Republic of the Philippines public, peaceful and uninterrupted possession of
SUPREME COURT said lots up to the time this case came up.
Manila
EN BANC
G.R. No. L-28379 March 27, 1929
THE GOVERNMENT OF THE PHILIPPINE
ISLANDS, applicant-appellant,
vs.
CONSORCIA CABANGIS, ET AL., claimants-appellees.
Attorney-General Jaranilla for appellant.
Abad Santos, Camus & Delgado for appellees.
VILLA-REAL, J.:
The Government of the Philippine Islands appeals to this
court from the judgment of the Court of First Instance of
Manila in cadastral proceeding No. 373 of the Court of
First Instance of Manila, G. L. R. O. Cadastral Record No.
373, adjudicating the title and decreeing the registration
of lots Nos. 36, 39 and 40, block 3055 of the cadastral
survey of the City of Manila in favor of Consuelo,
Consorcia, Elvira and Tomas, surnamed Cabangis, in
equal parts, and dismissing the claims presented by the
Government of the Philippine Islands and the City of
Manila.
In support of its appeal, the appellant assigns the
following alleged errors as committed by the trial court
in its judgment, to wit:
1. The lower court erred in not holding that the lots
in question are of the public domain, the same
having been gained from the sea (Manila Bay) by
accession, by fillings made by the Bureau of Public
Works and by the construction of the break-water
(built by the Bureau of Navigation) near the mouth
of Vitas Estero.
2. The lower court erred in holding that the lots in
question formed part of the big parcel of land
belonging to the spouses Maximo Cabangis and Tita
Andres, and in holding that these spouses and their
successors in interest have been in continuous,
they were reclaimed, giving his permission to some
fishermen to dry their fishing nets and deposit
3. The lower court erred in holding that said lots
existed before, but that due to the current of the
Pasig River and to the action of the big waves in
Manila Bay during the south-west monsoons, the
same disappeared.
4. The lower court erred in adjudicating the
registration of the lands in question in the name of
the appellees, and in denying the appellant's motion
for a new trial.
A preponderance of the evidence in the record which
may properly be taken into consideration in deciding the
case, proves the following facts:
Lots 36, 39 and 40, block 3035 of cadastral proceeding
No. 71 of the City of Manila, G. L. R. O. Record No. 373,
were formerly a part of a large parcel of land belonging
to the predecessor of the herein claimants and appellees.
From the year 1896 said land began to wear away, due to
the action of the waves of Manila Bay, until the year 1901
when the said lots became completely submerged in
water in ordinary tides, and remained in such a state
until 1912 when the Government undertook the
dredging of Vitas Estuary in order to facilitate navigation,
depositing all the sand and silt taken from the bed of the
estuary on the low lands which were completely covered
with water, surrounding that belonging to the Philippine
Manufacturing Company, thereby slowly and gradually
forming the lots, the subject matter of this proceeding.
Up to the month of February, 1927 nobody had declared
lot 39 for the purposes of taxation, and it was only in the
year 1926 that Dr. Pedro Gil, in behalf of the claimants
and appellees, declared lot No. 40 for such purpose.
In view of the facts just stated, as proved by a
preponderance of the evidence, the question arises: Who
owns lots 36, 39 and 40 in question?
The claimants-appellees contend that inasmuch as the
said lots once formed a part of a large parcel of land
belonging to their predecessors, whom they succeeded,
and their immediate predecessor in interest, Tomas
Cabangis, having taken possession thereof as soon as
their bancas thereon, said lots belong to them.
Article 339, subsection 1, of the Civil Code, reads:
Article 339. Property of public ownership is —
1. That devoted to public use, such as roads, canals,
rivers, torrents, ports and bridges constructed by
the State, riverbanks, shorts, roadsteads, and that of
a similar character.
xxx xxx xxx
Article 1, case 3, of the Law of Waters of August 3, 1866,
provides as follows:
ARTICLE 1. The following are part of the national
domain open to public use:
xxx xxx xxx
3. The Shores. By the shore is understood that space
covered and uncovered by the movement of the tide.
Its interior or terrestrial limit is the line reached by
the highest equinoctial tides. Where the tides are not
appreciable, the shore begins on the land side at the
line reached by the sea during ordinary storms or
tempests.
In the case of Aragon vs. Insular Government (19 Phil.,
223), with reference to article 339 of the Civil Code just
quoted, this court said:
We should not be understood, by this decision, to hold
that in a case of gradual encroachment or erosion by the
ebb and flow of the tide, private property may not
become 'property of public ownership,' as defined in
article 339 of the code, where it appears that the owner
has to all intents and purposes abandoned it and
permitted it to be totally destroyed, so as to become a
part of the 'playa' (shore of the seas), 'rada' (roadstead),
or the like. . . .
1
In the Enciclopedia Juridica Espanola, volume XII, page
558, we read the following:
With relative frequency the opposite phenomenon
occurs; that is, the sea advances and private
properties are permanently invaded by the waves,
and in this case they become part of the shore or
beach. They then pass to the public domain, but the
owner thus dispossessed does not retain any right
to the natural products resulting from their new
nature; it is a de facto case of eminent domain, and
not subject to indemnity.
Now then , when said land was reclaimed, did the
claimants-appellees or their predecessors recover it as
their original property?
As we have seen, the land belonging to the predecessors
of the herein claimants-appellees began to wear way in
1896, owing to the gradual erosion caused by the ebb and
flow of the tide, until the year 1901, when the waters of
Manila Bay completely submerged a portion of it,
included within lots 36, 39 and 40 here in question,
remaining thus under water until reclaimed as a result of
certain work done by the Government in 1912. According
to the above-cited authorities said portion of land, that is,
lots 36, 39 and 40, which was private property, became a
part of the public domain. The predecessors of the herein
claimants-appellees could have protected their land by
building a retaining wall, with the consent of competent
authority, in 1896 when the waters of the sea began to
wear it away, in accordance with the provisions of Article
29 of the aforecited Law of Waters of August 3, 1866, and
their failure to do so until 1901, when a portion of the
same became completely covered by said waters,
remaining thus submerged until 1912, constitutes
abandonment.
Now then: The lots under discussion having been
reclaimed from the seas as a result of certain work done
by the Government, to whom do they belong?
The answer to this question is found in article 5 of the
aforementioned Law of Waters, which is as follows:
ART. 5. Lands reclaimed from the sea in
consequence of works constructed by the State, or
by the provinces, pueblos or private persons, with
proper permission, shall become the property of the
party constructing such works, unless otherwise
provided by the terms of the grant of authority.
The fact that from 1912 some fishermen had been drying
their fishing nets and depositing their bancas on lots 36,
39 and 40, by permission of Tomas Cabangis, does not
confer on the latter or his successors the ownership of
said lots, because, as they were converted into public
land, no private person could acquire title thereto except
in the form and manner established by the law.
In the case of Buzon vs. Insular Government and City of
Manila (13 Phil., 324), cited by the claimants-appellees,
this court, admitting the findings and holdings of the
lower court, said the following:
If we heed the parol evidence, we find that the
seashore was formerly about one
hundred brazas distant from the land in question;
that, in the course of time, and by the removal of a
considerable quantity of sand from the shore at the
back of the land for the use of the street car company
in filling in Calle Cervantes, the sea water in ordinary
tides now covers part of the land described in the
petition.
The fact that certain land, not the bed of a river or of
the sea, is covered by sea water during the period of
ordinary high tide, is not a reason established by any
law to cause the loss thereof, especially when, as in
the present case, it becomes covered by water owing
to circumstances entirely independent of the will of
the owner.
In the case of Director of Lands vs. Aguilar (G.R. No.
22034),1 also cited by the claimants-appellees, wherein
the Government adduced no evidence in support of its
contention, the lower court said in part:
The contention of the claimants Cabangis is to the
effect that said lots are a part of the adjoining land
adjudicated to their deceased father, Don Tomas
Cabangis, which, for over fifty years had belonged to
their deceased grandmother, Tita Andres, and that,
due to certain improvements made in Manila Bay,
the waters of the sea covered a large part of the lots
herein claimed.
The Government of the Philippine Islands also
claims the ownership of said lots, because, at
ordinary high tide, they are covered by the sea.
Upon petition of the parties, the lower court made
an ocular inspection of said lots on September 12,
1923, and on said inspection found some light
material houses built thereon, and that on that
occasion the waters of the sea did not reach the
aforesaid lots.
From the evidence adduced at the trial of this cause,
it may be inferred that Tita Andres, during her
lifetime was the owner of a rather large parcel of
land which was adjudicated by a decree to her son
Tomas Cabangis; the lots now in question are
contiguous to that land and are covered by the
waters of the sea at extraordinary high tide; some 50
years before the sea did not reach said strip of land,
and on it were constructed, for the most part, light
material houses, occupied by the tenants of Tita
Andres, to whom they paid rent. Upon her death, her
son Tomas Cabangis succeeded to the possession,
and his children succeeded him, they being the
present claimants, Consuelo, Jesus, Tomas, and
Consorcia Cabangis.
The Government of the Philippine Islands did not
adduce any evidence in support of its contention,
with the exception of registry record No. 8147, to
show that the lots here in question were not
excluded from the application presented in said
proceeding.
It will be seen that in the case of Buzon vs. Insular
Government and City of Manila, cited above, the rise of
the waters of the sea that covered the lands there in
dispute, was due not to the action of the tide but to the
fact that a large quantity of sand was taken from the sea
at the side of said land in order to fill in Cervantes Street,
and this court properly held that because of this act,
entirely independent of the will of the owner of said land,
the latter could not lose the ownership thereof, and the
mere fact that the waters of the sea covered it as a result
2
of said act, is not sufficient to convert it into public land,
especially, as the land was high and appropriate for
building purposes.

In the case of the Director of Lands vs. Aguilar also cited

by the claimants-appellees, the Insular Government did
not present any evidence in support of its contention,
thus leaving uncontradicted the evidence adduced by the
claimants Aguilar et al., as to the ownership, possession
and occupation of said lots.

In the instant case the evidence shows that from 1896,

the waves of Manila Bay had been gradually and
constantly washing away the sand that formed the lots
here in question, until 1901, when the sea water
completely covered them, and thus they remained until
the year 1912. In the latter year they were reclaimed
from the sea by filling in with sand and silt extracted from
the bed of Vitas Estuary when the Government dredged
said estuary in order to facilitate navigation. Neither the
herein claimants-appellees nor their predecessors did
anything to prevent their destruction.

In conclusion, then, we hold that the lots in question

having disappeared on account of the gradual erosion
due to the ebb and flow of the tide, and having remained
in such a state until they were reclaimed from the sea by
the filling in done by the Government, they are public
land. (Aragon vs. Insular Government, 19 Phil., 223;
Francisco vs. Government of the Philippine Islands, 28
Phil., 505).

By virtue whereof, the judgment appealed from is

reversed and lots Nos. 36, 39 and 40 of cadastral
proceeding No. 373 of the City of Manila are held to be
public land belonging to the Government of the United
States under the administration and control of the
Government of the Philippine Islands. So ordered.

Johnson, Street, Malcolm, Ostrand, Johns and Romualdez,

JJ., concur.

3
 SECOND DIVISION
G.R. No. L40474 August 29, 1975
CEBU OXYGEN & ACETYLENE CO., INC., petitioner,
vs.
HON. PASCUAL A. BERCILLES Presiding Judge,
Branch XV, 14th Judicial District, and JOSE L.
ESPELETA, Assistant Provincial Fiscal, Province of
Cebu, representing the Solicitor General's Office and
the Bureau of Lands, respondents.
Jose Antonio R Conde for petitioner.
Office of the Acting Solicitor General Hugo E. Gutierrez,
Jr., Assistant Solicitor General Octavio R. Ramirez and
Trial Attorney David R. Hilario for respondents. .
CONCEPCION, Jr., J.:
This is a petition for the review of the order of the Court
of First Instance of Cebu dismissing petitioner's
application for registration of title over a parcel of land
situated in the City of Cebu.
The parcel of land sought to be registered was only a
portion of M. Borces Street, Mabolo, Cebu City. On
September 23, 1968, the City Council of Cebu, through
Resolution No. 2193, approved on October 3, 1968,
declared the terminal portion of M. Borces Street,
Mabolo, Cebu City, as an abandoned road, the same not
being included in the City Development
Plan.1 Subsequently, on December 19, 1968, the City
Council of Cebu passed Resolution No. 2755, authorizing
the Acting City Mayor to sell the land through a public
bidding.2 Pursuant thereto, the lot was awarded to the
herein petitioner being the highest bidder and on March
3, 1969, the City of Cebu, through the Acting City Mayor,
executed a deed of absolute sale to the herein petitioner
for a total consideration of P10,800.00.3 By virtue of the
aforesaid deed of absolute sale, the petitioner filed an
application with the Court of First instance of Cebu to
have its title to the land registered.4
On June 26, 1974, the Assistant Provincial Fiscal of Cebu
filed a motion to dismiss the application on the ground
that the property sought to be registered being a public
road intended for public use is considered part of the
public domain and therefore outside the commerce of
man. Consequently, it cannot be subject to registration by
any private individual.5
After hearing the parties, on October 11, 1974 the trial
court issued an order dismissing the petitioner's
application for registration of title.6 Hence, the instant
petition for review.
For the resolution of this case, the petitioner poses the
following questions:
(1) Does the City Charter of Cebu City (Republic Act
No. 3857) under Section 31, paragraph 34, give the
City of Cebu the valid right to declare a road as
abandoned? and
(2) Does the declaration of the road, as abandoned,
make it the patrimonial property of the City of Cebu
which may be the object of a common contract?
(1) The pertinent portions of the Revised Charter of Cebu
City provides:
Section 31. Legislative Powers. Any provision of law
and executive order to the contrary
notwithstanding, the City Council shall have the
following legislative powers: xxx xxx xxx
(34) ...; to close any city road, street or alley,
boulevard, avenue, park or square. Property thus
withdrawn from public servitude may be used or
conveyed for any purpose for which other real
property belonging to the City may be lawfully used
or conveyed.
From the foregoing, it is undoubtedly clear that the City
of Cebu is empowered to close a city road or street. In the
case of Favis vs. City of Baguio,7 where the power of the
city Council of Baguio City to close city streets and to
vacate or withdraw the same from public use was
similarly assailed, this court said:
5. So it is, that appellant may not challenge the city
council's act of withdrawing a strip of Lapu-Lapu
Street at its dead end from public use and converting
the remainder thereof into an alley. These are acts
well within the ambit of the power to close a city
street. The city council, it would seem to us, is the
authority competent to determine whether or not a
certain property is still necessary for public use.
Such power to vacate a street or alley is
discretionary. And the discretion will not ordinarily
be controlled or interfered with by the courts,
absent a plain case of abuse or fraud or collusion.
Faithfulness to the public trust will be presumed. So
the fact that some private interests may be served
incidentally will not invalidate the vacation
ordinance.
(2) Since that portion of the city street subject of
petitioner's application for registration of title was
withdrawn from public use, it follows that such
withdrawn portion becomes patrimonial property which
can be the object of an ordinary contract.
Article 422 of the Civil Code expressly provides that
"Property of public dominion, when no longer intended
for public use or for public service, shall form part of the
patrimonial property of the State."
Besides, the Revised Charter of the City of Cebu
heretofore quoted, in very clear and unequivocal terms,
states that: "Property thus withdrawn from public
servitude may be used or conveyed for any purpose for
which other real property belonging to the City may be
lawfully used or conveyed."
Accordingly, the withdrawal of the property in question
from public use and its subsequent sale to the petitioner
is valid. Hence, the petitioner has a registerable title over
the lot in question.
WHEREFORE, the order dated October 11, 1974,
rendered by the respondent court in Land Reg. Case No.
N-948, LRC Rec. No. N-44531 is hereby set aside, and the
respondent court is hereby ordered to proceed with the
hearing of the petitioner's application for registration of
title.
SO ORDERED.
Makalintal, C.J, Fernando, Barredo and Aquino, JJ., concur.
4
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-24950 March 25, 1926
VIUDA DE TAN TOCO, plaintiff-appellant,
vs.
THE MUNICIPAL COUNCIL OF ILOILO, defendant-
appellee.
Arroyo & Evangelista for appellant.
Provincial Fiscal Borromeo Veloso for appelle.
VILLAMOR, J.:
It appears from the record that the widow of Tan Toco
had sued the municipal council of Iloilo for the amount of
P42,966.40, being the purchase price of two strips of
land, one on Calle J. M. Basa consisting of 592 square
meters, and the other on Calle Aldiguer consisting of 59
square meters, which the municipality of Iloilo had
appropriated for widening said street. The Court of First
Instance of Iloilo sentenced the said municipality to pay
the plaintiff the amount so claimed, plus the interest, and
the said judgment was on appeal affirmed by this court.1
On account of lack of funds the municipality of Iloilo was
unable to pay the said judgment, wherefore plaintiff had
a writ of execution issue against the property of the said
municipality, by virtue of which the sheriff attached two
auto trucks used for street sprinkling, one police patrol
automobile, the police stations on Mabini street, and in
Molo and Mandurriao and the concrete structures, with
the corresponding lots, used as markets by Iloilo, Molo,
and Mandurriao.
After notice of the sale of said property had been made,
and a few days before the sale, the provincial fiscal of
Iloilo filed a motion which the Court of First Instance
praying that the attachment on the said property be
dissolved, that the said attachment be declared null and
void as being illegal and violative of the rights of the
defendant municipality.
Plaintiffs counsel objected o the fiscal's motion but the
court, by order of August 12, 1925, declared the
attachment levied upon the aforementioned property of
the defendant municipality null and void, thereby
dissolving the said attachment.
From this order the plaintiff has appealed by bill of
exceptions. The fundamental question raised by
appellant in her four assignments of error is whether or
not the property levied upon is exempt from execution.
The municipal law, section 2165 of the Administrative
Code, provides that:
Municipalities are political bodies corporate, and as
such are endowed with the faculties of municipal
corporations, to be exercised by and through their
respective municipal government in conformity with
law.
It shall be competent for them, in their proper
corporate name, to sue and be sued, to contract and
be contracted with, to acquire and hold real and
personal property for municipal purposes, and
generally to exercise the powers hereinafter specified
or otherwise conferred upon them by law.
For the purposes of the matter here in question, the
Administrative Code does not specify the kind of
property that a municipality may acquire. However,
article 343 of the Civil Code divides the property of
provinces and towns (municipalities) into property for
public use and patrimonial property. According to article
344 of the same Code, provincial roads and foot-path,
squares, streets, fountains and public waters, drives and
public improvements of general benefit built at the
expense of the said towns or provinces, are property for
public use.
All other property possessed by the said towns and
provinces is patrimonial and shall be subject to the
provisions of the Civil Code except as provided by special
laws.
Commenting upon article 344, Mr. Manresa says that "In
accordance with administrative legislation" (Spanish)
we must distinguish, as to the patrimonial property of
the towns, "between that a common benefit and that
which is private property of the town. The first differs
from property for public use in that generally its
enjoyment is less, as it is limited to neighbors or to a
group or class thereof; and, furthermore, such use, more
or less general, is not intrinsic with this kind of property,
for by its very nature it may be enjoyed as though it were
private property. The third group, that is, private
property, is used in the name of the town or province by
the entities representing it and, like and private
property, giving a source of revenue."
Such distinction, however, is of little practical
importance in this jurisdiction in view of the different
principles underlying the functions of a municipality
under the American rule. Notwithstanding this, we
believe that the principle governing property of the
public domain of the State is applicable to property for
public use of the municipalities as said municipal is
similar in character. The principle is that the property for
public use of the State is not within the commerce of man
and, consequently, is inalienable and not subject to
prescription. Likewise, property for public of the
municipality is not within the commerce of man so long
as it is used by the public and, consequently, said
property is also inalienable.
The American Law is more explicit about this matter as
expounded by Mcquilin in Municipal Corporations,
volume 3, paragraph 1160, where he says that:
States statutes often provide the court houses, jails
and other buildings owned by municipalities and
the lots on which they stand shall be exempt from
attachment and execution. But independent of
express statutory exemption, as a general
proposition, property, real and personal, held by
municipal corporations, in trust for the benefit of
their inhabitants, and used for public purposes, is
exempt.
For example, public buildings, school houses,
streets, squares, parks, wharves, engines and engine
houses, and the like, are not subject to execution. So
city waterworks, and a stock of liquors carried in a
town dispensary, are exempt. The reason for the
exemption is obvious. Municipal corporations are
created for public purposes and for the good of the
citizens in their aggregate or public capacity. That
they may properly discharge such public functions
5
 corporate property and revenues are essential, and
to deny them these means the very purpose of their
creation would be materially impeded, and in some
instances practically destroy it. Respecting this
subject the Supreme Court of Louisiana remarked:
"On the first view of this question there is something
very repugnant to the moral sense in the idea that a
municipal corporation should contract debts, and
that, having no resources but the taxes which are
due to it, these should not be subjected by legal
process to the satisfaction of its creditors. This
consideration, deduced from the principles of moral
equity has only given way to the more enlarged
contemplation of the great and paramount interests
of public order and the principles of government."
It is generally held that property owned by a
municipality, where not used for a public purpose
but for quasi private purposes, is subject to
execution on a judgment against the municipality,
and may be sold. This rule applies to shares of stock
owned by a municipal corporation, and the like. But
the mere fact that corporate property held for public
uses is being temporarily used for private purposes
does not make it subject execution.
If municipal property exempt from execution is
destroyed, the insurance money stands in lieu
thereof and is also exempt.
The members or inhabitants of a municipal
corporation proper are not personally liable for the
debts of the municipality, except that in the New
England States the individual liability of the
inhabitant is generally maintained.
In Corpus Juris, vol 23, page 355, the following is found:
Where property of a municipal or other public
corporation is sough to be subjected to execution to
satisfy judgments recovered against such
corporation, the question as to whether such
property is leviable or not is to be determined by the
usage and purposes for which it is held. The rule is
that property held for public uses, such as public
buildings, streets, squares parks, promenades,
wharves, landing places fire engines, hose and hose
carriages, engine houses, public markets, hospitals,
cemeteries, and generally everything held for
governmental purposes, is not subject to levy and
sale under execution against such corporation. The
rule also applies to funds in the hands of a public
officer. Likewise it has been held that taxes due to a
municipal corporation or country cannot be seized
under execution by a creditor of such corporation.
But where a municipal corporation or country owns
in its proprietary, as distinguished from its public or
governmental capacity, property not useful or used
for a public purpose but for quasi private purposes,
the general rule is that such property may be seized
and sold under execution against the corporation,
precisely as similar property of individuals is seized
and sold. But property held for public purposes is
not subject to execution merely because it is
temporarily used for private purposes, although if
the public use is wholly abandoned it becomes
subject to execution. Whether or not property held
as public property is necessary for the public use is
a political, rather than a judicial question.
In the case of City of New Orleans vs. Louisiana
Construction Co., Ltd. (140 U. S., 654; 35 Law. ed., 556), it
was held that a wharf for unloading sugar and molasses,
open to the public, was property for the public use of the
City of New Orleans and was not subject to attachment
for the payment of the debts of the said city.
In that case it was proven that the said wharf was a parcel
of land adjacent to the Mississippi River where all
shipments of sugar and molasses taken to New Orleans
were unloaded.
That city leased the said wharf to the Louisiana
Construction Company, Ltd., in order that it might erect
warehouses so that the merchandise upon discharge
might not be spoiled by the elements. The said company
was given the privilege of charging certain fees for
storing merchandise in the said warehouses and the
public in general had the right to unload sugar and
molasses there by paying the required fees, 10 per cent
of which was turned over to the city treasury.
The United States Supreme Court on an appeal held that
the wharf was public property, that it never ceased to be
such in order to become private property of the city;
wherefore the company could not levy execution upon
the wharf in order to collect the amount of the judgment
rendered in favor thereof.
In the case of Klein vs. City of New Orleans (98 U. S., 149;
25 Law. ed., 430), the Supreme Court of the United States
that a public wharf on the banks of the Mississippi River
was public property and not subject to execution for the
payment of a debt of the City of New Orleans where said
wharf was located.
In this case a parcel of land adjacent to the Mississippi
River, which formerly was the shore of the river and
which later enlarged itself by accession, was converted
into a wharf by the city for public use, who charged a
certain fee for its use.
It was held that the land was public property as
necessary as a public street and was not subject to
execution on account of the debts of the city. It was
further held that the fees collected where also exempt
from execution because they were a part of the income of
the city.
In the case of Tufexis vs. Olaguera and Municipal Council
of Guinobatan (32 Phil., 654), the question raised was
whether for the payment of a debt to a third person by
the concessionaire of a public market, the said public
market could be attached and sold at public auction. The
Supreme Court held that:
Even though a creditor is unquestionably entitled to
recover out of his debtor's property, yet when
among such property there is included the special
right granted by the Government of usufruct in a
building intended for a public service, and when this
privilege is closely related to a service of a public
character, such right of the creditor to the collection
of a debt owed him by the debtor who enjoys the
said special privilege of usufruct in a public market
is not absolute and may be exercised only through
the action of court of justice with respect to the
profits or revenue obtained under the special right
of usufruct enjoyed by debtor.
The special concession of the right of usufruct in a
public market cannot be attached like any ordinary
right, because that would be to permit a person who
has contracted with the state or with the
administrative officials thereof to conduct and
6
 manage a service of a public character, to be
substituted, without the knowledge and consent of
the administrative authorities, by one who took no
part in the contract, thus giving rise to the possibility
of the regular course of a public service being
disturbed by the more or less legal action of a
grantee, to the prejudice of the state and the public
interests.
The privilege or franchise granted to a private
person to enjoy the usufruct of a public market
cannot lawfully be attached and sold, and a creditor
of such person can recover his debt only out of the
income or revenue obtained by the debtor from the
enjoyment or usufruct of the said privilege, in the
same manner that the rights of such creditors of a
railroad company can be exercised and their credit
collected only out of the gross receipts remaining
after deduction has been made therefrom of the
operating expenses of the road. (Law of November
12, 1896, extended to the overseas provinces by the
royal order of August 3, 1886.)
For the reasons contained in the authorities above
quoted we believe that this court would have reached the
same conclusion if the debtor had been municipality of
Guinobatan and the public market had been levied upon
by virtue of the execution.
It is evident that the movable and immovable property of
a municipality, necessary for governmental purpose,
may not be attached and sold for the payment of a
judgment against the municipality. The supreme reason
for this rule is the character of the public use to which
such kind of property is devoted. The necessity for
government service justifies that the property of public
of the municipality be exempt from execution just as it is
necessary to exempt certain property of private
individuals in accordance with section 452 of the Code of
Civil Procedure.
Even the municipal income, according to the above
quoted authorities, is exempt from levy and execution. In
volume 1, page 467, Municipal Corporations by Dillon we
find that:
Municipal corporations are instituted by the
supreme authority of a state for the public good.
They exercise, by delegation from the legislature, a
portion of the sovereign power. The main object of By virtue of all the foregoing, the judgment appealed
their creation is to act as administrative agencies for from should be and is hereby affirmed with costs against
the state, and to provide for the police and local the appellant. So ordered.
government of certain designated civil divisions of
its territory. To this end they are invested with Avanceña, C. J., Street, Malcolm, Ostrand, Johns, Romualdez
certain governmental powers and charged with and Villa-Real., JJ., concur.
civil, political, and municipal duties. To enable them
beneficially to exercise these powers and discharge
these duties, they are clothed with the authority to
raise revenues, chiefly by taxation, and
subordinately by other modes as by licenses, fines, Footnotes
and penalties. The revenue of the public corporation
is the essential means by which it is enabled to 1R.G. No. L-22617, promulgated November 28,
perform its appointed work. Deprived of its regular 1924, not reported.
and adequate supply of revenue, such a corporation
is practically destroyed and the ends of its erection
thwarted. Based upon considerations of this
character, it is the settled doctrine of the law that
only the public property but also the taxes and
public revenues of such corporations cannot be
seized under execution against them, either in the
treasury or when in transit to it. Judgments
rendered for taxes, and the proceeds of such
judgments in the hands of officers of the law, are not
subject to execution unless so declared by statute.
The doctrine of the inviolability of the public
revenues by the creditor is maintained, although the
corporation is in debt, and has no means of payment
but the taxes which it is authorized to collect.
Another error assigned by counsel for appellant is the
holding of the court a quo that the proper remedy for
collecting the judgment in favor of the plaintiff was by
way or mandamus.
While this question is not necessarily included in the one
which is the subject of this appeal, yet we believe that the
holding of the court, assigned as error by appellant's
counsel, is true when, after a judgment is rendered
against a municipality, it has no property subject to
execution. This doctrine is maintained by Dillon
(Municipal Corporations, vol. 4, par. 1507, 5th ed.) based
upon the decisions of several States of the Union
upholding the same principle and which are cited on
page 2679 of the aforesaid work. In this sense this
assignment of error, we believe, is groundless.
7
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-29788 August 30, 1972
RAFAEL S. SALAS, in his capacity as Executive
Secretary; CONRADO F. ESTRELLA, in his capacity as
Governor of the Land Authority; and LORENZO
GELLA, in his capacity as Register of Deeds of
Manila, petitioners-appellants,
vs.
HON. HILARION U. JARENCIO, as Presiding Judge of
Branch XXIII, Court of First Instance of Manila;
ANTONIO J. VILLEGAS, in his capacity as Mayor of
the City of Manila; and the CITY OF
MANILA, respondents-appellees.
Office of the Solicitor General Felix V. Makasiar, Assistant
Solicitor-General Antonio A. Torres, Solicitor Raul I. Goco
and Magno B. Pablo & Cipriano A. Tan, Legal Staff, Land
Authority for petitioners-appellants.
Gregorio A. Ejercito and Felix C. Chavez for respondents-
appellees.
ESGUERRA, J.:p
This is a petition for review of the decision of the Court
of First Instance of Manila, Branch XXIII, in Civil Case No.
67946, dated September 23, 1968, the dispositive
portion of which is as follows:
WHEREFORE, the Court renders judgment declaring
Republic Act No. 4118 unconstitutional and invalid
in that it deprived the City of Manila of its property
without due process and payment of just
compensation. Respondent Executive Secretary and
Governor of the Land Authority are hereby
restrained and enjoined from implementing the
provisions of said law. Respondent Register of
Deeds of the City of Manila is ordered to cancel
Transfer Certificate of Title No. 80876 which he had
issued in the name of the Land Tenure
Administration and reinstate Transfer Certificate of
Title No. 22547 in the name of the City of Manila
which he cancelled, if that is feasible, or issue a new
certificate of title for the same parcel of land in the
name of the City of Manila.1
The facts necessary for a clear understanding of this case
are as follows:
On February 24, 1919, the 4th Branch of the Court of First
Instance of Manila, acting as a land registration court,
rendered judgment in Case No. 18, G.L.R.O. Record No.
111, declaring the City of Manila the owner in fee simple
of a parcel of land known as Lot No. 1, Block 557 of the
Cadastral Survey of the City of Mani1a, containing an area
of 9,689.8 square meters, more or less. Pursuant to said
judgment the Register of Deeds of Manila on August 21,
1920, issued in favor of the City of Manila, Original
Certificate of Title No. 4329 covering the aforementioned
parcel of land. On various dates in 1924, the City of
Manila sold portions of the aforementioned parcel of
land in favor of Pura Villanueva. As a consequence of the
transactions Original Certificate of Title No. 4329 was
cancelled and transfer certificates of title were issued in
favor of Pura Villanueva for the portions purchased by
her. When the last sale to Pura Villanueva was effected
on August 22, 1924, Transfer Certificate of Title No.
21974 in the name of the City of Manila was cancelled
and in lieu thereof Transfer Certificate of Title (TCT) No.
22547 covering the residue thereof known as Lot 1-B-2-
B of Block 557, with an area of 7,490.10 square meters,
was issued in the name of the City of Manila.
On September 21, 1960, the Municipal Board of Manila,
presided by then Vice-Mayor Antono J. Villegas, adopted
a resolution requesting His Excellency, the President of
the Philippines to consider the feasibility of declaring the
City property bounded by Florida, San Andres, and
Nebraska Streets, under Transfer Certificate of Title Nos.
25545 and 22547, containing a total area of 7,450 square
meters as a patrimonial property of the City of Manila for
the purpose of reselling these lots to the actual occupants
thereof.2
The said resolution of the Municipil Board of the City of
Manila was officially transmitted to the President of the
Philippines by then Vice-Mayor Antonio J. Villegas on
September 21, 1960, with the information that the same
resolution was, on the same date, transmitted to the
Senate and House of Representatives of the Congress of
the Philippines.3
During the First Session of the Fifth Congress of the
Philippines, House Bill No. 191 was filed in the House of
Representatives by then Congressman Bartolome
Cabangbang seeking to declare the property in question
as patrimonial property of the City of Manila, and for
other purposes. The explanatory note of the Bill gave the
grounds for its enactment, to wit:
In the particular case of the property subject of this
bill, the City of Manila does not seem to have use
thereof as a public communal property. As a matter
of fact, a resolution was adopted by the Municipal
Board of Manila at its regular session held on
September 21, 1960, to request the feasibility of
declaring the city property bounded by Florida, San
Andres and Nebraska Streets as a patrimonial
property of the City of Manila for the purpose of
reselling these lots to the actual occupants thereof.
Therefore, it will be to the best interest of society
that the said property be used in one way or
another. Since this property has been occupied for a
long time by the present occupants thereof and
since said occupants have expressed their
willingness to buy the said property, it is but proper
that the same be sold to them.4
Subsequently, a revised version of the Bill was
introduced in the House of Representatives by
Congressmen Manuel Cases, Antonio Raquiza and
Nicanor Yñiguez as House Bill No. 1453, with the
following explanatory note:
The accompanying bill seeks to convert one (1)
parcel of land in the district of Malate, which is
reserved as communal property into a disposable or
alienable property of the State and to provide its
subdivision and sale to bona fide occupants or
tenants.
This parcel of land in question was originally an
aggregate part of a piece of land with an area of
9,689.8 square meters, more or less. ... On
September 21, 1960, the Municipal Board of Manila
in its regular session unanimously adopted a
resolution requesting the President of the
Philippines and Congress of the Philippines the
8
 feasibility of declaring this property into disposable
or alienable property of the State. There is therefore
a precedent that this parcel of land could be
subdivided and sold to bona fide occupants. This
parcel of land will not serve any useful public project
because it is bounded on all sides by private
properties which were formerly parts of this lot in
question.
Approval of this bill will implement the policy of the
Administration of land for the landless and the Fifth
Declaration of Principles of the Constitution, which
states that the promotion of Social Justice to insure
the well-being and economic security of all people
should be the concern of the State. We are ready and
willing to enact legislation promoting the social and
economic well-being of the people whenever an
opportunity for enacting such kind of legislation
arises.
In view of the foregoing consideration and to insure
fairness and justice to the present bona fide occupants
thereof, approval of this Bill is strongly urged.5
The Bill having been passed by the House of
Representatives, the same was thereafter sent to the
Senate where it was thoroughly discussed, as evidenced
by the Congressional Records for May 20, 1964,
pertinent portion of which is as follows:
SENATOR FERNANDEZ: Mr. President, it will be re
called that when the late Mayor Lacson was still
alive, we approved a similar bill. But afterwards, the
late Mayor Lacson came here and protested against
the approval, and the approval was reconsidered.
May I know whether the defect in the bill which we
approved, has already been eliminated in this
present bill?
SENATOR TOLENTINO: I understand Mr. President,
that that has already been eliminated and that is
why the City of Manila has no more objection to this
bill.
SENATOR FERNANDEZ: Mr. President, in view of
that manifestation and considering that Mayor
Villegas and Congressman Albert of the Fourth
District of Manila are in favor of the bill. I would not
want to pretend to know more what is good for the
City of Manila.
SENATOR TOLENTINO: Mr. President, there being
no objection, I move that we approve this bill on
second reading.
PRESIDENT PRO-TEMPORE: The biII is approved on
second reading after several Senetors said aye and
nobody said nay.
The bill was passed by the Senate, approved by the
President on June 20, 1964, and became Republic Act No.
4118. It reads as follows:
Lot I-B-2-B of Block 557 of the cadastral survey of
the City of Manila, situated in the District of Malate,
City of Manila, which is reserved as communal
property, is hereby converted into disposal or
alienable land of the State, to be placed under the
disposal of the Land Tenure Administration. The Land
Tenure Administration shall subdivide the property
into small lots, none of which shall exceed one
hundred and twenty square meters in area and sell
the same on installment basis to the tenants or bona
fide occupants thereof and to individuals, in the order
mentioned: Provided, That no down payment shall
be required of tenants or bona fide occupants who
cannot afford to pay such down payment: Provided,
further, That no person can purchase more than one
lot: Provided, furthermore, That if the tenant or bona
fide occupant of any given lot is not able to purchase
the same, he shall be given a lease from month to
month until such time that he is able to purchase the
lot: Provided, still further, That in the event of lease
the rentals which may be charged shall not exceed
eight per cent per annum of the assessed value of the
property leased: And provided, finally, That in fixing
the price of each lot, which shall not exceed twenty
pesos per square meter, the cost of subdivision and
survey shall not be included.
Sec. 2. Upon approval of this Act no ejectment
proceedings against any tenant or bona fide
occupant of the above lots shall be instituted and
any ejectment proceedings pending in court against
any such tenant or bona fide occupant shall be
dismissed upon motion of the defendant: Provided,
That any demolition order directed against any
tenant or bona fide occupant shall be lifted.
Sec. 3. Upon approval of this Act, if the tenant
or bona fide occupant is in arrears in the payment of
any rentals, the amount legally due shall be
liquidated and shall be payable in twenty-four equal
monthly installments from the date of liquidation.
Sec. 4. No property acquired by virtue of this Act
shall be transferred, sold, mortgaged, or otherwise
disposed of within a period of five years from the
date full ownership thereof has been vested in the
purchaser without the consent of the Land Tenure
Administration.
Sec. 5. In the event of the death of the purchaser
prior to the complete payment of the price of the lot
purchased by him, his widow and children shall
succeed in all his rights and obligations with respect
to his lot.
Sec. 6. The Chairman of the Land Tenure
Administration shall implement and issue such
rules and regulations as may be necessary to carry
out the provisions of this Act.
Sec. 7. The sum of one hundred fifty thousand pesos
is appropriated out of any funds in the National
Treasury not otherwise appropriated, to carry out
the purposes of this Act.
Sec. 8. All laws or parts of laws inconsistent with this
Act are repealed or modified accordingly.
Sec. 9. This Act shall take effect upon its approval.
Approved, June 20, 1964.
To implement the provisions of Republic Act No. 4118,
and pursuant to the request of the occupants of the
property involved, then Deputy Governor Jose V. Yap of
the Land Authority (which succeeded the Land Tenure
Administration) addressed a letter, dated February 18,
1965, to Mayor Antonio Villegas, furnishing him with a
copy of the proposed subdivision plan of said lot as
prepared for the Republic of the Philippines for resale of
9
the subdivision lots by the Land Authority to bona fide
applicants.6
On March 2, 1965, the City Mayor of Manila, through his
Executive and Technical Adviser, acknowledged receipt
of the proposed subdivision plan of the property in
question and informed the Land Authority that his office
would interpose no objection to the implementation of
said law, provided that its provisions be strictly complied
with.7
With the above-mentioned written conformity of the City
of Manila for the implementation of Republic Act No.
4118, the Land Authority, thru then Deputy Governor
Jose V. Yap, requested the City Treasurer of Manila, thru
the City Mayor, for the surrender and delivery to the
former of the owner's duplicate of Transfer Certificate of
Title No. 22547 in order to obtain title thereto in the
name of the Land Authority. The request was duly
granted with the knowledge and consent of the Office of
the City Mayor.8
With the presentation of Transfer Certificate of Title No.
22547, which had been yielded as above stated by the,
City authorities to the Land Authority, Transfer
Certificate of Title (T.C.T. No. 22547) was cancelled by
the Register of Deeds of Manila and in lieu thereof
Transfer Certificate of Title No. 80876 was issued in the
name of the Land Tenure Administration (now Land
Authority) pursuant to the provisions of Republic Act No.
4118.9
But due to reasons which do not appear in the record, the
City of Manila made a complete turn-about, for on
December 20, 1966, Antonio J. Villegas, in his capacity as
the City Mayor of Manila and the City of Manila as a duly
organized public corporation, brought an action for
injunction and/or prohibition with preliminary
injunction to restrain, prohibit and enjoin the herein
appellants, particularly the Governor of the Land
Authority and the Register of Deeds of Manila, from
further implementing Republic Act No. 4118, and
praying for the declaration of Republic Act No. 4118 as
unconstitutional.
With the foregoing antecedent facts, which are all
contained in the partial stipulation of facts submitted to
the trial court and approved by respondent Judge, the
parties waived the presentation of further evidence and
submitted the case for decision. On September 23, 1968,
judgment was rendered by the trial court declaring
Republic Act No. 4118 unconstitutional and invalid on
the ground that it deprived the City of Manila of its
property without due process of law and payment of just
compensation. The respondents were ordered to undo
all that had been done to carry out the provisions of said
Act and were restrained from further implementing the
same.
Two issues are presented for determination, on the
resolution of which the decision in this case hinges, to
wit:
I. Is the property involved private or patrimonial
property of the City of Manila?
II. Is Republic Act No. 4118 valid and not repugnant
to the Constitution?
I.
As regards the first issue, appellants maintain that the
land involved is a communal land or "legua comunal"
which is a portion of the public domain owned by the
State; that it came into existence as such when the City of
Manila, or any pueblo or town in the Philippines for that
matter, was founded under the laws of Spain, the former
sovereign; that upon the establishment of a pueblo, the
administrative authority was required to allot and set
aside portions of the public domain for a public plaza, a
church site, a site for public buildings, lands to serve as
common pastures and for streets and roads; that in
assigning these lands some lots were earmarked for
strictly public purposes, and ownership of these lots (for
public purposes) immediately passed to the new
municipality; that in the case of common lands or "legua
comunal", there was no such immediate acquisition of
ownership by the pueblo, and the land though
administered thereby, did not automatically become its
property in the absence of an express grant from the
Central Government, and that the reason for this
arrangement is that this class of land was not absolutely
needed for the discharge of the municipality's
governmental functions.
It is argued that the parcel of land involved herein has not
been used by the City of Manila for any public purpose
and had not been officially earmarked as a site for the
erection of some public buildings; that this circumstance
confirms the fact that it was originally "communal" land
alloted to the City of Manila by the Central Government
not because it was needed in connection with its
organization as a municipality but simply for the
common use of its inhabitants; that the present City of
Manila as successor of the Ayuntamiento de Manila
under the former Spanish sovereign merely enjoys the
usufruct over said land, and its exercise of acts of
ownership by selling parts thereof did not necessarily
convert the land into a patrimonial property of the City
of Manila nor divest the State of its paramount title.
Appellants further argue that a municipal corporation,
like a city is a governmental agent of the State with
authority to govern a limited portion of its territory or to
administer purely local affairs in a given political
subdivision, and the extent of its authority is strictly
delimited by the grant of power conferred by the State;
that Congress has the exclusive power to create, change
or destroy municipal corporations; that even if We admit
that legislative control over municipal corporations is
not absolute and even if it is true that the City of Manila
has a registered title over the property in question, the
mere transfer of such land by an act of the legislature
from one class of public land to another, without
compensation, does not invade the vested rights of the
City.
Appellants finally argue that Republic Act No. 4118 has
treated the land involved as one reserved for communal
use, and this classification is conclusive upon the courts;
that if the City of Manila feels that this is wrong and its
interests have been thereby prejudiced, the matter
should be brought to the attention of Congress for
correction; and that since Congress, in the exercise of its
wide discretionary powers has seen fit to classify the
land in question as communal, the Courts certainly owe
it to a coordinate branch of the Government to respect
such determination and should not interfere with the
enforcement of the law.
Upon the other hand, appellees argue by simply quoting
portions of the appealed decision of the trial court, which
read thus:
The respondents (petitioners-appellants herein)
contend, among other defenses, that the property in
question is communal property. This contention is,
10
however, disproved by Original Certificate of Title
No. 4329 issued on August 21, 1920 in favor of the
City of Manila after the land in question was
registered in the City's favor. The Torrens Title
expressly states that the City of Manila was the
owner in 'fee simple' of the said land. Under Sec. 38
of the Land Registration Act, as amended, the decree
of confirmation and registration in favor of the City
of Manila ... shall be conclusive upon and against all
persons including the Insular Government and all
the branches there ... There is nothing in the said
certificate of title indicating that the land was
'communal' land as contended by the respondents.
The erroneous assumption by the Municipal Board
of Manila that the land in question was communal
land did not make it so. The Municipal Board had no
authority to do that.
The respondents, however, contend that Congress
had the power and authority to declare that the land
in question was 'communal' land and the courts
have no power or authority to make a contrary
finding. This contention is not entirely correct or
accurate. Congress has the power to classify 'land of
the public domain', transfer them from one
classification to another and declare them
disposable or not. Such power does not, however,
extend to properties which are owned by cities,
provinces and municipalities in their 'patrimonial'
capacity.
Art. 324 of the Civil Code provides that properties of
provinces, cities and municipalities are divided into
properties for public use and patrimonial property.
Art. 424 of the same code provides that properties
for public use consist of provincial roads, city
streets, municipal streets, the squares, fountains,
public waters, promenades and public works for
public service paid for by said province, cities or
municipalities. All other property possessed by any
of them is patrimonial. Tested by this criterion the
Court finds and holds that the land in question is
patrimonial property of the City of Manila.
Respondents contend that Congress has declared
the land in question to be 'communal' and, therefore,
such designation is conclusive upon the courts. The
Courts holds otherwise. When a statute is assailed as
unconstitutional the Courts have the power and
authority to inquire into the question and pass upon
it. This has long ago been settled in Marbury vs.
Madison, 2 L. ed. 60, when the United States
Supreme Court speaking thru Chief Justice Marshall
held:
... If an act of the legislature, repugnant to the
constitution, is void, does it, notwithstanding
its validity, bind the courts, and oblige them to
give effect? It is emphatically the province and
duty of the judicial department to say what the
law is ... So if a law be in opposition to the
constitution; if both the law and the
constitution apply to a particular case, so that
the court must either decide that case
conformable to the constitution, disregarding
the law, the court must determine which of
these conflicting rules governs the case. This
is of the very essence of unconstitutional
judicial duty.
Appellees finally concluded that when the courts declare
a law unconstitutional it does not mean that the judicial
power is superior to the legislative power. It simply
means that the power of the people is superior to both
and that when the will of the legislature, declared in
statutes, stands in opposition to that of the people,
declared in the Constitution, the judges ought to be
governed by the Constitution rather than by the statutes.
There is one outstanding factor that should be borne in
mind in resolving the character of the land involved, and
it is that the City of Manila, although declared by the
Cadastral Court as owner in fee simple, has not shown by
any shred of evidence in what manner it acquired said
land as its private or patrimonial property. It is true that
the City of Manila as well as its predecessor, the
Ayuntamiento de Manila, could validly acquire property
in its corporate or private capacity, following the
accepted doctrine on the dual character — public and
private — of a municipal corporation. And when it
acquires property in its private capacity, it acts like an
ordinary person capable of entering into contracts or
making transactions for the transmission of title or other
real rights. When it comes to acquisition of land, it must
have done so under any of the modes established by law
for the acquisition of ownership and other real rights. In
the absence of a title deed to any land claimed by the City
of Manila as its own, showing that it was acquired with
its private or corporate funds, the presumption is that
such land came from the State upon the creation of the
municipality (Unson vs. Lacson, et al., 100 Phil. 695).
Originally the municipality owned no patrimonial
property except those that were granted by the State not
for its public but for private use. Other properties it owns
are acquired in the course of the exercise of its corporate
powers as a juridical entity to which category a municipal
corporation pertains.
Communal lands or "legua comunal" came into existence
when a town or pueblo was established in this country
under the laws of Spain (Law VII, Title III, Book VI,
Recopilacion de las Leyes de Indios). The municipalities
of the Philippines were not entitled, as a matter of right,
to any part of the public domain for use as communal
lands. The Spanish law provided that the usufruct of a
portion of the public domain adjoining municipal
territory might be granted by the Government for
communal purposes, upon proper petition, but, until
granted, no rights therein passed to the municipalities,
and, in any event, the ultimate title remained in the
sovereign (City of Manila vs. Insular Government, 10 Phil.
327).
For the establishment, then, of new pueblos the
administrative authority of the province, in
representation of the Governor General, designated
the territory for their location and extension and the
metes and bounds of the same; and before alloting
the lands among the new settlers, a special
demarcation was made of the places which were to
serve as the public square of the pueblo, for the
erection of the church, and as sites for the public
buildings, among others, the municipal building or
the casa real, as well as of the lands whick were to
constitute the common pastures, and propios of the
municipality and the streets and roads which were
to intersect the new town were laid out, ... .
(Municipality of Catbalogan vs. Director of Lands, 17
Phil. 216, 220) (Emphasis supplied)
It may, therefore, be laid down as a general rule that
regardless of the source or classification of land in the
possession of a municipality, excepting those acquired
with its own funds in its private or corporate capacity,
such property is held in trust for the State for the benefit
of its inhabitants, whether it be for governmental or
proprietary purposes. It holds such lands subject to the
paramount power of the legislature to dispose of the
same, for after all it owes its creation to it as an agent for
the performance of a part of its public work, the
11
municipality being but a subdivision or instrumentality
thereof for purposes of local administration. Accordingly,
the legal situation is the same as if the State itself holds
the property and puts it to a different use (2
McQuilin,Municipal Corporations, 3rd Ed., p. 197, citing
Monagham vs. Armatage, 218 Minn. 27, 15 N. W. 2nd
241).
True it is that the legislative control over a municipal
corporation is not absolute even when it comes to its
property devoted to public use, for such control must not
be exercised to the extent of depriving persons of their
property or rights without due process of law, or in a
manner impairing the obligations of contracts.
Nevertheless, when it comes to property of the
municipality which it did not acquire in its private or
corporate capacity with its own funds, the legislature can
transfer its administration and disposition to an agency
of the National Government to be disposed of according
to its discretion. Here it did so in obedience to the
constitutional mandate of promoting social justice to
insure the well-being and economic security of the
people.
It has been held that a statute authorizing the transfer of
a Municipal airport to an Airport Commission created by
the legislature, even without compensation to the city,
was not violative of the due process clause of the
American Federal Constitution. The Supreme Court of
Minnessota in Monagham vs. Armatage, supra, said:
... The case is controlled by the further rule that the
legislature, having plenary control of the local
municipality, of its creation and of all its affairs, has
the right to authorize or direct the expenditures of
money in its treasury, though raised, for a particular
purpose, for any legitimate municipal purpose, or to
order and direct a distribution thereof upon a
division of the territory into separate municipalities
... . The local municipality has no such vested right in
or to its public funds, like that which the
Constitution protects in the individual as precludes
legislative interferences. People vs. Power, 25 Ill.
187; State Board (of Education) vs. City, 56 Miss. 518.
As remarked by the supreme court of Maryland
in Mayor vs. Sehner, 37 Md. 180: "It is of the essence
of such a corporation, that the government has the
sole right as trustee of the public interest, at its own
good will and pleasure, to inspect, regulate, control,
and direct the corporation, its funds, and
franchises."
We therefore hold that c.500, in authorizing the
transfer of the use and possession of the municipal
airport to the commission without compensation to
the city or to the park board, does not violate the
Fourteenth Amendment to the Constitution of the
United States.
The Congress has dealt with the land involved as one
reserved for communal use (terreno comunal). The act of
classifying State property calls for the exercise of wide
discretionary legislative power and it should not be
interfered with by the courts.
This brings Us to the second question as regards the
validity of Republic Act No. 4118, viewed in the light of
Article III, Sections 1, subsection (1) and (2) of the
Constitution which ordain that no person shall be
deprived of his property without due process of law and
that no private property shall be taken for public use
without just compensation.
II .
The trial court declared Republic Act No. 4118
unconstitutional for allegedly depriving the City of
Manila of its property without due process of law and
without payment of just compensation. It is now well
established that the presumption is always in favor of the
constitutionality of a law (U S. vs. Ten Yu, 24 Phil. 1; Go
Ching, et al. vs. Dinglasan, et al., 45 O.G. No. 2, pp. 703,
705). To declare a law unconstitutional, the repugnancy
of that law to the Constitution must be clear and
unequivocal, for even if a law is aimed at the attainment
of some public good, no infringement of constitutional
rights is allowed. To strike down a law there must be a
clear showing that what the fundamental law condemns
or prohibits, the statute allows it to be done (Morfe vs.
Mutuc, et al., G.R. No. L-20387, Jan. 31, 1968; 22 SCRA
424). That situation does not obtain in this case as the
law assailed does not in any manner trench upon the
constitution as will hereafter be shown. Republic Act No.
4118 was intended to implement the social justice policy
of the Constitution and the Government program of
"Land for the Landless". The explanatory note of House
Bill No. 1453 which became Republic Act No. 4118, reads
in part as follows:
Approval of this bill will implement the policy of the
administration of "land for the landless" and the
Fifth Declaration of Principles of the Constitution
which states that "the promotion of social justice to
insure the well-being and economic security of all
people should be the concern of the State." We are
ready and willing to enact legislation promoting the
social and economic well-being of the people
whenever an opportunity for enacting such kind of
legislation arises.
The respondent Court held that Republic Act No. 4118,
"by converting the land in question — which is the
patrimonial property of the City of Manila into
disposable alienable land of the State and placing it under
the disposal of the Land Tenure Administration —
violates the provisions of Article III (Secs. 1 and 2) of the
Constitution which ordain that "private property shall
not be taken for public use without just compensation,
and that no person shall be deprived of life, liberty or
property without due process of law". In support thereof
reliance is placed on the ruling in Province of Zamboanga
del Norte vs. City of Zamboanga, G.R. No. 2440, March 28,
1968; 22 SCRA 1334, which holds that Congress cannot
deprive a municipality of its private or patrimonial
property without due process of law and without
payment of just compensation since it has no absolute
control thereof. There is no quarrel over this rule if it is
undisputed that the property sought to be taken is in
reality a private or patrimonial property of the
municipality or city. But it would be simply begging the
question to classify the land in question as such. The
property, as has been previously shown, was not
acquired by the City of Manila with its own funds in its
private or proprietary capacity. That it has in its name a
registered title is not questioned, but this title should be
deemed to be held in trust for the State as the land
covered thereby was part of the territory of the City of
Manila granted by the sovereign upon its creation. That
the National Government, through the Director of Lands,
represented by the Solicitor General, in the cadastral
proceedings did not contest the claim of the City of
Manila that the land is its property, does not detract from
its character as State property and in no way divests the
legislature of its power to deal with it as such, the state
12
not being bound by the mistakes and/or negligence of its
officers.
One decisive fact that should be noted is that the City of
Manila expressly recognized the paramount title of the
State over said land when by its resolution of September
20, 1960, the Municipal Board, presided by then Vice-
Mayor Antonio Villegas, requested "His Excellency the
President of the Philippines to consider the feasibility of
declaring the city property bounded by Florida, San
Andres and Nebraska Streets, under Transfer Certificate
of Title Nos. 25545 and 25547, containing an area of
7,450 square meters, as patrimonial property of the City
of Manila for the purpose of reselling these lots to the
actual occupants thereof." (See Annex E, Partial
Stipulation of Facts, Civil Case No. 67945, CFI, Manila, p.
121, Record of the Case) [Emphasis Supplied]
The alleged patrimonial character of the land under the
ownership of the City of Manila is totally belied by the
City's own official act, which is fatal to its claim since the
Congress did not do as bidden. If it were its patrimonial
property why should the City of Manila be requesting the
President to make representation to the legislature to
declare it as such so it can be disposed of in favor of the
actual occupants? There could be no more blatant
recognition of the fact that said land belongs to the State
and was simply granted in usufruct to the City of Manila
for municipal purposes. But since the City did not
actually use said land for any recognized public purpose
and allowed it to remain idle and unoccupied for a long
time until it was overrun by squatters, no presumption of
State grant of ownership in favor of the City of Manila
may be acquiesced in to justify the claim that it is its own
private or patrimonial property (Municipality of
Tigbauan vs. Director of Lands, 35 Phil. 798; City of
Manila vs. Insular Government, 10 Phil. 327; Municipality
of Luzuriaga vs. Director of Lands, 24 Phil. 193). The
conclusion of the respondent court that Republic Act No.
4118 converted a patrimonial property of the City of
Manila into a parcel of disposable land of the State and
took it away from the City without compensation is,
therefore, unfounded. In the last analysis the land in
question pertains to the State and the City of Manila
merely acted as trustee for the benefit of the people
therein for whom the State can legislate in the exercise of
its legitimate powers.
Republic Act No. 4118 was never intended to expropriate
the property involved but merely to confirm its character
as communal land of the State and to make it available untrammeled implementation of Republic Act No. 4118
for disposition by the National Government: And this was without any obstacle from the respondents. Without
done at the instance or upon the request of the City of costs.
Manila itself. The subdivision of the land and conveyance
of the resulting subdivision lots to the occupants by Concepcion, C.J., Makalintal, Zaldivar, Castro, Fernando,
Congressional authorization does not operate as an Teehankee and Antonio, JJ., concur.
exercise of the power of eminent domain without just
compensation in violation of Section 1, subsection (2),
Article III of the Constitution, but simply as a Barredo and Makasiar, JJ., took no part.
manifestation of its right and power to deal with state
property.
It should be emphasized that the law assailed was
enacted upon formal written petition of the Municipal
Board of Manila in the form of a legally approved
resolution. The certificate of title over the property in the
name of the City of Manila was accordingly cancelled and
another issued to the Land Tenure Administration after
the voluntary surrender of the City's duplicate certificate
of title by the City Treasurer with the knowledge and
consent of the City Mayor. To implement the provisions
of Republic Act No. 4118, the then Deputy Governor of
the Land Authority sent a letter, dated February 18,
1965, to the City Mayor furnishing him with a copy of the
"proposed subdivision plan of the said lot as prepared for
the Republic of the Philippines for subdivision and resale
by the Land Authority to bona fide applicants." On March
2, 1965, the Mayor of Manila, through his Executive and
Technical Adviser, acknowledged receipt of the
subdivision plan and informed the Land Authority that
his Office "will interpose no objection to the
implementation of said law provided that its provisions
are strictly complied with." The foregoing sequence of
events, clearly indicate a pattern of regularity and
observance of due process in the reversion of the
property to the National Government. All such acts were
done in recognition by the City of Manila of the right and
power of the Congress to dispose of the land involved.
Consequently, the City of Manila was not deprived of
anything it owns, either under the due process clause or
under the eminent domain provisions of the
Constitution. If it failed to get from the Congress the
concession it sought of having the land involved given to
it as its patrimonial property, the Courts possess no
power to grant that relief. Republic Act No. 4118 does
not, therefore, suffer from any constitutional infirmity.
WHEREFORE, the appealed decision is hereby reversed,
and petitioners shall proceed with the free and
13
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-61744 June 25, 1984
MUNICIPALITY OF SAN MIGUEL,
BULACAN, petitioner,
vs.
HONORABLE OSCAR C. FERNANDEZ, in his capacity
as the Presiding Judge, Branch IV, Baliuag, Bulacan,
The PROVINCIAL SHERIFF of Bulacan, MARGARITA
D. VDA. DE IMPERIO, ADORACION IMPERIO,
RODOLFO IMPERIO, CONRADO IMPERIO, ERNESTO
IMPERIO, ALFREDO IMPERIO, CARLOS IMPERIO, JR.,
JUAN IMPERIO and SPOUSES MARCELO PINEDA and
LUCILA PONGCO, respondents.
Pascual C. Liatchko for petitioner.
The Solicitor General and Marcelo Pineda for
respondents.
RELOVA, J.:
In Civil Case No. 604-B, entitled "Margarita D. Vda. de
Imperio, et al. vs. Municipal Government of San Miguel,
Bulacan, et al.", the then Court of First Instance of
Bulacan, on April 28, 1978, rendered judgment holding
herein petitioner municipality liable to private
respondents, as follows:
WHEREFORE, premises considered, judgment is
hereby rendered in favor of the plaintiffs and against
the defendant Municipal Government of San Miguel
Bulacan, represented by Mayor Mar Marcelo G. Aure
and its Municipal Treasurer:
1. ordering the partial revocation of the Deed of
Donation signed by the deceased Carlos Imperio in
favor of the Municipality of San Miguel Bulacan,
dated October 27, 1947 insofar as Lots Nos. 1, 2, 3, 4
and 5, Block 11 of Subdivision Plan Psd-20831 are
concerned, with an aggregate total area of 4,646
square meters, which lots are among those covered
and described under TCT No. T-1831 of the Register
of Deeds of Bulacan in the name of the Municipal
Government of San Miguel Bulacan,
2. ordering the defendant to execute the
corresponding Deed of Reconveyance over the
aforementioned five lots in favor of the plaintiffs in
the proportion of the undivided one-half (½) share
in the name of plaintiffs Margarita D. Vda. de
Imperio, Adoracion, Rodolfo, Conrado, Ernesto,
Alfredo, Carlos, Jr. and Juan, all surnamed Imperio,
and the remaining undivided one-half (½) share in
favor of plaintiffs uses Marcelo E. Pineda and Lucila
Pongco;
3. ordering the defendant municipality to pay to the
plaintiffs in the proportion mentioned in the
immediately preceding paragraph the sum of
P64,440.00 corresponding to the rentals it has
collected from the occupants for their use and
occupation of the premises from 1970 up to and
including 1975, plus interest thereon at the legal
rate from January 1970 until fully paid;
4. ordering the restoration of ownership and
possession over the five lots in question in favor of
the plaintiffs in the same proportion
aforementioned;
5. ordering the defendant to pay the plaintiffs the
sum of P3,000.00 for attomey's fees; and to pay the
cost of suit.
The counterclaim of the defendant is hereby
ordered dismissed for lack of evidence presented to
substantiate the same.
SO ORDERED. (pp. 11-12, Rollo)
The foregoing judgment became final when herein
petitioner's appeal was dismissed due to its failure to file
the record on appeal on time. The dismissal was affirmed
by the then Court of Appeals in CA-G.R. No. SP-12118 and
by this Court in G.R. No. 59938. Thereafter, herein private
respondents moved for issuance of a writ of execution for
the satisfaction of the judgment. Respondent judge, on
July 27, 1982, issued an order, to wit:
Considering that an entry of judgment had already
been made on June 14, 1982 in G. R. No. L-59938
and;
Considering further that there is no opposition to
plaintiffs' motion for execution dated July 23, 1983;
Let a writ of execution be so issued, as prayed for in
the aforestated motion. (p. 10, Rollo)
Petitioner, on July 30, 1982, filed a Motion to Quash the
writ of execution on the ground that the municipality's
property or funds are all public funds exempt from
execution. The said motion to quash was, however,
denied by the respondent judge in an order dated August
23, 1982 and the alias writ of execution stands in full
force and effect.
On September 13, 1982, respondent judge issued an
order which in part, states:
It is clear and evident from the foregoing that
defendant has more than enough funds to meet its
judgment obligation. Municipal Treasurer Miguel C,
Roura of San Miguel, Bulacan and Provincial
Treasurer of Bulacan Agustin O. Talavera are
therefor hereby ordered to comply with the money
judgment rendered by Judge Agustin C. Bagasao
against said municipality. In like manner, the
municipal authorities of San Miguel, Bulacan are
likewise ordered to desist from plaintiffs' legal
possession of the property already returned to
plaintiffs by virtue of the alias writ of execution.
Finally, defendants are hereby given an inextendible
period of ten (10) days from receipt of a copy of this
order by the Office of the Provincial Fiscal of Bulacan
within which to submit their written compliance, (p.
24, Rollo)
When the treasurers (provincial and municipal) failed to
comply with the order of September 13, 1982,
respondent judge issued an order for their arrest and
that they will be release only upon compliance thereof.
Hence, the present petition on the issue whether the
funds of the Municipality of San Miguel, Bulacan, in the
hands of the provincial and municipal treasurers of
14
Bulacan and San Miguel, respectively, are public funds
which are exempt from execution for the satisfaction of
the money judgment in Civil Case No. 604-B.
Well settled is the rule that public funds are not subject
to levy and execution. The reason for this was explained
in the case of Municipality of Paoay vs. Manaois, 86 Phil.
629 "that they are held in trust for the people, intended
and used for the accomplishment of the purposes for
which municipal corporations are created, and that to
subject said properties and public funds to execution
would materially impede, even defeat and in some
instances destroy said purpose." And, in Tantoco vs.
Municipal Council of Iloilo, 49 Phil. 52, it was held that "it
is the settled doctrine of the law that not only the public
property but also the taxes and public revenues of such
corporations Cannot be seized under execution against
them, either in the treasury or when in transit to it.
Judgments rendered for taxes, and the proceeds of such
judgments in the hands of officers of the law, are not
subject to execution unless so declared by statute." Thus,
it is clear that all the funds of petitioner municipality in
the possession of the Municipal Treasurer of San Miguel,
as well as those in the possession of the Provincial
Treasurer of Bulacan, are also public funds and as such
they are exempt from execution.
Besides, Presidential Decree No. 477, known as "The
Decree on Local Fiscal Administration", Section 2 (a),
provides:
SEC. 2. Fundamental Principles. — Local government
financial affairs, transactions, and operations shall
be governed by the fundamental principles set forth
hereunder:
(a) No money shall be paid out of the treasury except
in pursuance of a lawful appropriation or other
specific statutory authority.
xxx xxx xxx
Otherwise stated, there must be a corresponding
appropriation in the form of an ordinance duly passed by
the Sangguniang Bayan before any money of the
municipality may be paid out. In the case at bar, it has not
been shown that the Sangguniang Bayan has passed an
ordinance to this effect.
Furthermore, Section 15, Rule 39 of the New Rules of
Court, outlines the procedure for the enforcement of
money judgment:
(a) By levying on all the property of the debtor,
whether real or personal, not otherwise exempt
from execution, or only on such part of the property
as is sufficient to satisfy the judgment and accruing
cost, if he has more than sufficient property for the
purpose;
(b) By selling the property levied upon;
(c) By paying the judgment-creditor so much of the
proceeds as will satisfy the judgment and accruing
costs; and
(d) By delivering to the judgment-debtor the excess,
if any, unless otherwise, directed by judgment or
order of the court.
The foregoing has not been followed in the case at bar.
ACCORDINGLY, the petition is granted and the order of
respondent judge, dated July 27, 1982, granting issuance
of a writ of execution; the alias writ of execution, dated
July 27, 1982; and the order of respondent judge, dated
September 13, 1982, directing the Provincial Treasurer
of Bulacan and the Municipal Treasurer of San Miguel,
Bulacan to comply with the money judgments, are SET
ASIDE; and respondents are hereby enjoined from
implementing the writ of execution.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana,
Gutierrez, Jr., and De la Fuente, JJ,. concur.
15

