PROPERTY 2019 NEW CASES

1
G.R. No. 172410 April 14, 2008
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE TOLL
REGULATORY BOARD (TRB), petitione,
vs.
HOLY TRINITY REALTY DEVELOPMENT CORP., respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, seeking to set aside the Decision1dated 21 April 2006 of the
Court of Appeals in CA-G.R. SP No. 90981 which, in turn, set aside
two Orders2 dated 7 February 20053 and 16 May 20054 of the Regional
Trial Court (RTC) of Malolos, Bulacan, in Civil Case No. 869-M-2000.
The undisputed factual and procedural antecedents of this case are as
follows:
On 29 December 2000, petitioner Republic of the Philippines,
represented by the Toll Regulatory Board (TRB), filed with the RTC a
Consolidated Complaint for Expropriation against landowners whose
properties would be affected by the construction, rehabilitation and
expansion of the North Luzon Expressway. The suit was docketed as
Civil Case No. 869-M-2000 and raffled to Branch 85, Malolos, Bulacan.
Respondent Holy Trinity Realty and Development Corporation
(HTRDC) was one of the affected landowners.
On 18 March 2002, TRB filed an Urgent Ex-Parte Motion for the
issuance of a Writ of Possession, manifesting that it deposited a
sufficient amount to cover the payment of 100% of the zonal value of
the affected properties, in the total amount of P28,406,700.00, with the
Land Bank of the Philippines, South Harbor Branch (LBP-South
Harbor), an authorized government depository. TRB maintained that
since it had already complied with the provisions of Section 4 of
Republic Act No. 89745 in relation to Section 2 of Rule 67 of the Rules
of Court, the issuance of the writ of possession becomes ministerial on
the part of the RTC.
The RTC issued, on 19 March 2002, an Order for the Issuance of a
Writ of Possession, as well as the Writ of Possession itself. HTRDC
thereafter moved for the reconsideration of the 19 March 2002 Order of
the RTC.
On 7 October 2002, the Sheriff filed with the RTC a Report on Writ of
Possession stating, among other things, that since none of the
landowners voluntarily vacated the properties subject of the
expropriation proceedings, the assistance of the Philippine National
Police (PNP) would be necessary in implementing the Writ of
Possession. Accordingly, TRB, through the Office of the Solicitor
General (OSG), filed with the RTC an Omnibus Motion praying for an
Order directing the PNP to assist the Sheriff in the implementation of
the Writ of Possession. On 15 November 2002, the RTC issued an
Order directing the landowners to file their comment on TRB’s
Omnibus Motion.
On 3 March 2003, HTRDC filed with the RTC a Motion to Withdraw
Deposit, praying that the respondent or its duly authorized
representative be allowed to withdraw the amount of P22,968,000.00,
out of TRB’s advance deposit of P28,406,700.00 with LBP-South
Harbor, including the interest which accrued thereon. Acting on said
motion, the RTC issued an Order dated 21 April 2003, directing the
manager of LBP-South Harbor to release in favor of HTRDC the
amount of P22,968,000.00 since the latter already proved its absolute
ownership over the subject properties and paid the taxes due thereon
to the government. According to the RTC, "(t)he issue however on the
interest earned by the amount deposited in the bank, if there is any,
should still be threshed out."6
On 7 May 2003, the RTC conducted a hearing on the accrued interest,
after which, it directed the issuance of an order of expropriation, and
granted TRB a period of 30 days to inquire from LBP-South Harbor
"whether the deposit made by DPWH with said bank relative to these
expropriation proceedings is earning interest or not."7
The RTC issued an Order, on 6 August 2003, directing the appearance
of LBP Assistant Vice-President Atty. Rosemarie M. Osoteo and
Department Manager Elizabeth Cruz to testify on whether the
Department of Public Works and Highways’ (DPWH’s) expropriation
account with the bank was earning interest. On 9 October 2003, TRB
instead submitted a Manifestation to which was attached a letter dated
19 August 2003 by Atty. Osoteo stating that the DPWH Expropriation
Account was an interest bearing current account.
On 11 March 2004, the RTC issued an Order resolving as follows the
issue of ownership of the interest that had accrued on the amount
deposited by DPWH in its expropriation current account with LBP-
South Harbor:
WHEREFORE, the interest earnings from the deposit
of P22,968,000.00 respecting one hundred (100%) percent
of the zonal value of the affected properties in this
expropriation proceedings under the principle of accession
are considered as fruits and should properly pertain to the
herein defendant/property owner [HTRDC]. Accordingly, the
Land Bank as the depositary bank in this expropriation
proceedings is (1) directed to make the necessary
computation of the accrued interest of the amount
of P22,968,000.00 from the time it was deposited up to the
time it was released to Holy Trinity Realty and Development
Corp. and thereafter (2) to release the same to the
defendant Holy Trinity Development Corporation through its
authorized representative.8
TRB filed a Motion for Reconsideration of the afore-quoted RTC Order,
contending that the payment of interest on money deposited and/or
consigned for the purpose of securing a writ of possession was
sanctioned neither by law nor by jurisprudence.
TRB filed a Motion to Implement Order dated 7 May 2003, which
directed the issuance of an order of expropriation. On 5 November
2004, the RTC issued an Order of Expropriation.
On 7 February 2005, the RTC likewise granted TRB’s Motion for
Reconsideration. The RTC ruled that the issue as to whether or not
HTRDC is entitled to payment of interest should be ventilated before
the Board of Commissioners which will be created later for the
determination of just compensation.
Now it was HTRDC’s turn to file a Motion for Reconsideration of the
latest Order of the RTC. The RTC, however, denied HTRDC’s Motion
for Reconsideration in an Order dated 16 May 2005.
HTRDC sought recourse with the Court of Appeals by filing a Petition
for Certiorari, docketed as CA-G.R. SP No. 90981. In its Decision,
promulgated on 21 April 2006, the Court of Appeals vacated the
Orders dated 7 February 2005 and 16 May 2005 of the RTC, and
reinstated the Order dated 11 March 2004 of the said trial court
wherein it ruled that the interest which accrued on the amount
deposited in the expropriation account belongs to HTRDC by virtue of
accession. The Court of Appeals thus declared:
WHEREFORE, the foregoing premises considered, the
assailed Orders dated 07 February and 16 May 2005
respectively of the Regional Trial Court of Malolos, Bulacan
(Branch 85) are hereby VACATED and SET ASIDE.
Accordingly, the Order dated 11 March 2004 is hereby
reinstated.9
2
From the foregoing, the Republic, represented by the TRB, filed the
present Petition for Review on Certiorari, steadfast in its stance that
HTRDC is "entitled only to an amount equivalent to the zonal value of
the expropriated property, nothing more and nothing less."10 According
to the TRB, the owner of the subject properties is entitled to an exact
amount as clearly defined in both Section 4 of Republic Act No. 8974,
which reads:
Section 4. Guidelines for Expropriation Proceedings. –
Whenever it is necessary to acquire real property for the
right-of-way, site or location for any national government
infrastructure project through expropriation, the appropriate
implementing agency shall initiate the expropriation
proceedings before the proper court under the following
guidelines:
(a) Upon the filing of the complaint, and after due notice to
the defendant, the implementing agency shall immediately
pay the owner of the property the amount equivalent to the
sum of (1) one hundred (100%) percent of the value of
the property based on the current relevant zonal
valuation of the Bureau of Internal Revenue (BIR); and
(2) the value of the improvements and/or structures as
determined under Section 7 hereof.
and Section 2, Rule 67 of the Rules of Court, which provides:
Sec. 2. Entry of plaintiff upon depositing value with
authorized government depositary. – Upon the filing of the
complaint or at anytime thereafter and after due notice to the
defendant, the plaintiff shall have the right to take or enter
upon the possession of the real property involved if he
deposits with the authorized government depositary an
amount equivalent to the assessed value of the property
for purposes of taxation to be held by such bank subject to
the orders of the court. Such deposit shall be in money,
unless in lieu thereof the court authorizes the deposit of a
certificate of deposit of a government bank of the Republic of
the Philippines payable on demand to the authorized
government depositary.
The TRB reminds us that there are two stages 11 in expropriation
proceedings, the determination of the authority to exercise eminent
domain and the determination of just compensation. The TRB argues
that it is only during the second stage when the court will appoint
commissioners and determine claims for entitlement to interest,
citing Land Bank of the Philippines v. Wycoco12 and National Power
Corporation v. Angas.13
The TRB further points out that the expropriation account with LBP-
South Harbor is not in the name of HTRDC, but of DPWH. Thus, the
said expropriation account includes the compensation for the other
landowners named defendants in Civil Case No. 869-M-2000, and
does not exclusively belong to respondent.
At the outset, we call attention to a significant oversight in the TRB’s
line of reasoning. It failed to distinguish between the expropriation
procedures under Republic Act No. 8974 and Rule 67 of the Rules of
Court. Republic Act No. 8974 and Rule 67 of the Rules of Court speak
of different procedures, with the former specifically governing
expropriation proceedings for national government infrastructure
projects. Thus, in Republic v. Gingoyon,14 we held:
There are at least two crucial differences between the
respective procedures under Rep. Act No. 8974 and Rule
67. Under the statute, the Government is required to
make immediate payment to the property owner upon
the filing of the complaint to be entitled to a writ of
possession, whereas in Rule 67, the Government is
required only to make an initial deposit with an
authorized government depositary. Moreover, Rule 67
prescribes that the initial deposit be equivalent to the
assessed value of the property for purposes of taxation,
unlike Rep. Act No. 8974 which provides, as the relevant
standard for initial compensation, the market value of the
property as stated in the tax declaration or the current
relevant zonal valuation of the Bureau of Internal Revenue
(BIR), whichever is higher, and the value of the
improvements and/or structures using the replacement cost
method.
xxxx
Rule 67 outlines the procedure under which eminent domain
may be exercised by the Government. Yet by no means
does it serve at present as the solitary guideline through
which the State may expropriate private property. For
example, Section 19 of the Local Government Code governs
as to the exercise by local government units of the power of
eminent domain through an enabling ordinance. And then
there is Rep. Act No. 8974, which covers expropriation
proceedings intended for national government infrastructure
projects.
Rep. Act No. 8974, which provides for a procedure eminently
more favorable to the property owner than Rule 67,
inescapably applies in instances when the national
government expropriates property "for national government
infrastructure projects." Thus, if expropriation is engaged in
by the national government for purposes other than national
infrastructure projects, the assessed value standard and the
deposit mode prescribed in Rule 67 continues to apply.
There is no question that the proceedings in this case deal with the
expropriation of properties intended for a national government
infrastructure project. Therefore, the RTC correctly applied the
procedure laid out in Republic Act No. 8974, by requiring the deposit of
the amount equivalent to 100% of the zonal value of the properties
sought to be expropriated before the issuance of a writ of possession
in favor of the Republic.
The controversy, though, arises not from the amount of the deposit, but
as to the ownership of the interest that had since accrued on the
deposited amount.
Whether the Court of Appeals was correct in holding that the interest
earned by the deposited amount in the expropriation account would
accrue to HRTDC by virtue of accession, hinges on the determination
of who actually owns the deposited amount, since, under Article 440 of
the Civil Code, the right of accession is conferred by ownership of the
principal property:
Art. 440. The ownership of property gives the right by
accession to everything which is produced thereby, or which
is incorporated or attached thereto, either naturally or
artificially.
The principal property in the case at bar is part of the deposited
amount in the expropriation account of DPWH which pertains
particularly to HTRDC. Such amount, determined to
be P22,968,000.00 of the P28,406,700.00 total deposit, was already
ordered by the RTC to be released to HTRDC or its authorized
representative. The Court of Appeals further recognized that the
deposit of the amount was already deemed a constructive delivery
thereof to HTRDC:
When the [herein petitioner] TRB deposited the money as
advance payment for the expropriated property with an
authorized government depositary bank for purposes of
3
 obtaining a writ of possession, it is deemed to be a
"constructive delivery" of the amount corresponding to the
100% zonal valuation of the expropriated property. Since
[HTRDC] is entitled thereto and undisputably the owner of
the principal amount deposited by [herein petitioner] TRB,
conversely, the interest yield, as accession, in a bank
deposit should likewise pertain to the owner of the money
deposited.15
Since the Court of Appeals found that the HTRDC is the owner of the
deposited amount, then the latter should also be entitled to the interest
which accrued thereon.
We agree with the Court of Appeals, and find no merit in the instant
Petition.
The deposit was made in order to comply with Section 4 of Republic
Act No. 8974, which requires nothing less than the immediate
payment of 100% of the value of the property, based on the current
zonal valuation of the BIR, to the property owner. Thus, going back to
our ruling in Republic v. Gingoyon16:
It is the plain intent of Rep. Act No. 8974 to supersede the
system of deposit under Rule 67 with the scheme of
"immediate payment" in cases involving national government
infrastructure projects. The following portion of the Senate
deliberations, cited by PIATCO in its Memorandum, is worth
quoting to cogitate on the purpose behind the plain meaning
of the law:
THE CHAIRMAN (SEN. CAYETANO). "x x x
Because the Senate believes that, you know, we
have to pay the landowners immediately not by
treasury bills but by cash.
Since we are depriving them, you know, upon
payment, ‘no, of possession, we might as well pay
them as much, ‘no, hindi lang 50 percent.
xxxx
THE CHAIRMAN (REP. VERGARA). Accepted.
xxxx
THE CHAIRMAN (SEN. CAYETANO). Oo.
Because this is really in favor of the landowners,
e.
THE CHAIRMAN (REP. VERGARA). That’s why
we need to really secure the availability of funds.
xxxx
THE CHAIRMAN (SEN. CAYETANO). No, no. It’s
the same. It says here: iyong first paragraph,
diba? Iyong zonal – talagang magbabayad muna.
In other words, you know, there must be a
payment kaagad. (TSN, Bicameral Conference on
the Disagreeing Provisions of House Bill 1422 and
Senate Bill 2117, August 29, 2000, pp. 14-20)
xxxx
THE CHAIRMAN (SEN. CAYETANO). Okay,
okay, ‘no. Unang-una, it is not deposit, ‘no. It’s
payment."
REP. BATERINA. It’s payment, ho, payment."
The critical factor in the different modes of effecting delivery which
gives legal effect to the act is the actual intention to deliver on the part
of the party making such delivery.17 The intention of the TRB in
depositing such amount through DPWH was clearly to comply with the
requirement of immediate payment in Republic Act No. 8974, so that it
could already secure a writ of possession over the properties subject of
the expropriation and commence implementation of the project. In fact,
TRB did not object to HTRDC’s Motion to Withdraw Deposit with the
RTC, for as long as HTRDC shows (1) that the property is free from
any lien or encumbrance and (2) that respondent is the absolute owner
thereof.18
A close scrutiny of TRB’s arguments would further reveal that it does
not directly challenge the Court of Appeals’ determinative
pronouncement that the interest earned by the amount deposited in the
expropriation account accrues to HTRDC by virtue of accession. TRB
only asserts that HTRDC is "entitled only to an amount equivalent to
the zonal value of the expropriated property, nothing more and nothing
less."
We agree in TRB’s statement since it is exactly how the amount of the
immediate payment shall be determined in accordance with Section 4
of Republic Act No. 8974, i.e., an amount equivalent to 100% of the
zonal value of the expropriated properties. However, TRB already
complied therewith by depositing the required amount in the
expropriation account of DPWH with LBP-South Harbor. By depositing
the said amount, TRB is already considered to have paid the same to
HTRDC, and HTRDC became the owner thereof. The amount earned
interest after the deposit; hence, the interest should pertain to the
owner of the principal who is already determined as HTRDC. The
interest is paid by LBP-South Harbor on the deposit, and the TRB
cannot claim that it paid an amount more than what it is required to do
so by law.
Nonetheless, we find it necessary to emphasize that HTRDC is
determined to be the owner of only a part of the amount deposited in
the expropriation account, in the sum of P22,968,000.00. Hence, it is
entitled by right of accession to the interest that had accrued to the
said amount only.
We are not persuaded by TRB’s citation of National Power Corporation
v. Angas and Land Bank of the Philippines v. Wycoco, in support of its
argument that the issue on interest is merely part and parcel of the
determination of just compensation which should be determined in the
second stage of the proceedings only. We find that neither case is
applicable herein.
The issue in Angas is whether or not, in the computation of the legal
rate of interest on just compensation for expropriated lands, the
applicable law is Article 2209 of the Civil Code which prescribes a 6%
legal interest rate, or Central Bank Circular No. 416 which fixed the
legal rate at 12% per annum. We ruled in Angas that since the kind of
interest involved therein is interest by way of damages for delay in the
payment thereof, and not as earnings from loans or forbearances of
money, Article 2209 of the Civil Code prescribing the 6% interest shall
apply. In Wycoco, on the other hand, we clarified that interests in the
form of damages cannot be applied where there is prompt and valid
payment of just compensation.
The case at bar, however, does not involve interest as damages for
delay in payment of just compensation. It concerns interest earned by
the amount deposited in the expropriation account.
4
Under Section 4 of Republic Act No. 8974, the implementing agency of * Justice Teresita J. Leonardo-De Castro was designated to
the government pays just compensation twice: (1) immediately upon sit as additional member replacing Justice Antonio Eduardo
the filing of the complaint, where the amount to be paid is 100% of the B. Nachura per Raffle dated 26 March 2008.
value of the property based on the current relevant zonal valuation of
the BIR (initial payment); and (2) when the decision of the court in the 1
Penned by Associate Justice Bienvenido L. Reyes with
determination of just compensation becomes final and executory,
Associate Justices Arturo D. Brion and Arcangelita M.
where the implementing agency shall pay the owner the difference
Romilla-Lontok, concurring; rollo, pp. 32-39.
between the amount already paid and the just compensation as
determined by the court (final payment).19
2
Issued by Judge Ma. Belen Ringpis Liban.
HTRDC never alleged that it was seeking interest because of delay in
either of the two payments enumerated above. In fact, HTRDC’s cause 3
Rollo, pp. 155-156.
of action is based on the prompt initial payment of just compensation,
which effectively transferred the ownership of the amount paid to 4
HTRDC. Being the owner of the amount paid, HTRDC is claiming, by Id. at 164.
the right of accession, the interest earned by the same while on
deposit with the bank. 5
AN ACT TO FACILITATE THE ACQUISITION OF RIGHT-
OF-WAY, SITE OR LOCATION FOR NATIONAL
That the expropriation account was in the name of DPWH, and not of GOVERNMENT INFRASTRUCTURE PROJECTS AND
FOR OTHER PURPOSES.
HTRDC, is of no moment. We quote with approval the following
reasoning of the Court of Appeals:
6
CA rollo, p. 146.
Notwithstanding that the amount was deposited under the
DPWH account, ownership over the deposit transferred by 7
Id. at 147.
operation of law to the [HTRDC] and whatever interest,
considered as civil fruits, accruing to the amount of 8
Php22,968,000.00 should properly pertain to [HTRDC] as Rollo, p. 143.
the lawful owner of the principal amount deposited following
the principle of accession. Bank interest partake the nature 9
Id. at 38-39.
of civil fruits under Art. 442 of the New Civil Code. And since
these are considered fruits, ownership thereof should be due 10
to the owner of the principal. Undoubtedly, being an attribute Id. at 314.
of ownership, the [HTRDC’s] right over the fruits (jus
fruendi), that is the bank interests, must be respected.20 11
We held in Heirs of Alberto Suguitan v. City of
Mandaluyong, 384 Phil. 676, 691 (2000) that:
Considering that the expropriation account is in the name of DPWH,
then, DPWH should at most be deemed as the trustee of the amounts Rule 67 of the 1997 Revised Rules of Court
deposited in the said accounts irrefragably intended as initial payment reveals that expropriation proceedings are
for the landowners of the properties subject of the expropriation, until comprised of two stages:
said landowners are allowed by the RTC to withdraw the same.
(1) the first is concerned with the
As a final note, TRB does not object to HTRDC’s withdrawal of the determination of the authority of the
amount of P22,968,000.00 from the expropriation account, provided plaintiff to exercise the power of eminent
that it is able to show (1) that the property is free from any lien or domain and the propriety of its exercise
encumbrance and (2) that it is the absolute owner thereof.21 The said in the context of the facts involved in the
conditions do not put in abeyance the constructive delivery of the said suit; it ends with an order if not in a
amount to HTRDC pending the latter’s compliance therewith. Article dismissal of the action, of condemnation
118722 of the Civil Code provides that the "effects of a conditional declaring that the plaintiff has a lawful
obligation to give, once the condition has been fulfilled, shall retroact to right to take the property sought to be
the day of the constitution of the obligation." Hence, when HTRDC condemned, for the public use or
complied with the given conditions, as determined by the RTC in its purpose described in the complaint,
Order23 dated 21 April 2003, the effects of the constructive delivery upon the payment of just compensation
retroacted to the actual date of the deposit of the amount in the to be determined as of the date of the
expropriation account of DPWH. filing of the complaint;

WHEREFORE, the Petition is DENIED. The Court of Appeals Decision (2) the second phase is concerned with
dated 21 April 2006 in CA-G.R. SP No. 90981, which set aside the 7 the determination by the court of the just
February 2005 and 16 May 2005 Orders of the Regional Trial Court of compensation for the property sought to
Malolos, Bulacan, is AFFIRMED. No costs. be taken; this is done by the court with
the assistance of not more than three
SO ORDERED. (3) commissioners.

12
Ynares-Santiago, Chairperson, Austria-Martinez, Reyes, Leonardo-de G.R. No. 140160, 13 January 2004, 419 SCRA 67, 80.
Castro*, JJ., concur.
13
G.R. Nos. 60225-26, 8 May 1992, 208 SCRA 542.

14
G.R. No. 166429, 19 December 2005, 478 SCRA 474,
509-515.
Footnotes

5
 15
Rollo, p. 37.
16
Supra note 14 at 519-520.
17
Union Motor Corporation v. Court of Appeals, 414 Phil. 33,
43 (2001).
18
CA rollo, pp. 141-143.
19
The fourth paragraph of Section 4 of Rep. Act No. 8974
states: "In the event that the owner of the property contests
the implementing agency’s proffered value, the court shall
determine the just compensation to be paid the owner within
sixty (60) days from the date of filing of the expropriation
case. When the decision of the court becomes final and
executory, the implementing agency shall pay the owner the
difference between the amount already paid and the just
compensation as determined by the court."
20
Rollo, p. 37.
21
CA rollo, pp. 141-143.
22
Art. 1187. The effects of a conditional obligation to give,
once the condition has been fulfilled, shall retroact to the day
of the constitution of the obligation. Nevertheless, when the
obligation imposes reciprocal prestations upon the parties,
the fruits and interests during the pendency of the condition
shall be deemed to have been mutually compensated. If the
obligation is unilateral, the debtor shall appropriate the fruits
and interests received, unless from the nature and
circumstances of the obligation it should be inferred that the
intention of the person constituting the same was different.
In obligations to do and not to do, the courts shall determine,
in each case, the retroactive effect of the condition that has
been complied with.
23
CA rollo, pp. 144-146.
G.R. No. 189316 June 1, 2013
PHILIPPINE NATIONAL BANK, Petitioner,
vs.
SPOUSES BERNARD and CRESENCIA MARANON, Respondents.
RESOLUTION
REYES, J.:
This is a petition for review on certiorari1 under Rule 45 of the Rules of
Court, assailing the Decision2 dated June 18, 2008 and
Resolution3 dated August 10, 2009 of the Court of Appeals (CA) in CA-
G.R. SP No. 02513, which affirmed in toto the Orders dated
September 8, 20064 and December 6, 20065 of the Regional Trial
Court (RTC) of Bacolod City, Branch 54, directing petitioner Philippine
National Bank (PNB) to release in favor of Spouses Bernard and
Cresencia Marafion (Spouses Marafion) the rental fees it received
amounting to Thirty Thousand Pesos (₱30,000.00).
The Facts
The controversy at bar involves a 152-square meter parcel of land
located at Cuadra-Smith Streets, Downtown, Bacolod (subject lot)
erected with a building leased by various tenants. The subject lot was
among the properties mortgaged by Spouses Rodolfo and Emilie
Montealegre (Spouses Montealegre) to PNB as a security for a loan. In
their transactions with PNB, Spouses Montealegre used Transfer
Certificate of Title (TCT) No. T-156512 over the subject lot purportedly
registered in the name of Emilie Montealegre (Emilie).6
When Spouses Montealegre failed to pay the loan, PNB initiated
foreclosure proceedings on the mortgaged properties, including the
subject lot. In the auction sale held on August 16, 1991, PNB emerged
as the highest bidder. It was issued the corresponding Certificate of
Sale dated December 17, 19917 which was subsequently registered on
February 4, 1992.8
Before the expiration of the redemption period or on July 29, 1992,
Spouses Marañon filed before the RTC a complaint for Annulment of
Title, Reconveyance and Damages9 against Spouses Montealegre,
PNB, the Register of Deeds of Bacolod City and the Ex-Officio
Provincial Sheriff of Negros Occidental. The complaint, docketed as
Civil Case No. 7213, alleged that Spouses Marañon are the true
registered owners of the subject lot by virtue of TCT No. T-129577
which was illegally cancelled by TCT No. T-156512 under the name of
Emilie who used a falsified Deed of Sale bearing the forged signatures
of Spouse Marañon10 to effect the transfer of title to the property in her
name.
In its Answer,11 PNB averred that it is a mortgagee in good faith and for
value and that its mortgage lien on the property was registered thus
valid and binding against the whole world.
As reflected in the Pre-trial Order12 dated March 12, 1996, the parties
stipulated, among others, that the period for legal redemption of the
subject lot has already expired.
While the trial proceedings were ongoing, Paterio Tolete (Tolete), one
of the tenants of the building erected on the subject lot deposited his
rental payments with the Clerk of Court of Bacolod City which, as of
October 24, 2002, amounted to ₱144,000.00.
On June 2, 2006, the RTC rendered its Decision13 in favor of the
respondents after finding, based on the expert testimony of Colonel
Rodolfo Castillo, Head of the Forensic Technology Section of Bacolod
City Philippine National Police, that the signatures of Spouses
Marañon in the Deed of Sale presented by Spouses Montealegre
before the Register of Deeds to cause the cancellation of TCT No. T-
129577 were forged. Hence, the RTC concluded the sale to be null
and void and as such it did not transfer any right or title in law. PNB
was adjudged to be a mortgagee in good faith whose lien on the
subject lot must be respected. Accordingly, the Decision disposed as
follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs
herein respondents:
1. The cancellation of TCT No. 129577 over Lot 177-A-1
Bacolod Cadastre in the name of Bernard Marañon and the
issuance of new TCT No. 156512 in the name of defendant
Emilie Montealegre are hereby declared null and void;
2. The defendant Emilie Montealegre is ordered to reconvey
the title over Lot No. 177-A-1, Bacolod Cadastre back to the
plaintiffs Marañon herein respondents;
3. The Real Estate Mortgage lien of the Philippine National
Bank registered on the title of Lot No. 177-A-1 Bacolod
Cadastre shall stay and be respected; and
6
 4. The defendants - Emilie Montealegre and spouse are
ordered to pay attorney’s fees in the sum of Php50,000.00,
and to pay the costs of the suit.
SO ORDERED.14
Neither of the parties sought a reconsideration of the above decision or
any portion thereof nor did they elevate the same for appellate review.
What precipitated the controversy at hand were the subsequent
motions filed by Spouses Marañon for release of the rental payments
deposited with the Clerk of Court and paid to PNB by Tolete.
surrounding the transfer to Spouses Montealegre. The decretal portion
of the Decision thus read:
WHEREFORE, in view of the foregoing, the petition is hereby
DISMISSED. The Orders dated September 8, 2006 and December 6,
2006, rendered by the respondent Presiding Judge of the Regional
Trial Court, Branch 54, Bacolod City, in Civil Case NO. 7213 directing
the release of the deposited rental in the amount of THIRTY
THOUSAND PESOS ([P]30,000.00) to private respondents are hereby
AFFIRMED.
SO ORDERED.24

PNB moved for reconsideration25 but the motion was denied in the CA
On June 13, 2006, Spouses Marañon filed an Urgent Motion for the
Resolution dated August 10, 2009.26 Hence, the present recourse
Withdrawal of Deposited Rentals15 praying that the ₱144,000.00 rental
whereby PNB argues that the RTC Decision dated June 2, 2006
fees deposited by Tolete with the Clerk of Court be released in their
lapsed into finality when it was not appealed or submitted for
favor for having been adjudged as the real owner of the subject lot.
reconsideration. As such, all conclusions therein are immutable and
The RTC granted the motion in its Order16 dated June 28, 2006.
can no longer be modified by any court even by the RTC that rendered
the same. The CA however erroneously altered the RTC Decision by
On September 5, 2006, Spouses Marañon again filed with the RTC an reversing the pronouncement that PNB is a mortgagee-in-good-faith.
Urgent Ex-Parte Motion for Withdrawal of Deposited Rentals 17 praying
that the ₱30,000.00 rental fees paid to PNB by Tolete on December
PNB further asseverates that its mortgage lien was carried over to the
12, 1999 be released in their favor. The said lease payments were for
new title issued to Spouses Marañon and thus it retained the right to
the five (5)-month period from August 1999 to December 1999 at the
foreclose the subject lot upon non-payment of the secured debt. PNB
monthly lease rate of ₱6,000.00.
asserts that it is entitled to the rent because it became the subject lot’s
new owner when the redemption period expired without the property
The RTC granted the motion in its Order18 dated September 8, 2006 being redeemed.
reasoning that pursuant to its Decision dated June 2, 2006 declaring
Spouses Marañon to be the true registered owners of the subject lot,
Ruling of the Court
they are entitled to its fruits.

We deny the petition.

