may be necessary to carry out the provisions of this Act.

"Sec. 7. The sum of one hundred fifty thousand pesos is appropriated out of any funds in the
National Treasury not otherwise appropriated, to carry out the purposes of this Act.

"Sec. 8. All laws or parts of laws inconsistent with this Act are repealed or modified accordingly.

"Sec. 9. This Act shall take effect upon its approval.

"Approved, June 20, 1964." cralaw virtua1aw library

To implement the provisions of Republic Act No. 4118, and pursuant to the request of the
occupants of the property involved, then Deputy Governor Jose V. Yap of the Land Authority
(which succeeded the Land Tenure Administration) addressed a letter, dated February 18, 1965,
to Mayor Antonio Villegas, furnishing him with a copy of the proposed subdivision plan of said
lot as prepared for the Republic of the Philippines for resale of the subdivision lots by the Land
Authority to bona fide applicants. 6

On March 2, 1965, the City Mayor of Manila, through his Executive and Technical Adviser,
acknowledged receipt of the proposed subdivision plan of the property in question and informed
the Land Authority that his office would interpose no objection to the implementation of said
law, provided that its provisions be strictly complied with. 7

With the above-mentioned written conformity of the City of Manila for the implementation of
Republic Act No. 4118, the Laud Authority, thru then Deputy Governor Jose V. Yap, requested
the City Treasurer of Manila, thru the City Mayor, for the surrender and delivery to the former of
the owner’s duplicate of Transfer Certificate of Title No. 22547 in order to obtain title thereto in
the name of the Land Authority. The request was duly granted with the knowledge and consent
of the Office of the City Mayor. 8

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.

With the foregoing antecedent facts, which are all contained in the partial stipulation of facts
submitted to the trial court and approved by respondent Judge, the parties waived the
presentation of further evidence and submitted the case for decision. On September 23, 1968,
judgment was rendered by the trial court declaring Republic Act No. 4118 unconstitutional and
invalid on the ground that it deprived the City of Manila of its property without due process of
law and payment of just compensation. The respondents were ordered to undo all that had been
done to carry out the provisions of said Act and were restrained from further implementing the
same.

Two issues are presented for determination, on the resolution of which the decision in this case
hinges, to wit:
chanrob1es virtual 1aw library

I. Is the property involved private or patrimonial property of the City of Manila?

II. Is Republic Act No. 4118 valid and not repugnant to the Constitution?
 I

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.

It is argued that the parcel of land involved herein has not been used by the City of Manila for
any public purpose and had not been officially earmarked as a site for the erection of some
public buildings; that this circumstance confirms the fact that it was originally "communal" land
alloted to the City of Manila by the Central Government not because it was needed in connection
with its organization as a municipality but simply for the common use of its inhabitants; that the
present City of Manila as successor of the Ayuntamiento de Manila under the former Spanish
sovereign merely enjoys the usufruct over said land, and its exercise of acts of ownership by
selling parts thereof did not necessarily convert the land into a patrimonial property of the City of
Manila nor divest the State of its paramount title.

Appellants further argue that a municipal corporation, like a city is a governmental agent of the
State with authority to govern a limited portion of its territory or to administer purely local
affairs in a given political subdivision, and the extent of its authority is strictly delimited by the
grant of power conferred by the State; that Congress has the exclusive power to create, change or
destroy municipal corporations; that even if We admit that legislative control over municipal
corporations is not absolute and even if it is true that the City of Manila has a registered title over
the property in question, the mere transfer of such land by an act of the legislature from one class
of public land to another, without compensation, does not invade the vested rights of the City.

Appellants finally argue that Republic Act No. 4118 has treated the land involved as one
reserved for communal use, and this classification is conclusive upon the courts; that if the City
of Manila feels that this is wrong and its interests have been thereby prejudiced, the matter
should be brought to the attention of Congress for correction; and that since Congress, in the
exercise of its wide discretionary powers has seen fit to classify the land in question as
communal, the Courts certainly owe it to coordinate branch of the Government to respect such
determination and should not interfere with the enforcement of the law.

Upon the other hand, appellees argue by simply quoting portions of the appealed decision of the
trial court, which read thus:jgc:chanrobles.com.ph
"The respondents (petitioners-appellants herein) contend, among other defenses, that the
property in question is communal property. This contention is, however, disproved by Original
Certificate of Title No. 4329 issued on August 21, 1920 in favor of the City of Manila after the
land in question was registered in the City’s favor. The Torrens Title expressly states that the
City of Manila was the owner in ‘fee simple’ of the said land. Under Sec. 38 of the Land
Registration Act, as amended, the decree of confirmation and registration in favor of the City of
Manila . . . shall be conclusive upon and against all persons including the Insular Government
and all the branches there . . . is nothing in the said certificate of title indicating that the land was
‘communal’ land as contended by the respondents. The erroneous assumption by the Municipal
Board of Manila that the land in question was communal land did not make it so. The Municipal
Board had no authority to do that.

"The respondents, however, contend that Congress had the power and authority to declare that
the land in question was ‘communal’ land and the courts have no power or authority to make a
contrary finding. This contention is not entirely correct or accurate. Congress has the power to
classify ‘land of the public domain’, transfer them from one classification to another and declare
them disposable or not. Such power does not, however, extend to properties which are owned by
cities, provinces and municipalities in their ‘patrimonial’ capacity.

"Art. 324 of the Civil Code provides that properties of provinces, cities and municipalities are
divided into properties for public use and patrimonial property Art. 424 of the same code
provides that properties for public use consist of provincial roads, city streets, municipal streets,
the squares, fountains, public waters, promenades and public works for public service paid for by
said province, cities or municipalities. All other property possessed by any of them is
patrimonial. Tested by this criterion the Court finds and holds that the land in question is
patrimonial property of the City of Manila.

"Respondents contend that Congress has declared the land in question to be ‘communal’ and,
therefore, such designation is conclusive upon the courts. The Courts holds otherwise. When a
statute is assailed as unconstitutional the Courts have the power and authority to inquire into the
question and pass upon it. This has long ago been settled in Marbury v. Madison, 2 L. ed. 60,
when the United States Supreme Court speaking thru Chief Justice Marshall held: chanrob1es virtual 1aw library

‘. . . If an act of the legislature, repugnant to the constitution, is void, does it, notwithstanding its
validity, bind the courts, and oblige them to give effect? It is emphatically the province and duty
of the judicial department to say what the law is . . . So if a law be in opposition to the
constitution; if both the law and the constitution apply to a particular case, so that the court must
either decide that case conformable to the constitution, disregarding the law, the court must
determine which of these conflicting rules governs the case. This is of the very essence of
unconstitutional judicial duty.’"

Appellees finally concluded that when the courts declare a law unconstitutional it does not mean
that the judicial power is superior to the legislative power. It simply means that the power of the
people is superior to both and that when the will of the legislature, declared in statutes, stands in
opposition to that of the people, declared in the Constitution, the judges ought to be governed by
the Constitution rather than by the statutes.

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 v. 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.

Communal lands or "legua comunal" came into existence when a town or pueblo was established
in this country under the laws of Spain (Law VII, Title III, Book VI, Recopilacion de las Leyes
de Indios). The municipalities of the Philippines were not entitled, as a matter of right, to any
part of the public domain for use as communal lands. The Spanish law provided that the usufruct
of a portion of the public domain adjoining municipal territory might be granted by the
Government for communal purposes, upon proper petition, but, until granted, no rights therein
passed to the municipalities, and, in any event, the ultimate title remained in the sovereign (City
of Manila v. Insular Government, 10 Phil. 327).

"For the establishment, then, of new pueblos the administrative authority of the province, in
representation of the Governor General, designated the territory for their location and extension
and the metes and bounds of the same; and before alloting the lands among the new settlers, a
special demarcation was made of the places which were to serve as the public square of the
pueblo, for the erection of the church, and as cites for the public buildings, among others, the
municipal building or the case real, as well as of the lands which were to constitute the common
pastures, and propios of the municipality and the streets and roads which were to intersect the
new town were laid out, . . ." (Municipality of Catbalogan v. Director of Lands, 17 Phil. 216,
220) (Emphasis supplied)

It may, therefore, be laid down as a 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 (2
Mc Quilin, Municipal Corporations, 3rd Ed., p. 197, citing Monagham v. Armatage, 218 Minn.
27, 15 N.W. 2nd 241).

True it is that the legislative control over a municipal corporation is not absolute even when it
comes to its property devoted to public use, for such control must not be exercised to the extent
of depriving persons of their property or lights without due process of law, or in a manner
impairing the obligations of contracts. Nevertheless, when it comes to property of the
municipality which it did not acquire in its private or corporate capacity with its own funds, the
legislature can transfer its administration and disposition to an agency of the National
Government to be disposed of according to its discretion. Here it did so in obedience to the
constitutional mandate of promoting social justice to insure the well-being and economic security
of the people.

It has been held that a statute authorizing the transfer of a Municipal airport to an Airport
Commission created by the legislature, even without compensation to the city, was not violative
of the due process clause of the American Federal Constitution. The Supreme Court of
Minnessota in Monagham v. Armatage, supra, said: jgc:chanrobles.com.ph

". . . The case is controlled by the further rule that the legislature, having plenary control of the
local municipality, of its creation and of all its affairs, has the right to authorize or direct the
expenditures of money in its treasury, though raised, for a particular purpose, for any legitimate
municipal purpose, or to order and direct a distribution thereof upon a division of the territory
into separate municipalities . . . The local municipality has no such vested right in or to its public
funds, like that which the Constitution protects in the individual as precludes legislative
interferences. People v. Power, 25 Ill. 187; State Board (of Education) v. City, 56 Miss. 518. As
remarked by the supreme court of Maryland in Mayor v. Sehner, 37 Md. 180: ‘It is of the
essence of such a corporation, that the government has the sole right as trustee of the public
interest, at its own good will and pleasure, to inspect, regulate, control, and direct the
corporation, its funds, and franchises.’

"We therefore hold that c.500, in authorizing the transfer of the use and possession of the
municipal airport to the commission without compensation to the city or to the park board, does
not violate the Fourteenth Amendment to the Constitution of the United States." cralaw virtua1aw library

The Congress has dealt with the land involved as one reserved for communal use (terreno
comunal). The act of classifying State property calls for the exercise of wide discretionary
legislative power and it should not be interfered with by the courts.

This brings Us to the second question as regards the validity of Republic Act No. 4118, viewed
in the light of Article III, Sections 1, subsection (1) and (2) of the Constitution which ordain that
no person shall be deprived of his property without due process of law and that no private
property shall be taken for public use without just compensation.

II
The trial court declared Republic Act No. 4118 unconstitutional for allegedly depriving the City
of Manila of its property without due process of law and without payment of just compensation.
It is now well established that the presumption is always in favor of the constitutionality of a law
(U. S. v. Ten Yu, 24 Phil, 1; Go Ching, Et. Al. v. Dinglasan, Et Al., 45 O.G. No. 2, pp. 703,
705). To declare a law unconstitutional, the repugnancy of that law to the Constitution must be
clear and unequivocal, for even if a law is aimed at the attainment of some public good, no
infringement of constitutional rights is allowed. To strike down a law there must be a clear
showing that what the fundamental law condemns or prohibits, the statute allows it to be done
(Morfe v. Mutuc, Et Al., G.R. No. L-20387, Jan. 31, 1968; 22 SCRA 424). That situation does
not obtain in this case as the law assailed does not in any manner trench upon the constitution as
will hereafter be shown.

Republic Act No. 4118 was intended to implement the social justice policy of the Constitution
and the Government program of "Land for the Landless." The explanatory note of House Bill
No. 1453 which became Republic Act No. 4118, reads in part as follows: jgc:chanrobles.com.ph

"Approval of this bill will implement the policy of the administration of ‘land for the landless’
and the Fifth Declaration of Principles of the Constitution which states that ‘the promotion of
social justice to insure the well-being and economic security of all people should be the concern
of the State.’ We are ready and willing to enact legislation promoting the social and economic
well-being of the people whenever an opportunity for enacting such kind of legislation arises.’"

The respondent Court held that Republic Act No. 4118, "by converting the land in question —
which is the patrimonial property of the City of Manila into disposable alienable land of the State
and placing it under the disposal of the Land Tenure Administration — violates the provisions of
Article III (Secs. 1 and 2) of the Constitution which ordain that "private property shall not be
taken for public use without just compensation, and that no person shall be deprived of life,
liberty or property without due process of law." In support thereof reliance is placed on the ruling
in Province of Zamboanga del Norte v. City of Zamboanga, G.R. No. 2440, March 28, 1968; 22
SCRA 1334, which holds that Congress cannot deprive a municipality of its private or
patrimonial property without due process of law and without payment of just compensation since
it has no absolute control thereof. There is no quarrel over this rule if it is undisputed that the
property sought to be taken is in reality a private or patrimonial property of the municipality or
city. But it would be simply begging the question to classify the land in question as such. 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 time 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.
That the National Government, through the Director of Lands, represented by the Solicitor
General, in the cadastral proceedings did not contest the claim of the City of Manila that the land
is its property does not detract from its character as State property and in no way divests the
legislature of its power to deal with it as such, the state not being bound by the mistakes and/or
negligence of its officers.

One decisive fact that should be noted is that the City of Manila expressly recognized the
paramount title of the State over said land when by its resolution of September 20, 1960, the
Municipal Board, presided by then Vice-Mayor Antonio Villegas, requested "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
25547, containing an area of 7,450 square meters, as patrimonial property of the City of Manila
for the purpose of reselling these lots to the actual occupants thereof ." (See Annex E, Partial
Stipulation of Facts, Civil Case No. 67945, CFI, Manila, p. 121, Record of the Case) [Emphasis
Supplied]

The alleged patrimonial character of the land under the ownership of the City of Manila is totally
belied by the City’s own official act, which is fatal to its claim since the Congress did not do as
bidden. If it were its patrimonial property why should the City of Manila be requesting the
President to make representation to the legislature to declare it as such so it can be disposed of in
favor of the actual occupants? There could be no more blatant recognition of the fact that said
land belongs to the State and was simply granted in usufruct to the City of Manila for municipal
purposes. But since the City did not actually use said land for any recognized public purpose and
allowed it to remain idle and unoccupied for a long time until it was overrun by squatters, no
presumption of State grant of ownership in favor of the City of Manila may be acquiesced in to
justify the claim that it is its own private or patrimonial property (Municipality of Tigbauan v.
Director of Lands, 35 Phil. 798; City of Manila v. Insular Government, 10 Phil. 327;
Municipality of Luzuriaga v. Director of Lands, 24 Phil. 193). The conclusion of the respondent
court that Republic Act No. 4118 converted a patrimonial property of the City of Manila into a
parcel of disposable land of the State and took it away from the City without compensation is,
therefore, unfounded. In the last analysis the land in question pertains to the State and the City of
Manila merely acted as trustee for the benefit of the people therein for whom the State can
legislate in the exercise of its legitimate powers.

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.

WHEREFORE, the appealed decision is hereby reversed and petitioners shall proceed with the
free and untrammeled implementation of Republic Act No. 4118 without any obstacle from the
respondents. Without costs.

Concepcion, C.J., Makalintal, Zaldivar, Castro, Fernando, Teehankee and Antonio, JJ., concur.

Barredo and Makasiar, JJ., did not take part.

Endnotes:

1. Pages 79-80, Rollo.

2. Annex "E" to the Partial Stipulation of Facts, page 121, Records.

3. Annex "E-1" to the Partial Stipulation of Facts, page 122, Records.

4. Annex "F" to the Partial Stipulation of Facts, page 123, Records.

5. Annex "F-1", page 128, Records.

6. Annex "J", page 142, Records.

7. Annex "K", page 145, Records.

8. Annexes "L" and "L-1", pages 145-147, Records.

9. Annexes "A" and "N", pages 148-150, Records.

EN BANC

[G.R. No. 4957. April 2, 1909. ]

MIGUEL PASCUAL, Petitioner-Appellee, v. MACARIO ANGELES, ET AL., Respondents-

Appellants.

Alberto Barretto, for Appellants.

 Eusebio Orense, for Appellee.

SYLLABUS

1. LANDLORD AND TENANT; TENANTS’ ACTS BY PERMISSION OF LANDLORD;

RIGHT TO POSSESSION. — The acts of a possessory nature performed by the lessee on the
property leased, by permission of the lessor under the lease contract, will not avail him in an
attempt to establish his right to possession. (Art. 1942, Civil Code.)

2. ID.; REGISTRATION OF LAND BY LANDLORD; OPPOSITION BY TENANT. — The

person objecting to the inscription in the registry of certain land, after the signing of a lease
contract for the use and enjoyment thereof by himself, can not in an action deny the right of the
lessor seeking registration, nor impugn the lawfulness and existence of said contract by virtue of
which he has been occupying the land in question, without repudiating his own acts. Inasmuch as
he fails to prove his ownership of the property he can not lawfully impede the registration asked
for.

DECISION

TORRES, J. :

On October 11 , 1906, the attorneys for Miguel Pascual filed with the Court of Land Registration
an application for the registration, pursuant to the provisions of the Land Registration Act, o f a
piece of land belonging exclusively to him. Said land consists of four parcels, was inscribed in
the old registry, and is located in the barrio of San Roque, within the municipality of Navotas; it
is bounded on the north by lands belonging to Producio Suarez, Brigida Tengco, Saturnina
Bunda, Macario Angeles, and Damaso Oliveros; on the east by the Navotas River; on the south
by property of Faustino Pascual, and on the west by the Manila Bay, as will be seen on the map
accompanying said petition and submitted as Exhibit. A, That part of the land in question which
is classed as city property has an area of 18,474 square meters and 55 square decimeters, while
that part classed as rural property measures 35, 164 square meters and 75 square decimeters. A
dwelling house and a storehouse of strong materials and corrugated iron roof, the property of the
petitioner, are erected thereon. According to the application the said four parcels of land
composing the property above mentioned, inscribed in the old registry as already said, and
having the foregoing limits, were acquired by the applicant as heir of his mother Crisanta
Gonzalez, as appears from Exhibit B which is a certificate issued by the register of deeds of this
city. For the purposes of the payment of the land tax the four parcels in question were assessed
jointly in the sum of P24, 520, as shown by Exhibit C. Said property is free from all
encumbrances and, so far as petitioner is aware, no person claims any right or interest in said
land except Alejandro Santos, Quiteria Florindo, Marcos Naval, Andrea Soriano, Pedro Pascual,
Teodoro Pascual, Felipe Pascual, Angelo Pascual, Miguel Siano, Marcelo Joingco, Graciano
Alcantara, Pantaleion Bautista, Laureana Gonzalez, Aniceto Santos, Quintin Naval, Esperanza
Naval, Fausto Perez, Carlota Naval, Alejandro Senson, Damaso Oliveros and Macario Angeles,
all residents of said barrio and pueblo. These persons claim a right or interest in the portion of
the land occupied by each of them within the property above described, mention being made of
the names of the tenants of the part of the land classed as city property as well of the lessees on
shares of the part of the land classed as rural property.

At the hearing of this application, Marcelo Joingco, by his writing of March 12, 1907, appeared
and entered a general and specific denial of all and every one of the facts alleged in the
application, and by way of special defense he set forth: that there is pending before the Court of
First Instance of Rizal civil case No. 210 brought by the same Miguel Pascual, Petitioner, against
the respondent Marcelo Joingco and others, concerning the ownership of the land in question;
that by another action, No. 99, before the same court and between the applicant and the objector
as parties litigant, the issue in regard to the possession of this same land was decided by the court
in favor of the present objector; that within parcel B, as seen on map A, he owns a lot with a
house erected thereon, the boundaries of which are, on the north, the Calle Real of Navotas; on
the south, cultivated land, on the east, the lands of Miguel and Agustin Sianguio and Graciano
Alcantara, and on the west, the lands of Angelo Angeles and Pedro Burgos; its area being
2,318.70 square meters; that he and his predecessors in interest have held the land as owners for
a period of more than fifty years, possessing the same peacefully, quietly, and publicly; that he
had never known the applicant as owner of the said land, nor asked his permission to build and
erect a house nor to sow the land, for which reason he prayed the court to deny said application,
and in case it be granted by the court, that a provision be inserted in the decree excluding the
parcel of land the subject of his opposition, with the costs against the applicant.

Opposition was also filed by Macario Angeles, who , by his writing of the same date, entered a
general and specific denial of all and every one of the facts set forth in the application, and by
way of special defense stated that between the applicant and himself there is pending before the
Court First Instance of Rizal civil case No. 211 for recovery of possession, the land which is the
subject of his opposition being also in controversy in said case; that in that part of the land
indicated on the map by the letter A, in the direction of the bay, the objector has a parcel of 1,623
square meters, with a house and a storehouse erected thereon, its boundaries being, on the north,
the property of Damaso Oliveros; on the south, that o Gil Pascual; on the east, the field indicated
in green ink, and on the west, the shore of Manila Bay; that the applicant obtained possession of
a strip of this land, measuring 15 varas in length and 15 varas in width on the side bounded by
the property of Gil Pascual, through ejectment proceedings instituted in said court, for which
reason his opposition will not affect said strip of land; that the objector has been in quiet and
peaceful possession, as owner of the parcel which is the subject of his opposition for a period of
over thirty years; that he had never regarded the applicant is owner of the land, because, in
former times, said property was shore land which by his work he converted into land fit for
cultivation and building purposes and on which he has planted for a long time past trees such as
mangoes, lomboy, tamarind (sampaloc), casuy, almond, camanchile, guava, cane, etc.; for which
reason he prayed the court to deny the application, and in case it be granted, that a provision be
inserted in the decree of the court excluding therefrom the parcel which is the subject of his
opposition, with the costs against the applicant.

After the trial, and in view of the evidence submitted by both sides, and the documents presented
having been made part of the record, the court, on April 30, 1908, rendered judgment in said case
dismissing the oppositions filed by Marcelo Joingco and Macario Angeles, concerning the
respective parcels of land mentioned by them, and an order of default having been previously
made against any other objector, the court decreed the adjudication and registration of the parcels
in question in favor of the applicant Miguel Pascual. The objectors, Jiongco and Angeles, filed
an exception to said decree and also moved for the reopening and rehearing of the case on the
ground that the findings of fact of said judgment are openly and plainly contrary to the weight of
the evidence, and because the judgment is not supported by the evidence and ins contrary to law.
The court, by an order dated May 15, 1908, denied said motion, to which they excepted,
wherefore the corresponding bills of exceptions, duly approved, were forwarded to the office of
the clerk of this court.

This is an application for the registration of property originally consisting of four parcels of land,
of which two small ones are devoted to building and residential purposes, and the other two, of
much greeted area, are used as fields for plantation purposes. Said four parcels were inscribed
under different numbers in the old registry of property.

The opposition filed by the Attorney-General to the registration of the agricultural parcels of land
was afterwards withdrawn in view of the data obtained by the Government and the outcome of
the case and because the Government had no interest in said two parcels of agricultural land.

Let us now consider the opposition entered by Marcelo Joingco and Macario Angeles, the former
alleging possession of a lot and a building thereon erected within parcel

EN BANC

[G.R. No. L-260. March 25, 1946.]

FELIPE SAAVEDRA, Petitioner, v. POTENCIANO PECSON, Judge of First Instance of

Zamboanga, Respondent.

Atilano & Atilano for Petitioner.

Respondent Judge in his own behalf.

SYLLABUS

1. JURISDICTION; MUNICIPAL COURTS. — Plaintiff sued defendant to recover an

automobile, valued at P450, which the Japanese forces seized from plaintiff during the enemy
occupation, later was used by the PCAU and, lastly, was sold by an American enlisted man to
defendant. Held: The municipal court has jurisdiction to try the case.

2. ID.; COURT OF FIRST INSTANCE. — The municipal court dismissed the complaint on the
erroneous assumption that it has no jurisdiction to try the case. It appearing that the dismissal
involves a question of law, the court of first instance has jurisdiction on appeal to review the
ruling and may affirm or reverse it and, in case of reversal, to remand the case for further
proceedings, in pursuance of section 10 of Rule 40.
 3. ILLEGAL SEIZURE BY THE JAPANESE. — The fact that an automobile owned by a
civilian private citizen, has been seized by the Japanese forces during enemy occupation, does
not change the nature, character, and status of the automobile as a private property, nor does it
make it an enemy property.

DECISION

PERFECTO, J.:

On December 18, 1945, Valeriano Turija filed in the municipal court of Zamboanga a complaint
for the recovery of an automobile valued at P450 against petitioner Felipe Saavedra, who
acquired the same from Arthur D. Walker, an American enlisted man, said car belonging to the
plaintiff from whom it was seized and appropriated by the Japanese forces during the enemy
occupation and, after the liberation , had been in the possession and control of the PCAU before
its transfer by Arthur D. Walker to petitioner.

Petitioner filed a motion to dismiss the complaint on the ground that the municipal court has no
jurisdiction over the subject matter of the action, for the reason that the car has lost its character
as private property to take on the status of enemy state property and, therefore, the claim and
adjudication of the same should be made in and by the Office of the Custodian of Enemy
Property established by United States Government in Zamboanga. On January 2, 1946, the
municipal court, declaring itself without jurisdiction, ordered the dismissal of the case. On
January 3, 1946, the plaintiff appealed.

After both parties were given ample opportunity to present their oral arguments in support of
their respective contentions on the question of the jurisdiction of the municipal court, the
Honorable Potenciano Pecson, Judge of the Court of First Instance of Zamboanga, issued on
January 7, 1946, an order reversing the order of dismissal of the municipal court, declaring it
with jurisdiction to try the case, and remanding the same for further proceedings, without costs.
On January 9, 1946, petitioner moved for reconsideration of said order of January 7, but the
motion was denied on January 11.

Now petitioner comes to us to seek the annulment of the order of the respondent judge dated
January 7, 1946, as having been issued in excess of his jurisdiction.

We do not find any merit in petitioner’s contention.

It appearing that the complaint for the recovery of the automobile in question has been disposed
of by the municipal court of Zamboanga upon a question of law and not upon a trial on the
merits, the respondent judge has jurisdiction to issue the order dated January 7, 1946, in
accordance with section 10 of Rule 40 of the Rules of Court, which reads as follows: jgc:chanrobles.com.ph

"Sec. 10. Appellate powers of Court of First Instance where action not tried on its merits by
inferior courts. — Where the action has been disposed of by an inferior court upon a question of
law and not after a valid trial upon the merits, the Court of First Instance shall on appeal review
the ruling of the inferior court and may affirm or reverse it, as the case may be. In case of
reversal, the case shall be remanded for further proceedings." cralaw virtua1aw library

Whether respondent acted correctly or not in issuing said order, the proper remedy for petitioner
would be by appeal. But in the instant case, it appears that an appeal against the order would be
futile because the order is well-taken as the municipal court, without any shadow of doubt, has
jurisdiction to decide the litigation on the merits, it appearing that the value of the litigated
personal property is within the range of the concurrent jurisdiction between a court of first
instance and a municipal court.

Petitioner’s contention that, because the property had been appropriated by the Japanese forces
during enemy occupation, the automobile has lost its character as private property to take on the
status of enemy state property, lack merit. The illegal seizure made by the Japanese could not,
and cannot, change the nature, character, and status of a property legally belonging to a civilian
private citizen. Petitioner who is in possession of the automobile in question appears also to be a
private citizen, residing in the district of Tetuan, Zamboanga City, The litigation is, therefore,
between two private citizens, both residing within the territorial jurisdiction of the municipal,
court, and there is nothing to show that the automobile is not within the jurisdiction of said court.

Petition is dismissed, with costs to be taxed against petitioner.

Moran, C.J., Ozaeta, Paras, Jaranilla, Feria, De Joya, Pablo, Hilado, Bengzon, and Briones, JJ.,
concur.

EN BANC

G.R. No. L-2832 November 24, 1906

REV. JORGE BARLIN, in his capacity as apostolic administrator of this vacant bishopric
and legal representative of the general interests of the Roman Catholic Apostolic Church in
the diocese of Nueva Caceres, plaintiff-appellee,
vs.
P. VICENTE RAMIREZ, ex-rector of the Roman Catholic Apostolic Parochial Church of
Lagonoy, AND THE MUNICIPALITY OF LAGONOY, defendants-appellants.

Manly & Gallup for appellants.

Leoncio Imperial and Chicote, Miranda & Sierra for appellee.

WILLARD, J.:
There had been priests of the Roman Catholic Church in the pueblo of Lagonoy, in the Province
of Ambos Camarines, since 1839. On the 13th of January, 1869, the church and convent were
burned. They were rebuilt between 1870 and 1873. There was evidence that this was done by the
order of the provincial governor. The labor necessary for this reconstruction was performed by
the people of the pueblo the direction of the cabeza de barangay. Under the law then in force,
each man in the pueblo was required to work for the government, without compensation, for
forty days every year. The time spent in the reconstruction of these buildings was counted as a
part of the forty days. The material necessary was brought and paid for in part by the parish
priest from the funds of the church and in part was donated by certain individuals of the pueblo.
After the completion of the church it was always administered, until November 14, 1902, by a
priest of a Roman Catholic Communion and all the people of the pueblo professed that faith and
belonged to that church.