Republic of the Philippines
SUPREME COURT
Manila
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
— defunct Province of Zamboanga as follows: 54.39% for
No. of
Use
Lots
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
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 —
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
16
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?
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
17
considered public, it is enough that the property be held .................................. .................................. Hospital of Lands. Hence, there is sufficient basis for holding that
3283 1225
and, devoted for governmental purposes like local .... .... Site said eight lots constitute the appurtenant grounds of the
administration, public education, public health, etc. 10 .................................. 434- .................................. Burleigh schools, and partake of the nature of the same.
3748 School Site
.... A-1 ....
Supporting jurisprudence are found in the following .................................. .................................. Regarding the several buildings existing on the lots
5406 171 School Site
cases: (1) HINUNANGAN V. DIRECTOR OF .... .... above-mentioned, the records do not disclose whether
LANDS, 11 where it was stated that "... where the High they were constructed at the expense of the former
municipality has occupied lands distinctly for public .................................. .................................. School Province of Zamboanga. Considering however the fact
5564 168
purposes, such as for the municipal court house, the .... .... Play- that said buildings must have been erected even before
ground
public school, the public market, or other necessary 1936 when Commonwealth Act 39 was enacted and the
municipal building, we will, in the absence of proof to the .................................. 157 & .................................. Trade further fact that provinces then had no power to
5567
contrary, presume a grant from the States in favor of the .... 158 .... School authorize construction of buildings such as those in the
municipality; but, as indicated by the wording, that rule High case at bar at their own expense, 14 it can be assumed that
may be invoked only as to property which is used .................................. .................................. School said buildings were erected by the National Government,
5583 167
.... .... Play-
distinctly for public purposes...." (2) VIUDA DE TANTOCO using national funds. Hence, Congress could very well
ground
V. MUNICIPAL COUNCIL OF ILOILO 12 held that municipal dispose of said buildings in the same manner that it did
properties necessary for governmental purposes are .................................. (O.C.T. .................................. Curuan with the lots in question.
6181
.... ) .... School
public in nature. Thus, the auto trucks used by the
municipality for street sprinkling, the police patrol .................................. .................................. Leprosariu
11942 926 But even assuming that provincial funds were used,
.... .... m
automobile, police stations and concrete structures with still the buildings constitute mere accessories to the
the corresponding lots used as markets were declared .................................. .................................. Leprosariu
11943 927 lands, which are public in nature, and so, they follow the
exempt from execution and attachment since they were .... .... m
nature of said lands, i.e., public. Moreover, said buildings,
not patrimonial properties. (3) MUNICIPALITY OF .................................. .................................. Leprosariu
11944
....
925
.... m
though located in the city, will not be for the exclusive use
BATANGAS VS. CANTOS 13 held squarely that a municipal and benefit of city residents for they could be availed of
lot which had always been devoted to school purposes is .................................. .................................. Burleigh
5557 170 also by the provincial residents. The province then —
one dedicated to public use and is not patrimonial .... .... School
and its successors-in-interest — are not really deprived
property of a municipality. 5562
..................................
180
.................................. Burleigh of the benefits thereof.
.... .... School
Following this classification, Republic Act 3039 is .................................. ..................................
5565 172-B Burleigh But Republic Act 3039 cannot be applied to deprive
.... ....
valid insofar as it affects the lots used as capitol site, Zamboanga del Norte of its share in the value of the rest
school sites and its grounds, hospital and leprosarium .................................. ..................................
5570 171-A Burleigh of the 26 remaining lots which are patrimonial
sites and the high school playground sites — a total of 24 .... ....
properties since they are not being utilized for distinctly,
lots — since these were held by the former Zamboanga .................................. ..................................
5571
....
172-C
....
Burleigh governmental purposes. Said lots are:
province in its governmental capacity and therefore are
subject to the absolute control of Congress. Said lots .................................. ..................................
5572 174 Burleigh
considered as public property are the following: .... .... TCT Number Lot Number Use
.................................. .................................. ..................................... ..................................... Mydro,
5573 178 Burleigh 5577 177
.... .... . . Magay
TCT
Numbe Lot Number Use .................................. .................................. 1319 ..................................... 127- .....................................
5585 171-B Burleigh San Roque
r .... .... 8 . 0 .
.................................. .................................. .................................. .................................. ..................................... ..................................... Burleigh 1
2200 4-B Capitol Site 5586 173 Burleigh 5569 169
.... .... .... .... . . 5

.................................. .................................. .................................. .................................. ..................................... .....................................

2816 149 School Site 5587 172-A Burleigh 5558 175 Vacant
.... .... .... .... . .
.................................. .................................. Hospital ..................................... .....................................
3281 1224 5559 188 "
.... .... Site . .
We noticed that the eight Burleigh lots above
.................................. .................................. Hospital described are adjoining each other and in turn are ..................................... .....................................
3282 1226 5560 183 "
. .
.... .... Site between the two lots wherein the Burleigh schools are
built, as per records appearing herein and in the Bureau ..................................... .....................................
5561 186 "
. .

18
 ..................................... ..................................... along that of Civil Law. Moreover, this Court is not provide for retroactivity, it could not have validly
5563 191 "
. . inclined to hold that municipal property held and affected a completed act. Hence, the amount of
..................................... ..................................... devoted to public service is in the same category as P43,030.11 should be immediately returned by
5566 176 "
. . ordinary private property. The consequences are dire. As defendant City to plaintiff province. The remaining
..................................... ..................................... ordinary private properties, they can be levied upon and balance, if any, in the amount of plaintiff's 54.39% share
5568 179 " attached. They can even be acquired thru adverse in the 26 lots should then be paid by defendant City in the
. .
..................................... ..................................... possession — all these to the detriment of the local same manner originally adopted by the Secretary of
5574 196 " community. Lastly, the classification of properties other Finance and the Commissioner of Internal Revenue, and
. .
..................................... 181- ..................................... than those for public use in the municipalities as not in lump sum. Plaintiff's prayer, particularly pars. 5
5575 " patrimonial under Art. 424 of the Civil Code — is "... and 6, read together with pars. 10 and 11 of the first
. A .
..................................... 181- ..................................... without prejudice to the provisions of special laws." For cause of action recited in the complaint 17 clearly shows
5576 " purpose of this article, the principles, obtaining under that the relief sought was merely the continuance of the
. B .
the Law of Municipal Corporations can be considered as quarterly payments from the internal revenue
..................................... .....................................
5578 182 " "special laws". Hence, the classification of municipal allotments of defendant City. Art. 1169 of the Civil Code
. .
property devoted for distinctly governmental purposes on reciprocal obligations invoked by plaintiff to justify
..................................... .....................................
5579
.
197
.
" as public should prevail over the Civil Code classification lump sum payment is inapplicable since there has been
in this particular case. so far in legal contemplation no complete delivery of the
..................................... .....................................
5580 195 " lots in question. The titles to the registered lots are not
. .
Defendants' claim that plaintiff and its predecessor- yet in the name of defendant Zamboanga City.
..................................... 159- .....................................
5581 " in-interest are "guilty of laches is without merit. Under
. B .
..................................... ..................................... Commonwealth Act 39, Sec. 50, the cause of action in WHEREFORE, the decision appealed from is hereby
5582 194 " favor of the defunct Zamboanga Province arose only in set aside and another judgment is hereby entered as
. .
..................................... .....................................
1949 after the Auditor General fixed the value of the follows:.
5584 190 " properties in question. While in 1951, the Cabinet
. .
resolved transfer said properties practically for free to (1) Defendant Zamboanga City is hereby ordered to
..................................... .....................................
5588
.
184
.
" Zamboanga City, a reconsideration thereof was return to plaintiff Zamboanga del Norte in lump sum the
seasonably sought. In 1952, the old province was amount of P43,030.11 which the former took back from
..................................... .....................................
5589 187 " dissolved. As successor-in-interest to more than half of the latter out of the sum of P57,373.46 previously paid to
. .
the properties involved, Zamboanga del Norte was able the latter; and
..................................... .....................................
5590 189 " 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 (2) Defendants are hereby ordered to effect
5591 192 "
. . payments in favor of plaintiff of whatever balance
Republic Act 3039 in 1961 that the present controversy
..................................... ..................................... arose. Plaintiff brought suit in 1962. All the foregoing, remains of plaintiff's 54.39% share in the 26 patrimonial
5592 193 "
. . negative laches. properties, after deducting therefrom the sum of
..................................... ..................................... P57,373.46, on the basis of Resolution No. 7 dated March
5593 185 "
. . 26, 1949 of the Appraisal Committee formed by the
It results then that Zamboanga del Norte is still Auditor General, by way of quarterly payments from the
..................................... 414 .....................................
7379
. 7 .
" entitled to collect from the City of Zamboanga the allotments of defendant City, in the manner originally
former's 54.39% share in the 26 properties which are adopted by the Secretary of Finance and the
patrimonial in nature, said share to computed on the Commissioner of Internal Revenue. No costs. So ordered.
Moreover, the fact that these 26 lots basis of the valuation of said 26 properties as contained
are registered strengthens the proposition that they are in Resolution No. 7, dated March 26, 1949, of the
truly private in nature. On the other hand, that the 24 lots Appraisal Committee formed by the Auditor General. Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar,
used for governmental purposes are also registered is of Sanchez, Castro, Angeles and Fernando, JJ., concur.
no significance since registration cannot convert public Concepcion, C.J., is on leave.
Plaintiff's share, however, cannot be paid in lump
property to private. 16 sum, except as to the P43,030.11 already returned to
defendant City. The return of said amount to defendant
We are more inclined to uphold this latter view. The was without legal basis. Republic Act 3039 took effect
controversy here is more along the domains of the Law only on June 17, 1961 after a partial payment of
of Municipal Corporations — State vs. Province — than P57,373.46 had already been made. Since the law did not