The PNB differed with the RTC’s ruling and moved for reconsideration
averring that as declared by the RTC in its Decision dated June 2,
2006, its mortgage lien should be carried over to the new title
reconveying the lot to Spouses Marañon. PNB further argued that with
the expiration of the redemption period on February 4, 1993, or one (1)
year from the registration of the certificate of sale, PNB is now the
owner of the subject lot hence, entitled to its fruits. PNB prayed that (1)
the Order dated September 8, 2006 be set aside, and (2) an order be
issued directing Spouses Marañon to turn over to PNB the amount of
₱144,000.00 released in their favor by the Clerk of Court.19
On November 20, 2006, the RTC issued an Order again directing PNB
to release to Spouses Marañon the ₱30,000.00 rental payments
considering that they were adjudged to have retained ownership over
the property.20
On December 6, 2006, the RTC issued another Order denying PNB’s
motion for reconsideration and reiterating the directives in its Order
dated September 8, 2006.21
It is readily apparent from the facts at hand that the status of PNB’s
lien on the subject lot has already been settled by the RTC in its
Decision dated June 2, 2006 where it was adjudged as a mortgagee in
good faith whose lien shall subsist and be respected. The decision
lapsed into finality when neither of the parties moved for its
reconsideration or appealed.
Being a final judgment, the dispositions and conclusions therein have
become immutable and unalterable not only as against the parties but
even the courts. This is known as the doctrine of immutability of
judgments which espouses that a judgment that has acquired finality
becomes immutable and unalterable, and may no longer be modified in
any respect even if the modification is meant to correct erroneous
conclusions of fact or law and whether it will be made by the court that
rendered it or by the highest court of the land. 27 The significance of this
rule was emphasized in Apo Fruits Corporation v. Court of
Appeals,28 to wit:

The reason for the rule is that if, on the application of one party, the
Aggrieved, PNB sought recourse with the CA via a petition for certiorari
court could change its judgment to the prejudice of the other, it could
and mandamus22 claiming that as the lawful owner of the subject lot
thereafter, on application of the latter, again change the judgment and
per the RTC’s judgment dated June 2, 2006, it is entitled to the fruits of
continue this practice indefinitely. The equity of a particular case must
the same such as rentals paid by tenants hence, the ruling that "the
yield to the overmastering need of certainty and unalterability of judicial
real estate mortgage lien of the PNB registered on the title of Lot No.
pronouncements.
177-A-1 Bacolod Cadastre shall stay and be respected." PNB also
contended that it is an innocent mortgagee.
The doctrine of immutability and inalterability of a final judgment has a
two-fold purpose: (1) to avoid delay in the administration of justice and
In its Decision23 dated June 18, 2008, the CA denied the petition and
thus, procedurally, to make orderly the discharge of judicial business
affirmed the RTC’s judgment ratiocinating that not being parties to the
and (2) to put an end to judicial controversies, at the risk of occasional
mortgage transaction between PNB and Spouses Montealegre,
errors, which is precisely why courts exist. Controversies cannot drag
Spouses Marañon cannot be deprived of the fruits of the subject lot as
on indefinitely. The rights and obligations of every litigant must not
the same will amount to deprivation of property without due process of
hang in suspense for an indefinite period of time. The doctrine is not a
law. The RTC further held that PNB is not a mortgagee in good faith
mere technicality to be easily brushed aside, but a matter of public
because as a financial institution imbued with public interest, it should
policy as well as a time-honored principle of procedural
have looked beyond the certificate of title presented by Spouses
law.29 (Citations omitted)
Montealegre and conducted an inspection on the circumstances

7
Hence, as correctly argued by PNB, the issue on its status as a
mortgagee in good faith have been adjudged with finality and it was
error for the CA to still delve into and, worse, overturn, the same. The
CA had no other recourse but to uphold the status of PNB as a
mortgagee in good faith regardless of its defects for the sake of
maintaining stability of judicial pronouncements. "The main role of the
courts of justice is to assist in the enforcement of the law and in the
maintenance of peace and order by putting an end to judiciable
controversies with finality. Nothing better serves this role than the long
established doctrine of immutability of judgments."30
Further, it must be remembered that what reached the CA on certiorari
were RTC resolutions issued long after the finality of the Decision
dated June 2, 2006. The RTC Orders dated September 8, 2006 and
December 6, 2006 were implements of the pronouncement that
Spouses Marañon are still the rightful owners of the subject lot, a
matter that has been settled with finality as well. This notwithstanding,
the Court agrees with the ultimate outcome of the CA’s assailed
resolutions.
Rent is a civil fruit31 that belongs to the owner of the
property32 producing it by right of accession33.34 The rightful recipient of
the disputed rent in this case should thus be the owner of the subject
lot at the time the rent accrued. It is beyond question that Spouses
Marañon never lost ownership over the subject lot. This is the precise
consequence of the final and executory judgment in Civil Case No.
7213 rendered by the RTC on June 3, 2006 whereby the title to the
subject lot was reconveyed to them and the cloud thereon consisting of
Emilie’s fraudulently obtained title was removed. Ideally, the present
dispute can be simply resolved on the basis of such pronouncement.
However, the application of related legal principles ought to be clarified
in order to settle the intervening right of PNB as a mortgagee in good
faith.
The protection afforded to PNB as a mortgagee in good faith refers to
the right to have its mortgage lien carried over and annotated on the
new certificate of title issued to Spouses Marañon35 as so adjudged by
the RTC. Thereafter, to enforce such lien thru foreclosure proceedings
in case of non-payment of the secured debt,36 as PNB did so pursue.
The principle, however, is not the singular rule that governs real estate
mortgages and foreclosures attended by fraudulent transfers to the
mortgagor.
Rent, as an accessory follow the principal.37 In fact, when the principal
property is mortgaged, the mortgage shall include all natural or civil
fruits and improvements found thereon when the secured obligation
becomes due as provided in Article 2127 of the Civil Code, viz:
Art. 2127. The mortgage extends to the natural accessions, to the
improvements, growing fruits, and the rents or income not yet received
when the obligation becomes due, and to the amount of the indemnity
granted or owing to the proprietor from the insurers of the property
mortgaged, or in virtue of expropriation for public use, with the
declarations, amplifications and limitations established by law, whether
the estate remains in the possession of the mortgagor, or it passes into
the hands of a third person.
Consequently, in case of non-payment of the secured debt, foreclosure
proceedings shall cover not only the hypothecated property but all its
accessions and accessories as well. This was illustrated in the early
case of Cu Unjieng e Hijos v. Mabalacat Sugar Co.38 where the Court
held:
That a mortgage constituted on a sugar central includes not only the
land on which it is built but also the buildings, machinery, and
accessories installed at the time the mortgage was constituted as well
as the buildings, machinery and accessories belonging to the
mortgagor, installed after the constitution thereof x x x . 39
Applying such pronouncement in the subsequent case of Spouses
Paderes v. Court of Appeals,40 the Court declared that the
improvements constructed by the mortgagor on the subject lot are
covered by the real estate mortgage contract with the mortgagee bank
and thus included in the foreclosure proceedings instituted by the
latter.41
However, the rule is not without qualifications. In Castro, Jr. v. CA 42 the
Court explained that Article 2127 is predicated on the presumption that
the ownership of accessions and accessories also belongs to the
mortgagor as the owner of the principal. After all, it is an indispensable
requisite of a valid real estate mortgage that the mortgagor be the
absolute owner of the encumbered property, thus:
All improvements subsequently introduced or owned by the mortgagor
on the encumbered property are deemed to form part of the mortgage.
That the improvements are to be considered so incorporated only if so
owned by the mortgagor is a rule that can hardly be debated since a
contract of security, whether, real or personal, needs as an
indispensable element thereof the ownership by the pledgor or
mortgagor of the property pledged or mortgaged. x x x.43 (Citation
omitted)
Otherwise stated, absent an adverse claimant or any evidence to the
contrary, all accessories and accessions accruing or attached to the
mortgaged property are included in the mortgage contract and may
thus also be foreclosed together with the principal property in case of
non-payment of the debt secured.
Corollary, any evidence sufficiently overthrowing the presumption that
the mortgagor owns the mortgaged property precludes the application
of Article 2127. Otherwise stated, the provision is irrelevant and
inapplicable to mortgages and their resultant foreclosures if the
mortgagor is later on found or declared to be not the true owner of the
property, as in the instant case.1âwphi1
It is beyond question that PNB’s mortgagors, Spouses Montealegre,
are not the true owners of the subject lot much less of the building
which produced the disputed rent. The foreclosure proceedings on
August 16, 1991 caused by PNB could not have, thus, included the
building found on the subject lot and the rent it yields. PNB’s lien as a
mortgagee in good faith pertains to the subject lot alone because the
rule that improvements shall follow the principal in a mortgage under
Article 2127 of the Civil Code does not apply under the premises.
Accordingly, since the building was not foreclosed, it remains a
property of Spouses Marañon; it is not affected by non-redemption and
is excluded from any consolidation of title made by PNB over the
subject lot. Thus, PNB’s claim for the rent paid by Tolete has no basis.
It must be remembered that there is technically no juridical tie created
by a valid mortgage contract that binds PNB to the subject lot because
its mortgagor was not the true owner. But by virtue of the mortgagee in
good faith principle, the law allows PNB to enforce its lien. We cannot,
however, extend such principle so as to create a juridical tie between
PNB and the improvements attached to the subject lot despite clear
and undeniable evidence showing that no such juridical tie exists.
Lastly, it is worthy to note that the effects of the foreclosure of the
subject lot is in fact still contentious considering that as a purchaser in
the public sale, PNB was only substituted to and acquired the right,
title, interest and claim of the mortgagor to the property as of the time
of the levy.44 There being already a final judgment reconveying the
subject lot to Spouses Marañon and declaring as null and void Emilie's
purported claim of ownership, the legal consequences of the
foreclosure sale, expiration of the redemption period and even the
consolidation of the subject lot's title in PNB's name shall be subjected
to such final judgment. This is the clear import of the ruling in
Unionbank of the Philippines v. Court of Appeals:45
8
This is because as purchaser at a public auction, UNIONBANK is only
substituted to and acquires the right, title, interest and claim of the
judgment debtors or mortgagors to the property at the time of levy.
Perforce, the judgment in the main action for reconveyance will not be
rendered ineffectual by the consolidation of ownership and the
issuance of title in the name of UNIONBANK.46 (Citation omitted)
Nonetheless, since the present recourse stemmed from a mere motion
claiming ownership of rent and not from a main action for annulment of
the foreclosure sale or of its succeeding incidents, the Court cannot
proceed to make a ruling on the bearing of the CA's Decision dated
June 18, 2008 to PNB's standing as a purchaser in the public auction.
Such matter will have to be threshed out in the proper forum.
All told, albeit the dispositive portions of the assailed CA decision and
resolution are differently premised, they ought to be upheld as they
convey the similar conclusion that Spouses Marañon are the rightful
owners of the rent earned by the building on the subject lot.
WHEREFORE, foregoing considered, the petition is hereby DENIED.
The Decision dated June 18, 2008 and Resolution dated August 10,
2009 of the Court of Appeals in CA-G.R. SP No. 02513 are
AFFIRMED.
SO ORDERED.
27
Keppel Cebu Shipyard, Inc. v. Pioneer Insurance and Surety
Corporation, G.R. Nos. 180880-81, September 18, 2012, 681 SCRA
44, 60, citing FGU Insurance Corporation v. Regional Trial Court of
Makati City, Branch 66, G.R. No. 161282, February 23, 2011, 644
SCRA 50.
28
G.R. No. 164195, December 4, 2009, 607 SCRA 200.
29
Id. at 213-214.
30
Id. at 212-213.
31
CIVIL CODE, Article 442. Natural fruits are the spontaneous
products of the soil, and the young and other products of animals.
Industrial fruits are those produced by lands of any kind
through cultivation of labor.
Civil fruits are the rent of buildings, the price of leases of
lands and other property and the amount of perpetual or life
annuities or other similar income.
32
CIVIL CODE, Article 441. To the owner belongs:
(1) The natural fruits;
(2) The industrial fruits;
(3) The civil fruits.
33
CIVIL CODE, Article 440. The ownership of property gives the right
of accession to everything which is produced thereby or which is
incorporated or attached thereto, either naturally or artificially.
G.R. No. L-20851 September 3, 1966
JESUS AGUIRRE, petitioner,
vs.
VICTOR S. PHENG, in his capacity as General Manager of the
LEONORA & COMPANY, and NATIONAL SHIPYARDS AND STEEL
CORPORATION, respondents.
Sisenando Villaluz for petitioner.
M. C. Virata for respondent National Shipyards and Steel Corporation.
BARRERA, J.:
Antecedents.—On June 28, 1954, Vicente Aldaba and Teresa V.
Aldaba sold to Jesus Aguirre a circular bolted steel tank with a capacity
of 5,000 gallons, for the sum of P900.00, for which the latter delivered
to the sellers duly endorsed, Security Bank & Trust Company check
No. 281912, in the amount of P900.00. Aguirre, however, failed to,
take physical possession of the tank, having been prevented from
doing so by the municipal authorities of Los Baños, Laguna (where the
tank was located), in view of the claim of ownership being made by the
Bureau of Public Highways. It appears, however, that Vicente and
Teresa Aldaba again sold the same tank on December 2, 1954 to
Zosimo Gabriel, for P900.000. Gabriel, in turn, sold it to the Leonora &
Company on December 5, 1954, for P2,500.00. After some alterations
and improvements made on the tank, Leonora & Company was able to
sell the tank to National Shipyards & Steel Corporation (Nassco), for
P14,500.00. 1
Aguirre immediately filed with Nassco a formal notice of his claim of
ownership of the tank, as a consequence of which, payment of the
purchase price to Leonora & Company was suspended. Then, Aguirre
instituted Civil Case No. 24914 in the Court of First Instance of Manila,
against Leonora & Company and the Aldabas, for delivery to him of the
tank, with damages. On the other hand, because of the suspension of
payment of the purchase price, Leonora & Company filed Civil Case
No. 27988, against the Nassco, praying for the delivery of the
purchase price of P14,500.00, or the reimbursement of the sum of
P2,299.00 allegedly representing the actual investment and expenses
made and incurred to put the tank in usable condition. Jesus Aguirre
intervened in this proceeding. These two cases were jointly heard by
the trial court.
Thereafter, decision was rendered in Civil Case No. 24914, the
dispositive portion of which reads as follows:
IN VIEW OF THE FOREGOING, the Court hereby declares
Jesus Aguirre the absolute owner of the property described
in his complaint. The subsequent sale made by defendants
Aldaba to Zosimo Gabriel, the sale made by Zosimo Gabriel
to defendant Leonora and Co.; and the sale made by
defendant Leonora and Co. to the National Shipyards and
Steel Corporation, are hereby declared null and void and of
no effect. Defendants Aldaba and Leonora and Co. and the
National Shipyards and Steel Corporation, are hereby
ordered to deliver to plaintiff Jesus Aguirre the tank in
question. Failure to make such delivery, defendant National
Shipyards and Steel Corporation, in whose possession the
tank is at present, shall pay to the said Jesus Aguirre the
original purchase price of the tank in the amount of P900.00.
No appeal having been perfected on time, this decision became final.
In Civil Case No. 27988, the court rendered decision based on a
stipulation of facts by the parties, wherein the existence of Civil Case
No. 24914 was admitted, the dispositive portion of which provides:
9
 IN VIEW OF THE FOREGOING AGREEMENT, judgment is
hereby rendered as follows:
Intervenor Jesus Aguirre, as we have already declared in
Civil Case No. 24914, is hereby adjudged owner of the oil
tank in question. Defendant National Shipyards and Steel
Corporation is hereby ordered to deliver to the said Jesus
Aguirre such tank, but in the event that delivery is not
possible, to pay to Aguirre the purchase price of P900.00,
and to Leonora and Co. the amount of P11,299.00 which
represents the costs of the improvements made by the said
Leonora & Co.
In the event that the National Shipyards and Steel
Corporation shall deliver the oil tank to Jesus Aguirre as it is,
the latter shall pay to Leonora and Co. the amount of
P11,299.00 which, as already stated, was spent by Leonora
and Co. for the improvement of the tank.
From this decision, Aguirre perfected an appeal to the Court of
Appeals.
The present case.—On January 9, 1963, the Court of Appeals
rendered decision affirming the judgment of the lower court in Civil
Case No. 27988, to return to intervenor Aguirre the sum of P900.00 in
case delivery of the tank to him will not be possible —
because this was all the amount that Aguirre had parted with
when he purchased said tank. It was Leonora & Co. who had
5 spent the sum of P11,299.00 for the rehabilitation of said
tank and against this amount Aguirre has no rightful claim
whatsoever. Of course, in the event of delivery of the tank to
Aguirre as improved, it would be just for him to reimburse
Leonora & Co. the sum of P11,299.00. The trial court,
therefore, acted properly in denying Aguirre's claim to be
paid the fair and reasonable value of the tank as improved in
case the same could no longer be delivered to him.
Aguirre filed the present petition for review, alleging that the judgment
of the Court of Appeals, ordering the return to him of the sum of
P900.00 (when the value of the property is at least P14,500.00),
nullifies the declaration of his ownership of the tank. He contends that
under Article 440 of the Civil Code, his ownership of the property
entitles him to everything that is produced thereby, or is incorporated
or attached thereto, either naturally or artificially. Thus, he reiterates
the claim to the fair and reasonable value of the tank at the time of its
delivery to Nassco which is P14,500.00.
It is clear that we have here a case of accession by specification:
Leonora and Company, as purchaser acting in good faith, spending
P11,299.00 for the reconditioning of the tank which is later adjudged to
belong to petitioner Aguirre. There is no showing that without the works
made by Leonora & Company, the tank in its original condition when
Aguirre paid P900.00 therefor, would command the price of P14,500
which Nassco was willing to pay. Although ordinarily, therefore,
Aguirre, as owner of the tank, would be entitled to any accession
thereto, the rule is different where the works or improvements or the
accession was made on the property by one who acted in good
faith.2 And, it is not contended that the making of the improvements
and incurring of expenses amounting to P11,299.00 by Leonora &
Company was done in bad faith. Furthermore, to uphold petitioner's
contention that he is entitled to the sum of P14,500.00 the price of the
tank in its present condition, would be to allow him to enrich himself at
the expense of another. The lower courts, therefore, acted correctly in
ordering the reimbursement to Leonora & Company of the expenses it
made on the tank.1awphîl.nèt
It must also be remembered that the judgment in Civil Case No. 24914
of the Court of First Instance of Manila, wherein Nassco was directed
to pay to Aguirre the of P900.00, in case delivery of the same tank is
no longer possible, has already become final. This ruling cannot be
disregarded in the present proceeding which involves the same parties
and practically the same issue, arising from the same set of facts.
Nassco cannot also be compelled to pay more than P14,500.00 for the
tank, the bid offered by Leonora & Company and accepted by this
buyer, and which must be the actual market value of the property at
the time of its delivery to the latter. It has nothing to do at all with the
various transactions or sales and the deprivation of Aguirre's right to
possession of the tank, which culminated in this legal suit.
Wherefore finding no error in the decision of the Court of Appeals
under review, the present petition is hereby dismissed, with costs
against the petitioner. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P.,
Zaldivar, Sanchez and Castro, JJ., concur.
Footnotes
1
The sale made to Nassco was the result of a public bidding
won by Leonora & Company.
2
"ART. 466. Whenever two movable things belonging to
different owners are, without bad faith, united in such a way
that they form a single object, the owner of the principal thing
acquires the accessory, indemnifying the former owner
thereof for its value." (new Civil Code). Which provision is
applicable to all modes of accession.
G.R. No. 192088 October 9, 2012
INITIATIVES FOR DIALOGUE AND EMPOWERMENT THROUGH
ALTERNATIVE LEGAL SERVICES, INC. (IDEALS, INC.),
represented by its Executive Director, Mr. Edgardo Ligon, and
FREEDOM FROM DEBT COALITION (FDC), represented by its
Vice President Rebecca L. Malay, AKBAYAN CITIZEN'S ACTION
PARTY, represented by its Chair Emeritus Loretta Anne P.
Rosales, ALLIANCE OF PROGRESSIVE LABOR, represented by
its Chairperson, Daniel L. Edralin, REP. WALDEN BELLO, in his
capacity as duly-elected Member of the House of
Representatives, Petitioners,
vs.
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT
CORPORATION (PSALM), represented by its Acting President and
Chief Executive Officer Atty. Ma. Luz L. Caminero,
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM
(MWSS), represented by its Administrator Atty. Diosdado M.
Allado, NATIONAL IRRIGATION ADMINISTRATION (NIA),
represented by its Administrator Carlos S. Salazar, KOREA
WATER RESOURCES CORPORATION, represented by its Chief
Executive Officer, Kim Kuen-Ho and/or Attorneys-in-fact, Atty.
Anna Bianca L. Torres and Atty. Luther D. Ramos, FIRST GEN
NORTHERN ENERGY CORP., represented by its President, Mr.
Federico R. Lopez, SAN MIGUEL CORP., represented by its
President, Mr. Ramon S. Ang, SNABOITIZ POWER-PANGASINAN
INC., represented by its President, Mr. Antonio R. Moraza, TRANS-
ASIA OIL AND ENERGY DEVELOPMENT CORPORATION,
represented by its President and CEO, Mr. Francisco L. Viray, and
DMCI POWER CORP., represented by its President, Mr. Nestor
Dadivas,Respondents.
DECISION
10
VILLARAMA, J.:
Before us is a petition for certiorari and prohibition seeking to
permanently enjoin the sale of the Angat Hydro-Electric Power Plant
(AHEPP) to Korea Water Resources Corporation (K-Water) which won
the public bidding conducted by the Power Sector Assets and
Liabilities Management Corporation (PSALM).
The Facts
Respondent PSALM is a government-owned and controlled
corporation created by virtue of Republic Act No. 9136,1otherwise
known as the "Electric Power Industry Reform Act of 2001" (EPIRA).
The EPIRAprovided a framework for the restructuring of the electric
power industry, including the privatization of the assets of the National
Power Corporation (NPC), the transition to the desired competitive
structure, and the definition of the responsibilities of the various
government agencies and private entities. Said law mandated PSALM
to manage the orderly sale, disposition, and privatization of NPC
generation assets, real estate and other disposable assets, and
Independent Power Producer (IPP) contracts with the objective of
liquidating all NPC financial obligations and stranded contract costs in
an optimal manner, which liquidation is to be completed within
PSALM’s 25-year term of existence.2
Sometime in August 2005, PSALM commenced the privatization of the
246-megawatt (MW) AHEPP located in San Lorenzo, Norzagaray,
Bulacan. AHEPP’s main units built in 1967 and 1968, and 5 auxiliary
units, form part of the Angat Complex which includes the Angat Dam,
Angat Reservoir and the outlying watershed area. A portion of the
AHEPP - the 10 MW Auxiliary Unit No. 4 completed on June 16, 1986
and the 18 MW Auxiliary Unit No. 5 completed on January 14, 1993 - is
owned by respondent Metropolitan Waterworks and Sewerage System
(MWSS).3 The main units produce a total of 200 MW of power while the
auxiliary units yield the remaining 46 MW of power. The Angat Dam
and AHEPP are utilized for power generation, irrigation, water supply
and flood control purposes. Because of its multi-functional design, the
operation of the Angat Complex involves various government
agencies, namely: (1) NPC; (2) National Water Resources Board
(NWRB); (3) MWSS; (4) respondent National Irrigation Administration
(NIA); and (5) Philippine Atmospheric, Geophysical and Astronomical
Services Administration (PAG-ASA).
On December 15, 2009, PSALM’s Board of Directors approved the
Bidding Procedures for the privatization of the AHEPP. An Invitation to
Bid was published on January 11, 12 and 13, 2010 in three major
national newspapers. Subject of the bid was the AHEPP consisting of
4 main units and 3 auxiliary units with an aggregate installed capacity
of 218 MW. The two auxiliary units owned by MWSS were excluded
from the bid.
The following terms and conditions for the purchase of AHEPP were
set forth in the Bidding Package:
IB-05 CONDITION OF THE SALE
The Asset shall be sold on an "AS IS, WHERE IS" basis.
The Angat Dam (which is part of the Non-Power Components) is a
multi-purpose hydro facility which currently supplies water for domestic
use, irrigation and power generation. The four main units of the Angat
Plant release water to an underground trailrace that flows towards the
Bustos Dam which is owned and operated by the National Irrigation
Administration ("NIA") and provides irrigation requirements to certain
areas in Bulacan. The water from the auxiliary units 1, 2 and 3 flows to
the Ipo Dam which is owned and operated by MWSS and supplies
domestic water to Metro Manila and other surrounding cities.
The priority of water usage under Philippine Law would have to be
observed by the Buyer/Operator.
The Winning Bidder/Buyer shall be requested to enter into an
operations and maintenance agreement with PSALM for the Non-
Power Components in accordance with the terms and conditions of the
O & M Agreement to be issued as part of the Final Transaction
Documents. The Buyer, as Operator, shall be required to operate and
maintain the Non-Power Components at its own cost and expense.
PSALM is currently negotiating a water protocol agreement with
various parties which are currently the MWSS, NIA, the National Water
Resources Board and NPC. If required by PSALM, the Buyer will be
required to enter into the said water protocol agreement as a condition
to the award of the Asset.
The Buyer shall be responsible for securing the necessary rights to
occupy the land underlying the Asset.4 (Emphasis supplied.)
All participating bidders were required to comply with the following:
(a) submission of a Letter of Interest; (b) execution of Confidentiality
Agreement and Undertaking; and (c) payment of a non-refundable fee
of US$ 2,500 as Participation Fee.5 After holding pre-bid conferences
and forum discussions with various stakeholders, PSALM received the
following bids from six competing firms:
K-Water US$ 440,880,000.00
First Gen Northern Energy 365,000,678.00
Corporation
San Miguel Corporation 312,500,000.00
SNAboitiz Power-Pangasinan, Inc. 256,000,000.00
Trans-Asia Oil & Energy 237,000,000.00
Development Corporation
DMCI Power Corporation 188,890,000.00
On May 5, 2010, and after a post-bid evaluation, PSALM’s Board of
Directors approved and confirmed the issuance of a Notice of Award to
the highest bidder, K-Water.6
On May 19, 2010, the present petition with prayer for a temporary
restraining order (TRO) and/or writ of preliminary injunction was filed
by the Initiatives for Dialogue and Empowerment Through Alternative
Legal Services, Inc. (IDEALS), Freedom from Debt Coalition (FDC),
AKBAYAN Citizen’s Action Party (AKBAYAN) and Alliance of
Progressive Labor.
On May 24, 2010, this Court issued a Status QuoAnte Order directing
the respondents to maintain the status quo prevailing before the filing
of the petition and to file their respective Comments on the petition.7
Arguments of the Parties
Petitioners contend that PSALM gravely abused its discretion when, in
the conduct of the bidding it disregarded and violated the people’s right
to information guaranteed under the Constitution, as follows: (1) the
bidding process was commenced by PSALM without having previously
released to the public critical information such as the terms and
conditions of the sale, the parties qualified to bid and the minimum bid
price, as laid down in the case of Chavez v. Public Estates Authority8 ;
(2) PSALM refused to divulge significant information requested by
petitioners, matters which are of public concern; and (3) the bidding
was not conducted in an open and transparent manner, participation
was indiscriminately restricted to the private sectors in violation of the
EPIRA which provides that its provisions shall be "construed in favor of
the establishment, promotion, preservation of competition and people
empowerment so that the widest participation of the people, whether
directly or indirectly, is ensured."9
11
Petitioners also assail the PSALM in not offering the sale of the
AHEPP to MWSS which co-owned the Angat Complex together with
NPC and NIA. Being a mere co-owner, PSALM cannot sell the AHEPP
without the consent of co-owners MWSS and NIA, and being an
indivisible thing, PSALM has a positive obligation to offer its undivided
interest to the other co-owners before selling the same to an outsider.
Hence, PSALM’s unilateral disposition of the said hydro complex
facility violates the Civil Code rules on co-ownership (Art. 498) and
Sec. 47 (e) of the EPIRA which granted PSALM the legal option of
transferring possession, control and operation of NPC generating
assets like the AHEPP to another entity in order "to protect potable
water, irrigation and all other requirements imbued with public interest."
As to the participation in the bidding of and award of contract to K-
Water which is a foreign corporation, petitioners contend that PSALM
clearly violated the constitutional provisions on the appropriation and
utilization of water as a natural resource, as implemented by the Water
Code of the Philippines limiting water rights to Filipino citizens and
corporations which are at least 60% Filipino-owned. Further
considering the importance of the Angat Dam which is the source of
97% of Metro Manila’s water supply, as well as irrigation for farmlands
in 20 municipalities and towns in Pampanga and Bulacan, petitioners
assert that PSALM should prioritize such domestic and community use
of water over that of power generation.
They maintain that the Philippine Government, along with its agencies
and subdivisions, have an obligation under international law, to
recognize and protect the legally enforceable human right to water of
petitioners and the public in general.
Petitioners cite the Advisory on the "Right to Water in Light of the
Privatization of the Angat Hydro-Electric Power Plant"10 dated
November 9, 2009 issued by the Commission on Human Rights (CHR)
urging the Government to revisit and reassess its policy on water
resources vis-à-vis its concurrent obligations under international law to
provide, and ensure and sustain, among others, "safe, sufficient,
affordable and convenient access to drinking water." Since investment
in hydropower business is primarily driven by generation of revenues
both for the government and private sector, the CHR warns that once
the AHEPP is privatized, there will be less accessible water supply,
particularly for those living in Metro Manila and the Province of Bulacan
and nearby areas which are currently benefited by the AHEPP. The
CHR believes that the management of AHEPP is better left to MWSS
being a government body and considering the public interest involved.
However, should the decision to privatize the AHEPP become
inevitable, the CHR strongly calls for specific and concrete safeguards
to ensure the right to water of all, as the domestic use of water is more
fundamental than the need for electric power.
Petitioners thus argue that the protection of their right to water and of
public interest requires that the bidding process initiated by PSALM be
declared null and void for violating such right, as defined by
international law and by domestic law establishing the State’s
obligation to ensure water security for its people.
In its Comment With Urgent Motion to Lift Status Quo Ante Order,
respondent PSALM prayed for the dismissal of the petition on the
following procedural grounds: (a) a petition for certiorari is not the
proper remedy because PSALM was not acting as a tribunal or board
exercising judicial or quasi-judicial functions when it commenced the
privatization of AHEPP; (b) the present petition is rendered moot by the
issuance of a Notice of Award in favor of K-Water; (c) assuming the
petition is not mooted by such contract award, this Court has no
jurisdiction over the subject matter of the controversy involving a
political question, and also because if it were the intent of Congress to
exclude the AHEPP in the privatization of NPC assets, it should have
clearly expressed such intent as it did with the Agus and Pulangui
power plants under Sec. 47 of the EPIRA; (d) petitioners’ lack of
standing to question the bidding process for failure to show any injury
as a result thereof, while Rep. Walden Bello likewise does not have
such legal standing in his capacity as a duly elected member of the
House of Representatives as can be gleaned from the rulings in David
v. Arroyo11 and Philippine Constitutional Association v. Enriquez.12
On the alleged violation of petitioners’ right to information, PSALM
avers that it conducted the bidding in an open and transparent manner,
through a series of events in accordance with the governing rules on
public bidding. The non-disclosure of certain information in the
invitation to bid was understandable, such as the minimum or reserve
price which are still subject to negotiation and approval of PSALM’s
Board of Directors. The ruling in Chavez v. Public Estates Authority13 is
inapplicable since it involved government property which has become
unserviceable or was no longer needed and thus fell under Sec. 79 of
the Government Auditing Code whereas the instant case concerns a
hydroelectric power plant adjacent to a dam which still provides water
supply to Metro Manila. In the bidding for the AHEPP, PSALM claims
that it relied on the Rules and Regulations Implementing the EPIRA, as
well as COA Circular No. 89-296 on the general procedures for bidding
by government agencies and instrumentalities of assets that will be
divested or government property that will be disposed of. PSALM
likewise avers that it was constrained to deny petitioner IDEALS’ letter
dated April 20, 2010 requesting documents relative to the privatization
of Angat Dam due to non-submission of a Letter of Interest,
Confidentiality and Undertaking and non-payment of the Participation
Fee. With regard to IDEALS’ request for information about the winning
bidder, as contained in its letter dated May 14, 2010, the same was
already referred to respondent K-Water’s counsel for appropriate
action.
In any case, PSALM maintains that not all details relative to the
privatization of the AHEPP can be readily disclosed; the confidentiality
of certain matters was necessary to ensure the optimum bid price for
the property.
PSALM further refutes the assertion of petitioners that the Angat
Complex is an indivisible system and co-owned with MWSS and NIA. It
contends that MWSS’s contribution in the funds used for the
construction of the AHEPP did not give rise to a regime of co-
ownership as the said funds were merely in exchange for the supply of
water that MWSS would get from the Angat Dam, while the Umiray-
AngatTransbasin Rehabilitation Project the improvement and repair of
which were funded by MWSS, did not imply a co-ownership as these
facilities are located in remote places. Moreover, PSALM points out
that PSALM, MWSS and NIA each was issued a water permit, and are
thus holders of separate water rights.
On the alleged violation of petitioners’ and the people’s right to water,
PSALM contends that such is baseless and proceeds from the
mistaken assumption that the Angat Dam was sold and as a result
thereof, the continuity and availability of domestic water supply will be
interrupted. PSALM stresses that only the hydroelectric facility is being
sold and not the Angat Dam which remains to be owned by PSALM,
and that the NWRB still governs the water allocation therein while the
NPC-FFWSDO still retains exclusive control over the opening of
spillway gates during rainy season. The foregoing evinces the
continued collective control by government agencies over the Angat
Dam, which in the meantime, is in dire need of repairs, the cost of
which cannot be borne by the Government.
PSALM further debunks the nationality issue raised by petitioners,
citing previous opinions rendered by the Department of Justice (DOJ)
consistently holding that the utilization of water by a hydroelectric
power plant does not constitute appropriation of water from its natural
source considering that the source of water (dam) that enters the
intake gate of the power plant is an artificial structure. Moreover,
PSALM is mindful of the State’s duty to protect the public’s right to
water when it sold the AHEPP. In fact, such concern as taken into
consideration by PSALM in devising a privatization scheme for the
AHEPP whereby the water allocation is continuously regulated by the
NWRB and the dam and its spillway gates remain under the ownership
and control of NPC.
12
In its Comment,14 respondent MWSS asserts that by virtue of its
various statutory powers since its creation in 1971, which includes the
construction, maintenance and operation of dams, reservoir and other
waterworks within its territorial jurisdiction, it has supervision and
control over the Angat Dam given that the Angat Reservoir supplies
approximately 97% of the water requirements of Metro Manila. Over
the course of its authority over the Angat Dam, Dykes and Reservoir,
MWSS has incurred expenses to maintain their upkeep, improve and
upgrade their facilities. Thus, in 1962, MWSS contributed about 20%
for the construction cost of the Angat Dam and Dykes (then equivalent
to about ₱ 21 million); in 1992, MWSS contributed about ₱ 218 million
for the construction of Auxiliary Unit No. 5; in 1998, MWSS contributed
₱ 73.5 million for the construction cost of the low level outlet; and
subsequently, MWSS invested ₱ 3.3 billion to build the Umiray-
AngatTransbasin Tunnel to supplement the water supply available
from the Angat Dam, which tunnel contributes a minimum of about 9
cubic meters per second to the Angat Reservoir, thus increasing power
generation. MWSS argues that its powers over waterworks are vested
upon it by a special law (MWSS Charter) which prevails over the
EPIRA which is a general law, as well as other special laws, issuances
and presidential edicts. And as contained in Sec. 1 of the MWSS
Charter, which remains valid and effective, it is expressly provided that
the establishment, operation and maintenance of waterworks systems
must always be supervised by the State.
MWSS further alleges that after the enactment of EPIRA, it had
expressed the desire to acquire ownership and control of the AHEPP
so as not to leave the operation of the Angat Reservoir to private
discretion that may prejudice the water allocation to MWSS as dictated
by NWRB rules.
Representations were thereafter made with the Office of the President
(OP) for the turn over of the management of these facilities to MWSS,
and joint consultation was also held with PSALM officials for the
possibility of a Management Committee to manage and control the
Angat Dam Complex under the chairmanship of the water sector,
which position was supported by former Secretary
HermogenesEbdane of the Department of Public Works and Highways
(DPWH). In March 2008, PSALM proposed the creation of an inter-
agency technical working group (TWG) to draft the Operations and
Maintenance (O & M) Agreement for the AHEPP that will be in effect
after its privatization. PSALM likewise sought the view of the Office of
the Government Corporate Counsel (OGCC) which opined that
PSALM may turn over the facility to a qualified entity such as MWSS
without need of public bidding. In 2009, various local governments
supported the transfer of the control and management of the AHEPP to
MWSS, while the League of Cities and Municipalities interposed its
opposition to the privatization of the AHEPP fearing that it might
increase the cost of water in Metro Manila, and also because it will be
disadvantageous to the national government since the AHEPP only
contributes 246 MW of electricity to the Luzon Grid. Even the CHR has
advised the Government to reassess its privatization policy and to
always consider paramount the most basic resources necessary and
indispensable for human survival, which includes water.
MWSS further avers that upon the facilitation of the OGCC and
participated in by various stakeholders, including its two
concessionaires, Manila Water Company, Inc. and Maynilad Water
Services, Inc., various meetings and conferences were held relative to
the drafting of the
Memorandum of Agreement on the Angat Water Protocol. On April 20,
2010, the final draft of the Angat Water Protocol was finally complete.
However, as of June 18, 2010, only MWSS and NIA signed the said
final draft. MWSS thus contends that PSALM failed to institute any
safeguards as prescribed in Sec. 47 of the EPIRA when it proceeded
with the privatization of the AHEPP.
As to the issue of nationality requirement in the appropriation of water
resources under the Constitution, MWSS cites the case of Manila
Prince Hotel v. Government Service Insurance System15 which
interpreted paragraph 2, Sec. 10, Art. XII of the 1987 Constitution
providing that "in the grant of rights, privileges, and concessions
covering the national economy and patrimony, the State shall give
preference to qualified Filipinos" to imply "a mandatory, positive
command which is complete in itself and which needs no further
guidelines or implementing laws or rules for its enforcement x xx and is
per se judicially enforceable." In this case, the AHEPP is in dire danger
of being wholly-owned by a Korean corporation which probably merely
considers it as just another business opportunity, and as such cannot
be expected to observe and ensure the smooth facilitation of the more
critical purposes of water supply and irrigation.
Respondent First Gen Northern Energy Corporation (FGNEC) also
filed a Comment16 disagreeing with the contentions of petitioners and
respondent MWSS on account of the following: (1) the NPC charter
vested upon it complete jurisdiction and control over watersheds like
the Angat Watershed surrounding the reservoir of the power plants,
and hence Art. 498 of the Civil Code is inapplicable; (2) NPC, MWSS
and NIA are not co-owners of the various rights over the Angat Dam as
in fact each of them holds its own water rights; (3) the State through
the EPIRA expressly mandates PSALM to privatize all NPC assets,
which necessarily includes the AHEPP; (4) the privatization of the
AHEPP will not affect the priority of water for domestic and municipal
uses as there are sufficient safeguards to ensure the same, and also
because the Water Code specifically mandates that such use shall
take precedence over other uses, and even the EPIRA itself gives
priority to use of water for domestic and municipal purposes over
power generation; (5) the Water Protocol also safeguards priority of
use of water for domestic purposes; (6) the bidding procedure for the
AHEPP was valid, and the bidding was conducted by PSALM in an
open and transparent manner; and (7) the right to information of
petitioners and the public in general was fully satisfied, and PSALM
adopted reasonable rules and regulations for the orderly conduct of its
functions pursuant to its mandate under the EPIRA.
FGNEC nevertheless prays of this Court to declare the nationality
requirements for the ownership, operation and maintenance of the
AHEPP as prescribed by the Constitution and pertinent laws.
Considering the allegation of petitioners that K-Water is owned by the
Republic of South Korea, FGNEC asserts that PSALM should not have
allowed said entity to participate in the bidding because under our
Constitution, the exploration, development and utilization of natural
resources are reserved to Filipino citizens or to corporations with 60%
of their capital being owned by Filipinos.
Respondent NIA filed its Comment17 stating that its interest in this case
is limited only to the protection of its water allocation drawn from the
Angat Dam as determined by the NWRB. Acknowledging that it has to
share the meager water resources with other government agencies in
fulfilment of their respective mandate, NIA submits that it is willing to sit
down and discuss issues relating to water allocation, as evidenced by
the draft Memorandum of Agreement on the Angat Water Protocol.
Since the reliefs prayed for in the instant petition will not be applicable
to NIA which was not involved in the bidding conducted by PSALM, it
will thus not be affected by the outcome of the case.
Respondents San Miguel Corporation (SMC), DMCI Power
Corporation, Trans-Asia Oil and Energy Development Corporation and
SNAboitiz Power-Pangasinan, Inc. filed their respective
Comments18 with common submission that they are not real parties-in-
interest and should be excluded from the case. They assert that
PSALM acted pursuant to its mandate to privatize the AHEPP when it
conducted the bidding, and there exists no reason for them to take any
action to invalidate the said bidding wherein they lost to the highest
bidder K-Water.
On its part, respondent K-Water filed a Manifestation In Lieu of
Comment19 stating that it is not in a position to respond to petitioners’
allegations, having justifiably relied on the mandate and expertise of
PSALM in the conduct of public bidding for the privatization of the
AHEPP and had no reason to question the legality or constitutionality
13
of the privatization process, including the bidding. K-Water submits that
its participation in the bidding for the AHEPP was guided at all times by
an abiding respect for the Constitution and the laws of the Philippines,
and hopes for a prompt resolution of the present petition to further
strengthen and enhance the investment environment – considering the
level of investment entailed, not only in financial terms – by providing a
definitive resolution and reliable guidance for investors, whether
Filipino or foreign, as basis for effective investment and business
decisions.
In their Consolidated Reply,20 petitioners contend that the instant
petition is not mooted with the issuance of a Notice of Award to K-
Water because the privatization of AHEPP is not finished until and
unless the deed of absolute sale has been executed. They cite the
ruling in David v. Arroyo,21 that courts will decide cases, otherwise
moot and academic, if:
first, there is a grave violation of the Constitution; second, the
exceptional character of the situation and the paramount public interest
is involved; third, when constitutional issue raised requires formulation
of controlling principles to guide the bench, the bar and the public; and
fourth, the case is capable of repetition yet evading review.
Petitioners reiterate their legal standing to file the present suit in their
capacity as taxpayers, or as Filipino citizens asserting the promotion
and protection of a public right, aside from being directly injured by the
proceedings of PSALM. As to the absence of Certification and
Verification of Non-Forum Shopping from petitioner Bello in the file
copy of PSALM, the same was a mere inadvertence in photocopying
the same.
On the matter of compliance with an open and transparent bidding,
petitioners also reiterate as held in Chavez v. Public Estates
Authority,22 that the Court’s interpretation of public bidding applies to
any law which requires public bidding, especially since Sec. 79 of the
Government Auditing Code does not enumerate the data that must be
disclosed to the public. PSALM should have followed the minimum
requirements laid down in said case instead of adopting the "format
generally used by government entities in their procurement of goods,
infrastructure and consultancy services," considering that what was
involved in Chavez is an amended Joint Venture Agreement which
seeks to transfer title and ownership over government property.
Petitioners point out that the requirement under COA Circular 89-296
as regards confidentiality covers only sealed proposals and not all
information relating to the AHEPP privatization. PSALM’s simple
referral of IDEALS’ request letter to the counsel of K-Water is very
telling, indicating PSALM’s limited knowledge about a company it
allowed to participate in the bidding and which even won the bidding.
On the transfer of water rights to K-Water, petitioners reiterate that this
violates the Water Code, and contrary to PSALM’s statements, once
NPC transfers its water permit to K-Water, in accordance with the
terms of the Asset Purchase Agreement, NPC gives up its authority to
extract or utilize water from the Angat River. Petitioners further assert
that the terms of the sale of AHEPP allowing the buyer the operation
and management of the Non-Power Components, constitutes a
relinquishment of government control over the Angat Dam, in violation
of Art. XII, Sec. 2 of the Constitution. PSALM likewise has not stated
that all stakeholders have signed the Water Protocol. Such absence of
a signed Water Protocol is alarming in the light of PSALM’s
pronouncement that the terms of the sale to K-Water would still subject
to negotiation. Is PSALM’s refusal to sign the Water Protocol part of its
strategy to negotiate the terms of the sale with the bidders? If so, then
PSALM is blithely and cavalierly bargaining away the Filipinos’ right to
water.
Responding to the claims of MWSS in its Comment, PSALM contends
that MWSS’s allegations regarding the bidding process is belied by
MWSS’s own admission that it held discussions with PSALM to
highlight the important points and issues surrounding the AHEPP
privatization that needed to be threshed out. Moreover, MWSS also
admits having participated, along with other agencies and
stakeholders, various meetings and conferences relative to the drafting
of a Memorandum of Agreement on the Angat Water Protocol.
As regards the Angat Dam, PSALM emphasizes that MWSS never
exercised jurisdiction and control over the said facility. PSALM points
out that the Angat Dam was constructed in 1967, or four years before
the enactment of Republic Act No. 6234, upon the commissioning
thereof by the NPC and the consequent construction by Grogun, Inc., a
private corporation. MWSS’ attempt to base its claim of jurisdiction
over the Angat Dam upon its characterization of EPIRA as a general
law must likewise fail. PSALM explains that EPIRA cannot be classified
as a general law as it applies to a particular portion of the State, i.e.,
the energy sector. The EPIRA must be deemed an exception to the
provision in the Revised MWSS Charter on MWSS’s general
jurisdiction over waterworks systems.
PSALM stresses that pursuant to the EPIRA, PSALM took ownership
of all existing NPC generation assets, liabilities, IPP contracts, real
estate and other disposable assets, which necessarily includes the
AHEPP Complex, of which the Angat Dam is part. As to the OGCC
opinion cited by MWSS to support its position that control and
management of the Angat Dam Complex should be turned over to
MWSS, the OGCC had already issued a second opinion dated August
20, 2008 which clarified the tenor of its earlier Opinion No. 107, s.
2008, stating that "the disposal of the Angat HEPP by sale through
public bidding – the principal mode of disposition under EPIRA –
remains PSALM’s primary option." Moreover, as pointed out by the
National Economic Development Authority (NEDA) in its letter dated
September 16, 2009, the ownership and operation of a hydropower
plant goes beyond the mandate of MWSS. This view is consistent with
the provisions of EPIRA mandating the transfer of ownership and
control of NPC generation assets, IPP Contracts, real estate and other
disposable assets to a private person or entity. Consequently, a
transfer to another government entity of the said NPC assets would be
a clear violation of the EPIRA. Even assuming such is allowed by
EPIRA, it would not serve the objective of the EPIRA, i.e., that of
liquidating all NPC’s financial obligations and would merely transfer
NPC’s debts from the hands of one government entity to another, the
funds that would be utilized by MWSS in the acquisition of the AHEPP
would doubtless come from the pockets of the Filipino people.
As regards the opposition of various local government units to the sale
of the AHEPP, PSALM said that a forum was held specifically to
address their concerns. After the said forum, these LGUs did not
anymore raise the same concerns; such inaction on their part could be
taken as an acquiescence to, and acceptance of, the explanations
made by PSALM during the forum.
PSALM had made it clear that it is only the AHEPP and not the Angat
Dam which was being privatized. The same wrong premise
underpinned the position of the CHR with its erroneous allegation that
MWSS is allowed, under its Revised Charter, to operate and maintain
a power plant.
PSALM further contends that the sale of AHEPP to K-Water did not
violate the Constitution’s provision on the State’s natural resources and
neither is the ruling in Manila Prince Hotel applicable as said case was
decided under different factual circumstances. It reiterates that the
AHEPP, being a generation asset, can be sold to a foreign entity,
under the EPIRA, in accordance with the policy reforms said law
introduced in the power sector; the EPIRA aims to enable open access
in the electricity market and then enable the government to
concentrate more fully on the supply of basic needs to the Filipino
people. Owing to the competitive and open nature of the generation
sector, foreign corporation may own generation assets.
Issues
The present controversy raised the following issues:
14
1) Legal standing of petitioners;
2) Mootness of the petition;
3) Violation of the right to information;
4) Ownership of the AHEPP;
5) Violation of Sec. 2, Art. XII of the Constitution;
6) Violation of the Water Code provisions on the grant of water rights;
and
7) Failure of PSALM to comply with Sec. 47 (e) of EPIRA.
Mootness and Locus Standi
PSALM’s contention that the present petition had already been mooted
by the issuance of the Notice of Award to K-Water is misplaced.
Though petitioners had sought the immediate issuance of injunction
against the bidding commenced by PSALM -- specifically enjoining it
from proceeding to the next step of issuing a notice of award to any of
the bidders -- they further prayed that PSALM be permanently enjoined
from disposing of the AHEPP through privatization. The petition was
thus filed not only as a means of enforcing the State’s obligation to
protect the citizens’ "right to water" that is recognized under
international law and legally enforceable under our Constitution, but
also to bar a foreign corporation from exploiting our water resources in
violation of Sec. 2, Art. XII of the 1987 Constitution. If the impending
sale of the AHEPP to K-Water indeed violates the Constitution, it is the
duty of the Court to annul the contract award as well as its
implementation. As this Court held in Chavez v. Philippine Estates
Authority,23 "supervening events, whether intended or accidental,
cannot prevent the Court from rendering a decision if there is a grave
violation of the Constitution."
We also rule that petitioners possess the requisite legal standing in
filing this suit as citizens and taxpayers.
"Legal standing" or locus standi has been defined as a personal and
substantial interest in the case such that the party has sustained or will
sustain direct injury as a result of the governmental act that is being
challenged, alleging more than a generalized grievance. The gist of the
question of standing is whether a party alleges "such personal stake in
the outcome of the controversy as to assure that concrete adverseness
which sharpens the presentation of issues upon which the court
depends for illumination of difficult constitutional questions."24 This
Court, however, has adopted a liberal attitude on the locus standi of a
petitioner where the petitioner is able to craft an issue of
transcendental significance to the people, as when the issues raised
are of paramount importance to the public.25Thus, when the
proceeding involves the assertion of a public right, the mere fact that
the petitioner is a citizen satisfies the requirement of personal
interest.26
There can be no doubt that the matter of ensuring adequate water
supply for domestic use is one of paramount importance to the public.
That the continued availability of potable water in Metro Manila might
be compromised if PSALM proceeds with the privatization of the
hydroelectric power plant in the Angat Dam Complex confers upon
petitioners such personal stake in the resolution of legal issues in a
petition to stop its implementation.
Moreover, we have held that if the petition is anchored on the people’s
right to information on matters of public concern, any citizen can be the
real party in interest. The requirement of personal interest is satisfied
by the mere fact that the petitioner is a citizen, and therefore, part of
the general public which possesses the right. There is no need to show
any special interest in the result. It is sufficient that petitioners are
citizens and, as such, are interested in the faithful execution of the
laws.27
Violation of Right to Information
The people’s right to information is provided in Section 7, Article III of
the Constitution, which reads:
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 people’s constitutional right to information is intertwined with the
government’s constitutional duty of full public disclosure of all
transactions involving public interest.28 Section 28, Article II of the
Constitution declares the State policy of full transparency in all
transactions involving public interest, to wit:
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. (Italics supplied.)
The foregoing constitutional provisions 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. They are also essential to hold public officials "at
all times x xx accountable to the people," 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. 29
Consistent with this policy, the EPIRA was enacted to provide for "an
orderly and transparent privatization" of NPC’s assets and
liabilities.30 Specifically, said law mandated that "all assets of NPC shall
be sold in an open and transparent manner through public bidding."31
In Chavez v. Public Estates Authority32 involving the execution of an
Amended Joint Venture Agreement on the disposition of reclaimed
lands without public bidding, the Court held:
x x xBefore 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
15
non-proprietary information leading to such definite proposition. In Here, petitioners’ second letter dated May 14, 2010 specifically
Chavez v. PCGG, the Court ruled as follows: requested for detailed information regarding the winning bidder, such
as company profile, contact person or responsible officer, office
address and Philippine registration. But before PSALM could respond
"Considering the intent of the framers of the Constitution, we believe
to the said letter, petitioners filed the present suit on May 19, 2010.
that it is incumbent upon the PCGG and its officers, as well as other
PSALM’s letter-reply dated May 21, 2010 advised petitioners that their
government representatives, to disclose sufficient public information on
letter-re quest was referred to the counsel of K-Water. We find such
any proposed settlement they have decided to take up with the
action insufficient compliance with the constitutional requirement and
ostensible owners and holders of ill-gotten wealth. Such information,
inconsistent with the policy under EPIRA to implement the privatization
though, must pertain to definite propositions of the government not
of NPC assets in an "open and transparent" manner. PSALM’s evasive
necessarily to intra-agency or inter-agency recommendations or
response to the request for information was unjustified because all
communications during the stage when common assertions are still in
bidders were required to deliver documents such as company profile,
the process of being formulated or are in the "exploratory" stage. There
names of authorized officers/representatives, financial and technical
is need, of course, to observe the same restrictions on disclosure of
experience.
information in general, as discussed earlier – such as on matters
involving national security, diplomatic or foreign relations, intelligence
and other classified information." (Emphasis supplied.) Consequently, this relief must be granted to petitioners by directing
PSALM to allow petitioners access to the papers and documents
relating to the company profile and legal capacity of the winning bidder.
Chavez v. Public Estates Authority thus laid down the rule that the
Based on PSALM’s own press releases, K-Water is described as a
constitutional right to information includes official information on on-
Korean firm with extensive experience in implementing and managing
going negotiations before a final contract. The information, however,
water resources development projects in South Korea, and also
must constitute definite propositions by the government and should not
contributed significantly to the development of that country’s heavy and
cover recognized exceptions like privileged information, military and
chemical industries and the modernization of its national industrial
diplomatic secrets and similar matters affecting national security and
structure.
public order. In addition, Congress has prescribed other limitations on
the right to information in several legislations.33
AngatHEPP is Under the Jurisdiction of
the Department of Energy Through NPC
In this case, petitioners’ first letter dated April 20, 2010 requested for
documents such as Terms of Reference and proposed bids submitted
by the bidders. At that time, the bids were yet to be submitted at the It must be clarified that though petitioners had alleged a co-ownership
bidding scheduled on April 28, 2010. It is also to be noted that by virtue of the joint supervision in the operation of the Angat Complex
PSALM’s website carried news and updates on the sale of AHEPP, by MWSS, NPC and NIA, MWSS actually recognized the ownership
providing important information on bidding activities and clarifications and jurisdiction of NPC over the hydroelectric power plant itself. While
regarding the terms and conditions of the Asset Purchase Agreement MWSS had initially sought to acquire ownership of the AHEPP without
(APA) to be signed by PSALM and the winning bidder (Buyer).34 public bidding, it now prays that PSALM be ordered to turn over the
possession and control of the said facility to MWSS. MWSS invokes its
own authority or "special powers" by virtue of its general jurisdiction
In Chavez v. National Housing Authority,35 the Court held that pending
over waterworks systems, and in consideration of its substantial
the enactment of an enabling law, the release of information through
investments in the construction of two auxiliary units in the AHEPP, as
postings in public bulletin boards and government websites satisfies
well as the construction of the Umiray-AngatTransbasin Tunnel to
the constitutional requirement, thus:
supplement the water intake at the Angat Reservoir which resulted in
increased power generation.
It is unfortunate, however, that after almost twenty (20) years from birth
of the 1987 Constitution, there is still no enabling law that provides the
Records disclosed that as early as December 2005, following the
mechanics for the compulsory duty of government agencies to disclose
decision of PSALM’s Board of Directors to commence the sale process
information on government transactions. Hopefully, the desired
of the AHEPP along with Magat and AmlanHEPPs in August 2005,
enabling law will finally see the light of day if and when Congress
MWSS was actively cooperating and working with PSALM regarding
decides to approve the proposed "Freedom of Access to Information
the proposed Protocol for the Privatization of the AHEPP, specifically
Act." In the meantime, it would suffice that government agencies post
on the terms and conditions for the management, control and operation
on their bulletin boards the documents incorporating the information on
of the Angat Dam Complex taking into consideration the concerns of its
the steps and negotiations that produced the agreements and the
concessionaires. A Technical Working Group (TWG) similar to that
agreements themselves, and if finances permit, to upload said
formed for the Operation and Management Agreement of Pantabangan
information on their respective websites for easy access by interested
and Magat dams was created, consisting of representatives from
parties. Without any law or regulation governing the right to disclose
PSALM, MWSS and other concerned agencies, to formulate strategies
information, the NHA or any of the respondents cannot be faulted if
for the effective implementation of the privatization of AHEPP and
they were not able to disclose information relative to the SMDRP to the
appropriate structure for the operation and management of the Angat
public in general.36 (Emphasis supplied.)
Dam Complex.38

