THIRD DIVISION "On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take
"On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of the
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.
1
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
2
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.
FIRST DIVISION
G.R. No. L-50008 August 31, 1987
PRUDENTIAL BANK, petitioner, vs. HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III,
Court of First Instance of Zambales and Olongapo City; FERNANDO MAGCALE & TEODULA BALUYUT-
MAGCALE, respondents.
PARAS, J.:
This is a petition for review on certiorari of the November 13, 1978 Decision * of the then Court of First
Instance of Zambales and Olongapo City in Civil Case No. 2443-0 entitled "Spouses Fernando A. Magcale
and Teodula Baluyut-Magcale vs. Hon. Ramon Y. Pardo and Prudential Bank" declaring that the deeds of
real estate mortgage executed by respondent spouses in favor of petitioner bank are null and void.
The undisputed facts of this case by stipulation of the parties are as follows:
... on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and Teodula Baluyut Magcale secured
a loan in the sum of P70,000.00 from the defendant Prudential Bank. To secure payment of this loan,
3
plaintiffs executed in favor of defendant on the aforesaid date a deed of Real Estate Mortgage over the
following described properties:
l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse spaces containing a total floor area
of 263 sq. meters, more or less, generally constructed of mixed hard wood and concrete materials, under
a roofing of cor. g. i. sheets; declared and assessed in the name of FERNANDO MAGCALE under Tax
Declaration No. 21109, issued by the Assessor of Olongapo City with an assessed value of P35,290.00.
This building is the only improvement of the lot.
2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the right of occupancy on the lot
where the above property is erected, and more particularly described and bounded, as follows:
A first class residential land Identffied as Lot No. 720, (Ts-308, Olongapo Townsite Subdivision) Ardoin
Street, East Bajac-Bajac, Olongapo City, containing an area of 465 sq. m. more or less, declared and
assessed in the name of FERNANDO MAGCALE under Tax Duration No. 19595 issued by the Assessor of
Olongapo City with an assessed value of P1,860.00; bounded on the
NORTH: By No. 6, Ardoin Street
SOUTH: By No. 2, Ardoin Street
EAST: By 37 Canda Street, and
WEST: By Ardoin Street.
All corners of the lot marked by conc. cylindrical monuments of the Bureau of Lands as visible limits. (
Exhibit "A, " also Exhibit "1" for defendant).
Apart from the stipulations in the printed portion of the aforestated deed of mortgage, there appears a
rider typed at the bottom of the reverse side of the document under the lists of the properties
mortgaged which reads, as follows:
AND IT IS FURTHER AGREED that in the event the Sales Patent on the lot applied for by the Mortgagors
as herein stated is released or issued by the Bureau of Lands, the Mortgagors hereby authorize the
Register of Deeds to hold the Registration of same until this Mortgage is cancelled, or to annotate this
encumbrance on the Title upon authority from the Secretary of Agriculture and Natural Resources, which
title with annotation, shall be released in favor of the herein Mortgage.
From the aforequoted stipulation, it is obvious that the mortgagee (defendant Prudential Bank) was at
the outset aware of the fact that the mortgagors (plaintiffs) have already filed a Miscellaneous Sales
Application over the lot, possessory rights over which, were mortgaged to it.
Exhibit "A" (Real Estate Mortgage) was registered under the Provisions of Act 3344 with the Registry of
Deeds of Zambales on November 23, 1971.
On May 2, 1973, plaintiffs secured an additional loan from defendant Prudential Bank in the sum of
P20,000.00. To secure payment of this additional loan, plaintiffs executed in favor of the said defendant
another deed of Real Estate Mortgage over the same properties previously mortgaged in Exhibit "A."
(Exhibit "B;" also Exhibit "2" for defendant). This second deed of Real Estate Mortgage was likewise
registered with the Registry of Deeds, this time in Olongapo City, on May 2,1973.
On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the
parcel of land, possessory rights over which were mortgaged to defendant Prudential Bank, in favor of
plaintiffs. On the basis of the aforesaid Patent, and upon its transcription in the Registration Book of the
Province of Zambales, Original Certificate of Title No. P-2554 was issued in the name of Plaintiff
Fernando Magcale, by the Ex-Oficio Register of Deeds of Zambales, on May 15, 1972.
For failure of plaintiffs to pay their obligation to defendant Bank after it became due, and upon
application of said defendant, the deeds of Real Estate Mortgage (Exhibits "A" and "B") were
extrajudicially foreclosed. Consequent to the foreclosure was the sale of the properties therein
mortgaged to defendant as the highest bidder in a public auction sale conducted by the defendant City
Sheriff on April 12, 1978 (Exhibit "E"). The auction sale aforesaid was held despite written request from
plaintiffs through counsel dated March 29, 1978, for the defendant City Sheriff to desist from going with
the scheduled public auction sale (Exhibit "D")." (Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3, 1978 declared the deeds of Real Estate Mortgage as
null and void (Ibid., p. 35).
On December 14, 1978, petitioner filed a Motion for Reconsideration (Ibid., pp. 41-53), opposed by
private respondents on January 5, 1979 (Ibid., pp. 54-62), and in an Order dated January 10, 1979 (Ibid.,
p. 63), the Motion for Reconsideration was denied for lack of merit. Hence, the instant petition (Ibid., pp.
5-28).
The first Division of this Court, in a Resolution dated March 9, 1979, resolved to require the respondents
to comment (Ibid., p. 65), which order was complied with the Resolution dated May 18,1979, (Ibid., p.
100), petitioner filed its Reply on June 2,1979 (Ibid., pp. 101-112).
Thereafter, in the Resolution dated June 13, 1979, the petition was given due course and the parties
were required to submit simultaneously their respective memoranda. (Ibid., p. 114).
On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144), while private respondents filed
their Memorandum on August 1, 1979 (Ibid., pp. 146-155).
In a Resolution dated August 10, 1979, this case was considered submitted for decision (Ibid., P. 158).
In its Memorandum, petitioner raised the following issues:
1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND
2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE RESPONDENTS OF
MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24, 1972 UNDER ACT NO. 730 AND THE COVERING
ORIGINAL CERTIFICATE OF TITLE NO. P-2554 ON MAY 15,1972 HAVE THE EFFECT OF INVALIDATING THE
DEEDS OF REAL ESTATE MORTGAGE. (Memorandum for Petitioner, Rollo, p. 122).
This petition is impressed with merit.
The pivotal issue in this case is whether or not a valid real estate mortgage can be constituted on the
building erected on the land belonging to another.
The answer is in the affirmative.
In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court ruled
that, "it is obvious that the inclusion of "building" separate and distinct from the land, in said provision of
law can only mean that a building is by itself an immovable property." (Lopez vs. Orosa, Jr., et al., L-
10817-18, Feb. 28, 1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38, May 30,1958).
Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the
improvements thereon, buildings, still a building by itself may be mortgaged apart from the land on
which it has been built. Such a mortgage would be still a real estate mortgage for the building would still
4
be considered immovable property even if dealt with separately and apart from the land (Leung Yee vs.
Strong Machinery Co., 37 Phil. 644). In the same manner, this Court has also established that possessory
rights over said properties before title is vested on the grantee, may be validly transferred or conveyed
as in a deed of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]).
Coming back to the case at bar, the records show, as aforestated that the original mortgage deed on the
2-storey semi-concrete residential building with warehouse and on the right of occupancy on the lot
where the building was erected, was executed on November 19, 1971 and registered under the
provisions of Act 3344 with the Register of Deeds of Zambales on November 23, 1971. Miscellaneous
Sales Patent No. 4776 on the land was issued on April 24, 1972, on the basis of which OCT No. 2554 was
issued in the name of private respondent Fernando Magcale on May 15, 1972. It is therefore without
question that the original mortgage was executed before the issuance of the final patent and before the
government was divested of its title to the land, an event which takes effect only on the issuance of the
sales patent and its subsequent registration in the Office of the Register of Deeds (Visayan Realty Inc. vs.
Meer, 96 Phil. 515; Director of Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L-14702, May
23, 1961; Pena "Law on Natural Resources", p. 49). Under the foregoing considerations, it is evident that
the mortgage executed by private respondent on his own building which was erected on the land
belonging to the government is to all intents and purposes a valid mortgage.
As to restrictions expressly mentioned on the face of respondents' OCT No. P-2554, it will be noted that
Sections 121, 122 and 124 of the Public Land Act, refer to land already acquired under the Public Land
Act, or any improvement thereon and therefore have no application to the assailed mortgage in the case
at bar which was executed before such eventuality. Likewise, Section 2 of Republic Act No. 730, also a
restriction appearing on the face of private respondent's title has likewise no application in the instant
case, despite its reference to encumbrance or alienation before the patent is issued because it refers
specifically to encumbrance or alienation on the land itself and does not mention anything regarding the
improvements existing thereon.
But it is a different matter, as regards the second mortgage executed over the same properties on May 2,
1973 for an additional loan of P20,000.00 which was registered with the Registry of Deeds of Olongapo
City on the same date. Relative thereto, it is evident that such mortgage executed after the issuance of
the sales patent and of the Original Certificate of Title, falls squarely under the prohibitions stated in
Sections 121, 122 and 124 of the Public Land Act and Section 2 of Republic Act 730, and is therefore null
and void.
Petitioner points out that private respondents, after physically possessing the title for five years,
voluntarily surrendered the same to the bank in 1977 in order that the mortgaged may be annotated,
without requiring the bank to get the prior approval of the Ministry of Natural Resources beforehand,
thereby implicitly authorizing Prudential Bank to cause the annotation of said mortgage on their title.
However, the Court, in recently ruling on violations of Section 124 which refers to Sections 118, 120, 122
and 123 of Commonwealth Act 141, has held:
... Nonetheless, we apply our earlier rulings because we believe that as in pari delicto may not be
invoked to defeat the policy of the State neither may the doctrine of estoppel give a validating effect to a
void contract. Indeed, it is generally considered that as between parties to a contract, validity cannot be
given to it by estoppel if it is prohibited by law or is against public policy (19 Am. Jur. 802). It is not within
the competence of any citizen to barter away what public policy by law was to preserve (Gonzalo Puyat
& Sons, Inc. vs. De los Amas and Alino supra). ... (Arsenal vs. IAC, 143 SCRA 54 [1986]).
This pronouncement covers only the previous transaction already alluded to and does not pass upon any
new contract between the parties (Ibid), as in the case at bar. It should not preclude new contracts that
may be entered into between petitioner bank and private respondents that are in accordance with the
requirements of the law. After all, private respondents themselves declare that they are not denying the
legitimacy of their debts and appear to be open to new negotiations under the law (Comment; Rollo, pp.
95-96). Any new transaction, however, would be subject to whatever steps the Government may take for
the reversion of the land in its favor.
PREMISES CONSIDERED, the decision of the Court of First Instance of Zambales & Olongapo City is hereby
MODIFIED, declaring that the Deed of Real Estate Mortgage for P70,000.00 is valid but ruling that the
Deed of Real Estate Mortgage for an additional loan of P20,000.00 is null and void, without prejudice to
any appropriate action the Government may take against private respondents.
SO ORDERED.
Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.
THIRD DIVISION
G.R. No. 168557 February 16, 2007
FELS ENERGY, INC., Petitioner, vs. THE PROVINCE OF BATANGAS and
THE OFFICE OF THE PROVINCIAL ASSESSOR OF BATANGAS, Respondents.
x----------------------------------------------------x
G.R. No. 170628 February 16, 2007
NATIONAL POWER CORPORATION, Petitioner, vs. LOCAL BOARD OF ASSESSMENT APPEALS OF
BATANGAS, LAURO C. ANDAYA, in his capacity as the Assessor of the Province of Batangas, and the
PROVINCE OF BATANGAS represented by its Provincial Assessor, Respondents.
DECISION
CALLEJO, SR., J.:
Before us are two consolidated cases docketed as G.R. No. 168557 and G.R. No. 170628, which were filed
by petitioners FELS Energy, Inc. (FELS) and National Power Corporation (NPC), respectively. The first is a
petition for review on certiorari assailing the August 25, 2004 Decision1 of the Court of Appeals (CA) in
CA-G.R. SP No. 67490 and its Resolution2 dated June 20, 2005; the second, also a petition for review on
certiorari, challenges the February 9, 2005 Decision3 and November 23, 2005 Resolution4 of the CA in
CA-G.R. SP No. 67491. Both petitions were dismissed on the ground of prescription.
The pertinent facts are as follows:
On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW diesel
engine power barges moored at Balayan Bay in Calaca, Batangas. The contract, denominated as an
Energy Conversion Agreement5 (Agreement), was for a period of five years. Article 10 reads:
10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all taxes, import duties, fees,
charges and other levies imposed by the National Government of the Republic of the Philippines or any
agency or instrumentality thereof to which POLAR may be or become subject to or in relation to the
performance of their obligations under this agreement (other than (i) taxes imposed or calculated on the
basis of the net income of POLAR and Personal Income Taxes of its employees and (ii) construction
permit fees, environmental permit fees and other similar fees and charges) and (b) all real estate taxes
and assessments, rates and other charges in respect of the Power Barges.6
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The NPC initially
opposed the assignment of rights, citing paragraph 17.2 of Article 17 of the Agreement.
On August 7, 1995, FELS received an assessment of real property taxes on the power barges from
Provincial Assessor Lauro C. Andaya of Batangas City. The assessed tax, which likewise covered those due
for 1994, amounted to ₱56,184,088.40 per annum. FELS referred the matter to NPC, reminding it of its
obligation under the Agreement to pay all real estate taxes. It then gave NPC the full power and
5
authority to represent it in any conference regarding the real property assessment of the Provincial
Assessor.
In a letter7 dated September 7, 1995, NPC sought reconsideration of the Provincial Assessor’s decision to
assess real property taxes on the power barges. However, the motion was denied on September 22,
1995, and the Provincial Assessor advised NPC to pay the assessment.8 This prompted NPC to file a
petition with the Local Board of Assessment Appeals (LBAA) for the setting aside of the assessment and
the declaration of the barges as non-taxable items; it also prayed that should LBAA find the barges to be
taxable, the Provincial Assessor be directed to make the necessary corrections.9
In its Answer to the petition, the Provincial Assessor averred that the barges were real property for
purposes of taxation under Section 199(c) of Republic Act (R.A.) No. 7160.
Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that the
Department of Finance (DOF) had rendered an opinion10 dated May 20, 1996, where it is clearly stated
that power barges are not real property subject to real property assessment.
On August 26, 1996, the LBAA rendered a Resolution11 denying the petition. The fallo reads:
WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay the real estate tax in the amount of
₱56,184,088.40, for the year 1994.
SO ORDERED.12
The LBAA ruled that the power plant facilities, while they may be classified as movable or personal
property, are nevertheless considered real property for taxation purposes because they are installed at a
specific location with a character of permanency. The LBAA also pointed out that the owner of the
barges–FELS, a private corporation–is the one being taxed, not NPC. A mere agreement making NPC
responsible for the payment of all real estate taxes and assessments will not justify the exemption of
FELS; such a privilege can only be granted to NPC and cannot be extended to FELS. Finally, the LBAA also
ruled that the petition was filed out of time.
Aggrieved, FELS appealed the LBAA’s ruling to the Central Board of Assessment Appeals (CBAA).
On August 28, 1996, the Provincial Treasurer of Batangas City issued a Notice of Levy and Warrant by
Distraint13 over the power barges, seeking to collect real property taxes amounting to ₱232,602,125.91
as of July 31, 1996. The notice and warrant was officially served to FELS on November 8, 1996. It then
filed a Motion to Lift Levy dated November 14, 1996, praying that the Provincial Assessor be further
restrained by the CBAA from enforcing the disputed assessment during the pendency of the appeal.
On November 15, 1996, the CBAA issued an Order14 lifting the levy and distraint on the properties of
FELS in order not to preempt and render ineffectual, nugatory and illusory any resolution or judgment
which the Board would issue.
Meantime, the NPC filed a Motion for Intervention15 dated August 7, 1998 in the proceedings before the
CBAA. This was approved by the CBAA in an Order16 dated September 22, 1998.
During the pendency of the case, both FELS and NPC filed several motions to admit bond to guarantee
the payment of real property taxes assessed by the Provincial Assessor (in the event that the judgment
be unfavorable to them). The bonds were duly approved by the CBAA.
On April 6, 2000, the CBAA rendered a Decision17 finding the power barges exempt from real property
tax. The dispositive portion reads:
WHEREFORE, the Resolution of the Local Board of Assessment Appeals of the Province of Batangas is
hereby reversed. Respondent-appellee Provincial Assessor of the Province of Batangas is hereby ordered
to drop subject property under ARP/Tax Declaration No. 018-00958 from the List of Taxable Properties in
the Assessment Roll. The Provincial Treasurer of Batangas is hereby directed to act accordingly.
SO ORDERED.18
Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges belong to NPC; since they are
actually, directly and exclusively used by it, the power barges are covered by the exemptions under
Section 234(c) of R.A. No. 7160.19 As to the other jurisdictional issue, the CBAA ruled that prescription
did not preclude the NPC from pursuing its claim for tax exemption in accordance with Section 206 of
R.A. No. 7160. The Provincial Assessor filed a motion for reconsideration, which was opposed by FELS
and NPC.
In a complete volte face, the CBAA issued a Resolution20 on July 31, 2001 reversing its earlier decision.
The fallo of the resolution reads:
WHEREFORE, premises considered, it is the resolution of this Board that:
(a) The decision of the Board dated 6 April 2000 is hereby reversed.
(b) The petition of FELS, as well as the intervention of NPC, is dismissed.
(c) The resolution of the Local Board of Assessment Appeals of Batangas is hereby affirmed,
(d) The real property tax assessment on FELS by the Provincial Assessor of Batangas is likewise hereby
affirmed.
SO ORDERED.21
FELS and NPC filed separate motions for reconsideration, which were timely opposed by the Provincial
Assessor. The CBAA denied the said motions in a Resolution22 dated October 19, 2001.
Dissatisfied, FELS filed a petition for review before the CA docketed as CA-G.R. SP No. 67490. Meanwhile,
NPC filed a separate petition, docketed as CA-G.R. SP No. 67491.
On January 17, 2002, NPC filed a Manifestation/Motion for Consolidation in CA-G.R. SP No. 67490
praying for the consolidation of its petition with CA-G.R. SP No. 67491. In a Resolution23 dated February
12, 2002, the appellate court directed NPC to re-file its motion for consolidation with CA-G.R. SP No.
67491, since it is the ponente of the latter petition who should resolve the request for reconsideration.
NPC failed to comply with the aforesaid resolution. On August 25, 2004, the Twelfth Division of the
appellate court rendered judgment in CA-G.R. SP No. 67490 denying the petition on the ground of
prescription. The decretal portion of the decision reads:
WHEREFORE, the petition for review is DENIED for lack of merit and the assailed Resolutions dated July
31, 2001 and October 19, 2001 of the Central Board of Assessment Appeals are AFFIRMED.
SO ORDERED.24
On September 20, 2004, FELS timely filed a motion for reconsideration seeking the reversal of the
appellate court’s decision in CA-G.R. SP No. 67490.
Thereafter, NPC filed a petition for review dated October 19, 2004 before this Court, docketed as G.R.
No. 165113, assailing the appellate court’s decision in CA-G.R. SP No. 67490. The petition was, however,
denied in this Court’s Resolution25 of November 8, 2004, for NPC’s failure to sufficiently show that the
6
CA committed any reversible error in the challenged decision. NPC filed a motion for reconsideration,
which the Court denied with finality in a Resolution26 dated January 19, 2005.
Meantime, the appellate court dismissed the petition in CA-G.R. SP No. 67491. It held that the right to
question the assessment of the Provincial Assessor had already prescribed upon the failure of FELS to
appeal the disputed assessment to the LBAA within the period prescribed by law. Since FELS had lost the
right to question the assessment, the right of the Provincial Government to collect the tax was already
absolute.
NPC filed a motion for reconsideration dated March 8, 2005, seeking reconsideration of the February 5,
2005 ruling of the CA in CA-G.R. SP No. 67491. The motion was denied in a Resolution27 dated
November 23, 2005.
The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had been earlier denied for lack of
merit in a Resolution28 dated June 20, 2005.
On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557 before this Court, raising the
following issues:
A. Whether power barges, which are floating and movable, are personal properties and therefore, not
subject to real property tax.
B. Assuming that the subject power barges are real properties, whether they are exempt from real estate
tax under Section 234 of the Local Government Code ("LGC").
C. Assuming arguendo that the subject power barges are subject to real estate tax, whether or not it
should be NPC which should be made to pay the same under the law.
D. Assuming arguendo that the subject power barges are real properties, whether or not the same is
subject to depreciation just like any other personal properties.
E. Whether the right of the petitioner to question the patently null and void real property tax assessment
on the petitioner’s personal properties is imprescriptible.29
On January 13, 2006, NPC filed its own petition for review before this Court (G.R. No. 170628), indicating
the following errors committed by the CA:
I THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE APPEAL TO THE LBAA WAS FILED OUT
OF TIME.
II THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE POWER BARGES ARE NOT
SUBJECT TO REAL PROPERTY TAXES.
III THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE ASSESSMENT ON THE POWER
BARGES WAS NOT MADE IN ACCORDANCE WITH LAW.30
Considering that the factual antecedents of both cases are similar, the Court ordered the consolidation
of the two cases in a Resolution31 dated March 8, 2006.1awphi1.net
In an earlier Resolution dated February 1, 2006, the Court had required the parties to submit their
respective Memoranda within 30 days from notice. Almost a year passed but the parties had not
submitted their respective memoranda. Considering that taxes—the lifeblood of our economy—are
involved in the present controversy, the Court was prompted to dispense with the said pleadings, with
the end view of advancing the interests of justice and avoiding further delay.
In both petitions, FELS and NPC maintain that the appeal before the LBAA was not time-barred. FELS
argues that when NPC moved to have the assessment reconsidered on September 7, 1995, the running
of the period to file an appeal with the LBAA was tolled. For its part, NPC posits that the 60-day period
for appealing to the LBAA should be reckoned from its receipt of the denial of its motion for
reconsideration.
Petitioners’ contentions are bereft of merit.
Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, provides:
SECTION 226. Local Board of Assessment Appeals. – Any owner or person having legal interest in the
property who is not satisfied with the action of the provincial, city or municipal assessor in the
assessment of his property may, within sixty (60) days from the date of receipt of the written notice of
assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under
oath in the form prescribed for the purpose, together with copies of the tax declarations and such
affidavits or documents submitted in support of the appeal.
We note that the notice of assessment which the Provincial Assessor sent to FELS on August 7, 1995,
contained the following statement:
If you are not satisfied with this assessment, you may, within sixty (60) days from the date of receipt
hereof, appeal to the Board of Assessment Appeals of the province by filing a petition under oath on the
form prescribed for the purpose, together with copies of ARP/Tax Declaration and such affidavits or
documents submitted in support of the appeal.32
Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to file a
motion for reconsideration of the Provincial Assessor’s decision, a remedy not sanctioned by law.
The remedy of appeal to the LBAA is available from an adverse ruling or action of the provincial, city or
municipal assessor in the assessment of the property. It follows then that the determination made by the
respondent Provincial Assessor with regard to the taxability of the subject real properties falls within its
power to assess properties for taxation purposes subject to appeal before the LBAA.33
We fully agree with the rationalization of the CA in both CA-G.R. SP No. 67490 and CA-G.R. SP No. 67491.