19
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-61311 September 2l, 1987
FELICIDAD VILLANUEVA, FERNANDO CAISIP,
ANTONIO LIANG, FELINA MIRANDA, RICARDO PUNO,
FLORENCIO LAXA, and RENE OCAMPO, petitioners,
vs.
HON. MARIANO CASTAÑEDA, JR., Presiding Judge of
the Court of First Instance of Pampanga, Branch III,
VICENTE A. MACALINO, Officer-in-Charge, Office of
the Mayor, San Fernando, Pampanga, respondents.
CRUZ, J.:
There is in the vicinity of the public market of San
Fernando, Pampanga, along Mercado Street, a strip of
land measuring 12 by 77 meters on which stands a
conglomeration of vendors stalls together forming what
is commonly known as a talipapa. This is the subject of
the herein petition. The petitioners claim they have a
right to remain in and conduct business in this area by
virtue of a previous authorization granted to them by the
municipal government. The respondents deny this and
justify the demolition of their stalls as illegal
constructions on public property. At the petitioners'
behest, we have issued a temporary restraining order to
preserve the status quo between the parties pending our
decision. 1 Now we shall rule on the merits.
This dispute goes back to November 7, 1961, when the
municipal council of San Fernando adopted Resolution
No. 218 authorizing some 24 members of the Fernandino
United Merchants and Traders Association to construct
permanent stags and sell in the above-mentioned
place. 2 The action was protested on November 10, 1961,
in Civil Case No. 2040, where the Court of First Instance
of Pampanga, Branch 2, issued a writ of preliminary
injunction that prevented the defendants from
constructing the said stalls until final resolution of the
controversy. 3 On January 18, 1964, while this case was
pending, the municipal council of San Fernando adopted
Resolution G.R. No. 29, which declared the subject area
as "the parking place and as the public plaza of the
municipality, 4 thereby impliedly revoking Resolution
No. 218, series of 1961. Four years later, on November 2,
1968, Judge Andres C. Aguilar decided the aforesaid case
and held that the land occupied by the petitioners, being
public in nature, was beyond the commerce of man and
therefore could not be the subject of private
occupancy. 5 The writ of preliminary injunction was
made permanent. 6
The decision was apparently not enforced, for the
petitioners were not evicted from the place; in fact,
according to then they and the 128 other persons were
in 1971 assigned specific areas or space allotments
therein for which they paid daily fees to the municipal
government. 7 The problem appears to have festered for
some more years under a presumably uneasy truce
among the protagonists, none of whom made any move,
for some reason that does not appear in the record. Then,
on January 12, 1982, the Association of Concerned
Citizens and Consumers of San Fernando filed a petition
for the immediate implementation of Resolution No. 29,
to restore the subject property "to its original and
customary use as a public plaza. 8
Acting thereon after an investigation conducted by the
municipal attorney, 9 respondent Vicente A. Macalino, as
officer-in-charge of the office of the mayor of San
Fernando, issued on June 14, 1982, a resolution requiring
the municipal treasurer and the municipal engineer to
demolish the stalls in the subject place beginning July 1,
1982. 10 The reaction of the petitioners was to file a
petition for prohibition with the Court of First Instance
of Pampanga, docketed as Civil Case No. 6470, on June 26,
1982. The respondent judge denied the petition on July
19, 1982, 11 and the motion for reconsideration on
August 5, 1982, 12 prompting the petitioners to come to
this Court on certiorari to challenge his decision. 13
As required, respondent Macalino filed his
comment 14 on the petition, and the petitioners
countered with their reply. 15 In compliance with our
resolution of February 2, 1983, the petitioners submitted
their memorandum 16 and respondent Macalino, for his
part, asked that his comment be considered his
memorandum. 17 On July 28, 1986, the new officer-in-
charge of the office of the mayor of San Fernando,
Paterno S. Guevarra, was impleaded in lieu of Virgilio
Sanchez, who had himself earlier replaced the original
respondent Macalino. 18
After considering the issues and the arguments raised by
the parties in their respective pleadings, we rule for the
respondents. The petition must be dismissed.
There is no question that the place occupied by the
petitioners and from which they are sought to be evicted
is a public plaza, as found by the trial court in Civil Case
No. 2040. This finding was made after consideration of
the antecedent facts as especially established by the
testimony of former San Fernando Mayor Rodolfo Hizon,
who later became governor of Pampanga, that the
National Planning Commission had reserved the area for
a public plaza as early as 1951. This intention was
reiterated in 1964 through the adoption of Resolution
No. 29. 19
It does not appear that the decision in this case was
appealed or has been reversed. In Civil Case G.R. No.
6740, which is the subject of this petition, the respondent
judge saw no reason to disturb the finding in Civil Case
No. 2040 and indeed used it as a basis for his own
decision sustaining the questioned order. 20
The basic contention of the petitioners is that the
disputed area is under lease to them by virtue of
contracts they had entered into with the municipal
government, first in 1961 insofar as the original
occupants were concerned, and later with them and the
other petitioners by virtue of the space allocations made
in their favor in 1971 for which they saw they are paying
daily fees. 21 The municipal government has denied
making such agreements. In any case, they argue, since
the fees were collected daily, the leases, assuming their
validity, could be terminated at will, or any day, as the
claimed rentals indicated that the period of the leases
was from day to day. 22
The parties belabor this argument needlessly.
A public plaza is beyond the commerce of man and so
cannot be the subject of lease or any other contractual
undertaking. This is elementary. Indeed, this point was
settled as early as in Municipality of Cavite vs.
Rojas, 23 decided in 1915, where the Court declared as
null and void the lease of a public plaza of the said
municipality in favor of a private person.
20
Justice Torres said in that case:
According to article 344 of the Civil Code: "Property
for public use in provinces and in towns comprises
the provincial and town roads, the squares, streets,
fountains, and public waters, the promenades, and
public works of general service supported by said
towns or provinces.
The said Plaza Soledad being a promenade for public
use, the municipal council of Cavite could not in
1907 withdraw or exclude from public use a portion
thereof in order to lease it for the sole benefit of the
defendant Hilaria Rojas. In leasing a portion of said
plaza or public place to the defendant for private use
the plaintiff municipality exceeded its authority in
the exercise of its powers by executing a contract
over a thing of which it could not dispose, nor is it
empowered so to do.
The Civil Code, article 1271, prescribes that
everything which is not outside the commerce of
man may be the object of a contract, and plazas and
streets are outside of this commerce, as was decided
by the supreme court of Spain in its decision of
February 12, 1895, which says: "communal things
that cannot be sold because they are by their very
nature outside of commerce are those for public use,
such as the plazas, streets, common lands, rivers,
fountains, etc."
Therefore, it must be concluded that the contract,
Exhibit C, whereby the municipality of Cavite leased
to Hilaria Rojas a portion of the Plaza Soledad is null
and void and of no force or effect, because it is
contrary to the law and the thing leased cannot be
the object of a was held that the City of contract.
In Muyot vs. de la Fuente, 24 it was held that the City of
Manila could not lease a portion of a public sidewalk on
Plaza Sta. Cruz, being likewise beyond the commerce of
man.
Echoing Rojas, the decision said:
Appellants claim that they had obtained permit from
the present of the City of Manila, to connect booths
Nos. 1 and 2, along the premises in question, and for
the use of spaces where the booths were
constructed, they had paid and continued paying the
corresponding rentals. Granting this claim to be
true, one should not entertain any doubt that such
permit was not legal, because the City of Manila does
not have any power or authority at all to lease a
portion of a public sidewalk. The sidewalk in
question, forming part of the public plaza of Sta.
Cruz, could not be a proper subject matter of the
contract, as it was not within the commerce of man
(Article 1347, new Civil Code, and article 1271, old
Civil Code). Any contract entered into by the City of
Manila in connection with the sidewalk, is ipso
facto null and ultra vires. (Municipality of Cavite vs.
Roxas, et a1, 30 Phil. 603.) The sidewalk in question
was intended for and was used by the public, in
going from one place to another. "The streets and
public places of the city shall be kept free and clear
for the use of the public, and the sidewalks and
crossings for the pedestrians, and the same shall
only be used or occupied for other purpose as
provided by ordinance or regulation; ..." (Sec. 1119,
Revised Ordinances of the City of Manila.) The
booths in question served as fruit stands for their
owners and often, if not always, blocked the fire
passage of pedestrians who had to take the plaza
itself which used to be clogged with vehicular traffic.
Exactly in point is Espiritu vs. Municipal Council of
Pozorrubio, 25 where the Supreme Court declared:
There is absolutely no question that the town plaza
cannot be used for the construction of market stalls,
specially of residences, and that such structures
constitute a nuisance subject to abatement
according to law. Town plazas are properties of
public dominion, to be devoted to public use and to
be made available to the public in general They are
outside the common of man and cannot be disposed
of or even leased by the municipality to private
parties.
Applying this well-settled doctrine, we rule that the
petitioners had no right in the first place to occupy the
disputed premises and cannot insist in remaining there
now on the strength of their alleged lease contracts. They
should have realized and accepted this earlier,
considering that even before Civil Case No. 2040 was
decided, the municipalcouncil of San Fernando had
already adopted Resolution No. 29, series of 1964,
declaring the area as the parking place and public plaza
of the municipality.
It is the decision in Civil Case No. 2040 and the said
resolution of the municipal council of San Fernando that
respondent Macalino was seeking to enforce when he
ordered the demolition of the stags constructed in the
disputed area. As officer-in-charge of the office of the
mayor, he had the duty to clear the area and restore it to
its intended use as a parking place and public plaza of the
municipality of San Fernando, conformably to the
aforementioned orders from the court and the council. It
is, therefore, not correct to say that he had acted without
authority or taken the law into his hands in issuing his
order.
Neither can it be said that he acted whimsically in
exercising his authority for it has been established that
he directed the demolition of the stalls only after, upon
his instructions, the municipal attorney had conducted
an investigation, to look into the complaint filed by the
Association of Concerned Citizens and Consumers of San
Fernando. 26 There is evidence that the petitioners were
notified of this hearing, 27which they chose to disregard.
Photographs of the disputed area, 28 which does look
congested and ugly, show that the complaint was valid
and that the area really needed to be cleared, as
recommended by the municipal attorney.
The Court observes that even without such investigation
and recommendation, the respondent mayor was
justified in ordering the area cleared on the strength
alone of its status as a public plaza as declared by the
judicial and legislative authorities. In calling first for the
investigation (which the petitioner saw fit to boycott), he
was just scrupulously paying deference to the
requirements of due process, to remove an taint of
arbitrariness in the action he was caged upon to take.
Since the occupation of the place in question in 1961 by
the original 24 stallholders (whose number later
ballooned to almost 200), it has deteriorated
increasingly to the great prejudice of the community in
general. The proliferation of stags therein, most of them
makeshift and of flammable materials, has converted it
into a veritable fire trap, which, added to the fact that it
obstructs access to and from the public market itself, has
seriously endangered public safety. The filthy condition
of the talipapa, where fish and other wet items are sold,
21
has aggravated health and sanitation problems, besides
pervading the place with a foul odor that has spread into
the surrounding areas. The entire place is unsightly, to
the dismay and embarrassment of the inhabitants, who
want it converted into a showcase of the town of which
they can all be proud. The vendors in the talipapa have
also spilled into the street and obstruct the flow of traffic,
thereby impairing the convenience of motorists and
pedestrians alike. The regular stallholders in the public
market, who pay substantial rentals to the municipality,
are deprived of a sizable volume of business from
prospective customers who are intercepted by
the talipapa vendors before they can reach the market
proper. On top of all these, the people are denied the
proper use of the place as a public plaza, where they may
spend their leisure in a relaxed and even beautiful
environment and civic and other communal activities of
the town can be held.
The problems caused by the usurpation of the place by
the petitioners are covered by the police power as
delegated to the municipality under the general welfare
clause. 29 This authorizes the municipal council "to enact
such ordinances and make such regulations, not
repugnant to law, as may be necessary to carry into effect
and discharge the powers and duties conferred upon it
by law and such as shall seem necessary and proper to
provide for the health and safety, promote the
prosperity, improve the morals, peace, good order,
comfort, and convenience of the municipality and the
inhabitants thereof, and for the protection of property
therein." This authority was validly exercised in this
casethrough the adoption of Resolution No. 29, series of
1964, by the municipal council of San Fernando.
Even assuming a valid lease of the property in dispute,
the resolution could have effectively terminated the
agreement for it is settled that the police power cannot
be surrendered or bargained away through the medium
of a contract. 30 In fact, every contract affecting the public
interest suffers a congenital infirmity in that it contains
an implied reservation of the police power as a postulate
of the existing legal order. 31 This power can be activated
at any time to change the provisions of the contract, or
even abrogate it entirely, for the promotion or protection
of the general welfare. Such an act will not militate
against the impairment clause, which is subject to and
limited by the paramount police power. 32
We hold that the respondent judge did not commit grave
abuse of discretion in denying the petition for
prohibition. On the contrary, he acted correctly in
sustaining the right and responsibility of the mayor to
evict the petitioners from the disputed area and clear it
of an the structures illegally constructed therein.
The Court feels that it would have been far more amiable
if the petitioners themselves, recognizing their own civic
duty, had at the outset desisted from their original stance
and withdrawn in good grace from the disputed area to
permit its peaceful restoration as a public plaza and
parking place for the benefit of the whole municipality.
They owned this little sacrifice to the community in
general which has suffered all these many years because
of their intransigence. Regrettably, they have refused to
recognize that in the truly democratic society, the
interests of the few should yield to those of the greater
number in deference to the principles that the welfare of
the people is the supreme law and overriding purpose.
We do not see any altruism here. The traditional ties of
sharing are absent here. What we find, sad to say, is a
cynical disdaining of the spirit of "bayanihan," a selfish
rejection of the cordial virtues of "pakikisama " and
"pagbibigayan" which are the hallmarks of our people.
WHEREFORE, the petition is DISMISSED. The decision
dated July 19, 1982, and the order-dated August 5, 1982,
are AFFIRMED. The temporary restraining order dated
August 9, 1982, is LIFTED. This decision is immediately
executory. Costs against the petitioners.
SO ORDERED.
Teehankee, C.J., Narvasa and Paras, JJ., concur.
22
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-66575 September 30, 1986
ADRIANO MANECLANG, JULIETA, RAMONA, VICTOR,
ANTONINA, LOURDES, TEODORO and MYRNA, all
surnamed MANECLANG, petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT and
ALFREDO MAZA, CORLETO CASTRO, SALOME
RODRIGUEZ, EDUCARDO CUISON, FERNANDO
ZARCILLA, MARIANO GABRIEL, NICOMEDES
CORDERO, CLETO PEDROZO, FELIX SALARY and
JOSE PANLILIO, respondents.
Loreto Novisteros for petitioners.
Corleto R. Castro for respondents.
FERNAN, J.:
Petitioners Adriano Maneclang, et. al. filed before the
then Court of First Instance of Pangasinan, Branch XI a
complaint for quieting of title over a certain fishpond
located within the four [41 parcels of land belonging to
them situated in Barrio Salomague, Bugallon,
Pangasinan, and the annulment of Resolutions Nos. 38
and 95 of the Municipal Council of Bugallon Pangasinan.
The trial court dismissed the complaint in a decision
dated August 15, 1975 upon a finding that the body of
water traversing the titled properties of petitioners is a
creek constituting a tributary of the Agno River;
therefore public in nature and not subject to private
appropriation. The lower court likewise held that
Resolution No. 38, ordering an ocular inspection of the
Cayangan Creek situated between Barrios Salomague Sur
and Salomague Norte, and Resolution No. 95 authorizing
public bidding for the lease of all municipal ferries and
fisheries, including the fishpond under consideration,
were passed by respondents herein as members of the
Municipal Council of Bugallon, Pangasinan in the exercise
of their legislative powers.
Petitioners appealed said decision to the Intermediate acting thru its duly-constituted municipal council is
Appellate Court, which affirmed the same on April 29, clothed with authority to pass, as it did the two
1983. Hence, this petition for review on certiorari. resolutions dealing with its municipal waters, and it
cannot be said that petitioners were deprived of their
Acting on the petition, the Court required the right to due process as mere publication of the notice of
respondents to comment thereon. However, before the public bidding suffices as a constructive notice to the
respondents could do so, petitioners manifested that for whole world.
lack of interest on the part of respondent Alfredo Maza,
the awardee in the public bidding of the fishpond, the IN VIEW OF THE FOREGOING, the Court Resolved to set
parties desire to amicably settle the case by submitting aside the Compromise Agreement and declare the same
to the Court a Compromise Agreement praying that null and void for being contrary to law and public policy.
judgment be rendered recognizing the ownership of The Court further resolved to DISMISS the instant
petitioners over the land the body of water found within petition for lack of merit.
their titled properties, stating therein, among other
things, that "to pursue the case, the same will not amount
SO ORDERED.
to any benefit of the parties, on the other hand it is to the
advantage and benefit of the municipality if the
ownership of the land and the water found therein Feria (Chairman), Alampay, Gutierrez, Jr. and Paras, JJ.,
belonging to petitioners be recognized in their favor as it concur.
is now clear that after the National Irrigation
Administration [NIA] had built the dike around the land,
no water gets in or out of the land. 1
Footnotes
The stipulations contained in the Compromise
Agreement partake of the nature of an adjudication of 1 p. 60, Rollo.
ownership in favor of herein petitioners of the fishpond
in dispute, which, as clearly found by the lower and
appellate courts, was originally a creek forming a
tributary of the Agno River. Considering that as held in
the case of Mercado vs. Municipal President of
Macabebe, 59 Phil. 592 [1934], a creek, defined as a
recess or arm extending from a river and participating in
the ebb and flow of the sea, is a property belonging to the
public domain which is not susceptible to private
appropriation and acquisitive prescription, and as a
public water, it cannot be registered under the Torrens
System in the name of any individual [Diego v. Court of
Appeals, 102 Phil. 494; Mangaldan v. Manaoag, 38 Phil.
4551; and considering further that neither the mere
construction of irrigation dikes by the National Irrigation
Administration which prevented the water from flowing
in and out of the subject fishpond, nor its conversion into
a fishpond, alter or change the nature of the creek as a
property of the public domain, the Court finds the
Compromise Agreement null and void and of no legal
effect, the same being contrary to law and public policy.
The finding that the subject body of water is a creek
belonging to the public domain is a factual determination
binding upon this Court. The Municipality of Bugallon,
23
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-57461 September 11, 1987
THE DIRECTOR OF LANDS, petitioner,
vs.
MANILA ELECTRIC COMPANY and HON. RIZALINA
BONIFACIO VERA, as Presiding Judge, Court of First
Instance of Rizal, Pasig, Branch XXIII, respondents.
CORTES, J.:
This is an appeal by certiorari of a decision of the
respondent Judge in Land Registration Case No. N-10317
LRC Record No. N-54803 entitled "In Re: Application for
Registration of Title, Manila Electric Company,
applicant," dated May 29, 1981.
The facts are not disputed. Manila Electric Company filed
an amended application for registration of a parcel of
land located in Taguig, Metro Manila on December 4,
1979. On August 17, 1976, applicant acquired the land
applied for registration by purchase from Ricardo
Natividad (Exhibit E) who in turn acquired the same
from his father Gregorio Natividad as evidenced by a
Deed of Original Absolute Sale executed on December 28,
1970 (Exhibit E). Applicant's predecessors-in-interest
have possessed the property under the concept of an
owner for more than 30 years. The property was
declared for taxation purposes under the name of the
applicant (Exhibit 1) and the taxes due thereon have
been paid (Exhibits J and J-1).
On May 29, 1981 respondent Judge rendered a decision
ordering the registration of the property in the name of
the private respondent. The Director of Lands interposed
this petition raising the issue of whether or not a
corporation may apply for registration of title to land.
After comments were filed by the respondents, the Court
gave the petition due course. The legal issue raised by the
petitioner Director of Lands has been squarely dealt with
in two recent cases (The Director of Lands v.
Intermediate Appellate Court and Acme Plywood &
Veneer Co., Inc., etc., No. L-73002 (December 29, 1986),
146 SCRA 509. The Director of Lands v. Hon. Bengzon As ruled in the Acme case, the fact that the confirmation
and Dynamarine Corporation, etc., No. 54045 (July 28, proceedings were instituted by a corporation is simply
1987)], and resolved in the affirmative. There can be no another accidental circumstance, "productive of a defect
different answer in the case at bar. hardly more than procedural and in nowise affecting the
substance and merits of the right of ownership sought to
In the Acme decision, this Court upheld the doctrine that be confirmed in said proceedings." Considering that it is
open, exclusive and undisputed possession of alienable not disputed that the Natividads could have had their
title confirmed, only a rigid subservience to the letter of
public land for the period prescribed by law creates the
legal fiction whereby the land, upon completion of the the law would deny private respondent the right to
requisite period ipso jure and without the need of judicial register its property which was validly acquired.
or other sanction, ceases to be public land and becomes
private property. WHEREFORE, the petition is DENIED. The questioned
decision of the respondent Judge is AFFIRMED.
As the Court said in that case:
SO ORDERED.
Nothing can more clearly demonstrate the logical
inevitability of considering possession of public land Fernan (Chairman), Feliciano and Bidin JJ., concur.
which is of the character and duration prescribed by
statute as the equivalent of an express grant from
Separate Opinions
the State than the dictum of the statute itself that the
possessor(s) "... shall be conclusively presumed to
have performed all the conditions essential to a GUTIERREZ, JR., J.:, dissenting.
Government grant and shall be entitled to a
certificate of title .... " No proof being admissible to It is my view that Article XII, Section 3 of the Constitution
overcome a conclusive presumption, confirmation which prohibits private corporations or associations
proceedings would in truth be little more than a from holding alienable lands of the public domain except
formality, at the most limited to ascertaining by lease is circumvented when we allow corporations to
whether the possession claimed is of the required apply for judicial confirmation of imperfect titles to
character and length of time; and registration public land. I, therefore, reiterate my vote in Meralco v.
thereunder would not confer title, but simply Castro Bartolome, (114 SCRA 799), Republic v. Villanueva
recognize a title already vested. The proceedings and Iglesia ni Cristo (114 SCRA 875) and Director of
would not originally convert the land from public to Lands v. Intermediate Appellate Court (146 SCRA 509),
private land, but only confirm such a conversion and accordingly, dissent from the majority opinion in this
already affected (sic) from the moment the required case.
period of possession became complete.
Coming to the case at bar, if the land was
already private at the time Meralco bought it from
Natividad, then the prohibition in the 1973 Constitution
against corporations holding alienable lands of the public
domain except by lease (1973 Const., Art. XIV, See. 11)
does not apply.
Petitioner, however, contends that a corporation is not
among those that may apply for confirmation of title
under Section 48 of Commonwealth Act No. 141, the
Public Land Act.
24
 Republic of the Philippines
SUPREME COURT
Manila
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 Chancery of the Philippine Embassy" (Annex M-D to
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
Memorandum for Petitioner, p. 503). As intended, it
became the site of the Philippine Embassy until the latter
was transferred to Nampeidai on July 22, 1976 when the
Roppongi building needed major repairs. Due to the
failure of our government to provide necessary funds,
the Roppongi property has remained undeveloped since
that time.
A proposal was presented to President Corazon C.
Aquino by former Philippine Ambassador to Japan,
Carlos J. Valdez, to make the property the subject of a
lease agreement with a Japanese firm - Kajima
Corporation — which shall construct two (2) buildings in
Roppongi and one (1) building in Nampeidai and
renovate the present Philippine Chancery in Nampeidai.
The consideration of the construction would be the lease
to the foreign corporation of one (1) of the buildings to
be constructed in Roppongi and the two (2) buildings in
Nampeidai. The other building in Roppongi shall then be
used as the Philippine Embassy Chancery. At the end of
the lease period, all the three leased buildings shall be
occupied and used by the Philippine government. No
change of ownership or title shall occur. (See Annex "B"
to Reply to Comment) The Philippine government
retains the title all throughout the lease period and
thereafter. However, the government has not acted
favorably on this proposal which is pending approval and
ratification between the parties. Instead, on August 11,
25
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.
26
(Sections 2 and 3, Article XII, Constitution; Sections 22
and 23 of Commonwealth Act 141).i•t•c-aüsl
(2) The preference for Filipino citizens in the grant of
rights, privileges and concessions covering the national
economy and patrimony (Section 10, Article VI,
Constitution);
(3) The protection given to Filipino enterprises against
unfair competition and trade practices;
(4) The guarantee of the right of the people to
information on all matters of public concern (Section 7,
Article III, Constitution);
(5) The prohibition against the sale to non-Filipino
citizens or entities not wholly owned by Filipino citizens
of capital goods received by the Philippines under the
Reparations Act (Sections 2 and 12 of Rep. Act No. 1789);
and
(6) The declaration of the state policy of full public
disclosure of all transactions involving public interest
(Section 28, Article III, Constitution).
Petitioner Ojeda warns that the use of public funds in the
execution of an unconstitutional executive order is a
misapplication of public funds He states that since the
details of the bidding for the Roppongi property
were never publicly disclosed until February 15, 1990 (or
a few days before the scheduled bidding), the bidding
guidelines are available only in Tokyo, and the
accomplishment of requirements and the selection of
qualified bidders should be done in Tokyo, interested
Filipino citizens or entities owned by them did not have
the chance to comply with Purchase Offer Requirements
on the Roppongi. Worse, the Roppongi shall be sold for a
minimum price of $225 million from which price capital
gains tax under Japanese law of about 50 to 70% of the
floor price would still be deducted.
IV
The petitioners and respondents in both cases do not
dispute the fact that the Roppongi site and the three
related properties were through reparations
agreements, that these were assigned to the government
sector and that the Roppongi property itself was
specifically designated under the Reparations
Agreement to house the Philippine Embassy.
The nature of the Roppongi lot as property for public
service is expressly spelled out. It is dictated by the terms
of the Reparations Agreement and the corresponding
contract of procurement which bind both the Philippine
government and the Japanese government.
There can be no doubt that it is of public dominion unless
it is convincingly shown that the property has become
patrimonial. This, the respondents have failed to do.
As property of public dominion, the Roppongi lot is
outside the commerce of man. It cannot be alienated. Its
ownership is a special collective ownership for general
use and enjoyment, an application to the satisfaction of
collective needs, and resides in the social group. The
purpose is not to serve the State as a juridical person, but
the citizens; it is intended for the common and public
welfare and cannot be the object of appropration. (Taken
from 3 Manresa, 66-69; cited in Tolentino, Commentaries
on the Civil Code of the Philippines, 1963 Edition, Vol. II,
p. 26).
The applicable provisions of the Civil Code are:
ART. 419. Property is either of public dominion or of
private ownership.
ART. 420. The following things are property of
public dominion
(1) Those intended for public use, such as roads,
canals, rivers, torrents, ports and bridges
constructed by the State, banks shores roadsteads,
and others of similar character;
(2) Those which belong to the State, without being
for public use, and are intended for some public
service or for the development of the national
wealth.
ART. 421. All other property of the State, which is
not of the character stated in the preceding article,
is patrimonial property.
The Roppongi property is correctly classified under
paragraph 2 of Article 420 of the Civil Code as property
belonging to the State and intended for some public
service.
Has the intention of the government regarding the use of
the property been changed because the lot has been Idle
for some years? Has it become patrimonial?
The fact that the Roppongi site has not been used for a
long time for actual Embassy service does not
automatically convert it to patrimonial property. Any
such conversion happens only if the property is
withdrawn from public use (Cebu Oxygen and Acetylene
Co. v. Bercilles, 66 SCRA 481 [1975]). A property
continues to be part of the public domain, not available
for private appropriation or ownership until there is a
formal declaration on the part of the government to
withdraw it from being such (Ignacio v. Director of
Lands, 108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by
concerned public officials insinuating a change of
intention. We emphasize, however, that an abandonment
of the intention to use the Roppongi property for public
service and to make it patrimonial property under Article
422 of the Civil Code must be definite Abandonment
cannot be inferred from the non-use alone specially if the
non-use was attributable not to the government's own
deliberate and indubitable will but to a lack of financial
support to repair and improve the property (See Heirs of
Felino Santiago v. Lazaro, 166 SCRA 368 [1988]).
Abandonment must be a certain and positive act based
on correct legal premises.
A mere transfer of the Philippine Embassy to Nampeidai
in 1976 is not relinquishment of the Roppongi property's
original purpose. Even the failure by the government to
repair the building in Roppongi is not abandonment
since as earlier stated, there simply was a shortage of
government funds. The recent Administrative Orders
authorizing a study of the status and conditions of
government properties in Japan were merely directives
for investigation but did not in any way signify a clear
intention to dispose of the properties.
Executive Order No. 296, though its title declares an
"authority to sell", does not have a provision in its text
expressly authorizing the sale of the four properties
27
procured from Japan for the government sector. The
executive order does not declare that the properties lost
their public character. It merely intends to make the
properties available to foreigners and not to Filipinos
alone in case of a sale, lease or other disposition. It merely
eliminates the restriction under Rep. Act No. 1789 that
reparations goods may be sold only to Filipino citizens
and one hundred (100%) percent Filipino-owned
entities. The text of Executive Order No. 296 provides:
Section 1. The provisions of Republic Act No. 1789,
as amended, and of other laws to the contrary
notwithstanding, the above-mentioned properties
can be made available for sale, lease or any other
manner of disposition to non-Filipino citizens or to
entities owned by non-Filipino citizens.
Executive Order No. 296 is based on the wrong premise
or assumption that the Roppongi and the three other
properties were earlier converted into alienable real
properties. As earlier stated, Rep. Act No. 1789
differentiates the procurements for the government
sector and the private sector (Sections 2 and 12, Rep. Act
No. 1789). Only the private sector properties can be sold
to end-users who must be Filipinos or entities owned by
Filipinos. It is this nationality provision which was
amended by Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which
provides as one of the sources of funds for its
implementation, the proceeds of the disposition of the
properties of the Government in foreign countries, did
not withdraw the Roppongi property from being
classified as one of public dominion when it mentions
Philippine properties abroad. Section 63 (c) refers to
properties which are alienable and not to those reserved
for public use or service. Rep Act No. 6657, therefore,
does not authorize the Executive Department to sell the
Roppongi property. It merely enumerates possible
sources of future funding to augment (as and when
needed) the Agrarian Reform Fund created under
Executive Order No. 299. Obviously any property outside
of the commerce of man cannot be tapped as a source of
funds.
The respondents try to get around the public dominion
character of the Roppongi property by insisting that
Japanese law and not our Civil Code should apply.
It is exceedingly strange why our top government
officials, of all people, should be the ones to insist that in
the sale of extremely valuable government property,
Japanese law and not Philippine law should prevail. The
Japanese law - its coverage and effects, when enacted,
and exceptions to its provision — is not presented to the
Court It is simply asserted that the lex loci rei sitae or
Japanese law should apply without stating what that law
provides. It is a ed on faith that Japanese law would allow
the sale.
We see no reason why a conflict of law rule should apply
when no conflict of law situation exists. A conflict of law
situation arises only when: (1) There is a dispute over
the title or ownership of an immovable, such that the
capacity to take and transfer immovables, the formalities
of conveyance, the essential validity and effect of the
transfer, or the interpretation and effect of a conveyance,
are to be determined (See Salonga, Private International
Law, 1981 ed., pp. 377-383); and (2) A foreign law on
land ownership and its conveyance is asserted to conflict
with a domestic law on the same matters. Hence, the
need to determine which law should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership
or title. There is no question that the property belongs to
the Philippines. The issue is the authority of the
respondent officials to validly dispose of property
belonging to the State. And the validity of the procedures
adopted to effect its sale. This is governed by Philippine
Law. The rule of lex situs does not apply.
The assertion that the opinion of the Secretary of Justice
sheds light on the relevance of the lex situs rule is
misplaced. The opinion does not tackle the alienability of
the real properties procured through reparations nor the
existence in what body of the authority to sell them. In
discussing who are capable of acquiring the lots, the
Secretary merely explains that it is the foreign law which
should determine who can acquire the properties so that
the constitutional limitation on acquisition of lands of the
public domain to Filipino citizens and entities wholly
owned by Filipinos is inapplicable. We see no point in
belaboring whether or not this opinion is correct. Why
should we discuss who can acquire the Roppongi lot
when there is no showing that it can be sold?
The subsequent approval on October 4, 1988 by
President Aquino of the recommendation by the
investigating committee to sell the Roppongi property
was premature or, at the very least, conditioned on a
valid change in the public character of the Roppongi
property. Moreover, the approval does not have the force
and effect of law since the President already lost her
legislative powers. The Congress had already convened
for more than a year.
Assuming for the sake of argument, however, that the
Roppongi property is no longer of public dominion, there
is another obstacle to its sale by the respondents.
There is no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917
provides
Section 79 (f ) Conveyances and contracts to which
the Government is a party. — In cases in which the
Government of the Republic of the Philippines is a
party to any deed or other instrument conveying the
title to real estate or to any other property the value
of which is in excess of one hundred thousand pesos,
the respective Department Secretary shall prepare
the necessary papers which, together with the
proper recommendations, shall be submitted to the
Congress of the Philippines for approval by the
same. Such deed, instrument, or contract shall be
executed and signed by the President of the
Philippines on behalf of the Government of the
Philippines unless the Government of the
Philippines unless the authority therefor be
expressly vested by law in another officer.
(Emphasis supplied)
The requirement has been retained in Section 48, Book I
of the Administrative Code of 1987 (Executive Order No.
292).
SEC. 48. Official Authorized to Convey Real Property.
— Whenever real property of the Government
is authorized by law to be conveyed, the deed of
conveyance shall be executed in behalf of the
government by the following:
28
 (1) For property belonging to and titled in the name
of the Republic of the Philippines, by the President,
unless the authority therefor is expressly vested by
law in another officer.
(2) For property belonging to the Republic of the
Philippines but titled in the name of any political
subdivision or of any corporate agency or
instrumentality, by the executive head of the agency
or instrumentality. (Emphasis supplied)
It is not for the President to convey valuable real
property of the government on his or her own sole will.
Any such conveyance must be authorized and approved
by a law enacted by the Congress. It requires executive
and legislative concurrence.
Resolution No. 55 of the Senate dated June 8, 1989,
asking for the deferment of the sale of the Roppongi
property does not withdraw the property from public
domain much less authorize its sale. It is a mere
resolution; it is not a formal declaration abandoning the
public character of the Roppongi property. In fact, the
Senate Committee on Foreign Relations is conducting
hearings on Senate Resolution No. 734 which raises
serious policy considerations and calls for a fact-finding
investigation of the circumstances behind the decision to
sell the Philippine government properties in Japan.
The resolution of this Court in Ojeda v. Bidding
Committee, et al., supra, did not pass upon the
constitutionality of Executive Order No. 296. Contrary to
respondents' assertion, we did not uphold the authority
of the President to sell the Roppongi property. The Court
stated that the constitutionality of the executive order
was not the real issue and that resolving the
constitutional question was "neither necessary nor
finally determinative of the case." The Court noted that
"[W]hat petitioner ultimately questions is the use of the
proceeds of the disposition of the Roppongi property." In
emphasizing that "the decision of the Executive to
dispose of the Roppongi property to finance the CARP ...
cannot be questioned" in view of Section 63 (c) of Rep.
Act No. 6657, the Court did not acknowledge the fact that
the property became alienable nor did it indicate that the
President was authorized to dispose of the Roppongi
property. The resolution should be read to mean that in
case the Roppongi property is re-classified to be
patrimonial and alienable by authority of law, the
proceeds of a sale may be used for national economic
development projects including the CARP.
Moreover, the sale in 1989 did not materialize. The
petitions before us question the proposed 1990 sale of
the Roppongi property. We are resolving the issues
raised in these petitions, not the issues raised in 1989.
Having declared a need for a law or formal declaration to
withdraw the Roppongi property from public domain to
make it alienable and a need for legislative authority to
allow the sale of the property, we see no compelling
reason to tackle the constitutional issues raised by
petitioner Ojeda.
The Court does not ordinarily pass upon constitutional
questions unless these questions are properly raised in
appropriate cases and their resolution is necessary for
the determination of the case (People v. Vera, 65 Phil. 56
[1937]). The Court will not pass upon a constitutional
question although properly presented by the record if
the case can be disposed of on some other ground such
as the application of a statute or general law (Siler v.
Louisville and Nashville R. Co., 213 U.S. 175, [1909],
Railroad Commission v. Pullman Co., 312 U.S. 496
[1941]).
The petitioner in G.R. No. 92013 states why the Roppongi
property should not be sold:
The Roppongi property is not just like any piece of
property. It was given to the Filipino people in
reparation for the lives and blood of Filipinos who
died and suffered during the Japanese military
occupation, for the suffering of widows and orphans
who lost their loved ones and kindred, for the homes
and other properties lost by countless Filipinos
during the war. The Tokyo properties are a
monument to the bravery and sacrifice of the
Filipino people in the face of an invader; like the
monuments of Rizal, Quezon, and other Filipino
heroes, we do not expect economic or financial
benefits from them. But who would think of selling
these monuments? Filipino honor and national
dignity dictate that we keep our properties in Japan
as memorials to the countless Filipinos who died
and suffered. Even if we should become paupers we
should not think of selling them. For it would be as
if we sold the lives and blood and tears of our
countrymen. (Rollo- G.R. No. 92013, p.147)
The petitioner in G.R. No. 92047 also states:
Roppongi is no ordinary property. It is one ceded by
the Japanese government in atonement for its past
belligerence for the valiant sacrifice of life and limb
and for deaths, physical dislocation and economic
devastation the whole Filipino people endured in
World War II.
It is for what it stands for, and for what it could never
bring back to life, that its significance today remains
undimmed, inspire of the lapse of 45 years since the
war ended, inspire of the passage of 32 years since
the property passed on to the Philippine
government.
Roppongi is a reminder that cannot — should not —
be dissipated ... (Rollo-92047, p. 9)
It is indeed true that the Roppongi property is valuable
not so much because of the inflated prices fetched by real
property in Tokyo but more so because of its symbolic
value to all Filipinos — veterans and civilians alike.
Whether or not the Roppongi and related properties will
eventually be sold is a policy determination where both
the President and Congress must concur. Considering the
properties' importance and value, the laws on
conversion and disposition of property of public
dominion must be faithfully followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the
petitions are GRANTED. A writ of prohibition is issued
enjoining the respondents from proceeding with the sale
of the Roppongi property in Tokyo, Japan. The February
20, 1990 Temporary Restraining Order is made
PERMANENT.
SO ORDERED.
Melencio-Herrera, Paras, Bidin, Griño-Aquino and
Regalado, JJ., concur.
29
Separate Opinions
CRUZ, J., concurring:
I concur completely with the excellent ponencia of Mr.
Justice Gutierrez and will add the following observations
only for emphasis.
It is clear that the respondents have failed to show the
President's legal authority to sell the Roppongi property.
When asked to do so at the hearing on these petitions, the
Solicitor General was at best ambiguous, although I must
add in fairness that this was not his fault. The fact is that
there is -no such authority. Legal expertise alone cannot
conjure that statutory permission out of thin air.
Exec. Order No. 296, which reads like so much legislative,
double talk, does not contain such authority. Neither
does Rep. Act No. 6657, which simply allows the
proceeds of the sale of our properties abroad to be used
for the comprehensive agrarian reform program. Senate
Res. No. 55 was a mere request for the deferment of the
scheduled sale of tile Roppongi property, possibly to stop
the transaction altogether; and ill any case it is not a law.
The sale of the said property may be authorized only by
Congress through a duly enacted statute, and there is no
such law.
Once again, we have affirmed the principle that ours is a
government of laws and not of men, where every public
official, from the lowest to the highest, can act only by
virtue of a valid authorization. I am happy to note that in
the several cases where this Court has ruled against her,
the President of the Philippines has submitted to this
principle with becoming grace.
PADILLA, J., concurring:
I concur in the decision penned by Mr. Justice Gutierrez,
Jr., I only wish to make a few observations which could
help in further clarifying the issues.
Under our tripartite system of government ordained by
the Constitution, it is Congress that lays down or
determines policies. The President executes such
policies. The policies determined by Congress are
embodied in legislative enactments that have to be
approved by the President to become law. The President,
of course, recommends to Congress the approval of
policies but, in the final analysis, it is Congress that is the
policy - determining branch of government.
The judiciary interprets the laws and, in appropriate
cases, determines whether the laws enacted by Congress
and approved by the President, and presidential acts
implementing such laws, are in accordance with the
Constitution.
The Roppongi property was acquired by the Philippine
government pursuant to the reparations agreement
between the Philippine and Japanese governments.
Under such agreement, this property was acquired by the
Philippine government for a specific purpose, namely, to
serve as the site of the Philippine Embassy in Tokyo,
Japan. Consequently, Roppongi is a property of public
dominion and intended for public service, squarely
falling within that class of property under Art. 420 of the
Civil Code, which provides:
Art. 420. The following things are property of public
dominion :
(1) ...
(2) Those which belong to the State, without being
for public use, and are intended for some public
service or for the development of the national
wealth. (339a)
Public dominion property intended for public service
cannot be alienated unless the property is first
transformed into private property of the state otherwise
known as patrimonial property of the state. 1 The
transformation of public dominion property to state
patrimonial property involves, to my mind, a policy
decision. It is a policy decision because the treatment of
the property varies according to its classification.
Consequently, it is Congress which can decide and
declare the conversion of Roppongi from a public
dominion property to a state patrimonial property.
Congress has made no such decision or declaration.
Moreover, the sale of public property (once converted
from public dominion to state patrimonial property)
must be approved by Congress, for this again is a matter
of policy (i.e. to keep or dispose of the property). Sec. 48,
Book 1 of the Administrative Code of 1987 provides:
SEC. 48. Official Authorized to Convey Real Property.
— Whenever real property of the Government is
authorized by law to be conveyed, the deed of
conveyance shall be executed in behalf of the
government by the following:
(1) For property belonging to and titled in the
name of the Republic of the Philippines, by the
President, unless the authority therefor is
expressly vested by law in another officer.
(2) For property belonging to the Republic of
the Philippines but titled in the name of any
political subdivision or of any corporate
agency or instrumentality, by the executive
head of the agency or instrumentality.
(Emphasis supplied)
But the record is bare of any congressional decision or
approval to sell Roppongi. The record is likewise bare of
any congressional authority extended to the President to
sell Roppongi thru public bidding or otherwise.
It is therefore, clear that the President cannot sell or
order the sale of Roppongi thru public bidding or
otherwise without a prior congressional approval, first,
converting Roppongi from a public dominion property to
a state patrimonial property, and, second, authorizing
the President to sell the same.
ACCORDINGLY, my vote is to GRANT the petition and to
make PERMANENT the temporary restraining order
earlier issued by this Court.
SARMIENTO, J., concurring:
The central question, as I see it, is whether or not the so-
called "Roppongi property' has lost its nature as property
of public dominion, and hence, has become patrimonial
property of the State. I understand that the parties are
agreed that it was property intended for "public service"
within the contemplation of paragraph (2), of Article
430, of the Civil Code, and accordingly, land of State
dominion, and beyond human commerce. The lone issue
is, in the light of supervening developments, that is non-
30
user thereof by the National Government (for diplomatic
purposes) for the last thirteen years; the issuance of
Executive Order No. 296 making it available for sale to
any interested buyer; the promulgation of Republic Act
No. 6657, the Comprehensive Agrarian Reform Law,
making available for the program's financing, State
assets sold; the approval by the President of the
recommendation of the investigating committee formed
to study the property's utilization; and the issuance of
Resolution No. 55 of the Philippine Senate requesting for
the deferment of its disposition it, "Roppongi", is still
property of the public dominion, and if it is not, how it
lost that character.
When land of the public dominion ceases to be one, or
when the change takes place, is a question our courts
have debated early. In a 1906 decision, 1 it was held that
property of the public dominion, a public plaza in this
instance, becomes patrimonial upon use thereof for
purposes other than a plaza. In a later case, 2 this ruling
was reiterated. Likewise, it has been held that land,
originally private property, has become of public
dominion upon its donation to the town and its
conversion and use as a public plaza. 3 It is notable that
under these three cases, the character of the property,
and any change occurring therein, depends on the actual
use to which it is dedicated. 4
Much later, however, the Court held that "until a formal
declaration on the part of the Government, through the
executive department or the Legislative, to the effect that
the land . . . is no longer needed for [public] service- for
public use or for special industries, [it] continue[s] to be
part of the public [dominion], not available for private
expropriation or ownership." 5 So also, it was ruled that
a political subdivision (the City of Cebu in this case) alone
may declare (under its charter) a city road abandoned
and thereafter, to dispose of it. 6
In holding that there is "a need for a law or formal
declaration to withdraw the Roppongi property from
public domain to make it alienable and a land for
legislative authority to allow the sale of the
property" 7 the majority lays stress to the fact that: (1) An
affirmative act — executive or legislative — is necessary
to reclassify property of the public dominion, and (2) a
legislative decree is required to make it alienable. It also
clears the uncertainties brought about by earlier
interpretations that the nature of property-whether
public or patrimonial is predicated on the manner it is
actually used, or not used, and in the same breath,
repudiates the Government's position that the
continuous non-use of "Roppongi", among other
arguments, for "diplomatic purposes", has turned it into
State patrimonial property.
I feel that this view corresponds to existing
pronouncements of this Court, among other things, that:
(1) Property is presumed to be State property in the
absence of any showing to the contrary; 8 (2) With
respect to forest lands, the same continue to be lands of
the public dominion unless and until reclassified by the
Executive Branch of the Government; 9 and (3) All
natural resources, under the Constitution, and subject to
exceptional cases, belong to the State. 10
I am elated that the Court has banished previous
uncertainties.
FELICIANO, J., dissenting
With regret, I find myself unable to share the conclusions
reached by Mr. Justice Hugo E. Gutierrez, Jr.
For purposes of this separate opinion, I assume that the
piece of land located in 306 Roppongi, 5-Chome, Minato-
ku Tokyo, Japan (hereinafter referred to as the
"Roppongi property") may be characterized as property
of public dominion, within the meaning of Article 420 (2)
of the Civil Code:
[Property] which belong[s] to the State, without
being for public use, and are intended for some
public service -.
It might not be amiss however, to note that the
appropriateness of trying to bring within the confines of
the simple threefold classification found in Article 420 of
the Civil Code ("property for public use property
"intended for some public service" and property
intended "for the development of the national
wealth") all property owned by the Republic of the
Philippines whether found within the territorial
boundaries of the Republic or located within the
territory of another sovereign State, is not self-evident.
The first item of the classification property intended
for public use — can scarcely be properly applied to
property belonging to the Republic but found within the
territory of another State. The third item of the
classification property intended for the development of
the national wealth is illustrated, in Article 339 of the
Spanish Civil Code of 1889, by mines or mineral
properties. Again, mineral lands owned by a sovereign
State are rarely, if ever, found within the territorial base
of another sovereign State. The task of examining in
detail the applicability of the classification set out in
Article 420 of our Civil Code to property that the
Philippines happens to own outside its own boundaries
must, however, be left to academicians.
For present purposes, too, I agree that there is no
question of conflict of laws that is, at the present time,
before this Court. The issues before us relate essentially
to authority to sell the Roppongi property so far as
Philippine law is concerned.
The majority opinion raises two (2) issues: (a) whether
or not the Roppongi property has been converted into
patrimonial property or property of the private domain
of the State; and (b) assuming an affirmative answer to
(a), whether or not there is legal authority to dispose of
the Roppongi property.
I
Addressing the first issue of conversion of property of
public dominion intended for some public service, into
property of the private domain of the Republic, it should
be noted that the Civil Code does not address the
question of who has authority to effect such conversion.
Neither does the Civil Code set out or refer to
any procedure for such conversion.
Our case law, however, contains some fairly explicit
pronouncements on this point, as Justice Sarmiento has
pointed out in his concurring opinion. In Ignacio v.
Director of Lands (108 Phils. 335 [1960]), petitioner
Ignacio argued that if the land in question formed part of
the public domain, the trial court should have declared
the same no longer necessary for public use or public
purposes and which would, therefore, have become
disposable and available for private ownership. Mr.
Justice Montemayor, speaking for the Court, said:
Article 4 of the Law of Waters of 1866 provides that
when a portion of the shore is no longer washed by
the waters of the sea and is not necessary for
31
 purposes of public utility, or for the establishment of
special industries, or for coast-guard service, the
government shall declare it to be the property of the
owners of the estates adjacent thereto and as an
increment thereof. We believe that only the
executive and possibly the legislative departments
have the authority and the power to make the
declaration that any land so gained by the sea, is not
necessary for purposes of public utility, or for the
establishment of special industries, or for coast-
guard service. If no such declaration has been made
by said departments, the lot in question forms part of
the public domain. (Natividad v. Director of
Lands, supra.)
The reason for this pronouncement, according to
this Tribunal in the case of Vicente Joven y
Monteverde v. Director of Lands, 93 Phil., 134 (cited
in Velayo's Digest, Vol. 1, p. 52).
... is undoubtedly that the courts are neither
primarily called upon, nor indeed in a position to
determine whether any public land are to be used
for the purposes specified in Article 4 of the Law of
Waters. Consequently, until a formal declaration on
the part of the Government, through the executive
department or the Legislature, to the effect that the
land in question is no longer needed for coast-guard
service, for public use or for special industries, they
continue to be part of the public domain not available
for private appropriation or ownership. (108 Phil. at
338-339; emphasis supplied)
Thus, under Ignacio, either the Executive Department or
the Legislative Department may convert property of the
State of public dominion into patrimonial property of the
State. No particular formula or procedure of conversion
is specified either in statute law or in case law. Article
422 of the Civil Code simply states that: "Property of
public dominion, when no longer intended for public use
or for public service, shall form part of the patrimonial
property of the State". I respectfully submit, therefore,
that the only requirement which is legitimately
imposable is that the intent to convert must be
reasonably clear from a consideration of the acts or acts
of the Executive Department or of the Legislative
Department which are said to have effected such
conversion.
The same legal situation exists in respect of conversion
of property of public dominion belonging to municipal
corporations, i.e., local governmental units, into
patrimonial property of such entities. In Cebu Oxygen
Acetylene v. Bercilles (66 SCRA 481 [1975]), the City
Council of Cebu by resolution declared a certain portion
of an existing street as an abandoned road, "the same not
being included in the city development plan".
Subsequently, by another resolution, the City Council of
Cebu authorized the acting City Mayor to sell the land
through public bidding. Although there was no formal and
explicit declaration of conversion of property for public use
into patrimonial property, the Supreme Court said:
xxx xxx xxx
(2) Since that portion of the city street subject of
petitioner's application for registration of title was
withdrawn from public use, it follows that such
withdrawn portion becomes patrimonial property
which can be the object of an ordinary contract.
Article 422 of the Civil Code expressly provides that
"Property of public dominion, when no longer
intended for public use of for public service, shall
form part of the patrimonial property of the State."
Besides, the Revised Charter of the City of Cebu
heretofore quoted, in very clear and unequivocal
terms, states that "Property thus withdrawn from
public servitude may be used or conveyed for any
purpose for which other real property belonging to
the City may be lawfully used or conveyed."
Accordingly, the withdrawal of the property in
question from public use and its subsequent sale to the
petitioner is valid. Hence, the petitioner has a
registrable title over the lot in question. (66 SCRA at
484-; emphasis supplied)
Thus, again as pointed out by Sarmiento J., in his separate
opinion, in the case of property owned by municipal
corporations simple non-use or the actual dedication of
public property to some use other than "public use" or
some "public service", was sufficient legally to convert
such property into patrimonial property (Municipality of
Oas v. Roa, 7 Phil. 20 [1906]- Municipality of Hinunganan
v. Director of Lands 24 Phil. 124 [1913]; Province of
Zamboanga del Norte v. City of Zamboanga, 22 SCRA 1334
(1968).
I would also add that such was the case not only in
respect of' property of municipal corporations but also in
respect of property of the State itself. Manresa in
commenting on Article 341 of the 1889 Spanish Civil
Code which has been carried over verbatim into our Civil
Code by Article 422 thereof, wrote:
La dificultad mayor en todo esto estriba,
naturalmente, en fijar el momento en que los bienes
de dominio publico dejan de serlo. Si la
Administracion o la autoridad competente
legislative realizan qun acto en virtud del cual cesa
el destino o uso publico de los bienes de que se trata
naturalmente la dificultad queda desde el primer
momento resuelta. Hay un punto de partida cierto
para iniciar las relaciones juridicas a que pudiera
haber lugar Pero puede ocurrir que no haya
taldeclaracion expresa, legislativa or administrativa,
y, sin embargo, cesar de hecho el destino publico de
los bienes; ahora bien, en este caso, y para los efectos
juridicos que resultan de entrar la cosa en el
comercio de los hombres,' se entedera que se ha
verificado la conversion de los bienes patrimoniales?
El citado tratadista Ricci opina, respecto del antiguo
Codigo italiano, por la afirmativa, y por nuestra
parte creemos que tal debe ser la soluciion. El
destino de las cosas no depende tanto de una
declaracion expresa como del uso publico de las
mismas, y cuanda el uso publico cese con respecto
de determinados bienes, cesa tambien su situacion
en el dominio publico. Si una fortaleza en ruina se
abandona y no se repara, si un trozo de la via publica
se abandona tambien por constituir otro nuevo an
mejores condiciones....ambos bienes cesan de estar
Codigo, y leyes especiales mas o memos
administrativas. (3 Manresa, Comentarios al Codigo
Civil Espanol, p. 128 [7a ed.; 1952) (Emphasis
supplied)
The majority opinion says that none of the executive acts
pointed to by the Government purported, expressly or
definitely, to convert the Roppongi property into
patrimonial property — of the Republic. Assuming that
to be the case, it is respectfully submitted that cumulative
effect of the executive acts here involved was to convert
32
property originally intended for and devoted to public
service into patrimonial property of the State, that is,
property susceptible of disposition to and appropration
by private persons. These executive acts, in their
totality if not each individual act, make crystal clear the
intent of the Executive Department to effect such
conversion. These executive acts include:
(a) Administrative Order No. 3 dated 11 August 1985,
which created a Committee to study the
disposition/utilization of the Government's property in
Japan, The Committee was composed of officials of the
Executive Department: the Executive Secretary; the
Philippine Ambassador to Japan; and representatives of
the Department of Foreign Affairs and the Asset
Privatization Trust. On 19 September 1988, the
Committee recommended to the President the sale of one
of the lots (the lot specifically in Roppongi) through
public bidding. On 4 October 1988, the President
approved the recommendation of the Committee.
On 14 December 1988, the Philippine Government by
diplomatic note informed the Japanese Ministry of
Foreign Affairs of the Republic's intention to dispose of
the property in Roppongi. The Japanese Government
through its Ministry of Foreign Affairs replied that it
interposed no objection to such disposition by the
Republic. Subsequently, the President and the
Committee informed the leaders of the House of
Representatives and of the Senate of the Philippines of
the proposed disposition of the Roppongi property.
(b) Executive Order No. 296, which was issued by the
President on 25 July 1987. Assuming that the majority
opinion is right in saying that Executive Order No. 296 is
insufficient to authorize the sale of the Roppongi
property, it is here submitted with respect that Executive
Order No. 296 is more than sufficient to indicate
an intention to convert the property previously devoted
to public service into patrimonial property that is
capable of being sold or otherwise disposed of
(c) Non-use of the Roppongi lot for fourteen (14) years
for diplomatic or for any other public purposes.
Assuming (but only arguendo) that non-use does not, by
itself, automatically convert the property into
patrimonial property. I respectfully urge that prolonged
non-use, conjoined with the other factors here listed, was
legally effective to convert the lot in Roppongi into
patrimonial property of the State. Actually, as already
pointed out, case law involving property of municipal
corporations is to the effect that simple non-use or the
actual dedication of public property to some use other
than public use or public service, was sufficient to
convert such property into patrimonial property of the
local governmental entity concerned. Also as pointed out
above, Manresa reached the same conclusion in respect
of conversion of property of the public domain of the
State into property of the private domain of the State.
The majority opinion states that "abandonment cannot
be inferred from the non-use alone especially if the non-
use was attributable not to the Government's own
deliberate and indubitable will but to lack of financial
support to repair and improve the property" (Majority
Opinion, p. 13). With respect, it may be stressed that
there is no abandonment involved here, certainly no
abandonment of property or of property rights. What is
involved is the charge of the classification of the property
from property of the public domain into property of the
private domain of the State. Moreover, if for fourteen
(14) years, the Government did not see fit to appropriate
whatever funds were necessary to maintain the property
in Roppongi in a condition suitable for diplomatic
representation purposes, such circumstance may, with
equal logic, be construed as a manifestation of the
crystalizing intent to change the character of the
property.
(d) On 30 March 1989, a public bidding was in fact held
by the Executive Department for the sale of the lot in
Roppongi. The circumstance that this bidding was not
successful certainly does not argue against an intent to
convert the property involved into property that is
disposable by bidding.
The above set of events and circumstances makes no
sense at all if it does not, as a whole, show at least the
intent on the part of the Executive Department (with the
knowledge of the Legislative Department) to convert the
property involved into patrimonial property that is
susceptible of being sold.
II
Having reached an affirmative answer in respect of the
first issue, it is necessary to address the second issue of
whether or not there exists legal authority for the sale or
disposition of the Roppongi property.
The majority opinion refers to Section 79(f) of the
Revised Administrative Code of 1917 which reads as
follows:
SEC. 79 (f). Conveyances and contracts to which the
Government is a party. — In cases in which the
Government of the Republic of the Philippines is a
party to any deed or other instrument conveying the
title to real estate or to any other property the value
of which is in excess of one hundred thousand pesos,
the respective Department Secretary shall prepare
the necessary papers which, together with the
proper recommendations, shall be submitted to the
Congress of the Philippines for approval by the same.
Such deed, instrument, or contract shall be executed
and signed by the President of the Philippines on
behalf of the Government of the Philippines unless
the authority therefor be expressly vested by law in
another officer. (Emphasis supplied)
The majority opinion then goes on to state that: "[T]he
requirement has been retained in Section 4, Book I of the
Administrative Code of 1987 (Executive Order No. 292)"
which reads:
SEC. 48. Official Authorized to Convey Real Property.
— Whenever real property of the Government
is authorized by law to be conveyed, the deed of
conveyance shall be executed in behalf of the
government by the following:
(1) For property belonging to and titled in the name
of the Republic of the Philippines, by the President,
unless the authority therefor is expressly vested by
law in another officer.
(2) For property belonging to the Republic of the
Philippines but titled in the name of any political
subdivision or of any corporate agency or
instrumentality, by the executive head of the agency
or instrumentality. (Emphasis supplied)
Two points need to be made in this connection.
Firstly, the requirement of obtaining specific approval of
Congress when the price of the real property being
33
disposed of is in excess of One Hundred Thousand Pesos
(P100,000.00) under the Revised Administrative Code of
1917, has been deleted from Section 48 of the 1987
Administrative Code. What Section 48 of the present
Administrative Code refers to is authorization by law for
the conveyance. Section 48 does not purport to be itself
a source of legal authority for conveyance of real
property of the Government. For Section 48 merely
specifies the official authorized to execute and sign on
behalf of the Government the deed of conveyance in case
of such a conveyance.
Secondly, examination of our statute books shows that
authorization by law for disposition of real property of
the private domain of the Government, has been granted
by Congress both in the form of (a) a general, standing
authorization for disposition of patrimonial property of
the Government; and (b) specific legislation authorizing
the disposition of particular pieces of the Government's
patrimonial property.
Standing legislative authority for the disposition of land
of the private domain of the Philippines is provided by
Act No. 3038, entitled "An Act Authorizing the Secretary
of Agriculture and Natural Resources to Sell or
Lease Land of the Private Domain of the Government of the
Philippine Islands (now Republic of the Philippines)",
enacted on 9 March 1922. The full text of this statute is
as follows:
Be it enacted by the Senate and House of
Representatives of the Philippines in Legislature
assembled and by the authority of the same:
SECTION 1. The Secretary of Agriculture and Natural
Resources (now Secretary of the Environment and
Natural Resources) is hereby authorized to sell or
lease land of the private domain of the Government
of the Philippine Islands, or any part thereof, to such
persons, corporations or associations as are, under
the provisions of Act Numbered Twenty-eight
hundred and seventy-four, (now Commonwealth
Act No. 141, as amended) known as the Public Land
Act, entitled to apply for the purchase or lease or
agricultural public land.
SECTION 2. The sale of the land referred to in the
preceding section shall, if such land is agricultural,
be made in the manner and subject to the limitations
prescribed in chapters five and six, respectively, of
said Public Land Act, and if it be classified differently,
in conformity with the provisions of chapter nine of
said Act: Provided, however, That the land necessary
for the public service shall be exempt from the
provisions of this Act.
SECTION 3. This Act shall take effect on its approval.
Approved, March 9, 1922. (Emphasis supplied)
Lest it be assumed that Act No. 3038 refers only to
agricultural lands of the private domain of the State, it
must be noted that Chapter 9 of the old Public Land Act
(Act No. 2874) is now Chapter 9 of the present Public
Land Act (Commonwealth Act No. 141, as amended) and
that both statutes refer to: "any tract of land of the public
domain which being neither timber nor mineral land, is
intended to be used for residential purposes or
for commercial or industrial purposes other than
agricultural" (Emphasis supplied).i•t•c-aüsl In other
words, the statute covers the sale or lease or residential,
commercial or industrial land of the private domain of
the State.
Implementing regulations have been issued for the
carrying out of the provisions of Act No. 3038. On 21
December 1954, the then Secretary of Agriculture and
Natural Resources promulgated Lands Administrative
Orders Nos. 7-6 and 7-7 which were entitled,
respectively: "Supplementary Regulations Governing the
Sale of the Lands of the Private Domain of the Republic of
the Philippines"; and "Supplementary Regulations
Governing the Lease of Lands of Private Domain of the
Republic of the Philippines" (text in 51 O.G. 28-29
[1955]).
It is perhaps well to add that Act No. 3038, although now
sixty-eight (68) years old, is still in effect and has not
been repealed. 1
Specific legislative authorization for disposition of
particular patrimonial properties of the State is
illustrated by certain earlier statutes. The first of these
was Act No. 1120, enacted on 26 April 1904, which
provided for the disposition of the friar lands, purchased
by the Government from the Roman Catholic Church,
to bona fide settlers and occupants thereof or to other
persons. In Jacinto v. Director of Lands (49 Phil. 853
[1926]), these friar lands were held to be private and
patrimonial properties of the State. Act No. 2360, enacted
on -28 February 1914, authorized the sale of the San
Lazaro Estate located in the City of Manila, which had
also been purchased by the Government from the Roman
Catholic Church. In January 1916, Act No. 2555 amended
Act No. 2360 by including therein all lands and buildings
owned by the Hospital and the Foundation of San Lazaro
theretofor leased by private persons, and which were
also acquired by the Philippine Government.
After the enactment in 1922 of Act No. 3038, there
appears, to my knowledge, to be only one statute
authorizing the President to dispose of a specific piece of
property. This statute is Republic Act No. 905, enacted on
20 June 1953, which authorized the
President to sell an Identified parcel of land of the private
domain of the National Government to the National Press
Club of the Philippines, and to other recognized national
associations of professionals with academic standing, for
the nominal price of P1.00. It appears relevant to note
that Republic Act No. 905 was not an outright disposition
in perpetuity of the property involved- it provided for
reversion of the property to the National Government in
case the National Press Club stopped using it for its
headquarters. What Republic Act No. 905 authorized was
really a donation, and not a sale.
The basic submission here made is that Act No. 3038
provides standing legislative authorization for
disposition of the Roppongi property which, in my view,
has been converted into patrimonial property of the
Republic. 2
To some, the submission that Act No. 3038 applies not
only to lands of the private domain of the State located in
the Philippines but also to patrimonial property found
outside the Philippines, may appear strange or unusual. I
respectfully submit that such position is not any more
unusual or strange than the assumption that Article 420
of the Civil Code applies not only to property of the
Republic located within Philippine territory but also to
property found outside the boundaries of the Republic.
It remains to note that under the well-settled doctrine
that heads of Executive Departments are alter egos of the
President (Villena v. Secretary of the Interior, 67 Phil. 451
[1939]), and in view of the constitutional power of
34
control exercised by the President over department
heads (Article VII, Section 17,1987 Constitution), the
President herself may carry out the function or duty that
is specifically lodged in the Secretary of the Department
of Environment and Natural Resources (Araneta v.
Gatmaitan 101 Phil. 328 [1957]). At the very least, the
President retains the power to approve or disapprove
the exercise of that function or duty when done by the
Secretary of Environment and Natural Resources.

It is hardly necessary to add that the foregoing analyses

and submissions relate only to the austere question of
existence of legal power or authority. They have nothing
to do with much debated questions of wisdom or
propriety or relative desirability either of the proposed
disposition itself or of the proposed utilization of the
anticipated proceeds of the property involved. These
latter types of considerations He within the sphere of
responsibility of the political departments of
government the Executive and the Legislative
authorities.

For all the foregoing, I vote to dismiss the Petitions for

Prohibition in both G.R. Nos. 92013 and 92047.

Fernan, C.J., Narvasa, Gancayco, Cortes and Medialdea, JJ.,

concurring.

35
 Republic of the Philippines
SUPREME COURT
Manila
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 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
36
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 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
37
 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
38
1, 1992. Section 5(d) of the new Code provides that rights
and obligations existing on the date of effectivity of the
new Code and arising out of contracts or any other
source of prestation involving a local government unit
shall be governed by the original terms and conditions of
the said contracts or the law in force at the time such
rights were vested.

ACCORDINGLY, the petition is GRANTED and the

decision of the respondent Regional Trial Court dated
December 17, 1990 which granted the writ of
preliminary injunction enjoining petitioner as PNP
Superintendent, Metropolitan Traffic Command from
enforcing the demolition of market stalls along J. 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.