The Court, however, distinguished the duty to disclose information

In March 2008, PSALM sought legal advice from the OGCC on
from the duty to permit access to information on matters of public
available alternatives to a sale structure for the AHEPP. On May 27,
concern under Sec. 7, Art. III of the Constitution. Unlike the disclosure
2008, then Government Corporate Counsel Alberto C. Agra issued
of information which is mandatory under the Constitution, the other
Opinion No. 107, s. 200839stating that PSALM is not limited to "selling"
aspect of the people’s right to know requires a demand or request for
as a means of fulfilling its mandate under the EPIRA, and that in
one to gain access to documents and paper of the particular agency.
dealing with the AHEPP, PSALM has the following options:
Moreover, the duty to disclose covers only transactions involving public
interest, while the duty to allow access has a broader scope of
information which embraces not only transactions involving public 1. Transfer the ownership, possession, control, and operation of the
interest, but any matter contained in official communications and public Angat Facility to another entity, which may or may not be a private
documents of the government agency.37 Such relief must be granted to enterprise, as specifically provided under Section 47 (e) of RA 9136;
the party requesting access to official records, documents and papers
relating to official acts, transactions, and decisions that are relevant to
2. Transfer the Angat Facility, through whatever form, to another entity
a government contract.
for the purpose of protecting the public interest.40