The defendant, Ramirez, having been appointed by the plaintiff parish priest, took possession of
the church on the 5th of July, 1901. he administered it as such under the orders of his superiors
until the 14th day of November, 1902. His successor having been then appointed, the latter made
a demand on this defendant for the delivery to him of the church, convent, and cemetery, and the
sacred ornaments, books, jewels, money, and other property of the church. The defendant, by a
written document of that date, refused to make such delivery. That document is as follows:

At 7 o'clock last night I received through Father Agripino Pisino your respected order of
the 12th instant, wherein I am advised of the appointment of Father Pisino as acting
parish priest of this town, and directed to turn over to him this parish and to report to you
at the vicarage. In reply thereto, I have the honor to inform you that the town of Lagonoy,
in conjunction with the parish priest thereof, has seen fit to sever connection with the
Pope at Rome and his representatives in these Islands, and join the Filipino Church, the
head of which is at Manila. This resolution of the people was reduced to writing and
triplicate copies made, of which I beg to inclose a copy herewith.

For this reason I regret to inform you that I am unable to obey your said order by
delivering to Father Agripino Pisino the parish property of Lagonoy which, as I
understand, is now outside of the control of the Pope and his representatives in these
Islands. May God guard you many years.

Lagonoy, November 14, 1902.

(Signed) VICENTE RAMIREZ.

RT. REV. VICAR OF THIS DISTRICT.

The document, a copy of which is referred to in this letter, is as follows:

LAGONOY, November, 9, 1902.

The municipality of this town and some of its most prominent citizens having learned
through the papers from the capital of these Islands of the constitution of the Filipino
National Church, separate from the control of the Pope at Rome by reason of the fact that
 the latter has refused to either recognize or grant the rights to the Filipino clergy which
have many times been urged, and it appearing to us that the reasons advanced why such
offices should be given to the Filipino clergy are evidently well-founded, we have
deemed it advisable to consult with the parish priest of this town as to whether it would
be advantageous to join the said Filipino Church and to separate from the control of the
Pope as long as he continues to ignore the rights of the said Filipino clergy, under the
conditions that there will be no change in the articles of faith, and that the sacraments and
other dogmas will be recognized and particularly that of the immaculate conception of
the mother of our Lord. But the moment the Pope at Rome recognizes and grants the
rights heretofore denied to the Filipino clergy we will return to his control. In view of
this, and subject to this condition, the reverend parish priest, together with the people of
the town, unanimously join in declaring that from this date they separate themselves from
the obedience and control of the Pope and join the Filipino National Church. This
assembly and the reverend parish priest have accordingly adopted this resolution written
in triplicate, and resolved to send a copy thereof to the civil government of this province
for its information, and do sign the same below. Vicente Ramirez, Francisco Israel,
Ambrosio Bocon, Florentino Relloso, Macario P. Ledesma, Cecilio Obias, Balbino
Imperial, Juan Preseñada, Fernando Deudor, Mauricio Torres, Adriano Sabater.

At the meeting at which the resolution spoken of in this document was adopted, there were
present about 100 persons of the pueblo. There is testimony in the case that the population of the
pueblo was at that time 9,000 and that all but 20 of the inhabitants were satisfied with the action
there taken. Although it is of no importance in the case, we are inclined to think that the
testimony to this effect merely means that about 100 of the principal men of the town were in
favor of the resolution and about 20 of such principal men were opposed to it. After the 14th of
November, the defendant, Ramirez, continued in the possession of the church and other property
and administered the same under the directions of his superior, the Obispo Maximo of the
Independent Filipino Church. The rites and ceremonies and the manner of worship were the
same after the 14th day of November as they were before, but the relations between the Roman
Catholic Church and the defendant had been entirely severed.

In January, 1904, the plaintiff brought this action against the defendant, Ramirez, alleging in his
amended complaint that the Roman Catholic Church was the owner of the church building, the
convent, cemetery, the books, money, and other property belonging thereto, and asking that it be
restored to the possession thereof and that the defendant render an account of the property which
he had received and which was retained by him, and for other relief.

The answer of the defendant, Ramirez, in addition to a general denial of the allegation of the
complaint, admitted that he was in the possession and administration of the property described
therein with the authority of the municipality of Lagonoy and of the inhabitants of the same, who
were the lawful owners of the said property. After this answer had been presented, and on the 1st
day of November, 1904, the municipality of Lagonoy filed a petition asking that it be allowed to
intervene in the case and join with the defendant, Ramirez, as a defendant therein. This petition
been granted, the municipality of the 1st day of December filed an answer in which it alleged
that the defendant, Ramirez, was in possession of the property described in the complaint under
the authority and with the consent of the municipality of Lagonoy and that such municipality was
the owner thereof.

Plaintiff answered this complaint, or answer in intervention, and the case was tried and final
judgment in entered therein in favor of the plaintiff and against the defendants. The defendants
then brought the case here by a bill of exceptions.

That the person in the actual possession of the church and other property described in the
complaint is the defendant, Ramirez, is plainly established by the evidence. It does not appear
that the municipality, as a corporate body, ever took any action in reference to this matter until
they presented their petition for intervention in this case. In fact, the witnesses for the defense,
when they speak of the ownership of the buildings, say that they are owned by the people of the
pueblo, and one witness, the president, said that the municipality as a corporation had nothing
whatever to do with the matter. That the resolution adopted on the 14th of November, and which
has been quoted above, was not the action of the municipality, as such, is apparent from an
inspection thereof.

The witnesses for the defenses speak of a delivery of the church by the people of the pueblo to
the defendant, Ramirez, but there is no evidence in the case of any such delivery. Their
testimony in regard to the delivery always refers to the action taken on the 14th of November, a
record of which appears that in the document above quoted. It is apparent that the action taken
consisted simply in separating themselves from the Roman Catholic Church, and nothing is said
therein in reference to the material property then in possession of the defendant, Ramirez.

There are several grounds upon which this judgment must be affirmed.

(1) As to the defendant, Ramirez, it appears that he took possession of the property as the servant
or agent of the plaintiff. The only right which he had to the possession at the time he took it, was
the right which was given to him by the plaintiff, and he took possession under the agreement to
return that possession whenever it should be demanded of him. Under such circumstances he will
not be allowed, when the return of such possession is demanded by him the plaintiff, to say that
the plaintiff is not the owner of the property and is not entitled to have it delivered back to him.
The principle of law that a tenant can not deny his landlord's title, which is found in section 333,
paragraph 2, of the Code of Civil Procedure, and also in the Spanish law, is applicable to a case
of this kind. An answer of the defendant, Ramirez, in which he alleged that he himself was the
owner of the property at the time he received it from the plaintiff, or in which he alleged that the
pueblo was the owner of the property at that time, would constitute no defense. There is no claim
made by him that since the delivery of the possession of the property to him by the plaintiff he
has acquired the title thereto by other means, nor does he is own behalf make any claim whatever
either to the property or to the possession thereof.

(2) The municipality of Lagonoy, in its answer, claims as such, to be the owner of the property.
As we have said before, the evidence shows that it never was in the physical possession of the
property. But waiving this point and assuming that the possession of Ramirez, which he alleges
in his answer is the possession of the municipality, gives the municipality the rights of a
possessor, the question still arises, Who has the better right to the present possession of the
property? The plaintiff, in 1902, had been in the lawful possession thereof for more than thirty
years and during all that time its possession had never been questioned or disturbed. That
possession has been taken away from it and it has the right now to recover the possession from
the persons who have so deprived it of such possession, unless the latter can show that they have
a better right thereto. This was the preposition which was discussed and settled in the case of
Bishop of Cebu vs. Mangaron, 1No. 1748, decided June 1, 1906. That decision holds that as
against one who has been in possession for the length of the plaintiff has been in possession, and
who had been deprived of his possession, and who can not produce any written evidence of title,
the mere fact that the defendant is in possession does not entitle the defendant to retain that
possession. In order that he may continue in possession, he must show a better right thereto.

The evidence in this case does not show that the municipality has, as such, any right of whatever
in the property in question. It has produced no evidence of ownership. Its claim of ownership is
rested in its brief in this court upon the following propositions: That the property in question
belonged prior to the treaty of Paris to the Spanish Government; that by the treaty of Paris the
ownership thereof passed to the Government of the United States; that by section 12 of the act of
Congress of July 1, 1902, such property was transferred to the Government of the Philippine
Islands, and that by the circular of that Government, dated November 11, 1902, the ownership
and the right to the possession of this property passed to the municipality of Lagonoy. If, for the
purposes of the argument, we should admit that the other propositions are true, there is no
evidence whatever to support the last proposition, namely that the Government of the Philippine
Islands has transferred the ownership of this church to the municipality of Lagonoy. We have
found no circular of the date above referred to. The one of February 10, 1903, which is probably
the one intended, contains nothing that indicates any such transfer. As to the municipality of
Lagonoy, therefore, it is very clear that it has neither title, ownership, nor right of possession.

(3) We have said that it would have no such title or ownership ever admitting that the Spanish
Government was the owner of the property and it has passed by the treaty of Paris to the
American Government. But this assumption is not true. As a matter of law, the Spanish
Government at the time the treaty of peace was signed, was not the owner of this property, nor of
any other property like it, situated in the Philippine Islands.

It does not admit of doubt that from the earliest times the parish churches in the Philippine
Islands were built by the Spanish Government. Law 2, title 2, book 1, of the Compilation of the
Laws of the Indies is, in part, as follows:

Having erected all the churches, cathedrals, and parish houses of the Spaniards and
natives of our Indian possessions from their discovery at the cost and expense of our
royal treasury, and applied for their service and maintenance the part of the tithes
belonging to us by apostolic concession according to the division we have made.

Law 3 of the same title to the construction of parochial churches such as the one in question.
That law is as follows:

The parish churches which was erected in Spanish towns shall be of durable and decent
construction. Their costs shall be divided and paid in three parts: One by our royal
 treasury, another by the residents and Indian encomenderos of the place where such
churches are constructed, and the other part by the Indians who abide there; and if within
the limits of a city, village, or place there should be any Indians incorporated to our royal
crown, we command that for our part there be contributed the same amount as the
residents and encomenderos, respectively, contribute; and the residents who have no
Indians shall also contribute for this purpose in accordance with their stations and wealth,
and that which is so given shall be deducted from the share of the Indians should
pay.1âwphil.net

Law 11 of the same title is as follows:

We command that the part of the tithes which belongs to the fund for the erection of
churches shall be given to their superintendents to be expended for those things necessary
for these churches with the advice of the prelates and officials, and by their warrants, and
not otherwise. And we request and charge the archbishops and bishops not to interfere in
the collection and disbursement thereof, but to guard these structures.

Law 4, title 3, book 6, is as follows:

In all settlements, even though the Indians are few, there shall be erected a church where
mass can be decently held, and it shall have a donor with a key, notwithstanding the fact
that it be the subject to or separate from a parish.

Not only were all the parish churches in the Philippines erected by the King and under his
direction, but it was made unlawful to erect a church without the license of the King. This
provision is contained in Law 2, title 6, book 1, which is as follows:

Whereas it is our intention to erect, institute, found, and maintain all cathedrals, parish
churches, monasteries, votive hospitals, churches, and religious and pious establishments
where they are necessary for the teaching, propagation, and preaching of the doctrine of
our sacred Roman Catholic faith, and to aid to this effect with out royal treasury
whenever possible, and to receive information of such places where they should be
founded and are necessary, and the ecclesiastical patronage of all our Indies belonging to
us:

We command that there shall not be erected, instituted, founded, or maintained any
cathedral, parish church, monastery, hospital, or votive churches, or other pious or
religious establishment without our express permission as is provided in Law 1, title 2,
and Law 1, title 3, of this book, notwithstanding any permission heretofore given by our
viceroy or other ministers, which in this respect we revoke and make null, void, and of no
effect.

By agreement at an early date between the Pope and the Crown of Spain, all tithes in the Indies
were given by the former to the latter and the disposition made the King of the fund thus created
is indicated by Law 1, title 16, book 1, which is as follows:
 Whereas the ecclesiastical tithes from the Indies belong to us by the apostolic
concessions of the supreme pontiffs, we command the officials of our royal treasury of
those provinces to collect and cause to be collected all tithes due and to become due from
the crops and flocks of the residents in the manner in which it has been the custom to pay
the same, and from these tithes the churches shall be provided with competent persons of
good character to serve them and with all ornaments and things which may be necessary
for divine worship, to the end that these churches may be well served and equipped, and
we shall be informed of God, our Lord; this order shall be observed where the contrary
has not already been directed by us in connection with the erection of churches.

That the condition of things existing by virtue of the Laws of the Indies was continued to the
present time is indicated by the royal order of the 31st of January, 1856, and by the royal order of
the 13th of August, 1876, both relating to the construction and repair of churches, there being
authority for saying that the latter order was in force in the Philippines.

This church, and other churches similarly situated in the Philippines, having been erected by the
Spanish Government, and under its direction, the next question to be considered is, To whom did
these churches belong?

Title 28 of the third partida is devoted to the ownership of things and, after discussing what can
be called public property and what can be called private property, speaks, in Law 12, of those
things which are sacred, religious, or holy. That law is as follows:

Law XII. — HOW SACRED OR RELIGIOUS THINGS CAN NOT BE OWNED BY

ANY PERSON.

No sacred, religious, or holy thing, devoted to the service of God, can be the subject of
ownership by any man, nor can it be considered as included in his property holdings.
Although the priests may have such things in their possession, yet they are not the owners
thereof. They, hold them thus as guardians or servants, or because they have the care of
the same and serve God in or without them. Hence they were allowed to take from the
revenues of the church and lands what was reasonably necessary for their support; the
balance, belonging to God, was to be devoted to pious purposes, such as the feeding and
clothing of the poor, the support of orphans, the marrying of poor virgins to prevent their
becoming evil women because of their poverty, and for the redemption of captives and
the repairing of the churches, and the buying of chalices, clothing, books, and others
things which they might be in need of, and other similar charitable purposes.

And then taking up for consideration the first of the classes in to which this law has divided these
things, it defines in Law 13, title 28, third partida, consecrated things. That law is as follows:

Sacred things, we say, are those which are consecrated by the bishops, such as churches,
the altars therein, crosses, chalices, censers, vestments, books, and all other things which
are in tended for the service of the church, and the title to these things can not be
alienated except in certain specific cases as we have already shown in the first partida of
this book by the laws dealing with this subject. We say further that even where a
 consecrated church is razed, the ground upon which it formerly stood shall always be
consecrated ground. But if any consecrated church should fall into the hands of the
enemies of our faith it shall there and then cease to be sacred as long as the enemy has it
under control, although once recovered by the Christians, it will again become sacred,
reverting to its condition before the enemy seized it and shall have all the right and
privileges formerly belonging to it.

That the principles of the partida in reference to churches still exist is indicated by Sanchez
Roman, whose work on the Civil Law contains the following statement:

First Group. Spiritual and corporeal or ecclesiastical. A. Spiritual. — From early times
distinction has been made by authors and by law between things governed by divine law,
called divine, and those governed by human law, called human, and although the former
can not be the subject of civil juridical relations, their nature and species should be
ascertained either to identify them and exclude them from such relations or because they
furnish a complete explanation of the foregoing tabulated statement, or finally because
the laws of the partida deal with them.

Divine things are those which are either directly or indirectly established by God for
his service and sanctification of men and which are governed by divine or canonical
laws. This makes it necessary to divide them into spiritual things, which are those
which have a direct influence on the religious redemption of man such as the
sacrament, prayers, fasts, indulgences, etc., and corporeal or ecclesiastical, which
are those means more or less direct for the proper religious salvation of man.

7. First Group. Divine things. B. Corporeal or ecclesiastical things (sacred,

religious, holy, and temporal belonging to the church). — Corporeal or
ecclesiastical things are so divided.

(a) Sacred things are those devoted to God, religion, and worship in general,
such as temples, altars, ornaments, etc. These things can not be alienated except
for some pious purpose and in such cases as are provided for in the laws,
according to which their control pertains to the ecclesiastical authorities, and in
so far as their use is concerned, to the believers and the clergy. (2 Derecho
Civil Español, Sanchez Roman, p. 480; 8 Manresa, Commentaries on the
Spanish Civil Code, p. 636; 3 Alcubilla, Diccionario de la Administracion
Española, p. 486.)

The partidas defined minutely what things belonged to the public in general and what
belonged to private persons. In the first group churches are not named. The present
Civil Code declares in article 338 that property is of public or private ownership.
Article 339, which defines public property, is as follows:

Property of public ownership is —

 1. That destined to the public use, such as roads, canals, rivers, torrents, ports,
and bridges constructed by the State, and banks, shores, roadsteads, and that of
similar character.

2. That belonging exclusively to the state without being for public use and
which is destined to some public service, or to the development of the national
wealth, such as walls, fortresses, and other works for the defense of the
territory, and mines, until their concession has been granted.

The code also defines the property of provinces and of pueblos, and in defining what
property is of public use, article 344 declares as follows:

Property for public use in provinces and in towns comprises the provincial and
town roads, the squares, streets, fountains, and public waters, the promenades,
and public works of general service supported by the said towns or provinces.

All other property possessed by either is patrimonial, and shall be governed by

the provisions of this code, unless otherwise prescribe in special laws.

It will be noticed that in either one of these articles is any mention made of churches.
When the Civil Code undertook to define those things in a pueblo which were for the
common use of the inhabitants of the pueblo, or which belonged to the State, while it
mentioned a great many other things, it did not mention churches.

It has been said that article 25 of the Regulations for the Execution of the Mortgage
Law indicates that churches belong to the State and are public property. That article is
as follows:

There shall be excepted from the record required by article 2 of the law:

First. Property which belongs exclusively to the eminent domain of the State,
and which is for the use of all, such as the shores of the sea, islands, rivers and
their borders, wagon roads, and the roads of all kinds, with the exception of
railroads; streets, parks, public promenades, and commons of towns, provided
they are not lands of common profit to the inhabitants; walls of cities and parks,
ports, and roadsteads, and any other analogous property during the time they
are in common and general use, always reserving the servitudes established by
law on the shores of the sea and borders of navigable rivers.

Second. Public temples dedicated to the Catholic faith.

A reading of this article shows that far from proving that churches belong to the State
and to the eminent domain thereof, it proves the contrary, for, if they had belonged to
the State, they would have been included in the first paragraph instead of being placed
in a paragraph by themselves.

The truth is that, from the earliest times down to the cession of the Philippines to the
United States, churches and other consecrated objects were considered outside of the
commerce of man. They were not public property, nor could they be subjects of
private property in the sense that any private person could the owner thereof. They
constituted a kind of property distinctive characteristic of which was that it was
devoted to the worship of God.

But, being material things was necessary that some one should have the care and
custody of them and the administration thereof, and the question occurs, To whom,
under the Spanish law, was intrusted that possession and administration? For the
purposes of the Spanish law there was only one religion. That was the religion
professed by the Roman Catholic Church. It was for the purposes of that religion and
for the observance of its rites that this church and all other churches in the Philippines
were erected. The possession of the churches, their care and custody, and the
maintenance of religious worship therein were necessarily, therefore, intrusted to that
body. It was, by virtue of the laws of Spain, the only body which could under any
circumstances have possession of, or any control over, any church dedicated to the
worship of God. By virtue of those laws this possession and right of control were
necessarily exclusive. It is not necessary or important to give any name to this right of
possession and control exercised by the Roman Catholic Church in the church
buildings of the Philippines prior to 1898. It is not necessary to show that the church
as a juridical person was the owner of the buildings. It is sufficient to say that this
right to the exclusive possession and control of the same, for the purposes of its
creation, existed.

The right of patronage, existing in the King of Spain with reference to the churches in
the Philippines, did not give him any right to interfere with the material possession of
these buildings.

Title 6 of book 1 of the Compilation of the laws of the Indies treats Del Patronazgo
Real de las Indias. There is nothing in any one of the fifty-one laws which compose
this title which in any way indicates that the King of Spain was the owner of the
churches in the Indies because he had constructed them. These laws relate to the right
of presentation to ecclesiastical charges and offices. For example, Law 49 of the title
commences as follows:
 Because the patronage and right of presentation of all archbishops, bishops,
dignitaries, prevents, curates, and doctrines and all other beneficiaries and
ecclesiastical offices whatsoever belong to us, no other person can obtain or
possess the same without our presentation as provided in Law 1 and other laws
of this title.

Title 15 of the first partida treats of the right of patronage vesting in private persons,
but there is nothing in any one of its fifteen laws which in any way indicates that the
private patron is the owner of the church.

When it is said that this church never belonged to the Crown of Spain, it is not
intended to say that the Government and had no power over it. It may be that by virtue
of that power of eminent domain which is necessarily resides in every government, it
might have appropriated this church and other churches, and private property of
individuals. But nothing of this kind was ever attempted in the Philippines.

It, therefore, follows that in 1898, and prior to the treaty of Paris, the Roman Catholic
Church had by law the exclusive right to the possession of this church and it had the
legal right to administer the same for the purposes for which the building was
consecrated. It was then in the full and peaceful possession of the church with the
rights aforesaid. That these rights were fully protected by the treaty of Paris is very
clear. That treaty, in article 8, provides, among other things, as follows:

And it is hereby declared that the relinquishment or cession, as the case may be,
to which the preceding paragraph refers, can not in any respect impair the
property or rights which by law belong to the peaceful possession of property
of all kinds, or provinces, municipalities, public or private establishments,
ecclesiastical or civic bodies, or any other associations having legal capacity to
acquire and possess property in the aforesaid territories renounced or ceded, or
of private individuals, or whatsoever nationality such individuals may be.

It is not necessary, however, to invoke the provisions of that treaty. Neither the
Government of the United States, nor the Government of these Islands, has ever
attempted in any way to interfere with the rights which the Roman Catholic Church
had in this building when Spanish sovereignty ceased in the Philippines. Any
interference that has resulted has been caused by private individuals, acting without
any authority from the Government.

No point is made in the brief of the appellant that any distinction should be made
between the church and the convent. The convent undoubtedly was annexed to the
church and, as to it, the provisions of Law 19, title 2, book 1, of the Compilation of
the Laws of the Indies would apply. That law is as follows:
 We command that the Indians of each town or barrio shall construct such
houses as may be deemed sufficient in which the priests of such towns or
barrios may live comfortably adjoining the parish church of the place where
that may be built for the benefit of the priests in charge of such churches and
engaged in the education and conversion of their Indian parishioners, and they
shall not be alienated or devoted to any other purpose.

The evidence in this case makes no showing in regard to the cemetery. It is always
mentioned in connection with the church and convent and no point is made by the
possession of the church and convent, he is not also entitled to recover possession of
the cemetery. So, without discussing the question as to whether the rules applicable to
churches are all respects applicable to cemeteries, we hold for the purpose of this case
that the plaintiff has the same right to the cemetery that he has to the church.

(4) It is suggested by the appellant that the Roman Catholic Church has no legal
personality in the Philippine Islands. This suggestion, made with reference to an
institution which antedates by almost a thousand years any other personality in
Europe, and which existed "when Grecian eloquence still flourished in Antioch, and
when idols were still worshiped in the temple of Mecca," does not require serious
consideration. In the preamble to the budget relating to ecclesiastical obligations,
presented by Montero Rios to the Cortes on the 1st of October 1871, speaking of the
Roman Catholic Church, he says:

Persecuted as an unlawful association since the early days of its existence up to

the time of Galieno, who was the first of the Roman emperors to admit it
among the juridicial entities protected by the laws of the Empire, it existed until
then by the mercy and will of the faithful and depended for such existence upon
pious gifts and offerings. Since the latter half of the third century, and more
particularly since the year 313, when Constantine, by the edict of Milan,
inaugurated an era of protection for the church, the latter gradually entered
upon the exercise of such rights as were required for the acquisition,
preservation, and transmission of property the same as any other juridical entity
under the laws of the Empire. (3 Dictionary of Spanish Administration,
Alcubilla, p. 211. See also the royal order of the 4th of December, 1890, 3
Alcubilla, 189.)

The judgment of the court below is affirmed, with the costs of this instance against the
appellant. After the expiration of twenty days from the date hereof let judgment be
entered in accordance herewith, and ten days thereafter the record be remanded to the
court below for execution. So ordered.
Arellano, C.J., Torres, Mapa and Tracey, JJ., concur.
Johnson, J., reserves his vote.

Separate Opinions

CARSON, J., concurring:

I am in entire accord with the majority of the court as to the disposition of this case,
but I can not adopt the reasoning by which some of the conclusions appear to have
been obtained, nor accept without reserve all of the propositions laid down in the
majority opinion.

Profoundly as I respect the judgment of my associates, and distrustful as I ought to be

of my own, the transcendant importance of the issues involved seems to impose upon
me the duty of writing a separate opinion and stating therein as clearly as may be the
precise grounds upon which I base my assent and the reasons which forbid my
acceptance of the majority opinion in its entirety.

I accept the argument and authority of the opinion of the court in so far as it finds:
That the Roman Catholic Church is a juridical entity in the Philippine Islands; that the
defendant, Ramirez, can not and should not be permitted in this action to deny the
plaintiff's right to the possession of the property in question, because he can not be
heard to set up title thereto in himself or a third person, at least until he has first
formally surrendered it to the plaintiff who intrusted it to his care; that the
municipality of Lagonoy has failed to show by evidence of record that it is or ever
was in physical possession of the property in question; and that the possession of the
defendant Ramirez, can not be relied upon as the possession of the municipality
because the same reason which estops Ramirez from denying the right of possession
in the plaintiff estops any other person claiming possession through him from denying
that right. I agree, furthermore, with the finding that the defendant municipality failed
to establish a better right to the possession than the plaintiff in this action, because,
claiming to be the owner by virtue of a grant from the Philippine Government, it
failed to establish the existence of such grant; and because, furthermore, it was shown
that the plaintiff or his predecessors had been in possession and control of the property
in question for a long period of years prior to the treaty of Paris by unlawful authority
of the King of Spain, and that since the sovereignty of these Islands has been
transferred to the United States the new sovereign has never at any time divested or
attempted to divest the plaintiff of this possession and control.

Thus far I am able to accept the reasoning of the majority opinion, and these
propositions, supported as they are by the law and the evidence in this case,
completely dispose of the question before us and establish the right of the plaintiff to a
judgment for possession.

I am not prepared, however, to give my assent to the proposition that prior to the
Treaty of Paris "The King of Spain was not the owner of the property in question nor
of any other property like it situated in the Philippine Islands," and inferentially that
the United States is not now the owner thereof and has no property rights therein other
than, perhaps, the mere right of eminent domain.

I decline to affirm this proposition, first, because it is not necessary in the decision of
this case; and second, because I am of opinion that, in the unlimited and unrestricted
sense in which it is stated in the majority opinion, it is inaccurate and misleading, if
not wholly erroneous.

That it is not necessary for the proper disposition of this case will be apparent if we
consider the purpose for which it is introduced in the argument and the proposition
which it is intended to controvert. As stated in the majority opinion, the claim of
ownership of the defendant municipality —

It is rested upon the following propositions: That the property in question

belonged, prior to the treaty of Paris, to the Spanish Government; that by the
treaty of Paris the ownership of thereof passed to the Government of the United
States; that by article 12 of the act of Congress of July 1, 1902, such property
was transferred to the Government of the Philippine Islands, and that by a
circular of that Government dated November 11, 1902, the ownership and the
right to the possession of this property passed to the municipality of Lagonoy.

It is evident that if any of these propositions is successfully controverted, the

defendants' claim of ownership must fall to the ground. The majority opinion finds
(and I am entire accord as to this finding) that neither the Government of the United
States nor the Philippine Government had ever made, or attempted to make, such
transfer, and in making its finding it completely, conclusively, and finally disposes of
defendants' claim of ownership.
All the acts of the Government of the United States and of the present Government of
the Philippine Islands which can have any relation to the property in question are
before us, and so short a period of years has elapsed since the transfer of the
sovereignty of these Islands to the United States that it is possible to demonstrate with
the utmost certainty that by no act of the United States or of the Government of the
Philippine Islands has the ownership and possession of this property been conferred
upon the defendant municipality; it is a very different undertaking, however, to review
the legislation of Spain for the three centuries of her Philippine occupation for the
purpose of deciding the much-vexed question of the respective property rights of the
Spanish sovereign and the Roman Catholic Church in State-constructed and State-
aided churches in these Islands; and if I am correct in my contention that a holding
that the King of Spain was not." and, inferentially, that the Government of the United
States is not, "the owner of this property or any other property like it is situated in the
Philippine Islands" is not necessary for the full, final, and complete determination of
the case at bar, then I think that this court should refrain from making so momentous a
finding in a case wherein the United States is not a party and has never had an
opportunity to be heard.