39

EN BANC
G.R. No. 133250 July 9, 2002
FRANCISCO I. CHAVEZ, petitioner,
vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL
BAY DEVELOPMENT CORPORATION, respondents.
CARPIO, J.:
This is an original Petition for Mandamus with prayer for
a writ of preliminary injunction and a temporary
restraining order. The petition seeks to compel the
Public Estates Authority ("PEA" for brevity) to disclose
all facts on PEA's then on-going renegotiations with
Amari Coastal Bay and Development Corporation
("AMARI" for brevity) to reclaim portions of Manila Bay.
The petition further seeks to enjoin PEA from signing a
new agreement with AMARI involving such reclamation.
The Facts
On November 20, 1973, the government, through the
Commissioner of Public Highways, signed a contract with
the Construction and Development Corporation of the
Philippines ("CDCP" for brevity) to reclaim certain
foreshore and offshore areas of Manila Bay. The contract
also included the construction of Phases I and II of the
Manila-Cavite Coastal Road. CDCP obligated itself to
carry out all the works in consideration of fifty percent of
the total reclaimed land.
On February 4, 1977, then President Ferdinand E. Marcos
issued Presidential Decree No. 1084 creating PEA. PD No.
1084 tasked PEA "to reclaim land, including foreshore
and submerged areas," and "to develop, improve,
acquire, x x x lease and sell any and all kinds of
lands."1 On the same date, then President Marcos issued
Presidential Decree No. 1085 transferring to PEA the
"lands reclaimed in the foreshore and offshore of the
Manila Bay"2 under the Manila-Cavite Coastal Road and
Reclamation Project (MCCRRP).
On December 29, 1981, then President Marcos issued a
memorandum directing PEA to amend its contract with
CDCP, so that "[A]ll future works in MCCRRP x x x shall
be funded and owned by PEA." Accordingly, PEA and
CDCP executed a Memorandum of Agreement dated
December 29, 1981, which stated:
"(i) CDCP shall undertake all reclamation,
construction, and such other works in the MCCRRP
as may be agreed upon by the parties, to be paid
according to progress of works on a unit price/lump
sum basis for items of work to be agreed upon,
subject to price escalation, retention and other
terms and conditions provided for in Presidential
Decree No. 1594. All the financing required for such
works shall be provided by PEA.
xxx
(iii) x x x CDCP shall give up all its development
rights and hereby agrees to cede and transfer in
favor of PEA, all of the rights, title, interest and
participation of CDCP in and to all the areas of land
reclaimed by CDCP in the MCCRRP as of December
30, 1981 which have not yet been sold, transferred
or otherwise disposed of by CDCP as of said date,
which areas consist of approximately Ninety-Nine
Thousand Four Hundred Seventy Three (99,473)
square meters in the Financial Center Area covered
by land pledge No. 5 and approximately Three
Million Three Hundred Eighty Two Thousand Eight
Hundred Eighty Eight (3,382,888) square meters of
reclaimed areas at varying elevations above Mean
Low Water Level located outside the Financial
Center Area and the First Neighborhood Unit."3
On January 19, 1988, then President Corazon C. Aquino
issued Special Patent No. 3517, granting and transferring
to PEA "the parcels of land so reclaimed under the
Manila-Cavite Coastal Road and Reclamation Project
(MCCRRP) containing a total area of one million nine
hundred fifteen thousand eight hundred ninety four
(1,915,894) square meters." Subsequently, on April 9,
1988, the Register of Deeds of the Municipality of
Parañaque issued Transfer Certificates of Title Nos.
7309, 7311, and 7312, in the name of PEA, covering the
three reclaimed islands known as the "Freedom Islands"
located at the southern portion of the Manila-Cavite
Coastal Road, Parañaque City. The Freedom Islands have
a total land area of One Million Five Hundred Seventy
Eight Thousand Four Hundred and Forty One
(1,578,441) square meters or 157.841 hectares.
On April 25, 1995, PEA entered into a Joint Venture
Agreement ("JVA" for brevity) with AMARI, a private
corporation, to develop the Freedom Islands. The JVA
also required the reclamation of an additional 250
hectares of submerged areas surrounding these islands
to complete the configuration in the Master Development
Plan of the Southern Reclamation Project-MCCRRP. PEA
and AMARI entered into the JVA through negotiation
without public bidding.4 On April 28, 1995, the Board of
Directors of PEA, in its Resolution No. 1245, confirmed
the JVA.5 On June 8, 1995, then President Fidel V. Ramos,
through then Executive Secretary Ruben Torres,
approved the JVA.6
On November 29, 1996, then Senate President Ernesto
Maceda delivered a privilege speech in the Senate and
denounced the JVA as the "grandmother of all scams." As
a result, the Senate Committee on Government
Corporations and Public Enterprises, and the Committee
on Accountability of Public Officers and Investigations,
conducted a joint investigation. The Senate Committees
reported the results of their investigation in Senate
Committee Report No. 560 dated September 16,
1997.7 Among the conclusions of their report are: (1) the
reclaimed lands PEA seeks to transfer to AMARI under
the JVA are lands of the public domain which the
government has not classified as alienable lands and
therefore PEA cannot alienate these lands; (2) the
certificates of title covering the Freedom Islands are thus
void, and (3) the JVA itself is illegal.
On December 5, 1997, then President Fidel V. Ramos
issued Presidential Administrative Order No. 365
creating a Legal Task Force to conduct a study on the
legality of the JVA in view of Senate Committee Report
No. 560. The members of the Legal Task Force were the
Secretary of Justice,8 the Chief Presidential Legal
Counsel,9 and the Government Corporate Counsel.10 The
40
Legal Task Force upheld the legality of the JVA, contrary
to the conclusions reached by the Senate Committees.11
On April 4 and 5, 1998, the Philippine Daily
Inquirer and Today published reports that there were
on-going renegotiations between PEA and AMARI under
an order issued by then President Fidel V. Ramos.
According to these reports, PEA Director Nestor Kalaw,
PEA Chairman Arsenio Yulo and retired Navy Officer
Sergio Cruz composed the negotiating panel of PEA.
On April 13, 1998, Antonio M. Zulueta filed before the
Court a Petition for Prohibition with Application for the
Issuance of a Temporary Restraining Order and
Preliminary Injunction docketed as G.R. No. 132994
seeking to nullify the JVA. The Court dismissed the
petition "for unwarranted disregard of judicial hierarchy,
without prejudice to the refiling of the case before the
proper court."12
On April 27, 1998, petitioner Frank I. Chavez
("Petitioner" for brevity) as a taxpayer, filed the
instant Petition for Mandamus with Prayer for the
Issuance of a Writ of Preliminary Injunction and
Temporary Restraining Order. Petitioner contends the
government stands to lose billions of pesos in the sale by
PEA of the reclaimed lands to AMARI. Petitioner prays
that PEA publicly disclose the terms of any renegotiation
of the JVA, invoking Section 28, Article II, and Section 7,
Article III, of the 1987 Constitution on the right of the
people to information on matters of public concern.
Petitioner assails the sale to AMARI of lands of the public
domain as a blatant violation of Section 3, Article XII of
the 1987 Constitution prohibiting the sale of alienable
lands of the public domain to private corporations.
Finally, petitioner asserts that he seeks to enjoin the loss
of billions of pesos in properties of the State that are of
public dominion.
After several motions for extension of time,13 PEA and
AMARI filed their Comments on October 19, 1998 and
June 25, 1998, respectively. Meanwhile, on December 28,
1998, petitioner filed an Omnibus Motion: (a) to require
PEA to submit the terms of the renegotiated PEA-AMARI
contract; (b) for issuance of a temporary restraining
order; and (c) to set the case for hearing on oral
argument. Petitioner filed a Reiterative Motion for
Issuance of a TRO dated May 26, 1999, which the Court
denied in a Resolution dated June 22, 1999.
In a Resolution dated March 23, 1999, the Court gave due
course to the petition and required the parties to file
their respective memoranda.
On March 30, 1999, PEA and AMARI signed the Amended
Joint Venture Agreement ("Amended JVA," for brevity).
On May 28, 1999, the Office of the President under the
administration of then President Joseph E. Estrada
approved the Amended JVA.
Due to the approval of the Amended JVA by the Office of
the President, petitioner now prays that on
"constitutional and statutory grounds the renegotiated
contract be declared null and void."14
The Issues
The issues raised by petitioner, PEA15 and AMARI16 are
as follows:
I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR
IN THE PETITION ARE MOOT AND ACADEMIC
BECAUSE OF SUBSEQUENT EVENTS;
II. WHETHER THE PETITION MERITS DISMISSAL
FOR FAILING TO OBSERVE THE PRINCIPLE
GOVERNING THE HIERARCHY OF COURTS;
III. WHETHER THE PETITION MERITS DISMISSAL
FOR NON-EXHAUSTION OF ADMINISTRATIVE
REMEDIES;
IV. WHETHER PETITIONER HAS LOCUS STANDI TO
BRING THIS SUIT;
V. WHETHER THE CONSTITUTIONAL RIGHT TO
INFORMATION INCLUDES OFFICIAL INFORMATION
ON ON-GOING NEGOTIATIONS BEFORE A FINAL
AGREEMENT;
VI. WHETHER THE STIPULATIONS IN THE
AMENDED JOINT VENTURE AGREEMENT FOR THE
TRANSFER TO AMARI OF CERTAIN LANDS,
RECLAIMED AND STILL TO BE RECLAIMED,
VIOLATE THE 1987 CONSTITUTION; AND
VII. WHETHER THE COURT IS THE PROPER FORUM
FOR RAISING THE ISSUE OF WHETHER THE
AMENDED JOINT VENTURE AGREEMENT IS
GROSSLY DISADVANTAGEOUS TO THE
GOVERNMENT.
The Court's Ruling
First issue: whether the principal reliefs prayed for in
the petition are moot and academic because of
subsequent events.
The petition prays that PEA publicly disclose the "terms
and conditions of the on-going negotiations for a new
agreement." The petition also prays that the Court enjoin
PEA from "privately entering into, perfecting and/or
executing any new agreement with AMARI."
PEA and AMARI claim the petition is now moot and
academic because AMARI furnished petitioner on June
21, 1999 a copy of the signed Amended JVA containing
the terms and conditions agreed upon in the
renegotiations. Thus, PEA has satisfied petitioner's
prayer for a public disclosure of the renegotiations.
Likewise, petitioner's prayer to enjoin the signing of the
Amended JVA is now moot because PEA and AMARI have
already signed the Amended JVA on March 30, 1999.
Moreover, the Office of the President has approved the
Amended JVA on May 28, 1999.
Petitioner counters that PEA and AMARI cannot avoid
the constitutional issue by simply fast-tracking the
signing and approval of the Amended JVA before the
Court could act on the issue. Presidential approval does
not resolve the constitutional issue or remove it from the
ambit of judicial review.
We rule that the signing of the Amended JVA by PEA and
AMARI and its approval by the President cannot operate
to moot the petition and divest the Court of its
jurisdiction. PEA and AMARI have still to implement the
Amended JVA. The prayer to enjoin the signing of the
Amended JVA on constitutional grounds necessarily
includes preventing its implementation if in the
meantime PEA and AMARI have signed one in violation
41
of the Constitution. Petitioner's principal basis in
assailing the renegotiation of the JVA is its violation of
Section 3, Article XII of the Constitution, which prohibits
the government from alienating lands of the public
domain to private corporations. If the Amended JVA
indeed violates the Constitution, it is the duty of the Court
to enjoin its implementation, and if already
implemented, to annul the effects of such
unconstitutional contract.
The Amended JVA is not an ordinary commercial
contract but one which seeks to transfer title and
ownership to 367.5 hectares of reclaimed lands and
submerged areas of Manila Bay to a single private
corporation. It now becomes more compelling for the
Court to resolve the issue to insure the government itself
does not violate a provision of the Constitution intended
to safeguard the national patrimony. Supervening
events, whether intended or accidental, cannot prevent
the Court from rendering a decision if there is a grave
violation of the Constitution. In the instant case, if the
Amended JVA runs counter to the Constitution, the Court
can still prevent the transfer of title and ownership of
alienable lands of the public domain in the name of
AMARI. Even in cases where supervening events had
made the cases moot, the Court did not hesitate to
resolve the legal or constitutional issues raised to
formulate controlling principles to guide the bench, bar,
and the public.17
Also, the instant petition is a case of first impression. All
previous decisions of the Court involving Section 3,
Article XII of the 1987 Constitution, or its counterpart
provision in the 1973
Constitution,18 covered agricultural lands sold to
private corporations which acquired the lands from
private parties. The transferors of the private
corporations claimed or could claim the right to judicial
confirmation of their imperfect titles19 under Title II of
Commonwealth Act. 141 ("CA No. 141" for brevity). In
the instant case, AMARI seeks to acquire from PEA, a
public corporation, reclaimed lands and submerged
areas for non-agricultural purposes by purchase under
PD No. 1084 (charter of PEA) and Title III of CA No. 141.
Certain undertakings by AMARI under the Amended JVA
constitute the consideration for the purchase. Neither
AMARI nor PEA can claim judicial confirmation of their
titles because the lands covered by the Amended JVA are
newly reclaimed or still to be reclaimed. Judicial
confirmation of imperfect title requires open,
continuous, exclusive and notorious occupation of
agricultural lands of the public domain for at least thirty
years since June 12, 1945 or earlier. Besides, the deadline
for filing applications for judicial confirmation of
imperfect title expired on December 31, 1987.20
Lastly, there is a need to resolve immediately the
constitutional issue raised in this petition because of the
possible transfer at any time by PEA to AMARI of title and
ownership to portions of the reclaimed lands. Under the
Amended JVA, PEA is obligated to transfer to AMARI the
latter's seventy percent proportionate share in the
reclaimed areas as the reclamation progresses. The
Amended JVA even allows AMARI to mortgage at any
time the entire reclaimed area to raise financing for the
reclamation project.21
Second issue: whether the petition merits dismissal for
failing to observe the principle governing the
hierarchy of courts.
PEA and AMARI claim petitioner ignored the judicial
hierarchy by seeking relief directly from the Court. The
principle of hierarchy of courts applies generally to cases
involving factual questions. As it is not a trier of facts, the
Court cannot entertain cases involving factual issues. The
instant case, however, raises constitutional issues of
transcendental importance to the public.22 The Court can
resolve this case without determining any factual issue
related to the case. Also, the instant case is a petition for
mandamus which falls under the original jurisdiction of
the Court under Section 5, Article VIII of the Constitution.
We resolve to exercise primary jurisdiction over the
instant case.
Third issue: whether the petition merits dismissal for
non-exhaustion of administrative remedies.
PEA faults petitioner for seeking judicial intervention in
compelling PEA to disclose publicly certain information
without first asking PEA the needed information. PEA
claims petitioner's direct resort to the Court violates the
principle of exhaustion of administrative remedies. It
also violates the rule that mandamus may issue only if
there is no other plain, speedy and adequate remedy in
the ordinary course of law.
PEA distinguishes the instant case from Tañada v.
Tuvera23 where the Court granted the petition for
mandamus even if the petitioners there did not initially
demand from the Office of the President the publication
of the presidential decrees. PEA points out that in
Tañada, the Executive Department had an affirmative
statutory duty under Article 2 of the Civil Code24 and
Section 1 of Commonwealth Act No. 63825 to publish the
presidential decrees. There was, therefore, no need for
the petitioners in Tañada to make an initial demand from
the Office of the President. In the instant case, PEA claims
it has no affirmative statutory duty to disclose publicly
information about its renegotiation of the JVA. Thus, PEA
asserts that the Court must apply the principle of
exhaustion of administrative remedies to the instant case
in view of the failure of petitioner here to demand
initially from PEA the needed information.
The original JVA sought to dispose to AMARI public lands
held by PEA, a government corporation. Under Section
79 of the Government Auditing Code,26 the disposition of
government lands to private parties requires public
bidding. PEA was under a positive legal duty to
disclose to the public the terms and conditions for the
sale of its lands. The law obligated PEA to make this
public disclosure even without demand from petitioner
or from anyone. PEA failed to make this public disclosure
because the original JVA, like the Amended JVA, was the
result of a negotiated contract, not of a public bidding.
Considering that PEA had an affirmative statutory duty
to make the public disclosure, and was even in breach of
this legal duty, petitioner had the right to seek direct
judicial intervention.
Moreover, and this alone is determinative of this issue,
the principle of exhaustion of administrative remedies
does not apply when the issue involved is a purely legal
or constitutional question.27 The principal issue in the
instant case is the capacity of AMARI to acquire lands
held by PEA in view of the constitutional ban prohibiting
the alienation of lands of the public domain to private
corporations. We rule that the principle of exhaustion of
administrative remedies does not apply in the instant
case.
Fourth issue: whether petitioner has locus standi to
bring this suit
PEA argues that petitioner has no standing to
institute mandamus proceedings to enforce his
constitutional right to information without a showing
42
that PEA refused to perform an affirmative duty imposed
on PEA by the Constitution. PEA also claims that
petitioner has not shown that he will suffer any concrete
injury because of the signing or implementation of the
Amended JVA. Thus, there is no actual controversy
requiring the exercise of the power of judicial review.
The petitioner has standing to bring this taxpayer's suit
because the petition seeks to compel PEA to comply with
its constitutional duties. There are two constitutional
issues involved here. First is the right of citizens to
information on matters of public concern. Second is the
application of a constitutional provision intended to
insure the equitable distribution of alienable lands of the
public domain among Filipino citizens. The thrust of the
first issue is to compel PEA to disclose publicly
information on the sale of government lands worth
billions of pesos, information which the Constitution and
statutory law mandate PEA to disclose. The thrust of the
second issue is to prevent PEA from alienating hundreds
of hectares of alienable lands of the public domain in
violation of the Constitution, compelling PEA to comply
with a constitutional duty to the nation.
Moreover, the petition raises matters of transcendental
importance to the public. In Chavez v. PCGG,28 the Court
upheld the right of a citizen to bring a taxpayer's suit on
matters of transcendental importance to the public, thus
- possesses the right.'
"Besides, petitioner emphasizes, the matter of
recovering the ill-gotten wealth of the Marcoses is
an issue of 'transcendental importance to the
public.' He asserts that ordinary taxpayers have a
right to initiate and prosecute actions questioning
the validity of acts or orders of government agencies
or instrumentalities, if the issues raised are of
'paramount public interest,' and if they
'immediately affect the social, economic and moral
well being of the people.'
Moreover, the mere fact that he is a citizen satisfies
the requirement of personal interest, when the
proceeding involves the assertion of a public right,
such as in this case. He invokes several decisions of
this Court which have set aside the procedural
matter of locus standi, when the subject of the case
involved public interest.
xxx
In Tañada v. Tuvera, the Court asserted that when
the issue concerns a public right and the object of
mandamus is to obtain the enforcement of a public
duty, the people are regarded as the real parties in
interest; and because it is sufficient that petitioner is
a citizen and as such is interested in the execution of
the laws, he need not show that he has any legal or
special interest in the result of the action. In the
aforesaid case, the petitioners sought to enforce
their right to be informed on matters of public
concern, a right then recognized in Section 6, Article
IV of the 1973 Constitution, in connection with the
rule that laws in order to be valid and enforceable
must be published in the Official Gazette or
otherwise effectively promulgated. In ruling for the
petitioners' legal standing, the Court declared that
the right they sought to be enforced 'is a public right
recognized by no less than the fundamental law of
the land.'
Legaspi v. Civil Service Commission, while reiterating
Tañada, further declared that 'when a mandamus
proceeding involves the assertion of a public right,
the requirement of personal interest is satisfied by
the mere fact that petitioner is a citizen and,
therefore, part of the general 'public' which
Further, in Albano v. Reyes, we said that while
expenditure of public funds may not have been
involved under the questioned contract for the
development, management and operation of the
Manila International Container Terminal, 'public
interest [was] definitely involved considering the
important role [of the subject contract] . . . in the
economic development of the country and the
magnitude of the financial consideration involved.'
We concluded that, as a consequence, the disclosure
provision in the Constitution would constitute
sufficient authority for upholding the petitioner's
standing.
Similarly, the instant petition is anchored on the
right of the people to information and access to
official records, documents and papers — a right
guaranteed under Section 7, Article III of the 1987
Constitution. Petitioner, a former solicitor general,
is a Filipino citizen. Because of the satisfaction of the
two basic requisites laid down by decisional law to
sustain petitioner's legal standing, i.e. (1) the
enforcement of a public right (2) espoused by a
Filipino citizen, we rule that the petition at bar
should be allowed."
We rule that since the instant petition, brought by a
citizen, involves the enforcement of constitutional rights
- to information and to the equitable diffusion of natural
resources - matters of transcendental public importance,
the petitioner has the requisite locus standi.
Fifth issue: whether the constitutional right to
information includes official information on on-going
negotiations before a final agreement.
Section 7, Article III of the Constitution explains the
people's right to information on matters of public
concern in this manner:
"Sec. 7. The right of the people to information on
matters of public concern shall be recognized.
Access to official records, and to documents, and
papers pertaining to official acts, transactions, or
decisions, as well as to government research data
used as basis for policy development, shall be
afforded the citizen, subject to such limitations as
may be provided by law." (Emphasis supplied)
The State policy of full transparency in all transactions
involving public interest reinforces the people's right to
information on matters of public concern. This State
policy is expressed in Section 28, Article II of the
Constitution, thus:
"Sec. 28. Subject to reasonable conditions
prescribed by law, the State adopts and implements
a policy of full public disclosure of all its
transactions involving public interest." (Emphasis
supplied)
These twin provisions of the Constitution seek to
promote transparency in policy-making and in the
operations of the government, as well as provide the
people sufficient information to exercise effectively
other constitutional rights. These twin provisions are
essential to the exercise of freedom of expression. If the
43
government does not disclose its official acts,
transactions and decisions to citizens, whatever citizens
say, even if expressed without any restraint, will be
speculative and amount to nothing. These twin
provisions are also essential to hold public officials "at all
times x x x accountable to the people,"29 for unless
citizens have the proper information, they cannot hold
public officials accountable for anything. Armed with the
right information, citizens can participate in public
discussions leading to the formulation of government
policies and their effective implementation. An informed
citizenry is essential to the existence and proper
functioning of any democracy. As explained by the Court
in Valmonte v. Belmonte, Jr.30 –
"An essential element of these freedoms is to keep
open a continuing dialogue or process of
communication between the government and the
people. It is in the interest of the State that the
channels for free political discussion be maintained
to the end that the government may perceive and be
responsive to the people's will. Yet, this open
dialogue can be effective only to the extent that the
citizenry is informed and thus able to formulate its
will intelligently. Only when the participants in the
discussion are aware of the issues and have access
to information relating thereto can such bear fruit."
PEA asserts, citing Chavez v. PCGG,31 that in cases of on-
going negotiations the right to information is limited to
"definite propositions of the government." PEA
maintains the right does not include access to "intra-
agency or inter-agency recommendations or
communications during the stage when common
assertions are still in the process of being formulated or
are in the 'exploratory stage'."
Also, AMARI contends that petitioner cannot invoke the
right at the pre-decisional stage or before the closing of
the transaction. To support its contention, AMARI cites
the following discussion in the 1986 Constitutional
Commission:
"Mr. Suarez. And when we say 'transactions' which
should be distinguished from contracts, agreements,
or treaties or whatever, does the Gentleman refer to
the steps leading to the consummation of the
contract, or does he refer to the contract itself?
Mr. Ople: The 'transactions' used here, I suppose
is generic and therefore, it can cover both steps
leading to a contract and already a consummated
contract, Mr. Presiding Officer.
Mr. Suarez: This contemplates inclusion of
negotiations leading to the consummation of the
transaction.
Mr. Ople: Yes, subject only to reasonable
safeguards on the national interest.
Mr. Suarez: Thank you."32 (Emphasis supplied)
AMARI argues there must first be a consummated
contract before petitioner can invoke the right. Requiring
government officials to reveal their deliberations at the
pre-decisional stage will degrade the quality of decision-
making in government agencies. Government officials
will hesitate to express their real sentiments during
deliberations if there is immediate public dissemination
of their discussions, putting them under all kinds of
pressure before they decide.
We must first distinguish between information the law
on public bidding requires PEA to disclose publicly, and
information the constitutional right to information
requires PEA to release to the public. Before the
consummation of the contract, PEA must, on its own and
without demand from anyone, disclose to the public
matters relating to the disposition of its property. These
include the size, location, technical description and
nature of the property being disposed of, the terms and
conditions of the disposition, the parties qualified to bid,
the minimum price and similar information. PEA must
prepare all these data and disclose them to the public at
the start of the disposition process, long before the
consummation of the contract, because the Government
Auditing Code requires public bidding. If PEA fails to
make this disclosure, any citizen can demand from PEA
this information at any time during the bidding process.
Information, however, on on-going evaluation or
review of bids or proposals being undertaken by the
bidding or review committee is not immediately
accessible under the right to information. While the
evaluation or review is still on-going, there are no
"official acts, transactions, or decisions" on the bids or
proposals. However, once the committee makes
its official recommendation, there arises a "definite
proposition" on the part of the government. From this
moment, the public's right to information attaches, and
any citizen can access all the non-proprietary
information leading to such definite proposition.
In Chavez v. PCGG,33 the Court ruled as follows:
"Considering the intent of the framers of the
Constitution, we believe that it is incumbent upon the
PCGG and its officers, as well as other government
representatives, to disclose sufficient public
information on any proposed settlement they have
decided to take up with the ostensible owners and
holders of ill-gotten wealth. Such information,
though, must pertain to definite propositions of the
government, not necessarily to intra-agency or inter-
agency recommendations or communications during
the stage when common assertions are still in the
process of being formulated or are in the
"exploratory" stage. There is need, of course, to
observe the same restrictions on disclosure of
information in general, as discussed earlier – such as
on matters involving national security, diplomatic or
foreign relations, intelligence and other classified
information." (Emphasis supplied)
Contrary to AMARI's contention, the commissioners of
the 1986 Constitutional Commission understood that the
right to information "contemplates inclusion of
negotiations leading to the consummation of the
transaction." Certainly, a consummated contract is not a
requirement for the exercise of the right to information.
Otherwise, the people can never exercise the right if no
contract is consummated, and if one is consummated, it
may be too late for the public to expose its
defects.1âwphi1.nêt
Requiring a consummated contract will keep the public
in the dark until the contract, which may be grossly
disadvantageous to the government or even illegal,
becomes a fait accompli. This negates the State policy of
full transparency on matters of public concern, a
situation which the framers of the Constitution could not
have intended. Such a requirement will prevent the
citizenry from participating in the public discussion of
any proposed contract, effectively truncating a basic
right enshrined in the Bill of Rights. We can allow neither
an emasculation of a constitutional right, nor a retreat by
44
the State of its avowed "policy of full disclosure of all its
transactions involving public interest."
The right covers three categories of information which
are "matters of public concern," namely: (1) official
records; (2) documents and papers pertaining to official
acts, transactions and decisions; and (3) government
research data used in formulating policies. The first
category refers to any document that is part of the public
records in the custody of government agencies or
officials. The second category refers to documents and
papers recording, evidencing, establishing, confirming,
supporting, justifying or explaining official acts,
transactions or decisions of government agencies or
officials. The third category refers to research data,
whether raw, collated or processed, owned by the
government and used in formulating government
policies.
The information that petitioner may access on the
renegotiation of the JVA includes evaluation reports,
recommendations, legal and expert opinions, minutes of
meetings, terms of reference and other documents
attached to such reports or minutes, all relating to the
JVA. However, the right to information does not compel
PEA to prepare lists, abstracts, summaries and the like
relating to the renegotiation of the JVA.34 The right only
affords access to records, documents and papers, which
means the opportunity to inspect and copy them. One
who exercises the right must copy the records,
documents and papers at his expense. The exercise of the
right is also subject to reasonable regulations to protect
the integrity of the public records and to minimize
disruption to government operations, like rules
specifying when and how to conduct the inspection and
copying.35
The right to information, however, does not extend to
matters recognized as privileged information under the
separation of powers.36 The right does not also apply to
information on military and diplomatic secrets,
information affecting national security, and information
on investigations of crimes by law enforcement agencies
before the prosecution of the accused, which courts have
long recognized as confidential.37 The right may also be
subject to other limitations that Congress may impose by
law.
There is no claim by PEA that the information demanded
by petitioner is privileged information rooted in the
separation of powers. The information does not cover
Presidential conversations, correspondences, or
discussions during closed-door Cabinet meetings which,
like internal deliberations of the Supreme Court and
other collegiate courts, or executive sessions of either
house of Congress,38 are recognized as confidential. This
kind of information cannot be pried open by a co-equal
branch of government. A frank exchange of exploratory
ideas and assessments, free from the glare of publicity
and pressure by interested parties, is essential to protect
the independence of decision-making of those tasked to
exercise Presidential, Legislative and Judicial
power.39 This is not the situation in the instant case.
We rule, therefore, that the constitutional right to
information includes official information on on-going
negotiations before a final contract. The information,
however, must constitute definite propositions by the
government and should not cover recognized exceptions
like privileged information, military and diplomatic
secrets and similar matters affecting national security
and public order.40 Congress has also prescribed other
limitations on the right to information in several
legislations.41
Sixth issue: whether stipulations in the Amended JVA
for the transfer to AMARI of lands, reclaimed or to be
reclaimed, violate the Constitution.
The Regalian Doctrine
The ownership of lands reclaimed from foreshore and
submerged areas is rooted in the Regalian doctrine
which holds that the State owns all lands and waters of
the public domain. Upon the Spanish conquest of the
Philippines, ownership of all "lands, territories and
possessions" in the Philippines passed to the Spanish
Crown.42 The King, as the sovereign ruler and
representative of the people, acquired and owned all
lands and territories in the Philippines except those he
disposed of by grant or sale to private individuals.
The 1935, 1973 and 1987 Constitutions adopted the
Regalian doctrine substituting, however, the State, in lieu
of the King, as the owner of all lands and waters of the
public domain. The Regalian doctrine is the foundation of
the time-honored principle of land ownership that "all
lands that were not acquired from the Government,
either by purchase or by grant, belong to the public
domain."43 Article 339 of the Civil Code of 1889, which is
now Article 420 of the Civil Code of 1950, incorporated
the Regalian doctrine.
Ownership and Disposition of Reclaimed Lands
The Spanish Law of Waters of 1866 was the first
statutory law governing the ownership and disposition
of reclaimed lands in the Philippines. On May 18, 1907,
the Philippine Commission enacted Act No. 1654 which
provided for the lease, but not the sale, of reclaimed
lands of the government to corporations and
individuals. Later, on November 29, 1919, the Philippine
Legislature approved Act No. 2874, the Public Land Act,
which authorized the lease, but not the sale, of
reclaimed lands of the government to corporations
and individuals. On November 7, 1936, the National
Assembly passed Commonwealth Act No. 141, also
known as the Public Land Act, which authorized the
lease, but not the sale, of reclaimed lands of the
government to corporations and individuals. CA No.
141 continues to this day as the general law governing
the classification and disposition of lands of the public
domain.
The Spanish Law of Waters of 1866 and the Civil Code
of 1889
Under the Spanish Law of Waters of 1866, the shores,
bays, coves, inlets and all waters within the maritime
zone of the Spanish territory belonged to the public
domain for public use.44 The Spanish Law of Waters of
1866 allowed the reclamation of the sea under Article 5,
which provided as follows:
"Article 5. Lands reclaimed from the sea in
consequence of works constructed by the State, or
by the provinces, pueblos or private persons, with
proper permission, shall become the property of the
party constructing such works, unless otherwise
provided by the terms of the grant of authority."
Under the Spanish Law of Waters, land reclaimed from
the sea belonged to the party undertaking the
reclamation, provided the government issued the
45
necessary permit and did not reserve ownership of the
reclaimed land to the State.
Article 339 of the Civil Code of 1889 defined property of
public dominion as follows:
"Art. 339. Property of public dominion is –
1. That devoted to public use, such as roads, canals,
rivers, torrents, ports and bridges constructed by
the State, riverbanks, shores, roadsteads, and that of
a similar character;
2. That belonging exclusively to the State which,
without being of general public use, is employed in
some public service, or in the development of the
national wealth, such as walls, fortresses, and other
works for the defense of the territory, and mines,
until granted to private individuals."
Property devoted to public use referred to property open
for use by the public. In contrast, property devoted to
public service referred to property used for some specific
public service and open only to those authorized to use
the property.
Property of public dominion referred not only to
property devoted to public use, but also to property not
so used but employed to develop the national wealth.
This class of property constituted property of public
dominion although employed for some economic or
commercial activity to increase the national wealth.
Article 341 of the Civil Code of 1889 governed the re-
classification of property of public dominion into private
property, to wit:
"Art. 341. Property of public dominion, when no
longer devoted to public use or to the defense of the
territory, shall become a part of the private property
of the State."
This provision, however, was not self-executing. The
legislature, or the executive department pursuant to law,
must declare the property no longer needed for public
use or territorial defense before the government could
lease or alienate the property to private parties.45
Act No. 1654 of the Philippine Commission
On May 8, 1907, the Philippine Commission enacted Act
No. 1654 which regulated the lease of reclaimed and
foreshore lands. The salient provisions of this law were
as follows:
"Section 1. The control and disposition of the
foreshore as defined in existing law, and the title to
all Government or public lands made or
reclaimed by the Government by dredging or
filling or otherwise throughout the Philippine
Islands, shall be retained by the
Government without prejudice to vested rights and
without prejudice to rights conceded to the City of
Manila in the Luneta Extension.
Section 2. (a) The Secretary of the Interior shall
cause all Government or public lands made or
reclaimed by the Government by dredging or filling
or otherwise to be divided into lots or blocks, with
the necessary streets and alleyways located thereon,
and shall cause plats and plans of such surveys to be
prepared and filed with the Bureau of Lands.
(b) Upon completion of such plats and plans
the Governor-General shall give notice to the
public that such parts of the lands so made or
reclaimed as are not needed for public purposes
will be leased for commercial and business
purposes, x x x.
xxx
(e) The leases above provided for shall be
disposed of to the highest and best
bidder therefore, subject to such regulations and
safeguards as the Governor-General may by
executive order prescribe." (Emphasis supplied)
Act No. 1654 mandated that the government should
retain title to all lands reclaimed by the government.
The Act also vested in the government control and
disposition of foreshore lands. Private parties could lease
lands reclaimed by the government only if these lands
were no longer needed for public purpose. Act No. 1654
mandated public bidding in the lease of government
reclaimed lands. Act No. 1654 made government
reclaimed lands sui generis in that unlike other public
lands which the government could sell to private parties,
these reclaimed lands were available only for lease to
private parties.
Act No. 1654, however, did not repeal Section 5 of the
Spanish Law of Waters of 1866. Act No. 1654 did not
prohibit private parties from reclaiming parts of the sea
under Section 5 of the Spanish Law of Waters. Lands
reclaimed from the sea by private parties with
government permission remained private lands.
Act No. 2874 of the Philippine Legislature
On November 29, 1919, the Philippine Legislature
enacted Act No. 2874, the Public Land Act.46 The salient
provisions of Act No. 2874, on reclaimed lands, were as
follows:
"Sec. 6. The Governor-General, upon the
recommendation of the Secretary of Agriculture
and Natural Resources, shall from time to time
classify the lands of the public domain into –
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands, x x x.
Sec. 7. For the purposes of the government and
disposition of alienable or disposable public
lands, the Governor-General, upon
recommendation by the Secretary of Agriculture
and Natural Resources, shall from time to time
declare what lands are open to disposition or
concession under this Act."
Sec. 8. Only those lands shall be declared open to
disposition or concession which have been
officially delimited or classified x x x.
xxx
46
 Sec. 55. Any tract of land of the public domain which,
being neither timber nor mineral land, shall be
classified as suitable for residential purposes or
for commercial, industrial, or other productive
purposes other than agricultural purposes, and
shall be open to disposition or concession, shall be
disposed of under the provisions of this chapter, and
not otherwise.
Sec. 56. The lands disposable under this title shall
be classified as follows:
(a) Lands reclaimed by the Government by
dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water
bordering upon the shores or banks of
navigable lakes or rivers;
(d) Lands not included in any of the foregoing
classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b),
and (c) of section fifty-six shall be disposed of to
private parties by lease only and not otherwise, as
soon as the Governor-General, upon
recommendation by the Secretary of Agriculture
and Natural Resources, shall declare that the
same are not necessary for the public service and
are open to disposition under this chapter. The
lands included in class (d) may be disposed of by
sale or lease under the provisions of this Act."
(Emphasis supplied)
Section 6 of Act No. 2874 authorized the Governor-
General to "classify lands of the public domain into x x x
alienable or disposable"47 lands. Section 7 of the Act
empowered the Governor-General to "declare what
lands are open to disposition or concession." Section 8 of
the Act limited alienable or disposable lands only to
those lands which have been "officially delimited and
classified."
Section 56 of Act No. 2874 stated that lands "disposable
under this title48 shall be classified" as government
reclaimed, foreshore and marshy lands, as well as other
lands. All these lands, however, must be suitable for
residential, commercial, industrial or other
productive non-agricultural purposes. These
provisions vested upon the Governor-General the power
to classify inalienable lands of the public domain into
disposable lands of the public domain. These provisions
also empowered the Governor-General to classify further
such disposable lands of the public domain into
government reclaimed, foreshore or marshy lands of the
public domain, as well as other non-agricultural lands.
Section 58 of Act No. 2874 categorically mandated that
disposable lands of the public domain classified as
government reclaimed, foreshore and marshy
lands "shall be disposed of to private parties by lease
only and not otherwise." The Governor-General, before
allowing the lease of these lands to private parties, must
formally declare that the lands were "not necessary for
the public service." Act No. 2874 reiterated the State
policy to lease and not to sell government reclaimed,
foreshore and marshy lands of the public domain, a
policy first enunciated in 1907 in Act No. 1654.
Government reclaimed, foreshore and marshy lands
remained sui generis, as the only alienable or disposable
lands of the public domain that the government could not
sell to private parties.
The rationale behind this State policy is obvious.
Government reclaimed, foreshore and marshy public
lands for non-agricultural purposes retain their inherent
potential as areas for public service. This is the reason
the government prohibited the sale, and only allowed the
lease, of these lands to private parties. The State always
reserved these lands for some future public service.
Act No. 2874 did not authorize the reclassification of
government reclaimed, foreshore and marshy lands into
other non-agricultural lands under Section 56 (d). Lands
falling under Section 56 (d) were the only lands for non-
agricultural purposes the government could sell to
private parties. Thus, under Act No. 2874, the
government could not sell government reclaimed,
foreshore and marshy lands to private parties, unless the
legislature passed a law allowing their sale.49
Act No. 2874 did not prohibit private parties from
reclaiming parts of the sea pursuant to Section 5 of the
Spanish Law of Waters of 1866. Lands reclaimed from
the sea by private parties with government permission
remained private lands.
Dispositions under the 1935 Constitution
On May 14, 1935, the 1935 Constitution took effect upon
its ratification by the Filipino people. The 1935
Constitution, in adopting the Regalian doctrine, declared
in Section 1, Article XIII, that –
"Section 1. All agricultural, timber, and mineral
lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of
potential energy and other natural resources of the
Philippines belong to the State, and their
disposition, exploitation, development, or
utilization shall be limited to citizens of the
Philippines or to corporations or associations at
least sixty per centum of the capital of which is
owned by such citizens, subject to any existing right,
grant, lease, or concession at the time of the
inauguration of the Government established under
this Constitution. Natural resources, with the
exception of public agricultural land, shall not be
alienated, and no license, concession, or lease for
the exploitation, development, or utilization of any
of the natural resources shall be granted for a period
exceeding twenty-five years, renewable for another
twenty-five years, except as to water rights for
irrigation, water supply, fisheries, or industrial uses
other than the development of water power, in
which cases beneficial use may be the measure and
limit of the grant." (Emphasis supplied)
The 1935 Constitution barred the alienation of all natural
resources except public agricultural lands, which were
the only natural resources the State could alienate. Thus,
foreshore lands, considered part of the State's natural
resources, became inalienable by constitutional fiat,
available only for lease for 25 years, renewable for
another 25 years. The government could alienate
foreshore lands only after these lands were reclaimed
and classified as alienable agricultural lands of the public
domain. Government reclaimed and marshy lands of the
public domain, being neither timber nor mineral lands,
fell under the classification of public agricultural
47
lands.50 However, government reclaimed and marshy
lands, although subject to classification as disposable
public agricultural lands, could only be leased and not
sold to private parties because of Act No. 2874.
The prohibition on private parties from acquiring
ownership of government reclaimed and marshy lands of
the public domain was only a statutory prohibition and
the legislature could therefore remove such prohibition.
The 1935 Constitution did not prohibit individuals and
corporations from acquiring government reclaimed and
marshy lands of the public domain that were classified as
agricultural lands under existing public land laws.
Section 2, Article XIII of the 1935 Constitution provided
as follows:
"Section 2. No private corporation or association
may acquire, lease, or hold public agricultural
lands in excess of one thousand and twenty four
hectares, nor may any individual acquire such
lands by purchase in excess of one hundred and
forty hectares, or by lease in excess of one
thousand and twenty-four hectares, or by
homestead in excess of twenty-four hectares. Lands
adapted to grazing, not exceeding two thousand
hectares, may be leased to an individual, private
corporation, or association." (Emphasis supplied)
Still, after the effectivity of the 1935 Constitution, the
legislature did not repeal Section 58 of Act No. 2874 to
open for sale to private parties government reclaimed
and marshy lands of the public domain. On the contrary,
the legislature continued the long established State
policy of retaining for the government title and
ownership of government reclaimed and marshy lands of
the public domain.
Commonwealth Act No. 141 of the Philippine National
Assembly
On November 7, 1936, the National Assembly approved
Commonwealth Act No. 141, also known as the Public
Land Act, which compiled the then existing laws on lands
of the public domain. CA No. 141, as amended, remains to
this day the existing general law governing the
classification and disposition of lands of the public
domain other than timber and mineral lands.51
Section 6 of CA No. 141 empowers the President to
classify lands of the public domain into "alienable or
disposable"52 lands of the public domain, which prior to
such classification are inalienable and outside the
commerce of man. Section 7 of CA No. 141 authorizes the
President to "declare what lands are open to disposition
or concession." Section 8 of CA No. 141 states that the
government can declare open for disposition or
concession only lands that are "officially delimited and
classified." Sections 6, 7 and 8 of CA No. 141 read as
follows:
"Sec. 6. The President, upon the recommendation
of the Secretary of Agriculture and Commerce,
shall from time to time classify the lands of the
public domain into –
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in like manner transfer
such lands from one class to another,53 for the
purpose of their administration and disposition.
Sec. 7. For the purposes of the administration and
disposition of alienable or disposable public
lands, the President, upon recommendation by the
Secretary of Agriculture and Commerce, shall
from time to time declare what lands are open to
disposition or concession under this Act.
Sec. 8. Only those lands shall be declared open to
disposition or concession which have been
officially delimited and classified and, when
practicable, surveyed, and which have not been
reserved for public or quasi-public uses, nor
appropriated by the Government, nor in any manner
become private property, nor those on which a
private right authorized and recognized by this Act
or any other valid law may be claimed, or which,
having been reserved or appropriated, have ceased
to be so. x x x."
Thus, before the government could alienate or dispose of
lands of the public domain, the President must first
officially classify these lands as alienable or disposable,
and then declare them open to disposition or concession.
There must be no law reserving these lands for public or
quasi-public uses.
The salient provisions of CA No. 141, on government
reclaimed, foreshore and marshy lands of the public
domain, are as follows:
"Sec. 58. Any tract of land of the public domain
which, being neither timber nor mineral land, is
intended to be used for residential purposes or for
commercial, industrial, or other productive
purposes other than agricultural, and is open to
disposition or concession, shall be disposed of
under the provisions of this chapter and not
otherwise.
Sec. 59. The lands disposable under this title shall
be classified as follows:
(a) Lands reclaimed by the Government by
dredging, filling, or other means;
(b) Foreshore;
(c) Marshy lands or lands covered with water
bordering upon the shores or banks of navigable
lakes or rivers;
(d) Lands not included in any of the foregoing
classes.
Sec. 60. Any tract of land comprised under this title
may be leased or sold, as the case may be, to any
person, corporation, or association authorized to
purchase or lease public lands for agricultural
purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b),
and (c) of section fifty-nine shall be disposed of to
private parties by lease only and not otherwise, as
soon as the President, upon recommendation by
the Secretary of Agriculture, shall declare that the
same are not necessary for the public service and
are open to disposition under this chapter. The
lands included in class (d) may be disposed of by
48
 sale or lease under the provisions of this Act."
(Emphasis supplied)
Section 61 of CA No. 141 readopted, after the effectivity
of the 1935 Constitution, Section 58 of Act No. 2874
prohibiting the sale of government reclaimed, foreshore
and marshy disposable lands of the public domain. All
these lands are intended for residential, commercial,
industrial or other non-agricultural purposes. As before,
Section 61 allowed only the lease of such lands to private
parties. The government could sell to private parties only
lands falling under Section 59 (d) of CA No. 141, or those
lands for non-agricultural purposes not classified as
government reclaimed, foreshore and marshy disposable
lands of the public domain. Foreshore lands, however,
became inalienable under the 1935 Constitution which
only allowed the lease of these lands to qualified private
parties.
Section 58 of CA No. 141 expressly states that disposable
lands of the public domain intended for residential,
commercial, industrial or other productive purposes
other than agricultural "shall be disposed of under the
provisions of this chapter and not otherwise." Under
Section 10 of CA No. 141, the term "disposition" includes
lease of the land. Any disposition of government
reclaimed, foreshore and marshy disposable lands for
non-agricultural purposes must comply with Chapter IX,
Title III of CA No. 141,54 unless a subsequent law
amended or repealed these provisions.
In his concurring opinion in the landmark case
of Republic Real Estate Corporation v. Court of
Appeals,55 Justice Reynato S. Puno summarized
succinctly the law on this matter, as follows:
"Foreshore lands are lands of public dominion
intended for public use. So too are lands reclaimed by
the government by dredging, filling, or other means.
Act 1654 mandated that the control and disposition
of the foreshore and lands under water remained in
the national government. Said law allowed only the
'leasing' of reclaimed land. The Public Land Acts of
1919 and 1936 also declared that the foreshore and
lands reclaimed by the government were to be
"disposed of to private parties by lease only and not
otherwise." Before leasing, however, the Governor-
General, upon recommendation of the Secretary of
Agriculture and Natural Resources, had first to
determine that the land reclaimed was not necessary
for the public service. This requisite must have been
met before the land could be disposed of. But even
then, the foreshore and lands under water were
not to be alienated and sold to private parties. The
disposition of the reclaimed land was only by lease.
The land remained property of the State."
(Emphasis supplied)
As observed by Justice Puno in his concurring opinion,
"Commonwealth Act No. 141 has remained in effect at
present."
The State policy prohibiting the sale to private parties of
government reclaimed, foreshore and marshy alienable
lands of the public domain, first implemented in 1907
was thus reaffirmed in CA No. 141 after the 1935
Constitution took effect. The prohibition on the sale of
foreshore lands, however, became a constitutional edict
under the 1935 Constitution. Foreshore lands became
inalienable as natural resources of the State, unless
reclaimed by the government and classified as
agricultural lands of the public domain, in which case
they would fall under the classification of government
reclaimed lands.
After the effectivity of the 1935 Constitution,
government reclaimed and marshy disposable lands of
the public domain continued to be only leased and not
sold to private parties.56 These lands remained sui
generis, as the only alienable or disposable lands of the
public domain the government could not sell to private
parties.
Since then and until now, the only way the government
can sell to private parties government reclaimed and
marshy disposable lands of the public domain is for the
legislature to pass a law authorizing such sale. CA No. 141
does not authorize the President to reclassify
government reclaimed and marshy lands into other non-
agricultural lands under Section 59 (d). Lands classified
under Section 59 (d) are the only alienable or disposable
lands for non-agricultural purposes that the government
could sell to private parties.
Moreover, Section 60 of CA No. 141 expressly requires
congressional authority before lands under Section 59
that the government previously transferred to
government units or entities could be sold to private
parties. Section 60 of CA No. 141 declares that –
"Sec. 60. x x x The area so leased or sold shall be such
as shall, in the judgment of the Secretary of
Agriculture and Natural Resources, be reasonably
necessary for the purposes for which such sale or
lease is requested, and shall not exceed one hundred
and forty-four hectares: Provided, however, That
this limitation shall not apply to grants, donations,
or transfers made to a province, municipality or
branch or subdivision of the Government for the
purposes deemed by said entities conducive to the
public interest; but the land so granted, donated,
or transferred to a province, municipality or
branch or subdivision of the Government shall not
be alienated, encumbered, or otherwise disposed
of in a manner affecting its title, except when
authorized by Congress: x x x." (Emphasis
supplied)
The congressional authority required in Section 60 of CA
No. 141 mirrors the legislative authority required in
Section 56 of Act No. 2874.
One reason for the congressional authority is that Section
60 of CA No. 141 exempted government units and
entities from the maximum area of public lands that
could be acquired from the State. These government
units and entities should not just turn around and sell
these lands to private parties in violation of
constitutional or statutory limitations. Otherwise, the
transfer of lands for non-agricultural purposes to
government units and entities could be used to
circumvent constitutional limitations on ownership of
alienable or disposable lands of the public domain. In the
same manner, such transfers could also be used to evade
the statutory prohibition in CA No. 141 on the sale of
government reclaimed and marshy lands of the public
domain to private parties. Section 60 of CA No. 141
constitutes by operation of law a lien on these lands.57
In case of sale or lease of disposable lands of the public
domain falling under Section 59 of CA No. 141, Sections
63 and 67 require a public bidding. Sections 63 and 67 of
CA No. 141 provide as follows:
"Sec. 63. Whenever it is decided that lands covered
by this chapter are not needed for public purposes,
49
 the Director of Lands shall ask the Secretary of
Agriculture and Commerce (now the Secretary of
Natural Resources) for authority to dispose of the
same. Upon receipt of such authority, the Director of
Lands shall give notice by public advertisement in
the same manner as in the case of leases or sales of
agricultural public land, x x x.
Sec. 67. The lease or sale shall be made by oral
bidding; and adjudication shall be made to the
highest bidder. x x x." (Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to
public auction all leases or sales of alienable or
disposable lands of the public domain.58
Like Act No. 1654 and Act No. 2874 before it, CA No. 141
did not repeal Section 5 of the Spanish Law of Waters of
1866. Private parties could still reclaim portions of the
sea with government permission. However,
the reclaimed land could become private land only if
classified as alienable agricultural land of the public
domain open to disposition under CA No. 141. The 1935
Constitution prohibited the alienation of all natural
resources except public agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the
definition of property of public dominion found in the
Civil Code of 1889. Articles 420 and 422 of the Civil Code
of 1950 state that –
"Art. 420. The following things are property of
public dominion:
(1) Those intended for public use, such as roads,
canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads,
and others of similar character;
(2) Those which belong to the State, without being
for public use, and are intended for some public
service or for the development of the national
wealth.
x x x.
Art. 422. Property of public dominion, when no
longer intended for public use or for public service,
shall form part of the patrimonial property of the
State."
Again, the government must formally declare that the
property of public dominion is no longer needed for
public use or public service, before the same could be
classified as patrimonial property of the State.59 In the
case of government reclaimed and marshy lands of the
public domain, the declaration of their being disposable,
as well as the manner of their disposition, is governed by
the applicable provisions of CA No. 141.
Like the Civil Code of 1889, the Civil Code of 1950
included as property of public dominion those properties
of the State which, without being for public use, are
intended for public service or the "development of the
national wealth." Thus, government reclaimed and
marshy lands of the State, even if not employed for public
use or public service, if developed to enhance the
national wealth, are classified as property of public
dominion.
Dispositions under the 1973 Constitution
The 1973 Constitution, which took effect on January 17,
1973, likewise adopted the Regalian doctrine. Section 8,
Article XIV of the 1973 Constitution stated that –
"Sec. 8. All lands of the public domain, waters,
minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, wildlife, and
other natural resources of the Philippines belong to
the State. With the exception of agricultural,
industrial or commercial, residential, and
resettlement lands of the public domain, natural
resources shall not be alienated, and no license,
concession, or lease for the exploration,
development, exploitation, or utilization of any of
the natural resources shall be granted for a period
exceeding twenty-five years, renewable for not
more than twenty-five years, except as to water
rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water
power, in which cases, beneficial use may be the
measure and the limit of the grant." (Emphasis
supplied)
The 1973 Constitution prohibited the alienation of all
natural resources with the exception of "agricultural,
industrial or commercial, residential, and resettlement
lands of the public domain." In contrast, the 1935
Constitution barred the alienation of all natural
resources except "public agricultural lands." However,
the term "public agricultural lands" in the 1935
Constitution encompassed industrial, commercial,
residential and resettlement lands of the public
domain.60 If the land of public domain were neither
timber nor mineral land, it would fall under the
classification of agricultural land of the public
domain. Both the 1935 and 1973 Constitutions,
therefore, prohibited the alienation of all natural
resources except agricultural lands of the public
domain.
The 1973 Constitution, however, limited the alienation of
lands of the public domain to individuals who were
citizens of the Philippines. Private corporations, even if
wholly owned by Philippine citizens, were no longer
allowed to acquire alienable lands of the public domain
unlike in the 1935 Constitution. Section 11, Article XIV of
the 1973 Constitution declared that –
"Sec. 11. The Batasang Pambansa, taking into
account conservation, ecological, and development
requirements of the natural resources, shall
determine by law the size of land of the public
domain which may be developed, held or acquired
by, or leased to, any qualified individual,
corporation, or association, and the conditions
therefor. No private corporation or association
may hold alienable lands of the public domain
except by lease not to exceed one thousand
hectares in area nor may any citizen hold such lands
by lease in excess of five hundred hectares or
acquire by purchase, homestead or grant, in excess
of twenty-four hectares. No private corporation or
association may hold by lease, concession, license or
permit, timber or forest lands and other timber or
forest resources in excess of one hundred thousand
hectares. However, such area may be increased by
the Batasang Pambansa upon recommendation of
50
 the National Economic and Development
Authority." (Emphasis supplied)
Thus, under the 1973 Constitution, private corporations
could hold alienable lands of the public domain only
through lease. Only individuals could now acquire
alienable lands of the public domain, and private
corporations became absolutely barred from
acquiring any kind of alienable land of the public
domain. The constitutional ban extended to all kinds of
alienable lands of the public domain, while the statutory
ban under CA No. 141 applied only to government
reclaimed, foreshore and marshy alienable lands of the
public domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos
issued Presidential Decree No. 1084 creating PEA, a
wholly government owned and controlled corporation
with a special charter. Sections 4 and 8 of PD No. 1084,
vests PEA with the following purposes and powers:
"Sec. 4. Purpose. The Authority is hereby created for
the following purposes:
(a) To reclaim land, including foreshore and
submerged areas, by dredging, filling or other
means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal
in, subdivide, dispose, lease and sell any and all
kinds of lands, buildings, estates and other forms of
real property, owned, managed, controlled and/or
operated by the government;
(c) To provide for, operate or administer such
service as may be necessary for the efficient,
economical and beneficial utilization of the above
properties.
Sec. 5. Powers and functions of the Authority. The
Authority shall, in carrying out the purposes for
which it is created, have the following powers and
functions:
(a)To prescribe its by-laws.
xxx
(i) To hold lands of the public domain in excess of
the area permitted to private corporations by
statute.
(j) To reclaim lands and to construct work across,
or otherwise, any stream, watercourse, canal, ditch,
flume x x x.
xxx
(o) To perform such acts and exercise such functions
as may be necessary for the attainment of the
purposes and objectives herein specified."
(Emphasis supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore
and submerged areas of the public domain. Foreshore
areas are those covered and uncovered by the ebb and
flow of the tide.61 Submerged areas are those
permanently under water regardless of the ebb and flow
of the tide.62 Foreshore and submerged areas
indisputably belong to the public domain63 and are
inalienable unless reclaimed, classified as alienable lands
open to disposition, and further declared no longer
needed for public service.
The ban in the 1973 Constitution on private corporations
from acquiring alienable lands of the public domain did
not apply to PEA since it was then, and until today, a fully
owned government corporation. The constitutional ban
applied then, as it still applies now, only to "private
corporations and associations." PD No. 1084 expressly
empowers PEA "to hold lands of the public domain"
even "in excess of the area permitted to private
corporations by statute." Thus, PEA can hold title to
private lands, as well as title to lands of the public
domain.
In order for PEA to sell its reclaimed foreshore and
submerged alienable lands of the public domain, there
must be legislative authority empowering PEA to sell
these lands. This legislative authority is necessary in
view of Section 60 of CA No.141, which states –
"Sec. 60. x x x; but the land so granted, donated or
transferred to a province, municipality, or branch or
subdivision of the Government shall not be
alienated, encumbered or otherwise disposed of in a
manner affecting its title, except when authorized
by Congress; x x x." (Emphasis supplied)
Without such legislative authority, PEA could not sell but
only lease its reclaimed foreshore and submerged
alienable lands of the public domain. Nevertheless, any
legislative authority granted to PEA to sell its reclaimed
alienable lands of the public domain would be subject to
the constitutional ban on private corporations from
acquiring alienable lands of the public domain. Hence,
such legislative authority could only benefit private
individuals.
Dispositions under the 1987 Constitution
The 1987 Constitution, like the 1935 and 1973
Constitutions before it, has adopted the Regalian
doctrine. The 1987 Constitution declares that all natural
resources are "owned by the State," and except for
alienable agricultural lands of the public domain, natural
resources cannot be alienated. Sections 2 and 3, Article
XII of the 1987 Constitution state that –
"Section 2. All lands of the public domain, waters,
minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and other
natural resources are owned by the State. With the
exception of agricultural lands, all other natural
resources shall not be alienated. The exploration,
development, and utilization of natural resources
shall be under the full control and supervision of the
State. x x x.
Section 3. Lands of the public domain are classified
into agricultural, forest or timber, mineral lands,
and national parks. Agricultural lands of the public
domain may be further classified by law according
to the uses which they may be devoted. Alienable
lands of the public domain shall be limited to
agricultural lands. Private corporations or
associations may not hold such alienable lands of
the public domain except by lease, for a period not
exceeding twenty-five years, renewable for not
more than twenty-five years, and not to exceed
51
 one thousand hectares in area. Citizens of the
Philippines may lease not more than five hundred
hectares, or acquire not more than twelve hectares
thereof by purchase, homestead, or grant.
Taking into account the requirements of
conservation, ecology, and development, and
subject to the requirements of agrarian reform, the
Congress shall determine, by law, the size of lands of
the public domain which may be acquired,
developed, held, or leased and the conditions
therefor." (Emphasis supplied)
The 1987 Constitution continues the State policy in the
1973 Constitution banning private corporations
from acquiring any kind of alienable land of the public
domain. Like the 1973 Constitution, the 1987
Constitution allows private corporations to hold
alienable lands of the public domain only through lease.
As in the 1935 and 1973 Constitutions, the general law
governing the lease to private corporations of reclaimed,
foreshore and marshy alienable lands of the public
domain is still CA No. 141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on
corporations from acquiring, except through lease,
alienable lands of the public domain is not well
understood. During the deliberations of the 1986
Constitutional Commission, the commissioners probed
the rationale behind this ban, thus:
"FR. BERNAS: Mr. Vice-President, my questions have
reference to page 3, line 5 which says:
`No private corporation or association may hold
alienable lands of the public domain except by lease,
not to exceed one thousand hectares in area.'
If we recall, this provision did not exist under the
1935 Constitution, but this was introduced in the
1973 Constitution. In effect, it prohibits private
corporations from acquiring alienable public
lands. But it has not been very clear in
jurisprudence what the reason for this is. In some
of the cases decided in 1982 and 1983, it was
indicated that the purpose of this is to prevent
large landholdings. Is that the intent of this
provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the
Iglesia ni Cristo, there were instances where the
Iglesia ni Cristo was not allowed to acquire a mere
313-square meter land where a chapel stood
because the Supreme Court said it would be in
violation of this." (Emphasis supplied)
In Ayog v. Cusi,64 the Court explained the rationale
behind this constitutional ban in this way:
"Indeed, one purpose of the constitutional
prohibition against purchases of public agricultural
lands by private corporations is to equitably diffuse
land ownership or to encourage 'owner-
cultivatorship and the economic family-size farm'
and to prevent a recurrence of cases like the instant
case. Huge landholdings by corporations or private
persons had spawned social unrest."
However, if the constitutional intent is to prevent huge
landholdings, the Constitution could have simply limited
the size of alienable lands of the public domain that
corporations could acquire. The Constitution could have
followed the limitations on individuals, who could
acquire not more than 24 hectares of alienable lands of
the public domain under the 1973 Constitution, and not
more than 12 hectares under the 1987 Constitution.
If the constitutional intent is to encourage economic
family-size farms, placing the land in the name of a
corporation would be more effective in preventing the
break-up of farmlands. If the farmland is registered in the
name of a corporation, upon the death of the owner, his
heirs would inherit shares in the corporation instead of
subdivided parcels of the farmland. This would prevent
the continuing break-up of farmlands into smaller and
smaller plots from one generation to the next.
In actual practice, the constitutional ban strengthens the
constitutional limitation on individuals from acquiring
more than the allowed area of alienable lands of the
public domain. Without the constitutional ban,
individuals who already acquired the maximum area of
alienable lands of the public domain could easily set up
corporations to acquire more alienable public lands. An
individual could own as many corporations as his means
would allow him. An individual could even hide his
ownership of a corporation by putting his nominees as
stockholders of the corporation. The corporation is a
convenient vehicle to circumvent the constitutional
limitation on acquisition by individuals of alienable lands
of the public domain.
The constitutional intent, under the 1973 and 1987
Constitutions, is to transfer ownership of only a limited
area of alienable land of the public domain to a qualified
individual. This constitutional intent is safeguarded by
the provision prohibiting corporations from acquiring
alienable lands of the public domain, since the vehicle to
circumvent the constitutional intent is removed. The
available alienable public lands are gradually decreasing
in the face of an ever-growing population. The most
effective way to insure faithful adherence to this
constitutional intent is to grant or sell alienable lands of
the public domain only to individuals. This, it would
seem, is the practical benefit arising from the
constitutional ban.
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its
second Whereas clause, consists of three properties,
namely:
1. "[T]hree partially reclaimed and substantially
eroded islands along Emilio Aguinaldo Boulevard in
Paranaque and Las Pinas, Metro Manila, with a
combined titled area of 1,578,441 square meters;"
2. "[A]nother area of 2,421,559 square meters
contiguous to the three islands;" and
3. "[A]t AMARI's option as approved by PEA, an
additional 350 hectares more or less to regularize
the configuration of the reclaimed area."65
PEA confirms that the Amended JVA involves "the
development of the Freedom Islands and further
reclamation of about 250 hectares x x x," plus an option
52
"granted to AMARI to subsequently reclaim another 350
hectares x x x."66
In short, the Amended JVA covers a reclamation area of
750 hectares. Only 157.84 hectares of the 750-hectare
reclamation project have been reclaimed, and the rest
of the 592.15 hectares are still submerged areas
forming part of Manila Bay.
Under the Amended JVA, AMARI will reimburse PEA the
sum of P1,894,129,200.00 for PEA's "actual cost" in
partially reclaiming the Freedom Islands. AMARI will
also complete, at its own expense, the reclamation of the
Freedom Islands. AMARI will further shoulder all the
reclamation costs of all the other areas, totaling 592.15
hectares, still to be reclaimed. AMARI and PEA will share,
in the proportion of 70 percent and 30 percent,
respectively, the total net usable area which is defined in
the Amended JVA as the total reclaimed area less 30
percent earmarked for common areas. Title to AMARI's
share in the net usable area, totaling 367.5 hectares, will
be issued in the name of AMARI. Section 5.2 (c) of the
Amended JVA provides that –
"x x x, PEA shall have the duty to execute without
delay the necessary deed of transfer or conveyance
of the title pertaining to AMARI's Land share based
on the Land Allocation Plan. PEA, when requested
in writing by AMARI, shall then cause the issuance
and delivery of the proper certificates of title
covering AMARI's Land Share in the name of
AMARI, x x x; provided, that if more than seventy
percent (70%) of the titled area at any given time
pertains to AMARI, PEA shall deliver to AMARI only
seventy percent (70%) of the titles pertaining to
AMARI, until such time when a corresponding
proportionate area of additional land pertaining to
PEA has been titled." (Emphasis supplied)
Indisputably, under the Amended JVA AMARI will
acquire and own a maximum of 367.5 hectares of
reclaimed land which will be titled in its name.
To implement the Amended JVA, PEA delegated to the
unincorporated PEA-AMARI joint venture PEA's
statutory authority, rights and privileges to reclaim
foreshore and submerged areas in Manila Bay. Section
3.2.a of the Amended JVA states that –
"PEA hereby contributes to the joint venture its
rights and privileges to perform Rawland
Reclamation and Horizontal Development as well as
own the Reclamation Area, thereby granting the
Joint Venture the full and exclusive right, authority
and privilege to undertake the Project in accordance
with the Master Development Plan."
The Amended JVA is the product of a renegotiation of the
original JVA dated April 25, 1995 and its supplemental
agreement dated August 9, 1995.
The Threshold Issue
The threshold issue is whether AMARI, a private
corporation, can acquire and own under the Amended
JVA 367.5 hectares of reclaimed foreshore and
submerged areas in Manila Bay in view of Sections 2 and
3, Article XII of the 1987 Constitution which state that:
"Section 2. All lands of the public domain, waters,
minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the
exception of agricultural lands, all other natural
resources shall not be alienated. x x x.
xxx
Section 3. x x x Alienable lands of the public domain
shall be limited to agricultural lands. Private
corporations or associations may not hold such
alienable lands of the public domain except by
lease, x x x."(Emphasis supplied)
Classification of Reclaimed Foreshore and Submerged
Areas
PEA readily concedes that lands reclaimed from
foreshore or submerged areas of Manila Bay are
alienable or disposable lands of the public domain. In its
Memorandum,67 PEA admits that –
"Under the Public Land Act (CA 141, as
amended), reclaimed lands are classified as
alienable and disposable lands of the public
domain:
'Sec. 59. The lands disposable under this title shall
be classified as follows:
(a) Lands reclaimed by the government by dredging,
filling, or other means;
x x x.'" (Emphasis supplied)
Likewise, the Legal Task Force68 constituted under
Presidential Administrative Order No. 365 admitted in
its Report and Recommendation to then President Fidel
V. Ramos, "[R]eclaimed lands are classified as
alienable and disposable lands of the public
domain."69 The Legal Task Force concluded that –
"D. Conclusion
Reclaimed lands are lands of the public domain.
However, by statutory authority, the rights of
ownership and disposition over reclaimed lands
have been transferred to PEA, by virtue of which
PEA, as owner, may validly convey the same to any
qualified person without violating the Constitution
or any statute.
The constitutional provision prohibiting private
corporations from holding public land, except by
lease (Sec. 3, Art. XVII,70 1987 Constitution), does
not apply to reclaimed lands whose ownership has
passed on to PEA by statutory grant."
Under Section 2, Article XII of the 1987 Constitution, the
foreshore and submerged areas of Manila Bay are part of
the "lands of the public domain, waters x x x and other
natural resources" and consequently "owned by the
State." As such, foreshore and submerged areas "shall not
be alienated," unless they are classified as "agricultural
lands" of the public domain. The mere reclamation of
these areas by PEA does not convert these inalienable
natural resources of the State into alienable or
disposable lands of the public domain. There must be a
law or presidential proclamation officially classifying
these reclaimed lands as alienable or disposable and
open to disposition or concession. Moreover, these
reclaimed lands cannot be classified as alienable or
53
disposable if the law has reserved them for some public
or quasi-public use.71
Section 8 of CA No. 141 provides that "only those lands
shall be declared open to disposition or concession
which have been officially delimited and
classified."72 The President has the authority to classify
inalienable lands of the public domain into alienable or
disposable lands of the public domain, pursuant to
Section 6 of CA No. 141. In Laurel vs. Garcia,73 the
Executive Department attempted to sell the Roppongi
property in Tokyo, Japan, which was acquired by the
Philippine Government for use as the Chancery of the
Philippine Embassy. Although the Chancery had
transferred to another location thirteen years earlier, the
Court still ruled that, under Article 42274 of the Civil
Code, a property of public dominion retains such
character until formally declared otherwise. The Court
ruled that –
"The fact that the Roppongi site has not been used
for a long time for actual Embassy service does not
automatically convert it to patrimonial property.
Any such conversion happens only if the property is
withdrawn from public use (Cebu Oxygen and
Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A
property continues to be part of the public
domain, not available for private appropriation
or ownership 'until there is a formal declaration
on the part of the government to withdraw it from
being such' (Ignacio v. Director of Lands, 108 Phil.
335 [1960]." (Emphasis supplied)
PD No. 1085, issued on February 4, 1977, authorized the
issuance of special land patents for lands reclaimed by
PEA from the foreshore or submerged areas of Manila
Bay. On January 19, 1988 then President Corazon C.
Aquino issued Special Patent No. 3517 in the name of
PEA for the 157.84 hectares comprising the partially
reclaimed Freedom Islands. Subsequently, on April 9,
1999 the Register of Deeds of the Municipality of
Paranaque issued TCT Nos. 7309, 7311 and 7312 in the
name of PEA pursuant to Section 103 of PD No. 1529
authorizing the issuance of certificates of title
corresponding to land patents. To this day, these
certificates of title are still in the name of PEA.
PD No. 1085, coupled with President Aquino's actual
issuance of a special patent covering the Freedom
Islands, is equivalent to an official proclamation
classifying the Freedom Islands as alienable or
disposable lands of the public domain. PD No. 1085 and
President Aquino's issuance of a land patent also
constitute a declaration that the Freedom Islands are no
longer needed for public service. The Freedom Islands
are thus alienable or disposable lands of the public
domain, open to disposition or concession to qualified
parties.
At the time then President Aquino issued Special Patent
No. 3517, PEA had already reclaimed the Freedom
Islands although subsequently there were partial
erosions on some areas. The government had also
completed the necessary surveys on these islands. Thus,
the Freedom Islands were no longer part of Manila Bay
but part of the land mass. Section 3, Article XII of the
1987 Constitution classifies lands of the public domain
into "agricultural, forest or timber, mineral lands, and
national parks." Being neither timber, mineral, nor
national park lands, the reclaimed Freedom Islands
necessarily fall under the classification of agricultural
lands of the public domain. Under the 1987 Constitution,
agricultural lands of the public domain are the only
natural resources that the State may alienate to qualified
private parties. All other natural resources, such as the
seas or bays, are "waters x x x owned by the State"
forming part of the public domain, and are inalienable
pursuant to Section 2, Article XII of the 1987
Constitution.
AMARI claims that the Freedom Islands are private lands
because CDCP, then a private corporation, reclaimed the
islands under a contract dated November 20, 1973 with
the Commissioner of Public Highways. AMARI, citing
Article 5 of the Spanish Law of Waters of 1866, argues
that "if the ownership of reclaimed lands may be given to
the party constructing the works, then it cannot be said
that reclaimed lands are lands of the public domain
which the State may not alienate."75 Article 5 of the
Spanish Law of Waters reads as follows:
"Article 5. Lands reclaimed from the sea in
consequence of works constructed by the State, or
by the provinces, pueblos or private persons, with
proper permission, shall become the property of the
party constructing such works, unless otherwise
provided by the terms of the grant of authority."
(Emphasis supplied)
Under Article 5 of the Spanish Law of Waters of 1866,
private parties could reclaim from the sea only with
"proper permission" from the State. Private parties could
own the reclaimed land only if not "otherwise provided
by the terms of the grant of authority." This clearly meant
that no one could reclaim from the sea without
permission from the State because the sea is property of
public dominion. It also meant that the State could grant
or withhold ownership of the reclaimed land because any
reclaimed land, like the sea from which it emerged,
belonged to the State. Thus, a private person reclaiming
from the sea without permission from the State could not
acquire ownership of the reclaimed land which would
remain property of public dominion like the sea it
replaced.76 Article 5 of the Spanish Law of Waters of
1866 adopted the time-honored principle of land
ownership that "all lands that were not acquired from the
government, either by purchase or by grant, belong to
the public domain."77
Article 5 of the Spanish Law of Waters must be read
together with laws subsequently enacted on the
disposition of public lands. In particular, CA No. 141
requires that lands of the public domain must first be
classified as alienable or disposable before the
government can alienate them. These lands must not be
reserved for public or quasi-public
purposes.78 Moreover, the contract between CDCP and
the government was executed after the effectivity of the
1973 Constitution which barred private corporations
from acquiring any kind of alienable land of the public
domain. This contract could not have converted the
Freedom Islands into private lands of a private
corporation.
Presidential Decree No. 3-A, issued on January 11, 1973,
revoked all laws authorizing the reclamation of areas
under water and revested solely in the National
Government the power to reclaim lands. Section 1 of PD
No. 3-A declared that –
"The provisions of any law to the contrary
notwithstanding, the reclamation of areas under
water, whether foreshore or inland, shall be limited
to the National Government or any person
54
 authorized by it under a proper contract.
(Emphasis supplied)
x x x."
PD No. 3-A repealed Section 5 of the Spanish Law of
Waters of 1866 because reclamation of areas under
water could now be undertaken only by the National
Government or by a person contracted by the National
Government. Private parties may reclaim from the sea
only under a contract with the National Government, and
no longer by grant or permission as provided in Section
5 of the Spanish Law of Waters of 1866.
Executive Order No. 525, issued on February 14, 1979,
designated PEA as the National Government's
implementing arm to undertake "all reclamation projects
of the government," which "shall be undertaken by the
PEA or through a proper contract executed by it with
any person or entity." Under such contract, a private
party receives compensation for reclamation services
rendered to PEA. Payment to the contractor may be in
cash, or in kind consisting of portions of the reclaimed
land, subject to the constitutional ban on private
corporations from acquiring alienable lands of the public
domain. The reclaimed land can be used as payment in
kind only if the reclaimed land is first classified as
alienable or disposable land open to disposition, and
then declared no longer needed for public service.
The Amended JVA covers not only the Freedom Islands,
but also an additional 592.15 hectares which are still
submerged and forming part of Manila Bay. There is no
legislative or Presidential act classifying these
submerged areas as alienable or disposable lands of
the public domain open to disposition. These
submerged areas are not covered by any patent or
certificate of title. There can be no dispute that these
submerged areas form part of the public domain, and in
their present state are inalienable and outside the
commerce of man. Until reclaimed from the sea, these
submerged areas are, under the Constitution, "waters x x
x owned by the State," forming part of the public domain
and consequently inalienable. Only when actually
reclaimed from the sea can these submerged areas be
classified as public agricultural lands, which under the
Constitution are the only natural resources that the State
may alienate. Once reclaimed and transformed into
public agricultural lands, the government may then
officially classify these lands as alienable or disposable
lands open to disposition. Thereafter, the government
may declare these lands no longer needed for public
service. Only then can these reclaimed lands be
considered alienable or disposable lands of the public
domain and within the commerce of man.
The classification of PEA's reclaimed foreshore and
submerged lands into alienable or disposable lands open
to disposition is necessary because PEA is tasked under
its charter to undertake public services that require the
use of lands of the public domain. Under Section 5 of PD
No. 1084, the functions of PEA include the following:
"[T]o own or operate railroads, tramways and other
kinds of land transportation, x x x; [T]o construct,
maintain and operate such systems of sanitary sewers as
may be necessary; [T]o construct, maintain and operate
such storm drains as may be necessary." PEA is
empowered to issue "rules and regulations as may be
necessary for the proper use by private parties of any or
all of the highways, roads, utilities, buildings and/or
any of its properties and to impose or collect fees or tolls
for their use." Thus, part of the reclaimed foreshore and
submerged lands held by the PEA would actually be
needed for public use or service since many of the
functions imposed on PEA by its charter constitute
essential public services.
Moreover, Section 1 of Executive Order No. 525 provides
that PEA "shall be primarily responsible for integrating,
directing, and coordinating all reclamation projects for
and on behalf of the National Government." The same
section also states that "[A]ll reclamation projects shall
be approved by the President upon recommendation of
the PEA, and shall be undertaken by the PEA or through
a proper contract executed by it with any person or
entity; x x x." Thus, under EO No. 525, in relation to PD
No. 3-A and PD No.1084, PEA became the primary
implementing agency of the National Government to
reclaim foreshore and submerged lands of the public
domain. EO No. 525 recognized PEA as the government
entity "to undertake the reclamation of lands and ensure
their maximum utilization in promoting public welfare
and interests."79 Since large portions of these reclaimed
lands would obviously be needed for public service, there
must be a formal declaration segregating reclaimed lands
no longer needed for public service from those still
needed for public service.1âwphi1.nêt
Section 3 of EO No. 525, by declaring that all lands
reclaimed by PEA "shall belong to or be owned by the
PEA," could not automatically operate to classify
inalienable lands into alienable or disposable lands of the
public domain. Otherwise, reclaimed foreshore and
submerged lands of the public domain would
automatically become alienable once reclaimed by PEA,
whether or not classified as alienable or disposable.
The Revised Administrative Code of 1987, a later law
than either PD No. 1084 or EO No. 525, vests in the
Department of Environment and Natural Resources
("DENR" for brevity) the following powers and functions:
"Sec. 4. Powers and Functions. The Department
shall:
(1) x x x
xxx
(4) Exercise supervision and control over forest
lands, alienable and disposable public lands,
mineral resources and, in the process of exercising
such control, impose appropriate taxes, fees,
charges, rentals and any such form of levy and
collect such revenues for the exploration,
development, utilization or gathering of such
resources;
xxx
(14) Promulgate rules, regulations and
guidelines on the issuance of licenses, permits,
concessions, lease agreements and such other
privileges concerning the development,
exploration and utilization of the country's
marine, freshwater, and brackish water and over
all aquatic resources of the country and shall
continue to oversee, supervise and police our
natural resources; cancel or cause to cancel such
privileges upon failure, non-compliance or
violations of any regulation, order, and for all other
causes which are in furtherance of the conservation
of natural resources and supportive of the national
interest;
55
 (15) Exercise exclusive jurisdiction on the
management and disposition of all lands of the
public domain and serve as the sole agency
responsible for classification, sub-classification,
surveying and titling of lands in consultation with
appropriate agencies."80 (Emphasis supplied)
As manager, conservator and overseer of the natural
resources of the State, DENR exercises "supervision and
control over alienable and disposable public lands."
DENR also exercises "exclusive jurisdiction on the
management and disposition of all lands of the public
domain." Thus, DENR decides whether areas under
water, like foreshore or submerged areas of Manila Bay,
should be reclaimed or not. This means that PEA needs
authorization from DENR before PEA can undertake
reclamation projects in Manila Bay, or in any part of the
country.
DENR also exercises exclusive jurisdiction over the
disposition of all lands of the public domain. Hence,
DENR decides whether reclaimed lands of PEA should be
classified as alienable under Sections 681 and 782 of CA
No. 141. Once DENR decides that the reclaimed lands
should be so classified, it then recommends to the
President the issuance of a proclamation classifying the
lands as alienable or disposable lands of the public
domain open to disposition. We note that then DENR
Secretary Fulgencio S. Factoran, Jr. countersigned Special
Patent No. 3517 in compliance with the Revised
Administrative Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the
reclamation of areas under water, while PEA is vested
with the power to undertake the physical reclamation of
areas under water, whether directly or through private
contractors. DENR is also empowered to classify lands of
the public domain into alienable or disposable lands
subject to the approval of the President. On the other
hand, PEA is tasked to develop, sell or lease the reclaimed
alienable lands of the public domain.
Clearly, the mere physical act of reclamation by PEA of
foreshore or submerged areas does not make the
reclaimed lands alienable or disposable lands of the
public domain, much less patrimonial lands of PEA.
Likewise, the mere transfer by the National Government
of lands of the public domain to PEA does not make the
lands alienable or disposable lands of the public domain,
much less patrimonial lands of PEA.
Absent two official acts – a classification that these lands
are alienable or disposable and open to disposition and a
declaration that these lands are not needed for public
service, lands reclaimed by PEA remain inalienable lands
of the public domain. Only such an official classification
and formal declaration can convert reclaimed lands into
alienable or disposable lands of the public domain, open
to disposition under the Constitution, Title I and Title
III83 of CA No. 141 and other applicable laws.84
PEA's Authority to Sell Reclaimed Lands
PEA, like the Legal Task Force, argues that as alienable or
disposable lands of the public domain, the reclaimed
lands shall be disposed of in accordance with CA No. 141,
the Public Land Act. PEA, citing Section 60 of CA No. 141,
admits that reclaimed lands transferred to a branch or
subdivision of the government "shall not be alienated,
encumbered, or otherwise disposed of in a manner
affecting its title, except when authorized by Congress:
x x x."85 (Emphasis by PEA)
In Laurel vs. Garcia,86 the Court cited Section 48 of the
Revised Administrative Code of 1987, which states that –
"Sec. 48. Official Authorized to Convey Real
Property. Whenever real property of the
Government is authorized by law to be conveyed,
the deed of conveyance shall be executed in behalf
of the government by the following: x x x."
Thus, the Court concluded that a law is needed to convey
any real property belonging to the Government. The
Court declared that -
"It is not for the President to convey real property of
the government on his or her own sole will. Any
such conveyance must be authorized and
approved by a law enacted by the Congress. It
requires executive and legislative concurrence."
(Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525
constitute the legislative authority allowing PEA to sell
its reclaimed lands. PD No. 1085, issued on February 4,
1977, provides that –
"The land reclaimed in the foreshore and offshore
area of Manila Bay pursuant to the contract for the
reclamation and construction of the Manila-Cavite
Coastal Road Project between the Republic of the
Philippines and the Construction and Development
Corporation of the Philippines dated November 20,
1973 and/or any other contract or reclamation
covering the same area is hereby transferred,
conveyed and assigned to the ownership and
administration of the Public Estates
Authority established pursuant to PD No. 1084;
Provided, however, That the rights and interests of
the Construction and Development Corporation of
the Philippines pursuant to the aforesaid contract
shall be recognized and respected.
Henceforth, the Public Estates Authority shall
exercise the rights and assume the obligations of the
Republic of the Philippines (Department of Public
Highways) arising from, or incident to, the aforesaid
contract between the Republic of the Philippines
and the Construction and Development Corporation
of the Philippines.
In consideration of the foregoing transfer and
assignment, the Public Estates Authority shall issue
in favor of the Republic of the Philippines the
corresponding shares of stock in said entity with an
issued value of said shares of stock (which) shall be
deemed fully paid and non-assessable.
The Secretary of Public Highways and the General
Manager of the Public Estates Authority shall
execute such contracts or agreements, including
appropriate agreements with the Construction and
Development Corporation of the Philippines, as may
be necessary to implement the above.
Special land patent/patents shall be issued by the
Secretary of Natural Resources in favor of the
Public Estates Authority without prejudice to the
subsequent transfer to the contractor or his
assignees of such portion or portions of the land
reclaimed or to be reclaimed as provided for in
the above-mentioned contract. On the basis of
such patents, the Land Registration Commission
56
 shall issue the corresponding certificate of title."
(Emphasis supplied)
On the other hand, Section 3 of EO No. 525, issued on
February 14, 1979, provides that -
"Sec. 3. All lands reclaimed by PEA shall belong to
or be owned by the PEA which shall be responsible
for its administration, development, utilization or
disposition in accordance with the provisions of
Presidential Decree No. 1084. Any and all income
that the PEA may derive from the sale, lease or use
of reclaimed lands shall be used in accordance with
the provisions of Presidential Decree No. 1084."
There is no express authority under either PD No. 1085
or EO No. 525 for PEA to sell its reclaimed lands. PD No.
1085 merely transferred "ownership and
administration" of lands reclaimed from Manila Bay to
PEA, while EO No. 525 declared that lands reclaimed by
PEA "shall belong to or be owned by PEA." EO No. 525
expressly states that PEA should dispose of its reclaimed
lands "in accordance with the provisions of Presidential
Decree No. 1084," the charter of PEA.
PEA's charter, however, expressly tasks PEA "to develop,
improve, acquire, administer, deal in, subdivide, dispose,
lease and sell any and all kinds of lands x x x owned,
managed, controlled and/or operated by the
government."87 (Emphasis supplied) There is,
therefore, legislative authority granted to PEA to sell
its lands, whether patrimonial or alienable lands of
the public domain. PEA may sell to private parties
its patrimonial properties in accordance with the PEA
charter free from constitutional limitations. The
constitutional ban on private corporations from
acquiring alienable lands of the public domain does not
apply to the sale of PEA's patrimonial lands.
PEA may also sell its alienable or disposable lands of
the public domain to private individuals since, with the
legislative authority, there is no longer any statutory
prohibition against such sales and the constitutional ban
does not apply to individuals. PEA, however, cannot sell
any of its alienable or disposable lands of the public
domain to private corporations since Section 3, Article
XII of the 1987 Constitution expressly prohibits such
sales. The legislative authority benefits only individuals.
Private corporations remain barred from acquiring any
kind of alienable land of the public domain, including
government reclaimed lands.
The provision in PD No. 1085 stating that portions of the
reclaimed lands could be transferred by PEA to the
"contractor or his assignees" (Emphasis supplied) would
not apply to private corporations but only to individuals
because of the constitutional ban. Otherwise, the
provisions of PD No. 1085 would violate both the 1973
and 1987 Constitutions.
The requirement of public auction in the sale of
reclaimed lands
Assuming the reclaimed lands of PEA are classified as
alienable or disposable lands open to disposition, and
further declared no longer needed for public service, PEA
would have to conduct a public bidding in selling or
leasing these lands. PEA must observe the provisions of
Sections 63 and 67 of CA No. 141 requiring public
auction, in the absence of a law exempting PEA from
holding a public auction.88 Special Patent No. 3517
expressly states that the patent is issued by authority of
the Constitution and PD No. 1084, "supplemented by
Commonwealth Act No. 141, as amended." This is an
acknowledgment that the provisions of CA No. 141 apply
to the disposition of reclaimed alienable lands of the
public domain unless otherwise provided by law.
Executive Order No. 654,89 which authorizes PEA "to
determine the kind and manner of payment for the
transfer" of its assets and properties, does not exempt
PEA from the requirement of public auction. EO No. 654
merely authorizes PEA to decide the mode of payment,
whether in kind and in installment, but does not
authorize PEA to dispense with public auction.
Moreover, under Section 79 of PD No. 1445, otherwise
known as the Government Auditing Code, the
government is required to sell valuable government
property through public bidding. Section 79 of PD No.
1445 mandates that –
"Section 79. When government property has
become unserviceable for any cause, or is no longer
needed, it shall, upon application of the officer
accountable therefor, be inspected by the head of
the agency or his duly authorized representative in
the presence of the auditor concerned and, if found
to be valueless or unsaleable, it may be destroyed in
their presence. If found to be valuable, it may be
sold at public auction to the highest bidder under
the supervision of the proper committee on award
or similar body in the presence of the auditor
concerned or other authorized representative of the
Commission, after advertising by printed notice in
the Official Gazette, or for not less than three
consecutive days in any newspaper of general
circulation, or where the value of the property does
not warrant the expense of publication, by notices
posted for a like period in at least three public places
in the locality where the property is to be sold. In
the event that the public auction fails, the
property may be sold at a private sale at such
price as may be fixed by the same committee or
body concerned and approved by the
Commission."
It is only when the public auction fails that a negotiated
sale is allowed, in which case the Commission on Audit
must approve the selling price.90 The Commission on
Audit implements Section 79 of the Government Auditing
Code through Circular No. 89-29691 dated January 27,
1989. This circular emphasizes that government assets
must be disposed of only through public auction, and a
negotiated sale can be resorted to only in case of "failure
of public auction."
At the public auction sale, only Philippine citizens are
qualified to bid for PEA's reclaimed foreshore and
submerged alienable lands of the public domain. Private
corporations are barred from bidding at the auction sale
of any kind of alienable land of the public domain.
PEA originally scheduled a public bidding for the
Freedom Islands on December 10, 1991. PEA imposed a
condition that the winning bidder should reclaim
another 250 hectares of submerged areas to regularize
the shape of the Freedom Islands, under a 60-40 sharing
of the additional reclaimed areas in favor of the winning
bidder.92 No one, however, submitted a bid. On
December 23, 1994, the Government Corporate Counsel
advised PEA it could sell the Freedom Islands through
negotiation, without need of another public bidding,
because of the failure of the public bidding on December
10, 1991.93
However, the original JVA dated April 25, 1995 covered
not only the Freedom Islands and the additional 250
57
hectares still to be reclaimed, it also granted an option to
AMARI to reclaim another 350 hectares. The original JVA,
a negotiated contract, enlarged the reclamation area
to 750 hectares.94 The failure of public bidding on
December 10, 1991, involving only 407.84 hectares,95 is
not a valid justification for a negotiated sale of 750
hectares, almost double the area publicly auctioned.
Besides, the failure of public bidding happened on
December 10, 1991, more than three years before the
signing of the original JVA on April 25, 1995. The
economic situation in the country had greatly improved
during the intervening period.
Reclamation under the BOT Law and the Local
Government Code
The constitutional prohibition in Section 3, Article XII of
the 1987 Constitution is absolute and clear: "Private
corporations or associations may not hold such alienable
lands of the public domain except by lease, x x x." Even
Republic Act No. 6957 ("BOT Law," for brevity), cited by
PEA and AMARI as legislative authority to sell reclaimed
lands to private parties, recognizes the constitutional
ban. Section 6 of RA No. 6957 states –
"Sec. 6. Repayment Scheme. - For the financing,
construction, operation and maintenance of any
infrastructure projects undertaken through the
build-operate-and-transfer arrangement or any of its
variations pursuant to the provisions of this Act, the
project proponent x x x may likewise be repaid in the
form of a share in the revenue of the project or other
non-monetary payments, such as, but not limited to,
the grant of a portion or percentage of the reclaimed
land, subject to the constitutional requirements
with respect to the ownership of the land: x x x."
(Emphasis supplied)
A private corporation, even one that undertakes the
physical reclamation of a government BOT project,
cannot acquire reclaimed alienable lands of the public
domain in view of the constitutional ban.
Section 302 of the Local Government Code, also
mentioned by PEA and AMARI, authorizes local
governments in land reclamation projects to pay the
contractor or developer in kind consisting of a
percentage of the reclaimed land, to wit:
"Section 302. Financing, Construction, Maintenance,
Operation, and Management of Infrastructure
Projects by the Private Sector. x x x
xxx
In case of land reclamation or construction of
industrial estates, the repayment plan may consist
of the grant of a portion or percentage of the
reclaimed land or the industrial estate constructed."
Although Section 302 of the Local Government Code does
not contain a proviso similar to that of the BOT Law, the
constitutional restrictions on land ownership
automatically apply even though not expressly
mentioned in the Local Government Code.
Thus, under either the BOT Law or the Local Government
Code, the contractor or developer, if a corporate entity,
can only be paid with leaseholds on portions of the
reclaimed land. If the contractor or developer is an
individual, portions of the reclaimed land, not exceeding
12 hectares96 of non-agricultural lands, may be conveyed
to him in ownership in view of the legislative authority
allowing such conveyance. This is the only way these
provisions of the BOT Law and the Local Government
Code can avoid a direct collision with Section 3, Article
XII of the 1987 Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the "act of conveying the
ownership of the reclaimed lands to public respondent
PEA transformed such lands of the public domain to
private lands." This theory is echoed by AMARI which
maintains that the "issuance of the special patent leading
to the eventual issuance of title takes the subject land
away from the land of public domain and converts the
property into patrimonial or private property." In short,
PEA and AMARI contend that with the issuance of Special
Patent No. 3517 and the corresponding certificates of
titles, the 157.84 hectares comprising the Freedom
Islands have become private lands of PEA. In support of
their theory, PEA and AMARI cite the following rulings of
the Court:
1. Sumail v. Judge of CFI of Cotabato,97 where the
Court held –
"Once the patent was granted and the
corresponding certificate of title was issued, the
land ceased to be part of the public domain and
became private property over which the Director of
Lands has neither control nor jurisdiction."
2. Lee Hong Hok v. David,98 where the Court declared
-
"After the registration and issuance of the certificate
and duplicate certificate of title based on a public
land patent, the land covered thereby automatically
comes under the operation of Republic Act 496
subject to all the safeguards provided
therein."3. Heirs of Gregorio Tengco v. Heirs of Jose
Aliwalas,99 where the Court ruled -
"While the Director of Lands has the power to
review homestead patents, he may do so only so
long as the land remains part of the public domain
and continues to be under his exclusive control; but
once the patent is registered and a certificate of title
is issued, the land ceases to be part of the public
domain and becomes private property over which
the Director of Lands has neither control nor
jurisdiction."
4. Manalo v. Intermediate Appellate Court,100 where
the Court held –
"When the lots in dispute were certified as
disposable on May 19, 1971, and free patents were
issued covering the same in favor of the private
respondents, the said lots ceased to be part of the
public domain and, therefore, the Director of Lands
lost jurisdiction over the same."
5.Republic v. Court of Appeals,101 where the Court
stated –
"Proclamation No. 350, dated October 9, 1956, of
President Magsaysay legally effected a land grant to
the Mindanao Medical Center, Bureau of Medical
Services, Department of Health, of the whole lot,
validly sufficient for initial registration under the
58
 Land Registration Act. Such land grant is
constitutive of a 'fee simple' title or absolute title in
favor of petitioner Mindanao Medical Center. Thus,
Section 122 of the Act, which governs the
registration of grants or patents involving public
lands, provides that 'Whenever public lands in the
Philippine Islands belonging to the Government of
the United States or to the Government of the
Philippines are alienated, granted or conveyed to
persons or to public or private corporations, the
same shall be brought forthwith under the
operation of this Act (Land Registration Act, Act
496) and shall become registered lands.'"
The first four cases cited involve petitions to cancel the
land patents and the corresponding certificates of
titles issued to private parties. These four cases
uniformly hold that the Director of Lands has no
jurisdiction over private lands or that upon issuance of
the certificate of title the land automatically comes under
the Torrens System. The fifth case cited involves the
registration under the Torrens System of a 12.8-hectare
public land granted by the National Government to
Mindanao Medical Center, a government unit under the
Department of Health. The National Government
transferred the 12.8-hectare public land to serve as the
site for the hospital buildings and other facilities of
Mindanao Medical Center, which performed a public
service. The Court affirmed the registration of the 12.8-
hectare public land in the name of Mindanao Medical
Center under Section 122 of Act No. 496. This fifth case is
an example of a public land being registered under Act
No. 496 without the land losing its character as a
property of public dominion.
In the instant case, the only patent and certificates of title
issued are those in the name of PEA, a wholly
government owned corporation performing public as
well as proprietary functions. No patent or certificate of
title has been issued to any private party. No one is
asking the Director of Lands to cancel PEA's patent or
certificates of title. In fact, the thrust of the instant
petition is that PEA's certificates of title should remain
with PEA, and the land covered by these certificates,
being alienable lands of the public domain, should not be
sold to a private corporation.
Registration of land under Act No. 496 or PD No. 1529
does not vest in the registrant private or public
ownership of the land. Registration is not a mode of
acquiring ownership but is merely evidence of
ownership previously conferred by any of the recognized
modes of acquiring ownership. Registration does not
give the registrant a better right than what the registrant
had prior to the registration.102 The registration of lands
of the public domain under the Torrens system, by itself,
cannot convert public lands into private lands.103
Jurisprudence holding that upon the grant of the patent
or issuance of the certificate of title the alienable land of
the public domain automatically becomes private land
cannot apply to government units and entities like PEA.
The transfer of the Freedom Islands to PEA was made
subject to the provisions of CA No. 141 as expressly
stated in Special Patent No. 3517 issued by then
President Aquino, to wit:
"NOW, THEREFORE, KNOW YE, that by authority of
the Constitution of the Philippines and in conformity
with the provisions of Presidential Decree No. 1084,
supplemented by Commonwealth Act No. 141, as
amended, there are hereby granted and conveyed
unto the Public Estates Authority the aforesaid
tracts of land containing a total area of one million
nine hundred fifteen thousand eight hundred ninety
four (1,915,894) square meters; the technical
description of which are hereto attached and made
an integral part hereof." (Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the Freedom
Islands on matters not covered by PD No. 1084. Section
60 of CA No. 141 prohibits, "except when authorized by
Congress," the sale of alienable lands of the public
domain that are transferred to government units or
entities. Section 60 of CA No. 141 constitutes, under
Section 44 of PD No. 1529, a "statutory lien affecting title"
of the registered land even if not annotated on the
certificate of title.104 Alienable lands of the public domain
held by government entities under Section 60 of CA No.
141 remain public lands because they cannot be
alienated or encumbered unless Congress passes a law
authorizing their disposition. Congress, however, cannot
authorize the sale to private corporations of reclaimed
alienable lands of the public domain because of the
constitutional ban. Only individuals can benefit from
such law.
The grant of legislative authority to sell public lands in
accordance with Section 60 of CA No. 141 does not
automatically convert alienable lands of the public
domain into private or patrimonial lands. The alienable
lands of the public domain must be transferred to
qualified private parties, or to government entities not
tasked to dispose of public lands, before these lands can
become private or patrimonial lands. Otherwise, the
constitutional ban will become illusory if Congress can
declare lands of the public domain as private or
patrimonial lands in the hands of a government agency
tasked to dispose of public lands. This will allow private
corporations to acquire directly from government
agencies limitless areas of lands which, prior to such law,
are concededly public lands.
Under EO No. 525, PEA became the central
implementing agency of the National Government to
reclaim foreshore and submerged areas of the public
domain. Thus, EO No. 525 declares that –
"EXECUTIVE ORDER NO. 525
Designating the Public Estates Authority as the
Agency Primarily Responsible for all Reclamation
Projects
Whereas, there are several reclamation projects
which are ongoing or being proposed to be
undertaken in various parts of the country which
need to be evaluated for consistency with national
programs;
Whereas, there is a need to give further institutional
support to the Government's declared policy to
provide for a coordinated, economical and efficient
reclamation of lands;
Whereas, Presidential Decree No. 3-A requires that
all reclamation of areas shall be limited to the
National Government or any person authorized by it
under proper contract;
Whereas, a central authority is needed to act on
behalf of the National Government which shall
ensure a coordinated and integrated approach in
the reclamation of lands;
Whereas, Presidential Decree No. 1084 creates
the Public Estates Authority as a government
59
 corporation to undertake reclamation of lands
and ensure their maximum utilization in
promoting public welfare and interests; and
Whereas, Presidential Decree No. 1416 provides the
President with continuing authority to reorganize
the national government including the transfer,
abolition, or merger of functions and offices.
NOW, THEREFORE, I, FERDINAND E. MARCOS,
President of the Philippines, by virtue of the powers
vested in me by the Constitution and pursuant to
Presidential Decree No. 1416, do hereby order and
direct the following:
Section 1. The Public Estates Authority (PEA) shall
be primarily responsible for integrating,
directing, and coordinating all reclamation
projects for and on behalf of the National
Government. All reclamation projects shall be
approved by the President upon recommendation of
the PEA, and shall be undertaken by the PEA or
through a proper contract executed by it with any
person or entity; Provided, that, reclamation
projects of any national government agency or
entity authorized under its charter shall be
undertaken in consultation with the PEA upon
approval of the President.
x x x ."
As the central implementing agency tasked to undertake
reclamation projects nationwide, with authority to sell
reclaimed lands, PEA took the place of DENR as the
government agency charged with leasing or selling
reclaimed lands of the public domain. The reclaimed
lands being leased or sold by PEA are not private lands,
in the same manner that DENR, when it disposes of other
alienable lands, does not dispose of private lands but
alienable lands of the public domain. Only when qualified
private parties acquire these lands will the lands become
private lands. In the hands of the government agency
tasked and authorized to dispose of alienable of
disposable lands of the public domain, these lands are
still public, not private lands.
Furthermore, PEA's charter expressly states that PEA
"shall hold lands of the public domain" as well as "any
and all kinds of lands." PEA can hold both lands of the
public domain and private lands. Thus, the mere fact that
alienable lands of the public domain like the Freedom
Islands are transferred to PEA and issued land patents or
certificates of title in PEA's name does not automatically
make such lands private.
To allow vast areas of reclaimed lands of the public
domain to be transferred to PEA as private lands will
sanction a gross violation of the constitutional ban on
private corporations from acquiring any kind of alienable
land of the public domain. PEA will simply turn
around, as PEA has now done under the Amended JVA,
and transfer several hundreds of hectares of these
reclaimed and still to be reclaimed lands to a single
private corporation in only one transaction. This scheme
will effectively nullify the constitutional ban in Section 3,
Article XII of the 1987 Constitution which was intended
to diffuse equitably the ownership of alienable lands of
the public domain among Filipinos, now numbering over
80 million strong.
This scheme, if allowed, can even be applied to alienable
agricultural lands of the public domain since PEA can
"acquire x x x any and all kinds of lands." This will open
the floodgates to corporations and even individuals
acquiring hundreds of hectares of alienable lands of the
public domain under the guise that in the hands of PEA
these lands are private lands. This will result in
corporations amassing huge landholdings never before
seen in this country - creating the very evil that the
constitutional ban was designed to prevent. This will
completely reverse the clear direction of constitutional
development in this country. The 1935 Constitution
allowed private corporations to acquire not more than
1,024 hectares of public lands.105 The 1973 Constitution
prohibited private corporations from acquiring any kind
of public land, and the 1987 Constitution has
unequivocally reiterated this prohibition.
The contention of PEA and AMARI that public lands, once
registered under Act No. 496 or PD No. 1529,
automatically become private lands is contrary to
existing laws. Several laws authorize lands of the public
domain to be registered under the Torrens System or Act
No. 496, now PD No. 1529, without losing their character
as public lands. Section 122 of Act No. 496, and Section
103 of PD No. 1529, respectively, provide as follows:
Act No. 496
"Sec. 122. Whenever public lands in the Philippine
Islands belonging to the x x x Government of the
Philippine Islands are alienated, granted, or
conveyed to persons or the public or private
corporations, the same shall be brought forthwith
under the operation of this Act and shall become
registered lands."
PD No. 1529
"Sec. 103. Certificate of Title to Patents. Whenever
public land is by the Government alienated,
granted or conveyed to any person, the same shall
be brought forthwith under the operation of this
Decree." (Emphasis supplied)
Based on its legislative history, the phrase "conveyed to
any person" in Section 103 of PD No. 1529 includes
conveyances of public lands to public corporations.
Alienable lands of the public domain "granted, donated,
or transferred to a province, municipality, or branch or
subdivision of the Government," as provided in Section
60 of CA No. 141, may be registered under the Torrens
System pursuant to Section 103 of PD No. 1529. Such
registration, however, is expressly subject to the
condition in Section 60 of CA No. 141 that the land "shall
not be alienated, encumbered or otherwise disposed of
in a manner affecting its title, except when authorized
by Congress." This provision refers to government
reclaimed, foreshore and marshy lands of the public
domain that have been titled but still cannot be alienated
or encumbered unless expressly authorized by Congress.
The need for legislative authority prevents the registered
land of the public domain from becoming private land
that can be disposed of to qualified private parties.
The Revised Administrative Code of 1987 also recognizes
that lands of the public domain may be registered under
the Torrens System. Section 48, Chapter 12, Book I of the
Code states –
"Sec. 48. Official Authorized to Convey Real
Property. Whenever real property of the
Government is authorized by law to be conveyed,
60
 the deed of conveyance shall be executed in behalf
of the government by the following:
(1) x x x
(2) For property belonging to the Republic of the
Philippines, but titled in the name of any political
subdivision or of any corporate agency or
instrumentality, by the executive head of the
agency or instrumentality." (Emphasis supplied)
Thus, private property purchased by the National
Government for expansion of a public wharf may be
titled in the name of a government corporation
regulating port operations in the country. Private
property purchased by the National Government for
expansion of an airport may also be titled in the name of
the government agency tasked to administer the airport.
Private property donated to a municipality for use as a
town plaza or public school site may likewise be titled in
the name of the municipality.106 All these properties
become properties of the public domain, and if already
registered under Act No. 496 or PD No. 1529, remain
registered land. There is no requirement or provision in
any existing law for the de-registration of land from the
Torrens System.
Private lands taken by the Government for public use
under its power of eminent domain become
unquestionably part of the public domain. Nevertheless,
Section 85 of PD No. 1529 authorizes the Register of
Deeds to issue in the name of the National Government
new certificates of title covering such expropriated lands.
Section 85 of PD No. 1529 states –
"Sec. 85. Land taken by eminent domain. Whenever
any registered land, or interest therein, is
expropriated or taken by eminent domain, the
National Government, province, city or
municipality, or any other agency or instrumentality
exercising such right shall file for registration in the
proper Registry a certified copy of the judgment
which shall state definitely by an adequate
description, the particular property or interest
expropriated, the number of the certificate of title,
and the nature of the public use. A memorandum of
the right or interest taken shall be made on each
certificate of title by the Register of Deeds, and
where the fee simple is taken, a new certificate
shall be issued in favor of the National
Government, province, city, municipality, or any
other agency or instrumentality exercising such
right for the land so taken. The legal expenses
incident to the memorandum of registration or
issuance of a new certificate of title shall be for the
account of the authority taking the land or interest
therein." (Emphasis supplied)
Consequently, lands registered under Act No. 496 or PD
No. 1529 are not exclusively private or patrimonial lands.
Lands of the public domain may also be registered
pursuant to existing laws.
AMARI makes a parting shot that the Amended JVA is not
a sale to AMARI of the Freedom Islands or of the lands to
be reclaimed from submerged areas of Manila Bay. In the
words of AMARI, the Amended JVA "is not a sale but a
joint venture with a stipulation for reimbursement of the
original cost incurred by PEA for the earlier reclamation
and construction works performed by the CDCP under its
1973 contract with the Republic." Whether the Amended
JVA is a sale or a joint venture, the fact remains that the
Amended JVA requires PEA to "cause the issuance and
delivery of the certificates of title conveying AMARI's
Land Share in the name of AMARI."107
This stipulation still contravenes Section 3, Article XII of
the 1987 Constitution which provides that private
corporations "shall not hold such alienable lands of the
public domain except by lease." The transfer of title and
ownership to AMARI clearly means that AMARI will
"hold" the reclaimed lands other than by lease. The
transfer of title and ownership is a "disposition" of the
reclaimed lands, a transaction considered a sale or
alienation under CA No. 141,108 the Government Auditing
Code,109 and Section 3, Article XII of the 1987
Constitution.
The Regalian doctrine is deeply implanted in our legal
system. Foreshore and submerged areas form part of the
public domain and are inalienable. Lands reclaimed from
foreshore and submerged areas also form part of the
public domain and are also inalienable, unless converted
pursuant to law into alienable or disposable lands of the
public domain. Historically, lands reclaimed by the
government are sui generis, not available for sale to
private parties unlike other alienable public lands.
Reclaimed lands retain their inherent potential as areas
for public use or public service. Alienable lands of the
public domain, increasingly becoming scarce natural
resources, are to be distributed equitably among our
ever-growing population. To insure such equitable
distribution, the 1973 and 1987 Constitutions have
barred private corporations from acquiring any kind of
alienable land of the public domain. Those who attempt
to dispose of inalienable natural resources of the State,
or seek to circumvent the constitutional ban on
alienation of lands of the public domain to private
corporations, do so at their own risk.
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands
comprising the Freedom Islands, now covered by
certificates of title in the name of PEA, are alienable
lands of the public domain. PEA may lease these
lands to private corporations but may not sell or
transfer ownership of these lands to private
corporations. PEA may only sell these lands to
Philippine citizens, subject to the ownership
limitations in the 1987 Constitution and existing
laws.
2. The 592.15 hectares of submerged areas of Manila
Bay remain inalienable natural resources of the
public domain until classified as alienable or
disposable lands open to disposition and declared
no longer needed for public service. The
government can make such classification and
declaration only after PEA has reclaimed these
submerged areas. Only then can these lands qualify
as agricultural lands of the public domain, which are
the only natural resources the government can
alienate. In their present state, the 592.15 hectares
of submerged areas are inalienable and outside
the commerce of man.
3. Since the Amended JVA seeks to transfer to
AMARI, a private corporation, ownership of 77.34
hectares110 of the Freedom Islands, such transfer is
void for being contrary to Section 3, Article XII of the
1987 Constitution which prohibits private
corporations from acquiring any kind of alienable
land of the public domain.
4. Since the Amended JVA also seeks to transfer to
AMARI ownership of 290.156 hectares111 of still
61
 submerged areas of Manila Bay, such transfer is void
for being contrary to Section 2, Article XII of the
1987 Constitution which prohibits the alienation of
natural resources other than agricultural lands of
the public domain. PEA may reclaim these
submerged areas. Thereafter, the government can
classify the reclaimed lands as alienable or
disposable, and further declare them no longer
needed for public service. Still, the transfer of such
reclaimed alienable lands of the public domain to
AMARI will be void in view of Section 3, Article XII
of the 1987 Constitution which prohibits private
corporations from acquiring any kind of alienable
land of the public domain.