16
The OGCC cited COA Circular No. 89-296 which provides that
government property or assets that are no longer serviceable or
needed "may be transferred to other government entities/agencies
without cost or at an appraised value upon authority of the head or
governing body of the agency or corporation, and upon due
accomplishment of an Invoice and Receipt of Property." Pointing out
the absence of any prohibition under R.A. No. 9136 and its IRR for
PSALM to transfer the AHEPP to another government instrumentality,
and considering that MWSS is allowed under its charter to acquire the
said facility, the OGCC expressed the view that PSALM may, "in the
interest of stemming a potential water crisis, turn over the ownership,
operations and management of the Angat Facility to a qualified entity,
such as the MWSS, without need of public bidding as the latter is also
a government entity."41
Consequently, MWSS requested the Office of the President (OP) to
exclude the AHEPP from the list of NPC assets to be privatized under
the EPIRA. Said request was endorsed to the Department of Finance
(DOF) which requested the National Economic Development Authority
(NEDA) to give its comments. Meanwhile, on August 20, 2008, the
OGCC issued a Clarification42 on its Opinion No. 107, s. 2008 stating
that the tenor of the latter issuance was "permissive" and "necessarily,
the disposal of the AHEPP by sale through public bidding – the
principal mode of disposition under x xx R.A. 9136 – remains PSALM’s
primary option." The OGCC further explained its position, thus:
If, in the exercise of PSALM’s discretion, it determines that privatization
by sale through public bidding is the best mode to fulfill its mandate
under R.A. 9136, and that this mode will not contravene the State’s
declared policy on water resources, then the same is legally
permissible.
Finally, in OGCC Opinion No. 107 s. 2008, this Office underscored "the
overriding policy of the State x xx recognizing that ‘water is vital to
national development x xx’ and the crucial role which the Angat Facility
plays in the uninterrupted and adequate supply and distribution of
potable water to residents of Metro Manila." This Office reiterates "the
primacy of the State’s interest in mitigating the possible deleterious
effects of an impending "water crisis" encompassing areas even
beyond Metro Manila." Any transfer of the AHEPP to be undertaken by
PSALM – whether to a private or public entity – must not contravene
the State’s declared policy of ensuring the flow of clean, potable water
under RA 6395 and 9136, and Presidential Decree 1067. Hence, said
transfer and/or privatization scheme must ensure the preservation of
the AHEPP as a vital source of water for Metro Manila and the
surrounding provinces.43(Emphasis supplied.)
On September 16, 2009, NEDA Deputy Director General Rolando G.
Tungpalan, by way of comment to MWSS’s position, wrote the DOF
stating that MWSS’s concern on ensuring an uninterrupted and
adequate supply of water for domestic use is amply protected and
consistently addressed in the EPIRA. Hence, NEDA concluded that
there appears to be no basis to exclude AHEPP from the list of NPC
generation assets to be privatized and no compelling reason to transfer
its management, operations and control to MWSS.44 NEDA further
pointed out that:
Ownership and operation of a hydropower plant, however, goes
beyond the mandate of MWSS.To operate a power generation plant,
given the sector’s legislative setup would require certification and
permits that has to be secured by the operator. MWSS does not have
the technical capability to undertake the operation and maintenance of
the AHEPP nor manage the contract of a contracted private party to
undertake the task for MWSS. While MWSS may tap NPC to operate
and maintain the AHEPP, this, similar to contracting out a private party,
may entail additional transaction costs, and ultimately result to higher
generation rates.45 (Emphasis supplied.)
Thereafter, MWSS sought the support of the DPWH in a letter dated
September 24, 2009 addressed to then Secretary Hermogenes E.
Ebdane, Jr., for the exclusion of the AHEPP from the list of NPC
assets to be privatized and instead transfer the ownership, possession
and control thereof to MWSS with reasonable compensation. Acting on
the said request, Secretary Ebdane, Jr. wrote a memorandum for the
President recommending that "the Angat Dam be excluded from the list
of NPC assets to be privatized, and that the ownership, management
and control of the Dam be transferred from NPC to MWSS, with
reasonable compensation."46
Based on the foregoing factual backdrop, there seems to be no dispute
as to the complete jurisdiction of NPC over the government-owned
Angat Dam and AHEPP.
The Angat Reservoir and Dam were constructed from 1964 to 1967
and have become operational since 1968. They have multiple
functions:
1) To provide irrigation to about 31,000 hectares of land in 20
municipalities and towns in Pampanga and Bulacan;
2) To supply the domestic and industrial water requirements of
residents in Metro Manila;
3) To generate hydroelectric power to feed the Luzon Grid; and
4) To reduce flooding to downstream towns and villages.47
The Angat Dam is a rockfill dam with a spillway equipped with three
gates at a spilling level of 219 meters and has storage capacity of
about 850 million cubic meters. Water supply to the MWSS is released
through five auxiliary turbines where it is diverted to the two tunnels
going to the Ipo Dam.48 The Angat Dam is one of the dams under the
management of NPC while the La Mesa and Ipo dams are being
managed by MWSS. MWSS is a government corporation existing by
virtue of R.A. No. 6234.49 NAPOCOR or NPC is also a government-
owned corporation created under Commonwealth Act (C.A.) No.
120,50 which, among others, was vested with the following powers
under Sec. 2, paragraph (g):
(g) To construct, operate and maintain power plants, auxiliary plants,
dams, reservoirs, pipes, mains, transmission lines, power stations and
substations, and other works for the purpose of developing hydraulic
power from any river, creek, lake, spring and waterfall in the
Philippines and supplying such power to the inhabitants thereof; to
acquire, construct, install, maintain, operate and improve gas, oil, or
steam engines, and/or other prime movers, generators and other
machinery in plants and/or auxiliary plants for the production of electric
power; to establish, develop, operate, maintain and administer power
and lighting system for the use of the Government and the general
public; to sell electric power and to fix the rates and provide for the
collection of the charges for any service rendered: Provided, That the
rates of charges shall not be subject to revision by the Public Service
Commission;
x x x x (Emphasis supplied.)
On September 10, 1971, R.A. No. 6395 was enacted which revised the
charter of NPC, extending its corporate life to the year 2036. NPC
thereafter continued to exercise complete jurisdiction over dams and
power plants including the Angat Dam, Angat Reservoir and AHEPP.
While the NPC was expressly granted authority to construct, operate
and maintain power plants, MWSS was not vested with similar
function. Section 3 (f), (o) and (p) of R.A. No. 6234 provides that
MWSS’s powers and attributes include the following –
(f) To construct, maintain, and operate dams, reservoirs, conduits,
aqueducts, tunnels, purification plants, water mains, pipes, fire
hydrants, pumping stations, machineries and other waterworks for the
purpose of supplying water to the inhabitants of its territory, for
17
domestic and other purposes; and to purify, regulate and control the
use, as well as prevent the wastage of water;
xxxx
(o) To assist in the establishment, operation and maintenance of
waterworks and sewerage systems within its jurisdiction under
cooperative basis;
(p) To approve and regulate the establishment and construction of
waterworks and sewerage systems in privately owned subdivisions
within its jurisdiction; x xx. (Emphasis supplied.)
On December 9, 1992, by virtue of R.A. No. 7638,51 NPC was placed
under the Department of Energy (DOE) as one of its attached
agencies.
Aside from its ownership and control of the Angat Dam and AHEPP,
NPC was likewise mandated to exercise complete jurisdiction and
control over its watershed, pursuant to Sec. 2 (n) and (o) of R.A. No.
6395 for development and conservation purposes:
(n) To exercise complete jurisdiction and control over watersheds
surrounding the reservoirs of plants and/or projects constructed or
proposed to be constructed by the Corporation. Upon determination by
the Corporation of the areas required for watersheds for a specific
project, the Bureau of Forestry, the Reforestation Administration and
the Bureau of Lands shall, upon written advice by the Corporation,
forthwith surrender jurisdiction to the Corporation of all areas
embraced within the watersheds, subject to existing private rights, the
needs of waterworks systems, and the requirements of domestic water
supply;
(o) In the prosecution and maintenance of its projects, the Corporation
shall adopt measures to prevent environmental pollution and promote
the conservation, development and maximum utilization of natural
resources; and
x x x x (Emphasis supplied.)
On December 4, 1965, Presidential Proclamation No. 505 was issued
amending Proclamation No. 71 by transferring the administration of the
watersheds established in Montalban, San Juan del Monte,
Norzagaray, Angat, San Rafael, Peñaranda and Infanta, Provinces of
Rizal, Bulacan, Nueva Ecija and Quezon, to NPC. Subsequent
executive issuances Presidential Decree (P.D.) No. 1515 which was
signed in June 1978 and amended by P.D. No. 1749 in December
1980 led to the creation of the NPC Watershed Management Division
which presently has 11 watershed areas under its management. 52
Privatization of AHEPP Mandatory Under EPIRA
With the advent of EPIRA in 2001, PSALM came into existence for the
principal purpose of managing the orderly sale, privatization and
disposition of generation assets, real estate and other disposable
assets of the NPC including IPP Contracts. Accordingly, PSALM was
authorized to take title to and possession of, those assets transferred
to it. EPIRA mandated that all such assets shall be sold through public
bidding with the exception of Agus and Pulangui complexes in
Mindanao, the privatization of which was left to the discretion of
PSALM in consultation with Congress,53 thus:
Sec. 47. NPC Privatization. – Except for the assets of SPUG, the
generation assets, real estate, and other disposable assets as well as
IPP contracts of NPC shall be privatized in accordance with this Act.
Within six (6) months from the effectivity of this Act, the PSALM Corp.
shall submit a plan for the endorsement by the Joint Congressional
Power Commission and the approval of the President of the
Philippines, on the total privatization of the generation assets, x xx of
NPC and thereafter, implement the same, in accordance with the
following guidelines, except as provided for in paragraph (f) herein:
x xxx
(d) All assets of NPC shall be sold in an open and transparent
manner through public bidding, x xx;
x xxx
(f) The Agus and the Pulangui complexes in Mindanao shall be
excluded from among the generation companies that will be initially
privatized. Their ownership shall be transferred to the PSALM Corp.
and both shall continue to be operated by the NPC. Said complexes
may be privatized not earlier than ten (10) years from the effectivity of
this Act, x xx.The privatization of Agus and Pulangui complexes shall
be left to the discretion of PSALM Corp. in consultation with Congress;
x xxx (Emphasis supplied.)
The intent of Congress not to exclude the AHEPP from the
privatization of NPC generation assets is evident from the express
provision exempting only the aforesaid two power plants in Mindanao.
Had the legislature intended that PSALM should likewise be allowed
discretion in case of NPC generation assets other than those
mentioned in Sec. 47, it could have explicitly provided for the same.
But the EPIRA exempted from privatization only those two plants in
Mindanao and the Small Power Utilities Group
(SPUG).54 Expressiouniusestexclusioalterius, the express inclusion of
one implies the exclusion of all others.55
It is a settled rule of statutory construction that the express mention of
one person, thing, or consequence implies the exclusion of all others.
The rule is expressed in the familiar maxim,
expressiouniusestexclusioalterius.
The rule of expressiouniusestexclusioalterius is formulated in a number
of ways. One variation of the rule is principle that what is expressed
puts an end to that which is implied. Expressiumfacitcessaretacitum.
Thus, where a statute, by its terms, is expressly limited to certain
matters, it may not, by interpretation or construction, be extended to
other matters.
x xxx
The rule of expressiouniusestexclusioalterius and its variations are
canons of restrictive interpretation. They are based on the rules of logic
and the natural workings of the human mind. They are predicated upon
one’s own voluntary act and not upon that of others. They proceed
from the premise that the legislature would not have made specified
enumeration in a statute had the intention been not to restrict its
meaning and confine its terms to those expressly mentioned.56
The Court therefore cannot sustain the position of petitioners, adopted
by respondent MWSS, that PSALM should have exercised the
discretion not to proceed with the privatization of AHEPP, or at least
the availability of the option to transfer the said facility to another
government entity such as MWSS. Having no such discretion in the
first place, PSALM committed no grave abuse of discretion when it
commenced the sale process of AHEPP pursuant to the EPIRA.
In any case, the Court finds that the operation and maintenance of a
hydroelectric power plant is not among the statutorily granted powers
of MWSS. Although MWSS was granted authority to construct and
operate dams and reservoirs, such was for the specific purpose of
supplying water for domestic and other uses, and the treatment,
regulation and control of water usage, and not power
18
generation.57 Moreover, since the sale of AHEPP by PSALM merely
implements the legislated reforms for the electric power industry
through schemes that aim "to enhance the inflow of private capital and
broaden the ownership base of the power generation, transmission
and distribution sectors,"58 the proposed transfer to MWSS which is
another government entity contravenes that State policy. COA Circular
No. 89-296 likewise has no application to NPC generating assets
which are still serviceable and definitely needed by the Government for
the purpose of liquidating NPC’s accumulated debts amounting to
billions in US Dollars. Said administrative circular cannot prevail over
the EPIRA, a special law governing the disposition of government
properties under the jurisdiction of the DOE through NPC.
Sale of Government-Owned AHEPP
to a Foreign Corporation Not Prohibited
But Only Filipino Citizens and Corporations
60% of whose capital is owned by Filipinos
May be Granted Water Rights
The core issue concerns the legal implications of the acquisition by K-
Water of the AHEPP in relation to the constitutional policy on our
natural resources.
Sec. 2, Art. XII of the 1987 Constitution provides in part:
SEC.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. The State may
directly undertake such activities, or it may enter into co-production,
joint venture, or production-sharing agreements with Filipino citizens,
or corporations or associations at least sixty per centum of whose
capital is owned by such citizens. Such agreements may be for a
period not exceeding twenty-five years, renewable for not more than
twenty-five years, and under such terms and conditions as may be
provided by law. In case of water rights for irrigation, water supply,
fisheries, or industrial uses other than the development of water power,
beneficial use may be the measure and limit of the grant.
x xxx (Emphasis supplied.)
The State’s policy on the management of water resources is
implemented through the regulation of water rights. Presidential
Decree No. 1067, otherwise known as "The Water Code of the
Philippines" is the basic law governing the ownership, appropriation
utilization, exploitation, development, conservation and protection of
water resources and rights to land related thereto. The National Water
Resources Council (NWRC) was created in 1974 under P.D. No. 424
and was subsequently renamed as National Water Resources Board
(NWRB) pursuant to Executive Order No. 124-A.59 The NWRB is the
chief coordinating and regulating agency for all water resources
management development activities which is tasked with the
formulation and development of policies on water utilization and
appropriation, the control and supervision of water utilities and
franchises, and the regulation and rationalization of water rates.60
The pertinent provisions of Art. 3, P.D. No. 1067 provide:
Art. 3. The underlying principles of this code are:
a. All waters belong to the State.
b. All waters that belong to the State can not be
the subject to acquisitive prescription.
c. The State may allow the use or development of
waters by administrative concession.
d. The utilization, exploitation, development,
conservation and protection of water resources
shall be subject to the control and regulation of the
government through the National Water
Resources Council x xx
e. Preference in the use and development of
waters shall consider current usages and be
responsive to the changing needs of the country.
x xxx
Art. 9. Waters may be appropriated and used in accordance with the
provisions of this Code.
Appropriation of water, as used in this Code, is the acquisition of rights
over the use of waters or the taking or diverting of waters from a
natural source in the manner and for any purpose allowed by law.
Art. 10. Water may be appropriated for the
following purposes:
x xxx
(d) Power generation
x xxx
Art. 13. Except as otherwise herein provided, no person including
government instrumentalities or government-owned or controlled
corporations, shall appropriate water without a water right, which shall
be evidenced by a document known as a water permit.
Water right is the privilege granted by the government to appropriate
and use water.
x xxx
Art. 15. Only citizens of the Philippines, of legal age, as well as juridical
persons, who are duly qualified by law to exploit and develop water
resources, may apply for water permits. (Emphasis supplied.)
It is clear that the law limits the grant of water rights only to Filipino
citizens and juridical entities duly qualified by law to exploit and
develop water resources, including private corporations with sixty
percent of their capital owned by Filipinos. In the case of Angat River,
the NWRB has issued separate water permits to MWSS, NPC and
NIA.61
Under the EPIRA, the generation of electric power, a business affected
with public interest, was opened to private sector and any new
generation company is required to secure a certificate of compliance
from the Energy Regulatory Commission (ERC), as well as health,
safety and environmental clearances from the concerned government
agencies. Power generation shall not be considered a public utility
operation,62 and hence no franchise is necessary. Foreign investors are
likewise allowed entry into the electric power industry. However, there
is no mention of water rights in the privatization of multi-purpose
hydropower facilities. Section 47 (e) addressed the issue of water
security, as follows:
(e) In cases of transfer of possession, control, operation or privatization
of multi-purpose hydro facilities, safeguards shall be prescribed to
19
ensure that the national government may direct water usage in cases
of shortage to protect potable water, irrigation, and all other
requirements imbued with public interest;
x xxx (Emphasis supplied.)
This provision is consistent with the priority accorded to domestic and
municipal uses of water63 under the Water Code, thus:
Art. 22. Between two or more appropriators of water from the same
sources of supply, priority in time of appropriation shall give the better
right, except that in times of emergency the use of water for domestic
and municipal purposes shall have a better right over all other uses;
Provided, That, where water shortage is recurrent and the appropriator
for municipal use has a lower priority in time of appropriation, then it
shall be his duty to find an alternative source of supply in accordance
with conditions prescribed by the Board. (Emphasis supplied.)
Rule 23, Section 6 of the Implementing Rules and Regulations (IRR) of
the EPIRA provided for the structure of appropriation of water
resources in multi-purpose hydropower plants which will undergo
privatization, as follows:
Section 6. Privatization of Hydroelectric Generation Plants.
(a) Consistent with Section 47(e) of the Act and Section 4(f) of this
Rule, the Privatization of hydro facilities of NPC shall cover the power
component including assignable long-term water rights agreements for
the use of water, which shall be passed onto and respected by the
buyers of the hydroelectric power plants.
(b) The National Water Resources Board (NWRB) shall ensure that the
allocation for irrigation, as indicated by the NIA and requirements for
domestic water supply as provided for by the appropriate Local Water
District(s) are recognized and provided for in the water rights
agreements. NPC or PSALM may also impose additional conditions in
the shareholding agreement with the winning bidders to ensure
national security, including, but not limited to, the use of water during
drought or calamity.
(c) Consistent with Section 34(d) of the Act, the NPC shall continue to
be responsible for watershed rehabilitation and management and shall
be entitled to the environmental charge equivalent to one-fourth of one
centavo per kilowatt-hour sales (P0.0025/kWh), which shall form part
of the Universal Charge. This environmental fund shall be used solely
for watershed rehabilitation and management and shall bemanaged by
NPC under existing arrangements. NPC shall submit an annual report
to the DOE detailing the progress of the water shed rehabilitation
program.
(d) The NPC and PSALM or NIA, as the case may be, shall continue to
be responsible for the dam structure and all other appurtenant
structures necessary for the safe and reliable operation of the
hydropower plants. The NPC and PSALM or NIA, as the case may be,
shall enter into an operations and maintenance agreement with the
private operator of the power plant to cover the dam structure and all
other appurtenant facilities. (Emphasis supplied.)
In accordance with the foregoing implementing regulations, and in
furtherance of the Asset Purchase Agreement64(APA), PSALM, NPC
and K-Water executed on April 28, 2010 an Operations and
Maintenance Agreement65 (O & M Agreement) for the administration,
rehabilitation, operation, preservation and maintenance, by K-Water as
the eventual owner of the AHEPP, of the Non-Power Components
meaning the Angat Dam, non-power equipment, facilities, installations,
and appurtenant devices and structures, including the water sourced
from the Angat Reservoir.
It is the position of PSALM that as the new owner only of the
hydroelectric power plant, K-Water will be a mere operator of the Angat
Dam. In the power generation activity, K-Water will have to utilize the
waters already extracted from the river and impounded on the dam.
This process of generating electric power from the dam water entering
the power plant thus does not constitute appropriation within the
meaning of natural resource utilization in the Constitution and the
Water Code.
The operation of a typical hydroelectric power plant has been
described as follows:
Hydroelectric energy is produced by the force of falling water. The
capacity to produce this energy is dependent on both the available flow
and the height from which it falls. Building up behind a high dam, water
accumulates potential energy. This is transformed into mechanical
energy when the water rushes down the sluice and strikes the rotary
blades of turbine. The turbine's rotation spins electromagnets which
generate current in stationary coils of wire. Finally, the current is put
through a transformer where the voltage is increased for long distance
transmission over power lines.66
Foreign ownership of a hydropower facility is not prohibited under
existing laws. The construction, rehabilitation and development of
hydropower plants are among those infrastructure projects which even
wholly-owned foreign corporations are allowed to undertake under the
Amended Build-Operate-Transfer (Amended BOT) Law (R.A. No.
7718).67
Beginning 1987, the policy has been openness to foreign investments
as evident in the fiscal incentives provided for the restructuring and
privatization of the power industry in the Philippines, under the Power
Sector Restructuring Program (PSRP) of the Asian Development Bank.
The establishment of institutional and legal framework for the entry of
private sector in the power industry began with the issuance by
President Corazon C. Aquino of Executive Order No. 215 in 1987. Said
order allowed the entry of private sector – the IPPs –to participate in
the power generation activities in the country. The entry of IPPs was
facilitated and made attractive through the first BOT Law in 1990 (R.A.
No. 6957) which aimed to "minimize the burden of infrastructure
projects on the national government budget, minimize external
borrowing for infrastructure projects, and use the efficiency of the
private sector in delivering a public good." In 1993, the Electric Power
Crisis Act was passed giving the President emergency powers to
urgently address the power crisis in the country.68 The full
implementation of the restructuring and privatization of the power
industry was achieved when Congress passed the EPIRA in 2001.
With respect to foreign investors, the nationality issue had been framed
in terms of the character or nature of the power generation process
itself, i.e., whether the activity amounts to utilization of natural
resources within the meaning of Sec. 2, Art. XII of the Constitution. If
so, then foreign companies cannot engage in hydropower generation
business; but if not, then government may legally allow even foreign-
owned companies to operate hydropower facilities.
The DOJ has consistently regarded hydropower generation by foreign
entities as not constitutionally proscribed based on the definition of
water appropriation under the Water Code, thus:
Opinion No. 173, 1984
This refers to your request for opinion on the possibility of granting
water permits to foreign corporations authorized to do business in the
Philippines x xx
x xxx
20
x xx while the Water Code imposes a nationality requirement for the
grant of water permits, the same refers to the privilege "to appropriate
and use water." This should be interpreted to mean the extraction of
water from its natural source (Art. 9, P.D. No. 1067). Once removed
therefrom, they cease to be a part of the natural resources of the
country and are the subject of ordinary commerce and may be
acquired by foreigners (Op. No. 55, series of 1939). x xx in case of a
contract of lease, the water permit shall be secured by the lessor and
included in the lease as an improvement. The water so removed from
the natural source may be appropriated/used by the foreign
corporation leasing the property.
Opinion No. 14, S. 1995
The nationality requirement imposed by the Water Code refers to the
privilege "to appropriate and use water." This, we have consistently
interpreted to mean the extraction of water directly from its natural
source. Once removed from its natural source the water ceases to be a
part of the natural resources of the country and may be subject of
ordinary commerce and may even be acquired by foreigners.
(Secretary of Justice Op. No. 173, s. 1984; No. 24, s. 1989; No. 100 s.
1994)
In fine, we reiterate our earlier view that a foreign entity may legally
process or treat water after its removal from a natural source by a
qualified person, natural or juridical.
Opinion No. 122, s. 1998
The crucial issue at hand is the determination of whether the utilization
of water by the power plant to be owned and operated by a foreign-
owned corporation (SRPC) will violate the provisions of the Water
Code.
As proposed, the participation of SRPC to the arrangement
commences upon construction of the power station, consisting of a
dam and a power plant. After the completion of the said station, its
ownership and control shall be turned over to NPC. However, SRPC
shall remain the owner of the power plant and shall operate it for a
period of twenty-five (25) years.
It appears that the dam, which will be owned and controlled by NPC,
will block the natural flow of the river. The power plant, which is
situated next to it, will entirely depend upon the dam for its water
supply which will pass through an intake gate situated one hundred
(100) meters above the riverbed. Due to the distance from the
riverbed, water could not enter the power plant absent the dam that
traps the flow of the river. It appears further that no water shall enter
the power tunnel without specific dispatch instructions from NPC, and
such supplied water shall be used only by SRPC for power generation
and not for any other purpose. When electricity is generated therein,
the same shall be supplied to NPC for distribution to the public. These
facts x xx viewed in relation to the Water Code, specifically Article 9
thereof, x xx clearly show that there is no circumvention of the law.
This Department has declared that the nationality requirement imposed
by the Water Code refers to the privilege "to appropriate and use
water" and has interpreted this phrase to mean the extraction of water
directly from its natural source (Secretary of Justice Opinion No. 14, s.
1995). "Natural" is defined as that which is produced without aid of
stop, valves, slides, or other supplementary means (see Webster’s
New International Dictionary, Second Edition, p. 1630). The water that
is used by the power plant could not enter the intake gate without the
dam, which is a man-made structure. Such being the case, the source
of the water that enters the power plant is of artificial character rather
than natural. This Department is consistent in ruling, that once water is
removed from its natural source, it ceases to be a part of the natural
resources of the country and may be the subject of ordinary commerce
and may even be acquired by foreigners. (Ibid., No. 173, s. 1984; No.
24, s. 1989; No. 100, s. 1994).
It is also significant to note that NPC, a government-owned and
controlled corporation, has the effective control over all elements of the
extraction process, including the amount and timing thereof
considering that x xx the water will flow out of the power tunnel and
through the power plant, to be used for the generation of electricity,
only when the Downstream Gates are opened, which occur only upon
the specific water release instructions given by NPC to SRPC. This
specific feature of the agreement, taken together with the above-stated
analysis of the source of water that enters the plant, support the view
that the nationality requirement embodied in Article XII, Section 2 of
the present Constitution and in Article 15 of the Water Code, is not
violated.69
(Emphasis supplied.)
The latest executive interpretation is stated in DOJ Opinion No. 52, s.
2005 which was rendered upon the request of PSALM in connection
with the proposed sale structure for the privatization of hydroelectric
and geothermal generation assets (Gencos) of NPC. PSALM sought a
ruling on the legality of its proposed privatization scheme whereby the
non-power components (dam, reservoir and appurtenant structures
and watershed area) shall be owned by the State through government
entities like NPC or NIA which shall exercise control over the release of
water, while the ownership of the power components (power plant and
related facilities) is open to both Filipino citizens/corporations and
100% foreign-owned corporations.
Sustaining the position of PSALM, then Secretary Raul M. Gonzalez
opined:
Premised on the condition that only the power components shall be
transferred to the foreign bidders while the non-power
components/structures shall be retained by state agencies concerned,
we find that both PSALM’s proposal and position are tenable.
x xxx
x xx as ruled in one case by a U.S. court:
Where the State of New York took its natural resources consisting of
Saratoga Spring and, through a bottling process, put those resources
into preserved condition where they could be sold to the public in
competition with private waters, the state agencies were not immune
from federal taxes imposed upon bottled waters on the theory that
state was engaged in the sale of "natural resources."
Applied to the instant case, and construed in relation to the earlier-
mentioned constitutional inhibition, it would appear clear that while
both waters and geothermal steam are, undoubtedly "natural
resources", within the meaning of Section 2 Article XII of the present
Constitution, hence, their exploitation, development and utilization
should be limited to Filipino citizens or corporations or associations at
least sixty per centum of the capital of which is owned by Filipino
citizens, the utilization thereof can be opened even to foreign nationals,
after the same have been extracted from the source by qualified
persons or entities. The rationale is because, since they no longer form
part of the natural resources of the country, they become subject to
ordinary commerce.
A contrary interpretation, i.e., that the removed or extracted natural
resources would remain inalienable especially to foreign nationals, can
lead to absurd consequences, e.g. that said waters and geothermal
steam, and any other extracted natural resources, cannot be acquired
by foreign nationals for sale within or outside the country, which could
not have been intended by the framers of the Constitution.
The fact that under the proposal, the non-power components and
structures shall be retained and maintained by the government entities
concerned is, to us, not only a sufficient compliance of constitutional
21
requirement of "full control and supervision of the State" in the
exploitation, development and utilization of natural resources. It is also
an enough safeguard against the evil sought to be avoided by the
constitutional reservation x xx.70 (Italics in the original, emphasis
supplied.)
Appropriation of water, as used in the Water Code refers to the
"acquisition of rights over the use of waters or the taking or diverting of
waters from a natural source in the manner and for any purpose
allowed by law."71 This definition is not as broad as the concept of
appropriation of water in American jurisprudence:
An appropriation of water flowing on the public domain consists in the
capture, impounding, or diversion of it from its natural course or
channel and its actual application to some beneficial use private or
personal to the appropriator, to the entire exclusion (or exclusion to the
extent of the water appropriated) of all other persons. x xx72
On the other hand, "water right" is defined in the Water Code as the
privilege granted by the government to appropriate and use
water.73 Black’s Law Dictionary defined "water rights" as "a legal right,
in the nature of a corporeal hereditament, to use the water of a natural
stream or water furnished through a ditch or canal, for general or
specific purposes, such as irrigation, mining, power, or domestic use,
either to its full capacity or to a measured extent or during a defined
portion of the time," or "the right to have the water flow so that some
portion of it may be reduced to possession and be made private
property of individual, and it is therefore the right to divert water from
natural stream by artificial means and apply the same to beneficial
use."74
Under the Water Code concept of appropriation, a foreign company
may not be said to be "appropriating" our natural resources if it utilizes
the waters collected in the dam and converts the same into electricity
through artificial devices. Since the NPC remains in control of the
operation of the dam by virtue of water rights granted to it, as
determined under DOJ Opinion No. 122, s. 1998, there is no legal
impediment to foreign-owned companies undertaking the generation of
electric power using waters already appropriated by NPC, the holder of
water permit. Such was the situation of hydropower projects under the
BOT contractual arrangements whereby foreign investors are allowed
to finance or undertake construction and rehabilitation of infrastructure
projects and/or own and operate the facility constructed. However, in
case the facility requires a public utility franchise, the facility operator
must be a Filipino corporation or at least 60% owned by Filipino.75
With the advent of privatization of the electric power industry which
resulted in its segregation into four sectors -- generation, transmission,
distribution and supply – NPC’s generation and transmission functions
were unbundled. Power generation and transmission were treated as
separate sectors governed by distinct rules under the new regulatory
framework introduced by EPIRA. The National Transmission
Corporation (TRANSCO) was created to own and operate the
transmission assets and perform the transmission functions previously
under NPC. While the NPC continues to undertake missionary
electrification programs through the SPUG, PSALM was also created
to liquidate the assets and liabilities of NPC.
Under the EPIRA, NPC’s generation function was restricted as it was
allowed to "generate and sell electricity only from the undisposed
generating assets and IPP contracts of PSALM" and was prohibited
from incurring "any new obligations to purchase power through bilateral
contracts with generation companies or other suppliers." 76 PSALM, on
the other hand, was tasked "to structure the sale, privatization or
disposition of NPC assets and IPP contracts and/or their energy output
based on such terms and conditions which shall optimize the value and
sale prices of said assets."77 In the case of multi-purpose hydropower
plants, the IRR of R.A. No. 9136 provided that their privatization would
extend to water rights which shall be transferred or assigned to the
buyers thereof, subject to safeguards mandated by Sec. 47(e) to
enable the national government to direct water usage in cases of
shortage to protect water requirements imbued with public interest.
Accordingly, the Asset Purchase Agreement executed between
PSALM and K-Water stipulated:
2.04 Matters Relating to the Non-Power Component
x xxx
Matters relating to Water Rights
NPC has issued a certification (the "Water Certification") wherein NPC
consents, subject to Philippine Law, to the (i) transfer of the Water
Permit to the BUYER or its Affiliate, and (ii) use by the BUYER or its
Affiliate of the water covered by the Water Permit from Closing Date up
to a maximum period of one (1) year thereafter to enable the BUYER
to appropriate and use water sourced from Angat reservoir for
purposes of power generation; provided, that should the consent or
approval of any Governmental Body be required for either (i) or (ii), the
BUYER must secure such consent or approval. The BUYER agrees
and shall fully comply with the Water Permit and the Water
Certification. x xx
x xxx
Multi-Purpose Facility
The BUYER is fully aware that the Non-Power Components is a multi-
purpose hydro-facility and the water is currently being appropriated for
domestic use, municipal use, irrigation and power generation. Anything
in this Agreement notwithstanding, the BUYER shall, at all times even
after the Payment Date, fully and faithfully comply with Philippine Law,
including the Instructions, the Rule Curve and Operating Guidelines
and the Water Protocol.78 (Emphasis supplied.)
Lease or transfer of water rights is allowed under the Water Code,
subject to the approval of NWRB after due notice and
hearing.79 However, lessees or transferees of such water rights must
comply with the citizenship requirement imposed by the Water Code
and its IRR. But regardless of such qualification of water permit
holders/transferees, it is to be noted that there is no provision in the
EPIRA itself authorizing the NPC to assign or transfer its water rights in
case of transfer of operation and possession of multi-purpose
hydropower facilities. Since only the power plant is to be sold and
privatized, the operation of the non-power components such as the
dam and reservoir, including the maintenance of the surrounding
watershed, should remain under the jurisdiction and control of NPC
which continue to be a government corporation. There is therefore no
necessity for NPC to transfer its permit over the water rights to K-
Water. Pursuant to its purchase and operation/management contracts
with K-Water, NPC may authorize the latter to use water in the dam to
generate electricity.
NPC’s water rights remain an integral aspect of its jurisdiction and
control over the dam and reservoir. That the EPIRAitselfdid not ordain
any transfer of water rights leads us to infer that Congress intended
NPC to continue exercising full supervision over the dam, reservoir
and, more importantly, to remain in complete control of the extraction
or diversion of water from the Angat River. Indeed, there can be no
debate that the best means of ensuring that PSALM/NPC can fulfill the
duty to prescribe "safeguards to enable the national government to
direct water usage to protect potable water, irrigation, and all other
requirements imbued with public interest" is for it to retain the water
rights over those water resources from where the dam waters are
extracted. In this way, the State’s full supervision and control over the
country’s water resources is also assured notwithstanding the
privatized power generation business.
22
Section 6 (a) of the IRR of R.A. No. 9136 insofar as it directs the
transfer of water rights in the privatization of multi-purpose hydropower
facilities, is thus merely directory.
It is worth mentioning that the Water Code explicitly provides that
Filipino citizens and juridical persons who may apply for water permits
should be "duly qualified by law to exploit and develop water
resources."
Thus, aside from the grant of authority to construct and operate dams
and power plants, NPC’s Revised Charter specifically authorized it –
(f) To take water from any public stream, river, creek, lake, spring or
waterfall in the Philippines, for the purposes specified in this Act; to
intercept and divert the flow of waters from lands of riparian owners
and from persons owning or interested in waters which are or may be
necessary for said purposes, upon payment of just compensation
therefor; to alter, straighten, obstruct or increase the flow of water in
streams or water channels intersecting or connecting therewith or
contiguous to its works or any part thereof: Provided, That just
compensation shall be paid to any person or persons whose property
is, directly or indirectly, adversely affected or damaged thereby.80
The MWSS is likewise vested with the power to construct, maintain
and operate dams and reservoirs for the purpose of supplying water for
domestic and other purposes, as well to construct, develop, maintain
and operate such artesian wells and springs as may be needed in its
operation within its territory.81 On the other hand, NIA, also a water
permit holder in Angat River, is vested with similar authority to utilize
water resources, as follows:
(b) To investigate all available and possible water resources in the
country for the purpose of utilizing the same for irrigation, and to plan,
design and construct the necessary projects to make the ten to twenty-
year period following the approval of this Act as the Irrigation Age of
the Republic of the Philippines;82
(c) To construct multiple-purpose water resources projects designed
primarily for irrigation, and secondarily for hydraulic power
development and/or other uses such as flood control, drainage, land
reclamation, domestic water supply, roads and highway construction
and reforestation, among others, provided, that the plans, designs and
the construction thereof, shall be undertaken in coordination with the
agencies concerned;83
To reiterate, there is nothing in the EPIRAwhich declares that it is
mandatory for PSALM or NPC to transfer or assign NPC’s water rights
to buyers of its multi-purpose hydropower facilities as part of the
privatization process. While PSALM was mandated to transfer the
ownership of all hydropower plants except those mentioned in Sec. 47
(f), any transfer of possession, operation and control of the multi-
purpose hydropower facilities, the intent to preserve water resources
under the full supervision and control of the State is evident when
PSALM was obligated to prescribe safeguards to enable the national
government to direct water usage to domestic and other requirements
"imbued with public interest." There is no express requirement for the
transfer of water rights in all cases where the operation of hydropower
facilities in a multi-purpose dam complex is turned over to the private
sector.
As the new owner of the AHEPP, K-Water will have to utilize the
waters in the Angat Dam for hydropower generation. Consistent with
the goals of the EPIRA, private entities are allowed to undertake power
generation activities and acquire NPC’s generation assets. But since
only the hydroelectric power plants and appurtenances are being sold,
the privatization scheme should enable the buyer of a hydroelectric
power plant in NPC’s multi-purpose dam complex to have
beneficialuse of the waters diverted or collected in the Angat Dam for
its hydropower generation activities, and at the same time ensure that
the NPC retains full supervision and control over the extraction and
diversion of waters from the Angat River.
In fine, the Court rules that while the sale of AHEPP to a foreign
corporation pursuant to the privatization mandated by the EPIRA did
not violate Sec. 2, Art. XII of the 1987 Constitution which limits the
exploration, development and utilization of natural resources under the
full supervision and control of the State or the State’s undertaking the
same through joint venture, co-production or production sharing
agreements with Filipino corporations 60% of the capital of which is
owned by Filipino citizens, the stipulation in the Asset Purchase
Agreement and Operations and Maintenance Agreement whereby
NPC consents to the transfer of water rights to the foreign buyer, K-
Water, contravenes the aforesaid constitutional provision and the
Water Code.1âwphi1
Section 6, Rule 23 of the IRR of EPIRA, insofar as it ordered NPC’s
water rights in multi-purpose hydropower facilities to be included in the
sale thereof, is declared as merely directoryand not an absolute
condition in the privatization scheme. In this case, we hold that NPC
shall continue to be the holder of the water permit even as the
operational control and day-to-day management of the AHEPP is
turned over to K-Water under the terms and conditions of their APA
and O & M Agreement, whereby NPC grants authority to K-Water to
utilize the waters diverted or collected in the Angat Dam for
hydropower generation. Further, NPC and K-Water shall faithfully
comply with the terms and conditions of the Memorandum of
Agreement on Water Protocol, as well as with such other regulations
and issuances of the NWRB governing water rights and water usage.
WHEREFORE, the present petition for certiorari and prohibition with
prayer for injunctive relief/s is PARTLY GRANTED.
The following DISPOSITIONS are in ORDER:
1) The bidding conducted and the Notice of Award issued by
PSALM in favor of the winning bidder, KOREA WATER
RESOURCES CORPORATION (K-WATER), are
declared VALID and LEGAL;
2) PSALM is directed to FURNISH the petitioners with
copies of all documents and records in its files pertaining to
K-Water;
3) Section 6 (a), Rule 23, IRR of the EPIRA, is hereby
declared as merely DIRECTORY, and not an absolute
condition in all cases where NPC-owned hydropower
generation facilities are privatized;
4) NPC shall CONTINUE to be the HOLDER of Water
Permit No. 6512 issued by the National Water Resources
Board. NPC shall authorize K-Water to utilize the waters in
the Angat Dam for hydropower generation, subject to the
NWRB’s rules and regulations governing water right and
usage. The Asset Purchase Agreement and Operation &
Management Agreement between NPC/PSALM and K-
Water are thus amended accordingly.
Except for the requirement of securing a water permit, K-
Water remains BOUND by its undertakings and warranties
under the APA and O & M Agreement;
5) NPC shall be a CO-PARTY with K-Water in the Water
Protocol Agreement with MWSS and NIA, and not merely as
a conforming authority or agency; and
6) The Status Quo Ante Order issued by this Court on May
24, 2010 is hereby LIFTED and SET ASIDE.
23
No pronouncement as to costs.
SO ORDERED.
Footnotes
3
Rollo (Vol. II), p. 927. Auxiliary Units 1, 2 and 3 are owned by NPC.
Auxiliary Unit 4 is being operated and maintained by NPC under a
lease agreement between NPC and MWSS; Auxiliary Unit 5 was
installed and operated by NPC under a letter agreement between NPC
and MWSS. The 4 main units and 5 auxiliary units are all situated in a
single structure ("Power House"). Rollo (Vol. II), p. 924.
24
La Bugal-B’laan Tribal Association, Inc. v. Ramos, G.R. No. 127882,
January 27, 2004, 421 SCRA 148, 178, citing Integrated Bar of the
Philippines v. Zamora, G.R. No. 141284, August 15, 2000, 338 SCRA
81, 100; Dumlao v. COMELEC, No. L-52245, January 22, 1980, 95
SCRA 392; and People v. Vera, 65 Phil. 56 (1937).
25
Francisco, Jr. v.
NagmamalasakitnamgaManananggolngmgaManggagawang Pilipino,
Inc., G.R. Nos. 160261, 160262, etc., November 10, 2003, 415 SCRA
44, 139, citing Kilosbayan, Inc. v. Morato, G.R. No. 118910, November
16, 1995, 250 SCRA 130.
26
Id. at 136, citing Chavez v. Presidential Commission on Good
Government, G.R. No. 130716, December 9, 1998, 299 SCRA 744.
27
Guingona, Jr. v. Commission on Elections, G.R. No. 191846, May 6,
2010, 620 SCRA 448, 460.
28
Id. at 461.
29
Chavez v. Philippine Estates Authority, supra note 8, at 184, citing
Sec. 1, Art. XI of the 1987 Constitution and Valmonte v. Belmonte, Jr.,
G.R. No. 74930, February 13, 1989, 170 SCRA 256.
Sec. 1, Art. XI of the 1987 Constitution reads: "Public office
is a public trust. Public officers and employees must at all
times be accountable to the people, serve them with utmost
responsibility, integrity, loyalty, and efficiency, act with
patriotism and justice, and lead modest lives."
30
Sec. 2 (i), R.A. No. 9136.
31
Sec. 47 (d), id. Italics supplied.
32
Supra note 8, at 186-187.
33
Id. at 189, citing People’s Movement for Press Freedom, et al. v.
Hon. Raul Manglapus, G.R. No. 84642, En Banc Resolution dated
April 13, 1988; Chavez v. Presidential Commission on Good
Government, supra note 26; and Sec. 270 of the National Internal
Revenue Code, Sec. 14 of R.A. No. 8800 (Safeguard Measures Act),
Sec. 6 (j) of R.A. No. 8043 (Inter-Country Adoption Act), and Sec. 94
(f) of R.A. No. 7942 (Philippine Mining Act).
34
"PSALM launches sale of Angat hydro plant" posted 12 January
2010 at http://www.psalm.gov.ph/News.asp?id=20100012; "12 bidders
attend pre-bid conference for AngatHEPP sale" posted 19 February
2010 at http://www.psalm.gov.ph/News.asp?id=20100048;
"Angat Dam not for sale" posted 11 March 2010 at
http://www.psalm.gov.ph/News.asp?id=20100067;
"PSALM discusses Angat water protocol with prospective
bidders" posted 5 April 2010 at
http://www.psalm.gov.ph/News.asp?id=20100086; "Korean
company declared highest bidder for Angat power plant"
posted 28 Aril 2010 at
http://www.psalm.gov.ph/News.asp?id=20100111; "Sale of
AngatHEPP supported by EPIRA" posted 30 April 2010 at
http://www.psalm.gov.ph/News.asp?id=20100114; rollo (Vol.
I), pp. 121-129.
52
"…the Watershed Management Group was created with five
watershed areas under its management, namely: Ambuklao and Binga
(Upper Agno), Angat, Caliraya and Tiwi. Considering its huge
investments in hydro and geothermal plants, the complete control and
jurisdiction of these five watersheds with addition of Buhi-Barit and
Makiling-Banahaw Geothermal reservation was vested to NPC by
virtue of Executive [O]rder No. 224 which was signed in July 16, 1987.
At present, a total of eleven (11) watersheds are being managed by
NPC with the addition of San Roque watershed (Lower Agno) (portion)
for San Roque Multi-Purpose Project (SRMPP) by virtue of PD 2320
and two (2) watershed reservations namely Pantabangan and Magat
under an area sharing scheme with National Irrigation Administration
(NIA) and two (2) more watersheds, Lake Lanao-Agus and Pulangi
Watershed Area under a Memorandum of agreement with the
Department of Environmental and Natural Resources (DENR)."
Source:
http://www.napocor.gov.ph/WMD%20WEBPAGE/about%20us.htm.
53
Sec. 47 (f), R.A. No. 9136 provides: "The Agus and the Pulangui
complexes in Mindanao shall be excluded from among the generation
companies that will be initially privatized. Their ownership shall be
transferred to the PSALM Corp. and both shall continue to be operated
by the NPC. Said complexes may be privatized not earlier than ten
(10) years from the effectivity of this Act, x xx. The privatization of Agus
and Pulangui complexes shall be left to the discretion of PSALM Corp.
in consultation with Congress." (Emphasis supplied.)
54
Sec. 4 (tt): "Small Power Utilities Group or "SPUG" refers to the
functional unit of NPC created to pursue missionary electrification
function."
55
See Commissioner of Internal Revenue v. Michel J. Lhuillier
Pawnshop, Inc., G.R. No. 150947, July 15, 2003, 406SCRA 178, 186.
56
Malinias v. Commission on Elections, G.R. No. 146943, October 4,
2002, 390 SCRA 480, 491-492, as cited in Lung Center of the
Philippines v. Quezon City, G.R. No. 144104, June 29, 2004, 433
SCRA 119, 135.
57
Sec. 3 (f), R.A. No. 6234.
58
Sec. 1 (d), R.A. No. 9136.
59
Issued by President Corazon C. Aquino on July 22, 1987.
60
Country Paper.National Water Sector Apex Body.Philippines:
National Water Resources Board,
www.pacificwater.org/userfiles/file/IWRM/Philippines.pdf.
61
Rollo (Vol. I), pp. 95-97.
62
Sec. 6, R.A. No. 9136.
63
Art.10, P.D. No. 1067 provides in part:
Use of water for domestic purposes is the utilization of water
for drinking, washing, bathing, cooking or other household
24
 needs, home gardens, and watering of lawns or domestic
animals.
Use of water for municipal purposes is the utilization of water
for supplying the water requirements of the community.
Use of water for irrigation is the utilization of water for
producing agricultural crops.
64
Rollo (Vol. II), pp. 1330-1378.
65
Id. at 1379-1407.
66
"Hydroelectric Power Water Use" (Source: Environment Canada),
accessed at http://ga.water.usgs.gov/edu/wuhy.html.
67
Sec. 2, R.A. No. 7718.
68
"Philippine Power Industry Restructuring and Privatization",
Philippine Council for Investigative Journalism (PCIJ), accessed at
http://www. pcij.org/blog/wp-docs/Philippine_Power_Fact_Sheet.pdf.
DISSENTING OPINION
VELASCO, JR., J.:
Subject of this petition for certiorari and prohibition are two Agreement
entered into by and between Power Sector Assets and Liabilities
Management Corporation (PSALM) and Korean Water Resources
Corporation (K-Water), involving the Angat Hydro-Electric Power Plant
(AHEPP) and the Angat Dam Complex. The first agreement,
denominated as Asset Purchase Agreement (APA), covers AHEPP,
while the second, the Operation and Maintenance Agreement (O & M),
covers the non-power components of AHEPP, including Angat Dam.
PSALM entered into the said agreements pursuant to its mandate
under Republic Act No. (RA) 9136 or the Electric Power Industry
Reform Act of 2001 (EPIRA) to privatize the assets of National Power
Corporation (NPC).
Petitioners question the validity of the said agreements for being
repugnant to the 1987 Constitution, specifically Sec. 2, Art. XII thereof,
Presidential Decree No. (PD) 1067 or the Water Code of the
Philippines (Water Code), and the EPIRA. They allege that PSALM
acted with grave abuse of discretion when it allowed K-Water, a
corporate entity wholly owned by the Republic of Korea, to participate
in the bidding process, and thereafter declaring it the winning bidder. 1
I submit that the two Agreements themselves are, in their entirety, null
and void for infringing the ownership and nationality limitations in Sec.
2, Art. XII of the 1987 Constitution, which provides:
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. The State may
directly undertake such activities, or it may enter into co-production,
joint venture, or production-sharing agreements with Filipino citizens,
or corporations or associations at least sixty per centum of whose
capital is owned by such citizens. Such agreements may be for a
period not exceeding twenty-five years, renewable for not more than
twenty-five years, and under such terms and conditions as may be
provided by law. In cases of water rights for irrigation, water supply
fisheries, or industrial uses other than the development of water power,
beneficial use may be the measure and limit of the grant." (Emphasis
supplied.)
The Agreements fall squarely within the ambit of the aforequoted
constitutional provision, and are, thus, properly subject to the
nationality restriction provided therein. K-Water, being a wholly foreign-
owned corporation, is disqualified from engaging in activities involving
the exploration, development, and utilization of water and natural
resources belonging to the state. Necessarily, it is barred from
operating Angat Dam, a structure indispensable in ensuring water
security in Metro Manila. PSALM, therefore, committed grave abuse of
discretion amounting to lack or excess of jurisdiction when it allowed K-
Water to participate in the bidding out of properties that will directly
extract and utilize natural resources of the Philippines.
The Facts
On June 8, 2001, RA 9136 or the EPIRA was passed into law. Among
the policies declared therein is the "orderly and transparent
privatization of the assets and liabilities of the National Power
Corporation (NPC)."2 To carry out this policy, the EPIRA created
PSALM, a government-owned and controlled corporation with the
mandate to "manage the orderly sale, disposition, and privatization of
NPC generation assets, real estate and other disposable assets, and
IPP [independent power producers] contracts with the objective of
liquidating all NPC financial obligations and stranded contract costs in
an optimal manner."3 To enable PSALM to effectively discharge its
functions under the law, it was allowed to "take ownership of all
existing NPC generation assets, liabilities, IPP contracts, real estate,
and all other disposable assets."4 On the manner of privatization of
NPC assets, the EPIRA provides:
Section 47. NPC Privatization. - Except for the assets of SPUG, the
generating assets, real estate, and other disposable assets as well as
generation contracts of NPC shall be privatized in accordance with this
Act. Within six (6) months from the effectivity of this Act, the PSALM
Corp. shall submit a plan for the endorsement by the Joint
Congressional Power Commission and the approval of the President of
the Philippines, on the total privatization of the generation assets, real
estate, other disposable assets as well as existing generation contracts
of NPC and thereafter, implement the same, in accordance with the
following guidelines, except as provided for in paragraph (e) herein:
(a) The privatization value to the national
government of the NPC generation assets, real
estate, other disposable assets as well as IPP
contracts shall be optimized;
(b) The participation by Filipino citizens and
corporations in the purchase of NPC assets shall
be encouraged;
In the case of foreign buyers at least seventy-five
percent (75%) of the funds used to acquire NPC-
generating assets and generating contracts shall
be inwardly remitted and registered with the
Bangko Sentral ng Pilipinas.
xxxx
(d) All generation assets and IPP contracts shall
be sold in an open and transparent manner
through public bidding;
xxxx
(h) Not later than three (3) years from the
effectivity of this Act, and in no case later than the
25
 initial implementation of open access, at least
seventy percent (70%) of the total capacity of
generating assets of NPC and of the total capacity
of the power plants under contract with NPC
located in Luzon and Visayas shall have been
privatized; and
(i) NPC may generate and sell electricity only from
the undisposed generating assets and IPP
contracts of PSALM Corp.: Provided, That any
unsold capacity shall be privatized not later than
eight (8) years from the effectivity of this Act.
Pursuant to the EPIRA, PSALM is currently the owner of the subject
Angat Dam complex, including AHEPP.
On January 11, 2010, PSALM officially opened the process of
privatization of AHEPP, through the publication of an Invitation to Bid in
local broadsheets on January 11, 12, and 13, 2010.5 This notice was
also posted on its website.6In the Invitation to Bid, interested parties
were required to submit a Letter of Interest (LOI) which expresses the
interested party’s intention to participate in the bidding, a
Confidentiality Agreement and Undertaking with PSALM, and a non-
refundable participation fee of two thousand five hundred US dollars
(USD 2,500).
The bidding package indicated that the prospective bid shall cover the
sale and purchase of the asset, and operations and maintenance by
the buyer of the non-power components, to wit:
The four main units each have a rated capacity of 50 MW. Main units 1
and 2 were commissioned in 1967 and main units 3 and 4 in 1968.
Three auxiliary units each have a rated capacity of 6 MW and were
commissioned as follows: auxiliary units 1 and 2 in 1967 and auxiliary
unit 3 in 1978. It is the foregoing 4 main units and 3 auxiliary units with
an aggregate installed capacity of 218 MW that is the subject of the
Bid.
xxxx
The Asset includes all the items listed in Schedule A (List of Assets).
All other assets which may be found on the site or with the Asset but
are not listed in Schedule A do not form part of the Asset. The Non-
Power Components are more particularly described in Schedule B
(Non-Power Components). The Information Memorandum contained in
the Bidding Package also contains relevant information on the Asset
and Non-Power Component. The final list of the Asset and the
description of the Non-Power Components shall be contained in the
Final Transaction Documents.7 (Emphasis in the original.)
The bidding package also contains the following conditions with
respect to the proposed sale of AHEPP:
The Asset shall be sold on an "AS IS, WHERE IS" basis.
The Angat Dam (which is part of the Non-Power Components) is a
multi-purpose hydro facility which currently supplies water for domestic
use, irrigation and power generation. The four main units of the Angat
Plant release water to an underground tailrace that flows towards the
Bustos Dam which is owned and operated by the National Irrigation
Administration ("NIA") and provides irrigation requirements to certain
areas in Bulacan. The water from the auxiliary units 1,2, and 3 flows to
the Ipo Dam which is owned and operated by MWSS and supplied
domestic water to Metro Manila and other surrounding cities.
The priority of water usage under Philippine Law would have to be
observed by the Buyer/Operator.
The Winning Bidder/Buyer shall be required to enter into an operations
and maintenance agreement with PSALM for the Non-Power
Components in accordance with the terms and conditions of the O&M
Agreement to be issued as part of the Final Transaction Documents.
The Buyer, as Operator, shall be required to operate and maintain the
Non-Power Components at its own cost and expense.
PSALM is currently negotiating a water protocol agreement with
various parties which are currently the MWSS, NIA, National Water
Resources Board and NPC. If required by PSALM, the Buyer will be
required to enter into the said water protocol agreement as a condition
to the award of the Asset.
The Buyer shall be responsible for securing the necessary rights to
occupy the underlying Asset.8
On February 17, 2010, a pre-bid conference was conducted between
PSALM, prospective bidders, and government agencies affected by
the privatization.9
On April 5, 2010, PSALM declared the bids of the following as
complying with the bidding procedures: (1) DMCI Power Corporation
(DMCI); (2) First Gen Northern Energy Corporation (First Gen); (3)
Korean Water Resources Corporation (K-Water); (4) San Miguel
Corporation (SMC); (5) SN Aboitiz Power-Pangasinan, Inc. (SN
Aboitiz); and (6) Trans-Asia Oil & Energy Development Corporation
(Trans-Asia). Five other bidders were, however, disqualified for failure
to comply with the pre-qualification requirements.10
On April 16, 2010, PSALM approved the Asset Purchase Agreement
(for AHEPP) and the Operations & Maintenance Agreement (for the
Non-Power Components) for the public bidding.11 Following the
opening and evaluation of the bid envelopes of the six qualifying firms
on April 28, 2010, the PSALM Bids and Awards Committee opened the
bid envelopes of the six qualifying firms, and found their respective
bids as follows:
Korean Water Resources Corporation USD 440,880,000
First Gen Northern Energy Corporation 365,000,678
San Miguel Corporation 312,500,000
SN Aboitiz Power-Pangasinan, Inc. 256,000,000
Trans-Asia Oil & Energy Development Corporation 237,000,000
DMCI Power Corporation 188,890,000
On May 5, 2010, after the post-bid evaluation, the Board of Directors of
PSALM approved and confirmed the issuance of a Notice of Award in
favor of K-Water.12 In its Manifestation in lieu of Comment,13 K-Water
opted not make any statement as to its being a Korean state-owned
corporation. PSALM, however, in its Comment14 admitted that K-Water
is a Korean state-owned corporation.
In the instant petition, petitioners assert that the sale of AHEPP is
imbued with public interest, 97% of the water supply of Metro Manila
sourced as it were directly from Angat Dam. They argue that the
physical control and management of Angat Dam, as well as the
security of the water supply, are matters of transcendental interest to
them as residents of Metro Manila. In spite of this, petitioners claim,
PSALM kept the bidding process largely confidential, and information
over such process withheld from the public. Further, they maintain that
the bidding process for AHEPP undermined the elements of the right to
water.15 Lastly, they argue that PSALM, in grave abuse of its
discretion, overstepped the Constitution and the Water Code in
allowing foreign-owned corporation, K-Water, to participate in the
bidding, and later favoring it with a Notice of Award.16
They, thus, urge the nullification of the same, and the enjoinment of the
privatization of AHEPP.
26
On May 24, 2010, this Court issued a Status Quo Ante
Order,17 directing the parties and all concerned to maintain the status
quo prevailing before the filing of the petition, until further orders from
the Court.
Respondents Trans-Asia, DMCI, SN Aboitiz, and SMC forthwith filed
their respective Comments,18 all averring that they are merely nominal
parties to the petition, and thus are not real parties-in-interest.
In its Comment19 dated June 17, 2010, respondent NIA disclaimed
involvement in the bidding conducted by PSALM concerning AHEPP,
adding that its interest is "only limited to the protection of its water
allocation drawn from the Angat Dam as determined by the National
Water Resources Board (NWRB)."
In its Comment20 dated June 22, 2010, respondent PSALM stressed its
compliance with the relevant laws and the Constitution in conducting
the bidding process for AHEPP, describing the process as open and
transparent manner, and with full respect to the limitations set forth in
the Constitution. It further alleged that contrary to the petitioners’
posture, the agreements will have no effect on the right to water, as
they do not involve the sale of Angat Dam itself.
On the procedural aspect, PSALM claimed that the petitioners have no
standing to file the petition, and that a petition for certiorari is not the
proper remedy, PSALM not exercising discretionary powers. Further,
they take the view that the controversy has been rendered moot and
academic by the issuance of a Notice of Award. In any case, they
added, the petition poses a political question over which the Court has
no jurisdiction.
Vis-à-vis the AHEPP and Angat Dam, PSALM argued that it is the sole
owner of the two facilities, by virtue of the transfer of ownership from
NPC under Sec. 49 of the EPIRA. Neither MWSS nor NIA, it said, was
a co-owner of the said structures. Further, transfer of ownership of
AHEPP to MWSS or NIA would not be in accordance with the law,
since the respective charters of MWSS and NIA do not have provisions
for their operating a hydro-power facility like AHEPP.
Finally, PSALM, citing DOJ Opinions to the effect that there is no
constitutional barrier to the operation of a power plant by a foreign
entity, would assert that the award of the AHEPP to K-Water is in
accordance with the law, since AHEPP, as a generation asset, may be
sold to a foreign entity.
Respondent First Gen, in its Comment21 dated June 23, 2010,
supported the position of PSALM with respect to the AHEPP being
subject to privatization under the terms of the EPIRA. AHEPP, it
concurred, is merely one facility in the Angat Complex, exclusively
owned and operated by NPC. Further, it claimed that the watershed is
under the exclusive jurisdiction and control of NPC, pursuant to
Executive Order No. (EO) 258,22 which provides:
Section 2. NPC’s jurisdiction and control over the Angat Watershed
Reservation is hereby restored. Accordingly, NPC shall be responsible
for its management, protection, development and rehabilitation in
accordance with the provisions of Sec. 3(n) of Republic Act No. 6359,
as amended, Sec. 2 of Executive Order No. 224 and the preceding
Section.
For its part, respondent MWSS, in its Comment23 of July 19, 2010,
stated that AHEPP is not like any other hydro-electric power plant,
because while its power contribution to the Luzon grid is negligible, its
water supply to the commercial and domestic needs of the clientele of
MWSS is incontestable and indispensable. Pushing this point, MWSS
would argue that the case is really about the virtual surrender of the
control and operation of the Angat Dam and Reservoir to a foreign
country, thereby impinging on the water supply of twelve million
Filipinos.
Respondent MWSS further asserted that, by statutory mandate, part of
the waterworks that are within its jurisdiction and under its control and
supervision ipso jure are the Angat Dam, Dykes and Reservoir. This is
by virtue of Sections 1 and 3 of the MWSS Charter24 which vests
MWSS with the powers of control, supervision, and regulation of the
use of all waterworks systems, including dams, reservoirs, and other
waterworks for the purpose of supplying water to inhabitants of its
territory. It claimed that in the exercise of its jurisdiction over Angat
Dam, it even incurred expenses for its upkeep and maintenance.
MWSS related that upon the passage of EPIRA, it wrote PSALM
informing the latter of its desire to acquire ownership or control, upon
payment of just compensation, over AHEPP. In this regard, MWSS
draws attention to the support it got for its desire from the Department
of Public Works and Highways (DPWH) and various local government
units.
In 2006, PSALM also acknowledged the need to come up with
effective strategies for the implementation of the privatization of
AHEPP. MWSS and PSALM thereafter engaged in several discussions
over AHEPP and the control and management of AHEPP and Angat
Dam. A draft of the Angat Water Protocol was made between MWSS,
PSALM, NIA, NPC, and NWRB. However, only MWSS and NIA signed
the draft protocol.
MWSS then went on to argue that due to the non-signing of the Water
Protocol, respondent PSALM failed to provide safeguards to protect
potable water, irrigation, and all other requirements imbued with public
interest, in violation of the EPIRA. It then went on to say that the sale
of AHEPP to a foreign corporation violates the Constitution. It said that
the waters of the Angat River that propel the AHEPP to supply water
and irrigation and generate power form part of the National Patrimony.
It added that K-Water would probably simply consider AHEPP as
another business opportunity, contrary to the role that the Angat Dam
Complex plays in the life of the Filipino people. Thus, MWSS prayed
for the granting of the petition, and in the alternative, to order PSALM
to turn over control and management of AHEPP to MWSS.
Meanwhile, respondent K-Water filed a Manifestation in lieu of
Comment, wherein it averred that it merely relied on the mandate and
expertise of PSALM in conducting the bidding process for the
privatization of AHEPP. It stated that in participating with the bidding
process, it was guided at all times by the Constitution and the laws of
the Philippines.
Petitioners, in their Consolidated Reply25 dated October 29, 2010,
traversed in some detail respondent PSALM’s allegations and
supportive arguments on the issues of legal standing, mootness of the
petition, and on whether a political question is posed in the
controversy. On the matter of mootness, they claimed that the
issuance of a Notice of Award does not ipso facto render the case
moot, as it is not the final step for the privatization of AHEPP. On the
claim that the controversy constitutes a political question, they replied
that they have amply argued that PSALM’s exercise of power is limited
by the Constitution, the EPIRA, other laws, as well as binding norms of
international law. Thus, its acts in conducting the bidding process fall
within the expanded jurisdiction of this Court. On the matter of
standing, they claimed to have sufficient personality as the issue
involves a public right. Moreover, they invoked the transcendental
importance doctrine and the rule on liberality when it comes to public
rights.
And on the matter of how PSALM conducted the bidding, the
petitioners reiterated their contention that PSALM ran roughshod over
the public’s right to be informed of the bidding process, the terms and
conditions of the privatization, the bidding procedures, minimum price,
and other similar information. They related that Initiatives for Dialogue
and Empowerment through Alternative Legal Services, Inc.’s (IDEAL’s)
request for information on the winning bidder was unheeded, with
PSALM merely referring the matter to the counsel of K-Water for
appropriate action.
27
On the matter of water rights, they related that the provisions of the
APA itself negate PSALM’s contention that it is erroneous to conclude
that water rights will be necessarily transferred to respondent K-Water
as a result of the AHEPP. They claimed that this is a wanton disregard
of the provisions of the Water Code.
While conceding that Angat Dam is not being sold, petitioners
nonetheless maintain that, by the terms of the Agreements in question,
the control over Angat Dam, among other non-power components will
also be given to the buyer. This, taken with the fact that the Water
Protocol continues to be unsigned, the petitioners argue, leads to no
other conclusion except PSALM’s failure to provide safeguards to
ensure adequate water supply coming from Angat Dam. This, they
claimed, would result in the winning K-Water having complete control
over the entire Angat Dam Complex.
As a counterpoint, particularly to the allegations of MWSS in its
Comment, respondent PSALM, in its Comment,26stated that the non-
signing of the Water Protocol was merely due to its observance of this
Court’s Status Quo Ante Order. It claimed that MWSS admitted
participating, along with various stakeholders, in the discussions over
AHEPP, through the various meetings and correspondences held
relative to the drafting of the Memorandum of Agreement on the Angat
Water Protocol.
On the issue of jurisdiction over Angat Dam, PSALM replied that
MWSS never exercised control and jurisdiction over Angat Dam. The
arguments of MWSS, so PSALM claims, are based on the faulty
characterization of EPIRA as a general law and the MWSS Charter as
a special law.
Further, PSALM stressed that its mandate under the EPIRA is to
privatize the assets of NPC, i.e., to transfer ownership and control
thereof to a private person or entity, not to another government entity.
PSALM also reiterated that AHEPP may be sold to a foreign entity, in
accordance with the policy reforms espoused by EPIRA, i.e., to enable
open access in the electricity market and then enable the government
to concentrate more fully on the supply of basic needs of the people.
Even assuming that the transfer of AHEPP to MWSS is allowed under
EPIRA, the same would not serve the objective of EPIRA of liquidating
all of the financial obligations of NPC.
The Issues
1.
WHETHER THE PETITIONERS AVAILED OF THE PROPER
REMEDY BY FILING THIS PETITION FOR CERTIORARI AND
PROHIBITION.
2.
WHETHER THE PETITION HAS BEEN RENDERED MOOT AND
ACADEMIC BY THE ISSUANCE OF A NOTICE OF AWARD IN
FAVOR OF RESPONDENT K-WATER ON MAY 5, 2010
3.
WHETHER THE PETITION INVOLVES A POLITICAL QUESTION
4.
WHETHER THE PETITIONERS HAVE LEGAL STANDING TO FILE
THE INSTANT PETITION
5.
WHETHER THE PETITIONER’S RIGHT TO INFORMATION HAS
BEEN VIOLATED BY THE PUBLIC RESPONDENT PSALM
6.
WHETHER PETITIONER ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT UNDERTOOK THE PRIVATIZATION OF
AHEPP
7.
WHETHER THE PUBLIC RESPONDENT PSALM ACTED WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN IT ALLOWED K-WATER TO
PARTICIPATE IN THE BIDDING FOR AHEPP, AND LATER
AWARDED K-WATER AS THE HIGHEST BIDDER
Discussion
First Issue:
Petition for Certiorari and Prohibition as the Proper Remedy
The Court’s jurisdiction over questions of grave abuse of discretion
finds expression in Art. VIII, Sec. 1 of the Constitution vesting the Court
the power to "determine whether or not there has been a grave abuse
of discretion amounting to lack or excess of jurisdiction on the part of
any branch or instrumentality of the government." This expanded
power of judicial review allows the Court to review acts of other
branches of the government, to determine whether such acts are
committed with grave abuse of discretion amounting to lack or excess
of jurisdiction.
Grave abuse of discretion generally refers to:
capricious or whimsical exercise of judgment as is equivalent to lack of
jurisdiction. The abuse of discretion must be patent and gross as to
amount to an evasion of a positive duty or a virtual refusal to perform a
duty enjoined by law, or to act at all in contemplation of law, as where
the power is exercised in an arbitrary and despotic manner by reason
of passion and hostility.27 (Citations omitted.)
However, not all errors in exercise of judgment amount to grave abuse
of discretion. The transgression, jurisprudence teaches, must be "so
patent and gross as to amount to an evasion of positive duty or a
virtual refusal to perform the duty enjoined or to act at all in
contemplation of law."28
In the case before Us, the petitioners allege that respondent PSALM
exceeded its jurisdiction when it allowed K-Water to participate in the
bidding for the privatization of AHEPP, and later awarded the contract
to it. In its exercise of its mandate under the EPIRA, PSALM exercises
not only ministerial, but also discretionary powers. The EPIRA merely
provides that the privatization be done "in an open and transparent
manner through public bidding,"29suggesting that it is up to PSALM to
decide the specific manner and method in conducting the bidding
process.
In determining the terms of reference of the public bidding to be
conducted, as well as in determining the qualifications of the respective
bidders, respondent PSALM exercises discretionary, not ministerial,
powers. Corollarily, when it allowed K-Water to participate in the
bidding, and when it eventually awarded the contract to K-Water as the
highest bidder, PSALM was engaged not in ministerial functions, but
was actually exercising its discretionary powers.
28
Hence, as a government agency discharging official functions, its Political questions, as defined in Tañada v. Cuenco,33 refer to:
actions are subject to judicial review by this Court, as expressly
provided under Art. VIII, Sec. 1, par. 2 of the Constitution.
those questions which, under the Constitution, are to be decided by the
people in their sovereign capacity, or in regard to which full
This Court’s jurisdiction over petitions for certiorari under Rule 65 is discretionary authority has been delegated to the legislature or the
concurrent with Regional Trial Courts. This jurisdiction arrangement executive branch of the Government.
calls for the application of the doctrine of hierarchy of courts, such that
this Court generally will not entertain petitions filed directly before it.
Simply put, the political question doctrine applies when the question
However, direct recourse to this Court may be allowed in certain
calls for a ruling on the wisdom, and not the legality, of a particular
situations. As We said in Chavez v. National Housing Authority
governmental act or issuance.
(NHA):30