The two divisions of the appellate court cited the case of Callanta v. Office of the Ombudsman,34 where
we ruled that under Section 226 of R.A. No 7160,35 the last action of the local assessor on a particular
assessment shall be the notice of assessment; it is this last action which gives the owner of the property
the right to appeal to the LBAA. The procedure likewise does not permit the property owner the remedy
of filing a motion for reconsideration before the local assessor. The pertinent holding of the Court in
Callanta is as follows:
x x x [T]he same Code is equally clear that the aggrieved owners should have brought their appeals
before the LBAA. Unfortunately, despite the advice to this effect contained in their respective notices of
assessment, the owners chose to bring their requests for a review/readjustment before the city assessor,
a remedy not sanctioned by the law. To allow this procedure would indeed invite corruption in the
system of appraisal and assessment. It conveniently courts a graft-prone situation where values of real
property may be initially set unreasonably high, and then subsequently reduced upon the request of a
property owner. In the latter instance, allusions of a possible covert, illicit trade-off cannot be avoided,
and in fact can conveniently take place. Such occasion for mischief must be prevented and excised from
our system.36
For its part, the appellate court declared in CA-G.R. SP No. 67491:
x x x. The Court announces: Henceforth, whenever the local assessor sends a notice to the owner or
lawful possessor of real property of its revised assessed value, the former shall no longer have any
7
jurisdiction to entertain any request for a review or readjustment. The appropriate forum where the
aggrieved party may bring his appeal is the LBAA as provided by law. It follows ineluctably that the 60-
day period for making the appeal to the LBAA runs without interruption. This is what We held in SP
67490 and reaffirm today in SP 67491.37
To reiterate, if the taxpayer fails to appeal in due course, the right of the local government to collect the
taxes due with respect to the taxpayer’s property becomes absolute upon the expiration of the period to
appeal.38 It also bears stressing that the taxpayer’s failure to question the assessment in the LBAA
renders the assessment of the local assessor final, executory and demandable, thus, precluding the
taxpayer from questioning the correctness of the assessment, or from invoking any defense that would
reopen the question of its liability on the merits.39
In fine, the LBAA acted correctly when it dismissed the petitioners’ appeal for having been filed out of
time; the CBAA and the appellate court were likewise correct in affirming the dismissal. Elementary is the
rule that the perfection of an appeal within the period therefor is both mandatory and jurisdictional, and
failure in this regard renders the decision final and executory.40
In the Comment filed by the Provincial Assessor, it is asserted that the instant petition is barred by res
judicata; that the final and executory judgment in G.R. No. 165113 (where there was a final
determination on the issue of prescription), effectively precludes the claims herein; and that the filing of
the instant petition after an adverse judgment in G.R. No. 165113 constitutes forum shopping.
FELS maintains that the argument of the Provincial Assessor is completely misplaced since it was not a
party to the erroneous petition which the NPC filed in G.R. No. 165113. It avers that it did not participate
in the aforesaid proceeding, and the Supreme Court never acquired jurisdiction over it. As to the issue of
forum shopping, petitioner claims that no forum shopping could have been committed since the
elements of litis pendentia or res judicata are not present.
We do not agree.
Res judicata pervades every organized system of jurisprudence and is founded upon two grounds
embodied in various maxims of common law, namely: (1) public policy and necessity, which makes it to
the interest of the
State that there should be an end to litigation – republicae ut sit litium; and (2) the hardship on the
individual of being vexed twice for the same cause – nemo debet bis vexari et eadem causa. A conflicting
doctrine would subject the public peace and quiet to the will and dereliction of individuals and prefer the
regalement of the litigious disposition on the part of suitors to the preservation of the public tranquility
and happiness.41 As we ruled in Heirs of Trinidad De Leon Vda. de Roxas v. Court of Appeals:42
x x x An existing final judgment or decree – rendered upon the merits, without fraud or collusion, by a
court of competent jurisdiction acting upon a matter within its authority – is conclusive on the rights of
the parties and their privies. This ruling holds in all other actions or suits, in the same or any other
judicial tribunal of concurrent jurisdiction, touching on the points or matters in issue in the first suit.
xxx
Courts will simply refuse to reopen what has been decided. They will not allow the same parties or their
privies to litigate anew a question once it has been considered and decided with finality. Litigations must
end and terminate sometime and somewhere. The effective and efficient administration of justice
requires that once a judgment has become final, the prevailing party should not be deprived of the fruits
of the verdict by subsequent suits on the same issues filed by the same parties.
This is in accordance with the doctrine of res judicata which has the following elements: (1) the former
judgment must be final; (2) the court which rendered it had jurisdiction over the subject matter and the
parties; (3) the judgment must be on the merits; and (4) there must be between the first and the second
actions, identity of parties, subject matter and causes of action. The application of the doctrine of res
judicata does not require absolute identity of parties but merely substantial identity of parties. There is
substantial identity of parties when there is community of interest or privity of interest between a party
in the first and a party in the second case even if the first case did not implead the latter.43
To recall, FELS gave NPC the full power and authority to represent it in any proceeding regarding real
property assessment. Therefore, when petitioner NPC filed its petition for review docketed as G.R. No.
165113, it did so not only on its behalf but also on behalf of FELS. Moreover, the assailed decision in the
earlier petition for review filed in this Court was the decision of the appellate court in CA-G.R. SP No.
67490, in which FELS was the petitioner. Thus, the decision in G.R. No. 165116 is binding on petitioner
FELS under the principle of privity of interest. In fine, FELS and NPC are substantially "identical parties" as
to warrant the application of res judicata. FELS’s argument that it is not bound by the erroneous petition
filed by NPC is thus unavailing.
On the issue of forum shopping, we rule for the Provincial Assessor. Forum shopping exists when, as a
result of an adverse judgment in one forum, a party seeks another and possibly favorable judgment in
another forum other than by appeal or special civil action or certiorari. There is also forum shopping
when a party institutes two or more actions or proceedings grounded on the same cause, on the gamble
that one or the other court would make a favorable disposition.44
Petitioner FELS alleges that there is no forum shopping since the elements of res judicata are not present
in the cases at bar; however, as already discussed, res judicata may be properly applied herein.
Petitioners engaged in forum shopping when they filed G.R. Nos. 168557 and 170628 after the petition
for review in G.R. No. 165116. Indeed, petitioners went from one court to another trying to get a
favorable decision from one of the tribunals which allowed them to pursue their cases.
It must be stressed that an important factor in determining the existence of forum shopping is the
vexation caused to the courts and the parties-litigants by the filing of similar cases to claim substantially
the same reliefs.45 The rationale against forum shopping is that a party should not be allowed to pursue
simultaneous remedies in two different fora. Filing multiple petitions or complaints constitutes abuse of
court processes, which tends to degrade the administration of justice, wreaks havoc upon orderly judicial
procedure, and adds to the congestion of the heavily burdened dockets of the courts.46
Thus, there is forum shopping when there exist: (a) identity of parties, or at least such parties as
represent the same interests in both actions, (b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts, and (c) the identity of the two preceding particulars is such that
any judgment rendered in the pending case, regardless of which party is successful, would amount to res
judicata in the other.47
Having found that the elements of res judicata and forum shopping are present in the consolidated
cases, a discussion of the other issues is no longer necessary. Nevertheless, for the peace and
contentment of petitioners, we shall shed light on the merits of the case.
As found by the appellate court, the CBAA and LBAA power barges are real property and are thus subject
to real property tax. This is also the inevitable conclusion, considering that G.R. No. 165113 was
dismissed for failure to sufficiently show any reversible error. Tax assessments by tax examiners are
presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise.48
Besides, factual findings of administrative bodies, which have acquired expertise in their field, are
generally binding and conclusive upon the Court; we will not assume to interfere with the sensible
exercise of the judgment of men especially trained in appraising property. Where the judicial mind is left
in doubt, it is a sound policy to leave the assessment undisturbed.49 We find no reason to depart from
this rule in this case.
8
In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al.,50 a power
company brought an action to review property tax assessment. On the city’s motion to dismiss, the
Supreme Court of New York held that the barges on which were mounted gas turbine power plants
designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant
barges, and the accessory equipment mounted on the barges were subject to real property taxation.
Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks and structures which, though
floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast" are
considered immovable property. Thus, power barges are categorized as immovable property by
destination, being in the nature of machinery and other implements intended by the owner for an
industry or work which may be carried on in a building or on a piece of land and which tend directly to
meet the needs of said industry or work.51
Petitioners maintain nevertheless that the power barges are exempt from real estate tax under Section
234 (c) of R.A. No. 7160 because they are actually, directly and exclusively used by petitioner NPC, a
government- owned and controlled corporation engaged in the supply, generation, and transmission of
electric power.
We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS,
which in fine, is the entity being taxed by the local government. As stipulated under Section 2.11, Article
2 of the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings,
machinery and equipment on the Site used in connection with the Power Barges which have been
supplied by it at its own cost. POLAR shall operate, manage and maintain the Power Barges for the
purpose of converting Fuel of NAPOCOR into electricity.52
It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its
exemption in Section 234 (c) of R.A. No. 7160, which reads:
SECTION 234. Exemptions from Real Property Tax. – The following are exempted from payment of the
real property tax:
xxx
(c) All machineries and equipment that are actually, directly and exclusively used by local water districts
and government-owned or controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power; x x x
Indeed, the law states that the machinery must be actually, directly and exclusively used by the
government owned or controlled corporation; nevertheless, petitioner FELS still cannot find solace in this
provision because Section 5.5, Article 5 of the Agreement provides:
OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of the
necessary Fuel pursuant to Article 6 and to the other provisions hereof, it will operate the Power Barges
to convert such Fuel into electricity in accordance with Part A of Article 7.53
It is a basic rule that obligations arising from a contract have the force of law between the parties. Not
being contrary to law, morals, good customs, public order or public policy, the parties to the contract are
bound by its terms and conditions.54
Time and again, the Supreme Court has stated that taxation is the rule and exemption is the
exception.55 The law does not look with favor on tax exemptions and the entity that would seek to be
thus privileged must justify it by words too plain to be mistaken and too categorical to be
misinterpreted.56 Thus, applying the rule of strict construction of laws granting tax exemptions, and the
rule that doubts should be resolved in favor of provincial corporations, we hold that FELS is considered a
taxable entity.
The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be responsible
for the payment of all real estate taxes and assessments, does not justify the exemption. The privilege
granted to petitioner NPC cannot be extended to FELS. The covenant is between FELS and NPC and does
not bind a third person not privy thereto, in this case, the Province of Batangas.
It must be pointed out that the protracted and circuitous litigation has seriously resulted in the local
government’s deprivation of revenues. The power to tax is an incident of sovereignty and is unlimited in
its magnitude, acknowledging in its very nature no perimeter so that security against its abuse is to be
found only in the responsibility of the legislature which imposes the tax on the constituency who are to
pay for it.57 The right of local government units to collect taxes due must always be upheld to avoid
severe tax erosion. This consideration is consistent with the State policy to guarantee the autonomy of
local governments58 and the objective of the Local Government Code that they enjoy genuine and
meaningful local autonomy to empower them to achieve their fullest development as self-reliant
communities and make them effective partners in the attainment of national goals.59
In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed
revenues to finance and support myriad activities of the local government units for the delivery of basic
services essential to the promotion of the general welfare and the enhancement of peace, progress, and
prosperity of the people.60
WHEREFORE, the Petitions are DENIED and the assailed Decisions and Resolutions AFFIRMED.
SO ORDERED.
ROMEO J. CALLEJO, SR. Associate Justice
WE CONCUR: CONSUELO YNARES-SANTIAGO Associate Justice, MA. ALICIA AUSTRIA-MARTINEZ
Asscociate Justice,
MINITA V. CHICO-NAZARIO Associate Justice
EN BANC
G.R. No. L-40411 August 7, 1935
DAVAO SAW MILL CO., INC., plaintiff-appellant, vs. APRONIANO G. CASTILLO and DAVAO LIGHT &
POWER CO., INC., defendants-appellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening sentence of the decision in the trial court and as set
forth by counsel for the parties on appeal, involves the determination of the nature of the properties
described in the complaint. The trial judge found that those properties were personal in nature, and as a
consequence absolved the defendants from the complaint, with costs against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine
Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of
Davao. However, the land upon which the business was conducted belonged to another person. On the
land the sawmill company erected a building which housed the machinery used by it. Some of the
implements thus used were clearly personal property, the conflict concerning machines which were
placed and mounted on foundations of cement. In the contract of lease between the sawmill company
and the owner of the land there appeared the following provision:
9
That on the expiration of the period agreed upon, all the improvements and buildings introduced and
erected by the party of the second part shall pass to the exclusive ownership of the party of the first part
without any obligation on its part to pay any amount for said improvements and buildings; also, in the
event the party of the second part should leave or abandon the land leased before the time herein
stipulated, the improvements and buildings shall likewise pass to the ownership of the party of the first
part as though the time agreed upon had expired: Provided, however, That the machineries and
accessories are not included in the improvements which will pass to the party of the first part on the
expiration or abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill
Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the
defendant in that action; a writ of execution issued thereon, and the properties now in question were
levied upon as personalty by the sheriff. No third party claim was filed for such properties at the time of
the sales thereof as is borne out by the record made by the plaintiff herein. Indeed the bidder, which was
the plaintiff in that action, and the defendant herein having consummated the sale, proceeded to take
possession of the machinery and other properties described in the corresponding certificates of sale
executed in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a
number of occasions treated the machinery as personal property by executing chattel mortgages in favor
of third persons. One of such persons is the appellee by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property
consists of —
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
xxx xxx xxx
5. 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 of industry.
Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no
doubt that the trial judge and appellees are right in their appreciation of the legal doctrines flowing from
the facts.
In the first place, it must again be pointed out that the appellant should have registered its protest
before or at the time of the sale of this property. It must further be pointed out that while not
conclusive, the characterization of the property as chattels by the appellant is indicative of intention and
impresses upon the property the character determined by the parties. In this connection the decision of
this court in the case of Standard Oil Co. of New York vs. Jaramillo ( [1923], 44 Phil., 630), whether obiter
dicta or not, furnishes the key to such a situation.
It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is
machinery which is involved; moreover, machinery not intended by the owner of any building or land for
use in connection therewith, but intended by a lessee for use in a building erected on the land by the
latter to be returned to the lessee on the expiration or abandonment of the lease.
A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it
was held that machinery which is movable in its nature only becomes immobilized when placed in a plant
by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person
having only a temporary right, unless such person acted as the agent of the owner. In the opinion written
by Chief Justice White, whose knowledge of the Civil Law is well known, it was in part said:
To determine this question involves fixing the nature and character of the property from the point of
view of the rights of Valdes and its nature and character from the point of view of Nevers & Callaghan as
a judgment creditor of the Altagracia Company and the rights derived by them from the execution levied
on the machinery placed by the corporation in the plant. Following the Code Napoleon, the Porto Rican
Code treats as immovable (real) property, not only land and buildings, but also attributes immovability in
some cases to property of a movable nature, that is, personal property, because of the destination to
which it is applied. "Things," says section 334 of the Porto Rican Code, "may be immovable either by
their own nature or by their destination or the object to which they are applicable." Numerous
illustrations are given in the fifth subdivision of section 335, which is as follows: "Machinery, vessels,
instruments or implements intended by the owner of the tenements for the industrial or works that they
may carry on in any building or upon any land and which tend directly to meet the needs of the said
industry or works." (See also Code Nap., articles 516, 518 et seq. to and inclusive of article 534,
recapitulating the things which, though in themselves movable, may be immobilized.) So far as the
subject-matter with which we are dealing — machinery placed in the plant — it is plain, both under the
provisions of the Porto Rican Law and of the Code Napoleon, that machinery which is movable in its
nature only becomes immobilized when placed in a plant by the owner of the property or plant. Such
result would not be accomplished, therefore, by the placing of machinery in a plant by a tenant or a
usufructuary or any person having only a temporary right. (Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit.
2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and decisions quoted in Fuzier-Herman ed. Code Napoleon
under articles 522 et seq.) The distinction rests, as pointed out by Demolombe, upon the fact that one
only having a temporary right to the possession or enjoyment of property is not presumed by the law to
have applied movable property belonging to him so as to deprive him of it by causing it by an act of
immobilization to become the property of another. It follows that abstractly speaking the machinery put
by the Altagracia Company in the plant belonging to Sanchez did not lose its character of movable
property and become immovable by destination. But in the concrete immobilization took place because
of the express provisions of the lease under which the Altagracia held, since the lease in substance
required the putting in of improved machinery, deprived the tenant of any right to charge against the
lessor the cost such machinery, and it was expressly stipulated that the machinery so put in should
become a part of the plant belonging to the owner without compensation to the lessee. Under such
conditions the tenant in putting in the machinery was acting but as the agent of the owner in compliance
with the obligations resting upon him, and the immobilization of the machinery which resulted arose in
legal effect from the act of the owner in giving by contract a permanent destination to the machinery.
xxx xxx xxx
The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the
Altagracia Company, being, as regards Nevers & Callaghan, movable property, it follows that they had
the right to levy on it under the execution upon the judgment in their favor, and the exercise of that right
did not in a legal sense conflict with the claim of Valdes, since as to him the property was a part of the
realty which, as the result of his obligations under the lease, he could not, for the purpose of collecting
his debt, proceed separately against. (Valdes vs. Central Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this
instance to be paid by the appellant.
Villa-Real, Imperial, Butte, and Goddard, JJ., concur.
10
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
11
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
12
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.
EN BANC
G.R. Nos. L-10837-38 May 30, 1958
ASSOCIATED INSURANCE and SURETY COMPANY, INC., plaintiff, vs. ISABEL IYA, ADRIANO VALINO and
LUCIA VALINO, defendants.
ISABEL IYA, plaintiff, vs. ADRIANO VALINO, LUCIA VALINO and ASSOCIATED INSURANCE and SURETY
COMPANY. INC., defendants.
Jovita L. de Dios for defendant Isabel Iya.
M. Perez Cardenas and Apolonio Abola for defendant Associated Insurance and Surety Co., Inc.
FELIX, J.:
Adriano Valino and Lucia A. Valino, husband and wife, were the owners and possessors of a house of
strong materials constructed on Lot No. 3, Block No. 80 of the Grace Park Subdivision in Caloocan, Rizal,
which they purchased on installment basis from the Philippine Realty Corporation. On November 6,
1951, to enable her to purchase on credit rice from the NARIC, Lucia A. Valino filed a bond in the sum of
P11,000.00 (AISCO Bond No. G-971) subscribed by the Associated Insurance and Surety Co., Inc., and as
counter-guaranty therefor, the spouses Valino executed an alleged chattel mortgage on the
aforementioned house in favor of the surety company, which encumbrance was duly registered with the
Chattel Mortgage Register of Rizal on December 6, 1951. It is admitted that at the time said undertaking
took place, the parcel of land on which the house is erected was still registered in the name of the
Philippine Realty Corporation. Having completed payment on the purchase price of the lot, the Valinos
were able to secure on October 18, 1958, a certificate of title in their name (T.C.T. No. 27884).
Subsequently, however, or on October 24, 1952, the Valinos, to secure payment of an indebtedness in
the amount of P12,000.00, executed a real estate mortgage over the lot and the house in favor of Isabel
Iya, which was duly registered and annotated at the back of the certificate of title.
On the other hand, as Lucia A. Valino, failed to satisfy her obligation to the NARIC, the surety company
was compelled to pay the same pursuant to the undertaking of the bond. In turn, the surety company
demanded reimbursement from the spouses Valino, and as the latter likewise failed to do so, the
company foreclosed the chattel mortgage over the house. As a result thereof, a public sale was
conducted by the Provincial Sheriff of Rizal on December 26, 1952, wherein the property was awarded to
the surety company for P8,000.00, the highest bid received therefor. The surety company then caused
the said house to be declared in its name for tax purposes (Tax Declaration No. 25128).
Sometime in July, 1953, the surety company learned of the existence of the real estate mortgage over
the lot covered by T.C.T. No. 26884 together with the improvements thereon; thus, said surety company
instituted Civil Case No. 2162 of the Court of First Instance of Manila naming Adriano and Lucia Valino
and Isabel Iya, the mortgagee, as defendants. The complaint prayed for the exclusion of the residential
house from the real estate mortgage in favor of defendant Iya and the declaration and recognition of
plaintiff's right to ownership over the same in virtue of the award given by the Provincial Sheriff of Rizal
during the public auction held on December 26, 1952. Plaintiff likewise asked the Court to sentence the
spouses Valino to pay said surety moral and exemplary damages, attorney's fees and costs. Defendant
Isabel Iya filed her answer to the complaint alleging among other things, that in virtue of the real estate
mortgage executed by her co-defendants, she acquired a real right over the lot and the house
constructed thereon; that the auction sale allegedly conducted by the Provincial Sheriff of Rizal as a
result of the foreclosure of the chattel mortgage on the house was null and void for non-compliance with
the form required by law. She, therefore, prayed for the dismissal of the complaint and anullment of the
sale made by the Provincial Sheriff. She also demanded the amount of P5,000.00 from plaintiff as
counterclaim, the sum of P5,000.00 from her co-defendants as crossclaim, for attorney's fees and costs.
Defendants spouses in their answer admitted some of the averments of the complaint and denied the
others. They, however, prayed for the dismissal of the action for lack of cause of action, it being alleged
that plaintiff was already the owner of the house in question, and as said defendants admitted this fact,
the claim of the former was already satisfied.
On October 29, 1953, Isabel Iya filed another civil action against the Valinos and the surety company
(Civil Case No. 2504 of the Court of First Instance of Manila) stating that pursuant to the contract of
mortgage executed by the spouses Valino on October 24, 1952, the latter undertook to pay a loan of
P12,000.00 with interest at 12% per annum or P120.00 a month, which indebtedness was payable in 4
years, extendible for only one year; that to secure payment thereof, said defendants mortgaged the
house and lot covered by T.C.T. No. 27884 located at No. 67 Baltazar St., Grace Park Subdivision,
Caloocan, Rizal; that the Associated Insurance and Surety Co., Inc., was included as a party defendant
because it claimed to have an interest on the residential house also covered by said mortgage; that it
was stipulated in the aforesaid real estate mortgage that default in the payment of the interest agreed
upon would entitle the mortgagee to foreclose the same even before the lapse of the 4-year period; and
as defendant spouses had allegedly failed to pay the interest for more than 6 months, plaintiff prayed
the Court to order said defendants to pay the sum of P12,000.00 with interest thereon at 12% per
annum from March 25, 1953, until fully paid; for an additional sum equivalent to 20% of the total
obligation as damages, and for costs. As an alternative in case such demand may not be met and satisfied
plaintiff prayed for a decree of foreclosure of the land, building and other improvements thereon to be
sold at public auction and the proceeds thereof applied to satisfy the demands of plaintiff; that the
Valinos, the surety company and any other person claiming interest on the mortgaged properties be
barred and foreclosed of all rights, claims or equity of redemption in said properties; and for deficiency
judgment in case the proceeds of the sale of the mortgaged property would be insufficient to satisfy the
claim of plaintiff.
Defendant surety company, in answer to this complaint insisted on its right over the building, arguing
that as the lot on which the house was constructed did not belong to the spouses at the time the chattel
mortgage was executed, the house might be considered only as a personal property and that the
encumbrance thereof and the subsequent foreclosure proceedings made pursuant to the provisions of
the Chattel Mortgage Law were proper and legal. Defendant therefore prayed that said building be
excluded from the real estate mortgage and its right over the same be declared superior to that of
plaintiff, for damages, attorney's fees and costs.
13
Taking side with the surety company, defendant spouses admitted the due execution of the mortgage
upon the land but assailed the allegation that the building was included thereon, it being contended that
it was already encumbered in favor of the surety company before the real estate mortgage was
executed, a fact made known to plaintiff during the preparation of said contract and to which the latter
offered no objection. As a special defense, it was asserted that the action was premature because the
contract was for a period of 4 years, which had not yet elapsed.
The two cases were jointly heard upon agreement of the parties, who submitted the same on a
stipulation of facts, after which the Court rendered judgment dated March 8, 1956, holding that the
chattel mortgage in favor of the Associated Insurance and Surety Co., Inc., was preferred and superior
over the real estate mortgage subsequently executed in favor of Isabel Iya. It was ruled that as the
Valinos were not yet the registered owner of the land on which the building in question was constructed
at the time the first encumbrance was made, the building then was still a personality and a chattel
mortgage over the same was proper. However, as the mortgagors were already the owner of the land at
the time the contract with Isabel Iya was entered into, the building was transformed into a real property
and the real estate mortgage created thereon was likewise adjudged as proper. It is to be noted in this
connection that there is no evidence on record to sustain the allegation of the spouses Valino that at the
time they mortgaged their house and lot to Isabel Iya, the latter was told or knew that part of the
mortgaged property, i.e., the house, had previously been mortgaged to the surety company.
The residential building was, therefore, ordered excluded from the foreclosure prayed for by Isabel Iya,
although the latter could exercise the right of a junior encumbrance. So the spouses Valino were ordered
to pay the amount demanded by said mortgagee or in their default to have the parcel of land subject of
the mortgage sold at public auction for the satisfaction of Iya's claim.