Clearly, the Amended JVA violates glaringly Sections 2

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

Seventh issue: whether the Court is the proper forum

to raise the issue of whether the Amended JVA is
grossly disadvantageous to the government.

Considering that the Amended JVA is null and void ab

initio, there is no necessity to rule on this last issue.
Besides, the Court is not a trier of facts, and this last issue
involves a determination of factual matters.

WHEREFORE, the petition is GRANTED. The Public

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

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Puno, Vitug, Kapunan, Mendoza,

Panganiban, Quisumbing, Ynares-Santiago, Sandoval-
Gutierrez, Austria-Martinez, and Corona, JJ., concur.

62
 specifically approved by the President of the
Philippines.5 1992-1997 RPT was paid on Dec. 24, 1997 as
per O.R.#9476102 for P4,207,028.75
On 21 March 1997, the Office of the Government
Corporate Counsel (OGCC) issued Opinion No. 061. The #9476101 for P28,676,480.00
OGCC opined that the Local Government Code of 1991
withdrew the exemption from real estate tax granted to
MIAA under Section 21 of the MIAA Charter. Thus, MIAA #9476103 for P49,115.006
negotiated with respondent City of Parañaque to pay the
real estate tax imposed by the City. MIAA then paid some On 17 July 2001, the City of Parañaque, through its City
EN BANC of the real estate tax already due. Treasurer, issued notices of levy and warrants of levy on
the Airport Lands and Buildings. The Mayor of the City of
G.R. No. 155650 July 20, 2006 On 28 June 2001, MIAA received Final Notices of Real Parañaque threatened to sell at public auction the
Estate Tax Delinquency from the City of Parañaque for Airport Lands and Buildings should MIAA fail to pay the
the taxable years 1992 to 2001. MIAA's real estate tax real estate tax delinquency. MIAA thus sought a
MANILA INTERNATIONAL AIRPORT
delinquency is broken down as follows: clarification of OGCC Opinion No. 061.
AUTHORITY, petitioner,
vs.
COURT OF APPEALS, CITY OF PARAÑAQUE, CITY On 9 August 2001, the OGCC issued Opinion No. 147
TAX TAXAB
MAYOR OF PARAÑAQUE, SANGGUNIANG DECLARAT LE TAX DUE PENALTY TOTAL clarifying OGCC Opinion No. 061. The OGCC pointed out
PANGLUNGSOD NG PARAÑAQUE, CITY ASSESSOR OF ION YEAR that Section 206 of the Local Government Code requires
PARAÑAQUE, and CITY TREASURER OF persons exempt from real estate tax to show proof of
E-016- 1992- 19,558,160. 11,201,083. 30,789,243.2
PARAÑAQUE, respondents. 01370 2001 00 20 0
exemption. The OGCC opined that Section 21 of the MIAA
Charter is the proof that MIAA is exempt from real estate
E-016- 1992- 111,689,424 68,149,479. 179,838,904. tax.
DECISION 01374 2001 .90 59 49
E-016- 1992- 20,276,058. 12,371,832. 32,647,890.0
01375 2001 00 00 0 On 1 October 2001, MIAA filed with the Court of Appeals
CARPIO, J.:
an original petition for prohibition and injunction, with
E-016- 1992- 58,144,028. 35,477,712. 93,621,740.0
prayer for preliminary injunction or temporary
The Antecedents 01376 2001 00 00 0
restraining order. The petition sought to restrain the City
E-016- 1992- 18,134,614. 11,065,188. 29,199,803.2 of Parañaque from imposing real estate tax on, levying
01377 2001 65 59 4
Petitioner Manila International Airport Authority against, and auctioning for public sale the Airport Lands
(MIAA) operates the Ninoy Aquino International Airport E-016- 1992- 111,107,950 67,794,681. 178,902,631. and Buildings. The petition was docketed as CA-G.R. SP
01378 2001 .40 59 99 No. 66878.
(NAIA) Complex in Parañaque City under Executive
Order No. 903, otherwise known as the Revised Charter E-016- 1992- 4,322,340.0 2,637,360.0 6,959,700.00
of the Manila International Airport Authority ("MIAA 01379 2001 0 0
On 5 October 2001, the Court of Appeals dismissed the
Charter"). Executive Order No. 903 was issued on 21 July E-016- 1992- 7,776,436.0 4,744,944.0 12,521,380.0 petition because MIAA filed it beyond the 60-day
1983 by then President Ferdinand E. Marcos. 01380 2001 0 0 0 reglementary period. The Court of Appeals also denied
Subsequently, Executive Order Nos. 9091 and *E-016- 1998- 6,444,810.0 2,900,164.5 9,344,974.50 on 27 September 2002 MIAA's motion for
2982 amended the MIAA Charter. 013-85 2001 0 0 reconsideration and supplemental motion for
*E-016- 1998- 34,876,800. 5,694,560.0 50,571,360.0 reconsideration. Hence, MIAA filed on 5 December 2002
As operator of the international airport, MIAA 01387 2001 00 0 0 the present petition for review.7
administers the land, improvements and equipment *E-016- 1998- 75,240.00 33,858.00 109,098.00
within the NAIA Complex. The MIAA Charter transferred 01396 2001 Meanwhile, in January 2003, the City of Parañaque
to MIAA approximately 600 hectares of land,3 including GRAND P392,435,86 P232,070,86 P 624,506,72 posted notices of auction sale at the Barangay Halls of
the runways and buildings ("Airport Lands and TOTAL 1.95 3.47 5.42 Barangays Vitalez, Sto. Niño, and Tambo, Parañaque City;
Buildings") then under the Bureau of Air in the public market of Barangay La Huerta; and in the
Transportation.4 The MIAA Charter further provides that main lobby of the Parañaque City Hall. The City of
no portion of the land transferred to MIAA shall be Parañaque published the notices in the 3 and 10 January
disposed of through sale or any other mode unless 2003 issues of the Philippine Daily Inquirer, a newspaper