The political question doctrine has no application in the case here. In

Such resort may be allowed in certain situations, wherein this Court
the privatization of AHEPP, PSALM’s discretion is circumscribed not
ruled that petitions for certiorari, prohibition, mandamus, though
only by the provisions of EPIRA and its Implementing Rules and
cognizable by other courts, may directly be filed with us if the redress
Regulations (IRR), but also by pertinent laws that are consequential
desired cannot be obtained in the appropriate courts or where
and relevant to its mandate of privatizing the power generation assets
exceptions compelling circumstances justify availment of a remedy
of NPC. Needless to stress, PSALM is duty bound to abide by the
within and calling for the exercise of this Court’s primary jurisdiction.
parameters set by the Constitution. In case it violates any existing law
(citation omitted)
or the Constitution, it cannot hide behind the mantle of the political
question doctrine, because such violation inevitably calls for the
As in Chavez, herein petitioners have made serious constitutional exercise of judicial review by this Court.
challenges not only with respect to the constitutional provision on
exploitation, development, and utilization of natural resources, but also
This is the very question the petitioners pose. They allege that in the
the primordial right of the people to access to clean water. The matter
process of pursuing its mandate under EPIRA, PSALM transgressed
concerning Angat Dam and its impact on the water supply to the entire
the Constitution, particularly when it failed to observe the petitioners’
Metro Manila area and neighboring cities and provinces, involving a
right to information, and when it allowed a foreign corporation to utilize
huge number of people has, to be sure, far-reaching consequences.
the natural resources of the Philippines.
These imperatives merit direct consideration by this Court, and compel
us, as now, to turn a blind eye to the judicial structure, like that
envisioned in the hierarchy of courts rule, "meant to provide an orderly Respondent PSALM’s contention that the petition partakes of the
dispensation of justice and consider the instant petition as a justified nature of a collateral attack on EPIRA34 is misplaced. Petitioners’
deviation from an established precept."31 challenge is not directed, as it were, against the wisdom of or the
inherent infirmity of the EPIRA, but the legality of PSALM’s acts, which,
to the petitioners, violate their paramount constitutional rights. This falls
Second Issue:
squarely within the expanded jurisdiction of this Court.
Mootness of the Petition

At any rate, political questions, without more, are now cognizable by

PSALM maintains that the petition no longer presents an actual
the Court under its expanded judicial review power. The Court said so
justiciable controversy due to the mootness of the issues presented in
in Osmeña v. COMELEC:35
the petition, for, as claimed, the petitioners are seeking to enjoin the
performance of an act that it has already performed, i.e., that of the
issuance of a Notice of Award to the highest winning bidder in the We would still not be precluded from resolving it under the expanded
public bidding for AHEPP.32 jurisdiction conferred upon us that now covers in proper cases even
political questions (Daza v. Singson, 180 SCRA 496), provided
naturally, that the question is not solely and exclusively political (as
PSALM’s contention on mootness cannot be sustained. What the
when the Executive extends recognition to a foreign government) but
petitioners seek in this recourse is to enjoin the privatization of AHEPP
one which really necessitates a forthright determination of
altogether, arguing that it runs counter to the nationality limitation in the
constitutionality, involving as it does a question of national importance.
Constitution. Moreover, they claim that the issues raised would have
consequences to their primordial right to access to clean water. And,
as the petitioners aptly argued, the Notice of Award itself is not the final Fourth Issue:
act in the privatization of AHEPP. Also telling is the fact that the water Legal Standing of Petitioners
protocol has yet to be finalized. In short, all the acts that, for all intents
and purposes, would bring about the privatization of AHEPP have yet
to ensue. The petitioners have sufficient locus standi to file the instant petition.

The petitioners raise questions relating to two different provisions of

Even assuming that the Notice of Award finalizes the privatization of
AHEPP, this Court will not shirk from its duty to prevent the execution
of a contract award violative of the Constitution. This Court can still
enjoin, if it must, the transfer of ownership of AHEPP if such transfer is
repugnant to the spirit and the letter of the Constitution. As We said in
Chavez: "it becomes more compelling for the Court to resolve the issue
to ensure 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."
Third Issue:
Application of the Political Question Doctrine
the Constitution, to wit: (1) the right to information on matters of public
concern36 and (2) the limitation on the exploration, development, and
utilization of natural resources to Filipino citizens and corporations and
associations at least sixty per centum of whose capital is owned by
such citizens.37
On the first constitutional question, the petition urges the Court to
compel PSALM to disclose publicly the details and records of the
Agreements with K-Water. On the second issue, the petition seeks to
declare the Agreements as unconstitutional, for violating the
constitutional limitation that only Filipino citizens and Filipino
corporations may engage in the exploration, development, and
utilization of natural resources.