There is no question as to appellant's right over the land covered by the real estate mortgage; however,
as the building constructed thereon has been the subject of 2 mortgages; controversy arise as to which
of these encumbrances should receive preference over the other. The decisive factor in resolving the
issue presented by this appeal is the determination of the nature of the structure litigated upon, for
where it be considered a personality, the foreclosure of the chattel mortgage and the subsequent sale
thereof at public auction, made in accordance with the Chattel Mortgage Law would be valid and the
right acquired by the surety company therefrom would certainly deserve prior recognition; otherwise,
appellant's claim for preference must be granted. The lower Court, deciding in favor of the surety
company, based its ruling on the premise that as the mortgagors were not the owners of the land on
which the building is erected at the time the first encumbrance was made, said structure partook of the
nature of a personal property and could properly be the subject of a chattel mortgage. We find reason to
hold otherwise, for as this Court, defining the nature or character of a building, has said:
. . . while it is true that generally, real estate connotes the land and the building constructed thereon, it is
obvious that the inclusion of the building, 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 . . . Moreover, and in view of the absence of any specific
provision to the contrary, a building is an immovable property irrespective of whether or not said
structure and the land on which it is adhered to belong to the same owner. (Lopez vs. Orosa, G.R. Nos.
supra, p. 98).
A building certainly cannot be divested of its character of a realty by the fact that the land on which it is
constructed belongs to another. To hold it the other way, the possibility is not remote that it would
result in confusion, for to cloak the building with an uncertain status made dependent on the ownership
of the land, would create a situation where a permanent fixture changes its nature or character as the
ownership of the land changes hands. In the case at bar, as personal properties could only be the subject
of a chattel mortgage (Section 1, Act 3952) and as obviously the structure in question is not one, the
execution of the chattel mortgage covering said building is clearly invalid and a nullity. While it is true
that said document was correspondingly registered in the Chattel Mortgage Register of Rizal, this act
produced no effect whatsoever for where the interest conveyed is in the nature of a real property, the
registration of the document in the registry of chattels is merely a futile act. Thus, the registration of the
chattel mortgage of a building of strong materials produce no effect as far as the building is concerned
(Leung Yee vs. Strong Machinery Co., 37 Phil., 644). Nor can we give any consideration to the contention
of the surety that it has acquired ownership over the property in question by reason of the sale
conducted by the Provincial Sheriff of Rizal, for as this Court has aptly pronounced:
A mortgage creditor who purchases real properties at an extrajudicial foreclosure sale thereof by virtue
of a chattel mortgage constituted in his favor, which mortgage has been declared null and void with
respect to said real properties, acquires no right thereto by virtue of said sale (De la Riva vs. Ah Keo, 60
Phil., 899).
Wherefore the portion of the decision of the lower Court in these two cases appealed from holding the
rights of the surety company, over the building superior to that of Isabel Iya and excluding the building
from the foreclosure prayed for by the latter is reversed and appellant Isabel Iya's right to foreclose not
only the land but also the building erected thereon is hereby recognized, and the proceeds of the sale
thereof at public auction (if the land has not yet been sold), shall be applied to the unsatisfied judgment
in favor of Isabel Iya. This decision however is without prejudice to any right that the Associated
Insurance and Surety Co., Inc., may have against the spouses Adriano and Lucia Valino on account of the
mortgage of said building they executed in favor of said surety company. Without pronouncement as to
costs. It is so ordered.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., and
Endencia, JJ., concur.
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:
14
(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
15
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.
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
16
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.
EN BANC
G.R. No. L-11139 April 23, 1958
SANTOS EVANGELISTA, petitioner, vs. ALTO SURETY & INSURANCE CO., INC., respondent.
Gonzalo D. David for petitioner.
Raul A. Aristorenas and Benjamin Relova for respondent.
CONCEPCION, J.:
This is an appeal by certiorari from a decision of the Court of Appeals.
Briefly, the facts are: On June 4, 1949, petitioner herein, Santos Evangelista, instituted Civil Case No.
8235 of the Court of First, Instance of Manila entitled " Santos Evangelista vs. Ricardo Rivera," for a sum
of money. On the same date, he obtained a writ of attachment, which levied upon a house, built by
Rivera on a land situated in Manila and leased to him, by filing copy of said writ and the corresponding
notice of attachment with the Office of the Register of Deeds of Manila, on June 8, 1949. In due course,
judgment was rendered in favor of Evangelista, who, on October 8, 1951, bought the house at public
auction held in compliance with the writ of execution issued in said case. The corresponding definite
deed of sale was issued to him on October 22, 1952, upon expiration of the period of redemption. When
Evangelista sought to take possession of the house, Rivera refused to surrender it, upon the ground that
he had leased the property from the Alto Surety & Insurance Co., Inc. — respondent herein — and that
the latter is now the true owner of said property. It appears that on May 10, 1952, a definite deed of sale
of the same house had been issued to respondent, as the highest bidder at an auction sale held, on
September 29, 1950, in compliance with a writ of execution issued in Civil Case No. 6268 of the same
court, entitled "Alto Surety & Insurance Co., Inc. vs. Maximo Quiambao, Rosario Guevara and Ricardo
Rivera," in which judgment, for the sum of money, had been rendered in favor respondent herein, as
plaintiff therein. Hence, on June 13, 1953, Evangelista instituted the present action against respondent
and Ricardo Rivera, for the purpose of establishing his (Evangelista) title over said house, securing
possession thereof, apart from recovering damages.
In its answer, respondent alleged, in substance, that it has a better right to the house, because the sale
made, and the definite deed of sale executed, in its favor, on September 29, 1950 and May 10, 1952,
respectively, precede the sale to Evangelista (October 8, 1951) and the definite deed of sale in his favor
(October 22, 1952). It, also, made some special defenses which are discussed hereafter. Rivera, in effect,
joined forces with respondent. After due trial, the Court of First Instance of Manila rendered judgment
for Evangelista, sentencing Rivera and respondent to deliver the house in question to petitioner herein
and to pay him, jointly and severally, forty pesos (P40.00) a month from October, 1952, until said
delivery, plus costs.
On appeal taken by respondent, this decision was reversed by the Court of Appeals, which absolved said
respondent from the complaint, upon the ground that, although the writ of attachment in favor of
Evangelista had been filed with the Register of Deeds of Manila prior to the sale in favor of respondent,
Evangelista did not acquire thereby a preferential lien, the attachment having been levied as if the house
in question were immovable property, although in the opinion of the Court of Appeals, it is "ostensibly a
personal property." As such, the Court of Appeals held, "the order of attachment . . . should have been
served in the manner provided in subsection (e) of section 7 of Rule 59," of the Rules of Court, reading:
The property of the defendant shall be attached by the officer executing the order in the following
manner:
(e) Debts and credits, and other personal property not capable of manual delivery, by leaving with the
person owing such debts, or having in his possession or under his control, such credits or other personal
property, or with, his agent, a copy of the order, and a notice that the debts owing by him to the
defendant, and the credits and other personal property in his possession, or under his control, belonging
to the defendant, are attached in pursuance of such order. (Emphasis ours.)
17
However, the Court of Appeals seems to have been of the opinion, also, that the house of Rivera should
have been attached in accordance with subsection (c) of said section 7, as "personal property capable of
manual delivery, by taking and safely keeping in his custody", for it declared that "Evangelists could not
have . . . validly purchased Ricardo Rivera's house from the sheriff as the latter was not in possession
thereof at the time he sold it at a public auction."
Evangelista now seeks a review, by certiorari, of this decision of the Court of Appeals. In this connection,
it is not disputed that although the sale to the respondent preceded that made to Evangelists, the latter
would have a better right if the writ of attachment, issued in his favor before the sale to the respondent,
had been properly executed or enforced. This question, in turn, depends upon whether the house of
Ricardo Rivera is real property or not. In the affirmative case, the applicable provision would be
subsection (a) of section 7, Rule 59 of the Rules of Court, pursuant to which the attachment should be
made "by filing with the registrar of deeds a copy of the order, together with a description of the
property attached, and a notice that it is attached, and by leaving a copy of such order, description, and
notice with the occupant of the property, if any there be."
Respondent maintains, however, and the Court of Appeals held, that Rivera's house is personal property,
the levy upon which must be made in conformity with subsections (c) and (e) of said section 7 of Rule 59.
Hence, the main issue before us is whether a house, constructed the lessee of the land on which it is
built, should be dealt with, for purpose, of attachment, as immovable property, or as personal property.
It is, our considered opinion that said house is not personal property, much less a debt, credit or other
personal property not capable of manual delivery, but immovable property. As explicitly held, in Laddera
vs. Hodges (48 Off. Gaz., 5374), "a true building (not merely superimposed on the soil) is immovable or
real property, whether it is erected by the owner of the land or by usufructuary or lessee. This is the
doctrine of our Supreme Court in Leung Yee vs. Strong Machinery Company, 37 Phil., 644. And it is amply
supported by the rulings of the French Court. . . ."
It is true that the parties to a deed of chattel mortgage may agree to consider a house as personal
property for purposes of said contract (Luna vs. Encarnacion, * 48 Off. Gaz., 2664; Standard Oil Co. of
New York vs. Jaramillo, 44 Phil., 630; De Jesus vs. Juan Dee Co., Inc., 72 Phil., 464). However, this view is
good only insofar as the contracting parties are concerned. It is based, partly, upon the principle of
estoppel. Neither this principle, nor said view, is applicable to strangers to said contract. Much less is it in
point where there has been no contract whatsoever, with respect to the status of the house involved, as
in the case at bar. Apart from this, in Manarang vs. Ofilada (99 Phil., 108; 52 Off. Gaz., 3954), we held:
The question now before us, however, is: Does the fact that the parties entering into a contract
regarding a house gave said property the consideration of personal property in their contract, bind the
sheriff in advertising the property's sale at public auction as personal property? It is to be remembered
that in the case at bar the action was to collect a loan secured by a chattel mortgage on the house. It is
also to be remembered that in practice it is the judgment creditor who points out to the sheriff the
properties that the sheriff is to levy upon in execution, and the judgment creditor in the case at bar is the
party in whose favor the owner of the house had conveyed it by way of chattel mortgage and, therefore,
knew its consideration as personal property.
These considerations notwithstanding, we hold that the rules on execution do not allow, and, we should
not interpret them in such a way as to allow, the special consideration that parties to a contract may
have desired to impart to real estate, for example, as personal property, when they are, not ordinarily
so. Sales on execution affect the public and third persons. The regulation governing sales on execution
are for public officials to follow. The form of proceedings prescribed for each kind of property is suited to
its character, not to the character, which the parties have given to it or desire to give it. When the rules
speak of personal property, property which is ordinarily so considered is meant; and when real property
is spoken of, it means property which is generally known as real property. The regulations were never
intended to suit the consideration that parties may have privately given to the property levied upon.
Enforcement of regulations would be difficult were the convenience or agreement of private parties to
determine or govern the nature of the proceedings. We therefore hold that the mere fact that a house
was the subject of the chattel mortgage and was considered as personal property by the parties does not
make said house personal property for purposes of the notice to be given for its sale of public auction.
This ruling is demanded by the need for a definite, orderly and well defined regulation for official and
public guidance and would prevent confusion and misunderstanding.
We, therefore, declare that the house of mixed materials levied upon on execution, although subject of a
contract of chattel mortgage between the owner and a third person, is real property within the purview
of Rule 39, section 16, of the Rules of Court as it has become a permanent fixture of the land, which, is
real property. (42 Am. Jur. 199-200; Leung Yee vs. Strong Machinery Co., 37 Phil., 644; Republic vs.
Ceniza, et al., 90 Phil., 544; Ladera,, et al. vs. Hodges, et al., [C.A.] Off. Gaz. 5374.)" (Emphasis ours.)
The foregoing considerations apply, with equal force, to the conditions for the levy of attachment, for it
similarly affects the public and third persons.
It is argued, however, that, even if the house in question were immovable property, its attachment by
Evangelista was void or ineffective, because, in the language of the Court of Appeals, "after presenting a
Copy of the order of attachment in the Office of the Register of Deeds, the person who might then be in
possession of the house, the sheriff took no pains to serve Ricardo Rivera, or other copies thereof." This
finding of the Court of Appeals is neither conclusive upon us, nor accurate.
The Record on Appeal, annexed to the petition for Certiorari, shows that petitioner alleged, in paragraph
3 of the complaint, that he acquired the house in question "as a consequence of the levy of an
attachment and execution of the judgment in Civil Case No. 8235" of the Court of First Instance of
Manila. In his answer (paragraph 2), Ricardo Rivera admitted said attachment execution of judgment. He
alleged, however, by way a of special defense, that the title of respondent "is superior to that of plaintiff
because it is based on a public instrument," whereas Evangelista relied upon a "promissory note" which
"is only a private instrument"; that said Public instrument in favor of respondent "is superior also to the
judgment in Civil Case No. 8235"; and that plaintiff's claim against Rivera amounted only to P866, "which
is much below the real value" of said house, for which reason it would be "grossly unjust to acquire the
property for such an inadequate consideration." Thus, Rivera impliedly admitted that his house had been
attached, that the house had been sold to Evangelista in accordance with the requisite formalities, and
that said attachment was valid, although allegedly inferior to the rights of respondent, and the
consideration for the sale to Evangelista was claimed to be inadequate.
Respondent, in turn, denied the allegation in said paragraph 3 of the complaint, but only " for the
reasons stated in its special defenses" namely: (1) that by virtue of the sale at public auction, and the
final deed executed by the sheriff in favor of respondent, the same became the "legitimate owner of the
house" in question; (2) that respondent "is a buyer in good faith and for value"; (3) that respondent
"took possession and control of said house"; (4) that "there was no valid attachment by the plaintiff
and/or the Sheriff of Manila of the property in question as neither took actual or constructive possession
or control of the property at any time"; and (5) "that the alleged registration of plaintiff's attachment,
certificate of sale and final deed in the Office of Register of Deeds, Manila, if there was any, is likewise,
not valid as there is no registry of transactions covering houses erected on land belonging to or leased
from another." In this manner, respondent claimed a better right, merely under the theory that, in case
of double sale of immovable property, the purchaser who first obtains possession in good faith, acquires
title, if the sale has not been "recorded . . . in the Registry of Property" (Art. 1544, Civil Code of the
Philippines), and that the writ of attachment and the notice of attachment in favor of Evangelista should
be considered unregistered, "as there is no registry of transactions covering houses erected on land
belonging to or leased from another." In fact, said article 1544 of the Civil Code of the Philippines,
governing double sales, was quoted on page 15 of the brief for respondent in the Court of Appeals, in
support of its fourth assignment of error therein, to the effect that it "has preference or priority over the
sale of the same property" to Evangelista.
18
In other words, there was no issue on whether copy of the writ and notice of attachment had been
served on Rivera. No evidence whatsoever, to the effect that Rivera had not been served with copies of
said writ and notice, was introduced in the Court of First Instance. In its brief in the Court of Appeals,
respondent did not aver, or even, intimate, that no such copies were served by the sheriff upon Rivera.
Service thereof on Rivera had been impliedly admitted by the defendants, in their respective answers,
and by their behaviour throughout the proceedings in the Court of First Instance, and, as regards
respondent, in the Court of Appeals. In fact, petitioner asserts in his brief herein (p. 26) that copies of
said writ and notice were delivered to Rivera, simultaneously with copies of the complaint, upon service
of summons, prior to the filing of copies of said writ and notice with the register deeds, and the truth of
this assertion has not been directly and positively challenged or denied in the brief filed before us by
respondent herein. The latter did not dare therein to go beyond making a statement — for the first time
in the course of these proceedings, begun almost five (5) years ago (June 18, 1953) — reproducing
substantially the aforementioned finding of the Court of Appeals and then quoting the same.
Considering, therefore, that neither the pleadings, nor the briefs in the Court of Appeals, raised an issue
on whether or not copies of the writ of attachment and notice of attachment had been served upon
Rivera; that the defendants had impliedly admitted-in said pleadings and briefs, as well as by their
conduct during the entire proceedings, prior to the rendition of the decision of the Court of Appeals —
that Rivera had received copies of said documents; and that, for this reason, evidently, no proof was
introduced thereon, we, are of the opinion, and so hold that the finding of the Court of Appeals to the
effect that said copies had not been served upon Rivera is based upon a misapprehension of the specific
issues involved therein and goes beyond the range of such issues, apart from being contrary to the
aforementioned admission by the parties, and that, accordingly, a grave abuse of discretion was
committed in making said finding, which is, furthermore, inaccurate.
Wherefore, the decision of the Court of Appeals is hereby reversed, and another one shall be entered
affirming that of the Court of First Instance of Manila, with the costs of this instance against respondent,
the Alto Surety and Insurance Co., Inc. It is so ordered.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Reyes, J.B.L., Endencia and Felix,
JJ., concur.
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;
19
(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,
20
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
21
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:
22
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. 133250 May 6, 2003
FRANCISCO I. CHAVEZ, petitioner, vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY
DEVELOPMENT CORPORATION, respondents.
RESOLUTION
CARPIO, J.:
For resolution of the Court are the following motions: (1) Motion to Inhibit and for Re-Deliberation filed
by respondent Amari Coastal Bay Development Corporation ("Amari" for brevity) on September 13,
2002; (2) Motion to Set Case for Hearing on Oral Argument filed by Amari on August 20, 2002; (3) Motion
for Reconsideration and Supplement to Motion for Reconsideration filed by Amari on July 26, 2002 and
August 20, 2002, respectively; (4) Motion for Reconsideration and Supplement to Motion for
Reconsideration filed by respondent Public Estates Authority ("PEA" for brevity) on July 26, 2002 and
August 8, 2002, respectively; and (5) Motion for Reconsideration and/or Clarification filed by the Office
of the Solicitor General on July 25, 2002. Petitioner Francisco I. Chavez filed on November 13, 2002 his
Consolidated Opposition to the main and supplemental motions for reconsideration.
To recall, the Court’s decision of July 9, 2002 ("Decision" for brevity) on the instant case states in its
summary:
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
hectares 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 hectares 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 1409 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.
23
Amari seeks the inhibition of Justice Antonio T. Carpio, ponente of the Decision, on the ground that
Justice Carpio, before his appointment to the Court, wrote in his Manila Times column of July 1, 1997, "I
have always maintained that the law requires the public bidding of reclamation projects." Justice Carpio,
then a private law practitioner, also stated in the same column, "The Amari-PEA reclamation contract is
legally flawed because it was not bid out by the PEA." Amari claims that because of these statements
Justice Carpio should inhibit himself "on the grounds of bias and prejudgment" and that the instant case
should be "re-deliberated" after being assigned to a new ponente.
The motion to inhibit Justice Carpio must be denied for three reasons. First, the motion to inhibit came
after Justice Carpio had already rendered his opinion on the merits of the case. The rule is that a motion
to inhibit must be denied if filed after a member of the Court had already given an opinion on the merits
of the case,1 the rationale being that "a litigant cannot be permitted to speculate upon the action of the
Court xxx (only to) raise an objection of this sort after a decision has been rendered." Second, as can be
readily gleaned from the summary of the Decision quoted above, the absence of public bidding is not
one of the ratio decidendi of the Decision which is anchored on violation of specific provisions of the
Constitution. The absence of public bidding was not raised as an issue by the parties. The absence of
public bidding was mentioned in the Decision only to complete the discussion on the law affecting
reclamation contracts for the guidance of public officials. At any rate, the Office of the Solicitor General
in its Motion for Reconsideration concedes that the absence of public bidding in the disposition of the
Freedom Islands rendered the Amended JVA null and void.2 Third, judges and justices are not
disqualified from participating in a case just because they have written legal articles on the law involved
in the case. As stated by the Court in Republic v. Cocofed,3 -
The mere fact that, as a former columnist, Justice Carpio has written on the coconut levy will not
disqualify him, in the same manner that jurists will not be disqualified just because they may have given
their opinions as textbook writers on the question involved in a case.
Besides, the subject and title of the column in question was "The CCP reclamation project" and the
column referred to the Amari-PEA contract only in passing in one sentence.
Amari’s motion to set the case for oral argument must also be denied since the pleadings of the parties
have discussed exhaustively the issues involved in the case.
The motions for reconsideration reiterate mainly the arguments already discussed in the Decision. We
shall consider in this Resolution only the new arguments raised by respondents.
In its Supplement to Motion for Reconsideration, Amari argues that the Decision should be made to
apply prospectively, not retroactively to cover the Amended JVA. Amari argues that the existence of a
statute or executive order prior to its being adjudged void is an operative fact to which legal
consequences are attached, citing De Agbayani v. PNB,4 thus:
x x x. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or
executive act must have been in force and had to be complied with. This is so as until after the judiciary,
in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have
acted under it and may have changed their positions. What could be more fitting than that in a
subsequent litigation regard be had to what has been done while such legislative or executive act was in
operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being
nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely
because the judiciary is the governmental organ which has the final say on whether or not a legislative or
executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial
review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness
and justice then, if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such
a determination [of unconstitutionality], is an operative fact and may have consequences which cannot
justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various aspects, - with respect to
particular relations, individual and corporate, and particular conduct, private and official." This language
has been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila Motor Co.,
Inc. v. Flores. x x x.
xxx
x x x That before the decision they were not constitutionally infirm was admitted expressly. There is all
the more reason then to yield assent to the now prevailing principle that the existence of a statute or
executive order prior to its being adjudged void is an operative fact to which legal consequences are
attached.
Amari now claims that "assuming arguendo that Presidential Decree Nos. 1084 and 1085, and Executive
Order Nos. 525 and 654 are inconsistent with the 1987 Constitution, the limitation imposed by the
Decision on these decrees and executive orders should only be applied prospectively from the finality of
the Decision."
Amari likewise asserts that a new doctrine of the Court cannot operate retroactively if it impairs vested
rights. Amari maintains that the new doctrine embodied in the Decision cannot apply retroactively on
those who relied on the old doctrine in good faith, citing Spouses Benzonan v. Court of Appeals,5 thus:
At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that
enunciated in Monge and Tupas cited above. The petitioners Benzonan and respondent Pe and the DBP
are bound by these decisions for pursuant to Article 8 of the Civil Code "judicial decisions applying or
interpreting the laws or the Constitution shall form a part of the legal system of the Philippines." But
while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil Code
which provides that "laws shall have no retroactive effect unless the contrary is provided." This is
expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The
rationale against retroactivity is easy to perceive. The retroactive application of a law usually divests
rights that have already become vested or impairs the obligations of contract and hence, is
unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]).
The same consideration underlies our rulings giving only prospective effect to decisions enunciating new
doctrines. Thus, we emphasized in People v. Jabinal, 55 SCRA 607 [1974] "x x x when a doctrine of this
Court is overruled and a different view is adopted, the new doctrine should be applied prospectively and
should not apply to parties who had relied on the old doctrine and acted on the faith thereof.
There may be special cases where weighty considerations of equity and social justice will warrant a
retroactive application of doctrine to temper the harshness of statutory law as it applies to poor farmers
or their widows and orphans. In the present petitions, however, we find no such equitable
considerations. Not only did the private respondent apply for free agricultural land when he did not need
it and he had no intentions of applying it to the noble purposes behind the law, he would now
repurchase for only P327,995.00, the property purchased by the petitioners in good faith for
P1,650,000.00 in 1979 and which, because of improvements and the appreciating value of land must be
worth more than that amount now.
The buyers in good faith from DBP had a right to rely on our rulings in Monge and Tupas when they
purchased the property from DBP in 1979 or thirteen (13) years ago. Under the rulings in these two
cases, the period to repurchase the disputed lot given to respondent Pe expired on June 18, 1982. He
failed to exercise his right. His lost right cannot be revived by relying on the 1988 case of Belisario. The
24
right of petitioners over the subject lot had already become vested as of that time and cannot be
impaired by the retroactive application of the Belisario ruling.
Amari’s reliance on De Agbayani and Spouses Benzonan is misplaced. These cases would apply if the
prevailing law or doctrine at the time of the signing of the Amended JVA was that a private corporation
could acquire alienable lands of the public domain, and the Decision annulled the law or reversed this
doctrine. Obviously, this is not the case here.