But the mere fact that a finding that the King of Spain had no right of ownership in
this property which could pass to the United States under the provisions of the treaty
of Paris is not necessary in my opinion for the disposition of the case at bar, would not
impose upon me the duty of writing a separate opinion if it were in fact and a law a
correct holding. I am convinced, however, that when stated without limitations or
restrictions, as it appears in the majority opinion, it is inaccurate and misleading, and
it may not be improper, therefore, to indicate briefly my reasons for doubting it.

As stated in the majority opinion, "it does not admit of doubt that the parish churches
in the Philippines were built by the Spanish Government," and it would seem
therefore that prior to their dedication, the beneficial ownership, the legal title, the
possession and control of all this property must be taken to have been vested in that
Government. But it must be admitted that after this property was dedicated, the
ownership, in contemplation of Spanish law, was said to have been in God, and there
can be no doubt that the physical possession and control of these churches for the
purposes for which they were dedicated was given to the Roman Catholic Church —
not, as I think, absolutely and conclusively, but limited by and subject to the royal
patronage ( patronato real) which included the right to intervene in the appointment
of the representatives of the church into whose hands the possession and control of the
sacred editors were to be intrusted.

The anomalous status thus created might well have given rise to doubts and
uncertainties as to the legal title and beneficial ownership of this property had not the
grantor and the lawgiver of Spain expressly and specifically provided that neither the
Roman Catholic Church nor any other person was or could become the owner thereof,
and that all these sacred edifices were to be regarded as beyond the commerce of men.

No sacred, religious, or holy thing, devoted to the service of God, can be the
subject of ownership by any man, nor it can be considered as included in his
property holdings. Although the priests may have such things in their
possession, yet they are not the owners thereof. They hold them thus as
guardians or servants, or because they have the care of the same and serve God
in or with them. Hence they were allowed to take from the Revenues of the
church and lands what was reasonably necessary for their support; the balance,
belonging to God, was to be devoted to pious purposes, such as the feeding and
clothing of the poor, the support of orphans, the marrying of poor virgins to
prevent their becoming evil women because of their poverty; and for the
redemption of captivers and the repairing of the churches, and the buying of
chalices, clothing, books, and other things which they might be in seed of, and
other similar charitable purposes. (Law 12, title 28, partida 3.)

It is difficult to determine, and still more difficult to state, the precise meaning and
legal effect of this disposition of the ownership, possession, and control of the parish
churches in the Philippines; but since it was not possible for God, in any usual or
ordinary sense to take or hold, to enforce or to defend the legal title to this property, it
would seem that a grant to Him by the King or the Government of Spain could not
suffice to convey to Him the legal title of the property set out in the grant, and the
truth would seem to be that the treatment of this property in contemplation of Spanish
law as the property of God was a mere arbitrary convention, the purpose and object of
which was crystallize the status of all such property in the peculiar and unusual mold
in which it was cast at the time of its dedication.

So long as church and state remained united and so long as the Roman Catholic
Church continued to be the church of the State, this convention served its purpose
well; indeed, its very indefiniteness seems to have aided in the accomplishment of the
end for which it was adopted, and on a review of all the pertinent citations of Spanish
law which have been brought to my attention, I am satisfied that the status created by
the above-cited law 12 of the partidas continued without substantial modification to
the date of the transfer of sovereignty from the King of Spain to the United States. But
this transfer of sovereignty, and the absolute severance of church and state which
resulted therefrom, render it necessary to ascertain as definitely as may be the true
meaning and intent of this conventional treatment of the parish churches in the
Philippines as the property of God, and it is evident that for this purpose we must look
to the substance rather than the form and examine the intention of the grantor and the
object he sought to attain, rather than the words and conventional terms whereby that
intent was symbolically expressed.
It is not necessary to go beyond the citations of the majority opinion to see that the
objects which the grantor sought to attain were, first, and chiefly, to advance the cause
of religion among the people of the Philippine Islands and to provide for their
religious instruction and edification by furnishing them with parish churches suitable
for the worship and glorification of God; second, to place those sacred edifices under
the guardian care and custody of the church of the State; and, third, to deny to that
church and to all others the right of ownership in the property thus dedicated; and
since God could neither take nor hold the legal title to this property, the declaration of
the King of Spain as set out in the above-cited law, that when dedicated these
churches became in some peculiar and especial manner the property of God, was in
effect no more than a solemn obligation imposed upon himself to hold them for the
purposes for which they were dedicated, and to exercise no right of property in them
inconsistent therewith.

This declaration that these churches are the property of God and the provisions which
accompanied it, appear to me to be precisely equivalent to a declaration of trust by the
grantor that he would hold the property as trustee for the use for which it was
dedicated — that is, for the religious edification and enjoyment of the people of the
Philippine Islands — and that he would give to the Roman Catholic Church the
physical possession and control thereof, including the disposition of any funds arising
therefrom, under certain stipulated conditions and for the purposes expressly provided
by law. In other words, the people of the Philippine Islands became the beneficial
owners of all such property, and the grantor continued to hold the legal title, in trust
nevertheless to hold the property for the purposes for which it was dedicated and on
the further trust to give the custody and control thereof to the Roman Catholic Church.
If this interpretation of the meaning and intent of the convention of Spanish law which
treated God as the owner of the parish churches of the Philippine Islands be correct, a
holding that the King of Spain had no right to ownership in this property which could
pass to the United States by virtue of the treaty of Paris can not be maintained; and it
is to withhold my assent from this proposition that I have been compelled to write this
separate opinion.

For the purposes of this opinion it is not necessary, nor would it be profitable, to do
more than indicate the line of reasoning which has led me to my conclusions, nor to
discuss at length the question of ownership of this property, because whether it be
held to be in abeyance or in God or in the Roman Catholic Church or in the United
States it has been shown without deciding this question of ownership that the right to
the possession for the purpose for which it was dedicated is in the Roman Catholic
Church, and while the complaint in this action alleges that the Roman Catholic
Church is the owner of the property in question, the prayer of the complaint is for the
possession of this property of which it is alleged that church has been unlawfully
deprived; and because, furthermore, if I am correct in my contention that the legal title
to the State-constructed churches in the Philippines passed to the United States the
virtue of the treaty of Paris, it passed, nevertheless, subject to the trusts under which it
was held prior thereto, and the United States can not at will repudiate the conditions of
that trust and retain its place in the circle of civilized nations; and as long as the
property continues to be used for the purposes for which it was dedicated, the
Government of the United States has no lawful right to deprive the Roman Catholic
Church of the possession and control thereof under the terms and conditions upon
which that possession and control were originally granted.

Footnotes

1 6 Phil. Rep., 286.

37 Phil. 644

[ G.R. No. 11658, February 15, 1918 ]

LEUNG YEE, PLAINTIFF AND APPELLANT, VS. FRANK L. STRONG
MACHINERY COMPANY AND J. G. WILLIAMSON, DEFENDANTS AND
APPELLEES.

DECISION

CARSON, J.:

The "Compañia Agricola Filipina" bought a considerable quantity of rice-cleaning machinery

from the defendant machinery company, and executed a chattel mortgage thereon to secure
payment of the purchase price. It included in the mortgage deed the building of strong materials
in which the machinery was installed, without any reference to the land on which it stood. The
indebtedness secured by this instrument not having been paid when it fell due, the mortgaged
property was sold by the sheriff, in pursuance of the terms of the mortgage instrument, and was
bought in by the machinery company. The mortgage was registered in the chattel mortgage
registry, and the sale of the property to the machinery company in satisfaction of the mortgage
was annotated in the same registry on December 29, 1913.

A few weeks thereafter, on or about the 14th of January, 1914, the "Compañia Agricola Filipina"
executed a deed of sale of the land upon which the building stood to the machinery company, but
this deed of sale, although executed in a public document, was not registered. This deed makes
no reference to the building erected on the land and would appear to have been executed for the
purpose of curing any defects which might be found to exist in the machinery company's title to
the building under the sheriff's certificate of sale. The machinery company went into possession
of the building at or about the time when this sale took place, that is to say, the month of
December, 1913, and it has continued in possession ever since.

At or about the time when the chattel mortgage was executed in favor of the machinery
company, the mortgagor, the "Compañia Agricola Filipina" executed another mortgage to the
plaintiff upon the building, separate and apart from the land on which it stood, to secure payment
of the balance of its indebtedness to the plaintiff under a contract for the construction of the
building. Upon the failure of the mortgagor to pay the amount of the indebtedness secured by the
mortgage, the plaintiff secured judgment for that amount, levied execution upon the building,
bought it in at the sheriff's sale on or about the 18th of December, 1914, and had the sheriff's
certificate of sale duly registered in the land registry of the Province of Cavite.

At the time when the execution was levied upon the building, the defendant machinery company,
which was in possession, filed with the sheriff a sworn statement setting up its claim of title and
demanding the release of the property from the levy. Thereafter, upon demand of the sheriff, the
plaintiff executed an indemnity bond in favor of the sheriff in the sum of P12,000, in reliance
upon which the sheriff sold the property at public auction to the plaintiff, who was the highest
bidder at the sheriff's sale.

This action was instituted by the plaintiff to recover possession of the building from the
machinery company.

The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in favor
of the machinery company,t on the ground that the company had its title to the building
registered prior to the date of registry of the plaintiff's certificate.

Article 1473 of the Civil Code is as follows:

"If the same thing should have been sold to different vendees, the ownership shall be transferred
to the person who may have first taken possession thereof in good faith, if it should be personal
property.

"Should it be real property, it shall belong to the person. acquiring it who first recorded it in. the
registry.

"Should there be no entry, the property shall belong to the person who first took possession of it
in good faith, and, in the absence thereof, to the person who presents the oldest title, provided
there is good faith."

The registry here referred to is of course the registry of real property, and it must be apparent that
the annotation or inscription of a deed of sale of real property in a chattel mortgage registry
cannot be given the legal effect of an inscription in the registry of real property. By its express
terms, the Chattel Mortgage Law contemplates and makes provision for mortgages of personal
property; and the sole purpose and object of the chattel mortgage registry is to provide for the
registry of "Chattel mortgages," that is to say, mortgages of personal property executed in the
manner and form prescribed in the statute. The building of strong materials in which the rice-
cleaning machinery was installed by the "Compania Agricola Filipina" was real property, and the
mere fact that the parties seem to have dealt with it separate and apart from the land on which it
stood in no wise changed its character as real property. It follows that neither the original registry
in the chattel mortgage registry of the instrument purporting to be a chattel mortgage of the
building and the machinery installed therein, nor the annotation in that registry of the sale of the
mortgaged property, had any effect whatever so far as the building was concerned.

We conclude that the ruling in favor of the machinery company cannot be sustained on the
ground assigned by the trial judge. We are of opinion, however, that the judgment must be
sustained on the ground that the agreed statement of facts in the court below discloses that
neither the purchase of the building by plaintiff nor his inscription of the sheriff's certificate of
sale in his favor was made in good faith, and that the machinery company must be held to be the
owner of the property under the third paragraph of the above cited article of the code, it
appearing that the company first took possession of the property; and further, that the building
and the land were sold to the machinery company long prior to ihe date of the sheriff's sale to the
plaintiff.

It has been suggested that since the provisions of article 1473 of the Civil Code require "good
faith," in express terms, in relation to "possession" and "title," but contain no express
requirement as to ''good faith" in relation to the "inscription" of the property in the registry, it
must be presumed that good faith is not an essential requisite of registration in order that it may
have the effect contemplated in this article. We cannot agree with this contention. It could not
have been the intention of the legislator to base the preferential right secured under this article of
the code upon an inscription of title in bad faith. Such an interpretation placed upon the language
of this section would open wide the door to fraud and collusion. The public records cannot be
converted into instruments of fraud and oppression by one who secures an inscription therein in
bad faith. The force and effect given by law to an inscription in a public record presupposes the
good faith of him who enters such inscription; and rights created by statute, which are predicated
upon an inscription in a public registry, do not and cannot accrue under an inscription "in bad
faith," to the benefit of the person who thus makes the inscription.

Construing the second paragraph of this article of the code, the supreme court of Spain held in its
sentencia of the 13th of May, 1908, that:

"This rule is always to be understood on the basis of the good faith mentioned in the first
paragraph; therefore, it having been found that the second purchasers who record their purchase
had knowledge of the previous sale, the question is to be decided in accordance with the
following paragraph." (Note 2, art. 1473, Civ. Code, Medina and Marañon [1911] edition.)

"Although article 1473, in its second paragraph, provides that the title of conveyance of
ownership of the real property that is first recorded in the registry shall have preference, this
provision must always be understood on the basis of the good faith mentioned in the first
paragraph; the legislator could not have wished to strike it out and to sanction bad faith, just to
comply with a mere formality which, in given cases, does not obtain even in real disputes
between third persons." (Note 2, art. 1473, Civ. Code, issued by the publishers of the La Revista
de los Tribunales, 13th edition.)

The agreed statement of facts clearly discloses that the plaintiff, when he bought the building at
the sheriff's sale and inscribed his title in the land registry, was duiy notified that the machinery
company had bought the building from plaintiff's judgment debtor; that it had gone into
possession long prior to the sheriff's sale; and that it was in possession at the time when the
sheriff executed his levy. The execution of an indemnity bond by the plaintiff in favor of the
sheriff, after the machinery company had filed its sworn claim of ownership, leaves no room for
doubt in this regard. Having bought in the building at the sheriff's sale with full knowledge that
at the time of the levy and sale the building had already been sold to the machinery company by
the judgment debtor, the plaintiff cannot be said to have been a purchaser in good faith; and of
course, the subsequent inscription of the sheriff's certificate of title must be held to have been
tainted with the same defect.

Perhaps we should make it clear that in holding that the inscription of the sheriff's certificate of
sale to the plaintiff was not made in good faith, we should not be understood as questioning, in
any way, the good faith and genuineness of plaintiff's claim against the "Compania Agricola
Filipina." The truth is that both the plaintiff and the defendant company appear to have had just
and righteous claims against their common debtor. No criticism can properly be made of the
exercise of the utmost diligence by the plaintiff in asserting and exercising his right to recover
the amount of his claim from the estate of the common debtor. We are strongly inclined to
believe that in procuring the levy of execution upon the factory building and in buying it at the
sheriff's sale, he conceived that he was doing no more than he had a right to do under all the
circumstances, and it is highly possible and even probable that he thought at that time that he
would be able to maintain his position in a contest with the machinery company. There was no
collusion on his part with the common debtor, and no thought of the perpetration of a fraud upon
the rights of another, in the ordinary sense of the word. He may have hoped, and doubtless he did
hope, that the title of the machinery company would not stand the test of an action in a court of
law; and if later developments had confirmed his unfounded hopes, no one could question the
legality or the propriety of the course he adopted.

But it appearing that he had full knowledge of the machinery company's claim of ownership
when he executed the indemnity bond and bought in the property at the sheriff's sale, and it
appearing further that the machinery company's claim of ownership was well founded, he cannot
be said to have been an innocent purchaser for value. He took the risk and must stand by the
consequences; and it is in this sense that we find that he was not a purchaser in good faith.

One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot
claim that he has acquired title thereto in good faith as against the true owner of the land or of an
interest therein; and the same rule must be applied to one who has knowledge of facts which
should have put him upon such inquiry and investigation as might be necessary to acquaint him
with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should
put a reasonable man upon his guard, and then claim that he acted in good faith under the belief
that there was no defect in the title of the vendor. His mere refusal to believe that such defect
exists, or his willful closing of his eyes to the possibility of the existence of a defect in his
vendor's title, will not make him an innocent purchaser for value, if it afterwards develops that
the title was in fact defective, and it appears that he had such notice of the defect as would have
led to its discovery had he acted with that measure of precaution which may reasonably be
required of a prudent man in a like situation. Good faith, or the lack of it, is in its last analysis a
question of intention; but in ascertaining the intention by which one is actuated on a given
occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by
which alone the inward motive may, with safety, be determined. So it is that "the honesty of
intention," "the honest lawful intent," which constitutes good faith implies a "freedom from
knowledge and circumstances which ought to put a person on inquiry," and so it is that proof of
such knowledge overcomes the presumption of good faith in which the courts always indulge in
the absence of proof to the contrary. "Good faith, or the want of it, is not a visible, tangible fact
that can be seen or touched, but rather a state or condition of mind which can only be judged of
by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas vs.
Miller, 108 Cal., 250; Breaux-Renoudet, Cypress Lumber Co. vs. Shadel, 52 La. Ann., 2094-
2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.)

We conclude that upon the grounds herein set forth the disposing part of the decision and
judgment entered in the court below should be affirmed with the costs of this instance against the
appellant. So ordered.

Arellano, C. J., Johnson, Araullo, Street, and Malcolm, JJ., concur.

Torres, Avanceña, and Fisher, JJ., did not take part.

THIRD DIVISION

G.R. No. 137705 August 22, 2000

SERG'S PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners,

vs.
PCI LEASING AND FINANCE, INC., respondent.

DECISION

PANGANIBAN, J.:

After agreeing to a contract stipulating that a real or immovable property be considered as

personal or movable, a party is estopped from subsequently claiming otherwise. Hence, such
property is a proper subject of a writ of replevin obtained by the other contracting party.

The Case

Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision1 of the
Court of Appeals (CA)2 in CA-GR SP No. 47332 and its February 26, 1999 Resolution3 denying
reconsideration. The decretal portion of the CA Decision reads as follows:
"WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and
Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are hereby AFFIRMED. The
writ of preliminary injunction issued on June 15, 1998 is hereby LIFTED."4

In its February 18, 1998 Order,5 the Regional Trial Court (RTC) of Quezon City (Branch 218)6
issued a Writ of Seizure.7 The March 18, 1998 Resolution8 denied petitioners’ Motion for
Special Protective Order, praying that the deputy sheriff be enjoined "from seizing immobilized
or other real properties in (petitioners’) factory in Cainta, Rizal and to return to their original
place whatever immobilized machineries or equipments he may have removed."9

The Facts

The undisputed facts are summarized by the Court of Appeals as follows:10

"On February 13, 1998, respondent PCI Leasing and Finance, Inc. ("PCI Leasing" for short) filed
with the RTC-QC a complaint for [a] sum of money (Annex ‘E’), with an application for a writ
of replevin docketed as Civil Case No. Q-98-33500.

"On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge issued a writ
of replevin (Annex ‘B’) directing its sheriff to seize and deliver the machineries and equipment
to PCI Leasing after 5 days and upon the payment of the necessary expenses.

"On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioner’s factory,
seized one machinery with [the] word that he [would] return for the other machineries.

"On March 25, 1998, petitioners filed a motion for special protective order (Annex ‘C’),
invoking the power of the court to control the conduct of its officers and amend and control its
processes, praying for a directive for the sheriff to defer enforcement of the writ of replevin.

"This motion was opposed by PCI Leasing (Annex ‘F’), on the ground that the properties [were]
still personal and therefore still subject to seizure and a writ of replevin.

"In their Reply, petitioners asserted that the properties sought to be seized [were] immovable as
defined in Article 415 of the Civil Code, the parties’ agreement to the contrary notwithstanding.
They argued that to give effect to the agreement would be prejudicial to innocent third parties.
They further stated that PCI Leasing [was] estopped from treating these machineries as personal
because the contracts in which the alleged agreement [were] embodied [were] totally sham and
farcical.

"On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of
the remaining properties. He was able to take two more, but was prevented by the workers from
taking the rest.

"On April 7, 1998, they went to [the CA] via an original action for certiorari."

Ruling of the Court of Appeals

Citing the Agreement of the parties, the appellate court held that the subject machines were
personal property, and that they had only been leased, not owned, by petitioners. It also ruled that
the "words of the contract are clear and leave no doubt upon the true intention of the contracting
parties." Observing that Petitioner Goquiolay was an experienced businessman who was "not
unfamiliar with the ways of the trade," it ruled that he "should have realized the import of the
document he signed." The CA further held:

"Furthermore, to accord merit to this petition would be to preempt the trial court in ruling upon
the case below, since the merits of the whole matter are laid down before us via a petition whose
sole purpose is to inquire upon the existence of a grave abuse of discretion on the part of the
[RTC] in issuing the assailed Order and Resolution. The issues raised herein are proper subjects
of a full-blown trial, necessitating presentation of evidence by both parties. The contract is being
enforced by one, and [its] validity is attacked by the other – a matter x x x which respondent
court is in the best position to determine."

Hence, this Petition.11

The Issues

In their Memorandum, petitioners submit the following issues for our consideration:

"A. Whether or not the machineries purchased and imported by SERG’S became real property by
virtue of immobilization.

B. Whether or not the contract between the parties is a loan or a lease."12

In the main, the Court will resolve whether the said machines are personal, not immovable,
property which may be a proper subject of a writ of replevin. As a preliminary matter, the Court
will also address briefly the procedural points raised by respondent.

The Court’s Ruling

The Petition is not meritorious.

Preliminary Matter:Procedural Questions

Respondent contends that the Petition failed to indicate expressly whether it was being filed
under Rule 45 or Rule 65 of the Rules of Court. It further alleges that the Petition erroneously
impleaded Judge Hilario Laqui as respondent.

There is no question that the present recourse is under Rule 45. This conclusion finds support in
the very title of the Petition, which is "Petition for Review on Certiorari."13

While Judge Laqui should not have been impleaded as a respondent,14 substantial justice
requires that such lapse by itself should not warrant the dismissal of the present Petition. In this
light, the Court deems it proper to remove, motu proprio, the name of Judge Laqui from the
caption of the present case.

Main Issue: Nature of the Subject Machinery

Petitioners contend that the subject machines used in their factory were not proper subjects of the
Writ issued by the RTC, because they were in fact real property. Serious policy considerations,
they argue, militate against a contrary characterization.

Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of
personal property only.15 Section 3 thereof reads:

"SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court shall
issue an order and the corresponding writ of replevin describing the personal property alleged to
be wrongfully detained and requiring the sheriff forthwith to take such property into his
custody."

On the other hand, Article 415 of the Civil Code enumerates immovable or real property as
follows:

"ART. 415. The following are immovable property:

xxx xxx xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for
an industry or 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;

xxx xxx x x x"

In the present case, the machines that were the subjects of the Writ of Seizure were placed by
petitioners in the factory built on their own land. Indisputably, they were essential and principal
elements of their chocolate-making industry. Hence, although each of them was movable or
personal property on its own, all of them have become "immobilized by destination because they
are essential and principal elements in the industry."16 In that sense, petitioners are correct in
arguing that the said machines are real, not personal, property pursuant to Article 415 (5) of the
Civil Code.17

Be that as it may, we disagree with the submission of the petitioners that the said machines are
not proper subjects of the Writ of Seizure.

The Court has held that contracting parties may validly stipulate that a real property be
considered as personal.18 After agreeing to such stipulation, they are consequently estopped
from claiming otherwise. Under the principle of estoppel, a party to a contract is ordinarily
precluded from denying the truth of any material fact found therein.
Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the parties to treat a house as
a personal property because it had been made the subject of a chattel mortgage. The Court ruled:

"x x x. 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."

Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile Mills20
also held that the machinery used in a factory and essential to the industry, as in the present case,
was a proper subject of a writ of replevin because it was treated as personal property in a
contract. Pertinent portions of the Court’s ruling are reproduced hereunder:

"x x x. 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."

In the present case, the Lease Agreement clearly provides that the machines in question are to be
considered as personal property. Specifically, Section 12.1 of the Agreement reads as follows:21

"12.1 The PROPERTY is, and shall at all times be and remain, personal property
notwithstanding that the PROPERTY or any part thereof may now be, or hereafter become, in
any manner affixed or attached to or embedded in, or permanently resting upon, real property or
any building thereon, or attached in any manner to what is permanent."

Clearly then, petitioners are estopped from denying the characterization of the subject machines
as personal property. Under the circumstances, they are proper subjects of the Writ of Seizure.

It should be stressed, however, that our holding -- that the machines should be deemed personal
property pursuant to the Lease Agreement – is good only insofar as the contracting parties are
concerned.22 Hence, while the parties are bound by the Agreement, third persons acting in good
faith are not affected by its stipulation characterizing the subject machinery as personal.23 In any
event, there is no showing that any specific third party would be adversely affected.

Validity of the Lease Agreement

In their Memorandum, petitioners contend that the Agreement is a loan and not a lease.24
Submitting documents supposedly showing that they own the subject machines, petitioners also
argue in their Petition that the Agreement suffers from "intrinsic ambiguity which places in
serious doubt the intention of the parties and the validity of the lease agreement itself."25 In their
Reply to respondent’s Comment, they further allege that the Agreement is invalid.26
These arguments are unconvincing. The validity and the nature of the contract are the lis mota of
the civil action pending before the RTC. A resolution of these questions, therefore, is effectively
a resolution of the merits of the case. Hence, they should be threshed out in the trial, not in the
proceedings involving the issuance of the Writ of Seizure.

Indeed, in La Tondeña Distillers v. CA,27 the Court explained that the policy under Rule 60 was
that questions involving title to the subject property – questions which petitioners are now raising
-- should be determined in the trial. In that case, the Court noted that the remedy of defendants
under Rule 60 was either to post a counter-bond or to question the sufficiency of the plaintiff’s
bond. They were not allowed, however, to invoke the title to the subject property. The Court
ruled:

"In other words, the law does not allow the defendant to file a motion to dissolve or discharge the
writ of seizure (or delivery) on ground of insufficiency of the complaint or of the grounds relied
upon therefor, as in proceedings on preliminary attachment or injunction, and thereby put at issue
the matter of the title or right of possession over the specific chattel being replevied, the policy
apparently being that said matter should be ventilated and determined only at the trial on the
merits."28

Besides, these questions require a determination of facts and a presentation of evidence, both of
which have no place in a petition for certiorari in the CA under Rule 65 or in a petition for
review in this Court under Rule 45.29

Reliance on the Lease Agreement

It should be pointed out that the Court in this case may rely on the Lease Agreement, for nothing
on record shows that it has been nullified or annulled. In fact, petitioners assailed it first only in
the RTC proceedings, which had ironically been instituted by respondent. Accordingly, it must
be presumed valid and binding as the law between the parties.

Makati Leasing and Finance Corporation30 is also instructive on this point. In that case, the
Deed of Chattel Mortgage, which characterized the subject machinery as personal property, was
also assailed because respondent had allegedly been required "to sign a printed form of chattel
mortgage which was in a blank form at the time of signing." The Court rejected the argument
and relied on the Deed, ruling as follows:

"x x x. Moreover, even granting that the charge is true, such fact alone does not render a contract
void ab initio, but can only be a ground for rendering said contract voidable, or annullable
pursuant to Article 1390 of the new Civil Code, by a proper action in court. 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. x x x"

Alleged Injustice Committed on the Part of Petitioners

Petitioners contend that "if the Court allows these machineries to be seized, then its workers
would be out of work and thrown into the streets."31 They also allege that the seizure would
nullify all efforts to rehabilitate the corporation.

Petitioners’ arguments do not preclude the implementation of the Writ.1âwphi1 As earlier

discussed, law and jurisprudence support its propriety. Verily, the above-mentioned
consequences, if they come true, should not be blamed on this Court, but on the petitioners for
failing to avail themselves of the remedy under Section 5 of Rule 60, which allows the filing of a
counter-bond. The provision states:

"SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the applicant’s
bond, or of the surety or sureties thereon, he cannot immediately require the return of the
property, but if he does not so object, he may, at any time before the delivery of the property to
the applicant, require the return thereof, by filing with the court where the action is pending a
bond executed to the applicant, in double the value of the property as stated in the applicant’s
affidavit for the delivery thereof to the applicant, if such delivery be adjudged, and for the
payment of such sum to him as may be recovered against the adverse party, and by serving a
copy bond on the applicant."

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals
AFFIRMED. Costs against petitioners.

SO ORDERED.

Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.

