Article 12.

National Economy and Patrimony

Section 2
1. A foreign company may not be said to be appropriating our natural resources if it utilizes the waters collected in the dam and
converts the same into electricity through artificial devices. Since the NPC remains in control of the operation of the dam by
virtue of water rights granted to it, there is no legal impediments to foreign-owned companies undertaking the generation of
electric power using waters already appropriated by NPC the holder of the water permit.
2. K-water only utilized the hydro-electric power plant and NOT the water itself.
3. Land or public domain may become private land when it is purchased from the government or given by grant. An exception
would be those possessed since time immemorial, for such possession would justify the presumption that the land had never
been part of the public domain.
4. Alienable land of the public domain may be transformed into private land when occupied open, exclusive and undisputed for
the prescribed period of time.
5. The thirty year period for possession will only begin from when the time is converted into alienable prior to that it will not be
counted
6. 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.
7. Roponggi Property in Japan is property of public dominion and therefore outside the commerce of man and cannot be
alienated. Aliens cannot lease lands of the public domain because that would involve enjoyment of the natural resources of the
public domain.
8. A foreign corporation may buy shares in excess of 40% in a corporation. The only consequence would be to lose its capacity to
hold land (the restriction of an alien to hold property is only restricted to land he may own other forms of immovable)
9. A lease to an alien for a reasonable period is valid. So is an option giving an alien the right to buy real property on the condition
that he is granted Philippine citizenship
10. Grandfather Rule – (when there is corporate layering to circumvent the req. in consti) percentage of Filipino equity in a corp.
is computed, in cases where corporate shareholders are present, by attributing the nationality of the second or even
subsequent tier of ownership to determine the nationality of the corporate holder. Applied only when there is doubt to the
‘beneficial ownership’ and ‘control’ of the corp.
11. Control Test – also known as the liberal test providing that shares belonging to corporations or partnerships at least 60% of the
capital of which is owned by Filipino citizens shall be considered of PH nationality. Does not scrutinize further the ownership of
the Filipino shareholders.

La Bugal-B’lann Tribal Association v. Ramos:

The case involves the constitutionality of RA 7942 the Philippine Mining Act, its RR and the FTAA executed between the govt and
Western Mining Corporation which is a subsidiary of an Australian Company. The Court en Banc decided that the FTAA (financial and
technical assistance agreement) executed between the two were service contracts prohibited by the 1987 constitution. During the
pendency of the case however, WMC shares were sold to Sagittarius which is 60% owned by Filipinos and/Fil owned corps and the
FTAA was subsequently transferred and registered in the name of Sagittarius from WMCP.

1. The SC ruled that since the FTAA is now to be implemented by a Filipino Corporation the court can no longer declare it
unconstitutional since the case pending is a dispute between two Filipino companies (Sagitarius and Lepanto).
2. The petitioners claim that a Fil. Corp is not allowed to enter into an FTAA with the government. An analysis of the Consti however
does not show this.
a. Under the constitution the mining activities (exploration, development and utilization) may be undertaken with Filipino
except when it is small scale utilization – Filipinos can undertake them alone by law and when the State through
agreements with foreign corps involving either technical or financial assistance.
b. “Involving agreements for financial or technical assistance” does not exclude other modes of assistance. The use of the
word “involving” would show the possibility of the inclusion of other forms of assistance or activities thus activities with
foreign corps should not be limited only to such.
c. Furthermore if it were only financial or technical assistance that would be allowed, then there would be no need to limit
them to large-scale mining operations as there would be a far greater need for them in the smaller-scale mining activities.
d. The framers knew that at that time there were several service contracts between Filipino companies and foreign companies
and if they meant to ban service contracts altogether they would have so provided for the termination of the contracts.
e. Technical or financial assistance agreements are still service contracts however with safeguards.—foreign is contractor
while Phil. Govt. is the principal or owner of the works. The Foreign contractors provide capital, technology and know-how
and managerial expertise in creating large-scale enterprises and the Govt. through agencies acitive exercises control and
supervision over the project.
3. Did RA 7942 and the IRR give the gov’t sufficient control in order to direct affairs of enterprises. It was claimed that the FTAA in
effect gives full control and management of mining enterprises over to fully owned foreign-owned corporations with the State. The
SC said the state does not merely become a passive regulator. The agencies are empowered to approve or disapprove (influence,
direct and change) various work programs and expenditure commitments for each of the exploration, development and utilization
phases of the mining enterprise. RA 7942 and the IRR have sufficient degree of control and supervision.
a. A provision under the RA allows foreign contractors to apply for and hold an exploration permit – is this unconstitutional?
The SC said no, the Constitution mandates full control and supervision over exploitation of mineral resources but nowhere
does it require the government to hold all exploration permits. These permits serve a practical purpose since during the
time of the contract they would spend time on exploration works even if not earning revenues.
4. Section 7.9 however is invalid because it gives away the State’s share of net mining revenues without anything in return. Unjust
enrichment on the stockholders of WMCP.
Section 7.82 also invalid because it provides that the money that the government paid for building roads etc. to lead to the mine site
will also be deductible form the State’s share in net mining – unjust enrichment.

Section 3
1. Only natural persons can acquire land by the 30-year statutory period. Juridical persons or corporations do not have such right.
BUT when natural persons have fulfilled the 30 years, they can now legally transfer their title to juridical persons.
2. The classification of public land is an exclusive prerogative of the executive department and not the courts. In the absence of
such classification the land remains unclassified (the change of classification does not happen automatically when the nature of
the land changes, a positive act by the executive is still required).
3. Owner of agricultural land where minerals are discovered does not own such, the State may stop the use of the person of such
land in order to extract the minerals (the owner is entitled to appropriate compensation for the loss of the use of the land).