Under the 1935 Constitution, private corporations were allowed to acquire alienable lands of the public
domain. But since the effectivity of the 1973 Constitution, private corporations were banned from
holding, except by lease, alienable lands of the public domain. The 1987 Constitution continued this
constitutional prohibition. The prevailing law before, during and after the signing of the Amended JVA is
that private corporations cannot hold, except by lease, alienable lands of the public domain. The
Decision has not annulled or in any way changed the law on this matter. The Decision, whether made
retroactive or not, does not change the law since the Decision merely reiterates the law that prevailed
since the effectivity of the 1973 Constitution. Thus, De Agbayani, which refers to a law that is invalidated
by a decision of the Court, has no application to the instant case.
Likewise, Spouses Benzonan is inapplicable because it refers to a doctrine of the Court that is overruled
by a subsequent decision which adopts a new doctrine. In the instant case, there is no previous doctrine
that is overruled by the Decision. Since the case of Manila Electric Company v. Judge Castro-Bartolome,6
decided on June 29, 1982, the Court has applied consistently the constitutional provision that private
corporations cannot hold, except by lease, alienable lands of the public domain. The Court reiterated this
in numerous cases, and the only dispute in the application of this constitutional provision is whether the
land in question had already become private property before the effectivity of the 1973 Constitution.7 If
the land was already private land before the 1973 Constitution because the corporation had possessed it
openly, continuously, exclusively and adversely for at least thirty years since June 12, 1945 or earlier,
then the corporation could apply for judicial confirmation of its imperfect title. But if the land remained
public land upon the effectivity of the 1973 Constitution, then the corporation could never hold, except
by lease, such public land. Indisputably, the Decision does not overrule any previous doctrine of the
Court.
The prevailing doctrine before, during and after the signing of the Amended JVA is that private
corporations cannot hold, except by lease, alienable lands of the public domain. This is one of the two
main reasons why the Decision annulled the Amended JVA. The other main reason is that submerged
areas of Manila Bay, being part of the sea, are inalienable and beyond the commerce of man, a doctrine
that has remained immutable since the Spanish Law on Waters of 1886. Clearly, the Decision merely
reiterates, and does not overrule, any existing judicial doctrine.
Even on the characterization of foreshore lands reclaimed by the government, the Decision does not
overrule existing law or doctrine. Since the adoption of the Regalian doctrine in this jurisdiction, the sea
and its foreshore areas have always been part of the public domain. And since the enactment of Act No.
1654 on May 18, 1907 until the effectivity of the 1973 Constitution, statutory law never allowed
foreshore lands reclaimed by the government to be sold to private corporations. The 1973 and 1987
Constitution enshrined and expanded the ban to include any alienable land of the public domain.
There are, of course, decisions of the Court which, while recognizing a violation of the law or
Constitution, hold that the sale or transfer of the land may no longer be invalidated because of "weighty
considerations of equity and social justice."8 The invalidation of the sale or transfer may also be
superfluous if the purpose of the statutory or constitutional ban has been achieved. But none of these
cases apply to Amari.
Thus, the Court has ruled consistently that where a Filipino citizen sells land to an alien who later sells
the land to a Filipino, the invalidity of the first transfer is corrected by the subsequent sale to a citizen.9
Similarly, where the alien who buys the land subsequently acquires Philippine citizenship, the sale is
validated since the purpose of the constitutional ban to limit land ownership to Filipinos has been
achieved.10 In short, the law disregards the constitutional disqualification of the buyer to hold land if the
land is subsequently transferred to a qualified party, or the buyer himself becomes a qualified party. In
the instant case, however, Amari has not transferred the Freedom Islands, or any portion of it, to any
qualified party. In fact, Amari admits that title to the Freedom Islands still remains with PEA.11
The Court has also ruled consistently that a sale or transfer of the land may no longer be questioned
under the principle of res judicata, provided the requisites for res judicata are present.12 Under this
principle, the courts and the parties are bound by a prior final decision, otherwise there will be no end to
litigation. As the Court declared in Toledo-Banaga v. Court of Appeals,13 "once a judgement has become
final and executory, it can no longer be disturbed no matter how erroneous it may be." In the instant
case, there is no prior final decision adjudicating the Freedom Islands to Amari.
There are, moreover, special circumstances that disqualify Amari from invoking equity principles. Amari
cannot claim good faith because even before Amari signed the Amended JVA on March 30, 1999,
petitioner had already filed the instant case on April 27, 1998 questioning precisely the qualification of
Amari to acquire the Freedom Islands. Even before the filing of this petition, two Senate Committees14
had already approved on September 16, 1997 Senate Committee Report No. 560. This Report concluded,
after a well-publicized investigation into PEA’s sale of the Freedom Islands to Amari, that the Freedom
Islands are inalienable lands of the public domain. Thus, Amari signed the Amended JVA knowing and
assuming all the attendant risks, including the annulment of the Amended JVA.
Amari has also not paid to PEA the full reimbursement cost incurred by PEA in reclaiming the Freedom
Islands. Amari states that it has paid PEA only P300,000,000.0015 out of the P1,894,129,200.00 total
reimbursement cost agreed upon in the Amended JVA. Moreover, Amari does not claim to have even
initiated the reclamation of the 592.15 hectares of submerged areas covered in the Amended JVA, or to
have started to construct any permanent infrastructure on the Freedom Islands. In short, Amari does not
claim to have introduced any physical improvement or development on the reclamation project that is
the subject of the Amended JVA. And yet Amari claims that it had already spent a "whopping
P9,876,108,638.00" as its total development cost as of June 30, 2002.16 Amari does not explain how it
spent the rest of the P9,876,108,638.00 total project cost after paying PEA P300,000,000.00. Certainly,
Amari cannot claim to be an innocent purchaser in good faith and for value.
In its Supplement to Motion for Reconsideration, PEA claims that it is "similarly situated" as the Bases
Conversion Development Authority (BCDA) which under R.A. No. 7227 is tasked to sell portions of the
Metro Manila military camps and other military reservations. PEA’s comparison is incorrect. The Decision
states as follows:
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 or disposable lands of the public domain, these lands are still public,
not private lands.
PEA is the central implementing agency tasked to undertake reclamation projects nationwide. PEA took
the place of Department of Environment and Natural Resources ("DENR" for brevity) as the government
agency charged with leasing or selling all reclaimed lands of the public domain. In the hands of PEA,
which took over the leasing and selling functions of DENR, reclaimed foreshore lands are public lands in
the same manner that these same lands would have been public lands in the hands of DENR. BCDA is an
entirely different government entity. BCDA is authorized by law to sell specific government lands that
25
have long been declared by presidential proclamations as military reservations for use by the different
services of the armed forces under the Department of National Defense. BCDA’s mandate is specific and
limited in area, while PEA’s mandate is general and national. BCDA holds government lands that have
been granted to end-user government entities – the military services of the armed forces. In contrast,
under Executive Order No. 525, PEA holds the reclaimed public lands, not as an end-user entity, but as
the government agency "primarily responsible for integrating, directing, and coordinating all reclamation
projects for and on behalf of the National Government."
In Laurel v. Garcia,17 cited in the Decision, the Court ruled that land devoted to public use by the
Department of Foreign Affairs, when no longer needed for public use, may be declared patrimonial
property for sale to private parties provided there is a law authorizing such act. Well-settled is the
doctrine that public land granted to an end-user government agency for a specific public use may
subsequently be withdrawn by Congress from public use and declared patrimonial property to be sold to
private parties. R.A. No. 7227 creating the BCDA is a law that declares specific military reservations no
longer needed for defense or military purposes and reclassifies such lands as patrimonial property for
sale to private parties.
Government owned lands, as long they are patrimonial property, can be sold to private parties, whether
Filipino citizens or qualified private corporations. Thus, the so-called Friar Lands acquired by the
government under Act No. 1120 are patrimonial property18 which even private corporations can acquire
by purchase. Likewise, reclaimed alienable lands of the public domain if sold or transferred to a public or
municipal corporation for a monetary consideration become patrimonial property in the hands of the
public or municipal corporation. Once converted to patrimonial property, the land may be sold by the
public or municipal corporation to private parties, whether Filipino citizens or qualified private
corporations.
We reiterate what we stated in the Decision is the rationale for treating PEA in the same manner as
DENR with respect to reclaimed foreshore lands, thus:
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, if not thousands, 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. The 1973 Constitution prohibited private
corporations from acquiring any kind of public land, and the 1987 Constitution has unequivocally
reiterated this prohibition.
Finally, the Office of the Solicitor General and PEA argue that the cost of reclaiming deeply submerged
areas is "enormous" and "it would be difficult for PEA to accomplish such project without the
participation of private corporations."19 The Decision does not bar private corporations from
participating in reclamation projects and being paid for their services in reclaiming lands. What the
Decision prohibits, following the explicit constitutional mandate, is for private corporations to acquire
reclaimed lands of the public domain. There is no prohibition on the directors, officers and stockholders
of private corporations, if they are Filipino citizens, from acquiring at public auction reclaimed alienable
lands of the public domain. They can acquire not more than 12 hectares per individual, and the land thus
acquired becomes private land.
Despite the nullity of the Amended JVA, Amari is not precluded from recovering from PEA in the proper
proceedings, on a quantum meruit basis, whatever Amari may have incurred in implementing the
Amended JVA prior to its declaration of nullity.
WHEREFORE, finding the Motions for Reconsideration to be without merit, the same are hereby DENIED
with FINALITY. The Motion to Inhibit and for Re-Deliberation and the Motion to Set Case for Hearing on
Oral Argument are likewise DENIED.
SO ORDERED.
Davide, Jr., C.J., Vitug, Panganiban, Quisumbing, Austria- Martinez, Carpio-Morales, and Callejo, Sr., JJ.,
concur.
Bellosillo, J., please see separate opinion, concurring and dissenting.
Puno, J., please see separate opinion.
Ynares-Santiago, and Sandoval-Gutierrez, JJ., please see dissenting opinion.
Corona, J., I dissent.
Azcuna, J., I take no part.
SECOND DIVISION
G.R. No. 126316 June 25, 2004
REPUBLIC OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS, HON. JOSE D. AZARRAGA AND
ANGEL T. YU, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision1 of the Court of Appeals dismissing the petition
for annulment of judgment filed before it by the petitioner.
The antecedent facts are as follows:
On June 22, 1994, respondent Angel T. Yu filed a petition2 for registration of a parcel of land, designated
as Lot 524, Cad. 633-D, Estancia Cadastre, Ap-063019-005139, with an area of 1,194 square meters,
more or less, situated at the Poblacion, Zone 1, Municipality of Estancia, Province of Iloilo. The case was
docketed as LRC Case No.1000, LRA Rec. No. N-64463 and raffled to the Regional Trial Court, Sixth
Judicial Region, Iloilo City, Branch 37.3 The petition was later amended to include the adjoining lots and
the corresponding owner’s name.
Initial hearing was scheduled on February 9, 1995 at 8:30 a.m. For the purpose, the Office of the Solicitor
General (OSG) entered its appearance on January 18, 1995 and at the same time deputized the City
Prosecutor of Iloilo City to appear for and in behalf of the Solicitor General under the latter’s supervision
and control. Except for the opposition filed by the Solicitor General, no one else appeared to oppose the
application/petition. The case was then set for reception of applicant’s evidence on February 16, 19954
which was again set to another day.5
On February 22, 1995, the RTC received a letter from the Land Registration Authority (LRA) requesting
the court to require the Land Management Bureau, Manila and the Community Environment and Natural
Resources Office (CENRO) at Barotac Viejo, Iloilo to report on the status of the subject land considering
that a discrepancy was noted after plotting the land.6
26
Thus, on March 6, 1995, the RTC issued an Order to the effect.7
On March 31, 1995, the RTC received a certification from the Land Management Bureau, Department of
Environment and Natural Resources (DENR), Manila stating that "according to the verification of our
records, this Office (formerly Bureau of Lands) has no record of any kind of public land application/land
patent covering the parcel of land situated in Estancia, Iloilo, identified as Lot No. 524, Cad. 633-D, Ap-
063019-005139, …"8
Based on this certification and after reception of evidence, the RTC rendered judgment on May 3, 1995,
the decretal portion of which reads:
WHEREFORE, ratifying the Order of general default previously entered in this case, and after considering
the evidence adduced and finding that petitioner Angel T. Yu had sufficient title proper for the
registration in his name of the land subject of the application, JUDGMENT is hereby rendered confirming
the title of the applicant/petitioner ANGEL T. YU, Filipino, of legal age, married and a resident of Estancia,
Iloilo, over a parcel of land (Lot 524, Cad. 633-D, Estancia Cadastre, AP-063019-005139) situated in the
Poblacion Zone 1, Municipality of Estancia, Province of Iloilo, Island of Panay, identified in the Plan,
Exhibit "E" and technically described in Exhibit "F".
As soon as this Decision becomes final, let an order for the issuance of the permanent decree and the
corresponding certificate of title be issued in accordance with law.9
No motion for reconsideration was filed by the City Prosecutor on behalf of the Solicitor General. Hence,
the said decision became final and executory on June 14, 1995, and entry of judgment was duly made on
July 7, 1995. An order was consequently issued by the RTC directing the issuance of the corresponding
decree of registration and certificate of title to respondent Angel T. Yu.10
On May 29, 1995,11 the OSG received a copy of the supplementary report and findings of Land
Management Officer Myra B. Rosal dated April 12, 1995 (Rosal Report), which was submitted to the trial
court in compliance with the court’s Order dated March 6, 1995. The report was worded, thus:
The Honorable Judge
JOSE AZARRAGA
Regional Trial Court
Sixth Judicial Region
Branch 37, Iloilo City
April 12, 1995
SUBJECT: LAND REGISTRATION CASE NO.
N-1000 LOT NO. 524, CAD,
CAD-633-D, ESTANCIA CADASTRE
ANGEL TILOS YU – APPLICANT
___________________________________
In compliance with the Order of March 6, 1995, received by this Office on March 15, 1995, attached for
your ready reference is the amended report in three (3) pages of Land Management Officer III Fabio O.
Catalan, Jr., of this Office, which was sent to Office of the Regional Technical Director, Land Management
Bureau, DENR Masonic Temple, Iloilo City, in a cover memorandum dated September 24, 1994, duly
endorsed by the CENR Officer of CENRO, Sara, Iloilo, Edgardo J. Himatay.
This supplementary report of the undersigned is prepared with the request that the additional findings
be made on record when the undersigned repaired on the premises of the land on April 7, 1995, in the
morning to conduct an ocular inspection. The following facts were ascertained and found;
1. [That] the Cadastral lot in question and subject of a Land Registration Case at bar, is Lot 524, Cad 633-
D, Estancia Cadastre, containing an area of 1,194 square meters, approved on October 21, 1980, located
at Zone 1, Poblacion Estancia, Iloilo. Again, Engr. Rogelio Santome, adopting the cadastral survey of the
then Bureau of Lands, prepared an Advance Plan and subsequently approved as Ap-063019-005139 on
May 25, 1994.
2. That Lot No. 524, Cad-633-D is covered by a Foreshore Lease Application (FLA No. (VI-I)78) applied for
by Angel Tilos Yu on July 1, 1977, with the then Bureau of Lands, MNR, Ministry of Natural Resources,
NRD (VI-7) Barotac Viejo, duly ratified by Land Investigator Antonio L. Luis. An amount of ₱775.00 each
had been paid in the year 1982 and the year 1983, (please see certification hereto attached) dated
February 6, 1995, of CENR Officer Edgardo J. Himatay.
3. That Lot No. 524, Cad-633-D is declared public land and is Alienable and Disposable per L.C. Map 1020,
Project 44 dated July 26, 1933.
4. That the improvements found on the land are as follows:
a) A commercial complex built of strong materials (concrete steel and galvanized iron with 18-20 feet
structure in depth, as foundation of the building, occupying around 600 square meters of the whole area
of Lot 524. The building itself houses 14 commercial concrete stalls of 14 x 5 meters which is offered for
rent as boutiques and dry goods stalls.
b) On the second floor now undergoing are bowling lanes (6 alleys) for recreational purposes which will
soon open to the public in 3 months time.
5. That Lot No. 524, Cad-633-D is not an agricultural land. That out of the total area of 1,194 square
meters, only around 850 square meters is dry land and that an area of 334 sq. meters which used to be
covered and uncovered by water during high tide is now a reclaimed area, since way back 1977 when
applicant Angel Tilos Yu applied for a Foreshore Lease Application with [the] then Bureau of Lands.
Respectfully submitted,
(signed)
MYRA B. ROSAL12
On June 22, 1995, the OSG received a letter from Regional Executive Director Jose P. Catus of the DENR,
stating that an investigation was conducted on the instant case, and it was found that there were
grounds for opposition to the respondent’s land application. Land Investigator Fabio O. Catalan, Jr., who
conducted an ocular inspection of the subject land, found the same to be a reclaimed foreshore area.
Attached therein was the Amended Report of Land Investigator Catalan, Jr.(Catalan Report);13 the 1977
Foreshore Lease Application of Angel T. Yu;14 the November 16, 1983 Visitation and Examination Report
of Land Investigator Antonio L. Luis over Lot No. 524;15 and a blueprint plan of Lot 524 (formerly Lot 2)
of the Estancia Cadastre.16
After discovering the actual status of Lot 524, the Republic filed a petition for the annulment of judgment
with a prayer for a writ of preliminary injunction with the Court of Appeals on July 20, 1995.17
27
On February 5, 1996, respondent Angel T. Yu filed a motion with the CA, praying that he be allowed to
submit to the Land Registration Authority the corrected technical description and the republication in
the Official Gazette of the corrected technical description of Plan Ap-063019, Lot 524, Cad. 633-D dated
January 15, 1996.18 The OSG filed its objection thereto.19
On September 10, 1996, the Court of Appeals dismissed the petition for annulment of judgment. It also
ruled that since the RTC decision had already become final and executory, the technical description could
no longer be modified to include the increased area as prayed for by the private respondent. The CA held
as follows:
Lot 524 is not a foreshore land.….
The CENRO report is proof that Lot 524, Cad-633-D, is an agricultural land. Out of the total area of 1,194
square meters, around 850 square meters is dry land. That an area of 334 sq. meters which used to be
covered and uncovered by water during high tide is now a reclaimed area, since way back
1977.(underlining supplied)
…
WHEREFORE, the petition for annulment of judgment is hereby DISMISSED. The motion of private
respondent dated January 15, 1996 is DENIED.20
Finding no relief from the CA, the Republic filed the instant petition, raising the issue that:
THE COURT OF APPEALS ERRED IN DENYING THE REPUBLIC’S PETITION FOR ANNULMENT OF JUDGMENT
ON THE MERE SUPPOSITION THAT LOT 524 IS NOT FORESHORE LAND, BUT AGRICULTURAL LAND.21
We find merit in the petition.
At the outset, there is a need to take a closer look at the true nature of the land in question.
The petitioner asserts that Lot 524 is foreshore land.
Foreshore land is that strip of land that lies between the high and low water marks and is alternatively
wet and dry according to the flow of tide. It is that part of the land adjacent to the sea, which is
alternately covered and left dry by the ordinary flow of tides.22 It is part of the alienable land of the
public domain and may be disposed of only by lease and not otherwise.23 Foreshore land remains part
of the public domain and is outside the commerce of man. It is not capable of private appropriation.24
It is for this reason that the petitioner persists in its action to revert the subject land to the State. Thus,
even if the decision of the RTC has become final and executory, we find that the respondent court
abused its discretion in dismissing the petition for annulment of judgment filed before it which is
impressed with public interest. There are valid and meritorious grounds to justify such action. The State
has to protect its interests and can not be bound by, or estopped from, the mistakes or negligent acts of
its officials or agents, much more, non-suited as a result thereof. As held in Republic vs. Alagad:25
…[T]he state as a persona in law is the judicial entity, which is the source of any asserted right to
ownership in land under the basic doctrine embodied in the 1935 Constitution as well as the present
charter. It is charged moreover with the conservation of such patrimony. There is need therefore of the
most rigorous scrutiny before private claims to portions thereof are judicially accorded recognition,
especially so where the matter is sought to be raked up anew after almost fifty years. Such primordial
consideration, not the apparent carelessness, much less the acquiescence of public officials, is the
controlling norm…
The Catalan Report, which states that the subject land is foreshore land, was received by the OSG only on
June 22, 1995, long after the RTC rendered its judgment on May 3, 1995. Angel T. Yu had, in fact, filed a
foreshore lease application in 1977 and paid the corresponding fees thereon. There is, therefore, doubt
to the respondent’s claim that he had been in actual, open, notorious, continuous possession , in the
concept of an owner.
Moreover, the Rosal Report dated April 12, 1995 was received by the OSG only on May 29, 1995.
Although the report states that Lot No. 524, Cad-633-D is declared public land and is alienable and
disposable per L.C. Map 1020, Project 44 dated July 26, 1933, the same report buttresses the contention
that the subject land is foreshore land and covered by a foreshore lease application filed by Angel T. Yu.
Finding the reports to be revealing and significant as to the real status of the land being foreshore, the
petitioner lost no time in filing the petition for annulment of judgment with the Court of Appeals.
We can not fault the trial court for not having considered in its decision the Rosal Report dated April 12,
1995 which was apparently submitted to it. On March 15, 1995, the trial court issued an order where it
considered the case submitted for decision "upon the submission to this court by the Land Management
Bureau, Manila and CENRO, Barotac Viejo, Iloilo of the report as directed in the Order of this Court dated
March 6, 1995, and after the Land Management Sector, Region 6, Iloilo City had duly verified the
discrepancy of plan Ap-063019-005139 of the subject land applied for."26 In compliance with the order,
the trial court received a certification from the Land Management Bureau that "the office has no record
of any kind of public land application/land patent covering the parcel of land"27 and thereby approved
the registration of the land in favor of respondent. The records reveal that the Rosal Report, through a
1st Indorsement dated April 24, 1995, was received by the RTC only on May 5, 1995,28 after the court
had already rendered its decision on May 3, 1995. No motion for reconsideration was filed to controvert
the said decision based on the report. The OSG’s receipt of the Rosal and Catalan Reports on the status
of the land were also belated through no fault of theirs.
Finally, we can not uphold the respondent court’s finding regarding the character of the land. The Rosal
Report clearly states that the subject land is not an agricultural land. Despite such declaration, the
respondent court continued to rule that the subject land is agricultural on the basis that out of the total
area of 1,194 square meters, 850 square meters is dry land and that 334 square meters is now a
reclaimed area.29
Clearly, there is a need to determine once and for all whether the subject land is really foreshore land
and/or whether the respondent has registerable title thereto. The classification of public lands is a
function of the executive branch of government, specifically, the director of lands (now the director of
the Land Management Bureau).30 This Court is not a trier of facts. Thus, for a proper and conclusive
classification of the land involved, the instant case has to be remanded to the trial court for that
determination.31
WHEREFORE, the petition is GRANTED. The Decisions of the Court of Appeals and the Regional Trial Court
are REVERSED and SET ASIDE. The case is REMANDED to the Regional Trial Court, Iloilo City, Branch 37
for further proceedings.
SO ORDERED.
Puno, Quisumbing, Austria-Martinez, and Tinga, JJ., concur.
28
FIRST DIVISION
G. R. No. L-41001 September 30, 1976
MANILA LODGE NO. 761, BENEVOLENT AND PROTECTIVE ORDER OF THE ELKS, INC., petitioner, vs. THE
HONORABLE COURT OF APPEALS, CITY OF MANILA, and TARLAC DEVELOPMENT CORPORATION,
respondents.
No. L-41012 September 30, 1976
TARLAC DEVELOPMENT CORPORATION, petitioner, vs. HONORABLE COURT OF APPEALS, CITY OF
MANILA, LODGE NO. 761, BENEVOLENT AND PROTECTIVE ORDER OF ELKS, INC., respondents.
CASTRO, C.J.
STATEMENT OF THE CASE AND STATEMENTOF THE FACTS
These two cases are petitions on certiorari to review the decision dated June 30, 1975 of the Court of
Appeals in CA-G.R. No. 51590-R entitled "Tarlac Development Corporation vs. City of Manila, and Manila
Lodge No. 761, Benevolent and Protective Order of Elks, Inc.," affirming the trial court's finding in Civil
Case No. 83009 that the property subject of the decision a quo is a "public park or plaza."