Footnotes
1 Rollo, pp. 177-180.
2 Penned by Justice Romeo A. Brawner (Division acting chairman), with the concurrence of Justices Eloy
R. Bello Jr. and Martin S. Villarama Jr.
3 Rollo, p. 189.
4 CA Decision, p. 3; rollo, p. 179.
5 Rollo, p. 356.
6 Presided by Judge Hilario L. Laqui.
7 Rollo, pp. 23-24.
8 Rollo, pp. 78-79.
9 Motion for Special Protective Order, pp. 3-4; rollo, pp. 76-77.
10 CA Decision, pp. 1-2; rollo, pp. 177-178.
11 The case was deemed submitted for resolution on October 21, 1999, upon receipt by this Court of the
petitioners’ Memorandum signed by Atty. Victor Basilio N. De Leon of Antonio R. Bautista & Partners.
Respondent’s Memorandum, which was signed by Atty. Amador F. Brioso Jr. of Perez & Calima Law
Offices, had been filed earlier on September 29, 1999.
12 Petitioners’ Memorandum, p. 3; rollo, p. 376.
13 Section 1, Rule 45 of the Rules of Court.
14 Section 4 (a) of Rule 45 provides that the petition shall state the full name of the parties, "without
impleading the lower courts or judges thereof either as petitioners or respondents."
15 BA Finance v. CA, 258 SCRA 102, July 5, 1996; Filinvest Credit v. CA, 248 SCRA 549, September 27,
1995; Machinery Engineering Supply v. CA, 96 Phil. 70, October 29, 1954.
 16 Mindanao Bus Co. v. City Assessor and Treasurer, 6 SCRA 197, September 29, 1962, per Labrador, J.
See also Vitug, Compendium of Civil Law and Jurisprudence, 1986 ed., pp. 99-100.
17 People’s Bank & Trust Co. v. Dahican Lumber, 20 SCRA 84, May 16, 1967; Burgos v. Chief of Staff,
133 SCRA 800, December 26, 1984; Davao Sawmill Co. v. Castillo, 61 Phil. 709, August 7, 1935.
18 Chua Peng Hian v. CA, 133 SCRA 572, December 19, 1984; Standard Oil Co. v. Jaranillo, 44 Phil. 630,
March 16, 1923; Luna v. Encarnacion, 91 Phil. 531, June 30, 1952; Manarang v. Ofilada, 99 Phil. 109, May
18, 1956; People’s Bank & Trust Co. v. Dahican Lumber, supra.
19 41 SCRA 143, 153, September 30, 1971, per Reyes, JBL, J.
20 122 SCRA 296, 300, May 16, 1983, per De Castro, J.
21 Rollo, p. 262.
22 Evangelista v. Alto Surety and Insurance Co., 103 Phil. 401, April 23, 1958; Navarro v. Pineda, 9 SCRA
631, November 30, 1963.
23 Vitug, supra, pp. 100-101.
24 Petitioners’ Memorandum, p. 8; rollo, p. 381.
25 Petition, p. 10; rollo, p. 12.
26 Reply, p. 7; rollo, p. 301.
27 209 SCRA 553, 567, June 8, 1992, per Narvasa, CJ.
28 Ibid.
29 See Fuentes v. Court of Appeals, 268 SCRA 703, February 26, 1997.
30 Supra, p. 301.
31 Petition, p. 16; rollo, p. 18.

EN BANC

G.R. No. L-30173 September 30, 1971

GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-appellees,

vs.
ALBERTA VICENCIO and EMILIANO SIMEON, defendants-appellants.

Castillo & Suck for plaintiffs-appellees.

Jose Q. Calingo for defendants-appellants.

REYES, J.B.L., J.:

Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R) for the reason that
only questions of law are involved.

This case was originally commenced by defendants-appellants in the municipal court of Manila
in Civil Case No. 43073, for ejectment. Having lost therein, defendants-appellants appealed to
the court a quo (Civil Case No. 30993) which also rendered a decision against them, the
dispositive portion of which follows:
 WHEREFORE, the court hereby renders judgment in favor of the plaintiffs and
against the defendants, ordering the latter to pay jointly and severally the former a
monthly rent of P200.00 on the house, subject-matter of this action, from March
27, 1956, to January 14, 1967, with interest at the legal rate from April 18, 1956,
the filing of the complaint, until fully paid, plus attorney's fees in the sum of
P300.00 and to pay the costs.

It appears on the records that on 1 September 1955 defendants-appellants executed a chattel

mortgage in favor of plaintiffs-appellees 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
becomeimmediately due and Payable and —

the Chattel Mortgage will be enforceable in accordance with the provisions of

Special Act No. 3135, and for this purpose, the Sheriff of the City of Manila or
any of his deputies is hereby empowered and authorized to sell all the Mortgagor's
property after the necessary publication in order to settle the financial debts of
P4,800.00, plus 12% yearly interest, and attorney's fees... 2

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 On 21 September 1956, the municipal court rendered its
decision —

... ordering the defendants to vacate the premises described in the complaint;
ordering further to pay monthly the amount of P200.00 from March 27, 1956,
until such (time that) the premises is (sic) completely vacated; plus attorney's fees
of P100.00 and the costs of the suit.5

Defendants-appellants, in their answers in both the municipal court and court a quo impugned
the legality of the chattel mortgage, claiming that they are still the owners of the house; but they
waived the right to introduce evidence, oral or documentary. Instead, they relied on their
memoranda in support of their motion to dismiss, predicated mainly on the grounds that: (a) the
municipal court did not have jurisdiction to try and decide the case because (1) the issue
involved, is ownership, and (2) there was no allegation of prior possession; and (b) failure to
prove prior demand pursuant to Section 2, Rule 72, of the Rules of Court.6
During the pendency of the appeal to the Court of First Instance, defendants-appellants failed to
deposit the rent for November, 1956 within the first 10 days of December, 1956 as ordered in the
decision of the municipal court. As a result, the court granted plaintiffs-appellees' motion for
execution, and it was actually issued on 24 January 1957. However, the judgment regarding the
surrender of possession to plaintiffs-appellees could not be executed because the subject house
had been already demolished on 14 January 1957 pursuant to the order of the court in a separate
civil case (No. 25816) for ejectment against the present defendants for non-payment of rentals on
the land on which the house was constructed.

The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas bond and
withdrawal of deposited rentals was denied for the reason that the liability therefor was
disclaimed and was still being litigated, and under Section 8, Rule 72, rentals deposited had to be
held until final disposition of the appeal.7

On 7 October 1957, the appellate court of First Instance rendered its decision, the dispositive
portion of which is quoted earlier. The said decision was appealed by defendants to the Court of
Appeals which, in turn, certified the appeal to this Court. Plaintiffs-appellees failed to file a brief
and this appeal was submitted for decision without it.

Defendants-appellants submitted numerous assignments of error which can be condensed into

two questions, namely: .

(a) Whether the municipal court from which the case originated had jurisdiction to
adjudicate the same;

(b) Whether the defendants are, under the law, legally bound to pay rentals to the
plaintiffs during the period of one (1) year provided by law for the redemption of
the extrajudicially foreclosed house.

We will consider these questions seriatim.

(a) Defendants-appellants mortgagors question the jurisdiction of the municipal court from
which the case originated, and consequently, the appellate jurisdiction of the Court of First
Instance a quo, on the theory that the chattel mortgage is void ab initio; whence it would follow
that the extrajudicial foreclosure, and necessarily the consequent auction sale, are also void.
Thus, the ownership of the house still remained with defendants-appellants who are entitled to
possession and not plaintiffs-appellees. Therefore, it is argued by defendants-appellants, the issue
of ownership will have to be adjudicated first in order to determine possession. lt is contended
further that ownership being in issue, it is the Court of First Instance which has jurisdiction and
not the municipal court.

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.
On the charge of fraud, deceit or trickery, the Court of First Instance found defendants-
appellants' contentions as not supported by evidence and accordingly dismissed the charge,8
confirming the earlier finding of the municipal court that "the defense of ownership as well as
the allegations of fraud and deceit ... are mere allegations."9

It has been held in Supia and Batiaco vs. Quintero and Ayala10 that "the answer is a mere
statement of the facts which the party filing it expects to prove, but it is not evidence;11 and
further, that when the question to be determined is one of title, the Court is given the authority to
proceed with the hearing of the cause until this fact is clearly established. In the case of Sy vs.
Dalman,12 wherein the defendant was also a successful bidder in an auction sale, it was likewise
held by this Court that in detainer cases the aim of ownership "is a matter of defense and raises
an issue of fact which should be determined from the evidence at the trial." What determines
jurisdiction are the allegations or averments in the complaint and the relief asked for. 13

Moreover, even granting that the charge is true, fraud or deceit does not render a contract void ab
initio, and can only be a ground for rendering the contract voidable or annullable pursuant to
Article 1390 of the New Civil Code, by a proper action in court. 14 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. Hence, defendants-appellants' claim of ownership on the basis of a voidable contract
which has not been voided fails.

It is claimed in the alternative by defendants-appellants that even if there was no fraud, deceit or
trickery, the chattel mortgage was still null and void ab initio because only personal properties
can be subject of a chattel mortgage. The rule about the status of buildings as immovable
property is stated in Lopez vs. Orosa, Jr. and Plaza Theatre Inc.,15 cited in Associated Insurance
Surety Co., Inc. vs. Iya, et al. 16 to the effect that —

... it is obvious that the inclusion of the building, separate and distinct from the
land, in the enumeration of what may constitute real properties (art. 415, New
Civil Code) could only mean one thing — that a building is by itself an
immovable property irrespective of whether or not said structure and the land on
which it is adhered to belong to the same owner.

Certain deviations, however, have been allowed for various reasons. In the case of Manarang
and Manarang vs. Ofilada,17 this Court stated that "it is undeniable that the parties to a contract
may by agreement treat as personal property that which by nature would be real property", citing
Standard Oil Company of New York vs. Jaramillo. 18 In the latter case, the mortgagor conveyed
and transferred to the mortgagee by way of mortgage "the following described personal
property." 19 The "personal property" consisted of leasehold rights and a building. Again, in the
case of Luna vs. Encarnacion,20 the subject of the contract designated as Chattel Mortgage was
a house of mixed materials, and this Court hold therein that it was a valid Chattel mortgage
because it was so expressly designated and specifically that the property given as security "is a
house of mixed materials, which by its very nature is considered personal property." In the later
case of Navarro vs. Pineda,21 this Court stated that —
 The view that parties to a deed of chattel mortgage 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 principle of
estoppel" (Evangelista vs. Alto Surety, No. L-11139, 23 April 1958). In a case, a
mortgaged 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 (Evangelists vs. Abad, [CA]; 36 O.G. 2913), for it is
now settled that an object placed on land by one who had only a temporary right
to the same, such as the lessee or usufructuary, does not become immobilized by
attachment (Valdez vs. Central Altagracia, 222 U.S. 58, cited in Davao Sawmill
Co., Inc. vs. 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 as so stipulated in the document of mortgage. (Evangelista vs.
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 vs. C.N.
Hodges, [CA] 48 O.G. 5374): 22

In the contract now before Us, the house on rented land is not only expressly designated as
Chattel Mortgage; it specifically provides that "the mortgagor ... voluntarily CEDES, SELLS and
TRANSFERS by way of Chattel Mortgage23 the property together with its leasehold rights over
the lot on which it is constructed and participation ..." 24 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 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. Finally unlike in the Iya cases, Lopez vs.
Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung Yee vs. F. L. Strong Machinery and Williamson,
26 wherein third persons assailed the validity of the chattel mortgage,27 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.

(b) Turning to the question of possession and rentals of the premises in question. The Court of
First Instance noted in its decision that nearly a year after the foreclosure sale the mortgaged
house had been demolished on 14 and 15 January 1957 by virtue of a decision obtained by the
lessor of the land on which the house stood. For this reason, the said court limited itself to
sentencing the erstwhile mortgagors to pay plaintiffs a monthly rent of P200.00 from 27 March
1956 (when the chattel mortgage was foreclosed and the house sold) until 14 January 1957
(when it was torn down by the Sheriff), plus P300.00 attorney's fees.
Appellants mortgagors question this award, claiming that they were entitled to remain in
possession without any obligation to pay rent during the one year redemption period after the
foreclosure sale, i.e., until 27 March 1957. On this issue, We must rule for the appellants.

Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act No. 1508.28
Section 14 of this Act allows the mortgagee to have the property mortgaged sold at public
auction through a public officer in almost the same manner as that allowed by Act No. 3135, as
amended by Act No. 4118, provided that the requirements of the law relative to notice and
registration are complied with. 29 In the instant case, the parties specifically stipulated that "the
chattel mortgage will be enforceable in accordance with the provisions of Special Act No. 3135
... ." 30 (Emphasis supplied).

Section 6 of the Act referred to 31 provides that the debtor-mortgagor (defendants-appellants

herein) may, at any time within one year from and after the date of the auction sale, redeem the
property sold at the extra judicial foreclosure sale. Section 7 of the same Act 32 allows the
purchaser of the property to obtain from the court the possession during the period of
redemption: but the same provision expressly requires the filing of a petition with the proper
Court of First Instance and the furnishing of a bond. It is only upon filing of the proper motion
and the approval of the corresponding bond that the order for a writ of possession issues as a
matter of course. No discretion is left to the court. 33 In the absence of such a compliance, as in
the instant case, the purchaser can not claim possession during the period of redemption as a
matter of right. In such a case, the governing provision is Section 34, Rule 39, of the Revised
Rules of Court 34 which also applies to properties purchased in extrajudicial foreclosure
proceedings.35 Construing the said section, this Court stated in the aforestated case of Reyes vs.
Hamada.

In other words, before the expiration of the 1-year period within which the
judgment-debtor or mortgagor may redeem the property, the purchaser thereof is
not entitled, as a matter of right, to possession of the same. Thus, while it is true
that the Rules of Court allow the purchaser to receive the rentals if the purchased
property is occupied by tenants, he is, nevertheless, accountable to the judgment-
debtor or mortgagor as the case may be, for the amount so received and the same
will be duly credited against the redemption price when the said debtor or
mortgagor effects the redemption. Differently stated, the rentals receivable from
tenants, although they may be collected by the purchaser during the redemption
period, do not belong to the latter but still pertain to the debtor of mortgagor. The
rationale for the Rule, it seems, is to secure for the benefit of the debtor or
mortgagor, the payment of the redemption amount and the consequent return to
him of his properties sold at public auction. (Emphasis supplied)

The Hamada case reiterates the previous ruling in Chan vs. Espe.36

Since the defendants-appellants were occupying the house at the time of the auction sale, they
are entitled to remain in possession during the period of redemption or within one year from and
after 27 March 1956, the date of the auction sale, and to collect the rents or profits during the
said period.
It will be noted further that in the case at bar the period of redemption had not yet expired when
action was instituted in the court of origin, and that plaintiffs-appellees did not choose to take
possession under Section 7, Act No. 3135, as amended, which is the law selected by the parties
to govern the extrajudicial foreclosure of the chattel mortgage. Neither was there an allegation to
that effect. Since plaintiffs-appellees' right to possess was not yet born at the filing of the
complaint, there could be no violation or breach thereof. Wherefore, the original complaint stated
no cause of action and was prematurely filed. For this reason, the same should be ordered
dismissed, even if there was no assignment of error to that effect. The Supreme Court is clothed
with ample authority to review palpable errors not assigned as such if it finds that their
consideration is necessary in arriving at a just decision of the cases. 37

It follows that the court below erred in requiring the mortgagors to pay rents for the year
following the foreclosure sale, as well as attorney's fees.

FOR THE FOREGOING REASONS, the decision appealed from is reversed and another one
entered, dismissing the complaint. With costs against plaintiffs-appellees.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor
and Makasiar, JJ., concur.

Footnotes
1 Exhibit "A," page 1, Folder of Exhibits.
2 See paragraph "G," Exhibit "A," supra.
3 Exhibit "B," page 4, Folder of Exhibits.
4 Page 2, Defendants' Record on appeal, page 97, Rollo.
5 Page 20, Id., page 115, Rollo.
6 Now Section 2, Rule 70, Revised Rules of Court, which reads that —
"SEC. 2. Landlord, to proceed against tenant only after demand. — No landlord, or his legal
representative or assign, shall bring such action against a tenant for failure to pay rent due or to
comply with the conditions of his lease, unless the tenant shall have failed to pay such rent or
comply with such conditions for a period of ... five (5) days in the case of building, after demand
therefor, made upon him personally, or by serving written notice of such demand upon the person
found on the premises, or by posting such notice on the premises if no persons be found thereon."
7 See CFI order of 20 February 1957, pages 21-25, Defendants' Record on Appeal.
8 Page 31, Defendants' Record on Appeal, page 213, Rollo.
9 See Municipal court decision, pages 17-18, Defendants' Record on Appeal, pages 199-200,
Rollo.
10 59 Phil. 320-321.
11 Emphasis supplied.
12 L-19200, 27 February 1958, 22 SCRA 834; See also Aquino vs. Deala, 63 Phil. 582 and De los
Reyes vs. Elepaño, et al., G.R. No. L-3466, 13 October 1950.
13 See Canaynay vs. Sarmiento, L-1246, 27 August 1947, 79 Phil. 36.
14 Last paragraph, Article 1290, N.C.C., supra.
15 No. L-10817-18, 28 February 1958, 103 Phil. 98.
16 No. L-10827-38, 30 May 1958, 103 Phil. 972.
17 No. L-8133, 18 May 1956, 99 Phil. 109.
18 No. L-20329, 16 March 1923, 44 Phil. 632.
19 Emphasis supplied.
20 No. L-4637, 30 June 1952, 91 Phil. 531.
21 No. L-18456, 30 November 1963, 9 SCRA 631.
 22 Emphasis supplied.
23 Emphasis supplied.
24 See paragraph 2 of Exhibit "A," page 1, Folder of Exhibits.
25 Supra.
26 Supra.
27 See Navarro vs. Pineda, supra.
28 Effective 1 August 1906.
29 See Luna vs. Encarnacion, et al., No. L-4637, 30 June 1952, 91 Phil. 531.
30 See paragraph "G," Exhibit "A," supra.
31 Section 6, Act No. 3135, as amended, provides:
"In all cases in which an extrajudicial sale is made under the special power hereinbefore referred
to, the debtor, his successor in interest or any judicial creditor or judgment creditor of said debtor,
or any person having a lien on the property subsequent to the mortgage or deed of trust under
which the property is sold, may redeem the same at any time within the term of one year from and
after the date of the sale; and such redemption shall be governed by the provisions of sections four
hundredand sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in
so far as these are not inconsistent with the provisions of this Act." (Emphasis supplied) .
32 Section 7, Act No. 3135, as amended, states: .
"In any sale made under the provisions of this Act, the purchaser may petition the Court of First
Instance of the province or place where the property or any part thereof is situated, to give him
possession thereof during the redemption period, furnishing bond in an amount equivalent to the
use of the property for a period of twelve months, to indemnify the debtor in case it be shown that
the sale was made without violating the mortgage or without complying with the requirements of
this Act..." (Emphasis supplied) .
33 See De Gracia vs. San Jose, et al., No. L-6493, 25 March 1954.
34 "SEC. 34. Rents and profits pending redemption. Statement thereof and credit therefor on
redemption. — The purchaser, from the time of the sale until a redemption, and a redemptioner,
from the time of his redemption until another redemption, is entitled to receive the rents of the
property sold or the value of the use and occupation thereof when such property is in possession of
a tenant. But when any such rents and profits have been received by the judgment creditor or
purchaser, or by a redemptioner, or by the assignee or either of them, from property thus sold
preceding such redemption, the amounts of such rents and profits shall be a credit upon the
redemption money to be paid; ..."
35 See Reyes vs. Hamada, No. L-19967, 31 May 1965, 14 SCRA 215; Emphasis supplied.
36 No. L-16777, 20 April 1961, 1 SCRA 1004.
37 Saura Import & Export Co. vs. Philippine International Surety Co., et al., No. L-15184, 31 May
1963, 8 SCRA 143, 148; Hernandez vs. Andal, 78 Phil.198, See also Sec. 7, Rule 51, of the
Revised Rules of Court. Cf. Santaells vs.Otto Lange Co., 155 Fed. 719; Mast vs. Superior Drill
Co., 154 Fed., 45, Francisco, Rules of Court (1965 Ed), Vol. 3, page 765.

FIRST DIVISION

G.R. No. 120098 October 2, 2001

RUBY L. TSAI, petitioner,

vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS, INC. and MAMERTO R
VILLALUZ, respondents.

x---------------------------------------------------------x
[G.R. No. 120109. October 2, 2001.]

PHILIPPINE BANK OF COMMUNICATIONS, petitioner,

vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS and MAMERTO R VILLALUZ,
respondents.

QUISUMBING, J.:

These consolidated cases assail the decision1 of the Court of Appeals in CA-G.R. CV No. 32986,
affirming the decision2 of the Regional Trial Court of Manila, Branch 7, in Civil Case No. 89-
48265. Also assailed is respondent court's resolution denying petitioners' motion for
reconsideration.

On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained a three
million peso (P3,000,000.00) loan from petitioner Philippine Bank of Communications
(PBCom). As security for the loan, EVERTEX executed in favor of PBCom, a deed of Real and
Chattel Mortgage over the lot under TCT No. 372097, where its factory stands, and the chattels
located therein as enumerated in a schedule attached to the mortgage contract. The pertinent
portions of the Real and Chattel Mortgage are quoted below:

MORTGAGE

(REAL AND CHATTEL)

xxx xxx xxx

The MORTGAGOR(S) hereby transfer(s) and convey(s), by way of First Mortgage, to

the MORTGAGEE, . . . certain parcel(s) of land, together with all the buildings and
improvements now existing or which may hereafter exist thereon, situated in . . .

"Annex A"

(Real and Chattel Mortgage executed by Ever Textile Mills in favor of

PBCommunications — continued)

LIST OF MACHINERIES & EQUIPMENT

A. Forty Eight (48) units of Vayrow Knitting Machines-Tompkins made in Hongkong:

Serial Numbers Size of Machines

xxx xxx xxx

B. Sixteen (16) sets of Vayrow Knitting Machines made in Taiwan.

 xxx xxx xxx

C. Two (2) Circular Knitting Machines made in West Germany.

xxx xxx xxx

D. Four (4) Winding Machines.

xxx xxx xxx

SCHEDULE "A"

I. TCT # 372097 - RIZAL

xxx xxx xxx

II. Any and all buildings and improvements now existing or hereafter to exist on the
above-mentioned lot.

III. MACHINERIES & EQUIPMENT situated, located and/or installed on the above-
mentioned lot located at . . .

(a) Forty eight sets (48) Vayrow Knitting Machines . . .

(b) Sixteen sets (16) Vayrow Knitting Machines . . .

(c) Two (2) Circular Knitting Machines . . .

(d) Two (2) Winding Machines . . .

(e) Two (2) Winding Machines . . .

IV. Any and all replacements, substitutions, additions, increases and accretions to above
properties.

xxx xxx xxx3

On April 23, 1979, PBCom granted a second loan of P3,356,000.00 to EVERTEX. The loan was
secured by a Chattel Mortgage over personal properties enumerated in a list attached thereto.
These listed properties were similar to those listed in Annex A of the first mortgage deed.

After April 23, 1979, the date of the execution of the second mortgage mentioned above,
EVERTEX purchased various machines and equipments.

On November 19, 1982, due to business reverses, EVERTEX filed insolvency proceedings
docketed as SP Proc. No. LP-3091-P before the defunct Court of First Instance of Pasay City,
Branch XXVIII. The CFI issued an order on November 24, 1982 declaring the corporation
insolvent. All its assets were taken into the custody of the Insolvency Court, including the
collateral, real and personal, securing the two mortgages as abovementioned.

In the meantime, upon EVERTEX's failure to meet its obligation to PBCom, the latter
commenced extrajudicial foreclosure proceedings against EVERTEX under Act 3135, otherwise
known as "An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed
to Real Estate Mortgages" and Act 1506 or "The Chattel Mortgage Law". A Notice of Sheriff's
Sale was issued on December 1, 1982.

On December 15, 1982, the first public auction was held where petitioner PBCom emerged as
the highest bidder and a Certificate of Sale was issued in its favor on the same date. On
December 23, 1982, another public auction was held and again, PBCom was the highest bidder.
The sheriff issued a Certificate of Sale on the same day.

On March 7, 1984, PBCom consolidated its ownership over the lot and all the properties in it. In
November 1986, it leased the entire factory premises to petitioner Ruby L. Tsai for P50,000.00 a
month. On May 3, 1988, PBCom sold the factory, lock, stock and barrel to Tsai for
P9,000,000.00, including the contested machineries.

On March 16, 1989, EVERTEX filed a complaint for annulment of sale, reconveyance, and
damages with the Regional Trial Court against PBCom, alleging inter alia that the extrajudicial
foreclosure of subject mortgage was in violation of the Insolvency Law. EVERTEX claimed that
no rights having been transmitted to PBCom over the assets of insolvent EVERTEX, therefore
Tsai acquired no rights over such assets sold to her, and should reconvey the assets.

Further, EVERTEX averred that PBCom, without any legal or factual basis, appropriated the
contested properties, which were not included in the Real and Chattel Mortgage of November 26,
1975 nor in the Chattel Mortgage of April 23, 1979, and neither were those properties included
in the Notice of Sheriff's Sale dated December 1, 1982 and Certificate of Sale . . . dated
December 15, 1982.

The disputed properties, which were valued at P4,000,000.00, are: 14 Interlock Circular Knitting
Machines, 1 Jet Drying Equipment, 1 Dryer Equipment, 1 Raisin Equipment and 1 Heatset
Equipment.

The RTC found that the lease and sale of said personal properties were irregular and illegal
because they were not duly foreclosed nor sold at the December 15, 1982 auction sale since these
were not included in the schedules attached to the mortgage contracts. The trial court decreed:

WHEREFORE, judgment is hereby rendered in favor of plaintiff corporation and against

the defendants:

1. Ordering the annulment of the sale executed by defendant Philippine Bank of

Communications in favor of defendant Ruby L. Tsai on May 3, 1988 insofar as it affects
the personal properties listed in par. 9 of the complaint, and their return to the plaintiff
 corporation through its assignee, plaintiff Mamerto R. Villaluz, for disposition by the
Insolvency Court, to be done within ten (10) days from finality of this decision;

2. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum
of P5,200,000.00 as compensation for the use and possession of the properties in question
from November 1986 to February 1991 and P100,000.00 every month thereafter, with
interest thereon at the legal rate per annum until full payment;

3. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum
of P50,000.00 as and for attorney's fees and expenses of litigation;

4. Ordering the defendants to pay jointly and severally the plaintiff corporation the sum
of P200,000.00 by way of exemplary damages;

5. Ordering the dismissal of the counterclaim of the defendants; and

6. Ordering the defendants to proportionately pay the costs of suit.

SO ORDERED.4

Dissatisfied, both PBCom and Tsai appealed to the Court of Appeals, which issued its decision
dated August 31, 1994, the dispositive portion of which reads:

WHEREFORE, except for the deletion therefrom of the award; for exemplary damages, and
reduction of the actual damages, from P100,000.00 to P20,000.00 per month, from November
1986 until subject personal properties are restored to appellees, the judgment appealed from is
hereby AFFIRMED, in all other respects. No pronouncement as to costs.5

Motion for reconsideration of the above decision having been denied in the resolution of April
28, 1995, PBCom and Tsai filed their separate petitions for review with this Court.

In G.R No. 120098, petitioner Tsai ascribed the following errors to the respondent court:

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN

EFFECT MAKING A CONTRACT FOR THE PARTIES BY TREATING THE 1981
ACQUIRED MACHINERIES AS CHATTELS INSTEAD OF REAL PROPERTIES
WITHIN THEIR EARLIER 1975 DEED OF REAL AND CHATTEL MORTGAGE OR
1979 DEED OF CHATTEL MORTGAGE.

II

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN

HOLDING THAT THE DISPUTED 1981 MACHINERIES ARE NOT REAL
PROPERTIES DEEMED PART OF THE MORTGAGE — DESPITE THE CLEAR
 IMPORT OF THE EVIDENCE AND APPLICABLE RULINGS OF THE SUPREME
COURT.

III

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN

DEEMING PETITIONER A PURCHASER IN BAD FAITH.

IV

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN

ASSESSING PETITIONER ACTUAL DAMAGES, ATTORNEY'S FEES AND
EXPENSES OF LITIGATION — FOR WANT OF VALID FACTUAL AND LEGAL
BASIS.

THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN

HOLDING AGAINST PETITIONER'S ARGUMENTS ON PRESCRIPTION AND
LACHES.6

In G.R. No. 120098, PBCom raised the following issues:

I.

DID THE COURT OF APPEALS VALIDLY DECREE THE MACHINERIES LISTED

UNDER PARAGRAPH 9 OF THE COMPLAINT BELOW AS PERSONAL PROPERTY
OUTSIDE OF THE 1975 DEED OF REAL ESTATE MORTGAGE AND EXCLUDED THEM
FROM THE REAL PROPERTY EXTRAJUDICIALLY FORECLOSED BY PBCOM
DESPITE THE PROVISION IN THE 1975 DEED THAT ALL AFTER-ACQUIRED
PROPERTIES DURING THE LIFETIME OF THE MORTGAGE SHALL FORM PART
THEREOF, AND DESPITE THE UNDISPUTED FACT THAT SAID MACHINERIES ARE
BIG AND HEAVY, BOLTED OR CEMENTED ON THE REAL PROPERTY MORTGAGED
BY EVER TEXTILE MILLS TO PBCOM, AND WERE ASSESSED FOR REAL ESTATE
TAX PURPOSES?