63
of general circulation in the Philippines. The notices
announced the public auction sale of the Airport Lands
and Buildings to the highest bidder on 7 February 2003,
10:00 a.m., at the Legislative Session Hall Building of
Parañaque City.
A day before the public auction, or on 6 February 2003,
at 5:10 p.m., MIAA filed before this Court an Urgent Ex-
Parte and Reiteratory Motion for the Issuance of a
Temporary Restraining Order. The motion sought to
restrain respondents — the City of Parañaque, City
Mayor of Parañaque, Sangguniang Panglungsod ng
Parañaque, City Treasurer of Parañaque, and the City
Assessor of Parañaque ("respondents") — from
auctioning the Airport Lands and Buildings.
On 7 February 2003, this Court issued a temporary
restraining order (TRO) effective immediately. The Court
ordered respondents to cease and desist from selling at
public auction the Airport Lands and Buildings.
Respondents received the TRO on the same day that the
Court issued it. However, respondents received the TRO
only at 1:25 p.m. or three hours after the conclusion of
the public auction.
On 10 February 2003, this Court issued a Resolution
confirming nunc pro tunc the TRO.
On 29 March 2005, the Court heard the parties in oral
arguments. In compliance with the directive issued
during the hearing, MIAA, respondent City of Parañaque,
and the Solicitor General subsequently submitted their
respective Memoranda.
MIAA admits that the MIAA Charter has placed the title
to the Airport Lands and Buildings in the name of MIAA.
However, MIAA points out that it cannot claim
ownership over these properties since the real owner of
the Airport Lands and Buildings is the Republic of the
Philippines. The MIAA Charter mandates MIAA to devote
the Airport Lands and Buildings for the benefit of the
general public. Since the Airport Lands and Buildings are
devoted to public use and public service, the ownership
of these properties remains with the State. The Airport
Lands and Buildings are thus inalienable and are not
subject to real estate tax by local governments.
MIAA also points out that Section 21 of the MIAA Charter
specifically exempts MIAA from the payment of real
estate tax. MIAA insists that it is also exempt from real
estate tax under Section 234 of the Local Government
Code because the Airport Lands and Buildings are owned
by the Republic. To justify the exemption, MIAA invokes
the principle that the government cannot tax itself. MIAA
points out that the reason for tax exemption of public
property is that its taxation would not inure to any public
advantage, since in such a case the tax debtor is also the
tax creditor.
Respondents invoke Section 193 of the Local
Government Code, which expressly withdrew the tax
exemption privileges of "government-owned and-
controlled corporations" upon the effectivity of the
Local Government Code. Respondents also argue that a
basic rule of statutory construction is that the express
mention of one person, thing, or act excludes all others.
An international airport is not among the exceptions
mentioned in Section 193 of the Local Government Code.
Thus, respondents assert that MIAA cannot claim that the
Airport Lands and Buildings are exempt from real estate
tax.
Respondents also cite the ruling of this Court in Mactan
International Airport v. Marcos8 where we held that
the Local Government Code has withdrawn the
exemption from real estate tax granted to international
airports. Respondents further argue that since MIAA has
already paid some of the real estate tax assessments, it is
now estopped from claiming that the Airport Lands and
Buildings are exempt from real estate tax.
The Issue
This petition raises the threshold issue of whether the
Airport Lands and Buildings of MIAA are exempt from
real estate tax under existing laws. If so exempt, then the
real estate tax assessments issued by the City of
Parañaque, and all proceedings taken pursuant to such
assessments, are void. In such event, the other issues
raised in this petition become moot.
The Court's Ruling
We rule that MIAA's Airport Lands and Buildings are
exempt from real estate tax imposed by local
governments.
First, MIAA is not a government-owned or controlled
corporation but an instrumentality of the National
Government and thus exempt from local
taxation. Second, the real properties of MIAA are owned
by the Republic of the Philippines and thus exempt from
real estate tax.
1. MIAA is Not a Government-Owned or Controlled
Corporation
Respondents argue that MIAA, being a government-
owned or controlled corporation, is not exempt from real
estate tax. Respondents claim that the deletion of the
phrase "any government-owned or controlled so exempt
by its charter" in Section 234(e) of the Local Government
Code withdrew the real estate tax exemption of
government-owned or controlled corporations. The
deleted phrase appeared in Section 40(a) of the 1974
Real Property Tax Code enumerating the entities exempt
from real estate tax.
There is no dispute that a government-owned or
controlled corporation is not exempt from real estate tax.
However, MIAA is not a government-owned or controlled
corporation. Section 2(13) of the Introductory
Provisions of the Administrative Code of 1987 defines a
government-owned or controlled corporation as follows:
SEC. 2. General Terms Defined. – x x x x
(13) Government-owned or controlled
corporation refers to any agency organized as a
stock or non-stock corporation, vested with
functions relating to public needs whether
governmental or proprietary in nature, and owned
by the Government directly or through its
instrumentalities either wholly, or, where
applicable as in the case of stock corporations, to the
extent of at least fifty-one (51) percent of its capital
stock: x x x. (Emphasis supplied)
A government-owned or controlled corporation must be
"organized as a stock or non-stock corporation."
MIAA is not organized as a stock or non-stock
corporation. MIAA is not a stock corporation because it
has no capital stock divided into shares. MIAA has no
64
stockholders or voting shares. Section 10 of the MIAA
Charter9 provides:
SECTION 10. Capital. — The capital of the Authority
to be contributed by the National Government shall
be increased from Two and One-half Billion
(P2,500,000,000.00) Pesos to Ten Billion
(P10,000,000,000.00) Pesos to consist of:
(a) The value of fixed assets including airport
facilities, runways and equipment and such other
properties, movable and immovable[,] which may
be contributed by the National Government or
transferred by it from any of its agencies, the
valuation of which shall be determined jointly with
the Department of Budget and Management and the
Commission on Audit on the date of such
contribution or transfer after making due
allowances for depreciation and other deductions
taking into account the loans and other liabilities of
the Authority at the time of the takeover of the
assets and other properties;
(b) That the amount of P605 million as of December
31, 1986 representing about seventy percentum
(70%) of the unremitted share of the National
Government from 1983 to 1986 to be remitted to
the National Treasury as provided for in Section 11
of E. O. No. 903 as amended, shall be converted into
the equity of the National Government in the
Authority. Thereafter, the Government contribution
to the capital of the Authority shall be provided in
the General Appropriations Act.
Clearly, under its Charter, MIAA does not have capital
stock that is divided into shares.
Section 3 of the Corporation Code10 defines a stock
corporation as one whose "capital stock is divided into
shares and x x x authorized to distribute to the
holders of such shares dividends x x x." MIAA has
capital but it is not divided into shares of stock. MIAA has
no stockholders or voting shares. Hence, MIAA is not a
stock corporation.
MIAA is also not a non-stock corporation because it has
no members. Section 87 of the Corporation Code defines
a non-stock corporation as "one where no part of its
income is distributable as dividends to its members,
trustees or officers." A non-stock corporation must have
members. Even if we assume that the Government is
considered as the sole member of MIAA, this will not
make MIAA a non-stock corporation. Non-stock
corporations cannot distribute any part of their income
to their members. Section 11 of the MIAA Charter
mandates MIAA to remit 20% of its annual gross
operating income to the National Treasury.11 This
prevents MIAA from qualifying as a non-stock
corporation.
Section 88 of the Corporation Code provides that non-
stock corporations are "organized for charitable,
religious, educational, professional, cultural,
recreational, fraternal, literary, scientific, social, civil
service, or similar purposes, like trade, industry,
agriculture and like chambers." MIAA is not organized for
any of these purposes. MIAA, a public utility, is organized
to operate an international and domestic airport for
public use.
Since MIAA is neither a stock nor a non-stock
corporation, MIAA does not qualify as a government-
owned or controlled corporation. What then is the legal
status of MIAA within the National Government?
MIAA is a government instrumentality vested with
corporate powers to perform efficiently its
governmental functions. MIAA is like any other
government instrumentality, the only difference is that
MIAA is vested with corporate powers. Section 2(10) of
the Introductory Provisions of the Administrative Code
defines a government "instrumentality" as follows:
SEC. 2. General Terms Defined. –– x x x x
(10) Instrumentality refers to any agency of the
National Government, not integrated within the
department framework, vested with special
functions or jurisdiction by law, endowed with
some if not all corporate powers, administering
special funds, and enjoying operational autonomy,
usually through a charter. x x x (Emphasis supplied)
When the law vests in a government instrumentality
corporate powers, the instrumentality does not become
a corporation. Unless the government instrumentality is
organized as a stock or non-stock corporation, it remains
a government instrumentality exercising not only
governmental but also corporate powers. Thus, MIAA
exercises the governmental powers of eminent
domain,12 police authority13 and the levying of fees and
charges.14 At the same time, MIAA exercises "all the
powers of a corporation under the Corporation Law,
insofar as these powers are not inconsistent with the
provisions of this Executive Order."15
Likewise, when the law makes a government
instrumentality operationally autonomous, the
instrumentality remains part of the National
Government machinery although not integrated with the
department framework. The MIAA Charter expressly
states that transforming MIAA into a "separate and
autonomous body"16 will make its operation more
"financially viable."17
Many government instrumentalities are vested with
corporate powers but they do not become stock or non-
stock corporations, which is a necessary condition before
an agency or instrumentality is deemed a government-
owned or controlled corporation. Examples are the
Mactan International Airport Authority, the Philippine
Ports Authority, the University of the Philippines
and Bangko Sentral ng Pilipinas. All these government
instrumentalities exercise corporate powers but they are
not organized as stock or non-stock corporations as
required by Section 2(13) of the Introductory Provisions
of the Administrative Code. These government
instrumentalities are sometimes loosely called
government corporate entities. However, they are not
government-owned or controlled corporations in the
strict sense as understood under the Administrative
Code, which is the governing law defining the legal
relationship and status of government entities.
A government instrumentality like MIAA falls under
Section 133(o) of the Local Government Code, which
states:
SEC. 133. Common Limitations on the Taxing Powers
of Local Government Units. – Unless otherwise
provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the
following:
xxxx
65
 (o) Taxes, fees or charges of any kind on the
National Government, its agencies and
instrumentalities and local government
units.(Emphasis and underscoring supplied)
Section 133(o) recognizes the basic principle that local
governments cannot tax the national government, which
historically merely delegated to local governments the
power to tax. While the 1987 Constitution now includes
taxation as one of the powers of local governments, local
governments may only exercise such power "subject to
such guidelines and limitations as the Congress may
provide."18
When local governments invoke the power to tax on
national government instrumentalities, such power is
construed strictly against local governments. The rule is
that a tax is never presumed and there must be clear
language in the law imposing the tax. Any doubt whether
a person, article or activity is taxable is resolved against
taxation. This rule applies with greater force when local
governments seek to tax national government
instrumentalities.
Another rule is that a tax exemption is strictly construed
against the taxpayer claiming the exemption. However,
when Congress grants an exemption to a national
government instrumentality from local taxation, such
exemption is construed liberally in favor of the national
government instrumentality. As this Court declared
in Maceda v. Macaraig, Jr.:
The reason for the rule does not apply in the case of
exemptions running to the benefit of the
government itself or its agencies. In such case the
practical effect of an exemption is merely to reduce
the amount of money that has to be handled by
government in the course of its operations. For
these reasons, provisions granting exemptions to
government agencies may be construed liberally, in
favor of non tax-liability of such agencies.19
There is, moreover, no point in national and local
governments taxing each other, unless a sound and
compelling policy requires such transfer of public funds
from one government pocket to another.
There is also no reason for local governments to tax
national government instrumentalities for rendering
essential public services to inhabitants of local
governments. The only exception is when the
legislature clearly intended to tax government
instrumentalities for the delivery of essential public
services for sound and compelling policy
considerations. There must be express language in the
law empowering local governments to tax national
government instrumentalities. Any doubt whether such
power exists is resolved against local governments.
Thus, Section 133 of the Local Government Code states
that "unless otherwise provided" in the Code, local
governments cannot tax national government
instrumentalities. As this Court held in Basco v.
Philippine Amusements and Gaming Corporation:
The states have no power by taxation or
otherwise, to retard, impede, burden or in any
manner control the operation of constitutional
laws enacted by Congress to carry into execution
the powers vested in the federal government. (MC
Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the
National Government over local governments.
"Justice Holmes, speaking for the Supreme Court,
made reference to the entire absence of power on
the part of the States to touch, in that way
(taxation) at least, the instrumentalities of the
United States (Johnson v. Maryland, 254 US 51)
and it can be agreed that no state or political
subdivision can regulate a federal instrumentality
in such a way as to prevent it from consummating
its federal responsibilities, or even to seriously
burden it in the accomplishment of them."
(Antieau, Modern Constitutional Law, Vol. 2, p.
140, emphasis supplied)
Otherwise, mere creatures of the State can defeat
National policies thru extermination of what local
authorities may perceive to be undesirable activities
or enterprise using the power to tax as "a tool for
regulation" (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall
as the "power to destroy" (Mc Culloch v. Maryland,
supra) cannot be allowed to defeat an instrumentality
or creation of the very entity which has the inherent
power to wield it. 20
2. Airport Lands and Buildings of MIAA are Owned by
the Republic
a. Airport Lands and Buildings are of Public
Dominion
The Airport Lands and Buildings of MIAA are property
of public dominion and therefore owned by the State
or the Republic of the Philippines. The Civil Code
provides:
ARTICLE 419. Property is either of public dominion
or of private ownership.
ARTICLE 420. The following things are property
of public dominion:
(1) Those intended for public use, such as roads,
canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores,
roadsteads, and others of similar character;
(2) Those which belong to the State, without being
for public use, and are intended for some public
service or for the development of the national
wealth. (Emphasis supplied)
ARTICLE 421. All other property of the State, which
is not of the character stated in the preceding article,
is patrimonial property.
ARTICLE 422. Property of public dominion, when no
longer intended for public use or for public service,
shall form part of the patrimonial property of the
State.
No one can dispute that properties of public dominion
mentioned in Article 420 of the Civil Code, like "roads,
canals, rivers, torrents, ports and bridges
constructed by the State," are owned by the State. The
term "ports" includes seaports and airports. The
MIAA Airport Lands and Buildings constitute a "port"
constructed by the State. Under Article 420 of the Civil
Code, the MIAA Airport Lands and Buildings are
66
properties of public dominion and thus owned by the
State or the Republic of the Philippines.
The Airport Lands and Buildings are devoted to public
use because they are used by the public for
international and domestic travel and
transportation. The fact that the MIAA collects terminal
fees and other charges from the public does not remove
the character of the Airport Lands and Buildings as
properties for public use. The operation by the
government of a tollway does not change the character of
the road as one for public use. Someone must pay for the
maintenance of the road, either the public indirectly
through the taxes they pay the government, or only those
among the public who actually use the road through the
toll fees they pay upon using the road. The tollway
system is even a more efficient and equitable manner of
taxing the public for the maintenance of public roads.
The charging of fees to the public does not determine the
character of the property whether it is of public
dominion or not. Article 420 of the Civil Code defines
property of public dominion as one "intended for public
use." Even if the government collects toll fees, the road is
still "intended for public use" if anyone can use the road
under the same terms and conditions as the rest of the
public. The charging of fees, the limitation on the kind of
vehicles that can use the road, the speed restrictions and
other conditions for the use of the road do not affect the
public character of the road.
The terminal fees MIAA charges to passengers, as well as
the landing fees MIAA charges to airlines, constitute the
bulk of the income that maintains the operations of
MIAA. The collection of such fees does not change the
character of MIAA as an airport for public use. Such fees
are often termed user's tax. This means taxing those
among the public who actually use a public facility
instead of taxing all the public including those who never
use the particular public facility. A user's tax is more
equitable — a principle of taxation mandated in the 1987
Constitution.21
The Airport Lands and Buildings of MIAA, which its
Charter calls the "principal airport of the Philippines for
both international and domestic air traffic,"22 are
properties of public dominion because they are intended
for public use. As properties of public dominion, they
indisputably belong to the State or the Republic of
the Philippines.
b. Airport Lands and Buildings are Outside the
Commerce of Man
The Airport Lands and Buildings of MIAA are devoted to
public use and thus are properties of public dominion. As
properties of public dominion, the Airport Lands and
Buildings are outside the commerce of man. The
Court has ruled repeatedly that properties of public
dominion are outside the commerce of man. As early as
1915, this Court already ruled in Municipality of Cavite
v. Rojas that properties devoted to public use are outside
the commerce of man, thus:
According to article 344 of the Civil Code:
"Property for public use in provinces and in
towns comprises the provincial and town
roads, the squares, streets, fountains, and
public waters, the promenades, and public
works of general service supported by said
towns or provinces."
The said Plaza Soledad being a promenade for
public use, the municipal council of Cavite could
not in 1907 withdraw or exclude from public
use a portion thereof in order to lease it for the
sole benefit of the defendant Hilaria Rojas. In
leasing a portion of said plaza or public place to
the defendant for private use the plaintiff
municipality exceeded its authority in the
exercise of its powers by executing a contract
over a thing of which it could not dispose, nor is
it empowered so to do.
The Civil Code, article 1271, prescribes that
everything which is not outside the commerce
of man may be the object of a contract, and
plazas and streets are outside of this
commerce, as was decided by the supreme
court of Spain in its decision of February 12,
1895, which says: "Communal things that
cannot be sold because they are by their
very nature outside of commerce are those
for public use, such as the plazas, streets,
common lands, rivers, fountains, etc."
(Emphasis supplied) 23
Again in Espiritu v. Municipal Council, the Court
declared that properties of public dominion are outside
the commerce of man:
xxx Town plazas are properties of public dominion,
to be devoted to public use and to be made available
to the public in general. They are outside the
commerce of man and cannot be disposed of or even
leased by the municipality to private parties. While in
case of war or during an emergency, town plazas may
be occupied temporarily by private individuals, as
was done and as was tolerated by the Municipality of
Pozorrubio, when the emergency has ceased, said
temporary occupation or use must also cease, and the
town officials should see to it that the town plazas
should ever be kept open to the public and free from
encumbrances or illegal private
constructions.24 (Emphasis supplied)
The Court has also ruled that property of public
dominion, being outside the commerce of man, cannot be
the subject of an auction sale.25
Properties of public dominion, being for public use, are
not subject to levy, encumbrance or disposition through
public or private sale. Any encumbrance, levy on
execution or auction sale of any property of public
dominion is void for being contrary to public policy.
Essential public services will stop if properties of public
dominion are subject to encumbrances, foreclosures and
auction sale. This will happen if the City of Parañaque can
foreclose and compel the auction sale of the 600-hectare
runway of the MIAA for non-payment of real estate tax.
Before MIAA can encumber26 the Airport Lands and
Buildings, the President must first withdraw from
public use the Airport Lands and Buildings. Sections 83
and 88 of the Public Land Law or Commonwealth Act No.
141, which "remains to this day the existing general law
governing the classification and disposition of lands of
the public domain other than timber and mineral
lands,"27 provide:
SECTION 83. Upon the recommendation of the
Secretary of Agriculture and Natural Resources, the
President may designate by proclamation any tract or
tracts of land of the public domain as reservations for
the use of the Republic of the Philippines or of any of
its branches, or of the inhabitants thereof, in
67
 accordance with regulations prescribed for this
purposes, or for quasi-public uses or purposes when
the public interest requires it, including reservations
for highways, rights of way for railroads, hydraulic
power sites, irrigation systems, communal pastures
or lequas communales, public parks, public quarries,
public fishponds, working men's village and other
improvements for the public benefit.
SECTION 88. The tract or tracts of land reserved
under the provisions of Section eighty-three shall
be non-alienable and shall not be subject to
occupation, entry, sale, lease, or other disposition
until again declared alienable under the
provisions of this Act or by proclamation of the
President. (Emphasis and underscoring supplied)
Thus, unless the President issues a proclamation
withdrawing the Airport Lands and Buildings from
public use, these properties remain properties of public
dominion and are inalienable. Since the Airport Lands
and Buildings are inalienable in their present status as
properties of public dominion, they are not subject to
levy on execution or foreclosure sale. As long as the
Airport Lands and Buildings are reserved for public use,
their ownership remains with the State or the Republic
of the Philippines.
The authority of the President to reserve lands of the
public domain for public use, and to withdraw such
public use, is reiterated in Section 14, Chapter 4, Title I,
Book III of the Administrative Code of 1987, which states:
SEC. 14. Power to Reserve Lands of the Public and
Private Domain of the Government. — (1) The
President shall have the power to reserve for
settlement or public use, and for specific public
purposes, any of the lands of the public domain,
the use of which is not otherwise directed by law.
The reserved land shall thereafter remain subject
to the specific public purpose indicated until
otherwise provided by law or proclamation;
x x x x. (Emphasis supplied)
There is no question, therefore, that unless the Airport
Lands and Buildings are withdrawn by law or
presidential proclamation from public use, they are
properties of public dominion, owned by the Republic
and outside the commerce of man.
c. MIAA is a Mere Trustee of the Republic
MIAA is merely holding title to the Airport Lands and
Buildings in trust for the Republic. Section 48, Chapter
12, Book I of the Administrative Code allows
instrumentalities like MIAA to hold title to real
properties owned by the Republic, thus:
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)
In MIAA's case, its status as a mere trustee of the Airport
Lands and Buildings is clearer because even its executive
head cannot sign the deed of conveyance on behalf of the
Republic. Only the President of the Republic can sign
such deed of conveyance.28
d. Transfer to MIAA was Meant to Implement a
Reorganization
The MIAA Charter, which is a law, transferred to MIAA
the title to the Airport Lands and Buildings from the
Bureau of Air Transportation of the Department of
Transportation and Communications. The MIAA Charter
provides:
SECTION 3. Creation of the Manila International
Airport Authority. — x x x x
The land where the Airport is presently located
as well as the surrounding land area of
approximately six hundred hectares, are hereby
transferred, conveyed and assigned to the
ownership and administration of the Authority,
subject to existing rights, if any. The Bureau of
Lands and other appropriate government agencies
shall undertake an actual survey of the area
transferred within one year from the promulgation
of this Executive Order and the corresponding title
to be issued in the name of the Authority. Any
portion thereof shall not be disposed through
sale or through any other mode unless
specifically approved by the President of the
Philippines. (Emphasis supplied)
SECTION 22. Transfer of Existing Facilities and
Intangible Assets. — All existing public airport
facilities, runways, lands, buildings and other
property, movable or immovable, belonging to the
Airport, and all assets, powers, rights, interests and
privileges belonging to the Bureau of Air
Transportation relating to airport works or air
operations, including all equipment which are
necessary for the operation of crash fire and rescue
facilities, are hereby transferred to the Authority.
(Emphasis supplied)
SECTION 25. Abolition of the Manila International
Airport as a Division in the Bureau of Air
Transportation and Transitory Provisions. — The
Manila International Airport including the Manila
Domestic Airport as a division under the Bureau of
Air Transportation is hereby abolished.
x x x x.
The MIAA Charter transferred the Airport Lands and
Buildings to MIAA without the Republic receiving cash,
promissory notes or even stock since MIAA is not a stock
corporation.
The whereas clauses of the MIAA Charter explain the
rationale for the transfer of the Airport Lands and
Buildings to MIAA, thus:
WHEREAS, the Manila International Airport as the
principal airport of the Philippines for both
international and domestic air traffic, is required to
68
 provide standards of airport accommodation and
service comparable with the best airports in the
world;
WHEREAS, domestic and other terminals, general
aviation and other facilities, have to be upgraded to
meet the current and future air traffic and other
demands of aviation in Metro Manila;
WHEREAS, a management and organization study
has indicated that the objectives of providing high
standards of accommodation and service within
the context of a financially viable operation, will
best be achieved by a separate and autonomous
body; and
WHEREAS, under Presidential Decree No. 1416, as
amended by Presidential Decree No. 1772, the
President of the Philippines is given continuing
authority to reorganize the National
Government, which authority includes the
creation of new entities, agencies and
instrumentalities of the Government[.]
(Emphasis supplied)
The transfer of the Airport Lands and Buildings from the
Bureau of Air Transportation to MIAA was not meant to
transfer beneficial ownership of these assets from the
Republic to MIAA. The purpose was merely
to reorganize a division in the Bureau of Air
Transportation into a separate and autonomous
body. The Republic remains the beneficial owner of the
Airport Lands and Buildings. MIAA itself is owned solely
by the Republic. No party claims any ownership rights
over MIAA's assets adverse to the Republic.
The MIAA Charter expressly provides that the Airport
Lands and Buildings "shall not be disposed through
sale or through any other mode unless specifically
approved by the President of the Philippines." This
only means that the Republic retained the beneficial
ownership of the Airport Lands and Buildings because
under Article 428 of the Civil Code, only the "owner has
the right to x x x dispose of a thing." Since MIAA cannot
dispose of the Airport Lands and Buildings, MIAA does
not own the Airport Lands and Buildings.
At any time, the President can transfer back to the
Republic title to the Airport Lands and Buildings without
the Republic paying MIAA any consideration. Under
Section 3 of the MIAA Charter, the President is the only
one who can authorize the sale or disposition of the
Airport Lands and Buildings. This only confirms that the
Airport Lands and Buildings belong to the Republic.
e. Real Property Owned by the Republic is Not
Taxable
Section 234(a) of the Local Government Code exempts
from real estate tax any "[r]eal property owned by the
Republic of the Philippines." Section 234(a) provides:
SEC. 234. Exemptions from Real Property Tax. — The
following are exempted from payment of the
real property tax:
(a) Real property owned by the Republic of the
Philippines or any of its political subdivisions
except when the beneficial use thereof has been
granted, for consideration or otherwise, to a
taxable person;
x x x. (Emphasis supplied)
This exemption should be read in relation with Section
133(o) of the same Code, which prohibits local
governments from imposing "[t]axes, fees or charges of
any kind on the National Government, its agencies
and instrumentalities x x x." The real properties owned
by the Republic are titled either in the name of the
Republic itself or in the name of agencies or
instrumentalities of the National Government. The
Administrative Code allows real property owned by the
Republic to be titled in the name of agencies or
instrumentalities of the national government. Such real
properties remain owned by the Republic and continue
to be exempt from real estate tax.
The Republic may grant the beneficial use of its real
property to an agency or instrumentality of the national
government. This happens when title of the real property
is transferred to an agency or instrumentality even as the
Republic remains the owner of the real property. Such
arrangement does not result in the loss of the tax
exemption. Section 234(a) of the Local Government Code
states that real property owned by the Republic loses its
tax exemption only if the "beneficial use thereof has been
granted, for consideration or otherwise, to a taxable
person." MIAA, as a government instrumentality, is not a
taxable person under Section 133(o) of the Local
Government Code. Thus, even if we assume that the
Republic has granted to MIAA the beneficial use of the
Airport Lands and Buildings, such fact does not make
these real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings
that MIAA leases to private entities are not exempt from
real estate tax. For example, the land area occupied by
hangars that MIAA leases to private corporations is
subject to real estate tax. In such a case, MIAA has
granted the beneficial use of such land area for a
consideration to a taxable person and therefore such
land area is subject to real estate tax. In Lung Center of
the Philippines v. Quezon City, the Court ruled:
Accordingly, we hold that the portions of the land
leased to private entities as well as those parts of the
hospital leased to private individuals are not exempt
from such taxes. On the other hand, the portions of
the land occupied by the hospital and portions of the
hospital used for its patients, whether paying or
non-paying, are exempt from real property taxes.29
3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not exempt from
real estate tax because Section 193 of the Local
Government Code of 1991 withdrew the tax exemption
of "all persons, whether natural or juridical" upon the
effectivity of the Code. Section 193 provides:
SEC. 193. Withdrawal of Tax Exemption
Privileges – Unless otherwise provided in this
Code, tax exemptions or incentives granted to,
or presently enjoyed by all persons, whether
natural or juridical, including government-owned
or controlled corporations, except local water
districts, cooperatives duly registered under R.A. No.
6938, non-stock and non-profit hospitals and
educational institutions are hereby withdrawn upon
effectivity of this Code. (Emphasis supplied)
The minority states that MIAA is indisputably a juridical
person. The minority argues that since the Local
Government Code withdrew the tax exemption of all
69
juridical persons, then MIAA is not exempt from real
estate tax. Thus, the minority declares:
It is evident from the quoted provisions of the
Local Government Code that the withdrawn
exemptions from realty tax cover not just GOCCs,
but all persons. To repeat, the provisions lay down
the explicit proposition that the withdrawal of realty
tax exemption applies to all persons. The reference
to or the inclusion of GOCCs is only clarificatory or
illustrative of the explicit provision.
The term "All persons" encompasses the two
classes of persons recognized under our laws,
natural and juridical persons. Obviously, MIAA
is not a natural person. Thus, the determinative
test is not just whether MIAA is a GOCC, but
whether MIAA is a juridical person at all.
(Emphasis and underscoring in the original)
The minority posits that the "determinative test"
whether MIAA is exempt from local taxation is its status
— whether MIAA is a juridical person or not. The
minority also insists that "Sections 193 and 234 may be
examined in isolation from Section 133(o) to ascertain
MIAA's claim of exemption."
The argument of the minority is fatally flawed. Section
193 of the Local Government Code expressly withdrew
the tax exemption of all juridical persons "[u]nless
otherwise provided in this Code." Now, Section 133(o)
of the Local Government Code expressly provides
otherwise, specifically prohibiting local governments
from imposing any kind of tax on national government
instrumentalities. Section 133(o) states:
SEC. 133. Common Limitations on the Taxing Powers
of Local Government Units. – Unless otherwise
provided herein, the exercise of the taxing powers of
provinces, cities, municipalities, and barangays shall
not extend to the levy of the following:
xxxx
(o) Taxes, fees or charges of any kinds on the National
Government, its agencies and instrumentalities, and
local government units. (Emphasis and underscoring
supplied)
By express mandate of the Local Government Code, local
governments cannot impose any kind of tax on national
government instrumentalities like the MIAA. Local
governments are devoid of power to tax the national
government, its agencies and instrumentalities. The
taxing powers of local governments do not extend to the
national government, its agencies and instrumentalities,
"[u]nless otherwise provided in this Code" as stated in
the saving clause of Section 133. The saving clause refers
to Section 234(a) on the exception to the exemption from
real estate tax of real property owned by the Republic.
The minority, however, theorizes that unless exempted
in Section 193 itself, all juridical persons are subject to
tax by local governments. The minority insists that the
juridical persons exempt from local taxation are limited
to the three classes of entities specifically enumerated as
exempt in Section 193. Thus, the minority states:
x x x Under Section 193, the exemption is
limited to (a) local water districts; (b) cooperatives
duly registered under Republic Act No. 6938; and (c)
non-stock and non-profit hospitals and educational
institutions. It would be belaboring the obvious why
the MIAA does not fall within any of the exempt
entities under Section 193. (Emphasis supplied)
The minority's theory directly contradicts and
completely negates Section 133(o) of the Local
Government Code. This theory will result in gross
absurdities. It will make the national government, which
itself is a juridical person, subject to tax by local
governments since the national government is not
included in the enumeration of exempt entities in Section
193. Under this theory, local governments can impose
any kind of local tax, and not only real estate tax, on the
national government.
Under the minority's theory, many national government
instrumentalities with juridical personalities will also be
subject to any kind of local tax, and not only real estate
tax. Some of the national government instrumentalities
vested by law with juridical personalities are: Bangko
Sentral ng Pilipinas,30 Philippine Rice Research
Institute,31 Laguna Lake
Development Authority,32 Fisheries Development
Authority,33 Bases Conversion Development
Authority,34 Philippine Ports Authority,35 Cagayan de
Oro Port Authority,36 San Fernando Port
Authority,37 Cebu Port Authority,38 and Philippine
National Railways.39
The minority's theory violates Section 133(o) of the
Local Government Code which expressly prohibits local
governments from imposing any kind of tax on national
government instrumentalities. Section 133(o) does not
distinguish between national government
instrumentalities with or without juridical personalities.
Where the law does not distinguish, courts should not
distinguish. Thus, Section 133(o) applies to all national
government instrumentalities, with or without juridical
personalities. The determinative test whether MIAA is
exempt from local taxation is not whether MIAA is a
juridical person, but whether it is a national government
instrumentality under Section 133(o) of the Local
Government Code. Section 133(o) is the specific
provision of law prohibiting local governments from
imposing any kind of tax on the national government, its
agencies and instrumentalities.
Section 133 of the Local Government Code starts with the
saving clause "[u]nless otherwise provided in this Code."
This means that unless the Local Government Code
grants an express authorization, local governments have
no power to tax the national government, its agencies
and instrumentalities. Clearly, the rule is local
governments have no power to tax the national
government, its agencies and instrumentalities. As an
exception to this rule, local governments may tax the
national government, its agencies and instrumentalities
only if the Local Government Code expressly so provides.
The saving clause in Section 133 refers to the exception
to the exemption in Section 234(a) of the Code, which
makes the national government subject to real estate tax
when it gives the beneficial use of its real properties to a
taxable entity. Section 234(a) of the Local Government
Code provides:
SEC. 234. Exemptions from Real Property Tax – The
following are exempted from payment of the real
property tax:
70
 (a) Real property owned by the Republic of the
Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person.
x x x. (Emphasis supplied)
Under Section 234(a), real property owned by the
Republic is exempt from real estate tax. The exception to
this exemption is when the government gives the
beneficial use of the real property to a taxable entity.
The exception to the exemption in Section 234(a) is the
only instance when the national government, its agencies
and instrumentalities are subject to any kind of tax by
local governments. The exception to the exemption
applies only to real estate tax and not to any other tax.
The justification for the exception to the exemption is
that the real property, although owned by the Republic,
is not devoted to public use or public service but devoted
to the private gain of a taxable person.
The minority also argues that since Section 133 precedes
Section 193 and 234 of the Local Government Code, the
later provisions prevail over Section 133. Thus, the
minority asserts:
x x x Moreover, sequentially Section 133 antecedes
Section 193 and 234. Following an accepted rule of
construction, in case of conflict the subsequent
provisions should prevail. Therefore, MIAA, as a
juridical person, is subject to real property taxes, the
general exemptions attaching to instrumentalities
under Section 133(o) of the Local Government Code
being qualified by Sections 193 and 234 of the same
law. (Emphasis supplied)
The minority assumes that there is an irreconcilable
conflict between Section 133 on one hand, and Sections
193 and 234 on the other. No one has urged that there is
such a conflict, much less has any one presenteda
persuasive argument that there is such a conflict. The
minority's assumption of an irreconcilable conflict in the
statutory provisions is an egregious error for two
reasons.
First, there is no conflict whatsoever between Sections
133 and 193 because Section 193 expressly admits its
subordination to other provisions of the Code when
Section 193 states "[u]nless otherwise provided in this
Code." By its own words, Section 193 admits the
superiority of other provisions of the Local Government
Code that limit the exercise of the taxing power in Section
193. When a provision of law grants a power but
withholds such power on certain matters, there is no
conflict between the grant of power and the withholding
of power. The grantee of the power simply cannot
exercise the power on matters withheld from its power.
Second, Section 133 is entitled "Common Limitations on
the Taxing Powers of Local Government Units." Section
133 limits the grant to local governments of the power to
tax, and not merely the exercise of a delegated power to
tax. Section 133 states that the taxing powers of local
governments "shall not extend to the levy" of any kind of
tax on the national government, its agencies and
instrumentalities. There is no clearer limitation on the
taxing power than this.
Since Section 133 prescribes the "common limitations"
on the taxing powers of local governments, Section 133
logically prevails over Section 193 which grants local
governments such taxing powers. By their very meaning
and purpose, the "common limitations" on the taxing
power prevail over the grant or exercise of the taxing
power. If the taxing power of local governments in
Section 193 prevails over the limitations on such taxing
power in Section 133, then local governments can
impose any kind of tax on the national government, its
agencies and instrumentalities — a gross absurdity.
Local governments have no power to tax the national
government, its agencies and instrumentalities, except as
otherwise provided in the Local Government Code
pursuant to the saving clause in Section 133 stating
"[u]nless otherwise provided in this Code." This
exception — which is an exception to the exemption of
the Republic from real estate tax imposed by local
governments — refers to Section 234(a) of the Code. The
exception to the exemption in Section 234(a) subjects
real property owned by the Republic, whether titled in
the name of the national government, its agencies or
instrumentalities, to real estate tax if the beneficial use of
such property is given to a taxable entity.
The minority also claims that the definition in the
Administrative Code of the phrase "government-owned
or controlled corporation" is not controlling. The
minority points out that Section 2 of the Introductory
Provisions of the Administrative Code admits that its
definitions are not controlling when it provides:
SEC. 2. General Terms Defined. — Unless the specific
words of the text, or the context as a whole, or a
particular statute, shall require a different meaning:
xxxx
The minority then concludes that reliance on the
Administrative Code definition is "flawed."
The minority's argument is a non sequitur. True, Section
2 of the Administrative Code recognizes that a statute
may require a different meaning than that defined in the
Administrative Code. However, this does not
automatically mean that the definition in the
Administrative Code does not apply to the Local
Government Code. Section 2 of the Administrative Code
clearly states that "unless the specific words x x x of a
particular statute shall require a different meaning," the
definition in Section 2 of the Administrative Code shall
apply. Thus, unless there is specific language in the Local
Government Code defining the phrase "government-
owned or controlled corporation" differently from the
definition in the Administrative Code, the definition in
the Administrative Code prevails.
The minority does not point to any provision in the Local
Government Code defining the phrase "government-
owned or controlled corporation" differently from the
definition in the Administrative Code. Indeed, there is
none. The Local Government Code is silent on the
definition of the phrase "government-owned or
controlled corporation." The Administrative Code,
however, expressly defines the phrase "government-
owned or controlled corporation." The inescapable
conclusion is that the Administrative Code definition of
the phrase "government-owned or controlled
corporation" applies to the Local Government Code.
The third whereas clause of the Administrative Code
states that the Code "incorporates in a unified document
the major structural, functional and procedural
principles and rules of governance." Thus, the
Administrative Code is the governing law defining the
status and relationship of government departments,
71
bureaus, offices, agencies and instrumentalities. Unless a
statute expressly provides for a different status and
relationship for a specific government unit or entity, the
provisions of the Administrative Code prevail.
The minority also contends that the phrase
"government-owned or controlled corporation" should
apply only to corporations organized under the
Corporation Code, the general incorporation law, and not
to corporations created by special charters. The minority
sees no reason why government corporations with
special charters should have a capital stock. Thus, the
minority declares:
I submit that the definition of "government-owned or
controlled corporations" under the Administrative
Code refer to those corporations owned by the
government or its instrumentalities which are
created not by legislative enactment, but formed and
organized under the Corporation Code through
registration with the Securities and Exchange
Commission. In short, these are GOCCs without
original charters.
xxxx
It might as well be worth pointing out that there is no
point in requiring a capital structure for GOCCs
whose full ownership is limited by its charter to the
State or Republic. Such GOCCs are not empowered to
declare dividends or alienate their capital shares.
The contention of the minority is seriously flawed. It is
not in accord with the Constitution and existing
legislations. It will also result in gross absurdities.
First, the Administrative Code definition of the phrase
"government-owned or controlled corporation" does not
distinguish between one incorporated under the
Corporation Code or under a special charter. Where the
law does not distinguish, courts should not distinguish.
Second, Congress has created through special charters
several government-owned corporations organized as
stock corporations. Prime examples are the Land Bank of
the Philippines and the Development Bank of the
Philippines. The special charter40 of the Land Bank of the
Philippines provides:
SECTION 81. Capital. — The authorized capital stock
of the Bank shall be nine billion pesos, divided into
seven hundred and eighty million common shares
with a par value of ten pesos each, which shall be fully
subscribed by the Government, and one hundred and
twenty million preferred shares with a par value of
ten pesos each, which shall be issued in accordance
with the provisions of Sections seventy-seven and
eighty-three of this Code. (Emphasis supplied)
Likewise, the special charter41 of the Development Bank
of the Philippines provides:
SECTION 7. Authorized Capital Stock – Par value. —
The capital stock of the Bank shall be Five Billion
Pesos to be divided into Fifty Million common shares
with par value of P100 per share. These shares are
available for subscription by the National
Government. Upon the effectivity of this Charter, the
National Government shall subscribe to Twenty-Five
Million common shares of stock worth Two Billion
Five Hundred Million which shall be deemed paid for
by the Government with the net asset values of the
Bank remaining after the transfer of assets and
liabilities as provided in Section 30 hereof. (Emphasis
supplied)
Other government-owned corporations organized as
stock corporations under their special charters are the
Philippine Crop Insurance Corporation,42 Philippine
International Trading Corporation,43 and the Philippine
National Bank44 before it was reorganized as a stock
corporation under the Corporation Code. All these
government-owned corporations organized under
special charters as stock corporations are subject to real
estate tax on real properties owned by them. To rule that
they are not government-owned or controlled
corporations because they are not registered with the
Securities and Exchange Commission would remove
them from the reach of Section 234 of the Local
Government Code, thus exempting them from real estate
tax.
Third, the government-owned or controlled
corporations created through special charters are those
that meet the two conditions prescribed in Section 16,
Article XII of the Constitution. The first condition is that
the government-owned or controlled corporation must
be established for the common good. The second
condition is that the government-owned or controlled
corporation must meet the test of economic viability.
Section 16, Article XII of the 1987 Constitution provides:
SEC. 16. The Congress shall not, except by general
law, provide for the formation, organization, or
regulation of private corporations. Government-
owned or controlled corporations may be created or
established by special charters in the interest of the
common good and subject to the test of economic
viability. (Emphasis and underscoring supplied)
The Constitution expressly authorizes the legislature to
create "government-owned or controlled corporations"
through special charters only if these entities are
required to meet the twin conditions of common good
and economic viability. In other words, Congress has no
power to create government-owned or controlled
corporations with special charters unless they are made
to comply with the two conditions of common good and
economic viability. The test of economic viability applies
only to government-owned or controlled corporations
that perform economic or commercial activities and need
to compete in the market place. Being essentially
economic vehicles of the State for the common good —
meaning for economic development purposes — these
government-owned or controlled corporations with
special charters are usually organized as stock
corporations just like ordinary private corporations.
In contrast, government instrumentalities vested with
corporate powers and performing governmental or
public functions need not meet the test of economic
viability. These instrumentalities perform essential
public services for the common good, services that every
modern State must provide its citizens. These
instrumentalities need not be economically viable since
the government may even subsidize their entire
operations. These instrumentalities are not the
"government-owned or controlled corporations"
referred to in Section 16, Article XII of the 1987
Constitution.
Thus, the Constitution imposes no limitation when the
legislature creates government instrumentalities vested
with corporate powers but performing essential
72
governmental or public functions. Congress has plenary
authority to create government instrumentalities vested
with corporate powers provided these instrumentalities
perform essential government functions or public
services. However, when the legislature creates through
special charters corporations that perform economic or
commercial activities, such entities — known as
"government-owned or controlled corporations" —
must meet the test of economic viability because they
compete in the market place.
This is the situation of the Land Bank of the Philippines
and the Development Bank of the Philippines and similar
government-owned or controlled corporations, which
derive their income to meet operating expenses solely
from commercial transactions in competition with the
private sector. The intent of the Constitution is to prevent
the creation of government-owned or controlled
corporations that cannot survive on their own in the
market place and thus merely drain the public coffers.
Commissioner Blas F. Ople, proponent of the test of
economic viability, explained to the Constitutional
Commission the purpose of this test, as follows:
MR. OPLE: Madam President, the reason for this
concern is really that when the government creates
a corporation, there is a sense in which this
corporation becomes exempt from the test of
economic performance. We know what happened in
the past. If a government corporation loses, then it
makes its claim upon the taxpayers' money through
new equity infusions from the government and what
is always invoked is the common good. That is the
reason why this year, out of a budget of P115 billion
for the entire government, about P28 billion of this
will go into equity infusions to support a few
government financial institutions. And this is all
taxpayers' money which could have been relocated
to agrarian reform, to social services like health and
education, to augment the salaries of grossly
underpaid public employees. And yet this is all going
down the drain.
Therefore, when we insert the phrase "ECONOMIC
VIABILITY" together with the "common good," this
becomes a restraint on future enthusiasts for state
capitalism to excuse themselves from the
responsibility of meeting the market test so that
they become viable. And so, Madam President, I
reiterate, for the committee's consideration and I
am glad that I am joined in this proposal by
Commissioner Foz, the insertion of the standard of
"ECONOMIC VIABILITY OR THE ECONOMIC TEST,"
together with the common good.45
Father Joaquin G. Bernas, a leading member of the
Constitutional Commission, explains in his textbook The
1987 Constitution of the Republic of the Philippines: A
Commentary:
The second sentence was added by the 1986
Constitutional Commission. The significant addition,
however, is the phrase "in the interest of the
common good and subject to the test of economic
viability." The addition includes the ideas that they
must show capacity to function efficiently in
business and that they should not go into activities
which the private sector can do better. Moreover,
economic viability is more than financial viability
but also includes capability to make profit and
generate benefits not quantifiable in financial
terms.46 (Emphasis supplied)
Clearly, the test of economic viability does not apply to
government entities vested with corporate powers and
performing essential public services. The State is
obligated to render essential public services regardless
of the economic viability of providing such service. The
non-economic viability of rendering such essential public
service does not excuse the State from withholding such
essential services from the public.
However, government-owned or controlled corporations
with special charters, organized essentially for economic
or commercial objectives, must meet the test of economic
viability. These are the government-owned or controlled
corporations that are usually organized under their
special charters as stock corporations, like the Land Bank
of the Philippines and the Development Bank of the
Philippines. These are the government-owned or
controlled corporations, along with government-owned
or controlled corporations organized under the
Corporation Code, that fall under the definition of
"government-owned or controlled corporations" in
Section 2(10) of the Administrative Code.
The MIAA need not meet the test of economic viability
because the legislature did not create MIAA to compete
in the market place. MIAA does not compete in the
market place because there is no competing
international airport operated by the private sector.
MIAA performs an essential public service as the primary
domestic and international airport of the Philippines.
The operation of an international airport requires the
presence of personnel from the following government
agencies:
1. The Bureau of Immigration and Deportation, to
document the arrival and departure of passengers,
screening out those without visas or travel
documents, or those with hold departure orders;
2. The Bureau of Customs, to collect import duties or
enforce the ban on prohibited importations;
3. The quarantine office of the Department of Health,
to enforce health measures against the spread of
infectious diseases into the country;
4. The Department of Agriculture, to enforce
measures against the spread of plant and animal
diseases into the country;
5. The Aviation Security Command of the Philippine
National Police, to prevent the entry of terrorists
and the escape of criminals, as well as to secure the
airport premises from terrorist attack or seizure;
6. The Air Traffic Office of the Department of
Transportation and Communications, to authorize
aircraft to enter or leave Philippine airspace, as well
as to land on, or take off from, the airport; and
7. The MIAA, to provide the proper premises — such
as runway and buildings — for the government
personnel, passengers, and airlines, and to manage
the airport operations.
All these agencies of government perform government
functions essential to the operation of an international
airport.
MIAA performs an essential public service that every
modern State must provide its citizens. MIAA derives its
73
revenues principally from the mandatory fees and
charges MIAA imposes on passengers and airlines. The
terminal fees that MIAA charges every passenger are
regulatory or administrative fees47 and not income from
commercial transactions.
MIAA falls under the definition of a government
instrumentality under Section 2(10) of the Introductory
Provisions of the Administrative Code, which provides:
SEC. 2. General Terms Defined. – x x x x
(10) Instrumentality refers to any agency of the
National Government, not integrated within the
department framework, vested with special functions
or jurisdiction by law, endowed with some if not all
corporate powers, administering special funds, and
enjoying operational autonomy, usually through a
charter. x x x (Emphasis supplied)
The fact alone that MIAA is endowed with corporate
powers does not make MIAA a government-owned or
controlled corporation. Without a change in its capital
structure, MIAA remains a government instrumentality
under Section 2(10) of the Introductory Provisions of the
Administrative Code. More importantly, as long as MIAA
renders essential public services, it need not comply with
the test of economic viability. Thus, MIAA is outside the
scope of the phrase "government-owned or controlled
corporations" under Section 16, Article XII of the 1987
Constitution.
The minority belittles the use in the Local Government
Code of the phrase "government-owned or controlled
corporation" as merely "clarificatory or illustrative." This
is fatal. The 1987 Constitution prescribes explicit
conditions for the creation of "government-owned or
controlled corporations." The Administrative Code
defines what constitutes a "government-owned or
controlled corporation." To belittle this phrase as
"clarificatory or illustrative" is grave error.
To summarize, MIAA is not a government-owned or
controlled corporation under Section 2(13) of the
Introductory Provisions of the Administrative Code
because it is not organized as a stock or non-stock
corporation. Neither is MIAA a government-owned or
controlled corporation under Section 16, Article XII of
the 1987 Constitution because MIAA is not required to
meet the test of economic viability. MIAA is a government
instrumentality vested with corporate powers and
performing essential public services pursuant to Section
2(10) of the Introductory Provisions of the
Administrative Code. As a government instrumentality,
MIAA is not subject to any kind of tax by local
governments under Section 133(o) of the Local
Government Code. The exception to the exemption in
Section 234(a) does not apply to MIAA because MIAA is
not a taxable entity under the Local Government Code.
Such exception applies only if the beneficial use of real
property owned by the Republic is given to a taxable
entity.
Finally, the Airport Lands and Buildings of MIAA are
properties devoted to public use and thus are properties
of public dominion. Properties of public dominion are
owned by the State or the Republic. Article 420 of the
Civil Code provides:
Art. 420. The following things are property of public
dominion:
(1) Those intended for public use, such as roads,
canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads,
and others of similar character;
(2) Those which belong to the State, without being
for public use, and are intended for some public
service or for the development of the national
wealth. (Emphasis supplied)
The term "ports x x x constructed by the State" includes
airports and seaports. The Airport Lands and Buildings
of MIAA are intended for public use, and at the very least
intended for public service. Whether intended for public
use or public service, the Airport Lands and Buildings are
properties of public dominion. As properties of public
dominion, the Airport Lands and Buildings are owned by
the Republic and thus exempt from real estate tax under
Section 234(a) of the Local Government Code.
4. Conclusion
Under Section 2(10) and (13) of the Introductory
Provisions of the Administrative Code, which governs the
legal relation and status of government units, agencies
and offices within the entire government machinery,
MIAA is a government instrumentality and not a
government-owned or controlled corporation. Under
Section 133(o) of the Local Government Code, MIAA as a
government instrumentality is not a taxable person
because it is not subject to "[t]axes, fees or charges of any
kind" by local governments. The only exception is when
MIAA leases its real property to a "taxable person" as
provided in Section 234(a) of the Local Government
Code, in which case the specific real property leased
becomes subject to real estate tax. Thus, only portions of
the Airport Lands and Buildings leased to taxable
persons like private parties are subject to real estate tax
by the City of Parañaque.
Under Article 420 of the Civil Code, the Airport Lands and
Buildings of MIAA, being devoted to public use, are
properties of public dominion and thus owned by the
State or the Republic of the Philippines. Article 420
specifically mentions "ports x x x constructed by the
State," which includes public airports and seaports, as
properties of public dominion and owned by the
Republic. As properties of public dominion owned by the
Republic, there is no doubt whatsoever that the Airport
Lands and Buildings are expressly exempt from real
estate tax under Section 234(a) of the Local Government
Code. This Court has also repeatedly ruled that
properties of public dominion are not subject to
execution or foreclosure sale.
WHEREFORE, we GRANT the petition. We SET
ASIDE the assailed Resolutions of the Court of Appeals of
5 October 2001 and 27 September 2002 in CA-G.R. SP No.
66878. We DECLARE the Airport Lands and Buildings of
the Manila International Airport
Authority EXEMPT from the real estate tax imposed by
the City of Parañaque. We declare VOID all the real estate
tax assessments, including the final notices of real estate
tax delinquencies, issued by the City of Parañaque on the
Airport Lands and Buildings of the Manila International
Airport Authority, except for the portions that the Manila
International Airport Authority has leased to private
parties. We also declare VOID the assailed auction sale,
and all its effects, of the Airport Lands and Buildings of
the Manila International Airport Authority.
No costs.
74
SO ORDERED.
Panganiban, C.J., Puno, Quisumbing, Ynares-Santiago,
Sandoval-Gutierrez, Austria-Martinez, Corona, Carpio
Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, Garcia,
Velasco, Jr., J.J., concur.
x--------------------------------------------------------------------x
DISSENTING OPINION
TINGA, J. :
The legally correct resolution of this petition would have
had the added benefit of an utterly fair and equitable
result – a recognition of the constitutional and statutory
power of the City of Parañaque to impose real property
taxes on the Manila International Airport Authority
(MIAA), but at the same time, upholding a statutory
limitation that prevents the City of Parañaque from
seizing and conducting an execution sale over the real
properties of MIAA. In the end, all that the City of
Parañaque would hold over the MIAA is a limited lien,
unenforceable as it is through the sale or disposition of
MIAA properties. Not only is this the legal effect of all the
relevant constitutional and statutory provisions applied
to this case, it also leaves the room for negotiation for a
mutually acceptable resolution between the City of
Parañaque and MIAA.
Instead, with blind but measured rage, the majority
today veers wildly off-course, shattering statutes and
judicial precedents left and right in order to protect the
precious Ming vase that is the Manila International
Airport Authority (MIAA). While the MIAA is left
unscathed, it is surrounded by the wreckage that once
was the constitutional policy, duly enacted into law, that
was local autonomy. Make no mistake, the majority has
virtually declared war on the seventy nine (79)
provinces, one hundred seventeen (117) cities, and one
thousand five hundred (1,500) municipalities of the
Philippines.1
The icing on this inedible cake is the strained and
purposely vague rationale used to justify the majority
opinion. Decisions of the Supreme Court are expected to
provide clarity to the parties and to students of
jurisprudence, as to what the law of the case is, especially
when the doctrines of long standing are modified or
clarified. With all due respect, the decision in this case is
plainly so, so wrong on many levels. More egregious, in
the majority's resolve to spare the Manila International
Airport Authority (MIAA) from liability for real estate
taxes, no clear-cut rule emerges on the important
question of the power of local government units (LGUs)
to tax government corporations, instrumentalities or
agencies.
The majority would overturn sub silencio, among others,
at least one dozen precedents enumerated below:
1) Mactan-Cebu International Airport Authority v. Hon.
Marcos,2 the leading case penned in 1997 by recently
retired Chief Justice Davide, which held that the express
withdrawal by the Local Government Code of previously
granted exemptions from realty taxes applied to
instrumentalities and government-owned or controlled
corporations (GOCCs) such as the Mactan-Cebu
International Airport Authority (MCIAA). The majority
invokes the ruling in Basco v. Pagcor,3 a precedent
discredited in Mactan, and a vanguard of a doctrine so
noxious to the concept of local government rule that the
Local Government Code was drafted precisely to counter
such philosophy. The efficacy of several rulings that
expressly rely on Mactan, such as PHILRECA v. DILG
Secretary,4 City Government of San Pablo v. Hon.
Reyes5 is now put in question.
2) The rulings in National Power Corporation v. City of
Cabanatuan,6 wherein the Court, through Justice Puno,
declared that the National Power Corporation, a GOCC, is
liable for franchise taxes under the Local Government
Code, and succeeding cases that have relied on it such as
Batangas Power Corp. v. Batangas City7 The majority
now states that deems instrumentalities as defined
under the Administrative Code of 1987 as purportedly
beyond the reach of any form of taxation by LGUs, stating
"[l]ocal governments are devoid of power to tax the
national government, its agencies and
instrumentalities."8 Unfortunately, using the definition
employed by the majority, as provided by Section 2(d) of
the Administrative Code, GOCCs are also considered as
instrumentalities, thus leading to the astounding
conclusion that GOCCs may not be taxed by LGUs under
the Local Government Code.
3) Lung Center of the Philippines v. Quezon
City,9 wherein a unanimous en banc Court held that the
Lung Center of the Philippines may be liable for real
property taxes. Using the majority's reasoning, the Lung
Center would be properly classified as an
instrumentality which the majority now holds as exempt
from all forms of local taxation.10
4) City of Davao v. RTC,11 where the Court held that the
Government Service Insurance System (GSIS) was liable
for real property taxes for the years 1992 to 1994, its
previous exemption having been withdrawn by the
enactment of the Local Government Code.12 This
decision, which expressly relied on Mactan, would be
directly though silently overruled by the majority.
5) The common essence of the Court's rulings in the two
Philippine Ports Authority v. City of Iloilo,13 cases penned
by Justices Callejo and Azcuna respectively, which relied
in part on Mactan in holding the Philippine Ports
Authority (PPA) liable for realty taxes, notwithstanding
the fact that it is a GOCC. Based on the reasoning of the
majority, the PPA cannot be considered a GOCC. The
reliance of these cases on Mactan, and its rationale for
holding governmental entities like the PPA liable for local
government taxation is mooted by the majority.
6) The 1963 precedent of Social Security System
Employees Association v. Soriano,14 which declared the
Social Security Commission (SSC) as a GOCC performing
proprietary functions. Based on the rationale employed
by the majority, the Social Security System is not a GOCC.
Or perhaps more accurately, "no longer" a GOCC.
7) The decision penned by Justice (now Chief Justice)
Panganiban, Light Rail Transit Authority v. Central Board
of Assessment.15 The characterization therein of the
Light Rail Transit Authority (LRTA) as a "service-
oriented commercial endeavor" whose patrimonial
property is subject to local taxation is now rendered
inconsequential, owing to the majority's thinking that an
entity such as the LRTA is itself exempt from local
government taxation16, irrespective of the functions it
performs. Moreover, based on the majority's criteria,
LRTA is not a GOCC.
8) The cases of Teodoro v. National Airports
Corporation17 and Civil Aeronautics Administration v.
Court of Appeals.18 wherein the Court held that the
75
predecessor agency of the MIAA, which was similarly
engaged in the operation, administration and
management of the Manila International Agency, was
engaged in the exercise of proprietary, as opposed to
sovereign functions. The majority would hold otherwise
that the property maintained by MIAA is actually
patrimonial, thus implying that MIAA is actually engaged
in sovereign functions.
9) My own majority in Phividec Industrial Authority v.
Capitol Steel,19 wherein the Court held that the Phividec
Industrial Authority, a GOCC, was required to secure the
services of the Office of the Government Corporate
Counsel for legal representation.20 Based on the
reasoning of the majority, Phividec would not be a GOCC,
and the mandate of the Office of the Government
Corporate Counsel extends only to GOCCs.
10) Two decisions promulgated by the Court just last
month (June 2006), National Power Corporation v.
Province of Isabela21 and GSIS v. City Assessor of Iloilo
City.22 In the former, the Court pronounced that
"[a]lthough as a general rule, LGUs cannot impose taxes,
fees, or charges of any kind on the National Government,
its agencies and instrumentalities, this rule admits of an
exception, i.e., when specific provisions of the LGC
authorize the LGUs to impose taxes, fees or charges on
the aforementioned entities." Yet the majority now rules
that the exceptions in the LGC no longer hold, since "local
governments are devoid of power to tax the national
government, its agencies and instrumentalities."23 The
ruling in the latter case, which held the GSIS as liable for
real property taxes, is now put in jeopardy by the
majority's ruling.
There are certainly many other precedents affected,
perhaps all previous jurisprudence regarding local
government taxation vis-a-vis government entities, as
well as any previous definitions of GOCCs, and previous
distinctions between the exercise of governmental and
proprietary functions (a distinction laid down by this
Court as far back as 191624). What is the reason offered
by the majority for overturning or modifying all these
precedents and doctrines? None is given, for the majority
takes comfort instead in the pretense that these
precedents never existed. Only children should be
permitted to subscribe to the theory that something bad
will go away if you pretend hard enough that it does not
exist.
I.
Case Should Have Been Decided
Following Mactan Precedent
The core issue in this case, whether the MIAA is liable to
the City of Parañaque for real property taxes under the
Local Government Code, has already been decided by this
Court in the Mactan case, and should have been resolved
by simply applying precedent.
Mactan Explained
A brief recall of the Mactan case is in order. The Mactan-
Cebu International Airport Authority (MCIAA) claimed
that it was exempt from payment of real property taxes
to the City of Cebu, invoking the specific exemption
granted in Section 14 of its charter, Republic Act No.
6958, and its status as an instrumentality of the
government performing governmental
functions.25 Particularly, MCIAA invoked Section 133 of
the Local Government Code, precisely the same provision
utilized by the majority as the basis for MIAA's
exemption. Section 133 reads:
Sec. 133. Common Limitations on the Taxing Powers of
Local Government Units.— Unless otherwise provided
herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to
the levy of the following:
xxx
(o) Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities and local
government units. (emphasis and underscoring
supplied).
However, the Court in Mactan noted that Section 133
qualified the exemption of the National Government, its
agencies and instrumentalities from local taxation with
the phrase "unless otherwise provided herein." It then
considered the other relevant provisions of the Local
Government Code, particularly the following:
SEC. 193. Withdrawal of Tax Exemption Privileges. –
Unless otherwise provided in this Code, tax exemption or
incentives granted to, or enjoyed by all persons, whether
natural or juridical, including government-owned and
controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-
stock and non-profit hospitals and educational
institutions, are hereby withdrawn upon the effectivity
of this Code.26
SECTION 232. Power to Levy Real Property Tax. – A
province or city or a municipality within the
Metropolitan Manila area may levy an annual ad valorem
tax on real property such as land, building, machinery,
and other improvements not hereafter specifically
exempted.27
SECTION 234. Exemptions from Real Property Tax. -- The
following are exempted from payment of the real
property tax:
(a) Real property owned by the Republic of the
Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person:
(b) Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, non-profit or
religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for
religious charitable or educational purposes;
(c) All machineries and equipment that are actually,
directly and exclusively used by local water districts and
government-owned and controlled corporations
engaged in the distribution of water and/or generation
and transmission of electric power;
(d) All real property owned by duly registered
cooperatives as provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control
and environmental protection.
76
Except as provided herein, any exemption from payment
of real property tax previously granted to, or presently
enjoyed by, all persons, whether natural or juridical,
including all government-owned or controlled
corporations are hereby withdrawn upon the effectivity
of this Code.28
Clearly, Section 133 was not intended to be so absolute a
prohibition on the power of LGUs to tax the National
Government, its agencies and instrumentalities, as
evidenced by these cited provisions which "otherwise
provided." But what was the extent of the limitation
under Section 133? This is how the Court, correctly to my
mind, defined the parameters in Mactan:
The foregoing sections of the LGC speak of: (a) the
limitations on the taxing powers of local government
units and the exceptions to such limitations; and (b) the
rule on tax exemptions and the exceptions thereto. The
use of exceptions or provisos in these sections, as shown
by the following clauses:
(1) "unless otherwise provided herein" in the opening
paragraph of Section 133;
(2) "Unless otherwise provided in this Code" in Section
193;
(3) "not hereafter specifically exempted" in Section 232;
and
(4) "Except as provided herein" in the last paragraph of
Section 234
initially hampers a ready understanding of the sections.
Note, too, that the aforementioned clause in Section 133
seems to be inaccurately worded. Instead of the clause
"unless otherwise provided herein," with the "herein" to
mean, of course, the section, it should have used the
clause "unless otherwise provided in this Code." The
former results in absurdity since the section itself
enumerates what are beyond the taxing powers of local
government units and, where exceptions were intended,
the exceptions are explicitly indicated in the next. For
instance, in item (a) which excepts income taxes "when
levied on banks and other financial institutions"; item (d)
which excepts "wharfage on wharves constructed and
maintained by the local government unit concerned";
and item (1) which excepts taxes, fees and charges for the
registration and issuance of licenses or permits for the
driving of "tricycles." It may also be observed that within
the body itself of the section, there are exceptions which
can be found only in other parts of the LGC, but the
section interchangeably uses therein the clause, "except
as otherwise provided herein" as in items (c) and (i), or
the clause "except as provided in this Code" in item (j).
These clauses would be obviously unnecessary or mere
surplusages if the opening clause of the section were
"Unless otherwise provided in this Code" instead of
"Unless otherwise provided herein." In any event, even if
the latter is used, since under Section 232 local
government units have the power to levy real property
tax, except those exempted therefrom under Section 234,
then Section 232 must be deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the
LGC, we conclude that as a general rule, as laid down in
Section 133, the taxing powers of local government units
cannot extend to the levy of, inter alia, "taxes, fees and
charges of any kind on the National Government, its
agencies and instrumentalities, and local government
units"; however, pursuant to Section 232, provinces,
cities, and municipalities in the Metropolitan Manila Area
may impose the real property tax except on, inter alia,
"real property owned by the Republic of the Philippines
or any of its political subdivisions except when the
beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person," as
provided in item (a) of the first paragraph of Section 234.
As to tax exemptions or incentives granted to or
presently enjoyed by natural or judicial persons,
including government-owned and controlled
corporations, Section 193 of the LGC prescribes the
general rule, viz., they are withdrawn upon the effectivity
of the LGC, except those granted to local water districts,
cooperatives duly registered under R.A. No. 6938, non-
stock and non-profit hospitals and educational
institutions, and unless otherwise provided in the LGC.
The latter proviso could refer to Section 234 which
enumerates the properties exempt from real property
tax. But the last paragraph of Section 234 further
qualifies the retention of the exemption insofar as real
property taxes are concerned by limiting the retention
only to those enumerated therein; all others not included
in the enumeration lost the privilege upon the effectivity
of the LGC. Moreover, even as to real property owned by
the Republic of the Philippines or any of its political
subdivisions covered by item (a) of the first paragraph of
Section 234, the exemption is withdrawn if the beneficial
use of such property has been granted to a taxable
person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally
withdrew, upon the effectivity of the LGC, exemptions
from payment of real property taxes granted to natural
or juridical persons, including government-owned or
controlled corporations, except as provided in the said
section, and the petitioner is, undoubtedly, a
government-owned corporation, it necessarily follows
that its exemption from such tax granted it in Section 14
of its Charter, R.A. No. 6958, has been withdrawn. Any
claim to the contrary can only be justified if the petitioner
can seek refuge under any of the exceptions provided in
Section 234, but not under Section 133, as it now asserts,
since, as shown above, the said section is qualified by
Sections 232 and 234.29
The Court in Mactan acknowledged that under Section
133, instrumentalities were generally exempt from all
forms of local government taxation, unless otherwise
provided in the Code. On the other hand, Section 232
"otherwise provided" insofar as it allowed LGUs to levy
an ad valorem real property tax, irrespective of who
owned the property. At the same time, the imposition of
real property taxes under Section 232 is in turn qualified
by the phrase "not hereinafter specifically exempted."
The exemptions from real property taxes are
enumerated in Section 234, which specifically states that
only real properties owned "by the Republic of the
Philippines or any of its political subdivisions" are
exempted from the payment of the tax. Clearly,
instrumentalities or GOCCs do not fall within the
exceptions under Section 234.30
Mactan Overturned the
Precedents Now Relied
Upon by the Majority
But the petitioners in Mactan also raised the Court's
ruling in Basco v. PAGCOR,31 decided before the
enactment of the Local Government Code. The Court in
77
Basco declared the PAGCOR as exempt from local taxes,
justifying the exemption in this wise:
Local governments have no power to tax
instrumentalities of the National Government. PAGCOR
is a government owned or controlled corporation with an
original charter, PD 1869. All of its shares of stocks are
owned by the National Government. In addition to its
corporate powers (Sec. 3, Title II, PD 1869) it also
exercises regulatory powers xxx
PAGCOR has a dual role, to operate and to regulate
gambling casinos. The latter role is governmental, which
places it in the category of an agency or instrumentality
of the Government. Being an instrumentality of the
Government, PAGCOR should be and actually is exempt
from local taxes. Otherwise, its operation might be
burdened, impeded or subjected to control by a mere
Local government.
"The states have no power by taxation or otherwise, to
retard impede, burden or in any manner control the
operation of constitutional laws enacted by Congress to
carry into execution the powers vested in the federal
government." (McCulloch v. Marland, 4 Wheat 316, 4 L
Ed. 579)
This doctrine emanates from the "supremacy" of the
National Government over local governments.
"Justice Holmes, speaking for the Supreme Court, made
reference to the entire absence of power on the part of
the States to touch, in that way (taxation) at least, the
instrumentalities of the United States (Johnson v.
Maryland, 254 US 51) and it can be agreed that no state
or political subdivision can regulate a federal
instrumentality in such a way as to prevent it from
consummating its federal responsibilities, or even to
seriously burden it in the accomplishment of them."
(Antieau, Modern Constitutional Law, Vol. 2, p. 140,
emphasis supplied)
Otherwise, mere creatures of the State can defeat
National policies thru extermination of what local
authorities may perceive to be undesirable activates or
enterprise using the power to tax as "a tool for
regulation" (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as
the "power to destroy" (McCulloch v. Maryland, supra)
cannot be allowed to defeat an instrumentality or
creation of the very entity which has the inherent power
to wield it.32
Basco is as strident a reiteration of the old guard view
that frowned on the principle of local autonomy,
especially as it interfered with the prerogatives and
privileges of the national government. Also consider the
following citation from Maceda v. Macaraig,33 decided
the same year as Basco. Discussing the rule of
construction of tax exemptions on government
instrumentalities, the sentiments are of a similar vein.
Moreover, it is a recognized principle that the rule on
strict interpretation does not apply in the case of
exemptions in favor of a government political
subdivision or instrumentality.
The basis for applying the rule of strict construction to
statutory provisions granting tax exemptions or
deductions, even more obvious than with reference to
the affirmative or levying provisions of tax statutes, is to
minimize differential treatment and foster impartiality,
fairness, and equality of treatment among tax payers.
The reason for the rule does not apply in the case of
exemptions running to the benefit of the government
itself or its agencies. In such case the practical effect of an
exemption is merely to reduce the amount of money that
has to be handled by government in the course of its
operations. For these reasons, provisions granting
exemptions to government agencies may be construed
liberally, in favor of non tax-liability of such agencies.
In the case of property owned by the state or a city or
other public corporations, the express exemption should
not be construed with the same degree of strictness that
applies to exemptions contrary to the policy of the state,
since as to such property "exemption is the rule and
taxation the exception."34
Strikingly, the majority cites these two very cases and the
stodgy rationale provided therein. This evinces the
perspective from which the majority is coming from. It is
admittedly a viewpoint once shared by this Court, and en
vogue prior to the enactment of the Local Government
Code of 1991.
However, the Local Government Code of 1991 ushered in
a new ethos on how the art of governance should be
practiced in the Philippines, conceding greater powers
once held in the private reserve of the national
government to LGUs. The majority might have private
qualms about the wisdom of the policy of local autonomy,
but the members of the Court are not expected to
substitute their personal biases for the legislative will,
especially when the 1987 Constitution itself promotes
the principle of local autonomy.
Article II. Declaration of Principles and State Policies
xxx
Sec. 25. The State shall ensure the autonomy of local
governments.
Article X. Local Government
xxx
Sec. 2. The territorial and political subdivisions shall
enjoy local autonomy.
Section 3. The Congress shall enact a local government
code which shall provide for a more responsive and
accountable local government structure instituted
through a system of decentralization with effective
mechanisms of recall, initiative, and referendum, allocate
among the different local government units their powers,
responsibilities, and resources, and provide for the
qualifications, election, appointment and removal, term,
salaries, powers and functions and duties of local
officials, and all other matters relating to the
organization and operation of the local units.
xxx
Section 5. Each local government unit shall have the
power to create its own sources of revenues and to levy
taxes, fees, and charges subject to such guidelines and
limitations as the Congress may provide, consistent with
the basic policy of local autonomy. Such taxes, fees, and
78
charges shall accrue exclusively to the local
governments.
xxx
The Court in Mactan recognized that a new day had
dawned with the enactment of the 1987 Constitution and
the Local Government Code of 1991. Thus, it expressly
rejected the contention of the MCIAA that Basco was
applicable to them. In doing so, the language of the Court
was dramatic, if only to emphasize how monumental the
shift in philosophy was with the enactment of the Local
Government Code:
Accordingly, the position taken by the [MCIAA] is
untenable. Reliance on Basco v. Philippine Amusement
and Gaming Corporation is unavailing since it was
decided before the effectivity of the [Local Government
Code]. Besides, nothing can prevent Congress from
decreeing that even instrumentalities or agencies of the
Government performing governmental functions may be
subject to tax. Where it is done precisely to fulfill a
constitutional mandate and national policy, no one can
doubt its wisdom.35 (emphasis supplied)
The Court Has Repeatedly
Reaffirmed Mactan Over the
Precedents Now Relied Upon
By the Majority
Since then and until today, the Court has been emphatic
in declaring the Basco doctrine as dead. The notion that
instrumentalities may be subjected to local taxation by
LGUs was again affirmed in National Power Corporation
v. City of Cabanatuan,36 which was penned by Justice
Puno. NPC or Napocor, invoking its continued exemption
from payment of franchise taxes to the City of
Cabanatuan, alleged that it was an instrumentality of the
National Government which could not be taxed by a city
government. To that end, Basco was cited by NPC. The
Court had this to say about Basco.
xxx[T]he doctrine in Basco vs. Philippine Amusement
and Gaming Corporation relied upon by the petitioner to
support its claim no longer applies. To emphasize, the
Basco case was decided prior to the effectivity of the LGC,
when no law empowering the local government units to
tax instrumentalities of the National Government was in
effect. However, as this Court ruled in the case of Mactan
Cebu International Airport Authority (MCIAA) vs.
Marcos, nothing prevents Congress from decreeing that
even instrumentalities or agencies of the government
performing governmental functions may be subject to
tax. In enacting the LGC, Congress exercised its
prerogative to tax instrumentalities and agencies of
government as it sees fit. Thus, after reviewing the