On June 26, 1905 the Philippine Commission enacted Act No. l360 which authorized the City of Manila to
reclaim a portion of Manila Bay. The reclaimed area was to form part of the Luneta extension. The Act
provided that the reclaimed area "Shall be the property of the City of Manila" and that "the City of
Manila is hereby authorized to set aside a tract of the reclaimed land formed by the Luneta extension x x
x at the north end not to exceed five hundred feet by six hundred feet in size, for a hotel site, and to
lease the same, with the approval of the Governor General, to a responsible person or corporation for a
term not exceed ninety-nine years."
Subsequently, the Philippine Commission passed on May 18, 1907 Act No. 1657, amending Act No. 1360,
so as to authorize the City of' Manila either to lease or to sell the portion set aside as a hotel site.
The total area reclaimed was a little over 25 hectares. The City of Manila applied for the registration of
the reclaimed area, and on January 20, 1911, O.C.T. No. 1909 was issued in the name of the City of
Manila. The title described the registered land as "un terreno conocido con el nombre de Luneta
Extension, situato en el distrito de la Ermita x x x." The registration was "subject, however to such of the
incumbrances mentioned in Article 39 of said law (Land Registration Act) as may be subsisting" and
"sujeto a las disposiciones y condiciones impuestas en la Ley No. 1360; y sujeto tambein a los contratos
de venta, celebrados y otorgados por la Ciudad de Manila a favor del Army and Navy Club y la Manila
Lodge No. 761, Benevolent and Protective Order of Elks, fechados respectivamente, en 29 de Diciembre
de 1908 y 16 de Enero de 1909." 1
On July 13, 1911 the City of Manila, affirming a prior sale dated January 16, 1909 cancelled 5,543.07
square meters of the reclaimed area to the Manila Lodge No. 761, Benevolent and Protective Order of
Elks of the U.S.A. (BPOE, for short) on the basis of which TCT No. 2195 2 was issued to the latter over the
Marcela de terreno que es parte de la Luneta Extension, Situada en el Distrito le la Ermita ... ." At the
back of this title vas annotated document 4608/T-1635, which in part reads as follows: "que la citada
Ciusdad de Manila tendra derecho a su opcion, de recomparar la expresada propiedad para fines
publicos solamete in cualquier tiempo despues de cincuenta anos desde el 13 le Julio le 1911, precio de
la misma propiedad, mas el valor que entonces tengan las mejoras."
For the remainder of the Luneta Extension, that is, after segregating therefrom the portion sold to the
Manila Lodge No. 761, PBOE, a new Certificate of Title No. 2196 3 was issued on July 17, 1911 to the City
of Manila.
Manila Lodge No. 761, BPOE, subsequently sold the said 5,543.07 square meters to the Elks Club, Inc., to
which was issued TCT No. 67488. 4 The registered owner, "The Elks Club, Inc.," was later changed by
court oder to "Manila Lodge No. 761, Benevolent and Protective Order of Elks, Inc."
In January 1963 the BPOE. petitioned the Court of First Instance of Manila, Branch IV, for the cancellation
of the right of the City of Manila to repurchase the property This petition was granted on February 15,
1963.
On November 19, 1963 the BPOE sold for the sum of P4,700,000 the land together with all the
improvements thereon to the Tarlac Development Corporation (TDC, for short) which paid P1,700.000 as
down payment and mortgaged to the vendor the same realty to secure the payment of the balance to be
paid in quarterly installments.5 At the time of the sale,, there was no annotation of any subsisting lien on
the title to the property. On December 12, 1963 TCT No. 73444 was issued to TDC over the subject land
still described as "UNA PARCELA DE TERRENO, que es parte de la Luneta Extension, situada en el Distrito
de Ermita ... ."
In June 1964 the City of Manila filed with the Court of First Instance of Manila a petition for the
reannotation of its right to repurchase; the court, after haering, issued an order, dated November 19,
1964, directing the Register of Deeds of the City of Manila to reannotate in toto the entry regarind the
right of the City of Manila to repurchase the property after fifty years. From this order TDC and BPOE
appealed to this Court which on July 31, 1968 affirmed in G.R. Nos. L-24557 and L-24469 the trial court's
order of reannotation, but reserved to TDC the right to bring another action for the clarification of its
rights.
As a consequence of such reservation, TDC filed on April 28, 1971 against the City of Manila and the
Manila Lodge No. 761, BPOE, a complaint, docketed as Civil Case No. 83009 of the Court of First Instance
of Manila, containing three causes of action and praying -
a) On the first cause of action, that the plaintiff TDC be declared to have purchased the parcel of land
now in question with the buildings and improvements thereon from the defendant BPOE for value and in
good faith, and accordingly ordering the cancellation of Entry No. 4608/T-1635 on Transfer Certificate of
Title No. 73444 in the name of the Plaintiff;
b) On the second cause of action, ordering the defendant City of Manila to pay the plaintiff TDC damages
in the sum of note less than one hundred thousand pesos (P100,000.00);
c) On the third cause of action, reserving to the plaintiff TDC the right to recover from the defendant
BPOE the amounts mentioned in par. XVI of the complaint in accordance with Art. 1555 of the Civil Code,
in the remote event that the final judgment in this case should be that the parcel of land now in question
is a public park; and
d) For costs, and for such other and further relief as the Court may deem just and equitable. 6
Therein defendant City of Manila, in its answer dated May 19, 1971, admitted all the facts alleged in the
first cause of action except the allegation that TDC purchased said property "for value and in good faith,"
but denied for lack of knowledge or information the allegations in the second and third causes of action.
As, special and affirmative defense, the City of Manila claimed that TDC was not a purchaser in good faith
for it had actual notice of the City's right to repurchase which was annotated at the back of the title prior
to its cancellation, and that, assuming arguendo that TDC had no notice of the right to repurchase, it
was, nevertheless, under obligation to investigate inasmuch as its title recites that the property is a part
of the Luneta extension. 7
The Manila Lodge No. 761, BPOE, in its answer dated June 7, 1971, admitted having sold the land
together with the improvements thereon for value to therein plaintiff which was in good faith, but
denied for lack of knowledge as to their veracity the allegations under the second cause of action. It
furthermore admitted that TDC had paid the quarterly installments until October l5, 1964 but claimed
that the latter failed without justifiable cause to pay the subsequent installments. It also asserted that it
was a seller for value in good faith without having misrepresented or concealed tacts relative to the title
29
on the property. As counterclaim, Manila Lodge No. 761 (BPOE) sought to recover the balance of the
purchase price plus interest and costs. 8
On June 15, 1971 TDC answered the aforesaid counterclaim, alleging that its refusal to make further
payments was fully justified.9
After due trial the court a quo rendered on July 14, 1972 its decision finding the subject land to be part of
the "public park or plaza" and, therefore, part of the public domain. The court consequently declared
that the sale of the subject land by the City of Manila to Manila Lodge No. 761, BPOE, was null and void;
that plaintiff TDC was a purchaser thereof in g faith and for value from BPOE and can enforce its rights
against the latter; and that BPOE is entitled to recover from the City of Manila whatever consideration it
had 'paid the latter. 'The dispositive part of the decision reads: ñé+.£ªwph!1
WHEREFORE, the Court hereby declares that the parcel of land formerly covered by Transfer Certificate
of Title Nos 2195 and 67488 in the name of BPOE and now by Transfer Certificate of Title No. 73444 in
the name of Tarlac Development Corporation is a public' park or plaza, and, consequently, instant
complaint is dimissed, without pronouncement as to costs.
In view of the reservation made by plaintiff Tarlac Development Corporation to recover from defendant
BPOE the amounts mentioned in paragraph XVI of the complaint in accordance with Article 1555 of the
Civil Code, the Court makes no pronouncement on this point. 10
From said decision the therein plaintiff TDC as well as the defendant Manila Lodge No. 761, BPOE,
appealed to the Court of Appeals.
In its appeal docketed as CA-G.R. No. 51590-R, the Manila Lodge No. 761, BPOE, avers that the trial court
committed the following errors, namely:
1. In holding that the property subject of the action is not patrimonial property of the City of Manila; and
2. In holding that the Tarlac Development Corporation may recover and enforce its right against the
defendant BPOE. 11
The Tarlac Development Corporation, on the other hand, asserts that the trial court erred:
(1) In finding that the property in question is or was a public park and in consequently nullifying the sale
thereof by the City of Manila to BPOE;
(2) In applying the cases of Municipality of Cavite vs. Rojas, 30 Phil. 602, and Government vs. Cabangis,
53 Phil. 112, to the case at bar; and
(3) In not holding that the plaintiff-appellant is entitled to ,recover damages from the defendant City of
Manila. 12
Furthermore, TDC as appellee regarding the second assignment of error raised by BPOE, maintained that
it can recover and enforce its rigth against BPOE in the event that the land in question is declared a
public park or part thereof.13
In its decision promulgated on June 30, 1975, the Court of Appeals concur ed in the findings and
conclusions of the lower court upon the ground that they are supported by he evidence and are in
accordance with law, and accordingly affirmed the lower court's judgment.
Hence, the present petitions for review on certiorari.
G.R. No. L-41001
The Manila Lodge No. 761, BPOE, contends, in its petition for review on certiorari docketed as G.R. No. L-
41001, that the Court of Appeals erred in (1) disregarding the very enabling acts and/or statutes
according to which the subject property was, and still is, patrimonial property of the City of Manila and
could therefore be sold and/or disposed of like any other private property; and (2) in departing from the
accepted and usual course of judicial proceedings when it simply made a general affirmance of the court
a quo's findings and conclusions without bothering to discuss or resolve several vital points stressed by
the BPOE in its assigned errrors. 14
G.R. No. L-41012
The Tarlac Development Corporation, in its petition for review on certiorari docketed as G.R. No. L-
41012, relies on the following grounds for the allowance of its petition:
1. that the Court of Appeals did not correctly interpret Act No. 1360, as amended by Act No. 1657, of the
Philippine Commission; and
2. that the Court of Appeals has departed from the accepted and usual course of judicial proceedings in
that it did not make its own findings but simply recited those of the lower court. 15
ISSUES AND ARGUMENTS
FIRST ISSUE
Upon the first issue, both petitioners claim that the property subject of the action, pursuant to the
provisions of Act No. 1360, as amended by Act No. 1657, was patrimonial property of the City of Manila
and not a park or plaza.
Arguments of Petitioners
In G.R. No. L-41001, the Manila Lodge No. 761, BPOE, admits that "there appears to be some logic in the
conclusion" of the Court of Appeals that "neither Act No. 1360 nor Act No. 1657 could have meant to
supply the City of Manila the authority to sell the subject property which is located at the south end not
the north — of the reclaimed area." 16 It argues, however, that when Act No. 1360, as amended,
authorized the City of Manila to undertake the construction of the Luneta extension by reclaimed land
from the Manila Bay, and declared that the reclaimed land shall be the "property of the City of Manila,"
the State expressly granted the ownership thereof to the City of Manila which. consequently. could enter
into transactions involving it; that upon the issuance of O.C.T. No. 1909, there could he no doubt that the
reclaimed area owned by the City was its patrimonial property;" that the south end of the reclaimed area
could not be for public use for. as argued by TDC a street, park or promenade can be property for public
use pursuant to Article 344 of the Spanish Civil Code only when it has already been so constructed or laid
out, and the subject land, at the time it was sold to the Elk's Club, was neither actually constructed as a
street, park or promenade nor laid out as a street, park or promenade;" that even assuming that the
subject property was at the beginning property of public dominion, it was subsequently converted into
patrimonial property pursuant to Art. 422 of the Civil Code, inasmuch as it had never been used, red or
utilized since it was reclaimed in 1905 for purpose other than this of an ordinary real estate for sale or
lease; that the subject property had never been intended for public use, is further shown by the fact that
it was neither included as a part of the Luneta Park under Plan No. 30 of the National Planning
Commission nor considered a part of the Luneta National Park (now Rizal Park) by Proclamation No. 234
dated December 19, 1955 of President Ramon Magsaysay or by Proclamation Order No. 274 dated
October 4, 1967 of President Ferdinand E. Marcos;" 19 that, such being the case, there is no reason why
the subject property should -not be considered as having been converted into patrimonial property,
pursuant to the ruling in Municipality vs. Roa 7 Phil. 20, inasmuch as the City of Manila has considered it
as its patrimonial property not only bringing it under the operation of the Land Registration Act but also
by disposing of it; 20 and that to consider now the subject property as a public plaza or park would not
30
only impair the obligations of the parties to the contract of sale (rated July 13, 1911, but also authorize
deprivation of property without due process of law.21
G.R. No. L-410112
In L-41012, the petitioner TDC stresses that the principal issue is the interpretation of Act No. 1360, as
amended by. Act No. 1657 of the Philippine Commission, 22 and avers that inasmuch as Section 6 of Act
No. 1360, as amended by Act 1657, provided that the reclamation of the Luneta extension was to be paid
for out of the funds of the City of Manila which was authorized to borrow P350,000 "to be expended in
the construction of Luneta Extension," the reclaimed area became "public land" belonging to the City of
Manila that spent for the reclamation, conformably to the holding in Cabangis,23 and consequently, said
land was subject to sale and other disposition; that the Insular Government itself considered the
reclaimed Luneta extension as patrimonial property subject to disposition as evidenced by the fact that
See. 3 of Act 1360 declared that "the land hereby reclaimed shall be the property of the City of Manila;"
that this property cannot be property for public use for according to Article 344 of the Civil Code, the
character of property for public use can only attach to roads and squares that have already been
constructed or at least laid out as such, which conditions did not obtain regarding the subject land, that
Sec. 5 of Act 1360 authorized the City of Manila to lease the northern part of the reclaimed area for hotel
purposes; that Act No. 1657 furthermore authorized the City of Manila to sell the same; 24 that the
express statutory authority to lease or sell the northern part of the reclaimed area cannot be interpreted
to mean that the remaining area could not be sold inasmuch as the purpose of the statute was not
merely to confer authority to sell the northern portion but rather to limit the city's power of disposition
thereof, to wit: to prevent disposition of the northern portion for any purpose other than for a hotel site
that the northern and southern ends of the reclaimed area cannot be considered as extension of the
Luneta for they lie beyond the sides of the original Luneta when extended in the direction of the sea, and
that is the reason why the law authorized the sale of the northern portion for hotel purposes, and, for
the same reason, it is implied that the southern portion could likewise be disposed of.26
TDC argues likewise that there are several items of uncontradicted circumstantial evidence which may
serve as aids in construing the legislative intent and which demonstrate that the subject property is
patrimonial in nature, to wit: (1) Exhibits "J" and "J-1", or Plan No. 30 of the National Planning
Commission showing the Luneta and its vicinity, do not include the subject property as part of the Luneta
Park; (2) Exhibit "K", which is the plan of the subject property covered by TCT No. 67488 of BPOE,
prepared on November 11, 1963, indicates that said property is not a public park; (3) Exhibit "T", which is
a certified copy of Proclamation No. 234 issued on December 15, 1955 is President Magsaysay, and
Exhibit "U" which is Proclamation Order No. 273 issued on October 4, 1967 by President Marcos, do not
include the subject property in the Luneta Park-, (4) Exhibit "W", which is the location plan of the Luneta
National Park under Proclamations Nos. 234 and 273, further confirms that the subject property is not a
public park; and (5) Exhibit "Y", which is a copy of O.C.T. No. 7333 in the name of the United States of
America covering the land now occupied by the America covering the land now occupied by the
American Embassy, the boundaries of which were delineated by the Philippine Legislature, states that
the said land is bounded on the northwest by properties of the Army and Navy Club (Block No. 321) and
the Elks Club (Block No. 321), and this circumstance shows that even the Philippine Legislature
recognized the subject property as private property of the Elks Club. 27
TDC furthermore contends that the City of Manila is estopped from questioning the validity of the sale of
the subject property that it executed on July 13, 1911 to the Manila Lodge No. 761, BPOE, for several
reasons, namely: (1) the City's petition for the reannotation of Entry No. 4608/T-1635 was predicated on
the validity of said sale; (2) when the property was bought by the petitioner TDC it was not a public plaza
or park as testified to by both Pedro Cojuanco, treasurer of TDC, and the surveyor, Manuel Añoneuvo,
according to whom the subject property was from all appearances private property as it was enclosed by
fences; (3) the property in question was cadastrally surveyed and registered as property of the Elks Club,
according to Manuel Anonuevo; (4) the property was never used as a public park, for, since the issuance
of T.C.T. No. 2165 on July 17, 1911 in the name of the Manila Lodge NO. 761, the latter used it as private
property, and as early as January 16, 1909 the City of Manila had already executed a deed of sale over
the property in favor of the Manila Lodge No. 761; and (5) the City of Manila has not presented any
evidence to show that the subject property has ever been proclaimed or used as a public park. 28
TDC, moreover, contends that Sec. 60 of Com. Act No. 141 cannot apply to the subject land, for Com. Act
No. 141 took effect on December 1, 1936 and at that time the subject land was no longer part of the part
of the public domain. 29
TDC also stresses that its rights as a purchaser in good faith cannot be disregarded, for the mere mention
in the certificate of title that the lot it purchased was "part of the Luneta extension" was not a sufficient
warning that tile title to the City of Manila was invalid; and that although the trial court, in its decision
affirmed by the Court of Appeals, found the TDC -to has been an innocent purchaser for value, the court
disregarded the petitioner's rights as such purchaser that relied on Torrens certificate of title. 30
The Court, continues the petitioner TDC erred in not holding that the latter is entitled to recover from
the City of Manila damages in the amount of P100,000 caused by the City's petition for- reannotation of
its right to repurchase.
DISCUSSION AND RESOLUTION OF FIRST ISSUE
It is a cardinal rule of statutory construction that courts must give effect to the general legislative intent
that can be discovered from or is unraveled by the four corners of the statute, 31 and in order to
discover said intent, the whole statute, and not only a particular provision thereof, should be
considered.32 It is, therefore, necessary to analyze all the provisions of Act No. 1360, as amended, in
order to unravel the legislative intent.
Act No. 1360 which was enacted by the Philippine Commission on June 26, 1905, as amended by Act No.
1657 enacted on May 18, 1907, authorized the "construction of such rock and timber bulkheads or sea
walls as may be necessary for the making of an extension to the Luneta" (Sec. 1 [a]), and the placing of
the material dredged from the harbor of Manila "inside the bulkheads constructed to inclose the Luneta
extension above referred to" (Sec. 1 [a]). It likewise provided that the plan of Architect D. H. Burnham as
"a general outline for the extension and improvement of the Luneta in the City of Manila" be adopted;
that "the reclamation from the Bay of Manila of the land included in said projected Luneta extension... is
hereby authorized and the land thereby reclaimed shall be the property of the City of Manila" (Sec. 3);
that "the City of Manila is hereby authorized to set aside a tract of the reclaimed land formed by the
Luneta extension authorized by this Act at the worth end of said tract, not to exceed five hundred feet by
six hundred feet in size, for a hotel site, and to lease the same with the approval of the Governor
General, ... for a term not exceeding ninety-nine years; that "should the Municipal Board ... deem it
advisable it is hereby authorized to advertise for sale to sell said tract of land ... ;" "that said tract shall be
used for hotel purposes as herein prescribed, and shall not be devoted to any other purpose or object
whatever;" "that should the grantee x x x fail to maintain on said tract a first-class hotel x x x then the
title to said tract of land sold, conveyed, and transferred, and shall not be devoted to any other purpose
or object whatever;" "that should the grantee x x x fail to maintain on said tract a first-class hotel x x x
then the title to said tract of land sold, conveyed, and transferred to the grantee shall revert to the City
of Manila, and said City of Manila shall thereupon become entitled to immediate possession of said tract
of land" (Sec. 5); that the construction of the rock and timber bulkheads or sea wall "shall be paid for out
of the funds of the City of Manila, but the area to be reclaimed by said proposed Luneta extension shall
be filled, without cost to the City of Manila, with material dredged from Manila Bay at the expense of the
Insular Government" (Sec. 6); and that "the City of Manila is hereby authorized to borrow from the
Insular Government ... the sum of three hundred thousand pesos, to be expended in the construction of
Luneta extension provided for by paragraph (a) of section one hereof" (Sec.7).
31
The grant made by Act No. 1360 of the reclaimed land to the City of Manila is a grant of "public" nature,
the same having been made to a local political subdivision. Such grants have always been strictly
construed against the grantee.33 One compelling reason given for the strict interpretation of a public
grant is that there is in such grant a gratuitous donation of, public money or resources which results in an
unfair advantage to the grantee and for that reason, the grant should be narrowly restricted in favor of
the public.34 This reason for strict interpretation obtains relative to the aforesaid grant, for, although the
City of Manila was to pay for the construction of such work and timber bulkheads or sea walls as may be
necessary for the making of the Luneta extension, the area to be reclaimed would be filled at the
expense of the Insular Government and without cost to the City of Manila, with material dredged from
Manila Bay. Hence, the letter of the statute should be narrowed to exclude maters which if included
would defeat the policy of the legislation.
The reclaimed area, an extension to the Luneta, is declared to be property of the City of Manila.
Property, however, is either of public ownership or of private ownership. 35 What kind of property of the
City is the reclaimed land? Is it of public ownership (dominion) or of private ownership?
We hold that it is of public dominion, intended for public use.
Firstly, if the reclaimed area was granted to the City of Manila as its patrimonial property, the City could,
by virtue of its ownership, dispose of the whole reclaimed area without need of authorization to do so
from the lawmaking body. Thus Article 348 of the Civil Code of Spain provides that "ownership is the
right to enjoy and dispose of a thing without further limitations than those established by law." 36 The
right to dispose (jus disponendi) of one's property is an attribute of ownership. Act No. 1360, as
amended, however, provides by necessary implication, that the City of Manila could not dispose of the
reclaimed area without being authorized by the lawmaking body. Thus the statute provides that "the City
of Manila is hereby authorized to set aside a tract ... at the north end, for a hotel site, and to lease the
same ... should the municipal board ... deem it advisable, it is hereby authorized ...to sell said tract of
land ... " (Sec. 5). If the reclaimed area were patrimonial property of the City, the latter could dispose of
it without need of the authorization provided by the statute, and the authorization to set aside ... lease
... or sell ... given by the statute would indeed be superfluous. To so construe the statute s to render the
term "authorize," which is repeatedly used by the statute, superfluous would violate the elementary rule
of legal hermeneutics that effect must be given to every word, clause, and sentence of the statute and
that a statute should be so interpreted that no part thereof becomes inoperative or superfluous. 37 To
authorize means to empower, to give a right to act. 38 Act No. 1360 furthermore qualifies the verb it
authorize" with the adverb "hereby," which means "by means of this statue or section," Hence without
the authorization expressly given by Act No. 1360, the City of Manila could not lease or sell even the
northern portion; much less could it dispose of the whole reclaimed area. Consequently, the reclaimed
area was granted to the City of Manila, not as its patrimonial property. At most, only the northern
portion reserved as a hotel site could be said to be patrimonial property for, by express statutory
provision it could be disposed of, and the title thereto would revert to the City should the grantee fail to
comply with the terms provided by the statute.
TDC however, contends that the purpose of the authorization provided in Act No. 1360 to lease or sell
was really to limit the City's power of disposition. To sustain such contention is to beg the question. If the
purpose of the law was to limit the City's power of disposition then it is necessarily assumed that the City
had already the power to dispose, for if such power did not exist, how could it be limited? It was
precisely Act 1360 that gave the City the power to dispose for it was hereby authorized by lease of sale.
Hence, the City of Manila had no power to dispose of the reclaimed land had such power not been
granted by Act No. 1360, and the purpose of the authorization was to empower the city to sell or lease
the northern part and not, as TDC claims, to limit only the power to dispose. Moreover, it is presumed
that when the lawmaking body enacted the statute, it had full knowledge of prior and existing laws and
legislation on the subject of the statute and acted in accordance or with respect thereto.39 If by another
previous law, the City of Manila could already dispose of the reclaimed area, which it could do if such
area were given to it as its patrimonial property, would it then not be a superfluity for Act No. 1360 to
authorize the City to dispose of the reclaimed land? Neither has petitioner TDC pointed to any other law
that authorized the City to do so, nor have we come across any. What we do know is that if the
reclaimed land were patrimonial property, there would be no need of giving special authorization to the
City to dispose of it. Said authorization was given because the reclaimed land was not intended to be
patrimonial property of the City of Manila, and without the express authorization to dispose of the
northern portion, the City could not dispose of even that part.