II

CAN PBCOM, WHO TOOK POSSESSION OF THE MACHINERIES IN QUESTION IN

GOOD FAITH, EXTENDED CREDIT FACILITIES TO EVER TEXTILE MILLS WHICH AS
OF 1982 TOTALLED P9,547,095.28, WHO HAD SPENT FOR MAINTENANCE AND
SECURITY ON THE DISPUTED MACHINERIES AND HAD TO PAY ALL THE BACK
TAXES OF EVER TEXTILE MILLS BE LEGALLY COMPELLED TO RETURN TO EVER
THE SAID MACHINERIES OR IN LIEU THEREOF BE ASSESSED DAMAGES. IS THAT
SITUATION TANTAMOUNT TO A CASE OF UNJUST ENRICHMENT? 7
The principal issue, in our view, is whether or not the inclusion of the questioned properties in
the foreclosed properties is proper. The secondary issue is whether or not the sale of these
properties to petitioner Ruby Tsai is valid.

For her part, Tsai avers that the Court of Appeals in effect made a contract for the parties by
treating the 1981 acquired units of machinery as chattels instead of real properties within their
earlier 1975 deed of Real and Chattel Mortgage or 1979 deed of Chattel Mortgage.8
Additionally, Tsai argues that respondent court erred in holding that the disputed 1981
machineries are not real properties.9 Finally, she contends that the Court of Appeals erred in
holding against petitioner's arguments on prescription and laches10 and in assessing petitioner
actual damages, attorney's fees and expenses of litigation, for want of valid factual and legal
basis.11

Essentially, PBCom contends that respondent court erred in affirming the lower court's judgment
decreeing that the pieces of machinery in dispute were not duly foreclosed and could not be
legally leased nor sold to Ruby Tsai. It further argued that the Court of Appeals' pronouncement
that the pieces of machinery in question were personal properties have no factual and legal basis.
Finally, it asserts that the Court of Appeals erred in assessing damages and attorney's fees against
PBCom.

In opposition, private respondents argue that the controverted units of machinery are not "real
properties" but chattels, and, therefore, they were not part of the foreclosed real properties,
rendering the lease and the subsequent sale thereof to Tsai a nullity.12

Considering the assigned errors and the arguments of the parties, we find the petitions devoid of
merit and ought to be denied.

Well settled is the rule that the jurisdiction of the Supreme Court in a petition for review on
certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law,
not of fact, unless the factual findings complained of are devoid of support by the evidence on
record or the assailed judgment is based on misapprehension of facts.13 This rule is applied more
stringently when the findings of fact of the RTC is affirmed by the Court of Appeals.14

The following are the facts as found by the RTC and affirmed by the Court of Appeals that are
decisive of the issues: (1) the "controverted machineries" are not covered by, or included in,
either of the two mortgages, the Real Estate and Chattel Mortgage, and the pure Chattel
Mortgage; (2) the said machineries were not included in the list of properties appended to the
Notice of Sale, and neither were they included in the Sheriff's Notice of Sale of the foreclosed
properties.15

Petitioners contend that the nature of the disputed machineries, i.e., that they were heavy, bolted
or cemented on the real property mortgaged by EVERTEX to PBCom, make them ipso facto
immovable under Article 415 (3) and (5) of the New Civil Code. This assertion, however, does
not settle the issue. Mere nuts and bolts do not foreclose the controversy. We have to look at the
parties' intent.
While it is true that the controverted properties appear to be immobile, a perusal of the contract
of Real and Chattel Mortgage executed by the parties herein gives us a contrary indication. In the
case at bar, both the trial and the appellate courts reached the same finding that the true intention
of PBCOM and the owner, EVERTEX, is to treat machinery and equipment as chattels. The
pertinent portion of respondent appellate court's ruling is quoted below:

As stressed upon by appellees, appellant bank treated the machineries as chattels; never
as real properties. Indeed, the 1975 mortgage contract, which was actually real and
chattel mortgage, militates against appellants' posture. It should be noted that the printed
form used by appellant bank was mainly for real estate mortgages. But reflective of the
true intention of appellant PBCOM and appellee EVERTEX was the typing in capital
letters, immediately following the printed caption of mortgage, of the phrase "real and
chattel." So also, the "machineries and equipment" in the printed form of the bank had to
be inserted in the blank space of the printed contract and connected with the word
"building" by typewritten slash marks. Now, then, if the machineries in question were
contemplated to be included in the real estate mortgage, there would have been no
necessity to ink a chattel mortgage specifically mentioning as part III of Schedule A a
listing of the machineries covered thereby. It would have sufficed to list them as
immovables in the Deed of Real Estate Mortgage of the land and building involved.

As regards the 1979 contract, the intention of the parties is clear and beyond question. It
refers solely to chattels. The inventory list of the mortgaged properties is an itemization
of sixty-three (63) individually described machineries while the schedule listed only
machines and 2,996,880.50 worth of finished cotton fabrics and natural cotton fabrics.16

In the absence of any showing that this conclusion is baseless, erroneous or uncorroborated by
the evidence on record, we find no compelling reason to depart therefrom.

Too, assuming arguendo that the properties in question are immovable by nature, nothing
detracts the parties from treating it as chattels to secure an obligation under the principle of
estoppel. As far back as Navarro v. Pineda, 9 SCRA 631 (1963), an immovable may be
considered a personal property if there is a stipulation as when it is used as security in the
payment of an obligation where a chattel mortgage is executed over it, as in the case at bar.

In the instant case, the parties herein: (1) executed a contract styled as "Real Estate Mortgage and
Chattel Mortgage," instead of just "Real Estate Mortgage" if indeed their intention is to treat all
properties included therein as immovable, and (2) attached to the said contract a separate "LIST
OF MACHINERIES & EQUIPMENT". These facts, taken together, evince the conclusion that
the parties' intention is to treat these units of machinery as chattels. A fortiori, the contested
after-acquired properties, which are of the same description as the units enumerated under the
title "LIST OF MACHINERIES & EQUIPMENT," must also be treated as chattels.

Accordingly, we find no reversible error in the respondent appellate court's ruling that inasmuch
as the subject mortgages were intended by the parties to involve chattels, insofar as equipment
and machinery were concerned, the Chattel Mortgage Law applies, which provides in Section 7
thereof that: "a chattel mortgage shall be deemed to cover only the property described therein
and not like or substituted property thereafter acquired by the mortgagor and placed in the same
depository as the property originally mortgaged, anything in the mortgage to the contrary
notwithstanding."

And, since the disputed machineries were acquired in 1981 and could not have been involved in
the 1975 or 1979 chattel mortgages, it was consequently an error on the part of the Sheriff to
include subject machineries with the properties enumerated in said chattel mortgages.

As the auction sale of the subject properties to PBCom is void, no valid title passed in its favor.
Consequently, the sale thereof to Tsai is also a nullity under the elementary principle of nemo dat
quod non habet, one cannot give what one does not have.17

Petitioner Tsai also argued that assuming that PBCom's title over the contested properties is a
nullity, she is nevertheless a purchaser in good faith and for value who now has a better right
than EVERTEX.

To the contrary, however, are the factual findings and conclusions of the trial court that she is not
a purchaser in good faith. Well-settled is the rule that the person who asserts the status of a
purchaser in good faith and for value has the burden of proving such assertion.18 Petitioner Tsai
failed to discharge this burden persuasively.

Moreover, a purchaser in good faith and for value is one who buys the property of another
without notice that some other person has a right to or interest in such property and pays a full
and fair price for the same, at the time of purchase, or before he has notice of the claims or
interest of some other person in the property.19 Records reveal, however, that when Tsai
purchased the controverted properties, she knew of respondent's claim thereon. As borne out by
the records, she received the letter of respondent's counsel, apprising her of respondent's claim,
dated February 27, 1987.20 She replied thereto on March 9, 1987.21 Despite her knowledge of
respondent's claim, she proceeded to buy the contested units of machinery on May 3, 1988. Thus,
the RTC did not err in finding that she was not a purchaser in good faith.

Petitioner Tsai's defense of indefeasibility of Torrens Title of the lot where the disputed
properties are located is equally unavailing. This defense refers to sale of lands and not to sale of
properties situated therein. Likewise, the mere fact that the lot where the factory and the disputed
properties stand is in PBCom's name does not automatically make PBCom the owner of
everything found therein, especially in view of EVERTEX's letter to Tsai enunciating its claim.

Finally, petitioners' defense of prescription and laches is less than convincing. We find no cogent
reason to disturb the consistent findings of both courts below that the case for the reconveyance
of the disputed properties was filed within the reglementary period. Here, in our view, the
doctrine of laches does not apply. Note that upon petitioners' adamant refusal to heed
EVERTEX's claim, respondent company immediately filed an action to recover possession and
ownership of the disputed properties. There is no evidence showing any failure or neglect on its
part, for an unreasonable and unexplained length of time, to do that which, by exercising due
diligence, could or should have been done earlier. The doctrine of stale demands would apply
only where by reason of the lapse of time, it would be inequitable to allow a party to enforce his
legal rights. Moreover, except for very strong reasons, this Court is not disposed to apply the
doctrine of laches to prejudice or defeat the rights of an owner.22

As to the award of damages, the contested damages are the actual compensation, representing
rentals for the contested units of machinery, the exemplary damages, and attorney's fees.

As regards said actual compensation, the RTC awarded P100,000.00 corresponding to the unpaid
rentals of the contested properties based on the testimony of John Chua, who testified that the
P100,000.00 was based on the accepted practice in banking and finance, business and
investments that the rental price must take into account the cost of money used to buy them. The
Court of Appeals did not give full credence to Chua's projection and reduced the award to
P20,000.00.

Basic is the rule that to recover actual damages, the amount of loss must not only be capable of
proof but must actually be proven with reasonable degree of certainty, premised upon competent
proof or best evidence obtainable of the actual amount thereof.23 However, the allegations of
respondent company as to the amount of unrealized rentals due them as actual damages remain
mere assertions unsupported by documents and other competent evidence. In determining actual
damages, the court cannot rely on mere assertions, speculations, conjectures or guesswork but
must depend on competent proof and on the best evidence obtainable regarding the actual
amount of loss.24 However, we are not prepared to disregard the following dispositions of the
respondent appellate court:

. . . In the award of actual damages under scrutiny, there is nothing on record warranting
the said award of P5,200,000.00, representing monthly rental income of P100,000.00
from November 1986 to February 1991, and the additional award of P100,000.00 per
month thereafter.

As pointed out by appellants, the testimonial evidence, consisting of the testimonies of

Jonh (sic) Chua and Mamerto Villaluz, is shy of what is necessary to substantiate the
actual damages allegedly sustained by appellees, by way of unrealized rental income of
subject machineries and equipments.

The testimony of John Cua (sic) is nothing but an opinion or projection based on what is
claimed to be a practice in business and industry. But such a testimony cannot serve as
the sole basis for assessing the actual damages complained of. What is more, there is no
showing that had appellant Tsai not taken possession of the machineries and equipments
in question, somebody was willing and ready to rent the same for P100,000.00 a month.

xxx xxx xxx

Then, too, even assuming arguendo that the said machineries and equipments could have
generated a rental income of P30,000.00 a month, as projected by witness Mamerto
Villaluz, the same would have been a gross income. Therefrom should be deducted or
removed, expenses for maintenance and repairs . . . Therefore, in the determination of the
actual damages or unrealized rental income sued upon, there is a good basis to calculate
 that at least four months in a year, the machineries in dispute would have been idle due to
absence of a lessee or while being repaired. In the light of the foregoing rationalization
and computation, We believe that a net unrealized rental income of P20,000.00 a month,
since November 1986, is more realistic and fair.25

As to exemplary damages, the RTC awarded P200,000.00 to EVERTEX which the Court of
Appeals deleted. But according to the CA, there was no clear showing that petitioners acted
malevolently, wantonly and oppressively. The evidence, however, shows otherwise.It is a
requisite to award exemplary damages that the wrongful act must be accompanied by bad faith,26
and the guilty acted in a wanton, fraudulent, oppressive, reckless or malevolent manner.27 As
previously stressed, petitioner Tsai's act of purchasing the controverted properties despite her
knowledge of EVERTEX's claim was oppressive and subjected the already insolvent respondent
to gross disadvantage. Petitioner PBCom also received the same letters of Atty. Villaluz,
responding thereto on March 24, 1987.28 Thus, PBCom's act of taking all the properties found in
the factory of the financially handicapped respondent, including those properties not covered by
or included in the mortgages, is equally oppressive and tainted with bad faith. Thus, we are in
agreement with the RTC that an award of exemplary damages is proper.

The amount of P200,000.00 for exemplary damages is, however, excessive. Article 2216 of the
Civil Code provides that no proof of pecuniary loss is necessary for the adjudication of
exemplary damages, their assessment being left to the discretion of the court in accordance with
the circumstances of each case.29 While the imposition of exemplary damages is justified in this
case, equity calls for its reduction. In Inhelder Corporation v. Court of Appeals, G.R. No. L-
52358, 122 SCRA 576, 585, (May 30, 1983), we laid down the rule that judicial discretion
granted to the courts in the assessment of damages must always be exercised with balanced
restraint and measured objectivity. Thus, here the award of exemplary damages by way of
example for the public good should be reduced to P100,000.00.

By the same token, attorney's fees and other expenses of litigation may be recovered when
exemplary damages are awarded.30 In our view, RTC's award of P50,000.00 as attorney's fees
and expenses of litigation is reasonable, given the circumstances in these cases.

WHEREFORE, the petitions are DENIED. The assailed decision and resolution of the Court of
Appeals in CA-G.R. CV No. 32986 are AFFIRMED WITH MODIFICATIONS. Petitioners
Philippine Bank of Communications and Ruby L. Tsai are hereby ordered to pay jointly and
severally Ever Textile Mills, Inc. the following: (1) P20,000.00 per month, as compensation for
the use and possession of the properties in question from November 198631 until subject personal
properties are restored to respondent corporation; (2) P100,000.00 by way of exemplary
damages, and (3) P50,000.00 as attorney's fees and litigation expenses. Costs against petitioners.

SO ORDERED.

Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.

Footnotes
1
Rollo, G.R. No. 120098, pp. 23-45.
 2
Id. at 23-24.
3
Folder of Exhibits, pp. 5-12.
4
Rollo, G.R. No. 120098, pp. 23-24.
5
Id. at 45.
6
Rollo, G.R. No. 120098, pp. 23-25.
7
Rollo, G.R. No. 120098, pp. 9-10.
8
Rollo, G.R. No. 120098, p. 25.
9
Id., at 33.
10
Id., at 49.
11
Id., at 44.
12
Id., at 133.
13
Congregation of the Religious of the Virgin Mary v. Court of Appeals, 291 SCRA 385, 391-392 (1998).
14
Manlapaz. Court of Appeals, 147 SCRA 236, 239 (1987).
15
Rollo, G.R No. 120109, pp. 62-63.
16
Rollo, G.R. No. 120098, pp. 68-69.
17
Segura vs. Segura, 165 SCRA 368,375 (1988); Noel vs. Court of Appeals, G.R. No. 59550, 240 SCRA
78,88 (1995).
18
Mathay v. Court of Appeals, 295 SCRA 556, 575 (1998).
19
Diaz-Duarte vs. Ong, 298 SCRA 388, 397 (1998).
20
Exhibit "U", Folder of Exhibits, p.64.
21
Exhibit "V", Id., at 66.
22
Noel vs. Court of Appeals, 240 SCRA 78,90 (1995).
23
Ace Hailers Corporation v. CA, et al., G.R No. 127934, August 23, 2000, p. 11.
24
Barzaga vs. Court of Appeals, 268 SCRA 105, 113-114 (1997).
25
Rollo G.R. No. 120109, pp. 43-44.
26
"J" Marketing Corp. vs. Sia, Jr., 285 SCRA 580, 583-584 (1998).
27
Cervantes vs. Court of Appeals, 304 SCRA 25, 33 (1997).
28
Exhibit "X", Folder of Exhibits, p. 69.
29
Art. 2216. Civil Code. — No proof of pecuniary loss is necessary in order that moral, nominal, temperate
liquidated or exemplary damages may be adjudicated. The assessment of such damages, except liquidated
ones, is left to the discretion of the court, according to the circumstances of each case.
30
Vital-Gozon v. Court of Appeals, 292 SCRA 124, 147 (1998).
31
The time when PBCom leased the disputed properties to Tsai. CA Rollo, p. 34.

EN BANC

G.R. No. L-32030 July 2, 1930

SOFIA LAVARRO, ET AL., plaintiffs-appellants,

vs.
REGINA LABITORIA, ET AL., defendants-appellants.

M. H. de Joya and Enrique Tiangco for plaintiffs-appellants.

Mariano Escueta for defendants-appellants.

OSTRAND, J.:

Anastacio Labitoria, who died over thirty years ago, was the original owner of a tract of land
divided into three parcels and situated in the barrio of Mangilag, municipality of Candelaria,
Province of Tayabas. He left four children, Francisco, Liberata, Tirso, and Eustacio Labitoria.
Francisco acquired the shares of Tirso and Eustacio together with the greater part of that of
Liberata, and thus became the owner of nearly all of the land. After his death, his children,
Macario and Regina Labitoria, became the owners of his interest in the land.

Sofia Lavarro is the daughter of Liberata Labitoria, and in or about the year 1897, her first
husband, Crispulo Alcantara, borrowed P330 from Francisco Labitoria on the condition that
Alcantara should plant 3,300 coconut palms on the land to be divided in equal shares between
the parties, the loan to be paid back by turning over to the creditor 330 coconut palms out of the
share of Alcantara and Sofia. Under this agreement, about 1,700 palms were planted by
Alcantara, but later on, further plantings were made by his wife, Sofia Lavarro.

In July, 1916, the land was registered in the names of Macario Labitoria, Regina Labitoria,
Bernardo Labitoria, Vidal Labitoria, Ariston Lavarro, Sofia Lavarro, and Isidro Lavaris. Nothing
seems to have been said about the improvements on the land and no special mention of them
appears in the certificate of title. Neither were the respective shares of the persons to whom the
land was adjudicated definitely determined.

On October 31, 1916, Macario, Regina, and Bernardo Labitoria and Ariston Lavarro brought an
action against Sofia Lavarro and her then husband, Emeterio Pureza, for the partition of the land
with its improvements. The action is civil case No. 351 of the Court of First Instance of Tayabas.
In her answer in that case, Sofia Lavarro set up a cross-complaint alleging, among other things,
that she was a coowner of the land and was entitled to a large proportion of the coconut palms
thereon. The prayer of the cross-complaint reads as follows:

Wherefore, by this cross-complaint Sofia Lavarro and Emeterio Pureza, through their
undersigned attorney, pray the court to decree the partition of the three parcels of land
described above, with all the improvements thereon, allotting to Sofia Lavarro and
Emeterio Pureza their rightful portion, and ordering Macario Labitoria to render the
proper accounts, and to deliver to his coheirs their proportionate part of the fruits and
products of said lands, with costs against the cross-complaint defendants. (Emphasis
supplied.)

Upon trial partition was ordered, and Sofia Lavarro was awarded 520 coconut trees and 43,391
square meters of land. She thereupon appealed to the Supreme Court, and a decision was
rendered by that court on March 24, 1927,1 in which it was held that Sofia Lavarro was entitled
to 1/28 of the land. In all the respects, the decision of the Court of First Instances was affirmed.
The partition seems to have been carried out in conformity with the decision of the Supreme
Court, and Sofia was awarded 6 hectares, 88 ares, and 77 centiares of land, together with 850
coconut palms instead of 520.

The present action was initiated by Sofia Lavarro and her daughters, Apolonia and Isabel
Alcantara, on August 15, 1927, against Regina Labitoria and Marciano Labitoria, the latter as
administrator of the estate of the deceased Macario Labitoria. In their amended complaint, the
plaintiffs allege that on or about the year 1897, Sofia Lavarro and her husband, Crispulo
Alcantara, planted 2,850 coconut palms on the land above-mentioned, of which 1,970 trees were
actually alive and bearing fruit; that after the death of Crispulo Alcantara in the year 1910, Sofia
Lavarro, being then a widow, planted 2,200 coconut palms on the same tract of land, 2,000
palms being still in existence and the greater part of them bearing fruit; that from the year 1897,
the plaintiffs had been in possession of the above-mentioned plantings and had collected the
fruits, but that the defendants were now endeavoring to take possession of said coconut palms;
and that each coconut palm was worth P12. The plaintiffs therefore prayed that unless the
defendants paid to the plaintiffs the sum of P47,640, the value of the 3,970 palms planted, it be
ordered that said plaintiffs be allowed to continue in possession of said coconut palms in
accordance with the law.

In their answer to the complaint, the defendants set up as special defenses res judicata and
prescription.

Upon trial, the court below, basing its decision on the case of Bautista vs. Jimenez (24 Phil.,
111), and article 361 of the Civil Code, ordered the defendants to pay the plaintiffs the sum of
P4,820 for 1,205 coconut palms or to require the plaintiffs to purchase the land, the plaintiffs to
retain the coconut palms until the aforesaid sum was paid. From this judgment both the plaintiffs
and defendants appealed.

It is very obvious that the court below erred in rendering judgment in favor of the plaintiffs. This
is an action for compensation for improvements alleged to have been made by the plaintiffs on
the land awarded to the defendants and is brought notwithstanding the fact that the question of
improvements was put in issue in case No. 351 and that the portion of land due Sofia Lavarro,
and the improvements as well, were determined and adjudicated by the court in that case. Her
rights in regard to the improvements are consequently res judicata.

But it is intimated that, while in the earlier case the issues related to the ownership of the
improvements, the issue here is only a question of money payment and that therefore the causes
of action are different. Assuming, without conceding, that such is the case, the result would be
the same. The issues in both cases arose from the same source or transactions and should have
been determined in the same case (sec. 97, Code of Civil Procedure). A judgment upon the
merits bars a subsequent suit upon the same cause, though brought in a different form of action.
(White vs. Martin, 1 Port. [Ala.], 215.) "The principle is firmly established that a party will not
be permitted to split up a single cause of action and make it the basis for several suits. If several
suits be brought for different parts of such a claim, the pendency of the first may be pleaded in
abatement of the others, and a recovery of any part of the cause of action will be a bar to an
action brought upon the other part. Not only is it a bar to suit, but the plaintiff in the former
action cannot subsequently avail himself of the residue by way of offset in an action against him
by the opposite party." (15 R. C. L., 965) In passing, it may be noted that a close examination of
the facts in the case of Bautista vs. Jimenez (24 Phil., 111), will show that it differs materially
from the present case; the case of Berses vs. Villanueva (25 Phil., 473), is more in point.

As to the other plaintiffs, Apolonia and Isabel Alcantara, it is sufficient to say that if they had
any claim to the property or improvements, such claims should have been presented in the
registration proceedings in 1916; trees and plants annexed to the land are parts thereof and unless
rights or interests in such trees or plants are claimed in the registration proceedings by others,
they become the property of the persons to whom the land is adjudicated. By timely proceedings
in equity, matters of that character, if fraudulent, may sometimes be corrected, but in the present
case, the plaintiffs Apolonia and Isabel Alcantara did not prosecute their alleged rights until
eleven years after the registration of the property, and it is obvious that whatever rights they may
have had are now lost by prescription.

The judgment of the court below is therefore reversed, and the case is dismissed with the costs in
both instances against the plaintiffs, jointly and severally. So ordered.

Malcolm, Villamor, Johns, Romualdez, and Villa-Real, JJ., concur.

Footnotes
1
G.R. No. 25385 Labitoria vs. Lavarro, not reported.

SECOND DIVISION

G.R. No. L-58469 May 16, 1983

MAKATI LEASING and FINANCE CORPORATION, petitioner,

vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS,
respondents.

Loreto C. Baduan for petitioner.

Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.

Jose V. Mancella for respondent.

DE CASTRO, J.:

Petition for review on certiorari of the decision of the Court of Appeals (now
Intermediate Appellate Court) promulgated on August 27, 1981 in CA-G.R. No. SP-
12731, setting aside certain Orders later specified herein, of Judge Ricardo J.
Francisco, as Presiding Judge of the Court of First instance of Rizal Branch VI, issued
in Civil Case No. 36040, as wen as the resolution dated September 22, 1981 of the said
appellate court, denying petitioner's motion for reconsideration.
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. However, the Deputy Sheriff assigned to implement the
foreclosure failed to gain entry into private respondent's premises and was not able to
effect the seizure of the aforedescribed machinery. Petitioner thereafter filed a
complaint for judicial foreclosure with the Court of First Instance of Rizal, Branch VI,
docketed as Civil Case No. 36040, the case before the lower court.

Acting on petitioner's application for replevin, the lower court issued a writ of seizure,
the enforcement of which was however subsequently restrained upon private
respondent's filing of a motion for reconsideration. After several incidents, the lower
court finally issued on February 11, 1981, an order lifting the restraining order for the
enforcement of the writ of seizure and an order to break open the premises of private
respondent to enforce said writ. The lower court reaffirmed its stand upon private
respondent's filing of a further motion for reconsideration.

On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of
private respondent and removed the main drive motor of the subject machinery.

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 appellate court rejected petitioner's argument that private respondent is
estopped from claiming that the machine is real property by constituting a chattel
mortgage thereon.

A motion for reconsideration of this decision of the Court of Appeals having been
denied, petitioner has brought the case to this Court for review by writ of certiorari. It is
contended by private respondent, however, that the instant petition was rendered moot
and academic by petitioner's act of returning the subject motor drive of respondent's
machinery after the Court of Appeals' decision was promulgated.

The contention of private respondent is without merit. When petitioner returned the
subject motor drive, it made itself unequivocably clear that said action was without
prejudice to a motion for reconsideration of the Court of Appeals decision, as shown by
the receipt duly signed by respondent's representative. 1 Considering that petitioner has
reserved its right to question the propriety of the Court of Appeals' decision, the
contention of private respondent that this petition has been mooted by such return may
not be sustained.

The next and the more crucial question to be resolved in this Petition is whether the
machinery in suit is real or personal property from the point of view of the parties, with
petitioner arguing that it is a personality, while the respondent claiming the contrary, and
was sustained by the appellate court, which accordingly held that the chattel mortgage
constituted thereon is null and void, as contended by said respondent.

A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where
this Court, speaking through Justice J.B.L. Reyes, ruled:

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 defendants-
appellants, having treated the subject house as personality.

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.

In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court
of Appeals 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 of the subject machinery as chattel by
the private respondent is indicative of 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 real property, as long as no
interest of third parties would be prejudiced thereby.

Private respondent contends that estoppel cannot apply against it because it had never
represented nor agreed that the machinery in suit be considered as personal property
but was merely required and dictated on by herein petitioner to sign a printed form of
chattel mortgage which was in a blank form at the time of signing. This contention lacks
persuasiveness. As aptly pointed out by petitioner and not denied by the respondent,
the status of the subject machinery as movable or immovable was never placed in issue
before the lower court and the Court of Appeals except in a supplemental memorandum
in support of the petition filed in the appellate court. Moreover, even granting that the
charge is true, such fact alone does not render a contract void ab initio, but can only be
a ground for rendering said contract voidable, or annullable pursuant to Article 1390 of
the new Civil Code, by a proper action in court. 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,

From what has been said above, the error of the appellate court in ruling that the
questioned machinery is real, not personal property, becomes very apparent. Moreover,
the case of Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70, heavily relied
upon by said court is not applicable to the case at bar, the nature of the machinery and
equipment involved therein as real properties never having been disputed nor in issue,
and they were not the subject of a Chattel Mortgage. Undoubtedly, the Tumalad case
bears more nearly perfect parity with the instant case to be the more controlling
jurisprudential authority.

WHEREFORE, the questioned decision and resolution of the Court of Appeals are
hereby reversed and set aside, and the Orders of the lower court are hereby reinstated,
with costs against the private respondent.

SO ORDERED.

Makasiar (Chairman), Aquino, Concepcion Jr., Guerrero and Escolin JJ., concur.

Abad Santos, J., concurs in the result.

Footnotes
1 p. 52, Rollo.

EN BANC

G.R. No. L-17870 September 29, 1962

MINDANAO BUS COMPANY, petitioner,

vs.
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan
de Oro City, respondents.

Binamira, Barria and Irabagon for petitioner.

Vicente E. Sabellina for respondents.

LABRADOR, J.:

This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No.
710 holding that the petitioner Mindanao Bus Company is liable to the payment of the realty tax
on its maintenance and repair equipment hereunder referred to.

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.

In the Court of Tax Appeals the parties submitted the following stipulation of facts:

Petitioner and respondents, thru their respective counsels agreed to the following
stipulation of 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;

2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains
Branch Offices and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur;
Davao City and Kibawe, Bukidnon Province;

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".

4. 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;

5. 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;

6. 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.1awphîl.nèt

The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having
denied a motion for reconsideration, petitioner brought the case to this Court assigning the
following errors:

1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that
the questioned assessments are valid; and that said tools, equipments or machineries are
immovable taxable real properties.