Section 5
Cruz v. Sec. of DENR:
Assailed is the constitutionality of the IPRA because it amounts to unlawful deprivation of the State’s ownership over the lands of
the public domain as well as minerals and other natural resources in violation of the Regalian Doctrine. Also providing an all-
encompassing definition of “ancestral domains” or “ancestral lands” violates the rights of private landowners. The SC said it was
constitutional (because voting was 7-7).
 Ancestral domains: all areas belonging to ICC/IPP under a claim of ownership since time immemorial or as a consequence of
government projects or other voluntary dealings with the government. Ancestral lands are held by ICC/IP under the same
conditions as ancestral domains but are limited to those not merely occupied and possessed but utilized under a claim of
individual or traditional group ownership.
 Native title in Carnio case that says that native title is private land and was never public thus never belonged to the state.
 All lands that were not acquired by government belongs to the public domain has an exception – any land that should have
been in the possession of an occupant and of his predecessors-in interest since time immemorial.
 The Certificate of Ancestral Title (CADT) is only a formality as ownership is recognized under customary law and can co-exist
with the civil law concept.
 The natural resources are still owned by the state and not included in the enumeration in IPRA. It merely grants
management over them to the ICC/IP.

Section 7
1. An alien may acquire property when at the time of the acquisition of the property there was no prohibition yet. Second if the
alien acquired Filipino citizenship later on.
2. An alien has no right to challenge the validity of the lease of a piece of land which his wife had acquired since he has no right to
acquire private property.
3. Partition of the estate of Ramirez among his widow, grandnephews and his companion Wanda. Under his will, he granted
usufruct of real property to Wanda who is an alien. Usufruct over land is not contrary to the constitution as it does not vest
ownership onto a person. Also in this case testamentary succession is included in the prohibition.
4. Usufruct- is a term referring to a right of one individual to use and enjoy the property of another provided its substance is
neither impaired nor altered. Example is a usufructuary right to use water from a stream in order to generate electrical power.
Such a right is distinguishable from a claim of legal ownership of the water itself.
5. When a property is gained by an alien then the alien sold it to a Filipino, such transfer cures the unconstitutionality.
6. When the mother only put the name of her son because he is the only Filipino citizen, such cannot be invoked to state that the
daughter of the same mother should also have a right to such land. Doctrine of unclean hands.

Section 8
1. Hereditary succession does not extend to TESTAMENTARY succession.
2. Spouses bought land when they were natural-born citizens. When they applied for its registration however they were
naturalized Canadian citizens already. The SC said that they can still register it even if they were no longer Filipino citizens at
that time. Under Art. 12 a natural born citizen who lost his citizenship may be a transferee of private land. As former Filipino
citizens they can have the land registered.

Section 10
1. The SC ruled that the sale of the Manila Hotel to Renong is violative of the constitution. Although the first paragrpah of Article
12 section 10 is non-self-executing as it needs legislation, the second part is a mandate that rights, privileges and concessions
covering national economy and patrimony of the state shall be given preference to qualified Filipinos. Estoppel wont work here
when it violates the constitution. Manila hotel is part of Filipino culture and the Filipino first policy does not only cover natural
resources but culture as well thus the sale to Renong is void.
2. A place leased should still be paid even though it is declared a historical landmark because the policy to protect and preserve
important properties and national treasures does not extend to ejectment cases.
3. NO way does Torre de Manila project any harm. It is NOT a nuisance per se (one recognized as a nuisance under ALL
circumstances because it endangers public health and safety. NO law prohibiting the construction of the Torre de Manila since it
is OUTSIDE the Rizal Park.

Section 11
1. Gamboa v. Teves – Capital means only COMMON SHARES which is the right to participate and vote in the mgt of the corp. It
does not mean the outstanding capital stock which is a combination of common shares and non-voting preferred shares which
will circumvent section 11 article 12.
2. Roy v. Herbosa – departed from Gamboa. The required percentage of Filipino ownership shall be applied to BOTH:
a. The total number of OUTSTANDING shares of stock entitled to vote in the election of directors.
b. The total number of outstanding shares of stock whether or not entitled to vote.
3. A Franchise is a legislative grant of a special privilege to someone either from statute or can also be by an administrative
agencies with delegated power to give franchise.
4. Nothing in the Constitution indicates the necessity of a congressional franchise before a public utility may operate if the law
delegates the authority to an administrative body to grant a franchise. (Needed to adapt to increase complexity of modern
life).
5. In this case the original period was 30 years, and the clause that would allow extension if necessary to repay the loans to the
lenders is a violation of the 50 year franchise threshold in the Constitution.

Section 17
1. PP 1017 does not authorize President Arroyo during the emergency to temporarily take over or direct the operation of any
privately owned public or business affected with public interest without authority from Congress.
2. Section 17 means the Congress NOT the president.

Section 18
1. When BOTC used PLDTs trunk lines to also provide long distance thus a competed with PLDT. The SC said should have made it
like an eminent domain case and pay just compensation for the beneficial use of property. Also under the law PLDT’s franchise
is not exclusive, and that PLDT is not even able to cope with the demand of telephone services. PLDT has right to just
compensation for services rendered to the Government telephone system.

Section 19
1. Luna worked for Avon, under their agreement there was a clause that they “can’t sell display or promote other products other
than that sold by the Company.” Luna then sold products of Sandre (vitamins and supplements). The agreement was terminated
on the ground of breach of the exclusivity clause. Luna claimed such was void for being restraint of trade. The SC held that an
exclusivity clause is not necessarily void but depends on the circumstances. In this case, can’t be said to be void because it
doesn’t really prevent new entrants from entering the market etc., it is only meant for the protection of the investment of the
company since they are engaged in direct selling.