Secondly, the reclaimed area is an "extension to the Luneta in the City of Manila." 40 If the reclaimed
area is an extension of the Luneta, then it is of the same nature or character as the old Luneta. Anent this
matter, it has been said that a power to extend (or continue an act or business) cannot authorize a
transaction that is totally distinct. 41 It is not disputed that the old Luneta is a public park or plaza and it
is so considered by Section 859 of the Revised Ordinances of the City of Manila.42 Hence the "extension
to the Luneta" must be also a public park or plaza and for public use.
TDC, however, contends that the subject property cannot be considered an extension of the old Luneta
because it is outside of the limits of the old Luneta when extended to the sea. This is a strained
interpretation of the term "extension," for an "extension," it has been held, "signifies enlargement in any
direction — in length, breadth, or circumstance." 43
Thirdly, the reclaimed area was formerly a part of the manila Bay. A bay is nothing more than an inlet of
the sea. Pursuant to Article 1 of the Law of Waters of 1866, bays, roadsteads, coast sea, inlets and shores
are parts of the national domain open to public use. These are also property of public ownership devoted
to public use, according to Article 339 of the Civil Code of Spain.
When the shore or part of the bay is reclaimed, it does not lose its character of being property for public
use, according to Government of the Philippine Islands vs. Cabangis.44 The predecessor of the claimants
in this case was the owner of a big tract of land including the lots in question. From 1896 said land began
to wear away due to the action of the waters of Manila Bay. In 1901 the lots in question became
completely submerged in water in ordinary tides. It remained in such a state until 1912 when the
Government undertook the dredging of the Vitas estuary and dumped the Sand and - silt from estuary on
the low lands completely Submerged in water thereby gradually forming the lots in question. Tomas
Cabangis took possession thereof as soon as they were reclaimed hence, the claimants, his successors in
interest, claimed that the lots belonged to them. The trial court found for the claimants and the
Government appealed. This Court held that when the lots became a part of the shore. As they remained
in that condition until reclaimed by the filling done by the Government, they belonged to the public
domain. for public use .4' Hence, a part of the shore, and for that purpose a part of the bay, did not lose
its character of being for public use after it was reclaimed.
Fourthly, Act 1360, as amended, authorized the lease or sale of the northern portion of the reclaimed
area as a hotel sites. The subject property is not that northern portion authorized to be leased or sold;
the subject property is the southern portion. Hence, applying the rule of expresio unius est exlusio
alterius, the City of Manila was not authorized to sell the subject property. The application of this
principle of statutory construction becomes the more imperative in the case at bar inasmuch as not only
must the public grant of the reclaimed area to the City of Manila be, as above stated, strictly construed
against the City of Manila, but also because a grant of power to a municipal corporation, as happens in
this case where the city is author ized to lease or sell the northern portion of the Luneta extension, is
strictly limited to such as are expressly or impliedly authorized or necessarily incidental to the objectives
of the corporation.
Fifthly, Article 344 of the Civil Code of Spain provides that to property of 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 paid for by such towns or provinces." A park or plaza,
such as the extension to the Luneta, is undoubtedly comprised in said article.
32
The petitioners, however, argue that, according to said Article 344, in order that the character of
property for public use may be so attached to a plaza, the latter must be actually constructed or at least
laid out as such, and since the subject property was not yet constructed as a plaza or at least laid out as a
plaza when it was sold by the City, it could not be property for public use. It should be noted, however,
that properties of provinces and towns for public use are governed by the same principles as properties
of the same character belonging to the public domain.46 In order to be property of public domain an
intention to devote it to public use is sufficient. 47 The, petitioners' contention is refuted by Manresa
himself who said, in his comments", on Article 344, that: ñé+.£ªwph!1
Las plazas, calles y paseos publicos correspondent sin duda aiguna aldominio publico municipal ), porque
se hallan establecidos sobre suelo municipal y estan destinadas al uso de todos Laurent presenta
tratando de las plazas, una question relativa a si deben conceptuarse como de dominio publico los
lugares vacios libres, que se encuenttan en los Municipios rurales ... Laurent opina contra Pioudhon que
toda vez que estan al servicio de todos pesos lugares, deben considerable publicos y de dominion
publico. Realmente, pala decidir el punto, bastara siempre fijarse en el destino real y efectivo de los
citados lugares, y si este destino entraña un uso comun de todos, no hay duda que son de dominio
publico municipal si no patrimoniales.
It is not necessary, therefore, that a plaza be already constructed of- laid out as a plaza in order that it be
considered property for public use. It is sufficient that it be intended to be such In the case at bar, it has
been shown that the intention of the lawmaking body in giving to the City of Manila the extension to the
Luneta was not a grant to it of patrimonial property but a grant for public use as a plaza.
We have demonstrated ad satietatem that the Luneta extension as intended to be property of the City of
Manila for public use. But, could not said property-later on be converted, as the petitioners contend, to
patrimonial property? It could be. But this Court has already said, in Ignacio vs. The Director of Lands, 49
the executive and possibly the legislation department that has the authority and the power to make the
declaration that said property, is no longer required for public use, and until such declaration i made the
property must continue to form paint of the public domain. In the case at bar, there has been no such
explicit or unequivocal declaration It should be noted, furthermore, anent this matter, that courts are
undoubted v not. primarily called upon, and are not in a position, to determine whether any public land
is still needed for the purposes specified in Article 4 of the Law of Waters .50
Having disposed of the petitioners' principal arguments relative to the main issue, we now pass to the
items of circumstantial evidence which TDC claims may serve as aids in construing the legislative intent in
the enactment of Act No. 1360, as amended. It is noteworthy that all these items of alleged
circumstantial evidence are acts far removed in time from the date of the enactment of Act No.1360
such that they cannot be considered contemporaneous with its enactment. Moreover, it is not
farfetched that this mass of circumstantial evidence might have been influenced by the antecedent
series of invalid acts, to wit: the City's having obtained over the reclaimed area OCT No. 1909 on January
20,1911; the sale made by the City of the subject property to Manila Lodge No. 761; and the issuance to
the latter of T.C.T. No. 2195. It cannot gainsaid that if the subsequent acts constituting the circumstantial
evidence have been base on, or at least influenced, by those antecedent invalid acts and Torrens titles S
they can hardly be indicative of the intent of the lawmaking body in enacting Act No. 1360 and its
amendatory act.
TDC claims that Exhs. "J," "J-l" "K," "T," "U," "W" and "Y" show that the subject property is not a park.
Exhibits "J" and "J-1," the "Luneta and vicinity showing proposed development" dated May 14, 1949,
were prepared by the National Urban Planning Commission of the Office of the President. It cannot be
reasonably expected that this plan for development of the Luneta should show that the subject property
occupied by the ElksClub is a public park, for it was made 38 years after the sale to the Elks, and after
T.C.T. No. 2195 had been issued to Elks. It is to be assumed that the Office of the President was cognizant
of the Torrens title of BPOE. That the subject property was not included as a part of the Luneta only
indicated that the National Urban Planning Commission that made the plan knew that the subject
property was occupied by Elks and that Elks had a Torrens title thereto. But this in no way proves that
the subject property was originally intended to be patrimonial property of the City of Manila or that the
sale to Elks or that the Torrens-title of the latter is valid.
Exhibit "K" is the "Plan of land covered by T.C.T . No ----, as prepared for Tarlac Development Company."
It was made on November 11, 1963 by Felipe F. Cruz, private land surveyor. This surveyor is admittedly a
surveyor for TDC. 51 This plan cannot be expected to show that the subject property is a part of the
Luneta Park, for he plan was made to show the lot that "was to be sold to petitioner." This plan must
have also assumed the existence of a valid title to the land in favor of Elks.
Exhibits "T" and "U" are copies of Presidential Proclamations No. 234 issued on November 15, 1955 and
No. 273 issued on October 4, 1967, respectively. The purpose of the said Proclamations was to reserve
certain parcels of land situated in the District of Ermita, City of Manila, for park site purposes. Assuming
that the subject property is not within the boundaries of the reservation, this cannot be interpreted to
mean that the subject property was not originally intended to be for public use or that it has ceased to
be such. Conversely, had the subject property been included in the reservation, it would mean, if it really
were private property, that the rights of the owners thereof would be extinguished, for the reservations
was "subject to private rights, if any there be." That the subject property was not included in the
reservation only indicates that the President knew of the existence of the Torrens titles mentioned
above. The failure of the Proclamations to include the subject property in the reservation for park site
could not change the character of the subject property as originally for public use and to form part of the
Luneta Park. What has been said here applies to Exhibits "V", "V-1" to "V-3," and "W" which also refer to
the area and location of the reservation for the Luneta Park.
Exhibit "Y" is a copy of O.C.T. No. 7333 dated November 13, 1935, covering the lot where now stands the
American Embassy [Chancery]. It states that the property is "bounded ... on the Northwest by properties
of Army and Navy Club (Block No.321) and Elks Club (Block No. 321)." Inasmuch as the said bounderies
delineated by the Philippine Legislature in Act No. 4269, the petitioners contend that the Legislature
recognized and conceded the existence of the Elks Club property as a primate property (the property in
question) and not as a public park or plaza. This argument is non sequitur plain and simple Said Original
Certificate of Title cannot be considered as an incontrovertible declaration that the Elks Club was in truth
and in fact the owner of such boundary lot. Such mention as boundary owner is not a means of acquiring
title nor can it validate a title that is null and void.
TDC finally claims that the City of Manila is estopped from questioning the validity of the sale it executed
on July 13,'1911 conconveying the subject property to the Manila Lodge No. 761, BPOE. This contention
cannot be seriously defended in the light of the doctrine repeatedly enunciated by this Court that the
Government is never estopped by mistakes or errors on the pan of its agents, and estoppel does not
apply to a municipal corporation to validate a contract that is prohibited by law or its against Republic
policy, and the sale of July 13, 1911 executed by the City of Manila to Manila Lodge was certainly a
contract prohibited by law. Moreover, estoppel cannot be urged even if the City of Manila accepted the
benefits of such contract of sale and the Manila Lodge No. 761 had performed its part of the agreement,
for to apply the doctrine of estoppel against the City of Manila in this case would be tantamount to
enabling it to do indirectly what it could not do directly. 52
The sale of the subject property executed by the City of Manila to the Manila Lodge No. 761, BPOE, was
void and inexistent for lack of subject matter. 53 It suffered from an incurable defect that could not be
ratified either by lapse of time or by express ratification. The Manila Lodge No. 761 therefore acquired
no right by virtue of the said sale. Hence to consider now the contract inexistent as it always has seen,
cannot be, as claimed by the Manila Lodge No. 761, an impairment of the obligations of contracts, for
there was it, contemplation of law, no contract at all.
33
The inexistence of said sale can be set up against anyone who asserts a right arising from it, not only
against the first vendee, the Manila Lodge No. 761, BPOE, but also against all its suceessors, including the
TDC which are not protected the doctrine of bona fide ii purchaser without notice, being claimed by the
TDC does not apply where there is a total absence of title in the vendor, and the good faith of the
purchaser TDC cannot create title where none exists. 55
The so-called sale of the subject property having been executed, the restoration or restitution of what
has been given is order 56
SECOND ISSUE
The second ground alleged in support of the instant petitions for review on certiorari is that the Court of
Appeals has departed from the accepted and usual course of judicial proceedings as to call for an
exercise of the power of supervision. TDC in L-41012, argues that the respondent Court did not make its
own findings but simply recited those of the lower court and made a general affirmance, contrary to the
requirements of the Constitution; that the respondent Court made glaring and patent mistakes in
recounting even the copied findings, palpably showing lack of deliberate consideration of the matters
involved, as, for example, when said court said that Act No. 1657 authorized the City of Manila to set
aside a portion of the reclaimed land "formed by the Luneta Extension of- to lease or sell the same for
park purposes;" and that respondent Court. further more, did not resolve or dispose of any of the
assigned errors contrary to the mandate of the Judiciary Act..57
The Manila Lodge No. 761, in L-41001, likewise alleges, as one of the reasons warranting review, that the
Court of Appeals departed from the accepted and usual course of Judicial proceedings by simply making
a general affirmance of the court a quo findings without bothering to resolve several vital points
mentioned by the BPOE in its assigned errors. 58
COMMENTS ON SECOND ISSUE
We have shown in our discussion of the first issue that the decision of the trial court is fully in
accordance with law. To follows that when such decision was affirmed by the Court of Appeals, the
affirmance was likewise in accordance with law. Hence, no useful purpose will be served in further
discussing the second issue.
CONCLUSION
ACCORDINGLY, the petitions in both G.R. Nos. L-41001 and L-41012 are denied for lack of merit, and the
decision of the Court of Appeals of June 30, 1975, is hereby affirmed, at petitioner's cost.
Makasiar, Munoz Palma and Martin, JJ., concur.1äwphï1.ñët
Teehankee, concurs in the result which is wholly consistent with the basic rulings and jugdment of this
Court in its decision of July 31, 1968.
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:
34
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.
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.
I The subject property in this case is one of the four (4) properties in Japan acquired by the Philippine
government under the Reparations Agreement entered into with Japan on May 9, 1956, the other lots
being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area of
approximately 2,489.96 square meters, and is at present the site of the Philippine Embassy Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72 square meters
and categorized as a commercial lot now being used as a warehouse and parking lot for the consulate
staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a residential lot
which is now vacant.
The properties and the capital goods and services procured from the Japanese government for national
development projects are part of the indemnification to the Filipino people for their losses in life and
property and their suffering during World War II.
The Reparations Agreement provides that reparations valued at $550 million would be payable in twenty
(20) years in accordance with annual schedules of procurements to be fixed by the Philippine and
Japanese governments (Article 2, Reparations Agreement). Rep. Act No. 1789, the Reparations Law,
prescribes the national policy on procurement and utilization of reparations and development loans. The
procurements are divided into those for use by the government sector and those for private parties in
projects as the then National Economic Council shall determine. Those intended for the private sector
shall be made available by sale to Filipino citizens or to one hundred (100%) percent Filipino-owned
entities in national development projects.
The Roppongi property was acquired from the Japanese government under the Second Year Schedule
and listed under the heading "Government Sector", through Reparations Contract No. 300 dated June
27, 1958. The Roppongi property consists of the land and building "for the Chancery of the Philippine
Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As intended, it became the site of the
Philippine Embassy until the latter was transferred to Nampeidai on July 22, 1976 when the Roppongi
building needed major repairs. Due to the failure of our government to provide necessary funds, the
Roppongi property has remained undeveloped since that time.
A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to Japan,
Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese firm - Kajima
Corporation — which shall construct two (2) buildings in Roppongi and one (1) building in Nampeidai and
renovate the present Philippine Chancery in Nampeidai. The consideration of the construction would be
the lease to the foreign corporation of one (1) of the buildings to be constructed in Roppongi and the
two (2) buildings in Nampeidai. The other building in Roppongi shall then be used as the Philippine
35
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
36
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
37
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:
38
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.
EN BANC
G.R. No. L-24440 March 28, 1968
THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee, vs. CITY OF ZAMBOANGA, SECRETARY
OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, defendants-appellants.
Fortugaleza, Lood, Sarmiento, M. T. Yap & Associates for plaintiff-appellee.
Office of the Solicitor General for defendants-appellants.
BENGZON, J.P., J.:
Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the
provincial capital of the then Zamboanga Province. On October 12, 1936, Commonwealth Act 39 was
approved converting the Municipality of Zamboanga into Zamboanga City. Sec. 50 of the Act also
provided that —
Buildings and properties which the province shall abandon upon the transfer of the capital to
another place will be acquired and paid for by the City of Zamboanga at a price to be fixed by the Auditor
General.
The properties and buildings referred to consisted of 50 lots and some buildings constructed
thereon, located in the City of Zamboanga and covered individually by Torrens certificates of title in the
name of Zamboanga Province. As far as can be gleaned from the records, 1 said properties were being
utilized as follows —
No. of Lots Use
1................................................ Capitol Site
3................................................ School Site
3................................................ Hospital Site
3................................................ Leprosarium
1................................................ Curuan School
1................................................ Trade School
2................................................ Burleigh School
2................................................ High School Playground
9................................................ Burleighs
1................................................ Hydro-Electric Site (Magay)
1................................................ San Roque
23................................................ vacant
It appears that in 1945, the capital of Zamboanga Province was transferred to Dipolog. 2
Subsequently, or on June 16, 1948, Republic Act 286 was approved creating the municipality of Molave
and making it the capital of Zamboanga Province.
On May 26, 1949, the Appraisal Committee formed by the Auditor General, pursuant to
Commonwealth Act 39, fixed the value of the properties and buildings in question left by Zamboanga
Province in Zamboanga City at P1,294,244.00. 3
On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga into two (2):
Zamboanga del Norte and Zamboanga del Sur. As to how the assets and obligations of the old province
were to be divided between the two new ones, Sec. 6 of that law provided:
Upon the approval of this Act, the funds, assets and other properties and the obligations of the
province of Zamboanga shall be divided equitably between the Province of Zamboanga del Norte and the
Province of Zamboanga del Sur by the President of the Philippines, upon the recommendation of the
Auditor General.
Pursuant thereto, the Auditor General, on January 11, 1955, apportioned the assets and obligations
of the defunct Province of Zamboanga as follows: 54.39% for Zamboanga del Norte and 45.61% for
Zamboanga del Sur. Zamboanga del Norte therefore became entitled to 54.39% of P1,294,244.00, the
total value of the lots and buildings in question, or P704,220.05 payable by Zamboanga City.
On March 17, 1959, the Executive Secretary, by order of the President, issued a ruling 4 holding
that Zamboanga del Norte had a vested right as owner (should be co-owner pro-indiviso) of the
properties mentioned in Sec. 50 of Commonwealth Act 39, and is entitled to the price thereof, payable
by Zamboanga City. This ruling revoked the previous Cabinet Resolution of July 13, 1951 conveying all the
said 50 lots and buildings thereon to Zamboanga City for P1.00, effective as of 1945, when the provincial
capital of the then Zamboanga Province was transferred to Dipolog.
The Secretary of Finance then authorized the Commissioner of Internal Revenue to deduct an
amount equal to 25% of the regular internal revenue allotment for the City of Zamboanga for the quarter
ending March 31, 1960, then for the quarter ending June 30, 1960, and again for the first quarter of the
fiscal year 1960-1961. The deductions, all aggregating P57,373.46, was credited to the province of
Zamboanga del Norte, in partial payment of the P764,220.05 due it.
However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of Commonwealth
Act 39 by providing that —
39
All buildings, properties and assets belonging to the former province of Zamboanga and located
within the City of Zamboanga are hereby transferred, free of charge, in favor of the said City of
Zamboanga. (Stressed for emphasis).
Consequently, the Secretary of Finance, on July 12, 1961, ordered the Commissioner of Internal
Revenue to stop from effecting further payments to Zamboanga del Norte and to return to Zamboanga
City the sum of P57,373.46 taken from it out of the internal revenue allotment of Zamboanga del Norte.
Zamboanga City admits that since the enactment of Republic Act 3039, P43,030.11 of the P57,373.46 has
already been returned to it.
This constrained plaintiff-appellee Zamboanga del Norte to file on March 5, 1962, a complaint
entitled "Declaratory Relief with Preliminary Mandatory Injunction" in the Court of First Instance of
Zamboanga del Norte against defendants-appellants Zamboanga City, the Secretary of Finance and the
Commissioner of Internal Revenue. It was prayed that: (a) Republic Act 3039 be declared
unconstitutional for depriving plaintiff province of property without due process and just compensation;
(b) Plaintiff's rights and obligations under said law be declared; (c) The Secretary of Finance and the
Internal Revenue Commissioner be enjoined from reimbursing the sum of P57,373.46 to defendant City;
and (d) The latter be ordered to continue paying the balance of P704,220.05 in quarterly installments of
25% of its internal revenue allotments.
On June 4, 1962, the lower court ordered the issuance of preliminary injunction as prayed for. After
defendants filed their respective answers, trial was held. On August 12, 1963, judgment was rendered,
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring Republic Act No. 3039 unconstitutional
insofar as it deprives plaintiff Zamboanga del Norte of its private properties, consisting of 50 parcels of
land and the improvements thereon under certificates of title (Exhibits "A" to "A-49") in the name of the
defunct province of Zamboanga; ordering defendant City of Zamboanga to pay to the plaintiff the sum of
P704,220.05 payment thereof to be deducted from its regular quarterly internal revenue allotment
equivalent to 25% thereof every quarter until said amount shall have been fully paid; ordering defendant
Secretary of Finance to direct defendant Commissioner of Internal Revenue to deduct 25% from the
regular quarterly internal revenue allotment for defendant City of Zamboanga and to remit the same to
plaintiff Zamboanga del Norte until said sum of P704,220.05 shall have been fully paid; ordering plaintiff
Zamboanga del Norte to execute through its proper officials the corresponding public instrument
deeding to defendant City of Zamboanga the 50 parcels of land and the improvements thereon under
the certificates of title (Exhibits "A" to "A-49") upon payment by the latter of the aforesaid sum of
P704,220.05 in full; dismissing the counterclaim of defendant City of Zamboanga; and declaring
permanent the preliminary mandatory injunction issued on June 8, 1962, pursuant to the order of the
Court dated June 4, 1962. No costs are assessed against the defendants.
It is SO ORDERED.
Subsequently, but prior to the perfection of defendants' appeal, plaintiff province filed a motion to
reconsider praying that Zamboanga City be ordered instead to pay the P704,220.05 in lump sum with 6%
interest per annum. Over defendants' opposition, the lower court granted plaintiff province's motion.
The defendants then brought the case before Us on appeal.
Brushing aside the procedural point concerning the property of declaratory relief filed in the lower
court on the assertion that the law had already been violated and that plaintiff sought to give it coercive
effect, since assuming the same to be true, the Rules anyway authorize the conversion of the
proceedings to an ordinary action, 5 We proceed to the more important and principal question of the
validity of Republic Act 3039.
 The validity of the law ultimately depends on the nature of the 50 lots and buildings thereon in
question. For, the matter involved here is the extent of legislative control over the properties of a
municipal corporation, of which a province is one. The principle itself is simple: If the property is owned
by the municipality (meaning municipal corporation) in its public and governmental capacity, the
property is public and Congress has absolute control over it. But if the property is owned in its private or
proprietary capacity, then it is patrimonial and Congress has no absolute control. The municipality
cannot be deprived of it without due process and payment of just compensation. 6
The capacity in which the property is held is, however, dependent on the use to which it is intended
and devoted. Now, which of two norms, i.e., that of the Civil Code or that obtaining under the law of
Municipal Corporations, must be used in classifying the properties in question?
and concrete structures with the corresponding lots used as markets were declared exempt from
execution and attachment since they were not patrimonial properties. (3) MUNICIPALITY OF BATANGAS
VS. CANTOS 13 held squarely that a municipal lot which had always been devoted to school purposes is
one dedicated to public use and is not patrimonial property of a municipality.
Following this classification, Republic Act 3039 is valid insofar as it affects the lots used as capitol
site, school sites and its grounds, hospital and leprosarium sites and the high school playground sites — a
total of 24 lots — since these were held by the former Zamboanga province in its governmental capacity
and therefore are subject to the absolute control of Congress. Said lots considered as public property are
the following:

The Civil Code classification is embodied in its Arts. 423 and 424 which provide:1äwphï1.ñët

ART. 423. The property of provinces, cities, and municipalities is divided into property for public use
and patrimonial property.

ART. 424. Property for public use, in the provinces, cities, and municipalities, consists of the
provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and
public works for public service paid for by said provinces, cities, or municipalities.

All other property possessed by any of them is patrimonial and shall be governed by this Code, without
prejudice to the provisions of special laws. (Stressed for emphasis).

Applying the above cited norm, all the properties in question, except the two (2) lots used as High
School playgrounds, could be considered as patrimonial properties of the former Zamboanga province.