2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil
Code, and holding that pursuant thereto the movable equipments are taxable realties, by
reason of their being intended or destined for use in an industry.
 3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent
City Assessor's power to assess and levy real estate taxes on machineries is further
restricted by section 31, paragraph (c) of Republic Act No. 521; and

4. The Tax Court erred in denying petitioner's motion for reconsideration.

Respondents contend that said equipments, tho movable, are immobilized by destination, in
accordance with paragraph 5 of Article 415 of the New Civil Code which provides:

Art. 415. — The following are immovable properties:

xxx xxx xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the

tenement for an industry or 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. (Emphasis
ours.)

Note that the stipulation expressly states that the equipment are placed on wooden or cement
platforms. They can be moved around and about in petitioner's repair shop. In the case of B. H.
Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court said:

Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real
property to "machinery, liquid containers, instruments or implements intended by the
owner of any building or land for use in connection with any industry or trade being
carried on therein and which are expressly adapted to meet the requirements of such trade
or industry."

If the installation of the machinery and equipment in question in the central of the
Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing therein, for its
sugar and industry, converted them into real property by reason of their purpose, it cannot
be said that their incorporation therewith was not permanent in character because, as
essential and principle 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. (Emphasis ours.)

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.

The law that governs the determination of the question at issue is as follows:

Art. 415. The following are immovable property:

xxx xxx xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the

tenement for an industry or 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; (Civil Code
of the Phil.)

Aside from the element of essentiality the above-quoted provision also requires that the industry
or works be carried on in a building or on a piece of land. Thus in the case of Berkenkotter vs.
Cu Unjieng, supra, the "machinery, liquid containers, and instruments or implements" are found
in a building constructed on the land. A sawmill would also be installed in a building on land
more or less permanently, and the sawing is conducted in the land or building.

But in the case at bar the equipments in question are destined only to repair or service the
transportation business, which is not carried on in a building or permanently on a piece of land,
as demanded by the law. Said equipments may not, therefore, be deemed real property.

Resuming what we have set forth above, we hold that the equipments in question are not
absolutely essential to the petitioner's transportation business, and petitioner's business is not
carried on in a building, tenement or on a specified land, so said equipment may not be
considered real estate within the meaning of Article 415 (c) of the Civil Code.

WHEREFORE, the decision subject of the petition for review is hereby set aside and the
equipment in question declared not subject to assessment as real estate for the purposes of the
real estate tax. Without costs.
So ordered.

Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L., Paredes, Dizon and Makalintal, JJ.,
concur.
Regala, Concepcion and Barrera JJ., took no part.

EN BANC

G.R. No. L-15334 January 31, 1964

BOARD OF ASSESSMENT APPEALS, CITY ASSESSOR and CITY TREASURER OF

QUEZON CITY, petitioners,
vs.
MANILA ELECTRIC COMPANY, respondent.

Assistant City Attorney Jaime R. Agloro for petitioners.

Ross, Selph and Carrascoso for respondent.

PAREDES, J.:

From the stipulation of facts and evidence adduced during the hearing, the following appear:

On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized the
Municipal Board of Manila to grant a franchise to construct, maintain and operate an electric
street railway and electric light, heat and power system in the City of Manila and its suburbs to
the person or persons making the most favorable bid. Charles M. Swift was awarded the said
franchise on March 1903, the terms and conditions of which were embodied in Ordinance No. 44
approved on March 24, 1903. Respondent Manila Electric Co. (Meralco for short), became the
transferee and owner of the franchise.

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:

The first steel tower is located in South Tatalon, España Extension, Quezon City. The
findings were as follows: the ground around one of the four posts was excavated to a
depth of about eight (8) feet, with an opening of about one (1) meter in diameter,
decreased to about a quarter of a meter as it we deeper until it reached the bottom of the
post; at the bottom of the post were two parallel steel bars attached to the leg means of
bolts; the tower proper was attached to the leg three bolts; with two cross metals to
 prevent mobility; there was no concrete foundation but there was adobe stone underneath;
as the bottom of the excavation was covered with water about three inches high, it could
not be determined with certainty to whether said adobe stone was placed purposely or
not, as the place abounds with this kind of stone; and the tower carried five high voltage
wires without cover or any insulating materials.

The second tower inspected was located in Kamuning Road, K-F, Quezon City, on land
owned by the petitioner approximate more than one kilometer from the first tower. As in
the first tower, the ground around one of the four legs was excavate from seven to eight
(8) feet deep and one and a half (1-½) meters wide. There being very little water at the
bottom, it was seen that there was no concrete foundation, but there soft adobe beneath.
The leg was likewise provided with two parallel steel bars bolted to a square metal frame
also bolted to each corner. Like the first one, the second tower is made up of metal rods
joined together by means of bolts, so that by unscrewing the bolts, the tower could be
dismantled and reassembled.

The third tower examined is located along Kamias Road, Quezon City. As in the first two
towers given above, the ground around the two legs of the third tower was excavated to a
depth about two or three inches beyond the outside level of the steel bar foundation. It
was found that there was no concrete foundation. Like the two previous ones, the bottom
arrangement of the legs thereof were found to be resting on soft adobe, which, probably
due to high humidity, looks like mud or clay. It was also found that the square metal
frame supporting the legs were not attached to any material or foundation.

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.

The tax exemption privilege of the petitioner is quoted hereunder:

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. (Par. 9, Part Two, Act No. 484 Respondent's Franchise;
emphasis supplied.)

The word "pole" means "a long, comparatively slender usually cylindrical piece of wood or
timber, as typically the stem of a small tree stripped of its branches; also by extension, a similar
typically cylindrical piece or object of metal or the like". The term also refers to "an upright
standard to the top of which something is affixed or by which something is supported; as a
dovecote set on a pole; telegraph poles; a tent pole; sometimes, specifically a vessel's master
(Webster's New International Dictionary 2nd Ed., p. 1907.) Along the streets, in the City of
Manila, may be seen cylindrical metal poles, cubical concrete poles, and poles of the PLDT Co.
which are made of two steel bars joined together by an interlacing metal rod. They are called
"poles" notwithstanding the fact that they are no made of wood. It must be noted from paragraph
9, above quoted, that the concept of the "poles" for which exemption is granted, is not
determined by their place or location, nor by the character of the electric current it carries, nor
the material or form of which it is made, but the use to which they are dedicated. In accordance
with the definitions, pole is not restricted to a long cylindrical piece of wood or metal, but
includes "upright standards to the top of which something is affixed or by which something is
supported. As heretofore described, respondent's steel supports consists of a framework of four
steel bars or strips which are bound by steel cross-arms atop of which are cross-arms supporting
five high voltage transmission wires (See Annex A) and their sole function is to support or carry
such wires.

The conclusion of the CTA that the steel supports in question are embraced in the term "poles" is
not a novelty. Several courts of last resort in the United States have called these steel supports
"steel towers", and they denominated these supports or towers, as electric poles. In their
decisions the words "towers" and "poles" were used interchangeably, and it is well understood in
that jurisdiction that a transmission tower or pole means the same thing.

In a proceeding to condemn land for the use of electric power wires, in which the law provided
that wires shall be constructed upon suitable poles, this term was construed to mean either wood
or metal poles and in view of the land being subject to overflow, and the necessary carrying of
numerous wires and the distance between poles, the statute was interpreted to include towers or
poles. (Stemmons and Dallas Light Co. (Tex) 212 S.W. 222, 224; 32-A Words and Phrases, p.
365.)

The term "poles" was also used to denominate the steel supports or towers used by an association
used to convey its electric power furnished to subscribers and members, constructed for the
purpose of fastening high voltage and dangerous electric wires alongside public highways. The
steel supports or towers were made of iron or other metals consisting of two pieces running from
the ground up some thirty feet high, being wider at the bottom than at the top, the said two metal
pieces being connected with criss-cross iron running from the bottom to the top, constructed like
ladders and loaded with high voltage electricity. In form and structure, they are like the steel
towers in question. (Salt River Valley Users' Ass'n v. Compton, 8 P. 2nd, 249-250.)

The term "poles" was used to denote the steel towers of an electric company engaged in the
generation of hydro-electric power generated from its plant to the Tower of Oxford and City of
Waterbury. These steel towers are about 15 feet square at the base and extended to a height of
about 35 feet to a point, and are embedded in the cement foundations sunk in the earth, the top of
which extends above the surface of the soil in the tower of Oxford, and to the towers are attached
insulators, arms, and other equipment capable of carrying wires for the transmission of electric
power (Connecticut Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl. p. 1).

In a case, the defendant admitted that the structure on which a certain person met his death was
built for the purpose of supporting a transmission wire used for carrying high-tension electric
power, but claimed that the steel towers on which it is carried were so large that their wire took
their structure out of the definition of a pole line. It was held that in defining the word pole, one
should not be governed by the wire or material of the support used, but was considering the
danger from any elevated wire carrying electric current, and that regardless of the size or
material wire of its individual members, any continuous series of structures intended and used
solely or primarily for the purpose of supporting wires carrying electric currents is a pole line
(Inspiration Consolidation Cooper Co. v. Bryan 252 P. 1016).

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.

Granting for the purpose of argument that the steel supports or towers in question are not
embraced within the term poles, the logical question posited is whether they constitute real
properties, so that they can be subject to a real property tax. The tax law does not provide for a
definition of real property; but Article 415 of the Civil Code does, by stating the following are
immovable property:

(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;

xxx xxx xxx

(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;

xxx xxx xxx

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

xxx xxx xxx

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.

It is finally contended that the CTA erred in ordering the City Treasurer of Quezon City to
refund the sum of P11,651.86, despite the fact that Quezon City is not a party to the case. It is
argued that as the City Treasurer is not the real party in interest, but Quezon City, which was not
a party to the suit, notwithstanding its capacity to sue and be sued, he should not be ordered to
effect the refund. This question has not been raised in the court below, and, therefore, it cannot
be properly raised for the first time on appeal. The herein petitioner is indulging in legal
technicalities and niceties which do not help him any; for factually, it was he (City Treasurer)
whom had insisted that respondent herein pay the real estate taxes, which respondent paid under
protest. Having acted in his official capacity as City Treasurer of Quezon City, he would surely
know what to do, under the circumstances.

IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against the
petitioners.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera and
Regala, JJ., concur.
Makalintal, J., concurs in the result.
Dizon, J., took no part.

SECOND DIVISION

G.R. No. L-50466 May 31, 1982

CALTEX (PHILIPPINES) INC., petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY,
respondents.

AQUINO, J.:

This case is about the realty tax on machinery and equipment installed by Caltex
(Philippines) Inc. in its gas stations located on leased land.

The machines and equipment consists of underground tanks, elevated tank, elevated
water tanks, water tanks, gasoline pumps, computing pumps, water pumps, car washer,
car hoists, truck hoists, air compressors and tireflators. The city assessor described the
said equipment and machinery in this manner:

A gasoline service station is a piece of lot where a building or shed is

erected, a water tank if there is any is placed in one corner of the lot, car
hoists are placed in an adjacent shed, an air compressor is attached in the
wall of the shed or at the concrete wall fence.

The controversial underground tank, depository of gasoline or crude oil, is

dug deep about six feet more or less, a few meters away from the shed.
This is done to prevent conflagration because gasoline and other
combustible oil are very inflammable.

This underground tank is connected with a steel pipe to the gasoline pump
and the gasoline pump is commonly placed or constructed under the
shed. The footing of the pump is a cement pad and this cement pad is
imbedded in the pavement under the shed, and evidence that the gasoline
underground tank is attached and connected to the shed or building
through the pipe to the pump and the pump is attached and affixed to the
cement pad and pavement covered by the roof of the building or shed.

The building or shed, the elevated water tank, the car hoist under a
separate shed, the air compressor, the underground gasoline tank, neon
lights signboard, concrete fence and pavement and the lot where they are
all placed or erected, all of them used in the pursuance of the gasoline
service station business formed the entire gasoline service-station.

As to whether the subject properties are attached and affixed to the

tenement, it is clear they are, for the tenement we consider in this
particular case are (is) the pavement covering the entire lot which was
constructed by the owner of the gasoline station and the improvement
 which holds all the properties under question, they are attached and
affixed to the pavement and to the improvement.

The pavement covering the entire lot of the gasoline service station, as
well as all the improvements, machines, equipments and apparatus are
allowed by Caltex (Philippines) Inc. ...

The underground gasoline tank is attached to the shed by the steel pipe to
the pump, so with the water tank it is connected also by a steel pipe to the
pavement, then to the electric motor which electric motor is placed under
the shed. So to say that the gasoline pumps, water pumps and
underground tanks are outside of the service station, and to consider only
the building as the service station is grossly erroneous. (pp. 58-60, Rollo).

The said machines and equipment are loaned by Caltex to gas station operators under
an appropriate lease agreement or receipt. It is stipulated in the lease contract that the
operators, upon demand, shall return to Caltex the machines and equipment in good
condition as when received, ordinary wear and tear excepted.

The lessor of the land, where the gas station is located, does not become the owner of
the machines and equipment installed therein. Caltex retains the ownership thereof
during the term of the lease.

The city assessor of Pasay City characterized the said items of gas station equipment
and machinery as taxable realty. The realty tax on said equipment amounts to
P4,541.10 annually (p. 52, Rollo). The city board of tax appeals ruled that they are
personalty. The assessor appealed to the Central Board of Assessment Appeals.

The Board, which was composed of Secretary of Finance Cesar Virata as chairman,
Acting Secretary of Justice Catalino Macaraig, Jr. and Secretary of Local Government
and Community Development Jose Roño, held in its decision of June 3, 1977 that the
said machines and equipment are real property within the meaning of sections 3(k) &
(m) and 38 of the Real Property Tax Code, Presidential Decree No. 464, which took
effect on June 1, 1974, and that the definitions of real property and personal property in
articles 415 and 416 of the Civil Code are not applicable to this case.

The decision was reiterated by the Board (Minister Vicente Abad Santos took
Macaraig's place) in its resolution of January 12, 1978, denying Caltex's motion for
reconsideration, a copy of which was received by its lawyer on April 2, 1979.

On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting aside
of the Board's decision and for a declaration that t he said machines and equipment are
personal property not subject to realty tax (p. 16, Rollo).

The Solicitor General's contention that the Court of Tax Appeals has exclusive appellate
jurisdiction over this case is not correct. When Republic act No. 1125 created the Tax
Court in 1954, there was as yet no Central Board of Assessment Appeals. Section 7(3)
of that law in providing that the Tax Court had jurisdiction to review by appeal decisions
of provincial or city boards of assessment appeals had in mind the local boards of
assessment appeals but not the Central Board of Assessment Appeals which under the
Real Property Tax Code has appellate jurisdiction over decisions of the said local
boards of assessment appeals and is, therefore, in the same category as the Tax Court.

Section 36 of the Real Property Tax Code provides that the decision of the Central
Board of Assessment Appeals shall become final and executory after the lapse of fifteen
days from the receipt of its decision by the appellant. Within that fifteen-day period, a
petition for reconsideration may be filed. The Code does not provide for the review of
the Board's decision by this Court.

Consequently, the only remedy available for seeking a review by this Court of the
decision of the Central Board of Assessment Appeals is the special civil action of
certiorari, the recourse resorted to herein by Caltex (Philippines), Inc.

The issue is whether the pieces of gas station equipment and machinery already
enumerated are subject to realty tax. This issue has to be resolved primarily under the
provisions of the Assessment Law and the Real Property Tax Code.

Section 2 of the Assessment Law provides that the realty tax is due "on real property,
including land, buildings, machinery, and other improvements" not specifically exempted
in section 3 thereof. This provision is reproduced with some modification in the Real
Property Tax Code which provides:

SEC. 38. Incidence of Real Property Tax.— There shall be levied,

assessed and collected in all provinces, cities and municipalities an
annual ad valorem tax on real property, such as land, buildings, machinery
and other improvements affixed or attached to real property not
hereinafter specifically exempted.

The Code contains the following definitions in its section 3:

k) Improvements — is a valuable addition made to property or an

amelioration in its condition, amounting to more than mere repairs or
replacement of waste, costing labor or capital and intended to enhance its
value, beauty or utility or to adapt it for new or further purposes.

m) Machinery — shall embrace machines, mechanical contrivances,

instruments, appliances and apparatus attached to the real estate. It
includes the physical facilities available for production, as well as the
installations and appurtenant service facilities, together with all other
equipment designed for or essential to its manufacturing, industrial or
agricultural purposes (See sec. 3[f], Assessment Law).
We hold that the said equipment and machinery, as appurtenances to the gas station
building or shed owned by Caltex (as to which it is subject to realty tax) 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 or affixed 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.

Caltex invokes the rule 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 (Davao Saw Mill Co. vs. Castillo,
61 Phil 709).

That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code regarding
machinery that becomes real property by destination. In the Davao Saw Mills case the
question was whether the machinery mounted on foundations of cement and installed
by the lessee on leased land should be regarded as real property for purposes of
execution of a judgment against the lessee. The sheriff treated the machinery as
personal property. This Court sustained the sheriff's action. (Compare with Machinery &
Engineering Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case
machinery was treated as realty).

Here, the question is whether the gas station equipment and machinery permanently
affixed by Caltex to its gas station and pavement (which are indubitably taxable realty)
should be subject to the realty tax. This question is different from the issue raised in the
Davao Saw Mill case.

Improvements on land are commonly taxed as realty even though for some purposes
they might be considered personalty (84 C.J.S. 181-2, Notes 40 and 41). "It is a familiar
phenomenon to see things classed as real property for purposes of taxation which on
general principle might be considered personal property" (Standard Oil Co. of New York
vs. Jaramillo, 44 Phil. 630, 633).

This case is also easily distinguishable from Board of Assessment Appeals vs. Manila
Electric Co., 119 Phil. 328, where Meralco's steel towers were considered poles within
the meaning of paragraph 9 of its franchise which exempts its poles from taxation. The
steel towers were considered personalty because they were attached to square metal
frames by means of bolts and could be moved from place to place when unscrewed and
dismantled.

Nor are Caltex's gas station equipment and machinery the same as tools and
equipment in the repair shop of a bus company which were held to be personal property
not subject to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil. 501).
The Central Board of Assessment Appeals did not commit a grave abuse of discretion
in upholding the city assessor's is imposition of the realty tax on Caltex's gas station and
equipment.

WHEREFORE, the questioned decision and resolution of the Central Board of

Assessment Appeals are affirmed. The petition for certiorari is dismissed for lack of
merit. No costs.

SO ORDERED.

Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur.

Concepcion, Jr. and Abad Santos, JJ., took no part.

EN BANC

G.R. No. 155076 January 13, 2009

LUIS MARCOS P. LAUREL, Petitioner,

vs.
HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial Court, Makati City,
Branch 150, PEOPLE OF THE PHILIPPINES & PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY Respondents.

RESOLUTION

YNARES-SANTIAGO, J.:

On February 27, 2006, this Court’s First Division rendered judgment in this case as follows:

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Orders of the
Regional Trial Court and the Decision of the Court of Appeals are REVERSED and SET
ASIDE. The Regional Trial Court is directed to issue an order granting the motion of the
petitioner to quash the Amended Information.

SO ORDERED.1

By way of brief background, petitioner is one of the accused in Criminal Case No. 99-2425, filed
with the Regional Trial Court of Makati City, Branch 150. The Amended Information charged
the accused with theft under Article 308 of the Revised Penal Code, committed as follows:

On or about September 10-19, 1999, or prior thereto in Makati City, and within the jurisdiction
of this Honorable Court, the accused, conspiring and confederating together and all of them
mutually helping and aiding one another, with intent to gain and without the knowledge and
consent of the Philippine Long Distance Telephone (PLDT), did then and there willfully,
unlawfully and feloniously take, steal and use the international long distance calls belonging to
PLDT by conducting International Simple Resale (ISR), which is a method of routing and
completing international long distance calls using lines, cables, antenae, and/or air wave
frequency which connect directly to the local or domestic exchange facilities of the country
where the call is destined, effectively stealing this business from PLDT while using its facilities
in the estimated amount of P20,370,651.92 to the damage and prejudice of PLDT, in the said
amount.

CONTRARY TO LAW.2

Petitioner filed a "Motion to Quash (with Motion to Defer Arraignment)," on the ground that the
factual allegations in the Amended Information do not constitute the felony of theft. The trial
court denied the Motion to Quash the Amended Information, as well petitioner’s subsequent
Motion for Reconsideration.

Petitioner’s special civil action for certiorari was dismissed by the Court of Appeals. Thus,
petitioner filed the instant petition for review with this Court.

In the above-quoted Decision, this Court held that the Amended Information does not contain
material allegations charging petitioner with theft of personal property since international long
distance calls and the business of providing telecommunication or telephone services are not
personal properties under Article 308 of the Revised Penal Code.

Respondent Philippine Long Distance Telephone Company (PLDT) filed a Motion for
Reconsideration with Motion to Refer the Case to the Supreme Court En Banc. It maintains that
the Amended Information charging petitioner with theft is valid and sufficient; that it states the
names of all the accused who were specifically charged with the crime of theft of PLDT’s
international calls and business of providing telecommunication or telephone service on or about
September 10 to 19, 1999 in Makati City by conducting ISR or International Simple Resale; that
it identifies the international calls and business of providing telecommunication or telephone
service of PLDT as the personal properties which were unlawfully taken by the accused; and that
it satisfies the test of sufficiency as it enabled a person of common understanding to know the
charge against him and the court to render judgment properly.

PLDT further insists that the Revised Penal Code should be interpreted in the context of the Civil
Code’s definition of real and personal property. The enumeration of real properties in Article 415
of the Civil Code is exclusive such that all those not included therein are personal properties.
Since Article 308 of the Revised Penal Code used the words "personal property" without
qualification, it follows that all "personal properties" as understood in the context of the Civil
Code, may be the subject of theft under Article 308 of the Revised Penal Code. PLDT alleges
that the international calls and business of providing telecommunication or telephone service are
personal properties capable of appropriation and can be objects of theft.

PLDT also argues that "taking" in relation to theft under the Revised Penal Code does not require
"asportation," the sole requisite being that the object should be capable of "appropriation." The
element of "taking" referred to in Article 308 of the Revised Penal Code means the act of
depriving another of the possession and dominion of a movable coupled with the intention, at the
time of the "taking," of withholding it with the character of permanency. There must be intent to
appropriate, which means to deprive the lawful owner of the thing. Thus, the term "personal
properties" under Article 308 of the Revised Penal Code is not limited to only personal
properties which are "susceptible of being severed from a mass or larger quantity and of being
transported from place to place."

PLDT likewise alleges that as early as the 1930s, international telephone calls were in existence;
hence, there is no basis for this Court’s finding that the Legislature could not have contemplated
the theft of international telephone calls and the unlawful transmission and routing of electronic
voice signals or impulses emanating from such calls by unlawfully tampering with the telephone
device as within the coverage of the Revised Penal Code.

According to respondent, the "international phone calls" which are "electric currents or sets of
electric impulses transmitted through a medium, and carry a pattern representing the human
voice to a receiver," are personal properties which may be subject of theft. Article 416(3) of the
Civil Code deems "forces of nature" (which includes electricity) which are brought under the
control by science, are personal property.

In his Comment to PLDT’s motion for reconsideration, petitioner Laurel claims that a telephone
call is a conversation on the phone or a communication carried out using the telephone. It is not
synonymous to electric current or impulses. Hence, it may not be considered as personal property
susceptible of appropriation. Petitioner claims that the analogy between generated electricity and
telephone calls is misplaced. PLDT does not produce or generate telephone calls. It only
provides the facilities or services for the transmission and switching of the calls. He also insists
that "business" is not personal property. It is not the "business" that is protected but the "right to
carry on a business." This right is what is considered as property. Since the services of PLDT
cannot be considered as "property," the same may not be subject of theft.

The Office of the Solicitor General (OSG) agrees with respondent PLDT that "international
phone calls and the business or service of providing international phone calls" are subsumed in
the enumeration and definition of personal property under the Civil Code hence, may be proper
subjects of theft. It noted that the cases of United States v. Genato,3 United States v. Carlos4 and
United States v. Tambunting,5 which recognized intangible properties like gas and electricity as
personal properties, are deemed incorporated in our penal laws. Moreover, the theft provision in
the Revised Penal Code was deliberately couched in broad terms precisely to be all-
encompassing and embracing even such scenario that could not have been easily anticipated.

According to the OSG, prosecution under Republic Act (RA) No. 8484 or the Access Device
Regulations Act of 1998 and RA 8792 or the Electronic Commerce Act of 2000 does not preclude
prosecution under the Revised Penal Code for the crime of theft. The latter embraces
unauthorized appropriation or use of PLDT’s international calls, service and business, for
personal profit or gain, to the prejudice of PLDT as owner thereof. On the other hand, the special
laws punish the surreptitious and advanced technical means employed to illegally obtain the
subject service and business. Even assuming that the correct indictment should have been under
RA 8484, the quashal of the information would still not be proper. The charge of theft as alleged
in the Information should be taken in relation to RA 8484 because it is the elements, and not the
designation of the crime, that control.

Considering the gravity and complexity of the novel questions of law involved in this case, the
Special First Division resolved to refer the same to the Banc.

We resolve to grant the Motion for Reconsideration but remand the case to the trial court for
proper clarification of the Amended Information.

Article 308 of the Revised Penal Code provides:

Art. 308. Who are liable for theft. – Theft is committed by any person who, with intent to gain
but without violence against, or intimidation of persons nor force upon things, shall take personal
property of another without the latter’s consent.

The elements of theft under Article 308 of the Revised Penal Code are as follows: (1) that there
be taking of personal property; (2) that said property belongs to another; (3) that the taking be
done with intent to gain; (4) that the taking be done without the consent of the owner; and (5)
that the taking be accomplished without the use of violence against or intimidation of persons or
force upon things.

Prior to the passage of the Revised Penal Code on December 8, 1930, the definition of the term
"personal property" in the penal code provision on theft had been established in Philippine
jurisprudence. This Court, in United States v. Genato, United States v. Carlos, and United States
v. Tambunting, consistently ruled that any personal property, tangible or intangible, corporeal or
incorporeal, capable of appropriation can be the object of theft.

Moreover, since the passage of the Revised Penal Code on December 8, 1930, the term "personal
property" has had a generally accepted definition in civil law. In Article 335 of the Civil Code of
Spain, "personal property" is defined as "anything susceptible of appropriation and not included
in the foregoing chapter (not real property)." Thus, the term "personal property" in the Revised
Penal Code should be interpreted in the context of the Civil Code provisions in accordance with
the rule on statutory construction that where words have been long used in a technical sense and
have been judicially construed to have a certain meaning, and have been adopted by the
legislature as having a certain meaning prior to a particular statute, in which they are used, the
words used in such statute should be construed according to the sense in which they have been
previously used.6 In fact, this Court used the Civil Code definition of "personal property" in
interpreting the theft provision of the penal code in United States v. Carlos.

Cognizant of the definition given by jurisprudence and the Civil Code of Spain to the term
"personal property" at the time the old Penal Code was being revised, still the legislature did not
limit or qualify the definition of "personal property" in the Revised Penal Code. Neither did it
provide a restrictive definition or an exclusive enumeration of "personal property" in the Revised
Penal Code, thereby showing its intent to retain for the term an extensive and unqualified
interpretation.1avvphi1.zw+ Consequently, any property which is not included in the
enumeration of real properties under the Civil Code and capable of appropriation can be the
subject of theft under the Revised Penal Code.

The only requirement for a personal property to be the object of theft under the penal code is that
it be capable of appropriation. It need not be capable of "asportation," which is defined as
"carrying away."7 Jurisprudence is settled that to "take" under the theft provision of the penal
code does not require asportation or carrying away.8

To appropriate means to deprive the lawful owner of the thing.9 The word "take" in the Revised
Penal Code includes any act intended to transfer possession which, as held in the assailed
Decision, may be committed through the use of the offenders’ own hands, as well as any
mechanical device, such as an access device or card as in the instant case. This includes
controlling the destination of the property stolen to deprive the owner of the property, such as the
use of a meter tampering, as held in Natividad v. Court of Appeals,10 use of a device to
fraudulently obtain gas, as held in United States v. Tambunting, and the use of a jumper to divert
electricity, as held in the cases of United States v. Genato, United States v. Carlos, and United
States v. Menagas.11

As illustrated in the above cases, appropriation of forces of nature which are brought under
control by science such as electrical energy can be achieved by tampering with any apparatus
used for generating or measuring such forces of nature, wrongfully redirecting such forces of
nature from such apparatus, or using any device to fraudulently obtain such forces of nature. In
the instant case, petitioner was charged with engaging in International Simple Resale (ISR) or
the unauthorized routing and completing of international long distance calls using lines, cables,
antennae, and/or air wave frequency and connecting these calls directly to the local or domestic
exchange facilities of the country where destined.