specific provisions of the LGC, this Court held that
MCIAA, although an instrumentality of the national
government, was subject to real property tax.37
In the 2003 case of Philippine Ports Authority v. City of
Iloilo,38 the Court, in the able ponencia of Justice Azcuna,
affirmed the levy of realty taxes on the PPA. Although the
taxes were assessed under the old Real Property Tax
Code and not the Local Government Code, the Court again
cited Mactan to refute PPA's invocation of Basco as the
basis of its exemption.
[Basco] did not absolutely prohibit local governments
from taxing government instrumentalities. In fact we
stated therein:
The power of local government to "impose taxes and
fees" is always subject to "limitations" which Congress
may provide by law. Since P.D. 1869 remains an
"operative" law until "amended, repealed or revoked". . .
its "exemption clause" remains an exemption to the
exercise of the power of local governments to impose
taxes and fees.
Furthermore, in the more recent case of Mactan Cebu
International Airport Authority v. Marcos, where the
Basco case was similarly invoked for tax exemption, we
stated: "[N]othing can prevent Congress from decreeing
that even instrumentalities or agencies of the
Government performing governmental functions may be
subject to tax. Where it is done precisely to fulfill a
constitutional mandate and national policy, no one can
doubt its wisdom." The fact that tax exemptions of
government-owned or controlled corporations have
been expressly withdrawn by the present Local
Government Code clearly attests against petitioner's
claim of absolute exemption of government
instrumentalities from local taxation.39
Just last month, the Court in National Power Corporation
v. Province of Isabela40 again rejected Basco in emphatic
terms. Held the Court, through Justice Callejo, Sr.:
Thus, the doctrine laid down in the Basco case is no
longer true. In the Cabanatuan case, the Court noted
primarily that the Basco case was decided prior to the
effectivity of the LGC, when no law empowering the local
government units to tax instrumentalities of the National
Government was in effect. It further explained that in
enacting the LGC, Congress empowered the LGUs to
impose certain taxes even on instrumentalities of the
National Government.41
The taxability of the PPA recently came to fore in
Philippine Ports Authority v. City of Iloilo42 case, a
decision also penned by Justice Callejo, Sr., wherein the
Court affirmed the sale of PPA's properties at public
auction for failure to pay realty taxes. The Court again
reiterated that "it was the intention of Congress to
withdraw the tax exemptions granted to or presently
enjoyed by all persons, including government-owned or
controlled corporations, upon the effectivity" of the
Code.43 The Court in the second Public Ports Authority
case likewise cited Mactan as providing the "raison d'etre
for the withdrawal of the exemption," namely, "the State
policy to ensure autonomy to local governments and the
objective of the [Local Government Code] that they enjoy
genuine and meaningful local autonomy to enable them
to attain their fullest development as self-reliant
communities. . . . "44
Last year, the Court, in City of Davao v. RTC,45 affirmed
that the legislated exemption from real property taxes of
the Government Service Insurance System (GSIS) was
removed under the Local Government Code. Again,
Mactan was relied upon as the governing precedent. The
removal of the tax exemption stood even though the then
GSIS law46 prohibited the removal of GSIS' tax
exemptions unless the exemption was specifically
repealed, "and a provision is enacted to substitute the
declared policy of exemption from any and all taxes as an
essential factor for the solvency of the fund."47 The Court,
citing established doctrines in statutory construction
and Duarte v. Dade48 ruled that such proscription on
future legislation was itself prohibited, as "the legislature
79
cannot bind a future legislature to a particular mode of
repeal."49
And most recently, just less than one month ago, the
Court, through Justice Corona in Government Service
Insurance System v. City Assessor of Iloilo50 again
affirmed that the Local Government Code removed the
previous exemption from real property taxes of the GSIS.
Again Mactan was cited as having "expressly withdrawn
the [tax] exemption of the [GOCC].51
Clearly then, Mactan is not a stray or unique precedent,
but the basis of a jurisprudential rule employed by the
Court since its adoption, the doctrine therein consistent
with the Local Government Code. Corollarily, Basco, the
polar opposite of Mactan has been emphatically rejected
and declared inconsistent with the Local Government
Code.
II.
Majority, in Effectively Overturning Mactan,
Refuses to Say Why Mactan Is Wrong
The majority cites Basco in support. It does not cite
Mactan, other than an incidental reference that it is relied
upon by the respondents.52 However, the ineluctable
conclusion is that the majority rejects the rationale and
ruling in Mactan. The majority provides for a wildly
different interpretation of Section 133, 193 and 234 of
the Local Government Code than that employed by the
Court in Mactan. Moreover, the parties in Mactan and in
this case are similarly situated, as can be obviously
deducted from the fact that both petitioners are airport
authorities operating under similarly worded charters.
And the fact that the majority cites doctrines
contrapuntal to the Local Government Code as in Basco
and Maceda evinces an intent to go against the Court's
jurisprudential trend adopting the philosophy of
expanded local government rule under the Local
Government Code.
Before I dwell upon the numerous flaws of the majority,
a brief comment is necessitated on the majority's studied
murkiness vis-à-vis the Mactan precedent. The majority
is obviously inconsistent with Mactan and there is no
way these two rulings can stand together. Following
basic principles in statutory construction, Mactan will be
deemed as giving way to this new ruling.
However, the majority does not bother to explain why
Mactan is wrong. The interpretation in Mactan of the
relevant provisions of the Local Government Code is
elegant and rational, yet the majority refuses to explain
why this reasoning of the Court in Mactan is erroneous.
In fact, the majority does not even engage Mactan in any
meaningful way. If the majority believes that Mactan may
still stand despite this ruling, it remains silent as to the
viable distinctions between these two cases.
The majority's silence on Mactan is baffling, considering
how different this new ruling is with the ostensible
precedent. Perhaps the majority does not simply know
how to dispense with the ruling in Mactan. If Mactan
truly deserves to be discarded as precedent, it deserves
a more honorable end than death by amnesia or
ignonominous disregard. The majority could have
devoted its discussion in explaining why it thinks Mactan
is wrong, instead of pretending that Mactan never
existed at all. Such an approach might not have won the
votes of the minority, but at least it would provide some
degree of intellectual clarity for the parties, LGUs and the
national government, students of jurisprudence and
practitioners. A more meaningful debate on the matter
would have been possible, enriching the study of law and
the intellectual dynamic of this Court.
There is no way the majority can be justified unless
Mactan is overturned. The MCIAA and the MIAA are
similarly situated. They are both, as will be
demonstrated, GOCCs, commonly engaged in the
business of operating an airport. They are the owners of
airport properties they respectively maintain and hold
title over these properties in their name.53 These entities
are both owned by the State, and denied by their
respective charters the absolute right to dispose of their
properties without prior approval elsewhere.54 Both of
them are
not empowered to obtain loans or encumber their
properties without prior approval the prior approval of
the President.55
III.
Instrumentalities, Agencies
And GOCCs Generally
Liable for Real Property Tax
I shall now proceed to demonstrate the errors in
reasoning of the majority. A bulwark of my position lies
with Mactan, which will further demonstrate why the
majority has found it inconvenient to even grapple with
the precedent that is Mactan in the first place.
Mactan held that the prohibition on taxing the national
government, its agencies and instrumentalities under
Section 133 is qualified by Section 232 and Section 234,
and accordingly, the only relevant exemption now
applicable to these bodies is as provided under Section
234(o), or on "real property owned by the Republic of the
Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person."
It should be noted that the express withdrawal of
previously granted exemptions by the Local Government
Code do not even make any distinction as to whether the
exempt person is a governmental entity or not. As
Sections 193 and 234 both state, the withdrawal applies
to "all persons, including [GOCCs]", thus encompassing
the two classes of persons recognized under our laws,
natural persons56 and juridical persons.57
The fact that the Local Government Code mandates the
withdrawal of previously granted exemptions evinces
certain key points. If an entity was previously granted an
express exemption from real property taxes in the first
place, the obvious conclusion would be that such entity
would ordinarily be liable for such taxes without the
exemption. If such entities were already deemed exempt
due to some overarching principle of law, then it would
be a redundancy or surplusage to grant an exemption to
an already exempt entity. This fact militates against the
claim that MIAA is preternaturally exempt from realty
taxes, since it required the enactment of an express
exemption from such taxes in its charter.
Amazingly, the majority all but ignores the disquisition in
Mactan and asserts that government instrumentalities
are not taxable persons unless they lease their properties
80
to a taxable person. The general rule laid down in Section
232 is given short shrift. In arriving at this conclusion,
several leaps in reasoning are committed.
Majority's Flawed Definition
of GOCCs.
The majority takes pains to assert that the MIAA is not a
GOCC, but rather an instrumentality. However, and quite
grievously, the supposed foundation of this assertion is
an adulteration.
The majority gives the impression that a government
instrumentality is a distinct concept from a government
corporation.58 Most tellingly, the majority selectively
cites a portion of Section 2(10) of the Administrative
Code of 1987, as follows:
Instrumentality refers to any agency of the National
Government not integrated within the department
framework, vested with special functions or jurisdiction
by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational
autonomy, usually through a charter. xxx59 (emphasis
omitted)
However, Section 2(10) of the Administrative Code,
when read in full, makes an important clarification which
the majority does not show. The portions omitted by the
majority are highlighted below:
(10)Instrumentality refers to any agency of the National
Government not integrated within the department
framework, vested with special functions or jurisdiction
by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational
autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions and
government—owned or controlled corporations.60
Since Section 2(10) makes reference to "agency of the
National Government," Section 2(4) is also worth citing
in full:
(4) Agency of the Government refers to any of the various
units of the Government, including a department, bureau,
office, instrumentality, or government-owned or
controlled corporation, or a local government or a
distinct unit therein. (emphasis supplied)61
Clearly then, based on the Administrative Code, a GOCC
may be an instrumentality or an agency of the National
Government. Thus, there actually is no point in the
majority's assertion that MIAA is not a GOCC, since based
on the majority's premise of Section 133 as the key
provision, the material question is whether MIAA is
either an instrumentality, an agency, or the National
Government itself. The very provisions of the
Administrative Code provide that a GOCC can be either
an instrumentality or an agency, so why even bother to
extensively discuss whether or not MIAA is a GOCC?
Indeed as far back as the 1927 case of Government of the
Philippine Islands v. Springer,62 the Supreme Court
already noted that a corporation of which the
government is the majority stockholder "remains an
agency or instrumentality of government."63
Ordinarily, the inconsequential verbiage stewing in
judicial opinions deserve little rebuttal. However, the
entire discussion of the majority on the definition of a
GOCC, obiter as it may ultimately be, deserves emphatic
refutation. The views of the majority on this matter are
very dangerous, and would lead to absurdities, perhaps
unforeseen by the majority. For in fact, the majority
effectively declassifies many entities created and
recognized as GOCCs and would give primacy to the
Administrative Code of 1987 rather than their respective
charters as to the definition of these entities.
Majority Ignores the Power
Of Congress to Legislate and
Define Chartered Corporations
First, the majority declares that, citing Section 2(13) of
the Administrative Code, a GOCC must be "organized as a
stock or non-stock corporation," as defined under the
Corporation Code. To insist on this as an absolute rule
fails on bare theory. Congress has the undeniable power
to create a corporation by legislative charter, and has
been doing so throughout legislative history. There is no
constitutional prohibition on Congress as to what
structure these chartered corporations should take on.
Clearly, Congress has the prerogative to create a
corporation in whatever form it chooses, and it is not
bound by any traditional format. Even if there is a
definition of what a corporation is under the Corporation
Code or the Administrative Code, these laws are by no
means sacrosanct. It should be remembered that these
two statutes fall within the same level of hierarchy as a
congressional charter, since they all are legislative
enactments. Certainly, Congress can choose to disregard
either the Corporation Code or the Administrative Code
in defining the corporate structure of a GOCC, utilizing
the same extent of legislative powers similarly vesting it
the putative ability to amend or abolish the Corporation
Code or the Administrative Code.
These principles are actually recognized by both the
Administrative Code and the Corporation Code. The
definition of GOCCs, agencies and instrumentalities
under the Administrative Code are laid down in the
section entitled "General Terms Defined," which
qualifies:
Sec. 2. General Terms Defined. – Unless the specific
words of the text, or the context as a whole, or a
particular statute, shall require a different meaning:
(emphasis supplied)
xxx
Similar in vein is Section 6 of the Corporation Code which
provides:
SEC. 4. Corporations created by special laws or
charters.— Corporations created by special laws or
charters shall be governed primarily by the provisions of
the special law or charter creating them or applicable to
them, supplemented by the provisions of this Code,
insofar as they are applicable. (emphasis supplied)
Thus, the clear doctrine emerges – the law that governs
the definition of a corporation or entity created by
Congress is its legislative charter. If the legislative
enactment defines an entity as a corporation, then it is a
corporation, no matter if the Corporation Code or the
Administrative Code seemingly provides otherwise. In
case of conflict between the legislative charter of a
government corporation, on one hand, and the Corporate
81
Code and the Administrative Code, on the other, the
former always prevails.
Majority, in Ignoring the
Legislative Charters, Effectively
Classifies Duly Established GOCCs,
With Disastrous and Far Reaching
Legal Consequences
Second, the majority claims that MIAA does not qualify
either as a stock or non-stock corporation, as defined
under the Corporation Code. It explains that the MIAA is
not a stock corporation because it does not have any
capital stock divided into shares. Neither can it be
considered as a non-stock corporation because it has no
members, and under Section 87, a non-stock corporation
is one where no part of its income is distributable as
dividends to its members, trustees or officers.
This formulation of course ignores Section 4 of the
Corporation Code, which again provides that
corporations created by special laws or charters shall be
governed primarily by the provisions of the special law
or charter, and not the Corporation Code.
That the MIAA cannot be considered a stock corporation
if only because it does not have a stock structure is hardly
a plausible proposition. Indeed, there is no point in
requiring a capital stock structure for GOCCs whose full
ownership is limited by its charter to the State or
Republic. Such GOCCs are not empowered to declare
dividends or alienate their capital shares.
Admittedly, there are GOCCs established in such a
manner, such as the National Power Corporation (NPC),
which is provided with authorized capital stock wholly
subscribed and paid for by the Government of the
Philippines, divided into shares but at the same time, is
prohibited from transferring, negotiating, pledging,
mortgaging or otherwise giving these shares as security
for payment of any obligation.64 However, based on the
Corporation Code definition relied upon by the majority,
even the NPC cannot be considered as a stock
corporation. Under Section 3 of the Corporation Code,
stock corporations are defined as being "authorized to
distribute to the holders of its shares dividends or
allotments of the surplus profits on the basis of the
shares held."65 On the other hand, Section 13 of the NPC's
charter states that "the Corporation shall be non-profit
and shall devote all its returns from its capital
investment, as well as excess revenues from its
operation, for expansion."66 Can the holder of the shares
of NPC, the National Government, receive its surplus
profits on the basis of its shares held? It cannot,
according to the NPC charter, and hence, following
Section 3 of the Corporation Code, the NPC is not a stock
corporation, if the majority is to be believed.
The majority likewise claims that corporations without
members cannot be deemed non-stock corporations.
This would seemingly exclude entities such as the NPC,
which like MIAA, has no ostensible members. Moreover,
non-stock corporations cannot distribute any part of its
income as dividends to its members, trustees or officers.
The majority faults MIAA for remitting 20% of its gross
operating income to the national government. How
about the Philippine Health Insurance Corporation,
created with the "status of a tax-exempt government
corporation attached to the Department of Health" under
Rep. Act No. 7875.67 It too cannot be considered as a
stock corporation because it has no capital stock
structure. But using the criteria of the majority, it is
doubtful if it would pass muster as a non-stock
corporation, since the PHIC or Philhealth, as it is
commonly known, is expressly empowered "to collect,
deposit, invest, administer and disburse" the National
Health Insurance Fund.68 Or how about the Social
Security System, which under its revised charter,
Republic Act No. 8282, is denominated as a "corporate
body."69 The SSS has no capital stock structure, but has
capital comprised of contributions by its members,
which are eventually remitted back to its members. Does
this disqualify the SSS from classification as a GOCC,
notwithstanding this Court's previous pronouncement in
Social Security System Employees Association v.
Soriano?70
In fact, Republic Act No. 7656, enacted in 1993, requires
that all GOCCs, whether stock or non-stock,71 declare and
remit at least fifty percent (50%) of their annual net
earnings as cash, stock or property dividends to the
National Government.72 But according to the majority,
non-stock corporations are prohibited from declaring
any part of its income as dividends. But if Republic Act
No. 7656 requires even non-stock corporations to
declare dividends from income, should it not follow that
the prohibition against declaration of dividends by non-
stock corporations under the Corporation Code does not
apply to government-owned or controlled corporations?
For if not, and the majority's illogic is pursued, Republic
Act No. 7656, passed in 1993, would be fatally flawed, as
it would contravene the Administrative Code of 1987 and
the Corporation Code.
In fact, the ruinous effects of the majority's hypothesis on
the nature of GOCCs can be illustrated by Republic Act
No. 7656. Following the majority's definition of a GOCC
and in accordance with Republic Act No. 7656, here are
but a few entities which are not obliged to remit fifty
(50%) of its annual net earnings to the National
Government as they are excluded from the scope of
Republic Act No. 7656:
1) Philippine Ports Authority73 – has no capital stock74,
no members, and obliged to apply the balance of its
income or revenue at the end of each year in a general
reserve.75
2) Bases Conversion Development Authority76 - has no
capital stock,77 no members.
3) Philippine Economic Zone Authority78 - no capital
stock,79 no members.
4) Light Rail Transit Authority80 - no capital stock,81 no
members.
5) Bangko Sentral ng Pilipinas82 - no capital stock,83 no
members, required to remit fifty percent (50%) of its net
profits to the National Treasury.84
6) National Power Corporation85 - has capital stock but is
prohibited from "distributing to the holders of its shares
dividends or allotments of the surplus profits on the
basis of the shares held;"86 no members.
7) Manila International Airport Authority – no capital
stock87, no members88, mandated to remit twenty
percent (20%) of its annual gross operating income to
the National Treasury.89
82
Thus, for the majority, the MIAA, among many others,
cannot be considered as within the coverage of Republic
Act No. 7656. Apparently, President Fidel V. Ramos
disagreed. How else then could Executive Order No. 483,
signed in 1998 by President Ramos, be explained? The
issuance provides:
WHEREAS, Section 1 of Republic Act No. 7656 provides
that:
"Section 1. Declaration of Policy. - It is hereby declared
the policy of the State that in order for the National
Government to realize additional revenues, government-
owned and/or controlled corporations, without
impairing their viability and the purposes for which they
have been established, shall share a substantial amount
of their net earnings to the National Government."
WHEREAS, to support the viability and mandate of
government-owned and/or controlled corporations
[GOCCs], the liquidity, retained earnings position and
medium-term plans and programs of these GOCCs were
considered in the determination of the reasonable
dividend rates of such corporations on their 1997 net
earnings.
WHEREAS, pursuant to Section 5 of RA 7656, the
Secretary of Finance recommended the adjustment on
the percentage of annual net earnings that shall be
declared by the Manila International Airport Authority
[MIAA] and Phividec Industrial Authority [PIA] in the
interest of national economy and general welfare.
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the
Philippines, by virtue of the powers vested in me by law,
do hereby order:
SECTION 1. The percentage of net earnings to be declared
and remitted by the MIAA and PIA as dividends to the
National Government as provided for under Section 3 of
Republic Act No. 7656 is adjusted from at least fifty
percent [50%] to the rates specified hereunder:
1. Manila International Airport Authority - 35% [cash]
2. Phividec Industrial Authority - 25% [cash]
SECTION 2. The adjusted dividend rates provided for
under Section 1 are only applicable on 1997 net earnings
of the concerned government-owned and/or controlled
corporations.
Obviously, it was the opinion of President Ramos and the
Secretary of Finance that MIAA is a GOCC, for how else
could it have come under the coverage of Republic Act
No. 7656, a law applicable only to GOCCs? But, the
majority apparently disagrees, and resultantly holds that
MIAA is not obliged to remit even the reduced rate of
thirty five percent (35%) of its net earnings to the
national government, since it cannot be covered by
Republic Act No. 7656.
All this mischief because the majority would declare the
Administrative Code of 1987 and the Corporation Code
as the sole sources of law defining what a government
corporation is. As I stated earlier, I find it illogical that
chartered corporations are compelled to comply with the
templates of the Corporation Code, especially when the
Corporation Code itself states that these corporations are
to be governed by their own charters. This is especially
true considering that the very provision cited by the
majority, Section 87 of the Corporation Code, expressly
says that the definition provided therein is laid down "for
the purposes of this [Corporation] Code." Read in
conjunction with Section 4 of the Corporation Code
which mandates that corporations created by charter be
governed by the law creating them, it is clear that
contrary to the majority, MIAA is not disqualified from
classification as a non-stock corporation by reason of
Section 87, the provision not being applicable to
corporations created by special laws or charters. In fact,
I see no real impediment why the MIAA and similarly
situated corporations such as the PHIC, the SSS, the
Philippine Deposit Insurance Commission, or maybe
even the NPC could at the very least, be deemed as no
stock corporations (as differentiated from non-stock
corporations).
The point, stripped to bare simplicity, is that entity
created by legislative enactment is a corporation if the
legislature says so. After all, it is the legislature that
dictates what a corporation is in the first place. This is
better illustrated by another set of entities created
before martial law. These include the Mindanao
Development Authority,90 the Northern Samar
Development Authority,91 the Ilocos Sur Development
Authority,92 the Southeastern Samar Development
Authority93 and the Mountain Province Development
Authority.94 An examination of the first section of the
statutes creating these entities reveal that they were
established "to foster accelerated and balanced growth"
of their respective regions, and towards such end, the
charters commonly provide that "it is recognized that a
government corporation should be created for the
purpose," and accordingly, these charters "hereby
created a body corporate."95 However, these
corporations do not have capital stock nor members, and
are obliged to return the unexpended balances of their
appropriations and earnings to a revolving fund in the
National Treasury. The majority effectively declassifies
these entities as GOCCs, never mind the fact that their
very charters declare them to be GOCCs.
I mention these entities not to bring an element of
obscurantism into the fray. I cite them as examples to
emphasize my fundamental point—that it is the
legislative charters of these entities, and not the
Administrative Code, which define the class of
personality of these entities created by Congress. To
adopt the view of the majority would be, in effect, to
sanction an implied repeal of numerous congressional
charters for the purpose of declassifying GOCCs.
Certainly, this could not have been the intent of the
crafters of the Administrative Code when they drafted
the "Definition of Terms" incorporated therein.
MIAA Is Without
Doubt, A GOCC
Following the charters of government corporations,
there are two kinds of GOCCs, namely: GOCCs which are
stock corporations and GOCCs which are no stock
corporations (as distinguished from non-stock
corporation). Stock GOCCs are simply those which have
capital stock while no stock GOCCs are those which have
no capital stock. Obviously these definitions are different
from the definitions of the terms in the Corporation Code.
Verily, GOCCs which are not incorporated with the
Securities and Exchange Commission are not governed
by the Corporation Code but by their respective charters.
For the MIAA's part, its charter is replete with provisions
that indubitably classify it as a GOCC. Observe the
following provisions from MIAA's charter:
83
SECTION 3. Creation of the Manila International Airport
Authority.—There is hereby established a body
corporate to be known as the Manila International
Airport Authority which shall be attached to the Ministry
of Transportation and Communications. The principal
office of the Authority shall be located at the New Manila
International Airport. The Authority may establish such
offices, branches, agencies or subsidiaries as it may deem
proper and necessary; Provided, That any subsidiary that
may be organized shall have the prior approval of the
President.
The land where the Airport is presently located as well
as the surrounding land area of approximately six
hundred hectares, are hereby transferred, conveyed and
assigned to the ownership and administration of the
Authority, subject to existing rights, if any. The Bureau of
Lands and other appropriate government agencies shall
undertake an actual survey of the area transferred within
one year from the promulgation of this Executive Order
and the corresponding title to be issued in the name of
the Authority. Any portion thereof shall not be disposed
through sale or through any other mode unless
specifically approved by the President of the Philippines.
xxx
SECTION 5. Functions, Powers, and Duties. — The
Authority shall have the following functions, powers and
duties:
xxx
(d) To sue and be sued in its corporate name;
(e) To adopt and use a corporate seal;
(f) To succeed by its corporate name;
(g) To adopt its by-laws, and to amend or repeal the same
from time to time;
(h) To execute or enter into contracts of any kind or
nature;
(i) To acquire, purchase, own, administer, lease,
mortgage, sell or otherwise dispose of any land, building,
airport facility, or property of whatever kind and nature,
whether movable or immovable, or any interest therein;
(j) To exercise the power of eminent domain in the
pursuit of its purposes and objectives;
xxx
(o) To exercise all the powers of a corporation under the
Corporation Law, insofar as these powers are not
inconsistent with the provisions of this Executive Order.
xxx
SECTION 16. Borrowing Power. — The Authority may,
after consultation with the Minister of Finance and with
the approval of the President of the Philippines, as
recommended by the Minister of Transportation and
Communications, raise funds, either from local or
international sources, by way of loans, credits or
securities, and other borrowing instruments, with the
power to create pledges, mortgages and other voluntary
liens or encumbrances on any of its assets or properties.
All loans contracted by the Authority under this Section,
together with all interests and other sums payable in
respect thereof, shall constitute a charge upon all the
revenues and assets of the Authority and shall rank
equally with one another, but shall have priority over any
other claim or charge on the revenue and assets of the
Authority: Provided, That this provision shall not be
construed as a prohibition or restriction on the power of
the Authority to create pledges, mortgages, and other
voluntary liens or encumbrances on any assets or
property of the Authority.
Except as expressly authorized by the President of the
Philippines the total outstanding indebtedness of the
Authority in the principal amount, in local and foreign
currency, shall not at any time exceed the net worth of
the Authority at any given time.
xxx
The President or his duly authorized representative after
consultation with the Minister of Finance may guarantee,
in the name and on behalf of the Republic of the
Philippines, the payment of the loans or other
indebtedness of the Authority up to the amount herein
authorized.
These cited provisions establish the fitness of MIAA to be
the subject of legal relations.96 MIAA under its charter
may acquire and possess property, incur obligations, and
bring civil or criminal actions. It has the power to
contract in its own name, and to acquire title to real or
personal property. It likewise may exercise a panoply of
corporate powers and possesses all the trappings of
corporate personality, such as a corporate name, a
corporate seal and by-laws. All these are contained in
MIAA's charter which, as conceded by the Corporation
Code and even the Administrative Code, is the primary
law that governs the definition and organization of the
MIAA.
In fact, MIAA itself believes that it is a GOCC represents
itself as such. It said so itself in the very first paragraph
of the present petition before this Court.97 So does,
apparently, the Department of Budget and Management,
which classifies MIAA as a "government owned &
controlled corporation" on its internet website.98 There
is also the matter of Executive Order No. 483, which
evinces the belief of the then-president of the Philippines
that MIAA is a GOCC. And the Court before had similarly
characterized MIAA as a government-owned and
controlled corporation in the earlier MIAA case, Manila
International Airport Authority v. Commission on
Audit.99
Why then the hesitance to declare MIAA a GOCC? As the
majority repeatedly asserts, it is because MIAA is actually
an instrumentality. But the very definition relied upon by
the majority of an instrumentality under the
Administrative Code clearly states that a GOCC is
likewise an instrumentality or an agency. The question of
whether MIAA is a GOCC might not even be
determinative of this Petition, but the effect of the
majority's disquisition on that matter may even be more
destructive than the ruling that MIAA is exempt from
realty taxes. Is the majority ready to live up to the
momentous consequences of its flawed reasoning?
Novel Proviso in 1987 Constitution
Prescribing Standards in the
84
Creation of GOCCs Necessarily
Applies only to GOCCs Created
After 1987.
One last point on this matter on whether MIAA is a GOCC.
The majority triumphantly points to Section 16, Article
XII of the 1987 Constitution, which mandates that the
creation of GOCCs through special charters be "in the
interest of the common good and subject to the test of
economic viability." For the majority, the test of
economic viability does not apply to government entities
vested with corporate powers and performing essential
public services. But this test of "economic viability" is
new to the constitutional framework. No such test was
imposed in previous Constitutions, including the 1973
Constitution which was the fundamental law in force
when the MIAA was created. How then could the MIAA,
or any GOCC created before 1987 be expected to meet
this new precondition to the creation of a GOCC? Does the
dissent seriously suggest that GOCCs created before
1987 may be declassified on account of their failure to
meet this "economic viability test"?
Instrumentalities and Agencies
Also Generally Liable For
Real Property Taxes
Next, the majority, having bludgeoned its way into
asserting that MIAA is not a GOCC, then argues that MIAA
is an instrumentality. It cites incompletely, as earlier
stated, the provision of Section 2(10) of the
Administrative Code. A more convincing view offered
during deliberations, but which was not adopted by the
ponencia, argued that MIAA is not an instrumentality but
an agency, considering the fact that under the
Administrative Code, the MIAA is attached within the
department framework of the Department of
Transportation and Communications.100 Interestingly,
Executive Order No. 341, enacted by President Arroyo in
2004, similarly calls MIAA an agency. Since
instrumentalities are expressly defined as "an agency not
integrated within the department framework," that view
concluded that MIAA cannot be deemed an
instrumentality.
Still, that distinction is ultimately irrelevant. Of course, as
stated earlier, the Administrative Code considers GOCCs
as agencies,101 so the fact that MIAA is an agency does not
exclude it from classification as a GOCC. On the other
hand, the majority justifies MIAA's purported exemption
on Section 133 of the Local Government Code, which
similarly situates "agencies and instrumentalities" as
generally exempt from the taxation powers of LGUs. And
on this point, the majority again evades Mactan and
somehow concludes that Section 133 is the general rule,
notwithstanding Sections 232 and 234(a) of the Local
Government Code. And the majority's ultimate
conclusion? "By express mandate of the Local
Government Code, local governments cannot impose any
kind of tax on national government instrumentalities like
the MIAA. Local governments are devoid of power to tax
the national government, its agencies and
instrumentalities."102
The Court's interpretation of the Local Government Code
in Mactan renders the law integrally harmonious and
gives due accord to the respective prerogatives of the
national government and LGUs. Sections 133 and 234(a)
ensure that the Republic of the Philippines or its political
subdivisions shall not be subjected to any form of local
government taxation, except realty taxes if the beneficial
use of the property owned has been granted for
consideration to a taxable entity or person. On the other
hand, Section 133 likewise assures that government
instrumentalities such as GOCCs may not be arbitrarily
taxed by LGUs, since they could be subjected to local
taxation if there is a specific proviso thereon in the Code.
One such proviso is Section 137, which as the Court
found in National Power Corporation,103 permits the
imposition of a franchise tax on businesses enjoying a
franchise, even if it be a GOCC such as NPC. And, as the
Court acknowledged in Mactan, Section 232 provides
another exception on the taxability of instrumentalities.
The majority abjectly refuses to engage Section 232 of
the Local Government Code although it provides the
indubitable general rule that LGUs "may levy an annual
ad valorem tax on real property such as land, building,
machinery, and other improvements not hereafter
specifically exempted." The specific exemptions are
provided by Section 234. Section 232 comes sequentially
after Section 133(o),104 and even if the sequencing is
irrelevant, Section 232 would fall under the qualifying
phrase of Section 133, "Unless otherwise provided
herein." It is sad, but not surprising that the majority is
not willing to consider or even discuss the general rule,
but only the exemptions under Section 133 and Section
234. After all, if the majority is dead set in ruling for MIAA
no matter what the law says, why bother citing what the
law does say.
Constitution, Laws and
Jurisprudence Have Long
Explained the Rationale
Behind the Local Taxation
Of GOCCs.
This blithe disregard of precedents, almost all of them
unanimously decided, is nowhere more evident than in
the succeeding discussion of the majority, which asserts
that the power of local governments to tax national
government instrumentalities be construed strictly
against local governments. The Maceda case, decided
before the Local Government Code, is cited, as is Basco.
This section of the majority employs deliberate pretense
that the Code never existed, or that the fundamentals of
local autonomy are of limited effect in our country. Why
is it that the Local Government Code is barely mentioned
in this section of the majority? Because Section 5 of the
Code, purposely omitted by the majority provides for a
different rule of interpretation than that asserted:
Section 5. Rules of Interpretation. – In the interpretation
of the provisions of this Code, the following rules shall
apply:
(a) Any provision on a power of a local government unit
shall be liberally interpreted in its favor, and in case of
doubt, any question thereon shall be resolved in favor of
devolution of powers and of the lower local government
unit. Any fair and reasonable doubt as to the existence of
the power shall be interpreted in favor of the local
government unit concerned;
(b) In case of doubt, any tax ordinance or revenue
measure shall be construed strictly against the local
85
government unit enacting it, and liberally in favor of the
taxpayer. Any tax exemption, incentive or relief granted
by any local government unit pursuant to the provisions
of this Code shall be construed strictly against the person
claiming it; xxx
Yet the majority insists that "there is no point in national
and local governments taxing each other, unless a sound
and compelling policy requires such transfer of public
funds from one government pocket to another."105 I
wonder whether the Constitution satisfies the majority's
desire for "a sound and compelling policy." To repeat:
Article II. Declaration of Principles and State Policies
xxx
Sec. 25. The State shall ensure the autonomy of local
governments.
Article X. Local Government
xxx
Sec. 2. The territorial and political subdivisions shall
enjoy local autonomy.
xxx
Section 5. Each local government unit shall have the
power to create its own sources of revenues and to levy
taxes, fees, and charges subject to such guidelines and
limitations as the Congress may provide, consistent with
the basic policy of local autonomy. Such taxes, fees, and
charges shall accrue exclusively to the local
governments.
Or how about the Local Government Code, presumably
an expression of sound and compelling policy
considering that it was enacted by the legislature, that
veritable source of all statutes:
SEC. 129. Power to Create Sources of Revenue. - Each
local government unit shall exercise its power to create
its own sources of revenue and to levy taxes, fees, and
charges subject to the provisions herein, consistent with
the basic policy of local autonomy. Such taxes, fees, and
charges shall accrue exclusively to the local government
units.
Justice Puno, in National Power Corporation v. City of
Cabanatuan,106 provides a more "sound and compelling
policy considerations" that would warrant sustaining the
taxability of government-owned entities by local
government units under the Local Government Code.
Doubtless, the power to tax is the most effective
instrument to raise 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. As this
Court observed in the Mactan case, "the original reasons
for the withdrawal of tax exemption privileges granted to
government-owned or controlled corporations and all
other units of government were that such privilege
resulted in serious tax base erosion and distortions in the
tax treatment of similarly situated enterprises." With the
added burden of devolution, it is even more imperative
for government entities to share in the requirements of
development, fiscal or otherwise, by paying taxes or
other charges due from them.107
I dare not improve on Justice Puno's exhaustive
disquisition on the statutory and jurisprudential shift
brought about the acceptance of the principles of local
autonomy:
In recent years, the increasing social challenges of the
times expanded the scope of state activity, and taxation
has become a tool to realize social justice and the
equitable distribution of wealth, economic progress and
the protection of local industries as well as public welfare
and similar objectives. Taxation assumes even greater
significance with the ratification of the 1987
Constitution. Thenceforth, the power to tax is no longer
vested exclusively on Congress; local legislative bodies
are now given direct authority to levy taxes, fees and
other charges pursuant to Article X, section 5 of the 1987
Constitution, viz:
"Section 5. Each Local Government unit shall have the
power to create its own sources of revenue, to levy taxes,
fees and charges subject to such guidelines and
limitations as the Congress may provide, consistent with
the basic policy of local autonomy. Such taxes, fees and
charges shall accrue exclusively to the Local
Governments."
This paradigm shift results from the realization that
genuine development can be achieved only by
strengthening local autonomy and promoting
decentralization of governance. For a long time, the
country's highly centralized government structure has
bred a culture of dependence among local government
leaders upon the national leadership. It has also
"dampened the spirit of initiative, innovation and
imaginative resilience in matters of local development on
the part of local government leaders." 35 The only way to
shatter this culture of dependence is to give the LGUs a
wider role in the delivery of basic services, and confer
them sufficient powers to generate their own sources for
the purpose. To achieve this goal, section 3 of Article X of
the 1987 Constitution mandates Congress to enact a local
government code that will, consistent with the basic
policy of local autonomy, set the guidelines and
limitations to this grant of taxing powers, viz:
"Section 3. The Congress shall enact a local government
code which shall provide for a more responsive and
accountable local government structure instituted
through a system of decentralization with effective
mechanisms of recall, initiative, and referendum, allocate
among the different local government units their powers,
responsibilities, and resources, and provide for the
qualifications, election, appointment and removal, term,
salaries, powers and functions and duties of local
officials, and all other matters relating to the
organization and operation of the local units."
To recall, prior to the enactment of the Rep. Act No. 7160,
also known as the Local Government Code of 1991 (LGC),
various measures have been enacted to promote local
autonomy. These include the Barrio Charter of 1959, the
Local Autonomy Act of 1959, the Decentralization Act of
1967 and the Local Government Code of 1983. Despite
these initiatives, however, the shackles of dependence on
the national government remained. Local government
units were faced with the same problems that hamper
their capabilities to participate effectively in the national
development efforts, among which are: (a) inadequate
tax base, (b) lack of fiscal control over external sources of
income, (c) limited authority to prioritize and approve
development projects, (d) heavy dependence on external
86
sources of income, and (e) limited supervisory control
over personnel of national line agencies.
Considered as the most revolutionary piece of legislation
on local autonomy, the LGC effectively deals with the
fiscal constraints faced by LGUs. It widens the tax base of
LGUs to include taxes which were prohibited by previous
laws such as the imposition of taxes on forest products,
forest concessionaires, mineral products, mining
operations, and the like. The LGC likewise provides
enough flexibility to impose tax rates in accordance with
their needs and capabilities. It does not prescribe
graduated fixed rates but merely specifies the minimum
and maximum tax rates and leaves the determination of
the actual rates to the respective sanggunian.108
And the Court's ruling through Justice Azcuna in
Philippine Ports Authority v. City of Iloilo109, provides
especially clear and emphatic rationale:
In closing, we reiterate that in taxing government-owned
or controlled corporations, the State ultimately suffers
no loss. In National Power Corp. v. Presiding Judge, RTC,
Br. XXV, 38 we elucidated:
Actually, the State has no reason to decry the taxation of
NPC's properties, as and by way of real property taxes.
Real property taxes, after all, form part and parcel of the
financing apparatus of the Government in development
and nation-building, particularly in the local government
level.
xxxxxxxxx
To all intents and purposes, real property taxes are funds
taken by the State with one hand and given to the other.
In no measure can the government be said to have lost
anything.
Finally, we find it appropriate to restate that the primary
reason for the withdrawal of tax exemption privileges
granted to government-owned and controlled
corporations and all other units of government was that
such privilege resulted in serious tax base erosion and
distortions in the tax treatment of similarly situated
enterprises, hence resulting in the need for these entities
to share in the requirements of development, fiscal or
otherwise, by paying the taxes and other charges due
from them.110
How does the majority counter these seemingly valid
rationales which establish the soundness of a policy
consideration subjecting national instrumentalities to
local taxation? Again, by simply ignoring that these
doctrines exist. It is unfortunate if the majority deems
these cases or the principles of devolution and local
autonomy as simply too inconvenient, and relies instead
on discredited precedents. Of course, if the majority faces
the issues squarely, and expressly discusses why Basco
was right and Mactan was wrong, then this entire
endeavor of the Court would be more intellectually
satisfying. But, this is not a game the majority wants to
play.
Mischaracterization of My
Views on the Tax Exemption
Enjoyed by the National Government
Instead, the majority engages in an extended attack
pertaining to Section 193, mischaracterizing my views on
that provision as if I had been interpreting the provision
as making "the national government, which itself is a
juridical person, subject to tax by local governments
since the national government is not included in the
enumeration of exempt entities in Section 193."111
Nothing is farther from the truth. I have never advanced
any theory of the sort imputed in the majority. My main
thesis on the matter merely echoes the explicit provision
of Section 193 that unless otherwise provided in the
Local Government Code (LGC) all tax exemptions
enjoyed by all persons, whether natural or juridical,
including GOCCs, were withdrawn upon the effectivity of
the Code. Since the provision speaks of withdrawal of tax
exemptions of persons, it follows that the exemptions
theretofore enjoyed by MIAA which is definitely a person
are deemed withdrawn upon the advent of the Code.
On the other hand, the provision does not address the
question of who are beyond the reach of the taxing power
of LGUs. In fine, the grant of tax exemption or the
withdrawal thereof assumes that the person or entity
involved is subject to tax. Thus, Section 193 does not
apply to entities which were never given any tax
exemption. This would include the national government
and its political subdivisions which, as a general rule, are
not subjected to tax in the first place.112 Corollarily, the
national government and its political subdivisions do not
need tax exemptions. And Section 193 which ordains the
withdrawal of tax exemptions is obviously irrelevant to
them.
Section 193 is in point for the disposition of this case as
it forecloses dependence for the grant of tax exemption
to MIAA on Section 21 of its charter. Even the majority
should concede that the charter section is now
ineffectual, as Section 193 withdraws the tax exemptions
previously enjoyed by all juridical persons.
With Section 193 mandating the withdrawal of tax
exemptions granted to all persons upon the effectivity of
the LGC, for MIAA to continue enjoying exemption from
realty tax, it will have to rely on a basis other than Section
21 of its charter.
Lung Center of the Philippines v. Quezon City113 provides
another illustrative example of the jurisprudential havoc
wrought about by the majority. Pursuant to its charter,
the Lung Center was organized as a trust administered
by an eponymous GOCC organized with the SEC.114 There
is no doubt it is a GOCC, even by the majority's reckoning.
Applying the Administrative Code, it is also considered as
an agency, the term encompassing even GOCCs. Yet since
the Administrative Code definition of "instrumentalities"
encompasses agencies, especially those not attached to a
line department such as the Lung Center, it also follows
that the Lung Center is an instrumentality, which for the
majority is exempt from all local government taxes,
especially real estate taxes. Yet just in 2004, the Court
unanimously held that the Lung Center was not exempt
from real property taxes. Can the majority and Lung
Center be reconciled? I do not see how, and no attempt is
made to demonstrate otherwise.
Another key point. The last paragraph of Section 234
specifically asserts that any previous exemptions from
realty taxes granted to or enjoyed by all persons,
including all GOCCs, are thereby withdrawn. The
majority's interpretation of Sections 133 and 234(a)
however necessarily implies that all instrumentalities,
including GOCCs, can never be subjected to real property
taxation under the Code. If that is so, what then is the
87
sense of the last paragraph specifically withdrawing
previous tax exemptions to all persons, including GOCCs
when juridical persons such as MIAA are anyway, to his
view, already exempt from such taxes under Section 133?
The majority's interpretation would effectively render
the express and emphatic withdrawal of previous
exemptions to GOCCs inutile. Ut magis valeat quam
pereat. Hence, where a statute is susceptible of more
than one interpretation, the court should adopt such
reasonable and beneficial construction which will render
the provision thereof operative and effective, as well as
harmonious with each other.115
But, the majority seems content rendering as absurd the
Local Government Code, since it does not have much use
anyway for the Code's general philosophy of fiscal
autonomy, as evidently seen by the continued reliance on
Basco or Maceda. Local government rule has never been
a grant of emancipation from the national government.
This is the favorite bugaboo of the opponents of local
autonomy—the fallacy that autonomy equates to
independence.
Thus, the conclusion of the majority is that under Section
133(o), MIAA as a government instrumentality is beyond
the reach of local taxation because it is not subject to
taxes, fees or charges of any kind. Moreover, the taxation
of national instrumentalities and agencies by LGUs
should be strictly construed against the LGUs, citing
Maceda and Basco. No mention is made of the
subsequent rejection of these cases in jurisprudence
following the Local Government Code, including Mactan.
The majority is similarly silent on the general rule under
Section 232 on real property taxation or Section 5 on the
rules of construction of the Local Government Code.
V.
MIAA, and not the National Government
Is the Owner of the Subject Taxable Properties
Section 232 of the Local Government Code explicitly
provides that there are exceptions to the general rule on
rule property taxation, as "hereafter specifically
exempted." Section 234, certainly "hereafter," provides
indubitable basis for exempting entities from real
property taxation. It provides the most viable legal
support for any claim that an governmental entity such
as the MIAA is exempt from real property taxes. To
repeat:
SECTION 234. Exemptions from Real Property Tax. -- The
following are exempted from payment of the real
property tax:
xxx
(f) Real property owned by the Republic of the
Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person:
The majority asserts that the properties owned by MIAA
are owned by the Republic of the Philippines, thus
placing them under the exemption under Section 234. To
arrive at this conclusion, the majority employs four main
arguments.
MIAA Property Is Patrimonial
And Not Part of Public Dominion
The majority claims that the Airport Lands and Buildings
are property of public dominion as defined by the Civil
Code, and therefore owned by the State or the Republic
of the Philippines. But as pointed out by Justice Azcuna in
the first PPA case, if indeed a property is considered part
of the public dominion, such property is "owned by the
general public and cannot be declared to be owned by a
public corporation, such as [the PPA]."
Relevant on this point are the following provisions of the
MIAA charter:
Section 3. Creation of the Manila International Airport
Authority. – xxx
The land where the Airport is presently located as well
as the surrounding land area of approximately six
hundred hectares, are hereby transferred, conveyed and
assigned to the ownership and administration of the
Authority, subject to existing rights, if any. xxx Any
portion thereof shall not be disposed through sale or
through any other mode unless specifically approved by
the President of the Philippines.
Section 22. Transfer of Existing Facilities and Intangible
Assets. – All existing public airport facilities, runways,
lands, buildings and other property, movable or
immovable, belonging to the Airport, and all assets,
powers rights, interests and privileges belonging to the
Bureau of Air Transportation relating to airport works or
air operations, including all equipment which are
necessary for the operation of crash fire and rescue
facilities, are hereby transferred to the Authority.
Clearly, it is the MIAA, and not either the State, the
Republic of the Philippines or the national government
that asserts legal title over the Airport Lands and
Buildings. There was an express transfer of ownership
between the MIAA and the national government. If the
distinction is to be blurred, as the majority does, between
the State/Republic/Government and a body corporate
such as the MIAA, then the MIAA charter showcases the
remarkable absurdity of an entity transferring property
to itself.
Nothing in the Civil Code or the Constitution prohibits
the State from transferring ownership over property of
public dominion to an entity that it similarly owns. It is
just like a family transferring ownership over the
properties its members own into a family corporation.
The family exercises effective control over the
administration and disposition of these properties. Yet
for several purposes under the law, such as taxation, it is
the corporation that is deemed to own those properties.
A similar situation obtains with MIAA, the State, and the
Airport Lands and Buildings.
The second Public Ports Authority case, penned by
Justice Callejo, likewise lays down useful doctrines in this
regard. The Court refuted the claim that the properties of
the PPA were owned by the Republic of the Philippines,
noting that PPA's charter expressly transferred
ownership over these properties to the PPA, a situation
which similarly obtains with MIAA. The Court even went
as far as saying that the fact that the PPA "had not been
issued any torrens title over the port and port facilities
and appurtenances is of no legal consequence. A torrens
title does not, by itself, vest ownership; it is merely an
evidence of title over properties. xxx It has never been
88
recognized as a mode of acquiring ownership over real
properties."116
The Court further added:
xxx The bare fact that the port and its facilities and
appurtenances are accessible to the general public does
not exempt it from the payment of real property taxes. It
must be stressed that the said port facilities and
appurtenances are the petitioner's corporate
patrimonial properties, not for public use, and that the
operation of the port and its facilities and the
administration of its buildings are in the nature of
ordinary business. The petitioner is clothed, under P.D.
No. 857, with corporate status and corporate powers in
the furtherance of its proprietary interests xxx The
petitioner is even empowered to invest its funds in such
government securities approved by the Board of
Directors, and derives its income from rates, charges or
fees for the use by vessels of the port premises,
appliances or equipment. xxx Clearly then, the petitioner
is a profit-earning corporation; hence, its patrimonial
properties are subject to tax.117
There is no doubt that the properties of the MIAA, as with
the PPA, are in a sense, for public use. A similar argument
was propounded by the Light Rail Transit Authority in
Light Rail Transit Authority v. Central Board of
Assessment,118 which was cited in Philippine Ports
Authority and deserves renewed emphasis. The Light
Rail Transit Authority (LRTA), a body corporate,
"provides valuable transportation facilities to the paying
public."119 It claimed that its carriage-ways and terminal
stations are immovably attached to government-owned
national roads, and to impose real property taxes
thereupon would be to impose taxes on public roads.
This view did not persuade the Court, whose decision
was penned by Justice (now Chief Justice) Panganiban. It
was noted:
Though the creation of the LRTA was impelled by public
service — to provide mass transportation to alleviate the
traffic and transportation situation in Metro Manila — its
operation undeniably partakes of ordinary business.
Petitioner is clothed with corporate status and corporate
powers in the furtherance of its proprietary objectives.
Indeed, it operates much like any private corporation
engaged in the mass transport industry. Given that it is
engaged in a service-oriented commercial endeavor, its
carriageways and terminal stations are patrimonial
property subject to tax, notwithstanding its claim of
being a government-owned or controlled corporation.
xxx
Petitioner argues that it merely operates and maintains
the LRT system, and that the actual users of the
carriageways and terminal stations are the commuting
public. It adds that the public use character of the LRT is
not negated by the fact that revenue is obtained from the
latter's operations.
We do not agree. Unlike public roads which are open for
use by everyone, the LRT is accessible only to those who
pay the required fare. It is thus apparent that petitioner
does not exist solely for public service, and that the LRT
carriageways and terminal stations are not exclusively
for public use. Although petitioner is a public utility, it is
nonetheless profit-earning. It actually uses those
carriageways and terminal stations in its public utility
business and earns money therefrom.120
xxx
Even granting that the national government indeed owns
the carriageways and terminal stations, the exemption
would not apply because their beneficial use has been
granted to petitioner, a taxable entity.121
There is no substantial distinction between the
properties held by the PPA, the LRTA, and the MIAA.
These three entities are in the business of operating
facilities that promote public transportation.
The majority further asserts that MIAA's properties,
being part of the public dominion, are outside the
commerce of man. But if this is so, then why does Section
3 of MIAA's charter authorize the President of the
Philippines to approve the sale of any of these
properties? In fact, why does MIAA's charter in the first
place authorize the transfer of these airport properties,
assuming that indeed these are beyond the commerce of
man?
No Trust Has Been Created
Over MIAA Properties For
The Benefit of the Republic
The majority posits that while MIAA might be holding
title over the Airport Lands and Buildings, it is holding it
in trust for the Republic. A provision of the
Administrative Code is cited, but said provision does not
expressly provide that the property is held in trust.
Trusts are either express or implied, and only those
situations enumerated under the Civil Code would
constitute an implied trust. MIAA does not fall within this
enumeration, and neither is there a provision in MIAA's
charter expressly stating that these properties are being
held in trust. In fact, under its charter, MIAA is obligated
to retain up to eighty percent (80%) of its gross
operating income, not an inconsequential sum assuming
that the beneficial owner of MIAA's properties is actually
the Republic, and not the MIAA.
Also, the claim that beneficial ownership over the MIAA
remains with the government and not MIAA is ultimately
irrelevant. Section 234(a) of the Local Government Code
provides among those exempted from paying real
property taxes are "[r]eal property owned by the
[Republic]… except when the beneficial use thereof has
been granted, for consideration or otherwise, to a taxable
person." In the context of Section 234(a), the identity of
the beneficial owner over the properties is not
determinative as to whether the exemption avails. It is
the identity of the beneficial user of the property owned
by the Republic or its political subdivisions that is crucial,
for if said beneficial user is a taxable person, then the
exemption does not lie.
I fear the majority confuses the notion of what might be
construed as "beneficial ownership" of the Republic over
the properties of MIAA as nothing more than what arises
as a consequence of the fact that the capital of MIAA is
contributed by the National Government.122 If so, then
there is no difference between the State's ownership
rights over MIAA properties than those of a majority
stockholder over the properties of a corporation. Even if
such shareholder effectively owns the corporation and
controls the disposition of its assets, the personality of
the stockholder remains separately distinct from that of
the corporation. A brief recall of the entrenched rule in
corporate law is in order:
89
The first consequence of the doctrine of legal entity
regarding the separate identity of the corporation and its
stockholders insofar as their obligations and liabilities
are concerned, is spelled out in this general rule deeply
entrenched in American jurisprudence:
Unless the liability is expressly imposed by constitutional
or statutory provisions, or by the charter, or by special
agreement of the stockholders, stockholders are not
personally liable for debts of the corporation either at
law or equity. The reason is that the corporation is a legal
entity or artificial person, distinct from the members
who compose it, in their individual capacity; and when it
contracts a debt, it is the debt of the legal entity or
artificial person – the corporation – and not the debt of
the individual members. (13A Fletcher Cyc. Corp. Sec.
6213)
The entirely separate identity of the rights and remedies
of a corporation itself and its individual stockholders
have been given definite recognition for a long time.
Applying said principle, the Supreme Court declared that
a corporation may not be made to answer for acts or
liabilities of its stockholders or those of legal entities to
which it may be connected, or vice versa. (Palay Inc. v.
Clave et. al. 124 SCRA 638) It was likewise declared in a
similar case that a bonafide corporation should alone be
liable for corporate acts duly authorized by its officers
and directors. (Caram Jr. v. Court of Appeals et.al. 151
SCRA, p. 372)123
It bears repeating that MIAA under its charter, is
expressly conferred the right to exercise all the powers
of a corporation under the Corporation Law, including
the right to corporate succession, and the right to sue and
be sued in its corporate name.124 The national
government made a particular choice to divest
ownership and operation of the Manila International
Airport and transfer the same to such an empowered
entity due to perceived advantages. Yet such transfer
cannot be deemed consequence free merely because it
was the State which contributed the operating capital of
this body corporate.
The majority claims that the transfer the assets of MIAA
was meant merely to effect a reorganization. The
imputed rationale for such transfer does not serve to
militate against the legal consequences of such
assignment. Certainly, if it was intended that the transfer
should be free of consequence, then why was it effected
to a body corporate, with a distinct legal personality from
that of the State or Republic? The stated aims of the MIAA
could have very well been accomplished by creating an
agency without independent juridical personality.
VI.
MIAA Performs Proprietary Functions
Nonetheless, Section 234(f) exempts properties owned
by the Republic of the Philippines or its political
subdivisions from realty taxation. The obvious question
is what comprises "the Republic of the Philippines." I
think the key to understanding the scope of "the
Republic" is the phrase "political subdivisions." Under
the Constitution, political subdivisions are defined as
"the provinces, cities, municipalities and
barangays."125 In correlation, the Administrative Code of
1987 defines "local government" as referring to "the
political subdivisions established by or in accordance
with the Constitution."
Clearly then, these political subdivisions are engaged in
the exercise of sovereign functions and are accordingly
exempt. The same could be said generally of the national
government, which would be similarly exempt. After all,
even with the principle of local autonomy, it is inherently
noxious and self-defeatist for local taxation to interfere
with the sovereign exercise of functions. However, the
exercise of proprietary functions is a different matter
altogether.
Sovereign and Proprietary
Functions Distinguished
Sovereign or constituent functions are those which
constitute the very bonds of society and are compulsory
in nature, while ministrant or proprietary functions are
those undertaken by way of advancing the general
interests of society and are merely optional.126 An
exhaustive discussion on the matter was provided by the
Court in Bacani v. NACOCO:127
xxx This institution, when referring to the national
government, has reference to what our Constitution has
established composed of three great departments, the
legislative, executive, and the judicial, through which the
powers and functions of government are exercised.
These functions are twofold: constituent and ministrant.
The former are those which constitute the very bonds of
society and are compulsory in nature; the latter are those
that are undertaken only by way of advancing the general
interests of society, and are merely optional. President
Wilson enumerates the constituent functions as follows:
"'(1) The keeping of order and providing for the
protection of persons and property from violence and
robbery.
'(2) The fixing of the legal relations between man and
wife and between parents and children.
'(3) The regulation of the holding, transmission, and
interchange of property, and the determination of its
liabilities for debt or for crime.
'(4) The determination of contract rights between
individuals.
'(5) The definition and punishment of crime.
'(6) The administration of justice in civil cases.
'(7) The determination of the political duties, privileges,
and relations of citizens.
'(8) Dealings of the state with foreign powers: the
preservation of the state from external danger or
encroachment and the advancement of its international
interests.'" (Malcolm, The Government of the Philippine
Islands, p. 19.)
The most important of the ministrant functions are:
public works, public education, public charity, health and
safety regulations, and regulations of trade and industry.
The principles determining whether or not a government
shall exercise certain of these optional functions are: (1)
that a government should do for the public welfare those
things which private capital would not naturally
undertake and (2) that a government should do these
things which by its very nature it is better equipped to
administer for the public welfare than is any private
90
individual or group of individuals. (Malcolm, The
Government of the Philippine Islands, pp. 19-20.)
From the above we may infer that, strictly speaking,
there are functions which our government is required to
exercise to promote its objectives as expressed in our
Constitution and which are exercised by it as an attribute
of sovereignty, and those which it may exercise to
promote merely the welfare, progress and prosperity of
the people. To this latter class belongs the organization
of those corporations owned or controlled by the
government to promote certain aspects of the economic
life of our people such as the National Coconut
Corporation. These are what we call government-owned
or controlled corporations which may take on the form
of a private enterprise or one organized with powers and
formal characteristics of a private corporations under
the Corporation Law.128
The Court in Bacani rejected the proposition that the
National Coconut Corporation exercised sovereign
functions:
Does the fact that these corporations perform certain
functions of government make them a part of the
Government of the Philippines?
The answer is simple: they do not acquire that status for
the simple reason that they do not come under the
classification of municipal or public corporation. Take for
instance the National Coconut Corporation. While it was
organized with the purpose of "adjusting the coconut
industry to a position independent of trade preferences
in the United States" and of providing "Facilities for the
better curing of copra products and the proper
utilization of coconut by-products," a function which our
government has chosen to exercise to promote the
coconut industry, however, it was given a corporate
power separate and distinct from our government, for it
was made subject to the provisions of our Corporation
Law in so far as its corporate existence and the powers
that it may exercise are concerned (sections 2 and 4,
Commonwealth Act No. 518). It may sue and be sued in
the same manner as any other private corporations, and
in this sense it is an entity different from our
government. As this Court has aptly said, "The mere fact
that the Government happens to be a majority
stockholder does not make it a public corporation"
(National Coal Co. vs. Collector of Internal Revenue, 46
Phil., 586-587). "By becoming a stockholder in the
National Coal Company, the Government divested itself
of its sovereign character so far as respects the
transactions of the corporation. . . . Unlike the
Government, the corporation may be sued without its
consent, and is subject to taxation. Yet the National Coal
Company remains an agency or instrumentality of
government." (Government of the Philippine Islands vs.
Springer, 50 Phil., 288.)
The following restatement of the entrenched rule by
former SEC Chairperson Rosario Lopez bears noting:
The fact that government corporations are
instrumentalities of the State does not divest them with
immunity from suit. (Malong v. PNR, 138 SCRA p. 63) It
is settled that when the government engages in a
particular business through the instrumentality of a
corporation, it divests itself pro hoc vice of its sovereign
character so as to subject itself to the rules governing
private corporations, (PNB v. Pabolan 82 SCRA 595) and
is to be treated like any other corporation. (PNR v. Union
de Maquinistas Fogonero y Motormen, 84 SCRA 223)
In the same vein, when the government becomes a
stockholder in a corporation, it does not exercise
sovereignty as such. It acts merely as a corporator and
exercises no other power in the management of the
affairs of the corporation than are expressly given by the
incorporating act. Nor does the fact that the government
may own all or a majority of the capital stock take from
the corporation its character as such, or make the
government the real party in interest. (Amtorg Trading
Corp. v. US 71 F2d 524, 528)129
MIAA Performs Proprietary
Functions No Matter How
Vital to the Public Interest
The simple truth is that, based on these accepted
doctrinal tests, MIAA performs proprietary functions.
The operation of an airport facility by the State may be
imbued with public interest, but it is by no means
indispensable or obligatory on the national government.
In fact, as demonstrated in other countries, it makes a lot
of economic sense to leave the operation of airports to
the private sector.
The majority tries to becloud this issue by pointing out
that the MIAA does not compete in the marketplace as
there is no competing international airport operated by
the private sector; and that MIAA performs an essential
public service as the primary domestic and international
airport of the Philippines. This premise is false, for one.
On a local scale, MIAA competes with other international
airports situated in the Philippines, such as Davao
International Airport and MCIAA. More pertinently,
MIAA also competes with other international airports in
Asia, at least. International airlines take into account the
quality and conditions of various international airports
in determining the number of flights it would assign to a
particular airport, or even in choosing a hub through
which destinations necessitating connecting flights
would pass through.
Even if it could be conceded that MIAA does not compete
in the market place, the example of the Philippine
National Railways should be taken into account. The PNR
does not compete in the marketplace, and performs an
essential public service as the operator of the railway
system in the Philippines. Is the PNR engaged in
sovereign functions? The Court, in Malong v. Philippine
National Railways,130 held that it was not.131
Even more relevant to this particular case is Teodoro v.
National Airports Corporation,132 concerning the proper
appreciation of the functions performed by the Civil
Aeronautics Administration (CAA), which had succeeded
the defunction National Airports Corporation. The CAA
claimed that as an unincorporated agency of the Republic
of the Philippines, it was incapable of suing and being
sued. The Court noted:
Among the general powers of the Civil Aeronautics
Administration are, under Section 3, to execute contracts
of any kind, to purchase property, and to grant
concession rights, and under Section 4, to charge landing
fees, royalties on sales to aircraft of aviation gasoline,
accessories and supplies, and rentals for the use of any
property under its management.
These provisions confer upon the Civil Aeronautics
Administration, in our opinion, the power to sue and be
sued. The power to sue and be sued is implied from the
91
power to transact private business. And if it has the
power to sue and be sued on its behalf, the Civil
Aeronautics Administration with greater reason should
have the power to prosecute and defend suits for and
against the National Airports Corporation, having
acquired all the properties, funds and choses in action
and assumed all the liabilities of the latter. To deny the
National Airports Corporation's creditors access to the
courts of justice against the Civil Aeronautics
Administration is to say that the government could
impair the obligation of its corporations by the simple
expedient of converting them into unincorporated
agencies. 133
xxx
Eventually, the charter of the CAA was revised, and it
among its expanded functions was "[t]o administer,
operate, manage, control, maintain and develop the
Manila International Airport."134 Notwithstanding this
expansion, in the 1988 case of CAA v. Court of
Appeals135 the Court reaffirmed the ruling that the CAA
was engaged in "private or non-governmental
functions."136 Thus, the Court had already ruled that the
predecessor agency of MIAA, the CAA was engaged in
private or non-governmental functions. These are more
precedents ignored by the majority. The following
observation from the Teodoro case very well applies to
MIAA.
The Civil Aeronautics Administration comes under the
category of a private entity. Although not a body
corporate it was created, like the National Airports
Corporation, not to maintain a necessary function of
government, but to run what is essentially a business,
even if revenues be not its prime objective but rather the
promotion of travel and the convenience of the traveling
public. It is engaged in an enterprise which, far from
being the exclusive prerogative of state, may, more than
the construction of public roads, be undertaken by
private concerns.137
If the determinative point in distinguishing between
sovereign functions and proprietary functions is the
vitality of the public service being performed, then it
should be noted that there is no more important public
service performed than that engaged in by public
utilities. But notably, the Constitution itself authorizes
private persons to exercise these functions as it allows
them to operate public utilities in this country138 If
indeed such functions are actually sovereign and
belonging properly to the government, shouldn't it
follow that the exercise of these tasks remain within the
exclusive preserve of the State?
There really is no prohibition against the government
taxing itself,139 and nothing obscene with allowing
government entities exercising proprietary functions to
be taxed for the purpose of raising the coffers of LGUs. On
the other hand, it would be an even more noxious
proposition that the government or the instrumentalities
that it owns are above the law and may refuse to pay a
validly imposed tax. MIAA, or any similar entity engaged
in the exercise of proprietary, and not sovereign
functions, cannot avoid the adverse-effects of tax evasion
simply on the claim that it is imbued with some of the
attributes of government.
VII.
MIAA Property Not Subject to
Execution Sale Without Consent
Of the President.
Despite the fact that the City of Parañaque ineluctably
has the power to impose real property taxes over the
MIAA, there is an equally relevant statutory limitation on
this power that must be fully upheld. Section 3 of the
MIAA charter states that "[a]ny portion [of the [lands
transferred, conveyed and assigned to the ownership
and administration of the MIAA] shall not be disposed
through sale or through any other mode unless
specifically approved by the President of the
Philippines."140
Nothing in the Local Government Code, even with its
wide grant of powers to LGUs, can be deemed as
repealing this prohibition under Section 3, even if it
effectively forecloses one possible remedy of the LGU in
the collection of delinquent real property taxes. While
the Local Government Code withdrew all previous local
tax exemptions of the MIAA and other natural and
juridical persons, it did not similarly withdraw any
previously enacted prohibitions on properties owned by
GOCCs, agencies or instrumentalities. Moreover, the
resulting legal effect, subjecting on one hand the MIAA to
local taxes but on the other hand shielding its properties
from any form of sale or disposition, is not contradictory
or paradoxical, onerous as its effect may be on the LGU.
It simply means that the LGU has to find another way to
collect the taxes due from MIAA, thus paving the way for
a mutually acceptable negotiated solution.141
There are several other reasons this statutory limitation
should be upheld and applied to this case. It is at this
juncture that the importance of the Manila Airport to our
national life and commerce may be accorded proper
consideration. The closure of the airport, even by reason
of MIAA's legal omission to pay its taxes, will have an
injurious effect to our national economy, which is ever
reliant on air travel and traffic. The same effect would
obtain if ownership and administration of the airport
were to be transferred to an LGU or some other entity
which were not specifically chartered or tasked to
perform such vital function. It is for this reason that the
MIAA charter specifically forbids the sale or disposition
of MIAA properties without the consent of the President.
The prohibition prevents the peremptory closure of the
MIAA or the hampering of its operations on account of
the demands of its creditors. The airport is important
enough to be sheltered by legislation from ordinary legal
processes.
Section 3 of the MIAA charter may also be appreciated as
within the proper exercise of executive control by the
President over the MIAA, a GOCC which despite its
separate legal personality, is still subsumed within the
executive branch of government. The power of executive
control by the President should be upheld so long as such
exercise does not contravene the Constitution or the law,
the President having the corollary duty to faithfully
execute the Constitution and the laws of the land.142 In
this case, the exercise of executive control is precisely
recognized and authorized by the legislature, and it
should be upheld even if it comes at the expense of
limiting the power of local government units to collect
real property taxes.
Had this petition been denied instead with Mactan as
basis, but with the caveat that the MIAA properties could
not be subject of execution sale without the consent of
the President, I suspect that the parties would feel little
distress. Through such action, both the Local
Government Code and the MIAA charter would have
been upheld. The prerogatives of LGUs in real property
92
taxation, as guaranteed by the Local Government Code,
would have been preserved, yet the concerns about the
ruinous effects of having to close the Manila
International Airport would have been averted. The
parties would then be compelled to try harder at working
out a compromise, a task, if I might add, they are all too
willing to engage in.143 Unfortunately, the majority will
cause precisely the opposite result of unremitting
hostility, not only to the City of Parañaque, but to the
thousands of LGUs in the country.
VIII.
Summary of Points
My points may be summarized as follows:
1) Mactan and a long line of succeeding cases have
already settled the rule that under the Local Government
Code, enacted pursuant to the constitutional mandate of
local autonomy, all natural and juridical persons, even
those GOCCs, instrumentalities and agencies, are no
longer exempt from local taxes even if previously
granted an exemption. The only exemptions from local
taxes are those specifically provided under the Local
Government Code itself, or those enacted through
subsequent legislation.
2) Under the Local Government Code, particularly
Section 232, instrumentalities, agencies and GOCCs are
generally liable for real property taxes. The only
exemptions therefrom under the same Code are
provided in Section 234, which include real property
owned by the Republic of the Philippines or any of its
political subdivisions.
3) The subject properties are owned by MIAA, a GOCC,
holding title in its own name. MIAA, a separate legal
entity from the Republic of the Philippines, is the legal
owner of the properties, and is thus liable for real
property taxes, as it does not fall within the exemptions
under Section 234 of the Local Government Code.
4) The MIAA charter expressly bars the sale or
disposition of MIAA properties. As a result, the City of
Parañaque is prohibited from seizing or selling these
properties by public auction in order to satisfy MIAA's
tax liability. In the end, MIAA is encumbered only by a
limited lien possessed by the City of Parañaque.
On the other hand, the majority's flaws are summarized
as follows:
1) The majority deliberately ignores all precedents
which run counter to its hypothesis, including Mactan.
Instead, it relies and directly cites those doctrines and
precedents which were overturned by Mactan. By
imposing a different result than that warranted by the
precedents without explaining why Mactan or the other
precedents are wrong, the majority attempts to overturn
all these ruling sub silencio and without legal
justification, in a manner that is not sanctioned by the
practices and traditions of this Court.
2) The majority deliberately ignores the policy and
philosophy of local fiscal autonomy, as mandated by the
Constitution, enacted under the Local Government Code,
and affirmed by precedents. Instead, the majority asserts
that there is no sound rationale for local governments to
tax national government instrumentalities, despite the
blunt existence of such rationales in the Constitution, the
Local Government Code, and precedents.
3) The majority, in a needless effort to justify itself,
adopts an extremely strained exaltation of the
Administrative Code above and beyond the Corporation
Code and the various legislative charters, in order to
impose a wholly absurd definition of GOCCs that
effectively declassifies innumerable existing GOCCs, to
catastrophic legal consequences.
4) The majority asserts that by virtue of Section 133(o)
of the Local Government Code, all national government
agencies and instrumentalities are exempt from any
form of local taxation, in contravention of several
precedents to the contrary and the proviso under Section
133, "unless otherwise provided herein [the Local
Government Code]."
5) The majority erroneously argues that MIAA holds its
properties in trust for the Republic of the Philippines,
and that such properties are patrimonial in character. No
express or implied trust has been created to benefit the
national government. The legal distinction between
sovereign and proprietary functions, as affirmed by
jurisprudence, likewise preclude the classification of
MIAA properties as patrimonial.
IX.
Epilogue
If my previous discussion still fails to convince on how
wrong the majority is, then the following points are well-
worth considering. The majority cites the Bangko Sentral
ng Pilipinas (Bangko Sentral) as a government
instrumentality that exercises corporate powers but not
organized as a stock or non-stock corporation.
Correspondingly for the majority, the Bangko ng Sentral
is exempt from all forms of local taxation by LGUs by
virtue of the Local Government Code.
Section 125 of Rep. Act No. 7653, The New Central Bank
Act, states:
SECTION 125. Tax Exemptions. — The Bangko Sentral
shall be exempt for a period of five (5) years from the
approval of this Act from all national, provincial,
municipal and city taxes, fees, charges and assessments.
The New Central Bank Act was promulgated after the
Local Government Code if the BSP is already
preternaturally exempt from local taxation owing to its
personality as an "government instrumentality," why
then the need to make a new grant of exemption, which
if the majority is to be believed, is actually a redundancy.
But even more tellingly, does not this provision evince a
clear intent that after the lapse of five (5) years, that the
Bangko Sentral will be liable for provincial, municipal
and city taxes? This is the clear congressional intent, and
it is Congress, not this Court which dictates which
entities are subject to taxation and which are exempt.
Perhaps this notion will offend the majority, because the
Bangko Sentral is not even a government owned
corporation, but a government instrumentality, or
perhaps "loosely", a "government corporate entity." How
could such an entity like the Bangko Sentral , which is not
even a government owned corporation, be subjected to
local taxation like any mere mortal? But then, see Section
1 of the New Central Bank Act:
93
SECTION 1. Declaration of Policy. — The State shall
maintain a central monetary authority that shall function
and operate as an independent and accountable body
corporate in the discharge of its mandated
responsibilities concerning money, banking and credit.
In line with this policy, and considering its unique
functions and responsibilities, the central monetary
authority established under this Act, while being a
government-owned corporation, shall enjoy fiscal and
administrative autonomy.
Apparently, the clear legislative intent was to create a
government corporation known as the Bangko Sentral ng
Pilipinas. But this legislative intent, the sort that is
evident from the text of the provision and not the one
that needs to be unearthed from the bowels of the
archival offices of the House and the Senate, is for naught
to the majority, as it contravenes the Administrative
Code of 1987, which after all, is "the governing law
defining the status and relationship of government
agencies and instrumentalities" and thus superior to the
legislative charter in determining the personality of a
chartered entity. Its like saying that the architect who
designed a school building is better equipped to teach
than the professor because at least the architect is
familiar with the geometry of the classroom.
Given these premises, there is no impediment for the
PITAHC to purchase land and construct thereupon a
massage parlor that would provide a cheaper alternative
to the opulent spas that have proliferated around the
metropolis. Such activity is in line with the purpose of the
PITAHC and with state policy. Is such massage parlor
exempt from realty taxes? For the majority, it is, for
PITAHC is an instrumentality or agency exempt from
local government taxation, which does not fall under the
exceptions under Section 234 of the Local Government
Code. Hence, this massage parlor would not just be a
shelter for frazzled nerves, but for taxes as well.
Ridiculous? One might say, certainly a decision of the
Supreme Court cannot be construed to promote an
absurdity. But precisely the majority, and the faulty
reasoning it utilizes, opens itself up to all sorts of
mischief, and certainly, a tax-exempt massage parlor is
one of the lesser evils that could arise from the majority
ruling. This is indeed a very strange and very wrong
decision.
I dissent.
DANTE O. TINGA