Even the capital site, the hospital and leprosarium sites, and the school sites will be considered
patrimonial for they are not for public use. They would fall under the phrase "public works for public
service" for it has been held that under the ejusdem generis rule, such public works must be for free and
indiscriminate use by anyone, just like the preceding enumerated properties in the first paragraph of Art
424. 7 The playgrounds, however, would fit into this category.

This was the norm applied by the lower court. And it cannot be said that its actuation was without
jurisprudential precedent for in Municipality of Catbalogan v. Director of Lands, 8 and in Municipality of
Tacloban v. Director of Lands, 9 it was held that the capitol site and the school sites in municipalities
constitute their patrimonial properties. This result is understandable because, unlike in the classification
regarding State properties, properties for public service in the municipalities are not classified as public.
Assuming then the Civil Code classification to be the chosen norm, the lower court must be affirmed
except with regard to the two (2) lots used as playgrounds.
On the other hand, applying the norm obtaining under the principles constituting the law of
Municipal Corporations, all those of the 50 properties in question which are devoted to public service are
deemed public; the rest remain patrimonial. Under this norm, to be considered public, it is enough that
the property be held and, devoted for governmental purposes like local administration, public education,
public health, etc. 10
Supporting jurisprudence are found in the following cases: (1) HINUNANGAN V. DIRECTOR OF
LANDS, 11 where it was stated that "... where the municipality has occupied lands distinctly for public
purposes, such as for the municipal court house, the public school, the public market, or other necessary
municipal building, we will, in the absence of proof to the contrary, presume a grant from the States in
favor of the municipality; but, as indicated by the wording, that rule may be invoked only as to property
which is used distinctly for public purposes...." (2) VIUDA DE TANTOCO V. MUNICIPAL COUNCIL OF ILOILO
12 held that municipal properties necessary for governmental purposes are public in nature. Thus, the
auto trucks used by the municipality for street sprinkling, the police patrol automobile, police stations
40
We noticed that the eight Burleigh lots above described are adjoining each other and in turn are
between the two lots wherein the Burleigh schools are built, as per records appearing herein and in the
Bureau of Lands. Hence, there is sufficient basis for holding that said eight lots constitute the
appurtenant grounds of the Burleigh schools, and partake of the nature of the same.
Regarding the several buildings existing on the lots above-mentioned, the records do not disclose
whether they were constructed at the expense of the former Province of Zamboanga. Considering
however the fact that said buildings must have been erected even before 1936 when Commonwealth Act
39 was enacted and the further fact that provinces then had no power to authorize construction of
buildings such as those in the case at bar at their own expense, 14 it can be assumed that said buildings
were erected by the National Government, using national funds. Hence, Congress could very well dispose
of said buildings in the same manner that it did with the lots in question.
But even assuming that provincial funds were used, still the buildings constitute mere accessories
to the lands, which are public in nature, and so, they follow the nature of said lands, i.e., public.
Moreover, said buildings, though located in the city, will not be for the exclusive use and benefit of city
residents for they could be availed of also by the provincial residents. The province then — and its
successors-in-interest — are not really deprived of the benefits thereof.
But Republic Act 3039 cannot be applied to deprive Zamboanga del Norte of its share in the value
of the rest of the 26 remaining lots which are patrimonial properties since they are not being utilized for
distinctly, governmental purposes. Said lots are:
Moreover, the fact that these 26 lots are registered strengthens the proposition that they are truly
private in nature. On the other hand, that the 24 lots used for governmental purposes are also registered
is of no significance since registration cannot convert public property to private. 16
We are more inclined to uphold this latter view. The controversy here is more along the domains of
the Law of Municipal Corporations — State vs. Province — than along that of Civil Law. Moreover, this
Court is not inclined to hold that municipal property held and devoted to public service is in the same
category as ordinary private property. The consequences are dire. As ordinary private properties, they
can be levied upon and attached. They can even be acquired thru adverse possession — all these to the
detriment of the local community. Lastly, the classification of properties other than those for public use
in the municipalities as patrimonial under Art. 424 of the Civil Code — is "... without prejudice to the
provisions of special laws." For purpose of this article, the principles, obtaining under the Law of
Municipal Corporations can be considered as "special laws". Hence, the classification of municipal
property devoted for distinctly governmental purposes as public should prevail over the Civil Code
classification in this particular case.
Defendants' claim that plaintiff and its predecessor-in-interest are "guilty of laches is without merit.
Under Commonwealth Act 39, Sec. 50, the cause of action in favor of the defunct Zamboanga Province
arose only in 1949 after the Auditor General fixed the value of the properties in question. While in 1951,
the Cabinet resolved transfer said properties practically for free to Zamboanga City, a reconsideration
41
thereof was seasonably sought. In 1952, the old province was dissolved. As successor-in-interest to more
than half of the properties involved, Zamboanga del Norte was able to get a reconsideration of the
Cabinet Resolution in 1959. In fact, partial payments were effected subsequently and it was only after
the passage of Republic Act 3039 in 1961 that the present controversy arose. Plaintiff brought suit in
1962. All the foregoing, negative laches.
It results then that Zamboanga del Norte is still entitled to collect from the City of Zamboanga the
former's 54.39% share in the 26 properties which are patrimonial in nature, said share to computed on
the basis of the valuation of said 26 properties as contained in Resolution No. 7, dated March 26, 1949,
of the Appraisal Committee formed by the Auditor General.
Plaintiff's share, however, cannot be paid in lump sum, except as to the P43,030.11 already
returned to defendant City. The return of said amount to defendant was without legal basis. Republic Act
3039 took effect only on June 17, 1961 after a partial payment of P57,373.46 had already been made.
Since the law did not provide for retroactivity, it could not have validly affected a completed act. Hence,
the amount of P43,030.11 should be immediately returned by defendant City to plaintiff province. The
remaining balance, if any, in the amount of plaintiff's 54.39% share in the 26 lots should then be paid by
defendant City in the same manner originally adopted by the Secretary of Finance and the Commissioner
of Internal Revenue, and not in lump sum. Plaintiff's prayer, particularly pars. 5 and 6, read together with
pars. 10 and 11 of the first cause of action recited in the complaint 17 clearly shows that the relief sought
was merely the continuance of the quarterly payments from the internal revenue allotments of
defendant City. Art. 1169 of the Civil Code on reciprocal obligations invoked by plaintiff to justify lump
sum payment is inapplicable since there has been so far in legal contemplation no complete delivery of
the lots in question. The titles to the registered lots are not yet in the name of defendant Zamboanga
City.
WHEREFORE, the decision appealed from is hereby set aside and another judgment is hereby
entered as follows:.
(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del Norte in lump
sum the amount of P43,030.11 which the former took back from the latter out of the sum of P57,373.46
previously paid to the latter; and
(2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever balance
remains of plaintiff's 54.39% share in the 26 patrimonial properties, after deducting therefrom the sum
of P57,373.46, on the basis of Resolution No. 7 dated March 26, 1949 of the Appraisal Committee
formed by the Auditor General, by way of quarterly payments from the allotments of defendant City, in
the manner originally adopted by the Secretary of Finance and the Commissioner of Internal Revenue.
No costs. So ordered.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Concepcion, C.J., is on leave.
EN BANC
G.R. No. L-24661 February 28, 1974
BENJAMIN RABUCO, VENANCIO G. GUIRNALDA, LEODEGARIO ALOBA, ELEUTERIO IBAÑES, ROGELIO
ARAGONES, ASENCIO ABANCO, BENEDICTO BAUTISTA, MAXIMO AQUINO, PAULINA DALUMIAS,
NENITA RAMOS, GUILLERMO VARIAS, EMELDA ARELLANO, PEDRO BILBAO, ERNESTO BONBALES,
ROSITA OCA BAUTISTA, TERESITA ESTEBAN, JOSE BENJAMIN, LORENZO BELDEVER, LEODEGARIO
TUMLOS, PATRICIO MALATE, ANSELMO CORTEJOS, ANACLETA ADUCA, SALOME BARCELONA, ENRICO
CELSO, IRENE CAMBA, MARIA COLLADO, RUFINO CANTIL, ANANIAS CANILLO, MAXIMO DE CASTRO,
CEFERINO SALAZAR, PATRIA ANAYA, FELISA VELASCO, IGNACIO SARASPI, FLAVIO DINAGUIT,
REMEDIOS BAROMETRO, PEDRO GEBANIA, RUBEN GEGABALEN, EMETRIO EDAÑO, LUCIANO
ARAGONES, ADRIANO ESTRELLADO, BONIFACIO EVARISTO, ISIDORO EDORIA, TIMOTEA ECARUAN,
BIENVENIDO COLLADO, CENON DAJUYA, RAFAELA FERNANDEZ, ALFONSO FAUSTINO, AVELINO
GARCIA, RICARDO GUIRNALDA, FRANCISCO HENERAL, CARMEN KIONESALA, FELICIANO LUMACTOD,
DOLORES VILLACAMPA, NARCISO LIM, EUFEMIO LEGASPI, MATILDE MABAQUIAO, EULOGIO VIÑA,
MACARIO ANTONIO, JEREMIAS DE LA CRUZ, MARTIN MANGABAN, SIMEON MANGABA T., CARIDAD
MER MILLA, FELIX MAHINAY, NAPOLEON MARZAN, ISAIAS MANALASTAS, JOSEFA CORVERA, JOSE
APRUEDO, ARSENIO REYES, EUGENIA A. ONO, CORNELIO OPOLENCIA, SEDECIAS PASCUA, ABUNDIO
PAGUNTALAN, ESPERANZA DE QUIROS, CRESENCIO SALEM, MOISES FERNANDEZ, FORTUNATO
GONZALES, SOCORRO R. VALEN, RODOLFO COLLADO, VENERIO CELSO, GREGORIO DE LA CRUZ, CELSO
ALCERA, NICOLAS ARAGONES, JOSEFINA MANANSALA, ADELAIDA CALASIN , JOSE AGUSTIN, TOMAS
JOSEPH, MANUEL DADOR, SERGIO LIPATON, ERNESTO SUMAYDING, MARCELINO DIOSO, MIGUEL
ALCERA, CRISANTA ENAMER, JUAN VIADO HILARION CHIOCO, EUROPIA CABAHUG, VICTORIA DUERO,
CONSORCIO ENOC, MAMERTO GAMONIDO, BONIFACIO SABADO, MARIA INTROLIZO, HENRY ENOLBA,
REYNALDO LIM, FORTUNATO LIPON, ERNESTO MALLOS, FLORENTINA PATRICIO, MAMERTO PALAPALA,
RAMON DE PERALTA, JOSE PARRAS, APOLINARIO YAP, JUAN ROQUE, FELIX ROQUE, GLICERIA
SALAZAR, MIGUELA SABIO, AGAPITO SAYAS, PAULINO SARROZA, PACIFICO JUANICO, LIBERADO
TULAWAN, LIGAYA LAUS, ERNESTO VERZOSA, LEOPOLDO BERNALES, JAIME VISTA, ISAIAS AMURAO,
BENITA M. BARENG, and BRIGIDA SANCHEZ, petitioners,
vs.
HON. ANTONIO J. VILLEGAS substituted by HON. RAMON BAGATSING as CITY MAYOR OF MANILA,
HON. LADISLAO J. TOLENTINO, City Engineer of Manila, their agents, employees, assistants and all
persons acting under them; HON. BENJAMIN GOZON, Administrator, Land Reform Authority
substituted by HON CONRADO ESTRELLA as Secretary of the Department of Agrarian Reforms and his
agents, employees, assistants and all persons acting under his orders, respondent.1
G.R. No. L-24915 February 28, 1974
BENJAMIN RABUCO, et al., (the same co-petitioners in L-24661), petitioners,
vs.
HON. ANTONIO J. VILLEGAS substituted by HON. RAMON BAGATSING as CITY MAYOR OF MANILA, et
al., (the same co-respondents in L-24661), respondents.
G.R. No. L-24916 February 28, 1974
BENJAMIN RABUCO, et al. (the same co-petitioners in L-24661), petitioners-appellants,
vs.
HON. ANTONIO J. VILLEGAS substituted by HON. RAMON BAGATSING as CITY MAYOR OF MANILA, et
al., (the same co-respondents in L-24661), respondents-appellees.
Manuel D. Melotindos and Ricardo M. Guirnalda for petitioners.
Second Assistant City Fiscal Manuel T. Reyes for respondents.
TEEHANKEE, J.:p
The Court herein upholds the constitutionality of Republic Act 3120 on the strength of the established
doctrine that the subdivision of communal land of the State (although titled in the name of the municipal
corporation) and conveyance of the resulting subdivision lots by sale on installment basis to bona fide
occupants by Congressional authorization and disposition does not constitute infringements of the due
process clause or the eminent domain provisions of the Constitution but operates simply as a
manifestation of the legislature's right of control and power to deal with State property.
42
The origin and background of the cases at bar which deal with the decisive issue of constitutionality of
Republic Act 3120 enacted on June 17, 1961, as raised by respondent mayor of Manila in resisting
petitioners' pleas that respondent mayor not only lacks the authority to demolish their houses or eject
them as tenants and bona fide occupants of a parcel of land in San Andres, Malate2 but is also expressly
prohibited from doing so by section 2 of the Act, may be summarized from the Court of Appeals'3
certification of resolution of May 31, 1965 as follows:
Case L-24916 involves petitioners' appeal to the Court of Appeals4 from the decision of the Manila court
of first instance dismissing their petition for injunction and mandamus to enjoin the demolition of their
houses and the ejectment from the public lots in question and to direct respondent administrator of the
Land Authority (now Secretary of Agrarian Reform) to implement the provisions of Republic Act 3120 for
the subdivision and sale on installment basis of the subdivided lots to them as the tenants and bona fide
occupants thereof, and instead ordering their ejectment.
Case L-24915 involves petitioners' independent petition for injunction filed directly with the Court of
Appeals January 29, 19655 to forestall the demolition overnight of their houses pursuant to the order of
demolition set for January 30, 1965 at 8 a.m. issued by respondents city officials pending the elevation of
their appeal. The appellate court gave due course thereto and issued the writ of preliminary injunction as
prayed for.
The two cases were ordered "consolidated into one" since they were "unavoidably interlaced." The
appellate court, finding that the constitutionality of Republic Act 3120 was "the dominant and
inextricable issue in the appeal" over which it had no jurisdiction and that the trial court incorrectly
"sidetracked" the issue, thereafter certified the said cases to this Court, as follows:
The validity of Republic Act 3120 which was seasonably posed in issue in the court below was
sidetracked by the trial court, thus:
The constitutionality of Republic Act No. 3120 need not be passed upon as the principal question in issue
is whether the houses of the petitioners are public nuisances, which the court resolved in the affirmative.
As a matter of fact even if the petitioners were already the owners of the land on which their respected
houses are erected, the respondent city officials could cause the removal thereof as they were
constructed in violation of city ordinances and constitute public nuisance.
It is significant to note, however, that what is sought by the respondent City Mayor and City Engineer of
Manila is not only the demolition of the petitioners' houses in the premises in controversy, but their
ejectment as well. Moreover, Republic Act 3120 does intend not only the dismissal of the ejectment
proceedings against the petitioners from the land in controversy upon their motion, but as well that any
demolition order issued against them shall also have to be dismissed. The law says:
Upon approval of this Act no ejectment proceedings against any tenants or bona fide occupant shall be
instituted and any proceedings 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 thereof, shall be dismissed. (Sec. 2, R. A. 3120).
Indeed, the petitioners-appellants, who contended in the court below that it was not necessary to decide
on the validity or constitutionality of the law, now asseverate that 'Republic Act No. 3120 expressly
prohibits ejectment and demolition of petitioners' home.' The petitioners' argument in their appeal to
this Court runs as follows:
1. Petitioners-appellants are entitled to the remedies of injunction and mandamus, being vested with
lawful possession over Lot 21-B, Block 610, granted by law, Republic Act No. 3120.
2. Civil Case No. 56092 has not been barred by any prior judgment, as wrongly claimed by respondents-
appellees.
3. Ejectment and demolition against petitioners-appellants are unlawful and clearly prohibited by
Republic Act No. 3120.
The defense of the respondents Mayor and City Engineer of Manila to arguments 2 and 3 is the invalidity
of the said Republic Act 3120 for being in violation of the Constitutional prohibition against the
deprivation of property without due process of law and without just compensation. So that even if
argument 2 interposed by the petitioners-appellants should be rejected, still they may claim a right, by
virtue of the aforesaid provisions of Republic Act 3120, to continue possession and occupation of the
premises and the lifting of the order of demolition issued against them. The constitutionality of the said
Republic Act 3120, therefore, becomes the dominant and inextricable issue of the appeal.
Case L-24661 for the continuation and maintenance of the writ of preliminary injunction previously
issued by the Court of Appeals for preservation of the status quo was filed by petitioners directly with
this Court on June 21, 1965, pending transmittal of the records of Cases L-24915 and L-24916 to this
Court as certified by the Court of Appeals which declared itself without jurisdiction over the principal and
decisive issue of constitutionality of Republic Act 3120.
The Court gave due course thereto and on August 17, 1965 issued upon a P1,000 — bond the writ of
preliminary injunction as prayed for enjoining respondents "from demolishing and/or continuing to
demolish the houses of herein petitioners situated in Lot No. 21-B, Block No. 610 of the Cadastral Survey
of the City of Manila, or from performing any act constituting an interference in or disturbance of their
present possession."
The records of two cases certified by the appellate court, L-24915 and L-24916, were eventually
forwarded to this Court which per its resolution of August 24, 1965 ordered that they be docketed and
be considered together with case L-24661.
In the early morning of April 19, 1970, a large fire of undetermined origin gutted the Malate area
including the lot on which petitioners had built their homes and dwellings. Respondents city officials
then took over the lot and kept petitioners from reconstructing or repairing their burned dwellings. At
petitioners' instance, the Court issued on June 17, 1970 a temporary restraining order enjoining
respondents city officials "from performing any act constituting an interference in or disturbance of
herein petitioners' possession of Lot No. 21-B, Block No. 610, of the Cadastral Survey of the City of
Manila" as safeguarded them under the Court's subsisting preliminary injunction of August 17, 1965.
The "dominant and inextricable issue" at bar, as correctly perceived by the appellate court is the
constitutionality of Republic Act 3120 whereby Congress converted the lot in question together with
another lot in San Andres, Malate "which are reserved as communal property" into "disposable or
alienable lands of the State to be placed under the administration and disposal of the Land Tenure
Administration" for subdivision into small lots not exceeding 120 square meters per lot for sale on
installment basis to the tenants or bona fide occupants thereof6 and expressly prohibited ejectment and
demolition of petitioners' homes under section 2 of the Act as quoted in the appellate court's
certification resolution, supra.
The incidental issue seized upon by the trial court as a main issue for "sidetracking" the decisive issue of
constitutionality, to wit, that petitioners' houses as they stood at the time of its judgment in 1965 "were
constructed in violation of city ordinances and constituted public nuisances" whose removal could be
ordered "even if petitioners were already the owners of the land on which their respective houses are
erected" has become moot with the burning down of the petitioners' houses in the fire of April 19, 1970.
43
If the Act is invalid and unconstitutional for constituting deprivation of property without due process of
law and without just compensation as contended by respondents city officials, then the trial court's
refusal to enjoin ejectment and demolition of petitioners' houses may be upheld. Otherwise, petitioners'
right under the Act to continue possession and occupation of the premises and to the lifting and
dismissal of the order of demolition issued against them must be enforced and the trial court's judgment
must be set aside.
Respondents city officials' contention that the Act must be stricken down as unconstitutional for
depriving the city of Manila of the lots in question and providing for their sale in subdivided small lots to
bona fide occupants or tenants without payment of just compensation is untenable and without basis,
since the lots in question are manifestly owned by the city in its public and governmental capacity and
are therefore public property over which Congress had absolute control as distinguished from
patrimonial property owned by it in its private or proprietary capacity of which it could not be deprived
without due process and without just compensation.7
Here, Republic Act 3120 expressly declared that the properties were "reserved as communal property"
and ordered their conversion into "disposable and alienable lands of the State" for sale in small lots to
the bona fide occupants thereof. It is established doctrine that the act of classifying State property calls
for the exercise of wide discretionary legislative power which will not be interfered with by the courts.
The case of Salas vs. Jarencio8 wherein the Court upheld the constitutionality of Republic Act 4118
whereby Congress in identical terms as in Republic Act 3120 likewise converted another city lot (Lot 1-B-
2-B of Block 557 of the cadastral survey of Manila also in Malate) which was reserved as communal
property into disposable land of the State for resale in small lots by the Land Tenure, Administration to
the bona fide occupants is controlling in the case at bar.
The Court therein reaffirmed the established general rule that "regardless of the source or classification
of land in the possession of a municipality, excepting those acquired with its own funds in its private or
corporate capacity, such property is held in trust for the State for the benefit of its inhabitants, whether
it be for governmental or proprietary purposes. It holds such lands subject to the paramount power of
the legislature to dispose of the same, for after all it owes its creation to it as an agent for the
performance of a part of its public work, the municipality being but a subdivision or instrumentality
thereof for purposes of local administration. Accordingly, the legal situation is the same as if the State
itself holds the property and puts it to a different use"9 and stressed that "the property, as has been
previously shown, was not acquired by the City of Manila with its own funds in its private or proprietary
capacity. That it has in its name a registered title is not questioned, but this title should be deemed to be
held in trust for the State as the land covered thereby was part of the territory of the City of Manila
granted by the sovereign upon its creation." 10
There as here, the Court holds that the Acts in question (Republic Acts 4118 in Salas and Republic Act
3120 in the case at bar) were intended to implement the social justice policy of the Constitution and the
government program of land for the landless and that they were not "intended to expropriate the
property involved but merely to confirm its character as communal land of the State and to make it
available for disposition by the National Government: ... The subdivision of the land and conveyane of
the resulting subdivision lots to the occupants by Congressional authorization does not operate as an
exercise of the power of eminent domain without just compensation in violation of Section 1, subsection
(2), Article III of the Constitution, 11 but simply as a manifestation of its right and power to deal with
state property." 12
Since the challenge of respondents city officials against the constitutionality of Republic Act 3120 must
fail as the City was not deprived thereby of anything it owns by acquisition with its private or corporate
funds either under the due process clause or under the eminent domain provisions of the Constitution,
the provisions of said Act must be enforced and petitioners are entitled to the injunction as prayed for
implementing the Act's prohibition against their ejectment and demolition of their houses.
WHEREFORE, the appealed decision of the lower court (in Case No. L-24916) is hereby set aside, and the
preliminary injunction heretofore issued on August 17, 1965 is hereby made permanent. The respondent
Secretary of Agrarian Reform as successor agency of the Land Tenure Administration may now proceed
with the due implementation of Republic Act 3120 in accordance with its terms and provisions. No costs.
Makalintal, C.J., Zaldivar, Castro, Barredo, Makasiar, Antonio, Esguerra, Muñoz Palma and Aquino, JJ.,
concur.
Fernandez, J., took no part.
EN BANC
G.R. No. 97764 August 10, 1992
LEVY D. MACASIANO, Brigadier General/PNP Superintendent, Metropolitan Traffic Command,
petitioner, vs. HONORABLE ROBERTO C. DIOKNO, Presiding Judge, Branch 62, Regional Trial Court of
Makati, Metro Manila, MUNICIPALITY OF 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.
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.
The antecedent facts are as follows:
On June 13, 1990, the respondent municipality passed Ordinance No. 86, Series of 1990 which
authorized the closure of J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena Streets located
at Baclaran, Parañaque, Metro Manila and the establishment of a flea market thereon. The said
ordinance was approved by the municipal council pursuant to MMC Ordinance No. 2, Series of 1979,
authorizing and regulating the use of certain city and/or municipal streets, roads and open spaces within
Metropolitan Manila as sites for flea market and/or vending areas, under certain terms and conditions.
On July 20, 1990, the Metropolitan Manila Authority approved Ordinance No. 86, s. 1990 of the
municipal council of respondent municipality subject to the following conditions:
1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the residents
do not oppose the establishment of the flea market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area shall be marked distinctly, and
that the 2 meters on both sides of the road shall be used by pedestrians;
3. That the time during which the vending area is to be used shall be clearly designated;
4. That the use of the vending areas shall be temporary and shall be closed once the reclaimed areas are
developed and donated by the Public Estate Authority.
On June 20, 1990, the municipal council of 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.