As early as 1910, the Court declared in Genato that ownership over electricity (which an
international long distance call consists of), as well as telephone service, is protected by the
provisions on theft of the Penal Code. The pertinent provision of the Revised Ordinance of the
City of Manila, which was involved in the said case, reads as follows:

Injury to electric apparatus; Tapping current; Evidence. – No person shall destroy, mutilate,
deface, or otherwise injure or tamper with any wire, meter, or other apparatus installed or used
for generating, containing, conducting, or measuring electricity, telegraph or telephone service,
nor tap or otherwise wrongfully deflect or take any electric current from such wire, meter, or
other apparatus.

No person shall, for any purpose whatsoever, use or enjoy the benefits of any device by means of
which he may fraudulently obtain any current of electricity or any telegraph or telephone service;
and the existence in any building premises of any such device shall, in the absence of satisfactory
explanation, be deemed sufficient evidence of such use by the persons benefiting thereby.

It was further ruled that even without the above ordinance the acts of subtraction punished
therein are covered by the provisions on theft of the Penal Code then in force, thus:
Even without them (ordinance), the right of the ownership of electric current is secured by
articles 517 and 518 of the Penal Code; the application of these articles in cases of subtraction of
gas, a fluid used for lighting, and in some respects resembling electricity, is confirmed by the
rule laid down in the decisions of the supreme court of Spain of January 20, 1887, and April 1,
1897, construing and enforcing the provisions of articles 530 and 531 of the Penal Code of that
country, articles 517 and 518 of the code in force in these islands.

The acts of "subtraction" include: (a) tampering with any wire, meter, or other apparatus installed
or used for generating, containing, conducting, or measuring electricity, telegraph or telephone
service; (b) tapping or otherwise wrongfully deflecting or taking any electric current from such
wire, meter, or other apparatus; and (c) using or enjoying the benefits of any device by means of
which one may fraudulently obtain any current of electricity or any telegraph or telephone
service.

In the instant case, the act of conducting ISR operations by illegally connecting various
equipment or apparatus to private respondent PLDT’s telephone system, through which
petitioner is able to resell or re-route international long distance calls using respondent PLDT’s
facilities constitutes all three acts of subtraction mentioned above.

The business of providing telecommunication or telephone service is likewise personal property

which can be the object of theft under Article 308 of the Revised Penal Code. Business may be
appropriated under Section 2 of Act No. 3952 (Bulk Sales Law), hence, could be object of theft:

Section 2. Any sale, transfer, mortgage, or assignment of a stock of goods, wares, merchandise,
provisions, or materials otherwise than in the ordinary course of trade and the regular
prosecution of the business of the vendor, mortgagor, transferor, or assignor, or any sale,
transfer, mortgage, or assignment of all, or substantially all, of the business or trade theretofore
conducted by the vendor, mortgagor, transferor or assignor, or all, or substantially all, of the
fixtures and equipment used in and about the business of the vendor, mortgagor, transferor, or
assignor, shall be deemed to be a sale and transfer in bulk, in contemplation of the Act. x x x.

In Strochecker v. Ramirez,12 this Court stated:

With regard to the nature of the property thus mortgaged which is one-half interest in the
business above described, such interest is a personal property capable of appropriation and not
included in the enumeration of real properties in article 335 of the Civil Code, and may be the
subject of mortgage.

Interest in business was not specifically enumerated as personal property in the Civil Code in
force at the time the above decision was rendered. Yet, interest in business was declared to be
personal property since it is capable of appropriation and not included in the enumeration of real
properties. Article 414 of the Civil Code provides that all things which are or may be the object
of appropriation are considered either real property or personal property. Business is likewise not
enumerated as personal property under the Civil Code. Just like interest in business, however, it
may be appropriated. Following the ruling in Strochecker v. Ramirez, business should also be
classified as personal property. Since it is not included in the exclusive enumeration of real
properties under Article 415, it is therefore personal property.13

As can be clearly gleaned from the above disquisitions, petitioner’s acts constitute theft of
respondent PLDT’s business and service, committed by means of the unlawful use of the latter’s
facilities. In this regard, the Amended Information inaccurately describes the offense by making
it appear that what petitioner took were the international long distance telephone calls, rather
than respondent PLDT’s business.

A perusal of the records of this case readily reveals that petitioner and respondent PLDT
extensively discussed the issue of ownership of telephone calls. The prosecution has taken the
position that said telephone calls belong to respondent PLDT. This is evident from its Comment
where it defined the issue of this case as whether or not "the unauthorized use or appropriation of
PLDT international telephone calls, service and facilities, for the purpose of generating personal
profit or gain that should have otherwise belonged to PLDT, constitutes theft."14

In discussing the issue of ownership, petitioner and respondent PLDT gave their respective
explanations on how a telephone call is generated.15 For its part, respondent PLDT explains the
process of generating a telephone call as follows:

38. The role of telecommunication companies is not limited to merely providing the medium (i.e.
the electric current) through which the human voice/voice signal of the caller is transmitted.
Before the human voice/voice signal can be so transmitted, a telecommunication company, using
its facilities, must first break down or decode the human voice/voice signal into electronic
impulses and subject the same to further augmentation and enhancements. Only after such
process of conversion will the resulting electronic impulses be transmitted by a
telecommunication company, again, through the use of its facilities. Upon reaching the
destination of the call, the telecommunication company will again break down or decode the
electronic impulses back to human voice/voice signal before the called party receives the same.
In other words, a telecommunication company both converts/reconverts the human voice/voice
signal and provides the medium for transmitting the same.

39. Moreover, in the case of an international telephone call, once the electronic impulses
originating from a foreign telecommunication company country (i.e. Japan) reaches the
Philippines through a local telecommunication company (i.e. private respondent PLDT), it is the
latter which decodes, augments and enhances the electronic impulses back to the human
voice/voice signal and provides the medium (i.e. electric current) to enable the called party to
receive the call. Thus, it is not true that the foreign telecommunication company provides (1) the
electric current which transmits the human voice/voice signal of the caller and (2) the electric
current for the called party to receive said human voice/voice signal.

40. Thus, contrary to petitioner Laurel’s assertion, once the electronic impulses or electric
current originating from a foreign telecommunication company (i.e. Japan) reaches private
respondent PLDT’s network, it is private respondent PLDT which decodes, augments and
enhances the electronic impulses back to the human voice/voice signal and provides the medium
(i.e. electric current) to enable the called party to receive the call. Without private respondent
PLDT’s network, the human voice/voice signal of the calling party will never reach the called
party.16

In the assailed Decision, it was conceded that in making the international phone calls, the human
voice is converted into electrical impulses or electric current which are transmitted to the party
called. A telephone call, therefore, is electrical energy. It was also held in the assailed Decision
that intangible property such as electrical energy is capable of appropriation because it may be
taken and carried away. Electricity is personal property under Article 416 (3) of the Civil Code,
which enumerates "forces of nature which are brought under control by science."17

Indeed, while it may be conceded that "international long distance calls," the matter alleged to be
stolen in the instant case, take the form of electrical energy, it cannot be said that such
international long distance calls were personal properties belonging to PLDT since the latter
could not have acquired ownership over such calls. PLDT merely encodes, augments, enhances,
decodes and transmits said calls using its complex communications infrastructure and facilities.
PLDT not being the owner of said telephone calls, then it could not validly claim that such
telephone calls were taken without its consent. It is the use of these communications facilities
without the consent of PLDT that constitutes the crime of theft, which is the unlawful taking of
the telephone services and business.

Therefore, the business of providing telecommunication and the telephone service are personal
property under Article 308 of the Revised Penal Code, and the act of engaging in ISR is an act of
"subtraction" penalized under said article. However, the Amended Information describes the
thing taken as, "international long distance calls," and only later mentions "stealing the business
from PLDT" as the manner by which the gain was derived by the accused. In order to correct this
inaccuracy of description, this case must be remanded to the trial court and the prosecution
directed to amend the Amended Information, to clearly state that the property subject of the theft
are the services and business of respondent PLDT. Parenthetically, this amendment is not
necessitated by a mistake in charging the proper offense, which would have called for the
dismissal of the information under Rule 110, Section 14 and Rule 119, Section 19 of the Revised
Rules on Criminal Procedure. To be sure, the crime is properly designated as one of theft. The
purpose of the amendment is simply to ensure that the accused is fully and sufficiently apprised
of the nature and cause of the charge against him, and thus guaranteed of his rights under the
Constitution.

ACCORDINGLY, the motion for reconsideration is GRANTED. The assailed Decision dated
February 27, 2006 is RECONSIDERED and SET ASIDE. The Decision of the Court of Appeals
in CA-G.R. SP No. 68841 affirming the Order issued by Judge Zeus C. Abrogar of the Regional
Trial Court of Makati City, Branch 150, which denied the Motion to Quash (With Motion to
Defer Arraignment) in Criminal Case No. 99-2425 for theft, is AFFIRMED. The case is
remanded to the trial court and the Public Prosecutor of Makati City is hereby DIRECTED to
amend the Amended Information to show that the property subject of the theft were services and
business of the private offended party.

SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice

LEONARDO A. QUISUMBING ANTONIO T. CARPIO

Associate Justice Associate Justice

MA. ALICIA AUSTRIA-

RENATO C. CORONA
MARTINEZ
Associate Justice
Associate Justice

CONCHITA CARPIO MORALES ADOLFO S. AZCUNA

Associate Justice Associate Justice

DANTE O. TINGA MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

ANTONIO EDUARDO B.
PRESBITERO J. VELASCO, JR.
NACHURA
Associate Justice
Associate Justice

TERESITA J. LEONARDO-DE
ARTURO D. BRION
CASTRO
Associate Justice
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions
in the above Resolution were reached in consultation before the case was assigned to the writer
of the opinion of the Court.

REYNATO S. PUNO
Chief Justice

Footnotes
1
Rollo, p. 728.
2
Id. at 57-58.
3
15 Phil. 170 (1910).
4
21 Phil. 553 (1911).
5
41 Phil. 364 (1921).
 6
Krivenko v. Register of Deeds, 79 Phil. 461 (1947).
7
People v. Mercado, 65 Phil. 665 (1938).
8
Id.; Duran v. Tan, 85 Phil 476 (1950).
9
Regalado, Criminal Law Conspectus (2000 ed.), p. 520.
10
G.R. No. L-14887, January 31, 1961, 1 SCRA 380.
11
11 N.E. 2d 403 (1937).
12
44 Phil. 933 (1922).
13
II Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines 26 (1992 ed.).
14
Rollo, p. 902.
15
Id. at 781-783; 832-837; 872, 874-877.
16
Id. at 875-877.
17
Supra note 13.

EN BANC

G.R. No. L-26278 August 4, 1927

LEON SIBAL , plaintiff-appellant,

vs.
EMILIANO J. VALDEZ ET AL., defendants.
EMILIANO J. VALDEZ, appellee.

J. E. Blanco for appellant.

Felix B. Bautista and Santos and Benitez for appellee.

JOHNSON, J.:

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.

On December 27, 1924, the court, after hearing both parties and upon approval of the bond for
P6,000 filed by the plaintiff, issued the writ of preliminary injunction prayed for in the
complaint.

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;

(b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of
the complaint;

(c) That he was the owner of the palay in parcels 1, 2 and 7; and

(d) That he never attempted to harvest the palay in parcels 4 and 5.

The defendant Emiliano J. Valdez by way of counterclaim, alleged that by reason of the
preliminary injunction he was unable to gather the sugar cane, sugar-cane shoots (puntas de cana
dulce) palay in said parcels of land, representing a loss to him of P8,375.20 and that, in addition
thereto, he suffered damages amounting to P3,458.56. He prayed, for a judgment (1) absolving
him from all liability under the complaint; (2) declaring him to be the absolute owner of the
sugar cane in question and of the palay in parcels 1, 2 and 7; and (3) ordering the plaintiff to pay
to him the sum of P11,833.76, representing the value of the sugar cane and palay in question,
including damages.

Upon the issues thus presented by the pleadings the cause was brought on for trial. After hearing
the evidence, and on April 28, 1926, the Honorable Cayetano Lukban, judge, rendered a
judgment against the plaintiff and in favor of the defendants —

(1) Holding that the sugar cane in question was personal property and, as such, was not
subject to redemption;

(2) Absolving the defendants from all liability under the complaint; and
 (3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and
Marcos Sibal to jointly and severally pay to the defendant Emiliano J. Valdez the sum of
P9,439.08 as follows:

(a) P6,757.40, the value of the sugar cane;

(b) 1,435.68, the value of the sugar-cane shoots;

(c) 646.00, the value of palay harvested by plaintiff;

(d) 600.00, the value of 150 cavans of palay which the defendant was not able to
raise by reason of the injunction, at P4 cavan. 9,439.08 From that judgment the
plaintiff appealed and in his assignments of error contends that the lower court
erred: (1) In holding that the sugar cane in question was personal property and,
therefore, not subject to redemption;

(2) In holding that parcels 1 and 2 of the complaint belonged to Valdez, as well as parcels
7 and 8, and that the palay therein was planted by Valdez;

(3) In holding that Valdez, by reason of the preliminary injunction failed to realized
P6,757.40 from the sugar cane and P1,435.68 from sugar-cane shoots (puntas de cana
dulce);

(4) In holding that, for failure of plaintiff to gather the sugar cane on time, the defendant
was unable to raise palay on the land, which would have netted him the sum of P600;
and.

(5) In condemning the plaintiff and his sureties to pay to the defendant the sum of
P9,439.08.

It appears from the record:

(1) That on May 11, 1923, the deputy sheriff of the Province of Tarlac, by virtue of writ
of execution in civil case No. 20203 of the Court of First Instance of Manila (Macondray
& Co., Inc. vs. Leon Sibal),levied an attachment on eight parcels of land belonging to
said Leon Sibal, situated in the Province of Tarlac, designated in the second of
attachment as parcels 1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit B, Exhibit 2-A).

(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight parcels of land, at
the auction held by the sheriff of the Province of Tarlac, for the sum to P4,273.93, having
paid for the said parcels separately as follows (Exhibit C, and 2-A):

Parcel
1 ..................................................................... P1.00
 2 ..................................................................... 2,000.00
3 ..................................................................... 120.93
4 ..................................................................... 1,000.00
5 ..................................................................... 1.00
6 ..................................................................... 1.00
7 with the house thereon .......................... 150.00

8 ..................................................................... 1,000.00
==========
4,273.93

(3) That within one year from the sale of said parcel of land, and on the 24th day of
September, 1923, the judgment debtor, Leon Sibal, paid P2,000 to Macondray & Co.,
Inc., for the account of the redemption price of said parcels of land, without specifying
the particular parcels to which said amount was to applied. The redemption price said
eight parcels was reduced, by virtue of said transaction, to P2,579.97 including interest
(Exhibit C and 2).

The record further shows:

(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy sheriff of the
Province of Tarlac, by virtue of a writ of execution in civil case No. 1301 of the Province
of Pampanga (Emiliano J. Valdez vs. Leon Sibal 1.º — the same parties in the present
case), attached the personal property of said Leon Sibal located in Tarlac, among which
was included the sugar cane now in question in the seven parcels of land described in the
complaint (Exhibit A).

(2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction said personal
properties of Leon Sibal, including the sugar cane in question to Emilio J. Valdez, who
paid therefor the sum of P1,550, of which P600 was for the sugar cane (Exhibit A).

(3) That on April 29,1924, said deputy sheriff, by virtue of said writ of execution, also
attached the real property of said Leon Sibal in Tarlac, including all of his rights, interest
and participation therein, which real property consisted of eleven parcels of land and a
house and camarin situated in one of said parcels (Exhibit A).

(4) That on June 25, 1924, eight of said eleven parcels, including the house and the
camarin, were bought by Emilio J. Valdez at the auction held by the sheriff for the sum of
P12,200. Said eight parcels were designated in the certificate of sale as parcels 1, 3, 4, 5,
6, 7, 10 and 11. The house and camarin were situated on parcel 7 (Exhibit A).
 (5) That the remaining three parcels, indicated in the certificate of the sheriff as parcels 2,
12, and 13, were released from the attachment by virtue of claims presented by Agustin
Cuyugan and Domiciano Tizon (Exhibit A).

(6) That on the same date, June 25, 1924, Macondray & Co. sold and conveyed to Emilio
J. Valdez for P2,579.97 all of its rights and interest in the eight parcels of land acquired
by it at public auction held by the deputy sheriff of Tarlac in connection with civil case
No. 20203 of the Court of First Instance of Manila, as stated above. Said amount
represented the unpaid balance of the redemption price of said eight parcels, after
payment by Leon Sibal of P2,000 on September 24, 1923, fro the account of the
redemption price, as stated above. (Exhibit C and 2).

The foregoing statement of facts shows:

(1) The Emilio J. Valdez bought the sugar cane in question, located in the seven parcels
of land described in the first cause of action of the complaint at public auction on May 9
and 10, 1924, for P600.

(2) That on July 30, 1923, Macondray & Co. became the owner of eight parcels of land
situated in the Province of Tarlac belonging to Leon Sibal and that on September 24,
1923, Leon Sibal paid to Macondray & Co. P2,000 for the account of the redemption
price of said parcels.

(3) That on June 25, 1924, Emilio J. Valdez acquired from Macondray & Co. all of its
rights and interest in the said eight parcels of land.

(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the rights and interest
which Leon Sibal had or might have had on said eight parcels by virtue of the P2,000
paid by the latter to Macondray.

(5) That Emilio J. Valdez became the absolute owner of said eight parcels of land.

The first question raised by the appeal is, whether the sugar cane in question is personal or real
property. It is contended that sugar cane comes under the classification of real property as
"ungathered products" in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article
334 enumerates as real property the following: Trees, plants, and ungathered products, while
they are annexed to the land or form an integral part of any immovable property." That article,
however, has received in recent years an interpretation by the Tribunal Supremo de España,
which holds that, under certain conditions, growing crops may be considered as personal
property. (Decision of March 18, 1904, vol. 97, Civil Jurisprudence of Spain.)

Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334 of the
Civil Code, in view of the recent decisions of the supreme Court of Spain, admits that growing
crops are sometimes considered and treated as personal property. He says:
 No creemos, sin embargo, que esto excluya la excepcionque muchos autores hacen
tocante a la venta de toda cosecha o de parte de ella cuando aun no esta cogida (cosa
frecuente con la uvay y la naranja), y a la de lenas, considerando ambas como muebles.
El Tribunal Supremo, en sentencia de 18 de marzo de 1904, al entender sobre un contrato
de arrendamiento de un predio rustico, resuelve que su terminacion por desahucio no
extingue los derechos del arrendario, para recolectar o percibir los frutos
correspondientes al año agricola, dentro del que nacieron aquellos derechos, cuando el
arrendor ha percibido a su vez el importe de la renta integra correspondiente, aun cuando
lo haya sido por precepto legal durante el curso del juicio, fundandose para ello, no solo
en que de otra suerte se daria al desahucio un alcance que no tiene, sino en que, y esto es
lo interesante a nuestro proposito, la consideracion de inmuebles que el articulo 334 del
Codigo Civil atribuge a los frutos pendientes, no les priva del caracter de productos
pertenecientes, como tales, a quienes a ellos tenga derecho, Ilegado el momento de su
recoleccion.

xxx xxx xxx

Mas actualmente y por virtud de la nueva edicion de la Ley Hipotecaria, publicada en 16

de diciembre de 1909, con las reformas introducidas por la de 21 de abril anterior, la
hipoteca, salvo pacto expreso que disponga lo contrario, y cualquiera que sea la
naturaleza y forma de la obligacion que garantice, no comprende los frutos cualquiera
que sea la situacion en que se encuentre. (3 Manresa, 5. edicion, pags. 22, 23.)

From the foregoing it appears (1) that, under Spanish authorities, pending fruits and ungathered
products may be sold and transferred as personal property; (2) that the Supreme Court of Spain,
in a case of ejectment of a lessee of an agricultural land, held that the lessee was entitled to
gather the products corresponding to the agricultural year, because said fruits did not go with the
land but belonged separately to the lessee; and (3) that under the Spanish Mortgage Law of 1909,
as amended, the mortgage of a piece of land does not include the fruits and products existing
thereon, unless the contract expressly provides otherwise.

An examination of the decisions of the Supreme Court of Louisiana may give us some light on
the question which we are discussing. Article 465 of the Civil Code of Louisiana, which
corresponds to paragraph 2 of article 334 of our Civil Code, provides: "Standing crops and the
fruits of trees not gathered, and trees before they are cut down, are likewise immovable, and are
considered as part of the land to which they are attached."

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." (Citizens' Bank vs.
Wiltz, 31 La. Ann., 244; Porche vs. Bodin, 28 La., Ann., 761; Sandel vs. Douglass, 27 La. Ann.,
629; Lewis vs. Klotz, 39 La. Ann., 267.)

"It is true," as the Supreme Court of Louisiana said in the case of Porche vs. Bodin (28 La. An.,
761) that "article 465 of the Revised Code says that standing crops are considered as immovable
and as part of the land to which they are attached, and 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.

In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:

If the crop quoad the pledge thereof under the act of 1874 was an immovable, it would be
destructive of the very objects of the act, it would render the pledge of the crop objects of
the act, it would render the pledge of the crop impossible, for if the crop was an
inseparable part of the realty possession of the latter would be necessary to that of the
former; but such is not the case. True, by article 465 C. C. it is provided that "standing
crops and the fruits of trees not gathered and trees before they are cut down are likewise
immovable and 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 other than the owners of the property to which the crop was
attached. The immovability of a growing crop is in the order of things temporary, for the
crop passes from the state of a growing to that of a gathered one, from an immovable to a
movable. 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
thereon. The provision of our Code is identical with the Napoleon Code 520, and we may
therefore obtain light by an examination of the jurisprudence of France.

The rule above announced, not only by the Tribunal Supremo de España but by the Supreme
Court of Louisiana, is followed in practically every state of the Union.

From an examination of the reports and codes of the State of California and other states we find
that the settle doctrine followed in said states in connection with the attachment of property and
execution of judgment is, that growing crops raised by yearly labor and cultivation are
considered personal property. (6 Corpuz Juris, p. 197; 17 Corpus Juris, p. 379; 23 Corpus Juris,
p. 329: Raventas vs. Green, 57 Cal., 254; Norris vs. Watson, 55 Am. Dec., 161; Whipple vs.
Foot, 3 Am. Dec., 442; 1 Benjamin on Sales, sec. 126; McKenzie vs. Lampley, 31 Ala., 526;
Crine vs. Tifts and Co., 65 Ga., 644; Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich.,
174; Freeman on Execution, vol. 1, p. 438; Drake on Attachment, sec. 249; Mechem on Sales,
sec. 200 and 763.)

Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in
existence, is reasonably certain to come into existence as the natural increment or usual incident
of something already in existence, and then belonging to the vendor, and then title will vest in
the buyer the moment the thing comes into existence. (Emerson vs. European Railway Co., 67
Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63.) Things of this nature are said to
have a potential existence. A man may sell property of which he is potentially and not actually
possessed. He may make a valid sale of the wine that a vineyard is expected to produce; or the
gain a field may grow in a given time; or the milk a cow may yield during the coming year; or
the wool that shall thereafter grow upon sheep; or what may be taken at the next cast of a
fisherman's net; or fruits to grow; or young animals not yet in existence; or the good will of a
trade and the like. The thing sold, however, must be specific and identified. They must be also
owned at the time by the vendor. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)

It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil Code has
been modified by section 450 of the Code of Civil Procedure as well as by Act No. 1508, the
Chattel Mortgage Law. Said section 450 enumerates the property of a judgment debtor which
may be subjected to execution. The pertinent portion of said section reads as follows: "All goods,
chattels, moneys, and other property, both real and personal, * * * shall be liable to execution.
Said section 450 and most of the other sections of the Code of Civil Procedure relating to the
execution of judgment were taken from the Code of Civil Procedure of California. The Supreme
Court of California, under section 688 of the Code of Civil Procedure of that state (Pomeroy, p.
424) has held, without variation, that growing crops were personal property and subject to
execution.

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.

It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that
"growing crops" are personal property. This consideration tends to support the conclusion
hereinbefore stated, that paragraph 2 of article 334 of the Civil Code has been modified by
section 450 of Act No. 190 and by Act No. 1508 in the sense that "ungathered products" as
mentioned in said article of the Civil Code have the nature of personal property. In other words,
the phrase "personal property" should be understood to include "ungathered products."
 At common law, and generally in the United States, all annual crops which are raised by
yearly manurance and labor, and essentially owe their annual existence to cultivation by
man, . may be levied on as personal property." (23 C. J., p. 329.) On this question
Freeman, in his treatise on the Law of Executions, says: "Crops, whether growing or
standing in the field ready to be harvested, are, when produced by annual cultivation, no
part of the realty. They are, therefore, liable to voluntary transfer as chattels. It is equally
well settled that they may be seized and sold under execution. (Freeman on Executions,
vol. p. 438.)

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.

All the other assignments of error made by the appellant, as above stated, relate to questions of
fact only. Before entering upon a discussion of said assignments of error, we deem it opportune
to take special notice of the failure of the plaintiff to appear at the trial during the presentation of
evidence by the defendant. His absence from the trial and his failure to cross-examine the
defendant have lent considerable weight to the evidence then presented for the defense.

Coming not to the ownership of parcels 1 and 2 described in the first cause of action of the
complaint, the plaintiff made a futile attempt to show that said two parcels belonged to Agustin
Cuyugan and were the identical parcel 2 which was excluded from the attachment and sale of
real property of Sibal to Valdez on June 25, 1924, as stated above. A comparison of the
description of parcel 2 in the certificate of sale by the sheriff (Exhibit A) and the description of
parcels 1 and 2 of the complaint will readily show that they are not the same.

The description of the parcels in the complaint is as follows:

1. La caña dulce sembrada por los inquilinos del ejecutado Leon Sibal 1.º en una parcela
de terreno de la pertenencia del citado ejecutado, situada en Libutad, Culubasa, Bamban,
Tarlac, de unas dos hectareas poco mas o menos de superficie.

2. La caña dulce sembrada por el inquilino del ejecutado Leon Sibal 1.º, Ilamado
Alejandro Policarpio, en una parcela de terreno de la pertenencia del ejecutado, situada
en Dalayap, Culubasa, Bamban, Tarlac de unas dos hectareas de superficie poco mas o
menos." The description of parcel 2 given in the certificate of sale (Exhibit A) is as
follows:

2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de 177,090 metros cuadrados
de superficie, linda al N. con Canuto Sibal, Esteban Lazatin and Alejandro Dayrit; al E.
con Francisco Dizon, Felipe Mañu and others; al S. con Alejandro Dayrit, Isidro Santos
and Melecio Mañu; y al O. con Alejandro Dayrit and Paulino Vergara. Tax No. 2854,
vador amillarado P4,200 pesos.
On the other hand the evidence for the defendant purported to show that parcels 1 and 2 of the
complaint were included among the parcels bought by Valdez from Macondray on June 25,
1924, and corresponded to parcel 4 in the deed of sale (Exhibit B and 2), and were also included
among the parcels bought by Valdez at the auction of the real property of Leon Sibal on June 25,
1924, and corresponded to parcel 3 in the certificate of sale made by the sheriff (Exhibit A). The
description of parcel 4 (Exhibit 2) and parcel 3 (Exhibit A) is as follows:

Parcels No. 4. — Terreno palayero, ubicado en el barrio de Culubasa,Bamban, Tarlac, I.

F. de 145,000 metros cuadrados de superficie, lindante al Norte con Road of the barrio of
Culubasa that goes to Concepcion; al Este con Juan Dizon; al Sur con Lucio Maño y
Canuto Sibal y al Oeste con Esteban Lazatin, su valor amillarado asciende a la suma de
P2,990. Tax No. 2856.

As will be noticed, there is hardly any relation between parcels 1 and 2 of the complaint and
parcel 4 (Exhibit 2 and B) and parcel 3 (Exhibit A). But, inasmuch as the plaintiff did not care to
appear at the trial when the defendant offered his evidence, we are inclined to give more weight
to the evidence adduced by him that to the evidence adduced by the plaintiff, with respect to the
ownership of parcels 1 and 2 of the compliant. We, therefore, conclude that parcels 1 and 2 of
the complaint belong to the defendant, having acquired the same from Macondray & Co. on June
25, 1924, and from the plaintiff Leon Sibal on the same date.

It appears, however, that the plaintiff planted the palay in said parcels and harvested therefrom
190 cavans. There being no evidence of bad faith on his part, he is therefore entitled to one-half
of the crop, or 95 cavans. He should therefore be condemned to pay to the defendant for 95
cavans only, at P3.40 a cavan, or the sum of P323, and not for the total of 190 cavans as held by
the lower court.

As to the ownership of parcel 7 of the complaint, the evidence shows that said parcel
corresponds to parcel 1 of the deed of sale of Macondray & Co, to Valdez (Exhibit B and 2), and
to parcel 4 in the certificate of sale to Valdez of real property belonging to Sibal, executed by the
sheriff as above stated (Exhibit A). Valdez is therefore the absolute owner of said parcel, having
acquired the interest of both Macondray and Sibal in said parcel.