29
Where the issue revolves around the people’s right to information, the
requisite legal standing is met by the mere fact that the petitioner is a
citizen. The Court said as much in Akbayan Citizens Action Party v.
Aquino:38
In a petition anchored upon the right of the people to information on
matters of public concern, which is a public right by its very nature,
petitioners need not show that they have any legal or special interest in
the result, it being sufficient to show that they are citizens and,
therefore, part of the general public which possesses the right.
(Emphasis supplied.)
Of the same tenor is the Court’s pronouncement in Guingona, Jr. v.
Commission on Elections:39 "If the petition is anchored on the people’s
right to information on matters of public concern, any citizen can be a
real party in interest."
Here, the members of the petitioner-organizations are Filipino citizens.
In view of the relevant jurisprudence on the matter, that fact alone is
sufficient to confer upon them legal personality to file this case to
assert their right to information on matters of public concern.
On the second constitutional question, on the constitutional limitation
on the exploration, development, and utilization of natural resources,
the rule on locus standi is not sufficiently overcome by the mere fact
that the petitioners are citizens. The general rule applies and the
petition must show that the party filing has a "personal stake in the
outcome of the controversy."40 As stated in Telecommunications and
Broadcast Attorneys of the Philippines, Inc., v. COMELEC, 41 "there
must be a showing that the citizen personally suffered some actual or
threatened injury arising from the alleged illegal official act." Thus,
petitioners here technically lack the requisite legal standing to file the
petition as taxpayers, as they have no direct and personal interest in
the controversy.
The above notwithstanding, the petitioners have sufficiently crafted an
issue involving matters of transcendental importance to the public.
Thus, the technical procedural rules on locus standi may be set aside
to allow this Court to make a pronouncement on the issue. We have
held before that the Court:
has discretion to take cognizance of a suit which does not satisfy the
requirement of legal standing when paramount interest is involved. In
not a few cases, the Court has adopted a liberal attitude on the locus
standi of a petitioner where the petitioner is able to craft an issue of
transcendental significance to the people.42
Here, the interest of the petitioners is inchoate in that neither they as
organizations nor their respective members will suffer any direct injury
in the allowing of a foreign corporation to utilize Philippine water
resources. As residents of Metro Manila, the consequences of the
privatization of AHEPP will have an impact on the petitioners, albeit not
the direct injury contemplated by law.
The issues they have raised, including the effect of the Agreements on
water security in Metro Manila, and the significance of Angat Dam as
part of the Angat-Ipo-La Mesa system, is, however, a matter of
transcendental importance. Hence, the technical rules on standing may
be brushed aside, and enable this Court to exercise judicial review.
Fifth Issue:
Alleged Violation of Petitioners’ Right to Information
Petitioners fault PSALM for failing to provide them with information on
the details of the transaction that PSALM was entering into, in breach
of their constitutional right to information regarding matters of public
concern. In particular, petitioners rue that the Invitation to Bid
published by PSALM did not specify crucial information related to the
sale of the water facility, including the terms and conditions of the
disposition, the qualification of bidders, the minimum price, and other
basic details.43 They allege that PSALM should have publicly disclosed
such crucial information on the privatization of AHEPP, pursuant to its
legal obligation to conduct the bidding in an open and transparent
manner.
As a counter-argument, PSALM states that it had discharged its duty of
disclosure when it publicly disseminated information regarding the
privatization of AHEPP, effected not only through the publication of the
Invitation to Bid, but right "from the very start of the disposition
process."44
First, PSALM points out, it wrote the Regional Director of the National
Commission on Indigenous Peoples (NCIP), informing him of the
planned disposition of AHEPP, and inviting him to a meeting to discuss
matters related to the concerns of indigenous peoples in the area.
Then, it conducted a forum in a hotel, with various stakeholders in
attendance, "to provide them an opportunity to share relevant
information and to thoroughly discuss the structure and pertinent
provisions of the sale."45 Third, it also published the relevant
information on its website, in the form of press releases.
On April 20, 2010, the petitioners sent a letter to respondent PSALM
requesting certain documents and information relating to the
privatization of AHEPP. This request was denied, however, allegedly
due to a violation of the bidding procedures. In its letter dated April 30,
2010, PSALM stated that it can only release such documents to
persons and entities which submitted a Letter of Interest, paid the
participation fee, and executed a Confidentiality Agreement and
Undertaking.
On May 14, 2010, the petitioners sent a second letter specifically
requesting for detailed information on the winning bidder, including its
company profile, contact person or responsible officer, office address
and Philippine registration. PSALM replied, in a letter dated May 19,
2010, that the petitioner’s request has been referred to the counsel of
K-Water.
The people’s right to information is based on Art. III, Sec. 7 of the
Constitution, which states:
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.
The policy of public disclosure and transparency of governmental
transactions involving public interest enunciated in Art. II, Sec. 28 of
the Constitution complements the right of the people to information:
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.
The purpose of these two constitutional provisions, as we observed
in Chavez v. Public Estates Authority, is:
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. x x x 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.46
30
This right to information, however, is not without limitation. Fr. Joaquin
Bernas S.J. notes that the two sentences of Section 7 guarantee only
one general right, the right to information on matters of public concern.
The right to access official records merely implements the right to
information.
Thus, regulatory discretion must include both authority to determine
what matters are of public concern and authority to determine the
manner of access to them.47
We have sufficiently elucidated the matter of right to information
in Chavez, where We said:
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, 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.)
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.
xxxx
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. Congress has also
prescribed other limitations on the right to information in several
legislations. (Emphasis supplied, citations omitted.)
We further explored the matter of right to information in Chavez v.
NHA, where We ruled that:
x x x Government agencies, without need of demand from anyone,
must bring into public view all the steps and negotiations leading to the
consummation of the transaction and the contents of the perfected
contract. Such information must pertain to "definite propositions of the
government," meaning official recommendations or final positions
reached on the different matters subject of negotiation. The
government agency, however, need not disclose "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." The limitation also covers privileged
communication like information on military and diplomatic secrets;
information affecting national security; information on investigations of
crimes by law enforcement agencies before the prosecution of the
accused; information on foreign relations, intelligence, and other
classified information.48
Even without any demand from anyone then, it behooved PSALM to
publicly disclose, information regarding the disposition of AHEPP.
Here, PSALM routinely published news and updates on the sale of
AHEPP on its website.49 It also organized several forums where
various stakeholders were apprised of the procedure to be
implemented in the privatization of AHEPP. As there is yet no sufficient
enabling law to provide the specific requirements in the discharge of its
duty under the Constitution, these unilateral actions from PSALM must
be construed to be a sufficient compliance of its duty under the
Constitution. As We observed in Chavez v. NHA:
It is unfortunate, however, that after almost twenty (20) years from birth
of the 1987 Constitution, there is still no enabling law that provides the
mechanics for the compulsory duty of government agencies to disclose
information on government transactions. Hopefully, the desired
enabling law will finally see the light of day if and when Congress
decides to approve the proposed "Freedom of Access to Information
Act." In the meantime, it would suffice that government agencies post
on their bulletin boards the documents incorporating the information on
the steps and negotiations that produced the agreements and the
agreements themselves, and if finances permit, to upload said
information on their respective websites for easy access by interested
parties. Without any law or regulation governing the right to disclose
information, the NHA or any of the respondents cannot be faulted if
they were not able to disclose information relative to the SMDRP to the
public in general.50
It must be noted however, that aside from its duty to disclose material
information regarding the sale of AHEPP, which, We hold, it had
sufficiently discharged when it regularly published updates on its
website, PSALM further has the duty to allow access to information on
matters of public concern. This burden requires a demand or request
from a member of the public, to which the right properly belongs. "The
gateway to information opens to the public the following: (1) official
records; (2) documents and papers pertaining to official acts,
transactions, or decisions; and (3) government research data used as
a basis for policy development."51
When petitioners’ wrote PSALM a letter of April 20, 2010 requesting
certain documents and information relating to the privatization of
31
AHEPP but was denied, PSALM veritably violated the petitioners’ right
to information. It should have permitted access to the specific
documents containing the desired information, in light of the disclosure
of the same information thus made in its website. The documents
referred to are neither confidential nor privileged in nature, as the gist
thereof had already been published in the news bulletins in the website
of PSALM, and as such, access thereto must be granted to the
petitioner. On the contrary, the documents requested partake of the
nature of official information.
The Court also takes stock of the fact that on May 14, 2010, petitioners
requested via another letter specifically requesting detailed information
on the winning bidder, including its company profile, contact person or
responsible officer, office address and Philippine registration. By way
of reply, PSALM informed the petitioners that their request has been
referred to the counsel of K-Water.
PSALM’s reply to the petitioners’ adverted second letter is insufficient
to discharge its duty under the Constitution. The reply is evasive, at
best. At that stage of the bidding process, PSALM already had
possession of and can provide, if so minded, the information
requested. As such, there was hardly any need to refer the request to
K-Water.
Given the above perspective, the petitioners must be granted relief by
granting them access to such documents and papers relating to the
disposition of AHEPP, provided the accommodation is limited to official
documents and official acts and transactions.
Sixth Issue:
The Legality of the Privatization of AHEPP
The mandate of PSALM under EPIRA is clear-privatization sale of
NPC generation assets, real estate, and other disposable assets.
Toward the accomplishment of this mandate, EPIRA has vested the
PSALM with the following powers:
(a) To formulate and implement a program for the sale and
privatization of the NPC assets and IPP contracts and the liquidation of
NPC debts and stranded contract costs, such liquidation to be
completed within the Corporation’s term of existence;
(b) To take title to and possession of, administer and conserve the
assets and IPP contracts transferred to it; to sell or dispose of the
same at such price and under such terms and conditions as it may
deem necessary or proper, subject to applicable laws, rules and
regulations;
xxxx
(i) To own, hold, acquire, or lease real and personal properties as may
be necessary or required in the discharge of its functions.52
PSALM, as may be noted, was not empowered under the EPIRA to
determine which NPC assets are to be privatized. The law merely
authorized PSALM to decide upon the specific program to utilize in the
disposition of NPC assets, and not the power to determine the
coverage of the privatization. The EPIRA itself had laid down which
particular assets are to be privatized, and which are not. Sec. 47
thereof provides:
Section 47. NPC Privatization. - Except for the assets of SPUG, the
generating assets, real estate, and other disposable assets as well as
generation contracts of NPC shall be privatized in accordance with this
Act. Within six (6) months from the effectivity of this Act, the PSALM
Corp. shall submit a plan for the endorsement by the Joint
Congressional Power Commission and the approval of the President of
the Philippines, on the total privatization of the generation assets, real
estate, other disposable assets as well as existing generation contracts
of NPC and thereafter, implement the same, in accordance with the
following guidelines, except as provided for in paragraph (e) herein:
xxxx
(f) The Agus and the Pulangui complexes in
Mindanao shall be excluded from among the
generating companies that will be initially
privatized. Their ownership shall be transferred to
the PSALM Corp. and both shall continue to be
operated by NPC. In case of privatization, said
complexes may be privatized not earlier than ten
(10) years from the effectivity of this Act, and, until
privatized, shall not be subject to Build-Operate-
Transfer (B-O-T), Build-Rehabilitate-Operate-
Transfer (B-R-O-T) and other variations pursuant
to Republic Act No. 6957, as amended by
Republic Act No. 7718. The privatization of Agus
and Pulangui complexes shall be left to the
discretion of PSALM Corp. in consultation with
Congress;
xxxx
(g) The ownership of the Caliraya-Botokan-
Kalayaan (CBK) pump storage complex shall be
transferred to the PSALM Corporation and shall
continue to be operated by NPC.
It is clear from the aforequoted provision that the intention of EPIRA is
to include in the privatization program all generating assets, real
estate, and other disposable assets of NPC, save those specifically
excluded under the same Act. By express provision, only three
facilities are excepted from privatization, viz.: Agus and Pulangui
Complexes, and the Caliraya-Botokan-Kalayaan pump storage
complex, and the assets of the Small Power Utilities Group (SPUG).
Nowhere in EPIRA is the AHEPP mentioned as part of the excluded
properties. It can, thus, be inferred that the legislative intent is to
include AHEPP in the privatization scheme that PSALM will
implement. Expresio unius est exclusio alterius.
PSALM is correct in arguing, therefore, that in privatizing AHEPP, it did
no more than to perform its mandate under EPIRA. PSALM is also
correct in its position that the respective charters of MWSS and NIA do
not grant either of them the power to operate a power plant. It is clear
that under the EPIRA, the fate of AHEPP is that of being privatized––
PSALM neither has discretion to exclude the property from
privatization, nor choose to abandon its duty to dispose of them
through public bidding. Thus, PSALM committed no grave abuse of
discretion in its decision to privatize AHEPP, and in its subsequent acts
toward that end.
Petitioners’ prayer to enjoin the privatization sale of AHEPP must
therefore, fail. The provisions of EPIRA are determinative of the matter,
and where the EPIRA provides that the assets of NPC must be
privatized, then the command of the law must reign supreme. This
Court must uphold the letter and the spirit of EPIRA, even in light of
petitioners’ argument on the possible repercussions of the privatization
of AHEPP.
Seventh Issue:
The Validity of the APA and O&M agreements
This brings Us to the substantive issue of the case. But first, a brief
background on the subject Angat Dam Complex is in order, the
assailed Agreements revolving as it were on that enormous
infrastructure, its features and operations.
32
The Angat Dam Complex
The Angat Dam Complex is part of the Anga-Ipo-La Mesa Dam
system. Originating from the western flank of the Sierra Madre
Mountains, the waters cut through mountainous terrain in a westerly
direction and flow to Angat River in San Lorenzo, Norzagaray,
Bulacan, where the Angat Dam and Reservoir is located. 53
Angat Dam and Reservoir is a multipurpose rockfill dam constructed in
1964-1967, and provides multiple functions:
(1) to provide irrigation to about 31,000 hectares of land in
20 municipalities and towns in Pampanga and Bulacan;
(2) to supply the domestic and industrial water requirements
of the residents in Metro Manila;
(3) to generate hydroelectric power to feed the Luzon Grid;
and
(4) to reduce flooding to downstream towns and villages.54
The reservoir is 35 km. long when the water surface of 2,300 hectares
is at normal maximum pool, and 3 km. wide at its widest point. 55 From
the reservoir, the water enters the intake tower and is conveyed by the
power tunnel to the penstocks and valve chambers, and finally to the
turbine runners of the AHEPP.56
AHEPP, meanwhile, is a 246 Megawatts (MW) rated hydroelectric
power plant also located in San Lorenzo, Norzagaray, Bulacan. It is
part of the Angat Dam Complex and is situated near the Angat Dam,
as it relies on the waters coming from the dam to generate power.
AHEPP consists of four (4) main units, producing 200 MW of power,
and five (5) auxiliary units, producing 46MW of power.57
AHEPP utilizes the waters of Angat Dam for hydropower generation by
taking in water from its intake tower. The waters are then conveyed by
the power tunnel to the penstocks and valve chambers, and finally to
the turbine runners in the AHEPP. Discharge is conveyed to the outlet
by the tailrace tunnel.58
From the Angat Dam Complex, the waters may flow in either of two
directions. The waters may be directed to Ipo Dam, near its confluence
with Ipo River.59 From there, the waters downstream are diverted to the
Novaliches Portal and the La Mesa Dam in Quezon City.60 From there,
the waters are treated to supply water to end consumers in Metro
Manila. The waters may also continue to go through the Balara
Treatment Plant, and also finally to end consumers in Metro Manila.
The waters coming from Angat Dam may also flow through Bustos
Dam in Bustos, Bulacan, where the waters are eventually used for
irrigation purposes by the National Irrigation Administration (NIA).61
Nature, Ownership, and Appropriation of Waters
Though of Spanish origin, the doctrine of Jura Regalia was first
explicitly enshrined in the 1935 Philippine Constitution which
proclaimed, as one of its dominating objectives, the nationalization and
conservation of the natural resources of the country. 62 Thus, the 1935
Constitution provides in its Sec. 1 of Art. XIII that:
Sec. 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 x x x (emphasis supplied)
That this doctrine was enshrined in the Constitution was merely a
means to an end, as "state ownership of natural resources was seen
as a necessary starting point to secure recognition of the state’s power
to control their disposition, exploitation, development, or
utilization."63 In Miners Association of the Philippines, Inc. v.
Factoran,64this Court found the importance of this limitation in the
Constitution, thus:
The exploration, development and utilization of the country's natural
resources are matters vital to the public interest and the general
welfare of the people. The recognition of the importance of the
country's natural resources was expressed as early as the 1984
Constitutional Convention. In connection therewith, the 1986 U.P.
Constitution Project observed: "The 1984 Constitutional Convention
recognized the importance of our natural resources not only for its
security and national defense. Our natural resources which constitute
the exclusive heritage of the Filipino nation, should be preserved for
those under the sovereign authority of that nation and for their
prosperity. This will ensure the country's survival as a viable and
sovereign republic." (Emphasis supplied)
The 1973 Constitution also incorporated the jura regalia doctrine in its
Sec. 2, Art. XII:
Sec. 2. All lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy,
fisheries, forests or timber, flora and fauna, and other natural
resources are owned by the State. x x x (emphasis supplied)
It was then transposed to the 1987 Constitution, with Sec. 2, Art. XII
thereof providing:
Sec. 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. x x x (emphasis supplied)
The 1935, 1973, and 1987 Constitutions uniformly provide that all
waters belong to the State. Statutorily, the Water Code reaffirms that
"all waters belong to the state."65
Corollary to the principle of state ownership of all waters is the
provision limiting the exploration, development, and utilization of such
resources to certain individuals and subject to certain restrictions. In
the 1935 Constitution, this rule was enunciated, thus:
x x x 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.66
The 1973 Constitution carried a similar provision, to wit:
Sec. 9. The disposition, exploration, development, exploitation, or
utilization of any of the natural resources of the Philippines shall be
limited to citizens of the Philippines, or to corporations or associations
at least sixty per centum of the capital which is owned by such citizens
x x x67
The 1987 Constitution couched the limitations a bit differently:
x x x The exploration, development, and utilization of natural resources
shall be under the full control and supervision of the State. The State
may directly undertake such activities, or it may enter into co-
production, joint venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at least sixty per
centum of whose capital is owned by such citizens. Such agreements
may be for a period not exceeding twenty-five years, renewable for not
33
more than twenty-five years, and under such terms and conditions as
may be provided by law. x x x68 (emphasis supplied)
In La Bugal B’laan v. Ramos,69 We reconstructed and stratified the
foregoing Constitutional provision, thus:
1. All natural resources are owned by the State. Except for agricultural
lands, natural resources cannot be alienated by the State.
2. The exploration, development and utilization (EDU) of natural
resources shall be under the full control and supervision of the State.
3. The State may undertake these EDU activities through either of the
following:
(a) By itself directly and solely
(b) By (i) co-production; (ii) joint venture; or (iii)
production sharing agreements with Filipino
citizens or corporations, at least 60 percent of the
capital of which is owned by such citizens.
The constitutional policy and bias concerning water resources is
implemented primarily by the Water Code. It provides that the state
may "allow the use or development of waters by administrative
concession"70 given in the form of a water permit.71 Article 13 of the
Code grants the permit holder the right to appropriate water,
"appropriation" being defined under the law as "the acquisition of rights
over the use of waters or the taking or diverting of waters from a
natural source in the manner and for any purpose allowed by
law."72 Finally, the Code limits the granting of water permits only to
"citizens of the Philippines, of legal age, as well as juridical persons,
who are duly qualified by law to exploit and develop water
resources."73
Created to control and regulate the utilization, exploitation,
development, conservation and protection of water resources is the
National Water Resources Council,74 later renamed National Water
Resources Board (NWRB).75The NWRB is the government agency
responsible for the granting of water permits, as well as the regulation
of water permits already issued.
In fine, the Constitution and the Water Code provide that all waters
belong to the State. The State may nevertheless allow the exploration,
development, and utilization of such water resources, through the
granting of water permits, but only to qualified persons and entities.
And when the Constitution and the Water Code speak of qualified
persons, the reference is explicit: Filipino citizens and associations or
corporations sixty percent of the capital of which is owned by Filipinos.
Such is the protection afforded to Philippine water resources.
The Operations and Maintenance Agreement
By the O & M Agreement, PSALM cedes to K-Water, as operator, the
administration, management, operation, maintenance, preservation,
repair, and rehabilitation of what the contract considers as the Non-
Power Components,76 defined thereunder as "the Angat Dam, non-
power equipment, facilities and installations, and appurtenant devices
and structures which are particularly described in Annex 1."77 The O &
M Agreement is for a period of twenty-five (25) years, renewable for
another twenty-five (25) years, maximum, upon mutual and written
agreement of the parties.78
As couched, the agreement does not include the operation of
watershed area, which shall continue to be under the NPC’s control
and administration. However, in case of emergencies and the NPC
does not act to alleviate the emergency in connection with its
performance of its obligations in the watershed, the operator shall have
the option to prevent the emergency, to mitigate its adverse effects on
the purchased assets and non-power components, and to undertake
remedial measures to address the emergency.79
Article 9 of the O & M Agreement also provides that the
buyer/operator, if not organized under Philippine law, warrants that "it
shall preserve and maintain in full force and effect its existence as a
corporation duly organized under such laws and its qualifications to do
business in the
Republic of the Philippines."80 The following is also expressly
stipulated: the O & M Agreement is merely "being executed in
furtherance of and ancillary to the APA and"81 "shall not survive the
termination of the APA."82
The Asset Purchase Agreement
The APA includes the sale of the 218 MW AHEPP on an "as is where
is" basis83 to buyer, K-Water. Excluded from the sale are Auxiliary
Units 4 and 5, with a rated capacity of 10 MW and 18 MW,
respectively. The non-power components of the Angat Dam Complex,
including Angat Dam, while not subject to sale under the APA, are
covered by the O & M Agreement.
On the matter of water rights, the APA, in its Art. 2.05, provides that
the "NPC consents, subject to Philippine Law, to the (i) transfer of the
Water Permit to the BUYER or its Affiliate, and (ii) use by the BUYER
or its Affiliate of the water covered by the Water Permit."84 The buyer
shall then provide NPC with electricity and water free of charge. 85 This
bolsters the claim that control over the waters of Angat Dam is, under
the APA, handed over to K-Water.
As in the O & M Agreement, the APA also contains a provision on
warranties on the buyer’s qualification to engage in business in the
country and to comply "at all times fully comply with Philippine Law."86
Clearly then, the purchase agreement grants the buyer not only
ownership of the physical structure of AHEPP, but also the
corresponding right to operate the hydropower facility for its intended
purpose, which in turn requires the utilization of the water resources in
Angat Dam. The use and exploitation of water resources critical for
power generation is doubtless the underlying purpose of the contract
involving the sale of the physical structure of AHEPP.
The waters of Angat Dam and
Reservoir form part of the natural
resources of the Philippines
Based on the foregoing factual backdrop, I submit that the APA and O
& M Agreements, individually or as a package, are themselves
infringing on the constitutional imperative limiting the exploration,
development, and utilization of the natural resources of the Philippines
to Filipino citizens and associations or corporations sixty percent of the
capital of which is owned by Filipinos. I also take the view that K-Water
was, from the start, disqualified from participating in the bidding for the
two projects in question.
Consider:
The waters flowing through Angat River, and eventually to the Angat
Dam and Reservoir, form part of the country’s natural resources. There
cannot be a substantial distinction between the waters in Angat River,
on one hand, and those settling in the Angat Dam and Reservoir, on
the other. There is no rhyme or reason to claim that the waters in the
dam cease to be part of the protected natural resources envisaged in
the Constitution.
34
First, the fact that an artificial structure was constructed to provide a
temporary catchment for the naturally-flowing waters does not
necessarily remove the waters from being part of the natural resources
of the Philippines. The waters themselves are natural in that it is
"brought about by nature, as opposed to artificial means."87
From the spillway gates of the Angat Dam, some of the waters are
diverted to Ipo Dam, and others still flow to Bustos Dam. Eventually,
the waters passing through Ipo Dam end up in Tullahan River in Metro
Manila. If there is any detention of the waters, it is merely temporary,
as Angat Dam is not meant to permanently impound the waters. An
examination of the flow of waters from Angat River readily shows that
the waters go through a contiguous series of dams and rivers, and the
waters are not actually extracted from it, when they pass through
structures such as the AHEPP.
To say that the waters in the Angat Dam and Reservoir have already
been extracted or appropriated by the mere fact that there is a
catchment system in Angat Dam would be to make a distinction
between the nature of the waters in different parts of this contiguous
series. On the contrary, the waters have not been extracted from its
natural source, the river and the dam forming a unitary system. The
waters naturally flowing through Angat River are the very same waters
that are stored in Angat Dam. Their characteristics, quality, and purity
cannot be distinguished from each other. It is the mechanisms in
AHEPP that permanently extract water from its natural source. Angat
Dam merely serves to temporarily impound the waters, which are later
allowed to flow downstream.
Were We to hold that the waters in Angat Dam cease to become a
natural resource, the same logic would lead to the conclusion that the
waters downstream in Ipo Dam are sourced partly from natural
resources (i.e. those directly flowing from Ipo River) and partly from
artificial sources, since part of the waters passing through Ipo Dam
already passed through Angat Dam. By extension, Tullahan River
would not be considered a natural resource, as the waters there are
sourced from La Mesa Dam. The law could not have intended such
absurd distinctions. Lex simper intendit quod convenitrationi. The law
always intends that which is agreeable to reason.
Appropriation of water implies beneficial use of the water, for any of the
particular purposes enumerated in the Water Code. In the case of
Angat Dam, the waters in the dam, so long as they remain in the dam
or in the reservoir, carry with them no economic value––they cannot be
directly used for any beneficial purpose. They cannot be directly used
for any of the purposes specified in the Water Code, including power
generation, the intended use of the waters in AHEPP.88
Second, the definition of water in the Water Code is broad enough to
cover the waters of Angat Dam. Waters are defined simply as "water
under the grounds, water above the ground, water in the atmosphere
and the waters of the sea within the territorial jurisdiction of the
Philippines."89 The requirement of water permits is also broad enough
to cover those coming from Angat Dam, because the only exceptions
provided in the Code are waters appropriated by means of hand
carried receptacles, and those used for bathing, washing, watering or
dipping of domestic or farm animals, and navigation of watercrafts or
transportation of logs and other objects by floatation.90
Pursuant to this water permit requirement, the waters of Angat Dam
are presently covered by three separate water permits granted to three
different entities, all for specific purposes: (1) Water Permit No.
650491 to NIA, for irrigation purposes; (2) Water Permit No. 651292 to
NPC, for power purposes; and (3) Water Permit No. 1146293 to MWSS
for municipal/industrial purposes. Needless to state, all the entities
currently holding water permits over Angat Dam are qualified to hold
such permits, both under the Constitution and the Water Code.
The grant by NWRB of permits covering the waters not only within the
Angat River but also those already impounded in the dam reveals an
intention on the part of the agency to treat the waters of Angat River,
including the waters in Angat Dam, as part of the water resources of
the Philippines. There is an intention to treat the waters flowing from
the river to the dam system as one contiguous system, all falling within
the ambit of protection afforded by the Constitution and the Water
Code to such water resources. Had NWRB through these years
viewed the waters in Angat River as not part of the natural resources of
the Philippines when they end up in the dam, how explain the water
permits extended covering the waters in the dam itself; it would have
suffice to grant a single water permit for the sole purpose of building
and operating a dam.
Third, the DOJ Opinions cited by PSALM are not authoritative
statements of the rule on the matter. Indeed, the DOJ Opinion94 saying
that the agreement between PSALM and K-Water does not violate the
constitution is not binding on this Court. Its probative value is limited to
just that, an opinion.
The opinion of the DOJ that the waters to be used in the operation of
AHEPP have already been extracted is based on a misapplication of a
US Supreme Court ruling. The cited U.S. v. State of New
York,95 concerning the Saratoga Springs Reservation, is not in point
with the facts here. In that case, the issue revolves around the
taxability of the bottling for sale and selling of mineral and table water
from Saratoga Springs by the State of New York, Saratoga Springs
Commission, and Saratoga Springs Authority. The US Supreme Court
there ruled that they are subject to taxation, because the activity was a
business enterprise and not merely a sale of natural resources.
The US Supreme Court noted that the State: "took its natural
resources and, through a bottling process, put those resources into a
preserved condition where they could be sold to the public in
competition with private waters."96
The process of bottling water involves the permanent extraction of
water from its natural source. There lies the difference. Here, there is
no actual extraction of waters, as the waters remain in the river-dam
system. What we have here is the operation of a power plant using
resources that originate from Angat River and held in the Angat Dam
and Reservoir.
The DOJ further opined that:
The fact that under the proposal, the non-power components and
structures shall be retained and maintained by the government entities
concerned is, to us, not only a sufficient compliance of constitutional
requirement of "full control and supervision of the State" in the
exploration, development, and utilization of natural resources. It is also
an enough safeguard against the evil sought to be avoided by the
constitutional reservation x x x97
This opinion is based on a clear misapprehension of facts. A cursory
reading of the express terms of the O & M Agreement reveals that the
operation and management of Angat Dam is being handed over the
operator, K-Water. There is no such safeguard anywhere in the APA
and O & M Agreement.
K-Water is disqualified from
participating in the bidding
PSALM argues that NPC’s obligation to transfer its water permit is
subject to a suspensive condition, i.e., K-Water has to become a
Filipino corporation, to become the transferee of NPC of its water
permit.98 This is an implied admission that PSALM knew of K-Water’s
disqualification to participate in the bidding. PSALM knew that the use
of waters is indispensable in the operation of the power plant, and it
goes against the spirit of EPIRA to sell the power plant to an entity
which is legally barred from operating it. PSALM, therefore, should
have disqualified K-Water at the outset.
35
It is unfortunate that instead of disqualifying K-Water, PSALM allowed continue to utilize and extract water, store them in the reservoir, then
the former to bid and eventually inked an Agreement with it on the pass through Angat Dam where the operator, K-Water, will be
operation of Angat Dam. That PSALM allowed this course of events to subjected to rules on water releases.101
transpire constitutes a grave abuse of discretion.
PSALM would have Us believe that the operator of Angat Dam will
The Agreements Violate the Constitution merely play a passive role in the control of the waters in Angat Dam,
yielding instead to MWSS, NIA and NPC, the last being the very entity
which grants the operator its rights under its water permit. This
The APA transfers ownership of the Angat Hydro-electric Power Plant
argument is hardly convincing, if not altogether implausible. It is
to the buyer, K-Water. To operate this power plant, K-Water, as the
foolhardy to believe that NPC, the assignor of the water permit, would
new owner, will have to utilize the waters coming from Angat Dam, as
get to retain some control over the water, much less retain the right to
it is the energy generated by the downstream of water that will be used
extract the waters. This goes contrary to the very nature of an
to generate electricity. The use of natural resources in the operation of
assignment. Once it assigns its water permit to the operator, it
a power plant by a foreign corporation is contrary to the words and
necessarily relinquishes any right it may have under the water permit.
spirit of the Constitution.
In fact, if it does further engage in water-related activities in Angat
River and Angat Dam, it will be violating the Water Code for engaging
The O & M is more straightforward, in that it expressly authorizes the in appropriation of water without the requisite permit.
operator, K-Water, to administer and manage non-power components,
which it defines as "the Angat Dam, non-power equipment, facilities
Moreover, PSALM made an express admission that it is not NPC alone
and installations, and appurtenant devices and structures which are
that engages in water-related activities in Angat Dam, as MWSS and
particularly described in Annex 1."99 While it is true, as PSALM argues,
NIA, pursuant to their respective water permits, engage in
that Angat Dam itself is not being sold, the operation and management
appropriation of water in Angat Dam. Even PAGASA engages in
of the same is being handed to a wholly foreign corporation. This is
activities within the dam complex. Yet the O&M Agreement readily
cannot be countenanced under the express limitations in Constitution
grants the operator the power to administer the entire Dam, without
and the Water Code.
consent from the other agencies operating in Angat Dam, as the Water
Protocol between the concerned agencies and entities has yet to be
In fine, the Agreements between PSALM and K-Water necessarily finalized.
grant to corporation wholly owned by a foreign state not just access to
but direct control over the water resources of Angat Dam, and
Power generation may not covered
consequently some portions of the Angat River as well. On this ground,
by the nationality restrictions, but
both agreements are constitutionally and statutorily infirm. They must
use of natural resources for power
be nullified.
generation is subject to the
limitation in the Constitution
The ponencia would rule toward the validity of the Agreements, but
would disallow the transfer or assignment of NPC of its Water Rights
While it is established that power generation is not considered a public
under its Water Permit to K-Water. NPC retains control over the flow of
utility operation,102 thus not subject to the nationality requirement for
waters (presumably by maintaining control over the spillway gates of
public utilities, the operator of a power plant is nevertheless bound to
Angat Dam), while K-Water is given the right to use the waters coming
comply with the pertinent constitutional provision when using natural
from the dam to generate electricity.
resources of the Philippines, including water resources. As already
discussed, the operation of AHEPP necessarily requires the utilization
The Water Permit of NPC itself however, states that the right given to and extraction of water resources. Thus, its operation should be limited
NPC is limited to power generation, and precisely for the purpose of to Filipino citizens and corporations or associations at least sixty per
operating the AHEPP.100 It is not given complete control over the centum of whose capital is owned by such citizens, following the clear
waters of Angat River and Angat Dam, because the waters there are mandate of the Constitution.
covered by separate water permits for different purposes. What NPC is
actually giving up to K-Water is its right to utilize the waters of Angat
PSALM has no power to cede control over Angat Dam
River for power generation, the very right granted to it under its Water
Permit. This, it cannot do, because of an express prohibition under the
Water Code and the Constitution. The O&M Agreement, in no uncertain terms, confers the operation of
Angat Dam, among other non-power components, to the operator; that
is, the buyer of AHEPP. But by express admission103 of respondent
It would be splitting hairs to differentiate between the control of waters
PSALM, the following governmental agencies jointly operate within the
by the NPC and the K-Water’s right to use the water for power
Angat Dam Complex:
generation. Water Permit No. 6512 granted to NPC will be rendered
inutile if NPC assigns its right to use the water for power generation.
That ensuing arrangement has the same effect as an assignment or First, NWRB controls the exploitation, development, and conservation
transfer. To allow K-Water to utilize the waters without a corresponding of the waters. It regulates the water from Angat River and allocates
water permit indirectly circumvents the regulatory measures imposed them to the three water permit holders, NPC, MWSS, and NIA.
by the Water Code in appropriating water resources.
Second, NIA appropriates the water coming from the outflow of the
Thus, the Agreement concerning water rights is in direct contravention main units of AHEPP to Bustos Dam, for use in its irrigation systems.
of the Water Code and Sec. 2, Art. XII of the Constitution. K-Water,
being a wholly foreign-owned corporation, is disqualified from obtaining
Third, MWSS appropriates water coming from the outflow of the
water permits and from being the transferee or assignee of an existing
auxiliary units of AHEPP, for domestic and other purposes through its
Water Permit. It is further barred from entering into any agreement that
two concessionaires, Manila Water Company, Inc. and Maynilad Water
has the effect of transferring any of the water rights covered by existing
Services, Inc.
water permits.