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
44
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. Gabriel St. in
Baclaran. These stalls were later returned to respondent Palanyag.
On October 16, 1990, petitioner Brig. General Macasiano wrote a letter to respondent Palanyag giving
the latter ten (10) days to discontinue the flea market; otherwise, the market stalls shall be dismantled.
Hence, on October 23, 1990, respondents municipality and Palanyag filed with the trial court a joint
petition for prohibition and mandamus with damages and prayer for preliminary injunction, to which the
petitioner filed his memorandum/opposition to the issuance of the writ of preliminary injunction.
On October 24, 1990, the trial court issued a temporary restraining order to enjoin petitioner from
enforcing his letter-order of October 16, 1990 pending the hearing on the motion for writ of preliminary
injunction.
On December 17, 1990, the trial court issued an order upholding the validity of Ordinance No. 86 s. 1990
of the Municipality' of Parañaque and enjoining petitioner Brig. Gen. Macasiano from enforcing his
letter-order against respondent Palanyag.
Hence, this petition was filed by the petitioner thru the Office of the Solicitor General alleging grave
abuse of discretion tantamount to lack or excess of jurisdiction on the part of the trial judge in issuing
the assailed order.
The sole issue to be resolved in this case is whether or not an ordinance or resolution issued by the
municipal council of 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 specific
authority to convert a property already in public use to another public use, respondent municipality is,
therefore, bereft of any authority to close municipal roads for the establishment of a flea market.
Petitioner also submits that assuming that the respondent municipality is authorized to close streets, it
failed to comply with the conditions set forth by the Metropolitan Manila Authority for the approval of
the ordinance providing for the establishment of flea markets on public streets. Lastly, petitioner
contends that by allowing the municipal streets to be used by market vendors the municipal council of
respondent municipality violated its duty under the Local Government Code to promote the general
welfare of the residents of the municipality.
In upholding the legality of the disputed ordinance, the trial court ruled:
. . . that Chanter II Section 10 of the Local Government Code is a statutory grant of power given to local
government units, the Municipality of 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).
xxx xxx xxx
The actuation of the respondent Brig. Gen. Levi Macasiano, though apparently within its power is in fact
an encroachment of power legally vested to the municipality, precisely because when the municipality
enacted the ordinance in question — the authority of the respondent as Police Superintendent ceases to
be operative on the ground that the streets covered by the ordinance ceases to be a public thoroughfare.
(pp. 33-34, Rollo)
We find the petition meritorious. In resolving the question of whether the disputed municipal ordinance
authorizing the flea market on the public streets is valid, it is necessary to examine the laws in force
during the time the said ordinance was enacted, namely, Batas Pambansa Blg. 337, otherwise known as
Local Government Code, in connection with established principles embodied in the Civil Code an
property and settled jurisprudence on the matter.
The property of provinces, cities and municipalities is divided into property for public use and
patrimonial property (Art. 423, Civil Code). As to what consists of property for public use, Article 424 of
Civil Code states:
Art. 424. Property for public use, in the provinces, cities and municipalities, consists of the provincial
roads, city streets, the squares, fountains, public waters, promenades, and public works for public service
paid for by said provinces, cities or municipalities.
All other property possessed by any of them is patrimonial and shall be governed by this Code, without
prejudice to the provisions of special laws.
Based on the foregoing, J. Gabriel G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets are local
roads used for public service and are therefore considered public properties of respondent municipality.
Properties of the local government which are devoted to public service are deemed public and are under
the absolute control of Congress (Province of Zamboanga del Norte v. City of Zamboanga, L-24440,
March 28, 1968, 22 SCRA 1334). Hence, local governments have no authority whatsoever to control or
regulate the use of public properties unless specific authority is vested upon them by Congress. One such
example of this authority given by Congress to the local governments is the power to close roads as
provided in Section 10, Chapter II of the Local Government Code, which states:
Sec. 10. Closure of roads. — A local government unit may likewise, through its head acting pursuant to a
resolution of its sangguniang and in accordance with existing law and the provisions of this Code, close
any barangay, municipal, city or provincial road, street, alley, park or square. No such way or place or any
part of thereof shall be close without indemnifying any person prejudiced thereby. A property thus
withdrawn from public use may be used or conveyed for any purpose for which other real property
belonging to the local unit concerned might be lawfully used or conveyed. (Emphasis ours).
However, the aforestated legal provision which gives authority to local government units to close roads
and other similar public places should be read and interpreted in accordance with basic principles
already established by law. These basic principles have the effect of limiting such authority of the
province, city or municipality to close a public street or thoroughfare. Article 424 of the Civil Code lays
down the basic principle that properties of public dominion devoted to public use and made available to
the public in general are outside the commerce of man and cannot be disposed of or leased by the local
government unit to private persons. Aside from the requirement of due process which should be
complied with before closing a road, street or park, the closure should be for the sole purpose of
withdrawing the road or other public property from public use when circumstances show that such
property is no longer intended or necessary for public use or public service. When it is already withdrawn
from public use, the property then becomes patrimonial property of the local government unit
concerned (Article 422, Civil Code; Cebu Oxygen, etc. et al. v. Bercilles, et al., G.R. No. L-40474, August
29, 1975, 66 SCRA 481). It is only then that the respondent municipality can "use or convey them for any
purpose for which other real property belonging to the local unit concerned might be lawfully used or
conveyed" in accordance with the last sentence of Section 10, Chapter II of Blg. 337, known as Local
Government Code. In one case, the City Council of Cebu, through a resolution, declared the terminal
road of M. Borces Street, Mabolo, Cebu City as an abandoned road, the same not being included in the
45
City Development Plan. Thereafter, the City Council passes another resolution authorizing the sale of the
said abandoned road through public bidding. We held therein that the City of Cebu is empowered to
close a city street and to vacate or withdraw the same from public use. Such withdrawn portion becomes
patrimonial property which can be the object of an ordinary contract (Cebu Oxygen and Acetylene Co.,
Inc. v. Bercilles, et al., G.R. No.
L-40474, August 29, 1975, 66 SCRA 481). However, those roads and streets which are available to the
public in general and ordinarily used for vehicular traffic are still considered public property devoted to
public use. In such case, the local government has no power to use it for another purpose or to dispose
of or lease it to private persons. This limitation on the authority of the local government over public
properties has been discussed and settled by this Court en banc in "Francisco V. Dacanay, petitioner v.
Mayor Macaria Asistio, Jr., et al., respondents, G.R. No. 93654, May 6, 1992." This Court ruled:
There is no doubt that the disputed areas from which the private respondents' market stalls are sought
to be evicted are public streets, as found by the trial court in Civil Case No. C-12921. A public street is
property for public use hence outside the commerce of man (Arts. 420, 424, Civil Code). Being outside
the commerce of man, it may not be the subject of lease or others contract (Villanueva, et al. v.
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.
The Executive Order issued by acting Mayor Robles authorizing the use of Heroes del '96 Street as a
vending area for stallholders who were granted licenses by the city government contravenes the general
law that reserves city streets and roads for public use. Mayor Robles' Executive Order may not infringe
upon the vested right of the public to use city streets for the purpose they were intended to serve: i.e.,
as arteries of travel for vehicles and pedestrians.
Even assuming, in gratia argumenti, that respondent municipality has the authority to pass the disputed
ordinance, the same cannot be validly implemented because it cannot be considered approved by the
Metropolitan Manila Authority due to non-compliance by respondent municipality of the conditions
imposed by the former for the approval of the ordinance, to wit:
1. That the aforenamed streets are not used for vehicular traffic, and that the majority of the residents
do(es) not oppose the establishment of the flea market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area shall be marked distinctly, and
that the 2 meters on both sides of the road shall be used by pedestrians;
3. That the time during which the vending area is to be used shall be clearly designated;
4. That the use of the vending areas shall be temporary and shall be closed once the reclaimed areas are
developed and donated by the Public Estate Authority. (p. 38, Rollo)
Respondent municipality has not shown any iota of proof that it has complied with the foregoing
conditions precedent to the approval of the ordinance. The allegations of respondent municipality that
the closed streets were not used for vehicular traffic and that the majority of the residents do not
oppose the establishment of a flea market on said streets are unsupported by any evidence that will
show that this first condition has been met. Likewise, the designation by respondents of a time schedule
during which the flea market shall operate is absent.
Further, it is of public notice that the streets along Baclaran area are congested with people, houses and
traffic brought about by the proliferation of vendors occupying the streets. To license and allow the
establishment of a flea market along J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena
streets in Baclaran would not help in solving the problem of congestion. We take note of the other
observations of the Solicitor General when he said:
. . . There have been many instances of emergencies and fires where ambulances and fire engines,
instead of using the roads for a more direct access to the fire area, have to maneuver and look for other
streets which are not occupied by stalls and vendors thereby losing valuable time which could,
otherwise, have been spent in saving properties and lives.
Along G.G. Cruz Street is a hospital, the St. Rita Hospital. However, its ambulances and the people
rushing their patients to the hospital cannot pass through G.G. Cruz because of the stalls and the
vendors. One can only imagine the tragedy of losing a life just because of a few seconds delay brought
about by the inaccessibility of the streets leading to the hospital.
The children, too, suffer. In view of the occupancy of the roads by stalls and vendors, normal
transportation flow is disrupted and school children have to get off at a distance still far from their
schools and walk, rain or shine.
Indeed one can only imagine the garbage and litter left by vendors on the streets at the end of the day.
Needless to say, these cause further pollution, sickness and deterioration of health of the residents
therein. (pp. 21-22, Rollo)
Respondents do not refute the truth of the foregoing findings and observations of petitioners. Instead,
respondents want this Court to focus its attention solely on the argument that the use of public spaces
for the establishment of a flea market is well within the powers granted by law to a local government
which should not be interfered with by the courts.
Verily, the powers of a local government unit are not absolute. They are subject to limitations laid down
by toe Constitution and the laws such as our Civil Code. Moreover, the exercise of such powers should be
subservient to paramount considerations of health and well-being of the members of the community.
Every local government unit has the sworn obligation to enact measures that will enhance the public
health, safety and convenience, maintain peace and order, and promote the general prosperity of the
inhabitants of the local units. Based on this objective, the local government should refrain from acting
towards that which might prejudice or adversely affect the general welfare.
As what we have said in the Dacanay case, the general public have a legal right to demand the
demolition of the illegally constructed stalls in public roads and streets and the officials of respondent
municipality have the corresponding duty arising from public office to clear the city streets and restore
them to their specific public purpose.
The instant case as well as the Dacanay case, involves an ordinance which is void and illegal for lack of
basis and authority in laws applicable during its time. However, at this point, We find it worthy to note
that Batas Pambansa Blg. 337, known as Local Government Lode, has already been repealed by Republic
Act No. 7160 known as Local Government Code of 1991 which took effect on January 1, 1992. Section
5(d) of the new Code provides that rights and obligations existing on the date of effectivity of the new
Code and arising out of contracts or any other source of prestation involving a local government unit
shall be governed by the original terms and conditions of the said contracts or the law in force at the
time such rights were vested.
46
ACCORDINGLY, the petition is GRANTED and the decision of the respondent Regional Trial Court dated
December 17, 1990 which granted the writ of preliminary injunction enjoining petitioner as PNP
Superintendent, Metropolitan Traffic Command from enforcing the demolition of market stalls along J.
Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension and Opena streets is hereby RESERVED and SET ASIDE.
SO ORDERED.
Narvasa, C.J., Gutierrez, Jr., Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero,
Nocon and Bellosillo, JJ., concur.
SECOND DIVISION
G.R. No. L-66807 January 26, 1989
REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR OF LANDS, petitioner, vs. MELITONA
ALAGAD, SPOUSES CARMEN ALAGAD AND ESPIRIDION KOLIMLIM, JUSTO ALAGAD, CARLOS ALAGAD,
SPOUSES LIBRADA ALAGAD AND EMERSON ABANO, DEMETRIO ALAGAD, ANTONIO ALAGAD, REGISTER
OF DEEDS OF LAGUNA, and the INTERMEDIATE APPELLATE COURT (Fourth Civil Cases Division),
respondents.
The Solicitor General for petitioner.
Alberto, Salazar & Associates for private respondents.
SARMIENTO, J.:
The Republic appeals from the decision of the Court of Appeals 1 affirming two orders of the defunct
Court of First Instance of Laguna 2 dismissing its petition for "annulment of title and reversion.3 The facts
appear in the decision appealed from:
On or about October 11, 1951, defendants filed an application for registration of their title over a parcel
of land situated at Linga, Pila, Laguna, with an area of 8.1263 hectares, reflected in survey plan Psu-
116971, which was amended after the land was divided into two parcels, namely, Lot 1 with an area of
5.2476 hectares and Lot 2 with an area of 2.8421 hectares, reflected in survey plan Psu-226971, amd. 2.
The Republic opposed the application on the stereo-typed ground that applicants and their predecessors
have not been in possession of the land openly, continuously, publicly and adversely under a bona fide
claim of ownership since July 26, 1894 and the land has not ceased to be a part of the public domain. It
appears that barrio folk also opposed the application. (LRC Case No. 189. G.L.R.O. Rec. No. 4922 of the
Court of First Instance of Laguna).
By virtue of a final judgment in said case, promulgated January 16, 1956, supplemented by orders issued
on March 21, 1956 and August 13, 1956, defendants were declared owners of Lot 1 and the remaining
portion, or Lot 2, was declared public land. Decree No. N-51479 was entered and Original Certificate of
Title No. 0- 40 1, dated October 18, 1956, was issued in the names of defendants.
In August, 1966, Civil Case No. 52 of the Municipal Court of Pila, Laguna, was filed by defendants to evict
the barrio folk occupying portions of Lot 1. On August 8, 1968, judgment was rendered in the eviction
case ordering the defendants therein to return possession of the premises to herein defendants, as
plaintiffs therein. The defendants therein did not appeal.
The foregoing anterior proceedings triggered the filing of the instant case. On October 6, 1970, as prayed
for in the complaint, a writ of preliminary injunction was issued enjoining the Provincial Sheriff of Laguna
or his deputies from enforcing the writ of execution issued in Civil Case No. 52, and the defendants from
selling, mortgaging, disposing or otherwise entering into any transaction affecting the area.
This case was set for pre-trial on July 6, 1971. Despite notice of the pre-trial, Atty. Alejandro A.
Ponferada, Special Attorney, Bureau of Lands, representing plaintiff Republic, did not appear. On July 16,
1971, the court a quo dismissed the complaint. The Republic filed a motion for reconsideration, was set
for hearing, and finally denied by the court a quo, hence, this appeal.
Plaintiff filed its record on appeal on March 13, 1972. It appears that the appeal was dismissed by this
Court for failure to show in the record on appeal that the appeal was perfected on time. Plaintiff went to
the Supreme Court on a petition for review on the action of this Court. On November 19, 1982, the
Supreme Court set aside the dismissal resolution of this Court and ordered Us to reinstate and give due
course to plaintiffs appeal.4
In commencing proceedings below, the Republic claims that the decree and title [rendered and issued in
LRC Case No. 189, G.L.R.O. Rec. No. L-4922] insofar as the 1.42 hectare northwestern portion on end of
Lot 1, Psu-116971, Amd. 2, is concerned, are void ab initio, 5 for the following reasons:
(a) That said l.42 hectare northwestern portion or end of Lot l, Psu-116971, Amd. 2, like the adjoining Lot
2 of the same survey plan containing 2.8421 hectares, had since time immemorial, been foreshore land
reached and covered by the waters of the Laguna de Bay (Republic vs. Ayala y Cia, L-20950, May 31,
1965; Antonio Dizon, et al., vs. Juan de G. Rodriguez, et al., L-20355- 56, April 30, 1965);
(b) That moreover said 1.42 hectare portion is actually now the site of Barrio Aplaya, formerly a sitio of
Linga, Pila, Laguna, having been occupied by the barrio people since the American occupation of the
country in the early 1900's where they established their houses;
(c) That the barrio people of Aplaya thru the years since the early 1900's have filled up and elevated the
land to its present condition of being some feet above the level of the adjoining Lot 2 of plan Psu-116971
and the rest of Lot 1 of the same survey plan so much so that this barrio site of Aplaya where there are
now sixty-eight (68) houses occupied by more than one hundred (100) families is no longer reached and
covered by the waters of the Laguna de Bay; and
(d) That were it not for the fillings made by the barrio people, the land in question would not have been
fit for human habitation, so much so that defendants and their predecessors-in-interest could not have
acquired an imperfect title to the property which could be judicially confirmed in a registration case, as
in fact said defendants and their predecessors-in-interest have never been in actual possession of the
land in question, the actual occupants thereof being the barrio people of Aplaya; 6
In sustaining the trial court, the Court of Appeals held that under Section 20, of Rule 20, of the Rules of
Court, dismissal was proper upon failure of the Republic to appear for pre-trial. It likewise ruled that the
judgment, dated January 16, 1956, in the said LRC No. 189 has long become final, titles to the properties
had been issued (in favor of the private respondents), and that res judicata, consequently, was a bar.
In its petition, the Republic assails the decision insofar as it sustained the lower court: (1) in dismissing
the petition for failure of the Republic to appear for pre-trial; and (2) in holding that res judicata is an
obstacle to the suit.
I. With respect to the first question, we hold that the Court of Appeals has been guilty of
grave abuse of discretion. It is well-established that the State cannot be bound by, or
estopped from, the mistakes or negligent acts of its official or agents, 7 much more,
non-suited as a result thereof.
This is so because:
... [T]he state as a persona in law is the judicial entity, which is the source of any asserted right to
ownership in land under the basic doctrine embodied in the 1935 Constitution as well as the present
charter. It is charged moreover with the conservation of such patrimony. There is need therefore of the
most rigorous scrutiny before private claims to portions thereof are judicially accorded recognition,
especially so where the matter is sought to be raked up anew after almost fifty years. Such primordial
47
consideration, not the apparent carelessness, much less the acquiescense of public officials, is the
controlling norm . . . 8
The cases of Ramos v. Centra l Bank of the Philippines 9 and Nilo v. Romero, 10 cited by the Court of
Appeals in support of its decision, are not applicable. In Ramos, we applied estoppel upon finding of bad
faith on the part of the State (the Central Bank) in deliberately reneging on its promises. In Nilo, we
denied efforts to impugn the jurisdiction of the court on the ground that the defendant had been
"erroneously' represented in the complaint by the City Attorney when it should have been the City
Mayor, on a holding that the City Attorney, in any event, could have ably defended the City (Davao City).
In both cases, it is seen that the acts that gave rise to estoppel were voluntary and intentional in
character, in which cases, it could not be said that the Government had been prejudiced by some
negligent act or omission.
There is no merit either, in claims that res judicata is an impediment to reversion of property. In Republic
v. Court of Appeals, 11 this Court stated:
... [a] certificate of title may be ordered cancelled (Republic v Animas, et al., . supra), and the cancellation
may be pursued through an ordinary action therefor. This action cannot be barred by the prior judgment
of the land registration court, since the said court had no jurisdiction over the subject matter. And if
there was no such jurisdiction, then the principle of res judicata does not apply. For it is a well-settled
rule that for a prior judgment to constitute a bar to a subsequent case, the following requisites must
concur; (1) it must be a final judgment; (2) it must have been rendered by a court having jurisdiction over
the subject matter and over the parties; (3) it must be a judgment on the merits; and (4) there must be,
between the first and second actions, identity of parties, identity of subject matter and identity of cause
of action (Municipality of Daet vs. CA, 93 SCRA 503; Mendoza vs. Arrieta, et al., 91 SCRA 113)...12
In the case at bar, if the parcel registered in the names of the private respondents were foreshore land,
the land registration court could not have validly awarded title thereto. It would have been without the
authority to do so. The fact that the Bureau of Lands had failed to appeal from the decree of registration
could not have validated the court's decision, rendered without jurisdiction.
II. “Property, according to the Civil Code, is either of public dominion or of private ownership
." 13 Property is of public dominion if it is:
(1) ... 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; 14 or if it:
(2) . . . belong[s] to the State, without being for public use, and are intended for some public service or
for the development of the national wealth. 15
All other property of the State, it is provided further, which is not of the character mentioned in ... article
[4201, is patrimonial property,16 meaning to say, property 'open to disposition17 by the Government, or
otherwise, property pertaining to the national domain, or public lands.18 Property of the public
dominion, on the other hand, refers to things held by the State by regalian right. They are things res
publicae in nature and hence, incapable of private appropriation. Thus, under the present Constitution,
[w]ith the exception of agricultural lands, all other natural resources shall not be alienated.'19
Specifically:
ART. 502. The following are of public dominion:
(1) Rivers and their natural beds;
(2) Continuous or intermittent waters of springs and brooks running in their natural beds and the beds
themselves;
(3) Waters rising continuously or intermittently on lands of public dominion;
(4) Lakes and lagoons formed by Nature on public lands, and their beds;
(5) Rain waters running through ravines or sand beds, which are also of public dominion;
(6) Subterranean waters on public lands;
(7) Waters found within the zone of operation of public works, even if constructed by a contractor;
(8) Waters rising continuously or intermittently on lands belonging to private persons, to the State, to a
province, or to a city or municipality from the moment they leave such lands;
(9) The waste waters of fountains, sewers and public establishments.20
So also is it ordained by the Spanish Law of Waters of August 3, 1866:
Art. 44. Natural ponds and lakes existing upon public lands and fed by public waters, belong to the public
domain.
Lakes, ponds, and pools existing upon the lands of private individuals, or the State or provinces, belong
to the respective owners of such lands, and those situated upon lands of communal use belong to their
respective pueblos.21
Assuming, therefore, for purposes of this petition, that the lands subject of the Republic's reversion
efforts are foreshore in nature, the Republic has legitimate reason to demand reconveyance. In that
case, res judicata or estoppel is no defense.22
Of course, whether or not the properties in question are, indeed, foreshore lands is the core of
controversy. According to the trial court, the aforementioned parcel of land is a portion of the public
domain belonging to the Republic of the Philippines, 23 and hence, available disposition and registration.
As we have pointed out, the Government holds otherwise, and that as foreshore laud, it is not
registerable.
The question, so it follows, is one of fact: Is the parcel foreshore or is it part and parcel of the public
domain?
Laguna de Bay has long been recognized as a lake .24 Thus:
Laguna de Bay is a body of water formed in depressions of the earth; it contains fresh water coming from
rivers and brooks or springs, and is connected with Manila Bay by the Pasig River. According to the
definition just quoted, Laguna de Bay is a lake. 25
And, "[i]nasmuch as Laguna de Bay is a lake, so Colegio de San Jose further tells us, "we must resort to
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 parcels of land in question.26 The recourse to legal
provisions is necessary, for under Article 74 of the Law of Waters, [T]he natural bed or basin of lakes ... is
the ground covered by their waters when at their highest ordinary depth. 27 and in which case, it forms
part of the national dominion. When Laguna de Bay's waters are at their highest ordinary depth has been
defined as:
... the highest depth of the waters of Laguna de Bay during the dry season, such depth being the regular,
common, natural, which occurs always or most of the time during the year . . . 28
Otherwise, where the rise in water level is due to the extraordinary action of nature, rainfall for instance,
the portions inundated thereby are not considered part of the bed or basin of the body of water in
48
question. It cannot therefore be said to be foreshore land but land outside of the public dominion, and
land capable of registration as private property.
A foreshore land, on the other hand, has been defined as follows:
. . . that part of (the land) which is between high and low water and left dry by the flux and reflux of the
tides... 29
The strip of land that lies between the high and low water marks and that is alternatively wet and dry
according to the flow of the tide.30
If the submergence, however, of the land is due to precipitation, it does not become foreshore, despite
its proximity to the waters.
The case, then, has to be decided alongside these principles and regretfully, the Court cannot make a
ruling, in the first place, because it is not a trier of facts, and in the second, it is in possession of no
evidence to assist it in arriving at a conclusive disposition 31 We therefore remand the case to the court
a quo to determine whether or not the property subject of controversy is foreshore. We, consequently,
reverse both the Court of Appeals and the trial court and reinstate the Republic's complaint.
WHEREFORE, this case is hereby REMANDED to the trial court for further proceedings.
Melencio-Herrera (Chairperson), Paras, Padilla and Regalado, JJ., concur.
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:
49
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.
50
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.
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.

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
51