Consider further the example of the Philippine Institute Associate Justice

of Traditional and Alternative Health Care (PITAHC),
created by Republic Act No. 8243 in 1997. It has similar
characteristics as MIAA in that it is established as a body
corporate,144 and empowered with the attributes of a
corporation,145 including the power to purchase or
acquire real properties.146 However the PITAHC has no
capital stock and no members, thus following the
majority, it is not a GOCC.

The state policy that guides PITAHC is the development

of traditional and alternative health care,147 and its
objectives include the promotion and advocacy of
alternative, preventive and curative health care
modalities that have been proven safe, effective and cost
effective.148 "Alternative health care modalities" include
"other forms of non-allophatic, occasionally non-
indigenous or imported healing methods" which include,
among others "reflexology, acupuncture, massage,
acupressure" and chiropractics.149

94
 Section 14(2) of Presidential Decree No. 1529
(Property Registration Decree).
Antecedents
The property subject of the application for
registration is a parcel of land situated in
Barangay Tibig, Silang Cavite, more particularly
identified as Lot 9864-A, Cad-452-D, with an
area of 71,324-square meters. On February 20,
1998, applicant Mario Malabanan, who had
purchased the property from Eduardo Velazco,
filed an application for land registration covering
Republic of the Philippines the property in the Regional Trial Court (RTC) in
Tagaytay City, Cavite, claiming that the property
SUPREME COURT
formed part of the alienable and disposable land
Manila
of the public domain, and that he and his
predecessors-in-interest had been in open,
EN BANC
continuous, uninterrupted, public and adverse
possession and occupation of the land for more
G.R. No. 179987 September 3, 2013
than 30 years, thereby entitling him to the
judicial confirmation of his title.1
HEIRS OF MARIO MALABANAN,
(Represented by Sally A.
To prove that the property was an alienable and
Malabanan), Petitioners,
disposable land of the public domain, Malabanan
vs.
presented during trial a certification dated June
REPUBLIC OF THE PHILIPPINES, Respondent. 11, 2001 issued by the Community Environment
and Natural Resources Office (CENRO) of the
RESOLUTION Department of Environment and Natural
Resources (DENR), which reads:
BERSAMIN, J.:
This is to certify that the parcel of land
For our consideration and resolution are the designated as Lot No. 9864 Cad 452-D, Silang
motions for reconsideration of the parties who Cadastre as surveyed for Mr. Virgilio Velasco
both assail the decision promulgated on April 29, located at Barangay Tibig, Silang, Cavite
2009, whereby we upheld the ruling of the Court containing an area of 249,734 sq. meters as
of Appeals (CA) denying the application of the shown and described on the Plan Ap-04-00952
petitioners for the registration of a parcel of land is verified to be within the Alienable or
situated in Barangay Tibig, Silang, Cavite on the Disposable land per Land Classification Map No.
ground that they had not established by 3013 established under Project No. 20-A and
sufficient evidence their right to the registration approved as such under FAO 4-1656 on March
in accordance with either Section 14(1) or 15, 1982.2
After trial, on December 3, 2002, the RTC
rendered judgment granting Malabanan’s
application for land registration, disposing
thusly:
WHEREFORE, this Court hereby approves this
application for registration and thus places
under the operation of Act 141, Act 496 and/or
P.D. 1529, otherwise known as Property
Registration Law, the lands described in Plan
Csd-04-0173123-D, Lot 9864-A and containing
an area of Seventy One Thousand Three Hundred
Twenty Four (71,324) Square Meters, as
supported by its technical description now
forming part of the record of this case, in
addition to other proofs adduced in the name of
MARIO MALABANAN, who is of legal age,
Filipino, widower, and with residence at Munting
Ilog, Silang, Cavite.
Once this Decision becomes final and executory,
the corresponding decree of registration shall
forthwith issue.
SO ORDERED.3
The Office of the Solicitor General (OSG)
appealed the judgment to the CA, arguing that
Malabanan had failed to prove that the property
belonged to the alienable and disposable land of
the public domain, and that the RTC erred in
finding that he had been in possession of the
property in the manner and for the length of time
required by law for confirmation of imperfect
title.
On February 23, 2007, the CA promulgated its
decision reversing the RTC and dismissing the
application for registration of Malabanan. Citing
the ruling in Republic v. Herbieto
(Herbieto),4 the CA declared that under Section
14(1) of the Property Registration Decree, any
period of possession prior to the classification of
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the land as alienable and disposable was
inconsequential and should be excluded from
the computation of the period of possession.
Noting that the CENRO-DENR certification stated
that the property had been declared alienable
and disposable only on March 15, 1982,
Velazco’s possession prior to March 15, 1982
could not be tacked for purposes of computing
Malabanan’s period of possession.
Due to Malabanan’s intervening demise during
the appeal in the CA, his heirs elevated the CA’s
decision of February 23, 2007 to this Court
through a petition for review on certiorari.
The petitioners assert that the ruling in Republic
v. Court of Appeals and Corazon Naguit5 (Naguit)
remains the controlling doctrine especially if the
property involved is agricultural land. In this
regard, Naguit ruled that any possession of
agricultural land prior to its declaration as
alienable and disposable could be counted in the
reckoning of the period of possession to perfect
title under the Public Land Act (Commonwealth
Act No. 141) and the Property Registration
Decree. They point out that the ruling in
Herbieto, to the effect that the declaration of the
land subject of the application for registration as
alienable and disposable should also date back to
June 12, 1945 or earlier, was a mere obiter
dictum considering that the land registration
proceedings therein were in fact found and
declared void ab initio for lack of publication of
the notice of initial hearing.
The petitioners also rely on the ruling in
Republic v. T.A.N. Properties, Inc.6 to support
their argument that the property had been ipso
jure converted into private property by reason of
the open, continuous, exclusive and notorious
possession by their predecessors-in-interest of
an alienable land of the public domain for more
than 30 years. According to them, what was
essential was that the property had been
"converted" into private property through
prescription at the time of the application
without regard to whether the property sought
to be registered was previously classified as
agricultural land of the public domain.
As earlier stated, we denied the petition for
review on certiorari because Malabanan failed to
establish by sufficient evidence possession and
occupation of the property on his part and on the
part of his predecessors-in interest since June
12, 1945, or earlier.
Petitioners’ Motion for Reconsideration
In their motion for reconsideration, the
petitioners submit that the mere classification of
the land as alienable or disposable should be
deemed sufficient to convert it into patrimonial
property of the State. Relying on the rulings in
Spouses De Ocampo v. Arlos,7 Menguito v.
Republic8 and Republic v. T.A.N. Properties,
Inc.,9 they argue that the reclassification of the
land as alienable or disposable opened it to
acquisitive prescription under the Civil Code;
that Malabanan had purchased the property
from Eduardo Velazco believing in good faith
that Velazco and his predecessors-in-interest
had been the real owners of the land with the
right to validly transmit title and ownership
thereof; that consequently, the ten-year period
prescribed by Article 1134 of the Civil Code, in
relation to Section 14(2) of the Property
Registration Decree, applied in their favor; and
that when Malabanan filed the application for
registration on February 20, 1998, he had
already been in possession of the land for almost
16 years reckoned from 1982, the time when the
land was declared alienable and disposable by
the State.
The Republic’s Motion for Partial
Reconsideration
The Republic seeks the partial reconsideration in
order to obtain a clarification with reference to
the application of the rulings in Naguit and
Herbieto.
Chiefly citing the dissents, the Republic contends
that the decision has enlarged, by implication,
the interpretation of Section 14(1) of the
Property Registration Decree through judicial
legislation. It reiterates its view that an applicant
is entitled to registration only when the land
subject of the application had been declared
alienable and disposable since June 12, 1945 or
earlier.
Ruling
We deny the motions for reconsideration.
In reviewing the assailed decision, we consider
to be imperative to discuss the different
classifications of land in relation to the existing
applicable land registration laws of the
Philippines.
Classifications of land according to ownership
Land, which is an immovable property,10 may be
classified as either of public dominion or of
private ownership.11 Land is considered of public
dominion if it either: (a) is intended for public
use; or (b) belongs to the State, without being for
public use, and is intended for some public
service or for the development of the national
wealth.12 Land belonging to the State that is not
of such character, or although of such character
but no longer intended for public use or for
public service forms part of the patrimonial
property of the State.13 Land that is other than
96
part of the patrimonial property of the State,
provinces, cities and municipalities is of private
ownership if it belongs to a private individual.
Pursuant to the Regalian Doctrine (Jura Regalia),
a legal concept first introduced into the country
from the West by Spain through the Laws of the
Indies and the Royal Cedulas,14 all lands of the
public domain belong to the State.15 This means
that the State is the source of any asserted right
to ownership of land, and is charged with the
conservation of such patrimony.16
All lands not appearing to be clearly under
private ownership are presumed to belong to the
State. Also, public lands remain part of the
inalienable land of the public domain unless the
State is shown to have reclassified or alienated
them to private persons.17
Classifications of public lands
according to alienability
Whether or not land of the public domain is
alienable and disposable primarily rests on the
classification of public lands made under the
Constitution. Under the 1935
Constitution,18 lands of the public domain were
classified into three, namely, agricultural, timber
and mineral.19 Section 10, Article XIV of the 1973
Constitution classified lands of the public
domain into seven, specifically, agricultural,
industrial or commercial, residential,
resettlement, mineral, timber or forest, and
grazing land, with the reservation that the law
might provide other classifications. The 1987
Constitution adopted the classification under the
1935 Constitution into agricultural, forest or
timber, and mineral, but added national
parks.20 Agricultural lands may be further
classified by law according to the uses to which
they may be devoted.21 The identification of
lands according to their legal classification is
done exclusively by and through a positive act of
the Executive Department.22
Based on the foregoing, the Constitution places a
limit on the type of public land that may be
alienated. Under Section 2, Article XII of the 1987
Constitution, only agricultural lands of the public
domain may be alienated; all other natural
resources may not be.
Alienable and disposable lands of the State fall
into two categories, to wit: (a) patrimonial lands
of the State, or those classified as lands of private
ownership under Article 425 of the Civil
Code,23 without limitation; and (b) lands of the
public domain, or the public lands as provided by
the Constitution, but with the limitation that the
lands must only be agricultural. Consequently,
lands classified as forest or timber, mineral, or
national parks are not susceptible of alienation
or disposition unless they are reclassified as
agricultural.24 A positive act of the Government is
necessary to enable such reclassification,25 and
the exclusive prerogative to classify public lands
under existing laws is vested in the Executive
Department, not in the courts.26 If, however,
public land will be classified as neither
agricultural, forest or timber, mineral or national
park, or when public land is no longer intended
for public service or for the development of the
national wealth, thereby effectively removing
the land from the ambit of public dominion, a
declaration of such conversion must be made in
the form of a law duly enacted by Congress or by
a Presidential proclamation in cases where the
President is duly authorized by law to that
effect.27 Thus, until the Executive Department
exercises its prerogative to classify or reclassify
lands, or until Congress or the President declares
that the State no longer intends the land to be
used for public service or for the development of
national wealth, the Regalian Doctrine is
applicable.
Disposition of alienable public lands
Section 11 of the Public Land Act (CA No. 141)
provides the manner by which alienable and
disposable lands of the public domain, i.e.,
agricultural lands, can be disposed of, to wit:
Section 11. Public lands suitable for agricultural
purposes can be disposed of only as follows, and
not otherwise:
(1) For homestead settlement;
(2) By sale;
(3) By lease; and
(4) By confirmation of imperfect or
incomplete titles;
(a) By judicial legalization; or
(b) By administrative legalization (free
patent).
The core of the controversy herein lies in the
proper interpretation of Section 11(4), in
relation to Section 48(b) of the Public Land Act,
which expressly requires possession by a
Filipino citizen of the land since June 12, 1945, or
earlier, viz:
Section 48. The following-described citizens of
the Philippines, occupying lands of the public
domain or claiming to own any such lands or an
interest therein, but whose titles have not been
perfected or completed, may apply to the Court
of First Instance of the province where the land
is located for confirmation of their claims and the
97
issuance of a certificate of title thereafter, under
the Land Registration Act, to wit:
xxxx
(b) Those who by themselves or through their
predecessors-in-interest have been in open,
continuous, exclusive, and notorious possession
and occupation of alienable and disposable lands
of the public domain, under a bona fide claim of
acquisition of ownership, since June 12, 1945, or
earlier, immediately preceding the filing of the
applications for confirmation of title, except
when prevented by war or force majeure. These
shall be conclusively presumed to have
performed all the conditions essential to a
Government grant and shall be entitled to a
certificate of title under the provisions of this
chapter. (Bold emphasis supplied)
Note that Section 48(b) of the Public Land Act
used the words "lands of the public domain" or
"alienable and disposable lands of the public
domain" to clearly signify that lands otherwise
classified, i.e., mineral, forest or timber, or
national parks, and lands of patrimonial or
private ownership, are outside the coverage of
the Public Land Act. What the law does not
include, it excludes. The use of the descriptive
phrase "alienable and disposable" further limits
the coverage of Section 48(b) to only the
agricultural lands of the public domain as set
forth in Article XII, Section 2 of the 1987
Constitution. Bearing in mind such limitations
under the Public Land Act, the applicant must
satisfy the following requirements in order for
his application to come under Section 14(1) of
the Property Registration Decree,28 to wit:
1. The applicant, by himself or through his
predecessor-in-interest, has been in
possession and occupation of the property
subject of the application;
2. The possession and occupation must be
open, continuous, exclusive, and notorious;
3. The possession and occupation must be
under a bona fide claim of acquisition of
ownership;
4. The possession and occupation must have
taken place since June 12, 1945, or earlier;
and
5. The property subject of the application
must be an agricultural land of the public
domain.
Taking into consideration that the Executive
Department is vested with the authority to
classify lands of the public domain, Section 48(b)
of the Public Land Act, in relation to Section
14(1) of the Property Registration Decree,
presupposes that the land subject of the
application for registration must have been
already classified as agricultural land of the
public domain in order for the provision to apply.
Thus, absent proof that the land is already
classified as agricultural land of the public
domain, the Regalian Doctrine applies, and
overcomes the presumption that the land is
alienable and disposable as laid down in Section
48(b) of the Public Land Act. However, emphasis
is placed on the requirement that the
classification required by Section 48(b) of the
Public Land Act is classification or
reclassification of a public land as agricultural.
The dissent stresses that the classification or
reclassification of the land as alienable and
disposable agricultural land should likewise
have been made on June 12, 1945 or earlier,
because any possession of the land prior to such
classification or reclassification produced no
legal effects. It observes that the fixed date of
June 12, 1945 could not be minimized or glossed
over by mere judicial interpretation or by
judicial social policy concerns, and insisted that
the full legislative intent be respected.
We find, however, that the choice of June 12,
1945 as the reckoning point of the requisite
possession and occupation was the sole
prerogative of Congress, the determination of
which should best be left to the wisdom of the
lawmakers. Except that said date qualified the
period of possession and occupation, no other
legislative intent appears to be associated with
the fixing of the date of June 12, 1945.
Accordingly, the Court should interpret only the
plain and literal meaning of the law as written by
the legislators.
Moreover, an examination of Section 48(b) of the
Public Land Act indicates that Congress
prescribed no requirement that the land subject
of the registration should have been classified as
agricultural since June 12, 1945, or earlier. As
such, the applicant’s imperfect or incomplete
title is derived only from possession and
occupation since June 12, 1945, or earlier. This
means that the character of the property subject
of the application as alienable and disposable
agricultural land of the public domain
determines its eligibility for land registration,
not the ownership or title over it.
Alienable public land held by a possessor, either
personally or through his predecessors-in-
interest, openly, continuously and exclusively
during the prescribed statutory period is
converted to private property by the mere lapse
or completion of the period.29 In fact, by virtue of
this doctrine, corporations may now acquire
lands of the public domain for as long as the
lands were already converted to private
98
ownership, by operation of law, as a result of
satisfying the requisite period of possession
prescribed by the Public Land Act.30 It is for this
reason that the property subject of the
application of Malabanan need not be classified
as alienable and disposable agricultural land of
the public domain for the entire duration of the
requisite period of possession.
To be clear, then, the requirement that the land
should have been classified as alienable and
disposable agricultural land at the time of the
application for registration is necessary only to
dispute the presumption that the land is
inalienable.
The declaration that land is alienable and
disposable also serves to determine the point at
which prescription may run against the State.
The imperfect or incomplete title being
confirmed under Section 48(b) of the Public
Land Act is title that is acquired by reason of the
applicant’s possession and occupation of the
alienable and disposable agricultural land of the
public domain. Where all the necessary
requirements for a grant by the Government are
complied with through actual physical, open,
continuous, exclusive and public possession of
an alienable and disposable land of the public
domain, the possessor is deemed to have
acquired by operation of law not only a right to a
grant, but a grant by the Government, because it
is not necessary that a certificate of title be
issued in order that such a grant be sanctioned
by the courts.31
If one follows the dissent, the clear objective of
the Public Land Act to adjudicate and quiet titles
to unregistered lands in favor of qualified
Filipino citizens by reason of their occupation
and cultivation thereof for the number of years
prescribed by law32 will be defeated. Indeed, we
should always bear in mind that such objective
still prevails, as a fairly recent legislative
development bears out, when Congress enacted
legislation (Republic Act No. 10023)33 in order to
liberalize stringent requirements and
procedures in the adjudication of alienable
public land to qualified applicants, particularly
residential lands, subject to area limitations.34
On the other hand, if a public land is classified as
no longer intended for public use or for the
development of national wealth by declaration of
Congress or the President, thereby converting
such land into patrimonial or private land of the
State, the applicable provision concerning
disposition and registration is no longer Section
48(b) of the Public Land Act but the Civil Code, in
conjunction with Section 14(2) of the Property
Registration Decree.35 As such, prescription can
now run against the State.
To sum up, we now observe the following rules
relative to the disposition of public land or lands
of the public domain, namely:
(1) As a general rule and pursuant to the
Regalian Doctrine, all lands of the public
domain belong to the State and are
inalienable. Lands that are not clearly under
private ownership are also presumed to
belong to the State and, therefore, may not
be alienated or disposed;
(2) The following are excepted from the
general rule, to wit:
(a) Agricultural lands of the public
domain are rendered alienable and
disposable through any of the exclusive
modes enumerated under Section 11 of
the Public Land Act. If the mode is judicial
confirmation of imperfect title under
Section 48(b) of the Public Land Act, the
agricultural land subject of the
application needs only to be classified as
alienable and disposable as of the time of
the application, provided the applicant’s
possession and occupation of the land
dated back to June 12, 1945, or earlier.
Thereby, a conclusive presumption that
the applicant has performed all the
conditions essential to a government
grant arises,36 and the applicant becomes
the owner of the land by virtue of an
imperfect or incomplete title. By legal
fiction, the land has already ceased to be
part of the public domain and has become
private property.37
(b) Lands of the public domain
subsequently classified or declared as no
longer intended for public use or for the
development of national wealth are
removed from the sphere of public
dominion and are considered converted
into patrimonial lands or lands of private
ownership that may be alienated or
disposed through any of the modes of
acquiring ownership under the Civil
Code. If the mode of acquisition is
prescription, whether ordinary or
extraordinary, proof that the land has
been already converted to private
ownership prior to the requisite
acquisitive prescriptive period is a
condition sine qua non in observance of
the law (Article 1113, Civil Code) that
property of the State not patrimonial in
character shall not be the object of
prescription.
To reiterate, then, the petitioners failed to
present sufficient evidence to establish that they
and their predecessors-in-interest had been in
possession of the land since June 12, 1945.
Without satisfying the requisite character and
period of possession - possession and
99
occupation that is open, continuous, exclusive,
and notorious since June 12, 1945, or earlier - the
land cannot be considered ipso jure converted to
private property even upon the subsequent
declaration of it as alienable and disposable.
Prescription never began to run against the
State, such that the land has remained ineligible
for registration under Section 14(1) of the
Property Registration Decree. Likewise, the land
continues to be ineligible for land registration
under Section 14(2) of the Property Registration
Decree unless Congress enacts a law or the
President issues a proclamation declaring the
land as no longer intended for public service or
for the development of the national wealth. 1âwphi 1

WHEREFORE, the Court DENIES the petitioners'

Motion for Reconsideration and the
respondent's Partial Motion for Reconsideration
for their lack of merit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

100