Fourth, PAGASA uses its facilities located within the Angat Complex to
PSALM argues on this point that it will not be K-Water, as the operator
forecast weather in the area, forecasts which are vital to the operation
of Angat Dam, which will extract or utilize the water from its natural
of the complex itself.
source. They allege that it will be NPC, MWSS, and NIA that will

36
Fifth, the Flood Forecasting and Warning System for Dam Operations
(NPC-FFWSDO) is responsible for the opening of the spillway gates
during the rainy season. It has sole authority to disseminate flood
warning and notifies the public, particularly those residing along the
riverbanks, during spilling operation.
Sixth, the NPC-Watershed is responsible for preserving and
conserving the forest of Angat Watershed, vital to the maintenance of
water storage in the Dam.
The O&M Agreement hands over to the operator, lock, stock, and
barrel, the operation of the entire Angat Dam, among other non-power
components within the Angat Dam Complex, to K-Water. This
agreement undermines the capacity and power of the various
governmental agencies to operate within the dam, as the operation
thereof is being handed over to a private entity.
The distinction that PSALM intends to create is more illusory than real.
The O&M Agreement is explicit in handing over the operation of the
dam to the operator/buyer of AHEPP. There is an utter lack of
supposed protocols in the management of water between the operator
and the various government agencies, as there is yet no finalized
Water Protocol. The provisions of the O&M Agreement by themselves
unreasonably limit the powers and responsibilities of the different
government agencies involved insofar as control of the waters of Angat
Dam is concerned. Their participation in the finalization of the Water
Protocol is already unjustly limited in that the provisions they may
propose to include in the Protocol must respect the powers already
given to the operator in the O&M Agreement.
This may result in dangerous consequences, as the operator can
effectively inhibit the responsible governmental agencies from
conducting activities within Angat Dam––activities that are vital not
only to those entities with operation within Angat Dam, but also to the
general public who will suffer the consequences of improper
management of the waters in Angat Dam. In the event of unnatural
swelling of the waters in the dam, for purposes of public accountability,
the proper government agencies should be the ones to manage the
outflow of water from the dam, and not a private operator.
To require the buyer to operate Angat Dam and the non-power
components is null and void. The operation must always be in the
hands of the government. The buyer can only be obliged to maintain
the non-power components, but still under the control and supervision
of the government.
The flow of waters to and from Angat Dam must at all times be within
the control of the government, lest it lose control over vital functions
including ensuring water security and flood control. Water security of
the consuming public must take precedence over proprietary interests
such as the operation of a power plant. Flood control, an increasingly
important government function in light of the changing times, should
never be left to a private entity, especially one with proprietary
interests.
The operation of Angat Dam not only involves the utilization and
extraction of waters, but also important government functions,
including flood control, weather forecasting, and providing adequate
water supply to the populace. Had it only been the former, the
government under the Constitution is permitted to enter into joint
venture agreements with those entities qualified under Sec. 2, Art. XII
of the Constitution. However, the latter are necessary government
functions which the government cannot devolve to private entities,
including Filipino citizens and corporations.
It leads Us then to conclude that the pivotal provisions of the O&M
Agreement entered into with K-Water, specifically those referring to the
operation of Angat Dam, are repugnant to the letter and spirit of the
1987 Constitution.104 The control and supervision of such areas must
at all times be under the direct control and supervision of the
government.
The maintenance of the dam, however, is a different matter. It is a
proprietary function that the government may assign or impose to
private entities. In the case here, We find it just to impose such duty to
maintain the facility to the buyer of AHEPP, as it is in the best interest
of the operations of AHEPP to ensure the optimal conditions of the
structures of the dam. The performance of this duty, however, must still
be under the supervision of the government.
In view of the urgency and time constraints in the privatization of
AHEPP, PSALM has the option to award the sale of AHEPP to any of
the losing qualified bidders, provided that the Angat Water Protocol is
executed and signed by all the concerned government agencies and
that the
Operations & Maintenance Agreement shall contain the provision that
the operation of the Angat Dam, and the non-power components shall
remain with the government while the maintenance and repair of the
Dam and other non-power components shall be shouldered by the
winning bidder, under the supervision and control of the government.
For the foregoing reasons, I vote to GRANT the Petition. The following
dispositions are in order:
(1) PSALM should FURNISH the petitioners with copies of
official documents, acts, and records relating to the bidding
process for AHEPP;
(2) The award by PSALM of the AHEPP to K-Water is NULL
AND VOID and UNCONSTITUTIONAL, as K-Water
is DISQUALIFIED from participating in the bidding to
privatize AHEPP. Accordingly, the APA and O&M
Agreement entered into between PSALM and K-Water
should be declared NULL AND VOID for being repugnant to
Sec. 2, Art. XII of the Constitution; PSALM should
be PERMANENTLY ENJOINED from further pursuing the
sale of AHEPP in favor of K-Water; and from further
pursuing the sale of AHEPP in favor of K-Water; and
(3) ONLY Filipino citizens and corporations at least sixty per
centum (60%) of whose capital is owned by Filipinio citizens
are QUALIFIED to participate in the bidding for the sale of
AHEPP.
PRESBITERO J. VELASCO, JR.
Associate Justice
G.R. No. 194336 March 11, 2013
PILAR DEVELOPMENT CORPORATION, Petitioner,
vs.
RAMON DUMADAG, EMMA BACABAC, RONALDO NAVARRO,
JIMMY PAGDALIAN, PAY DELOS SANTOS, ARMANDO TRILLOS,
FELICISIMO TRILLOS, ARCANGEL FLORES, EDDIE MARTIN,
PRESILLA LAYOG, CONRADO CAGUYONG, GINA GONZALES,
ARLENE PEDROSA, JOCELYN ABELINO, ROQUE VILLARAZA,
ROLANDO VILLARAZA, CAMILO GENOVE, NILDA ROAYANA,
SUSAN ROAYANA, JUANCHO PANGANIBAN, BONG DE
GUZMAN, ARNOLD ENVERSO, DONNA DELA RAZA, EMELYN
HAGNAYA, FREDDIE DE LEON, RONILLO DE LEON, MARIO
MARTINEZ, and PRECY LOPEZ, Respondents.
DECISION
37
PERALTA, J.:
Challenged in this petition for review on certiorari under Rule 45 of the
Rules of Civil Procedure are the March 5, 2010 Decision1 and October
29, 2010 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No.
90254, which affirmed the May 30, 2007 Decision3 of the Las Piñas
Regional Trial Court, Branch 197 (trial court) dismissing the complaint
filed by petitioner.
On July 1, 2002, petitioner filed a Complaint4 for accion publiciana with
damages against respondents for allegedly building their shanties,
without its knowledge and consent, in its 5,613-square-meter property
located at Daisy Road, Phase V, Pilar Village Subdivision, Almanza,
Las
10111 of Commonwealth Act (C.A.) No. 141 (otherwise known as The
Public Land Act).
The motion for reconsideration filed by petitioner was denied by the CA
per Resolution dated October 29, 2010, hence, this petition.
Anchoring its pleadings on Article 63012 of the Code, petitioner argues
that although the portion of the subject property occupied by
respondents is within the 3-meter strip reserved for public easement, it
still retains ownership thereof since the strip does not form part of the
public dominion. As the owner of the subject parcel of land, it is entitled
to its lawful possession, hence, the proper party to file an action for
recovery of possession against respondents conformably with Articles
42813 and 53914 of Code.

Piñas City. It claims that said parcel of land, which is duly registered in We deny.
its name under Transfer Certificate of Title No. 481436 of the Register
of Deeds for the Province of Rizal, was designated as an open space
An easement or servitude is a real right on another's property,
of Pilar Village Subdivision intended for village recreational facilities
corporeal and immovable, whereby the owner of the latter must refrain
and amenities for subdivision residents.5 In their Answer with
from doing or allowing somebody else to do or something to be done
Counterclaim,6 respondents denied the material allegations of the
on his or her property, for the benefit of another person or tenement; it
Complaint and briefly asserted that it is the local government, not
is jus in re aliena, inseparable from the estate to which it actively or
petitioner, which has jurisdiction and authority over them.
passively belongs, indivisible, perpetual, and a continuing property
right, unless extinguished by causes provided by law.15 The Code
Trial ensued. Both parties presented their respective witnesses and the defines easement as an encumbrance imposed upon an immovable for
trial court additionally conducted an ocular inspection of the subject the benefit of another immovable belonging to a different owner or for
property. the benefit of a community, or of one or more persons to whom the
encumbered estate does not belong.16 There are two kinds of
easement according to source: by law or by will of the owners – the
On May 30, 2007, the trial court dismissed petitioner’s complaint,
former are called legal and the latter voluntary easement.17 A legal
finding that the land being occupied by respondents are situated on the
easement or compulsory easement, or an easement by necessity
sloping area going down and leading towards the Mahabang Ilog
constituted by law has for its object either public use or the interest of
Creek, and within the three-meter legal easement; thus, considered as
private persons.18
public property and part of public dominion under Article 5027of the
New Civil Code (Code), which could not be owned by petitioner. The
court held: While Article 630 of the Code provides for the general rule that "the
owner of the servient estate retains the ownership of the portion on
which the easement is established, and may use the same in such a
x x x The land title of [petitioner] only proves that it is the owner in fee
manner as not to affect the exercise of the easement," Article 635
simple of the respective real properties described therein, free from all
thereof is specific in saying that "all matters concerning easements
liens and encumbrances, except such as may be expressly noted
established for public or communal use shall be governed by the
thereon or otherwise reserved by law x x x. And in the present case,
special laws and regulations relating thereto, and, in the absence
what is expressly reserved is what is written in TCT No. T-481436, to
thereof, by the provisions of this Title Title VII on Easements or
wit "that the 3.00 meter strip of the lot described herein along the
Servitudes."
Mahabang Ilog Creek is reserved for public easement purposes. (From
OCT 1873/A-50) and to the limitations imposed by Republic Act No.
440. x x x"8 In the case at bar, the applicability of DENR A.O. No. 99-21 dated
June 11, 1999, which superseded DENR A.O. No. 97-0519 dated
March 6, 1997 and prescribed the revised guidelines in the
The trial court opined that respondents have a better right to possess
implementation of the pertinent provisions of Republic Act (R.A.) No.
the occupied lot, since they are in an area reserved for public
1273 and Presidential Decree (P.D.) Nos. 705 and 1067, cannot be
easement purposes and that only the local government of Las Piñas
doubted. Inter alia, it was issued to further the government’s program
City could institute an action for recovery of possession or ownership.
of biodiversity preservation. Aside from Section 2.1 above-quoted,
Section 2.3 of which further mandates:
Petitioner filed a motion for reconsideration, but the same was denied
by the trial court in its Order dated August 21, 2007.9 Consequently,
2.3 Survey of Titled Lands:
petitioner elevated the matter to the Court of Appeals which, on March
5, 2010, sustained the dismissal of the case.
2.3.1 Administratively Titled Lands:
10
Referring to Section 2 of Administrative Order (A.O.) No. 99-21 of the
Department of Environment and Natural Resources (DENR), the The provisions of item 2.1.a and 2.1.b shall be observed as the above.
appellate court ruled that the 3-meter area being disputed is located However, when these lands are to be subdivided, consolidated or
along the creek which, in turn, is a form of a stream; therefore, consolidated-subdivided, the strip of three (3) meters which falls within
belonging to the public dominion. It said that petitioner could not close urban areas shall be demarcated and marked on the plan for
its eyes or ignore the fact, which is glaring in its own title, that the 3- easement and bank protection.
meter strip was indeed reserved for public easement. By relying on the
TCT, it is then estopped from claiming ownership and enforcing its
The purpose of these strips of land shall be noted in the technical
supposed right. Unlike the trial court, however, the CA noted that the
description and annotated in the title.
proper party entitled to seek recovery of possession of the contested
portion is not the City of Las Piñas, but the Republic of the Philippines,
through the Office of the Solicitor General (OSG), pursuant to Section xxxx

38
2.3.3 Complex Subdivision or Consolidation Subdivision Surveys for
Housing/Residential, Commercial or Industrial Purposes:
When titled lands are subdivided or consolidated-subdivided into lots
for residential, commercial or industrial purposes the segregation of the
three (3) meter wide strip along the banks of rivers or streams shall be
observed and be made part of the open space requirement pursuant to
P.D. 1216.
Housing Authority, shall implement the relocation and resettlement of
persons living in danger areas such as esteros, railroad tracks,
garbage dumps, riverbanks, shorelines, waterways, and in other public
places such as sidewalks, roads, parks and playgrounds. The local
government unit, in coordination with the National Housing Authority,
shall provide relocation or resettlement sites with basic services and
facilities and access to employment and livelihood opportunities
sufficient to meet the basic needs of the affected families.1âwphi1

Section 30. Prohibition Against New Illegal Structures. - It shall be

The strip shall be preserved and shall not be subject to subsequent
unlawful for any person to construct any structure in areas mentioned
subdivision. (Underscoring supplied)
in the preceding section. After the effectivity of this Act, the barangay,
municipal or city government units shall prevent the construction of any
Certainly, in the case of residential subdivisions, the allocation of the 3- kind or illegal dwelling units or structures within their respective
meter strip along the banks of a stream, like the Mahabang Ilog Creek localities. The head of any local government unit concerned who
in this case, is required and shall be considered as forming part of the allows, abets or otherwise tolerates the construction of any structure in
open space requirement pursuant to P.D. 1216 dated October 14, violation of this section shall be liable to administrative sanctions under
1977.20 Said law is explicit: open spaces are "for public use and are, existing laws and to penal sanctions provided for in this Act.
therefore, beyond the commerce of men" and that "[the] areas
reserved for parks, playgrounds and recreational use shall be non-
Yet all is not lost for petitioner. It may properly file an action for
alienable public lands, and non-buildable."
mandamus to compel the local government of Las Piñas City to
enforce with reasonable dispatch the eviction, demolition, and
Running in same vein is P.D. 1067 or The Water Code of the relocation of respondents and any other persons similarly situated in
Philippines21 which provides: order to give flesh to one of the avowed policies of R.A. 7279, which is
to reduce urban dysfunctions, particularly those that adversely affect
public health, safety, and ecology.28
Art. 51. The banks of rivers and streams and the shores of the seas
and lakes throughout their entire length and within a zone of three (3)
meters in urban areas, twenty (20) meters in agricultural areas and Indeed, as one of the basic human needs, housing is a matter of state
forty (40) meters in forest areas, along their margins, are subject to the concern as it directly and significantly affects the general welfare. 29
easement of public use in the interest of recreation, navigation,
floatage, fishing and salvage. No person shall be allowed to stay in this
WHEREFORE, the petition is DENIED. The March 5, 2010 Decision
zone longer than what is necessary for recreation, navigation, floatage,
and October 29, 2010 Resolution of the Court of Appeals in CA-G.R.
fishing or salvage or to build structures of any kind. (Underscoring
CV No. 90254, which affirmed the May 30, 2007 Decision of the Las
supplied)
Piñas RTC, Branch 197, dismissing petitioner's complaint, is hereby
AFFIRMED.
Thus, the above prove that petitioner’s right of ownership and
possession has been limited by law with respect to the 3-meter
SO ORDERED.
strip/zone along the banks of Mahabang Ilog Creek. Despite this, the
Court cannot agree with the trial court’s opinion, as to which the CA did
not pass upon, that respondents have a better right to possess the Footnotes
subject portion of the land because they are occupying an area
reserved for public easement purposes. Similar to petitioner, 7
respondents have no right or title over it precisely because it is public Art. 502 of the New Civil Code provides:
land. Likewise, we repeatedly held that squatters have no possessory
rights over the land intruded upon.22 The length of time that they may Art. 502. The following are of public dominion:
have physically occupied the land is immaterial; they are deemed to
have entered the same in bad faith, such that the nature of their
possession is presumed to have retained the same character (1) Rivers and their natural beds;
throughout their occupancy.23
(2) Continuous or intermittent waters of springs and brooks
As to the issue of who is the proper party entitled to institute a case running in their natural beds and the beds themselves;
with respect to the 3-meter strip/zone, We find and so hold that both
the Republic of the Philippines, through the OSG and the local (3) Waters rising continuously or intermittently on lands of
government of Las Piñas City, may file an action depending on the public dominion;
purpose sought to be achieved. The former shall be responsible in
case of action for reversion under C.A. 141, while the latter may also
bring an action to enforce the relevant provisions of Republic Act No. (4) Lakes and lagoons formed by Nature on public lands,
7279 (otherwise known as the Urban Development and Housing Act of and their beds;
1992).24 Under R.A. 7279, which was enacted to uplift the living
conditions in the poorer sections of the communities in urban areas (5) Rain waters running through ravines or sand beds, which
and was envisioned to be the antidote to the pernicious problem of are also of public dominion;
squatting in the metropolis,25 all local government units (LGUs) are
mandated to evict and demolish persons or entities occupying danger
areas such as esteros, railroad tracks, garbage dumps, riverbanks, (6) Subterranean waters on public lands;
shorelines, waterways, and other public places such as sidewalks,
roads, parks, and playgrounds.26 Moreover, under pain of (7) Waters found within the zone of operation of public
administrative and criminal liability in case of non-compliance,27 it works, even if constructed by a contractor;
obliges LGUs to strictly observe the following:

(8) Waters rising continuously or intermittently on lands

Section 29. Resettlement. - Within two (2) years from the effectivity of belonging to private persons, to the State, to a province, or
this Act, the local government units, in coordination with the National