With reference to the parcel of land in Pacalcal, Tarlac, described in paragraph 3 of the second
cause of action, it appears from the testimony of the plaintiff himself that said parcel corresponds
to parcel 8 of the deed of sale of Macondray to Valdez (Exhibit B and 2) and to parcel 10 in the
deed of sale executed by the sheriff in favor of Valdez (Exhibit A). Valdez is therefore the
absolute owner of said parcel, having acquired the interest of both Macondray and Sibal therein.

In this connection the following facts are worthy of mention:

Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were attached
under said execution. Said parcels of land were sold to Macondray & Co. on the 30th day of
July, 1923. Rice paid P4,273.93. On September 24, 1923, Leon Sibal paid to Macondray & Co.
P2,000 on the redemption of said parcels of land. (See Exhibits B and C ).
Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was attached,
including the sugar cane in question. (Exhibit A) The said personal property so attached, sold at
public auction May 9 and 10, 1924. April 29, 1924, the real property was attached under the
execution in favor of Valdez (Exhibit A). June 25, 1924, said real property was sold and
purchased by Valdez (Exhibit A).

June 25, 1924, Macondray & Co. sold all of the land which they had purchased at public auction
on the 30th day of July, 1923, to Valdez.

As to the loss of the defendant in sugar cane by reason of the injunction, the evidence shows that
the sugar cane in question covered an area of 22 hectares and 60 ares (Exhibits 8, 8-b and 8-c);
that said area would have yielded an average crop of 1039 picos and 60 cates; that one-half of the
quantity, or 519 picos and 80 cates would have corresponded to the defendant, as owner; that
during the season the sugar was selling at P13 a pico (Exhibit 5 and 5-A). Therefore, the
defendant, as owner, would have netted P 6,757.40 from the sugar cane in question. The
evidence also shows that the defendant could have taken from the sugar cane 1,017,000 sugar-
cane shoots (puntas de cana) and not 1,170,000 as computed by the lower court. During the
season the shoots were selling at P1.20 a thousand (Exhibits 6 and 7). The defendant therefore
would have netted P1,220.40 from sugar-cane shoots and not P1,435.68 as allowed by the lower
court.

As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, amounting to 190
cavans, one-half of said quantity should belong to the plaintiff, as stated above, and the other half
to the defendant. The court erred in awarding the whole crop to the defendant. The plaintiff
should therefore pay the defendant for 95 cavans only, at P3.40 a cavan, or P323 instead of P646
as allowed by the lower court.

The evidence also shows that the defendant was prevented by the acts of the plaintiff from
cultivating about 10 hectares of the land involved in the litigation. He expected to have raised
about 600 cavans of palay, 300 cavans of which would have corresponded to him as owner. The
lower court has wisely reduced his share to 150 cavans only. At P4 a cavan, the palay would
have netted him P600.

In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff and his
sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal are hereby ordered to pay to the
defendant jointly and severally the sum of P8,900.80, instead of P9,439.08 allowed by the lower
court, as follows:

P6,757.40 for the sugar cane;

1,220.40 for the sugar cane shoots;
323.00 for the palay harvested by plaintiff in parcels 1 and 2;
600.00 for the palay which defendant could have raised.
 8,900.80
============

In all other respects, the judgment appealed from is hereby affirmed, with costs. So ordered.

Street, Malcolm, Villamor, Romualdez and Villa-Real., JJ., concur.

EN BANC

G.R. No. L-42462 August 31, 1937

THE BACHRACH MOTOR CO., INC., plaintiff-appellant,

vs.
MARIANO LACSON LEDESMA, TALISAY-SILAY MILLING CO., INC., and THE
PHILIPPINE NATIONAL BANK, defendant-appellees.

William E. Greenbaum and Ohnick and Opisso for appellant.

Nolan and Hernaez for appellee Talisay-Silay Milling Co., Inc.
Roman J. Lacson and Francisco Fuentes for appellee Philippine National Bank.

IMPERIAL, J.:

This is an action brought by the plaintiff to recover the amount of the judgments obtained by it in
civil cases Nos. 31597 and 31821 of the Court of First Instance of Manila, praying in its
complaint: (a) That the transfer of certificate of stock dividends No. 772 of the Talisay-Silay
Milling of the Philippine National Bank, be declared null and void, as against the plaintiff: (b)
that the Talisay-Silay Milling Co., Inc., ordered to cancel the entry of the transfer of the 6,300
stock dividends covered by certificate No. 772, made by it on its books in favor of the Philippine
National Bank; (c) that said stock dividends be sold to satisfy the judgment obtained by it in civil
cases Nos. 31597 of the Court of First Instance of Manila; (d) that the Talisay-Silay Milling Co.,
Inc., be ordered to pay to it amount of P21,379.39, with interest on the sums and from the dates
set forth in paragraph XV of the complain, or any part thereof necessary to complete payment of
said sums and interest thereon , in case the 6,300 stock dividends can not be sold or the proceeds
of the sale thereof should be insufficient to cover the sums in question, and (e) that the
defendants pay the costs of the suit. The plaintiff appealed from the judgment declaring the right
of the Philippine National Bank to the 6,300 stock dividends a preferred one, and absolving the
defendants from the complaint, with costs.

The parties submitted the case upon the following stipulation of facts, to wit:

STIPULATION OF FACTS. — That the plaintiff, the Bachrach Motor Co., Inc., on June 30,
1927, obtained judgment in civil case No. 31597 of the Court of First Instance of Manila against
the defendant Mariano Lacson Ledesma, in the sum of P3,442.75, with interest thereon from
March 30, 1927, with costs. That a writ of execution of said judgment was issued on August 20,
1927, and Jose Y. Orosa was appointed Special sheriff to execute it. That on October 4, 1927,
said Jose Y. Orosa, as special sheriff, in compliance with the writ of execution in question,
attached all right, title to and interest which the defendant Mariano Lacson Ledesma may have in
"Any bonus, dividend, share of stock, money, or other property which that defendant is entitle to
receive from the Talisay-Silay Milling Co., Inc., by virtue of the fact that such defendant has
mortgage his land in favor of the Philippine National Bank to guarantee the indebtedness of the
Talisay-Silay Milling Co., Inc., or which such defendant is entitled to receive from the Talisay-
Silay Milling Co., Inc., on account of being a stockholder in the corporation or which he is
entitled to receive from that corporation for any other cause or pretext whatsoever." That notice
of said attachment was served not only upon the defendant Mariano Lacson Ledesma but also
upon the herein defendant the Talisay-Silay Milling Co., Inc., which received a copy of the
notice of attachment, as evidenced by the Annex A attached to this stipulation of facts. That on
October 3, 1927, the herein plaintiff, the Bachrach Motor Co., Inc., obtained judgment in case
No. 31821 of the Court of First Instance of Manila against the defendant Mariano Lacson
Ledesma, in the sum of four thousand four hundred pesos and seventy-eight centavos with
interest at 10 per cent per annum on the sum of P3,523.82 from April 30, 1927; in the sum of
P14,171, 52 with interest at 10 per cent per annum on the sum of P13,290.89 from April 30,
1927; and in the sum of P1,150.72 with the legal interest of 6 per cent per annum thereon from
May 25, 1927, and the costs. A copy of said judgment is attached to this stipulation of facts and
marked Annex B. That a writ of execution of said judgment was issue, thereby causing the
attachment, sale and adjudication to the plaintiff the Bachrach Motor Co., Inc., for the sum of
P100, Philippine currency, of the defendant Mariano Lacson Ledesma's right of redemption over
the following properties to wit: "Original certificate of title No. 1929 (Lot No. 1473 of the
Cadastral Survey of Bacolod) containing an area of 2,647 square meters, more or less.

Original certificate of title No. 2978 (Lot No. 1475 of the Cadastral Survey of Bacolod)
containing an area of 8.501 square meters, more or less.

Original certificate of title No. 2624 (Lot No. 1474 of the Cadastral Survey of Bacolod)
containing an area of 8,714 square meter, more or less.

Original certificate of title No. 9443 (Lot No. 426 of the Cadastral Survey of Talisay)
containing an area of 150,301 square meters more or less. Original certificate of title No.
1928 (Lot No. 1472 of the Cadastral Survey of Bacolod) containing an area of 36,818
square meters, more or less. Original certificate of title No. 2923 (Lot No. 1489 of the
Cadastral Survey of Bacolod) containing an area of 286,879 square meters, more or less.
Original certificate of title No. 356 (Lot No. 4-A of the Cadastral Survey of Bacolod)
containing an area of 641,448 square meters, more or less. Original certificate of title No.
356 (Lot No. 4-B of the Cadastral Survey of Bacolod) containing an area of 280,556
square meters, more or less. Original certificate of title No. 356 (Lot No. 4-C of the
cadastral Survey of Bacolod) containing an area of 2,842,946 square meters, more or
less." The certificate of sale issued by the provincial sheriff of Occidental Negros in favor
of the Bachrach Motor Co., Inc., on March 29, 1928, is attached to this stipulation of
facts, and marked Annex C. That on the date of the issuance of the execution in case No.
31597 of the Court of First Instance of Manila as well as on that of the issuance of the
execution and sale of the properties described in Exhibit C, in case No. 31821 of the same
court, said real properties were mortgaged to the Philippine National Bank to secure the
payment to said bank by Mariano Lacson Ledesma of the sum of P624,000, Philippine
currency, by virtue of an instrument executed by the debtor Mariano Lacson Ledesma in
favor of said bank on August 9, 1923. said instrument of mortgage is copied on pages 18
to 32, both inclusive, of the bill of exceptions in case No. 8136 of the Court of First
Instance of Iloilo (G. R. No. 35223), which is attached to this stipulation of facts and
marked Annex D. That in the same instrument of mortgage (pages 18 to 32 of Annex D)
said debtor Mariano Lacson Ledesma mortgaged in favor the bank, as part of the
securities to ensure compliance with his obligation, the following shares owned by him in
the Talisay-Silay Milling Co., Inc., to wit: 1,540 share covered by Certificate No. 147;
520 shares covered by Certificate No. 146; 40 share covered by Certificate in the
preceeding two paragraph, there was another mortgage constituted on the above-
described real properties in favor of the Philippine National Bank, to answer for the debts
contracted by the Central Talisay-Silay Milling Co., with said bank. That on December
22, 1923, the defendant, Central Talisay-Silay Milling Co. resolved to grant a bonus or
compensation to the owners of the real properties mortgaged to answer for the debts
contracted by said central with the Philippine National Bank, for the risk incurred by said
properties upon being subjected to said mortgage lien, and the resolution in question the
defendant Mariano Lacson Ledesma was allotted the sum of P19,911.11, Philippine
currency, which sum, however, would not be payable until the month of January, 1930.
That on September 29, 1928, the Philippine National Bank brought an action against the
defendant Mariano Lacson Ledesma and his wife Concepcion Diaz for the recovery of a
mortgage credit which, together with interest thereon amounted to P853,729.49 on said
date. Sometime later that is, on January 2, 1929, the Philippine National Bank amended
its complaint by including the Bachrach Motor Co., Inc., as party defendant, among
other, because they claim to have some right to certain properties which are the subject
matter of this complaint." Said case bears No. 4706 of the Court of First Instance of
Occidental Negros. That on January 30, 1929, the defendant Bachrach Motor Co., Inc.,
file a general denial. That after due hearing the Court of First Instance of Bacolod on
September 3, 1930, rendered judgment in case No. 4706 of said court in favor of the
Philippine National Bank and against the defendant Mariano Lacson Ledesma,
sentencing the latter to pay the amount claimed by said bank and ordering, upon failure to
satisfy said amount, the sale at public auction of the real properties mortgaged under the
instrument of mortgage appearing on pages 18 to 32 of Annex D. That the real estate and
chattel mortgage deed in question (pages 18 to 32 of Annex D), marked as Exhibit G, was
among the exhibits presented in said case No. 4706 of the Court of First Instance of
Occidental Negros. That likewise, among the exhibit presented in said case No. 4706 of
the Court of First Instance of Occidental Negros, was Exhibit H which was a deed of
mortgage of certain carabaos belonging to the debtor Mariano Lacson Ledesma, executed
by the latter in favor of the Philippine National Bank on January 21, 1925. That in the
decision rendered by the Court of First Instance of Occidental Negros in case No. 4706
thereof, said court, referring to stock certificates Nos. 145 and 147 of the Talisay-Silay
Milling Co., Inc., which were pledged or mortgaged by virtue of Exhibit G of said No.
4706, rendered the following ruling: "(e) With respect to the chattel mortgaged bank,
which are described in Exhibit G and H, the Philippine National Bank, as soon as this
judgment becomes final, shall have authority to sell them in accordance with the
provisions of section 23 of Act No. 2938, immediately informing this court of whatever
action it may take in the premises." That during the pendency of case No. 4706 of the
Court of First Instance of Bacolod referred to in the foregoing paragraphs, the plaintiff
Bachrach Motor Co., Inc., on December 20, 1929, brought an action in the Court of First
Instance of Iloilo against the Talisay-Silay Milling Co., Inc., recover from it the sum of
P13,850 against the bonus or dividend which, by virtue of the resolution of December 22,
1923, said Central Talisay-Silay Milling Co., Inc., had declared in favor of the defendant
Mariano Lacson Ledesma as one of the owners of the hacienda which had been
mortgaged to the Philippine National Bank to secure the obligation of the Talisay-Silay
Milling Co., Inc. in favor of said bank. Copy of said complaint appears on pages 2 to 5 of
the bill of exceptions in case No. 8136 of the Court of First Instance of Iloilo (G. R. No.
35223), Annex D of this stipulation of facts. That on January 30, 1930, the Philippine
National Bank sought permission to intervene in said case No. 8136 of the Court of First
Instance of Iloilo and after the permission had been granted, said bank, on February 13,
1930, filed a complaint in intervention alleging that it had a preferred right to said bonus
granted by the central to the defendant Mariano Lacson Ledesma as one of the owners of
the haciendas which had been mortgaged to said bank to answer for the obligations of the
Central Talisay-Silay Milling Co., Inc., basing such allegation on the fact that, as said
properties were mortgaged to it by the debtor Mariano Lacson Ledesma, not Talisay
Milling Co., Inc., but also by virtue of the deed of August 9, 1923 (pages 18 to 32 of
Annex D) and said bonus being a civil fruit of the mortgaged lands, said bank was
entitled to it on the ground that the mortgage of August 9, 1923, had become due. That
after the trial of civil case No. 8136 of the Court of First Instance of Iloilo, said court, on
December 8, 1930, rendered judgment in favor of the plaintiff Bachrach Motor Co., Inc.,
Upon appeal, the Supreme Court, on September 17, 1931, 1 affirmed the judgment of the
lower court, holding that the bonus had no immediate relation to the lands in question but
merely a remote and accidental one and, therefore, it was not a civil fruit of the real
properties mortgaged to the Philippine National Bank to secure the obligation of the
Talisay-Silay Milling Co., Inc., being a mere personal right of Mariano Lacson Ledesma.
The decision of the Supreme Court published in Volume 30, No. 104, of the Official
Gazette, on August 29, 1932, is attached to this stipulation of facts and marked Annex E.
That on January 24, 1930, that Talisay-Silay Milling Co., Inc., issued stock certificate
No. 772 for 3,600 shares, as stock dividend to Mariano Lacson Ledesma, which
certificate was ordered by Mariano Lacson Ledesma to be delivered to Roman Lacson,
attorney for the Philippine National Bank, by virtue of the letter of February 27, 1930,
Annex G of this stipulation of facts, and of the letter of the Philippine National Bank
dated January 18, 1930, Annex G-1. Said 6,300 shares constituted the stock dividend
allotted to Mariano Lacson Ledesma for his 2,100 original shares in the Talisay-Silay
Milling Co., Inc., which were given as pledge to the Philippine National Bank under the
deed of mortgage appearing on pages 18 to 32 of Annex D prior to the issuance of stock
certificate No. 772, an were covered by Stock Certificates Nos. 145, 146 and 147 of the
Talisay-Silay Milling Co., Inc. That stock certificate No. 772 was issued by virtue of
resolution No. 4 of the general meeting of stockholders of the Talisay-Silay Milling Co.,
Inc., which resolution is quote in paragraph 8 of the complaint in this case. That in a letter
of March 25, 1930, addressed by the Philippine National Bank to the Talisay-Silay
Milling Co., said bank informed the letter that the 6,300 shares represented by stock
certificate No. 772 had been given by Mariano Lacson Ledesma as pledge to the
Philippine National Bank. Said letter is attached to this stipulation of facts as Annex H.
That said stock certificate No. 772 has continuously been in the possession of the
Philippine National Bank from February 27, 1930, to February 25, 1931, but like stock
certificates Nos. 145, 146 and 147, it was registered in the books of the Talisay-Silay
Milling Co. in the name of Mariano Lacson Ledesma. That on August 11, 1930, the
plaintiff Bachrach Motor Co., by virtue of an alias execution issued in case No. 31821 of
the Court of First Instance of Manila, attached all right, title to an interest which the
defendant Mariano Lacson Ledesma might have in Any bonus, dividend, shares of stock,
money or other property specially on the sum of P19,911.11 which the defendant is
entitled to receive from the Talisay-Silay Milling Co., Inc., by virtue of the fact that such
defendant has mortgage his lands in favor of the Philippine National Bank to guarantee
the indebtedness of the Talisay-Silay Milling Co., Inc., or which such defendant is
entitled to receive from the Talisay-Silay Milling Co., Inc., on account of being
stockholder in that corporation, or which he is entitle to receive from that corporation for
any other cause or pretext whatsoever." In connection with the proceedings and
attachment made notice of garnishment was served on the Talisay-Silay Milling Co., Inc.,
as evidence by Annexes I and J of this stipulation of facts. That on February 5, 1931, the
provincial the is positive part of the decision rendered in civil case NO. 4706 of the Court
of First Instance of Occidental Negros, copy of which is attached to this stipulation of
facts as Annex I, sold at public auction not only the 2,100 share specified in the deed of
August 9, 1923, but also the 6,300 shares covered by stock certificate No. 772, the sale of
said shares having been made by order and under the direction of the attachment creditor
Philippine National Bank. A copy of the certificate of sale marked Exhibit K is attached
hereto. That on February 25, 1931, the Talisay-Silay Milling Co., Inc., upon petition of
the Philippine National Bank, as shown by the letter dated February 19,1931, marked and
attached to this stipulation as Annex L, which letter was accompanied by the certificate
of sale Exhibit K, issued stock certificate No. 1155 representing 8,968 shares, which
include the 6,300 shares formerly represented by stock certificate No. 772 and the 2,100
shares formerly represented by stock certificates Nos. 145, 146 and 147, the bank having
acknowledged receipt of certificate No. 1155 in a letter of March 4, 1931, marked as
Exhibit M. Attention is invited to the fact that of the 8,969 shares represented by stock
certificate No. 1155, 568 shares formerly belonged to Concepcion Diaz e Lacson wife of
the defendant Mariano Lacson Ledesma, and of the 568 shares, 142 were mortgaged
under the deed of August 9, 1923, and 426 were the stock dividend that had corresponded
to said 142 shares. That on the same date, February 25,1931, Marino Lacson Ledesma
endorsed the back of stock certificate No. 772 in favor of the Philippine National Bank.
Said stock certificate with the endorsement in question is attached to this stipulation of
facts and marked Annex N. That both on the date on which the garnishment was carried
out by the Bachrach Motor Co., that is, on August 11, 1930, and on the date on which the
6,300 shares, covered by stock certificate No. 772, were sold, case No. 8136 of the Court
of First Instance of Iloilo (G. R. No. 35223) was still pending. That the amount of the
actual indebtedness of the defendant Mariano Lacson Ledesma to the plaintiff the
Bachrach Motor Co. is P21,377.34 with the interest and other sums specified in
paragraph XV of the complaint. That the real properties mortgaged to the Philippine
 National Bank were sold for P300,000 Philippine currency; the mortgaged carabaos for
P2,000 Philippine currency, and all the shares, that is, the 8,968 share for the sum of
P90,000 Philippine currency, the bank having been the highest bidder herein all these
sales, there still remaining unpaid in civil case No. 4796 of the Court of First Instance of
Occidental Negros the sum of P695,421.74, as stated in Annex 9. That the notices of
garnishment issue by virtue of the execution in cases Nos. 31597 and 31821 of the Court
of First Instance of Manila are the same notices of attachment and garnishment
mentioned in the complaint in the case No. 8136 of the Court of First Instance of Iloilo
and presented as evidence in said case, and are the same notices mentioned in this case
now submitted to the court for decision. That on March 20,1925, the Philippine National
Bank served notice on the Talisay-Silay Milling Co., Inc, of the pledge made by Mariano
Lacson Ledesma to said bank of the shares represented by stock certificates Nos. 145,
146 and 147, and on March 25th the Talisay-Silay Milling Co., Inc., acknowledged
receipt thereof and considered itself notified of said pledge, as evidenced by Annexes P
and Q of this stipulation of facts, That prior to the declaration of stock divided by virtue
of resolution No. 4 of the regular meeting of stockholders of the Talisay-Silay Milling
Co., Inc., the shares of this corporation were quote in private sales at P32 a share; and
immediately after the declaration of stock dividend, the quotation of said shares dropped
by P7 or P8 a share, the same having been P11.25 a share on the date of their sale at
public auction. Upon this stipulation of facts, the parties submit the case to the court for
decision.

I. The plaintiff bases the preferred right invoked by it over the 6,300 stock dividends, certificate
No. 772, on the garnishment made thereon by reason of the issuance of the alias execution in
civil case No. 31821 of the Court of First Instance of Manila, which garnishment was carried out
on August 11, 1930. The plaintiff contends in its first assignment of error that these stock
dividends were certificate No. 772 thereof was delivered to the Philippine National Bank and
when the Talisay-Silay Milling Co., Inc., entered them in its books in the name of said bank and
issued certificate No. 1166 in favor of the latter. The contention is unfounded because it appears
that the stock dividends in question were pledged to the bank prior to the garnishment and
because certificate No. 772 was in the possession of said bank from February 27, 1930. The
reasons upon which this court base its opinion in declaring that the stock dividends were pledge
beforehand to the Philippine National Bank will be stated in the discussion of the following
assignment of error.

II. In the stipulation of facts, it appears stipulated by the parties that, by virtue of the letters of the
Philippine National Bank and having been so asked by Mariano Lacson Ledesma, certificate No.
772 covering the 6,300 stock dividends was delivered as security to Attorney Roman Lacson as
representative of the bank, on February 27, 1930, in view of the fact that the original shares
covered by certificate Nos. 145, 146 and 147 had been previously mortgaged to the same bank.
On February 25, 1931, the Talisay-Silay Milling Co., Inc., in conformity with the letter of the
Philippines National Bank of the 19th of said month, cancelled certificate No. 772 and in lieu
thereof issued certificate No. 1155 in favor of said bank, which certificate includes the 6,300
stock dividends, among other shares. On the other hand, the garnishment obtained by the
plaintiff, upon which it bases all its alleged preferred right was notified to the parties and became
effective on August 11, 1930, more than five months after the delivery of certificate No. 772.
The plaintiff, in its second assignment of error, maintains that the pledge is ineffective as against
it because evidence of its date was not made to appear in a public instrument and concludes that
its right to the 6,300 stock dividends is superior and preferred. It is admitted that the delivery of
the certificate in question and the pledge thereof were not made to appear in a public instrument.

It is true, according to article 1865 of the Civil Code, that in order that a pledge may be effective
as against third person, evidence of its date must appear in a public instrument in addition to the
delivery of the thing pledged to the creditor. This provision has been interpreted in the sense that
for the contract to affect third person, it must appear in a public instrument in addition to delivery
of the thing pledged (Ocejo, Perez and Co., vs. International Banking Corporation, 37 Phil., 631:
Tec Bi & Co. vs. Chartered Bank of India, Australia and China, 41 Phil., 596; Te Pate vs.
Ingersoll, 43 Phil., 394). It cannot be denied, however, that section 4 of Act No. 1508, otherwise
known as the Chattel Mortgage Law, implicitly modified article 1865 of the Civil Code in the
sense that a contract of pledge and that of chattel mortgage, to be effective as against third
persons, need not appear in public instruments provided the thing pledged or mortgaged be
delivered or placed in the possession of the creditor. In the case of Mahoney vs. Tuason (39 Phil.,
952, 958), where this doctrine was laid down, it was stated; "From the foregoing provisions of
the abovecited Act, it is inferred that the same does not entirely repeal the provisions of the Civil
Code, but only modify them in part and amplify them in another, as may be seen from an
examination of, and comparison between, the provisions of the Civil Code regarding pledge and
the abovequoted provisions of Act No. 1508. Article 1865 of the Civil Code provides that no
pledge shall be effective against a third person unless evidence of its date appears in a public
instrument. The provision of this article has, undoubtedly, been modified by section 4 of the
Chattel Mortgage Law, in so far as it provides that a chattel mortgage shall not be valid against
any person except the mortgagor, his executors or administrators, unless the possession of the
property is delivered to and retained by the mortgagee or unless the mortgage is recorded in the
office of the register of deeds of the province in which the mortgagor resides. From the date the
said Act No. 1508 was in force, a contract of pledge or chattel mortgage should be deemed
legally entered into and should produce all its effects and consequences, provided it appears to
have been in some manner perfected and that the things pledged have been delivered, and in a
contrary case, and even if the creditor has not received them or has not retained them in his
custody, provided that the contract of pledge or chattel mortgage appears in a notarial document
and is inscribed in the registry of deeds of the province." Therefore, this court holds that the
pledge of the 6,300 stock dividends is valid against the plaintiff for the reason that the certificate
was delivered to the creditor bank, notwithstanding the fact that the contract does not appear in a
public instrument.

The plaintiff further contends that the pledge could not legally exist because the certificate was
not the shares themselves, making it understood that a certificate of stock or of stock dividends
can not be the subject matter of the contract of pledge or of chattel mortgage. Neither is this
contention tenable. Certificates of stock or of stock dividends, under the Corporation Law, are
quasi negotiable instruments in the sense that they may be given in pledge or mortgage to secure
an obligation. The question is settled in this wise by the weight of American authorities and it is
the modern doctrine of general acceptance by the courts.
 In view, however, of the fact that certificates of stock, while not negotiable in the sense
of the law merchant, like bills and notes, are so framed and dealt with as to be
transferable, when property endorsed, by mere delivery, and as they frequently convey,
by estoppel against the corporation or against prior holders, as good a title to the
transferee as if they were negotiable, and inasmuch as a large commercial use is made of
such certificates as collateral security, and it is to the public interest that such use should
be simplify and facilitated by placing them as nearly as possible on the plane of
commercial paper, they are often spoken of and treated as quasi negotiable, that is as
having some of the attributes and partaking of the character of negotiable instruments, in
passing from hand to hand, especially where they are accompanied by an assignment and
power of attorney, executed in blank, to transfer them to anyone who may obtain
possession as holders, even though such assignment and power are under seal. (14 C. J.,
665, sec 1034; South Bend First Nat. Bank vs. Lanier, 20 Law. ed., 172; Weniger vs.
Success Min. Co., 227 Fedd., 548; Scott vs. Pequonnock Nat. Bank, 15 Fed., 494.)

III. In the third assignment of error, the plaintiff maintains that the court erred in holding that the
stock dividends are civil fruits or an extension of the original shares. This court deems it
unnecessary to determine whether or not the stock devidends are civil fruits or an extension of
the original shares. This point becomes immaterial after the case has been decided in the manner
stated in the discussion of the second assignment of error .

IV. In the forth assignment of error, the plaintiff contends that court erred in not declaring null
and void the sale of the 6,300 stock dividends in execution of the judgment rendered in favor of
the Philippine National Bank in civil case No. 4706 of the Court of First Instance of Occidental
Negros. Inasmuch as this court has declared that the stock dividends in question were pledged to
the bank, it follows that the sale thereof in execution of said judgment is legal and valid.

V. In the fifth assignment of error, the plaintiff argues that the court erred in declaring the
Philippine National Bank's right to the stock dividends a preferred one. After it has been held
that these stock dividends had been pledged to the Philippine National Bank and that this
contract was prior to the garnishment of the plaintiff, it appear clear that the court violated no
law in holding the right of the Philippine National Bank, as pledgee, a superior one.

VI. The plaintiff assigns as sixth and last error committed by the court the fact of its having
absolved all the defendants. The case having been decided in favor of the Philippine National
Bank, on the grounds stated in passing upon the second assignment of error, the absolution of the
defendants is unavoidable, thereby making this last assignment of error likewise untenable.

For the foregoing consideration the appealed judgment is affirmed, with the costs of this instance
to the plaintiff-appellant. So ordered.

Avanceña, C.J., Villa-Real, Abad Santos, Diaz, Laurel and Concepcion, JJ., concur.