39
 to a city or a municipality from the moment they leave such
lands;
(9) The waste waters of fountains, sewers and public
establishments.
10
Sec. 2 of DENR A.O. No. 99-21 states as follows:
2.1 Original Surveys:
2.1.a Public Lands:
All alienable and disposable (A and D) lands of the public
domain shall be surveyed pursuant to Section 1 Par. (1) of
R.A. 1273 [C.A. No. 141, Section 90(i)] whereby a strip of
forty (40) meters wide starting from the banks on each side
of any river or stream that may be found on the land shall be
demarcated and preserved as permanent timberland.
Likewise, to be demarcated are public lands along the banks
of rivers and streams and the shores of the seas and lakes
throughout their entire length and within a zone of three (3)
meters in urban areas, twenty (20) meters in agricultural
areas and forty (40) meters in forest area, along their
margins which are subject to the easement for public use in
the interest of recreation, navigation, floatage, fishing and
salvage.
11
Sec. 101. All actions for the reversion to the Government of lands of
the public domain or improvements thereon shall be instituted by the
Solicitor-General or the officer acting in his stead, in the proper courts,
in the name of the [Republic] of the Philippines.
12
Art. 630. The owner of the servient estate retains the ownership of
the portion on which the easement is established, and may use the
same in such a manner as not to affect the exercise of the easement.
13
Art. 428. The owner has the right to enjoy and dispose of a thing,
without other limitations than those established by law.
The owner has also a right of action against the holder and
possessor of the thing in order to recover it.
14
Art. 539. Every possessor has a right to be respected in his
possession; and should he be disturbed therein he shall be protected
in or restored to said possession by the means established by the laws
and the Rules of Court.
A possessor deprived of his possession through forcible
entry may within ten days from the filing of the complaint
present a motion to secure from the competent court, in the
action for forcible entry, a writ of preliminary mandatory
injunction to restore him in his possession. The court shall
decide the motion within thirty (30) days from the filing
thereof.
15
Villanueva v. Velasco, 399 Phil. 664, 672 (2000) and Quimen v.
Court of Appeals, 326 Phil. 969, 976-977 (1996).
16
CIVIL CODE, Arts. 613 and 614.
17
CIVIL CODE, Art. 619. See also Castro v. Monsod, G.R. No.
183719, February 2, 2011, 641 SCRA 486, 493-494.
18
CIVIL CODE, Art. 634, NCC. See also Woodridge School, Inc. v.
ARB Construction Co., Inc., G.R. No. 157285, February 16, 2007, 516
SCRA 176, 183; Villanueva v. Velasco, supra note 15; La Vista
Association, Inc. v. Court of Appeals, 311 Phil. 30, 46 (1997) and
Quimen v. Court of Appeals, supra note 15, at 977.
19
Entitled Procedures in the Retention of Areas Within Certain
Distances Along the Banks of Rivers, Streams, and Shores of Seas,
Lakes and Oceans for Environmental Protection.
20
P.D. 1216 is entitled Defining "Open Space" in Residential
Subdivisions and Amending Section 31 of Presidential Decree No. 957
Requiring Subdivision Owners to Provide Roads, Alleys, Sidewalks
and Reserve Open Space for Parks or Recreational Use.
21
Entitled A Decree Instituting a Water Code, thereby Revising and
Consolidating the Laws Governing the Ownership, Appropriation,
Utilization, Exploitation, Development, Conservation and Protection of
Water Resources, dated December 31, 1976.
22
D'Oro Land Realty and Development Corporation v. Claunan, 545
Phil. 573, 583-584 (2007); De Vera-Cruz v. Miguel, 505 Phil. 591, 607
(2005); and Pendot v. Court of Appeals, 254 Phil. 19, 28 (1989).
23
D'Oro Land Realty and Development Corporation v. Claunan, supra
note 22, at 584.
24
Approved on March 24, 1992 and published in the May 4, 1992 issue
of the Official Gazette. (Macasiano v. National Housing Authority, G.R.
No. 107921, July 1, 1993, 224 SCRA 236, 239).
25
Galay v. Court of Appeals, 321 Phil. 224, 226 (1995).
26
R.A. 7279, Sec. 28 (a).
27
Dec. 45 of R.A. No. 7279 provides:
Section 45. Penalty Cause. - Any person who violates any
provision of this Act shall be imposed the penalty of not more
than six (6) years of imprisonment or a fine of not less than
Five thousand pesos (₱5,000) but not more than One
hundred thousand pesos (₱100,000), or both, at the
discretion of the court:
Provided, That, if the offender is a corporation, partnership,
association or other juridical entity, the penalty shall be
imposed on the officer or officers of said corporation,
partnership, association or juridical entity who caused the
violation.
G.R. No. 163118 April 27, 2007
DORIS CHIONGBIAN-OLIVA, Petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, THE DEPARTMENT OF
ENVIRONMENT AND NATURAL RESOURCES AND THE
REGISTER OF DEEDS OF CEBU CITY, Respondents.
DECISION
QUISUMBING, J.:
This petition for certiorari assails (1) the Decision1 dated August 7,
2003 of the Court of Appeals in CA-G.R. CV. No. 74409, reversing the
Decision2 dated December 13, 2001 of the Regional Trial Court of
Cebu City, Branch 12 in SP. Proc. No. 10746-CEB, and (2) the
Resolution3 dated March 17, 2004, denying the motion for
reconsideration.
40
The following facts are undisputed.
Petitioner Doris Chiongbian-Oliva is the registered owner of a parcel of
land in Talamban, Cebu City, as evidenced by Transfer Certificate of
Title (TCT) No. 5455.4 This title originated from Original Certificate of
Title (OCT) No. 1066 from a free patent granted on September 11,
1969 under Commonwealth Act No. 141,5 as amended. The free
patent, OCT No. 1066, and TCT No. 5455 contained the condition that
a forty-meter legal easement from the bank of any river or stream shall
be preserved as permanent timberland.6
On October 1, 2001, petitioner filed a petition for reduction of legal
easement docketed as SP. Proc. No. 10746-CEB before the Regional
Trial Court of Cebu City, Branch 12. Petitioner alleged that the property
is residential as shown by the tax declaration7 and the Certification8 of
the Office of the City Assessor. Thus, the applicable legal easement is
only three meters pursuant to Department of Environment and Natural
Resources (DENR) Administrative Order No. 99-21,9 and not forty
meters, which applies to timberlands and forest lands. Petitioner also
alleged that enforcing the forty-meter legal easement would virtually
deprive her of the use and enjoyment of the property since it consists
only of 1,000 square meters.
The DENR countered that the property is inalienable. It also claimed
that the applicant agreed on the forty-meter legal easement when the
free patent was applied for.
The trial court ruled in favor of petitioner. It said that there is no longer
any reason for the forty-meter legal easement because the property
had been transformed into residential land and the area where it is
located has been reclassified as urban. Applying DENR A.O. No. 99-
21, the applicable legal easement is only three meters. The decision’s
decretal portion states:
WHEREFORE, premises considered, it is hereby ordered that the legal
encumbrance of forty (40) meters for river bank protection annotated
on Petitioner’s Transfer Certificate of Title No. 5455 be reduced to the
applicable legal easement of three (3) meters in accordance with law.
Accordingly, the Register of Deeds of Cebu City is hereby directed to
cancel the above legal encumbrance of forty (40) meters annotated on
Petitioner’s Transfer Certificate of Title No. 5455 and in lieu thereof,
annotate the applicable legal encumbrance of three (3) meters for river
bank protection.
SO ORDERED.10
On appeal, the Court of Appeals reversed the trial court’s decision. It
upheld the DENR’s claim that the property was inalienable.
Accordingly, a positive act of the government was necessary to
declassify it from forest land to alienable land. Declaration of the
property as residential in the tax declaration and reclassification of the
area where it is located as urban were insufficient bases to reclassify
the property. The fallo of the appellate court’s decision reads:
WHEREFORE, premises considered, the Decision dated December
13, 2001, of the Regional Trial Court, 7th Judicial Region, Branch 12,
Cebu City, in SP. PROC. NO. 10746-CEB, is hereby REVERSED and
SET ASIDE. No pronouncement as to costs.
SO ORDERED.11
The appellate court later denied petitioner’s motion for reconsideration.
Petitioner now raises the following issues:
I.
WHETHER OR NOT PETITIONER’S LOT COVERED BY THE LEGAL
ENCUMBRANCE IS A PUBLIC LAND/LAND OF THE PUBLIC
DOMAIN (AND THUS, CANNOT BE RECLASSIFIED EXCEPT BY
THE EXECUTIVE DEPARTMENT) OF THE GOVERNMENT, OR A
PRIVATE LAND.
II.
WHETHER OR NOT THE TRIAL COURT IS CORRECT IN TAKING
JUDICIAL NOTICE OF THE FACT THAT PETITIONER’S LOT
COVERED BY TCT NO. 5455 IS SITUATED IN AN URBAN AREA
AND NOT IN A FOREST AREA, AND IN THUS CONCLUDING THAT
THE LEGAL EASEMENT APPLICABLE FOR RIVER BANK
PROTECTION IS THREE (3) METERS AND NOT FORTY (40)
METERS.
III.
WHETHER OR NOT SECTION 90(i) OF C.A. NO. 141 WHICH
PROVIDES FOR A UNIFORM EASEMENT OF FORTY (40) METERS
FROM THE BANK ON EACH SIDE OF ANY RIVER, AND WHICH
PRESERVES THE SAID 40-METER PORTION AS PERMANENT
TIMBERLAND REGARDLESS OF WHETHER IT IS SITUATED IN A
FOREST AREA OR AN URBAN AREA, IS STILL APPLICABLE TO
LOTS SITUATED IN AN URBAN AREA IN THE LIGHT OF THE
PROVISIONS OF SUBSEQUENT LEGISLATION, SPECIFICALLY
SECTION 51 OF P.D. NO. 1067.12
Simply stated, the issues are: (1) Is the property public or private land?
and (2) Is the applicable legal easement forty or three meters?
On the first issue, C.A. No. 141, as amended, provides that lands of
the public domain may be classified by the President, upon the
recommendation of the Secretary of Environment and Natural
Resources, into: (1) alienable or disposable; (2) timber; and (3) mineral
lands.13 However, only alienable or disposable lands may be disposed
of through any of the forms of concession enumerated in the law.14 A
free patent is one of such concessions15 and once it is registered and
the corresponding certificate of title issued, the land covered by them
ceases to be part of the public domain and becomes private property. 16
Verily, by the issuance of a free patent on September 11, 1969, and
the subsequent issuance of OCT No. 1066 and TCT No. 5455, the
property in this case had become private land. It is inconsistent for an
alienable land of the public domain to be covered by a free patent and
at the same time retain its character as public land.
On the second issue, Section 90(i) of C.A. No. 141 requires that a
forty-meter legal easement from the bank of any river or stream shall
be preserved as permanent timberland. More specifically, it provides:
(i) That the applicant agrees that a strip forty meters wide starting from
the bank on each side of any river or stream that may be found on the
land applied for, shall be demarcated and preserved as permanent
timberland to be planted exclusively to trees of known economic value,
and that he shall not make any clearing thereon or utilize the same for
ordinary farming purposes even after patent shall have been issued to
him or a contract of lease shall have been executed in his favor.
(Emphasis supplied.)
To implement this, the DENR promulgated A.O. No. 99-21 which
provides the guidelines in the processing, verification, and approval of
isolated and cadastral surveys. Pertinent to this case are the following
provisions:
2.1 Original Surveys:
2.1.a Public Lands:
41
All alienable and disposable (A and D) lands of the public domain shall
be surveyed pursuant to Section 1 Par. (1) of R.A. 1273 [C.A. No. 141,
Section 90(i)] whereby a strip of forty (40) meters wide starting from
the banks on each side of any river or stream that may be found on the
land shall be demarcated and preserved as permanent timberland.
Likewise, to be demarcated are public lands along the banks of rivers
and streams and the shores of the seas and lakes throughout their
entire length and within a zone of three (3) meters in urban areas,
twenty (20) meters in agricultural areas and forty (40) meters in forest
area, along their margins which are subject to the easement for public
use in the interest of recreation, navigation, floatage, fishing and
salvage.
xxxx
2.3 Survey of Titled Lands:
2.3.1 Administratively Titled Lands:
The provisions of item 2.1.a and 2.1.b shall be observed as the above.
However, when these lands are to be subdivided, consolidated or
consolidated-subdivided, the strip of three (3) meters which falls within
urban areas shall be demarcated and marked on the plan for
easement and bank protection.
The purpose of these strips of land shall be noted in the technical
description and annotated in the title.
xxxx
Running in parallel vein is the Water Code of the Philippines17 which
provides:
Art. 51. The banks of rivers and streams and the shores of the seas
and lakes throughout their entire length and within a zone of three (3)
meters in urban areas, twenty (20) meters in agricultural areas and
forty (40) meters in forest areas, along their margins, are subject to the
easement of public use in the interest of recreation, navigation,
floatage, fishing and salvage. No person shall be allowed to stay in this
zone longer than what is necessary for recreation, navigation, floatage,
fishing or salvage or to build structures of any kind.
Since the property in this case was originally alienable land of the
public domain, the application for free patent contained the condition
that a forty-meter legal easement from the banks on each side of any
river or stream found on the land shall be demarcated and preserved
as permanent timberland. However, after the property was
administratively titled, it underwent several surveys for purposes of
subdivision, consolidation, or consolidation-subdivision as evidenced
by TCT No. 5455. This title provides that it is a transfer from TCT Nos.
3975 and 436018and describes the property as Lot 2 of the
consolidation-subdivision plan Pcs-07-002121, being a portion of Lot 6
and 7 Pcs-07-000974.19 Thus, presently only three meters is required
to be demarcated and preserved as permanent timberland.
In this case, the trial court properly took judicial notice that Talamban,
Cebu City is an urban area. Judicial notice is the cognizance of certain
facts which judges may properly take and act on without proof because
they already know them.20 A municipal jurisdiction, whether designated
as chartered city or provincial capital, is considered as urban in its
entirety if it has a population density of at least 1,000 persons per
square kilometer.21 The City of Cebu was created on October 20, 1934
under Commonwealth Act No. 58.22 It is a highly urbanized city
classified as entirely urban.23 Thus, all its barangays, including
Talamban, are considered urban.
Conformably with the foregoing considerations, the reduction of the
legal easement of forty meters on petitioner’s property covered by TCT
No. 5455 to three meters now is in order.
WHEREFORE, the instant petition is GRANTED. The assailed
Decision dated August 7, 2003 and Resolution dated March 17, 2004
of the Court of Appeals in CA-G.R. CV. No. 74409 are REVERSED,
and the Decision dated December 13, 2001 of the Regional Trial Court
of Cebu City, Branch 12 in SP. Proc. No. 10746-CEB is REINSTATED.
SO ORDERED.
Footnotes
6
Inserted by Republic Act No. 1273, Section 1, approved on June 14,
1955.
SECTION 1. Section ninety of Commonwealth Act
Numbered One hundred forty-one, otherwise known as the
"Public Land Act", is hereby amended by adding the
following subsection at the end thereof:
"(i) That the applicant agrees that a strip forty meters wide
starting from the bank on each side of any river or stream
that may be found on the land applied for, shall be
demarcated and preserved as permanent timberland to be
planted exclusively to trees of known economic value, and
that he shall not make any clearing thereon or utilize the
same for ordinary farming purposes even after patent shall
have been issued to him or a contract of lease shall have
been executed in his favor."
xxxx
16
Republic v. Heirs of Felipe Alejaga, Sr., G.R. No. 146030, December
3, 2002, 393 SCRA 361, 373; See Heirs of Carlos Alcaraz v. Republic,
G.R. No. 131667, July 28, 2005, 464 SCRA 280, 291, citing Baguio v.
Republic of the Philippines, 361 Phil. 374, 379 (1999).
17
Presidential Decree No. 1067. A Decree Instituting A Water Code,
Thereby Revising And Consolidating The Laws Governing The
Ownership, Appropriation, Utilization, Exploitation, Development,
Conservation And Protection Of Water Resources, done on December
31, 1976.
20
Habagat Grill v. DMC-Urban Property Developer, Inc., G.R. No.
155110, March 31, 2005, 454 SCRA 653, 668; See People v. Rullepa,
G.R. No. 131516, March 5, 2003, 398 SCRA 567, 586; People v.
Tundag, G.R. Nos. 135695-96, October 12, 2000, 342 SCRA 704, 716.
21
National Statistical Coordination Board, Active Stats, Philippine
Standard Geographic Code, Articles, Concepts and Definitions, at
http://www.nscb.gov.ph/data/pressrelease/2003/pr0382tx.html> (visited
October 12, 2005). The Philippine Standard Geographic Code (PSGC)
is a comprehensive geographical classification which serves as a tool
for ensuring the comparability of statistics relating to the geographical
areas of the country (See Commission on Information and
Communications Technology – National Computer Center, Plans
Review and Monitoring Office, Report on National Government
Agencies (NGAs) with Online Services (Stage 3) as of July 2005, at
http://www.ncc.gov.ph/files/stage3july2005.pdf> (visited October 12,
2005).
22
See Republic Act No. 3857. An Act to Revise the Charter of the City
of Cebu, approved on June 10, 1964.
42
23
National Statistics Office, Results from the 2000 Census of
Population and Housing, Philippines: Urban Population was Registered
at 48.05 Percent, Press Release No. 2003-82, October 10, 2003, at
http://www.census.gov.ph/data/pressrelease/2003/pr0382tx.html>
(visited October 12, 2005); See National Statistical Coordination
Board, Active Stats, Philippine Standard Geographic Code Interactive,
Municipality, at
http://www.nscb.gov.ph/activestats/psgc/municipality.asp?muncode=07
2217000&regcod=07&provcode=22> (visited October 12, 2005).
G.R. No. 186450 April 14, 2010
NATIONAL WATER RESOURCES BOARD (NWRB), Petitioner,
vs.
A. L. ANG NETWORK, INC., Respondent.
DECISION
CARPIO MORALES, J.:
In issue is whether Regional Trial Courts have jurisdiction over appeals
from decisions, resolutions or orders of the National Water Resources
Board (petitioner).
A.L. Ang Network (respondent) filed on January 23, 2003 an
application for a Certificate of Public Convenience (CPC) with
petitioner to operate and maintain a water service system in Alijis,
Bacolod City.
Bacolod City Water District (BACIWA) opposed respondent’s
application on the ground that it is the only government agency
authorized to operate a water service system within the city. 1
By Decision of August 20, 2003, petitioner granted respondent’s CPC
application. BACIWA moved to have the decision reconsidered,
contending that its right to due process was violated when it was not
allowed to present evidence in support of its opposition. 2
Petitioner reconsidered its Decision and allowed BACIWA to present
evidence,3 drawing respondent to file a petition for certiorari with the
Regional Trial Court (RTC) of Bacolod City against petitioner and
BACIWA. Petitioner moved to dismiss the petition, arguing that the
proper recourse of respondent was to the Court of Appeals, citing Rule
43 of the Rules of Court.
The RTC, by Order of April 15, 2005,4 dismissed respondent’s petition
for lack of jurisdiction, holding that it is the Court of Appeals which has
"exclusive appellate jurisdiction over all final judgments, decisions,
resolutions, order[s] or awards of . . . quasi-judicial agencies,
instrumentalities, boards or commission[s] . . . except those within the
appellate jurisdiction of the Supreme Court . . . ." Thus the RTC
explained:
Art. 89 of P.D. 1067 having been long repealed by BP 129, as
amended, which has effectively and explicitly removed the Regional
Trial Courts’ appellate jurisdiction over the decisions, resolutions,
order[s] or awards of quasi-judicial agencies such as [petitioner]
NWRB, and vested with the Court of Appeals, very clearly now, this
Court has no jurisdiction over this instant petition.
Its motion for reconsideration having been denied, respondent filed a
petition for certiorari at the Court of Appeals, which, by Decision of
January 25, 2008,5 annulled and set aside the RTC April 15, 2005,
holding that it is the RTC which has jurisdiction over appeals from
petitioner’s decisions. Thus the appellate court discoursed.
In the analogous case of BF Northwest Homeowners Association, Inc.
vs. Intermediate Appellate Court[,] the Supreme Court . . . categorically
pronounced the RTC’s jurisdiction over appeals from the decisions of
the NWRB consistent with Article 89 of P.D. No. 1067 and ratiocinated
in this wise:
x x x x.
The logical conclusion, therefore, is that jurisdiction over actions
for annulment of NWRC decisions lies with the Regional Trial Courts,
particularly, when we take note of the fact that the appellate jurisdiction
of the Regional Trial Court over NWRC decisions covers such broad
and all embracing grounds as grave abuse of discretion, questions of
law, and questions of fact and law (Art. 89, P.D. No. 1067). This
conclusion is also in keeping with the Judiciary Reorganization Act of
1980, which vests Regional Trial Courts with original jurisdiction to
issue writs of certiorari, prohibition, mandamus, etc. (Sec. 21 [1], B.P.
Blg. 129) relating to acts or omissions of an inferior court (Sec. 4, Rule
65, Rules of Court).
x x x x.
Similarly, in Tanjay Water District vs. Pedro Gabaton, the Supreme
Court conformably ruled, viz:
"Inasmuch as Civil Case No. 8144 involves the appropriation,
utilization and control of water, We hold that the jurisdiction to hear and
decide the dispute in the first instance, pertains to the Water
Resources Council as provided in PD No. 1067 which is the special
law on the subject. The Court of First Instance (now Regional Trial
Court) has only appellate jurisdiction over the case."
Based on the foregoing jurisprudence, there is no doubt that
[petitioner] NWRB is mistaken in its assertion. As no repeal is
expressly made, Article 89 of P.D. No. 1067 is certainly meant to be an
exception to the jurisdiction of the Court of Appeals over appeals or
petitions for certiorari of the decisions of quasi-judicial bodies. This
finds harmony with Paragraph 2, Section 4, Rule 65 of the Rules of
Court wherein it is stated that, "If it involves the acts of a quasi-judicial
agency, unless otherwise provided by law or these rules, the petition
shall be filed in and cognizable only by the Court of Appeals."
Evidently, not all petitions for certiorari under Rule 65 involving the
decisions of quasi-judicial agencies must be filed with the Court of
Appeals. The rule admits of some exceptions as plainly provided by
the phrase "unless otherwise provided by law or these rules"
and Article 89 of P.D. No. 1067 is verily an example of these
exceptions. (italics and emphasis partly in the original; underscoring
supplied)
Petitioner’s motion for reconsideration having been denied by the
appellate court by Resolution of February 9, 2009,6 petitioner filed the
present petition for review, contending that:
THE REGIONAL TRIAL COURT HAS NO CERTIORARI
JURISDICTION OVER THE [PETITIONER] SINCE SECTION 89, PD
NO. 1067, REGARDING APPEALS, HAS BEEN SUPERSEDED AND
REPEALED BY [BATAS PAMBANSA BILANG] 129 AND THE RULES
OF COURT. FURTHERMORE, PD 1067 ITSELF DOES NOT
CONTEMPLATE THAT THE REGIONAL TRIAL COURT SHOULD
HAVE CERTIORARI JURISDICTION OVER THE
[PETITIONER].7 (underscoring supplied)
Petitioner maintains that the RTC does not have jurisdiction over a
petition for certiorari and prohibition to annul or modify its acts or
omissions as a quasi-judicial agency. Citing Section 4 of Rule 65 of the
Rules of Court, petitioner contends that there is no law or rule which
requires the filing of a petition for certiorari over its acts or omissions in
any other court or tribunal other than the Court of Appeals.8
43
Petitioner goes on to fault the appellate court in holding that Batas
Pambansa Bilang 129 (BP 129) or the Judiciary Reorganization Act did
not expressly repeal Article 89 of Presidential Decree No. 1067 (PD
1067) otherwise known as the Water Code of the Philippines. 9
Respondent, on the other hand, maintains the correctness of the
assailed decision of the appellate court.
The petition is impressed with merit.
Section 9 (1) of BP 129 granted the Court of Appeals (then known as
the Intermediate Appellate Court) original jurisdiction to issue writs of
mandamus, prohibition, certiorari, habeas corpus and quo warranto,
and auxiliary writs or processes, whether or not in aid of its appellate
jurisdiction.10
Since the appellate court has exclusive appellate jurisdiction over
quasi-judicial agencies under Rule 4311 of the Rules of Court, petitions
for writs of certiorari, prohibition or mandamus against the acts and
omissions of quasi-judicial agencies, like petitioner, should be filed with
it. This is what Rule 65 of the Rules imposes for procedural uniformity.
The only exception to this instruction is when the law or the Rules itself
directs otherwise, as cited in Section 4, Rule 65.12 The appellate
court’s construction that Article 89 of PD 1067, which reads:
ART. 89. The decisions of the [NWRB] on water rights controversies
may be appealed to the [RTC] of the province where the subject matter
of the controversy is situated within fifteen (15) days from the date the
party appealing receives a copy of the decision, on any of the following
grounds: (1) grave abuse of discretion; (2) question of law; and (3)
questions of fact and law (emphasis and underscoring supplied), is
such an exception, is erroneous.
Article 89 of PD 1067 had long been rendered inoperative by the
passage of BP 129. Aside from delineating the jurisdictions of the
Court of Appeals and the RTCs, Section 47 of BP 129 repealed or
modified:
x x x. [t]he provisions of Republic Act No. 296, otherwise known as the
Judiciary Act of 1948, as amended, of Republic Act No. 5179, as
amended, of the Rules of Court, and of all other statutes, letters of
instructions and general orders or parts thereof, inconsistent with the
provisions of this Act x x x. (emphasis and underscoring supplied)
The general repealing clause under Section 47 "predicates the
intended repeal under the condition that a substantial conflict must be
found in existing and prior acts."13
In enacting BP 129, the Batasang Pambansa was presumed to have
knowledge of the provision of Article 89 of P.D. No. 1067 and to have
intended to change it.14 The legislative intent to repeal Article 89 is
clear and manifest given the scope and purpose of BP 129, one of
which is to provide a homogeneous procedure for the review of
adjudications of quasi-judicial entities to the Court of Appeals.
More importantly, what Article 89 of PD 1067 conferred to the RTC
was the power of review on appeal the decisions of petitioner. It
appears that the appellate court gave significant consideration to the
ground of "grave abuse of discretion" to thus hold that the RTC has
certiorari jurisdiction over petitioner’s decisions. A reading of said
Article 89 shows, however, that it only made "grave abuse of
discretion" as another ground to invoke in an ordinary appeal to the
RTC. Indeed, the provision was unique to the Water Code at the time
of its application in 1976.
The issuance of BP 129, specifically Section 9 (Jurisdiction of the
Court of Appeals, then known as Intermediate Appellate Court), and
the subsequent formulation of the Rules, clarified and delineated the
appellate and certiorari jurisdictions of the Court of Appeals over
adjudications of quasi-judicial bodies. Grave abuse of discretion may
be invoked before the appellate court as a ground for an error of
jurisdiction.
It bears noting that, in the present case, respondent assailed
petitioner’s order via certiorari before the RTC, invoking grave abuse of
discretion amounting to lack or excess of jurisdiction as ground-basis
thereof. In other words, it invoked such ground not for an error of
judgment.
While Section 9 (3) of BP 12915 and Section 1 of Rule 43 of the Rules
of Court16 does not list petitioner as "among" the quasi-judicial
agencies whose final judgments, orders, resolutions or awards are
appealable to the appellate court, it is non sequitur to hold that the
Court of Appeals has no appellate jurisdiction over petitioner’s
judgments, orders, resolutions or awards. It is settled that the list of
quasi-judicial agencies specifically mentioned in Rule 43 is not meant
to be exclusive.17 The employment of the word "among" clearly
instructs so.1avvphi1
BF Northwest Homeowners Association v. Intermediate Appellate
Court,18 a 1987 case cited by the appellate court to support its ruling
that RTCs have jurisdiction over judgments, orders, resolutions or
awards of petitioner, is no longer controlling in light of the definitive
instruction of Rule 43 of the Revised Rules of Court.
Tanjay Water District v. Gabaton19 is not in point either as the issue
raised therein was which between the RTC and the then National
Water Resources Council had jurisdiction over disputes in the
appropriation, utilization and control of water.
In fine, certiorari and appellate jurisdiction over adjudications of
petitioner properly belongs to the Court of Appeals.
WHEREFORE, the challenged Decision and Resolution of the Court of
Appeals are REVERSED and SET ASIDE. The April 15, 2005 Order of
the Regional Trial Court of Bacolod City dismissing petitioner’s petition
for lack of jurisdiction is UPHELD.
No costs.
SO ORDERED.
Footnotes
10
SEC. 9. Jurisdiction.—The [Court of Appeals] shall exercise:
(1) Original jurisdiction to issue writs of mandamus,
prohibition, certiorari, habeas corpus, and quo warranto, and
auxiliary writs or processes, whether or not in aid of its
appellate jurisdiction.;
(2) Exclusive original jurisdiction over actions for annulment
of judgments of Regional Trial Courts; and
(3) Exclusive appellate jurisdiction over all final judgments,
decisions, resolutions, orders or awards of Regional Trial
Courts and quasi-judicial agencies, instrumentalities, boards
or commissions, except those falling within the appellate
jurisdiction of the Supreme Court in accordance with the
Constitution, the provisions of this Act, and of subparagraph
(1) of the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948.
x x x x.
44
11
SECTION 1. Scope.—This Rule shall apply to appeals from
judgments or final orders of the Court of Tax Appeals* and from
awards, judgments, final orders or resolutions of or authorized by any
quasi-judicial agency in the exercise of its quasi-judicial functions.
Among these agencies are the Civil Service Commission, Central
Board of Assessment Appeals, Securities and Exchange
Commission,** Office of the President, Land Registration Authority,
Social Security Commission, Civil Aeronautics Board, Bureau of
Patents, Trademarks and Technology Transfer, National Electrification
Administration, Energy Regulatory Board, National
Telecommunications Commission, Department of Agrarian Reform
Under Republic Act No. 6657, Government Service Insurance System,
Employees Compensation Commission, Agricultural Inventions Board,
Insurance Commission, Philippine Atomic Energy Commission, Board
of Investments, Construction Industry Arbitration Commission, and
voluntary arbitrators authorized by law.
x x x x (underscoring supplied)
12
SEC. 4. When and where to file the petition. x x x .
If the petition relates to an act or an omission of a municipal
trial court or of a corporation, a board, an officer or a person,
it shall be filed with the Regional Trial Court exercising
jurisdiction over the territorial area as defined by the
Supreme Court. It may also be filed with the Court of
Appeals or with the Sandiganbayan, whether or not the
same is in aid of the court’s appellate jurisdiction. If it
involves the acts of a quasi-judicial agency, unless otherwise
provided by law or these rules, the petition shall be filed in
and cognizable only by the Court of Appeals.
x x x x. (emphasis and underscoring supplied)
17
Vide: United Coconut Planters Bank v. E. Ganzon, Inc, G.R. Nos.
168859 and 168897, June 30, 2009, 591 SCRA 321, 337; Land Bank
of the Philippines v. De Leon, 437 Phil. 347, 357 (2002); Sy v.
COSLAP, 417 Phil. 378, 393-394 (2001); and Metro Construction, Inc.
v. Chatham Properties, Inc., 418 Phil. 176, 203 (2001).
G.R. No. 96401 April 6, 1992
NEMESIO N. ATIS, petitioner,
vs.
COURT OF APPEALS, ORLANDO S. DELATINA (DECEASED),
SUBSTITUTED BY HIS HEIRS, NAMELY: MANSUETA BAGON
VDA. DE DELATINA & THEIR CHILDREN, DELIA, ELSIE &
ORLANDO, JR., SURNAMED DELATINA, respondents.
SPS. ARTURO M. PACULANANG and ELEUTERIA (LILIAN) B.
PACULANANG, Intervenors.
MELENCIO-HERRERA, J.:
This is an appeal by certiorari, under Rule 45 of the Rules of Court,
from the judgment of the Court of Appeals 1 in CA-G.R. CV No. 15534
(Nemesio N. Atis, Plaintiff-Appellant, versus Orlando Delatina,
Defendant-Appellee, Spouses Arturo M. Paculanang and Eleuteria
(Lilian) Bobes Paculanang, Intervenors-Appellees), dated 23
November 1989, affirming "in full" the Resolution dated 30 July 1987 of
the Regional Trial Court, Branch X, Dipolog City, which dismissed the
case "for failure to exhaust administrative remedies, under Presidential
Decree No. 1067."
The material allegations of the Complaint for "Judicial Abatement of
Nuisance, Mandatory Injunction and Damages," which the Trial Court
dismissed, read:
4. Lot 1 of the plaintiff, together with Lots 2, 3 & 4
of the persons named, have been devoted
primarily, directly and solely for fishpond purposes,
the nature of the realty being for these purposes
as there is a natural watercourse, stream, or
continuous water between the banks;
5. Since time immemorial the water flows from
these higher estates down to the sea of Dapitan
Bay, passing through a lower estate claimed by
one Eleuteria Lilian Bobis, the wife of Arturo M.
Paculanang, municipal trial judge of Liloy and
Sindangan, Zamboanga del Norte;
6. The natural watercourse, since time
immemorial, has been freely flowing from the
upper estates aforestated, unimpeded and
continuously into the sea, through the land
claimed by the said Eleuteria Lilian Bobis-
Paculanang, even as during high tide of the sea,
sea water also goes upwards into the fishpond of
plaintiff. This condition has been by nature,
existing since time immemorial and all riparian or
littoral estate owners have recognized it, since as
the public and government authorities have also
respected it;
7. Sometime in the middle of August 1986, without
plaintiff's knowledge or permission, defendant
closed the natural waterway by constructing and
building a dike on the land claimed by Eleuteria
Lilian Bobis-Paculanang thereby completely
blocking and obstructing the flow of the water from
the higher estate of plaintiff and his relatives, and
thus causing the water in plaintiff's fishpond to
remain stagnant, and leading to the poisoning of
plaintiff's growing shrimps, prawns, bangus
(milkfish) and others to the great and irreparable
damage and injury to plaintiff;
8. When plaintiff knew and realized defendant's
tortious acts, the effect of which was to create a
nuisance, plaintiff readily confronted him and
asked for an explanation why he did that, when as
a Barangay Captain of San Pedro, Dapitan City,
defendant has always known of the condition of
the watercourse that freely empties its water into
the sea, and vice versa, the sea water also goes
upwards during high tides, but defendant merely
said that he closed the waterflow because he was
making or constructing a dike for the fishpond
which he said, he was authorized to make for
Judge & Mrs. Paculanang; (pp. 36-38, Rollo).
As prayed for in the Complaint and reiterated by Petitioner in his
Motion, dated 25 November 1986, the Trial Court issued, on 27
November 1986, a Temporary Mandatory Restraining Order which
directed Respondent Delatina "to demolish or destroy immediately the
dyke he has constructed on the land of Mrs. Eleuteria Bobis
Paculanang and restore the condition of the water way prior to August,
1986, and to refrain from further acts that may change the contour in
the area surrounding Mrs. Paculanang's fishpond and the plaintiff's
fishpond."
45
In due time, Respondent Delatina (now deceased and substituted by
his heirs) filed his Answer denying the material allegations of the
Complaint.
Spouses Arturo and Eleuteria Paculanang filed an Answer-in-
Intervention with Counterclaim making common cause with
Respondent Delatina, which Answer the Trial Court admitted in an
Order, dated 8 January 1987. Intervenors maintained among others:
2. Defendant (Delatina) is a mere caretaker of the
intervenors in this case because the intervenors
are the true owners of the property in question:
3. That the action for nuisance by plaintiff is not
actionable because the community is not affected,
as in fact the people around the area are happy
with the construction of intervenors dike because
they have utilized the same as their bridge and
parthway which they have not availed in the
property of the plaintiff;
4. That the fishpond in question is a titled property
of the intervenors;
5. That plaintiff's complaint against defendant
and/or intervenors is unfounded and not true for
there was never any moment that they have
obstructed completely the free flow and passage
of water which may passed (sic) on their property
because of the construction of an irrigation dike
and canal in their property, as shown in the sketch
plan hereto attached as Annex "1" of intervenor
and made integral part of this answer;
In an Order bearing the same date, or on 8 January 1987, the Trial
Court directed its Clerk of Court, who was earlier designated as
Commissioner, to supervise the drainage experiment on the fishponds
involved.
In his Report dated 13 April 1987, the Commissioner recommended
"the immediate demolition of all dykes, obstructions and the like
introduced in August, 1986 and thereafter by defendant Delatina."
On 30 June 1987, Respondent Delatina filed a Motion to Dismiss the
case on the following grounds: (1) the Trial Court has no jurisdiction
over the subject matter or nature of the action, the same being vested
in the National Water Resources Council by Pres. Decree No.
424; 2 and (2) Petitioner failed to exhaust administrative remedies as
no prior recourse was made to said Council.
Acting on said Motion, the Trial Court dismissed the case on 30 July
1987, for Petitioner's "failure to exhaust administrative remedies under
Presidential Decree No. 1067."
As the Court of Appeals, to which Petitioner appealed, affirmed "in full"
the Trial Court's order of dismissal, herein Petitioner availed of this
recourse claiming that the Court of Appeals erred: (1) in failing to
consider the main issue raised by the ultimate facts which is whether
the acts of Private Respondents/Intervenors caused damage or injury
to the rights of Petitioner, no "dispute as to water rights" being
involved; (2) in applying the general rule on exhaustion of
administrative remedies, the instant case being an exception thereto;
and (3) in not ruling that Private Respondents/Intervenors could no
longer question the jurisdiction of the Trial Court after submitting to its
jurisdiction and seeking reliefs from it.
Private Respondents/Intervenors, on the other hand, have taken a
contrary position.
The decisive issue pivots around whether or not, under the material
allegations of the Complaint, the case falls under the jurisdiction of the
Trial Court.
As earlier stated, the Trial Court and the Court of Appeals entertained
a negative view. Both Courts agreed with the Private
Respondents/Intervenors that the case falls under the jurisdiction of
the National Water Resources Council.
Presidential Decree No. 1067 otherwise known as "The Water Code of
the Philippines" has spelled out in Article 3 thereof the underlying
principles of the Code, one of which is:
d. The utilization, exploitation, development,
conservation and protection of water resources
shall be subject to the control and regulation of the
government through the National Water
Resources Council,herein referred to as the
Council. (Emphasis supplied.)
Article 88 of the same Code provides that:
Art. 88. The Council shall have original jurisdiction
over all disputes relating to appropriation,
utilization, exploration, development, control,
conservation and protection of waters within the
meaning and context of this Code. (Emphasis
supplied)
The case at bar does not involve any dispute relating to appropriation
or use of waters. "Appropriation" as used in the Water Code means
that "acquisition of rights over the use of waters or the taking or
diverting of waters from a natural source" (Art. 9); while "use of water
for fisheries is the utilization of water for the propagation and culture of
fish as a commercial enterprise." In fact, Petitioner is the holder of: (1)
WATER PERMIT NO. 10974 to use water from the San Pedro Creek,
Dapitan City, and (2) WATER PERMIT NO. 10975 to use sea water,
"for purposes of Fisheries," issued to him by no less than the National
Water Resources Council on January 4, 1988 (pp. 93 and 94, Rollo).
The issuance of said permits served to grant petitioner water rights or
the privilege to appropriate and use water (Art. 13, Pres. Decree No.
1067) from the San Pedro Creek and sea water from Dapitan Bay for
his fishpond.
Private Respondents/Intervenors do not dispute the water rights
petitioner had acquired by reason of those permits but maintain that
said licenses were issued by the National Water Resources Council to
Petitioner only on 4 January 1988, or more than a year after the case
was filed in Court. The crucial point is, however, that "since time
immemorial" water had been flowing from the higher estates down to
Dapitan Bay and to the sea passing through the lower estate belonging
to the Intervenors. There is nothing in the records before us
controverting this statement of fact.
Obviously, therefore, no dispute lies relative to the use or appropriation
by Petitioner of water from the San Pedro Creek and sea water from
the Dapitan Bay. The case does not involve a determination of the
parties' respective water rights, which would otherwise be within the
competence and original jurisdiction of the National Water Resources
Council. Rather, the issue is whether or not the construction of the
dike, obstructed the natural water course or the free flow of water from
Petitioner's higher estate to Intervenors' lower estate thereby causing
injury to petitioners' rights and impairing the use of his fishpond. This
issue necessitates resort to judicial intervention. As held in the case
of Amistoso v. Ang (L-60219, 29 June 1984, 130 SCRA 228), where
there is a grant existing in favor of the petitioner, and there is a
violation of grantee's right by closure of the irrigation canal, it is the
enjoyment of the right emanating from the grant that is in litigation, and
the case is not within the jurisdiction of the National Water Resources
Council.
46
In fine, it is the Regional Trial Court, Branch X, Dipolog City, and not
the National Water Resources Council, that has jurisdiction over the
instant case. It follows that the doctrine of exhaustion of administrative
remedies on the basis of which the case was dismissed by both Courts
below, does not come into play.
WHEREFORE, the Decision of the Court of Appeals is SET ASIDE
and the case is ordered REMANDED to the Trial Court for further
proceedings, with costs against respondents/intervenors.
SO ORDERED.
Paras, Padilla, Regalado and Nocon, JJ., concur.
Footnotes
1 Eleventh Division, composed of Justices Josue
N. Bellosillo, Chairman, Alfredo
Marigomen, Ponente, and Cesar D. Francisco,
Member.
2 Creating a National Water Resources Council,
Reconstituting its Membership, Vesting the same
with Powers to Coordinate and Integrate Water
Resources Development . . .
G.R. No. 133140 August 10, 1999
JOSE MA. T. GARCIA, petitioner,
vs.
COURT OF APPEALS, SPS. LUISITO & MA. LUISA MAGPAYO
AND PHILIPPINE BANK OF COMMUNICATIONS, respondents.
PUNO, J.:
This is a petition for review under Rule 45 of the Rules of Court to set
aside the decision rendered by the Court of Appeals in CA-G.R. No.
44707 entitled "Jose Ma. T. Garcia, Plaintiff-Appellee versus Spouses
Luisito and Ma. Luisa Magpayo and Sheriff of Makati, Defendants,
Philippine Bank of Communications, Defendant-Appellant".1
The facts are as succinctly summarized by the appellate court, viz.:
Atty. Pedro V. Garcia, in whose name TCT No. S-31269
covering a parcel of land identified as Lot 17 situated at Bel
Air II Village, Makati, was registered, sold with the consent of
his wife Remedios T. Garcia, the same to their daughter Ma.
Luisa Magpayo and her husband Luisito Magpayo (the
Magpayos).
On March 5, 1981, the Magpayos mortgaged the land to the
Philippine Bank of Communications (PBCom) to secure a
loan, Five Hundred Sixty Four Thousand (P564,000.00)
Pesos according to them, One Million Two Hundred
Thousand (P1,200,000.00) Pesos according to
PBCom.1âwphi1.nêt
On March 9, 1981, Atty. Garcia's Title was cancelled and in
its stead Transfer Certificate of Title No. S-108412/545 was
issued in the name of the Magpayos.
The Deed of Real Estate Mortgage was registered at the
Makati Register of Deeds and annotated on the Magpayos
title.
The Magpayos failed to pay their loan upon its maturity,
hence, the mortgage was extrajudicially foreclosed and at
the public auction sale, PBCom which was the highest
bidder bought the land.
The redemption period of the foreclosed mortgage expired
without the Magpayos redeeming the same, hence, title over
the land was consolidated in favor of PBCom which
cancelled the Magpayo's title and Transfer Certificate of Title
No. 138233 was issued in its name.
On October 4, 1985, the Magpayos filed at the RTC of
Makati a complaint seeking the nullification of the
extrajudicial foreclosure of mortgage, public auction sale,
and PBCom's title docketed as Civil Case No. 11891. This
complaint was dismissed for failure to prosecute.
On October 15, 1985, PBCom filed at the Regional Trial
Court (RTC) of Makati a petition for the issuance of a writ of
possession over the land, docketed as LRC Case No. M-
731, which Branch 148 thereof granted.
Upon service of the writ of possession, Mrs. Magpayo's
brother, Jose Ma. T. Garcia (Garcia), who was in possession
of the land, refused to honor it and filed a motion for
Intervention in the above-said PBCom petition, which motion
was denied.
Garcia thereupon filed against PBCom, the Magpayos, and
the RTC Sheriff the instant suit for recovery of realty and
damages wherein he alleged, inter alia, that he inherited the
land as one of the heirs of his mother Remedios T. Garcia,
and that PBCom acquired no right thereover.
In its answer, PBCom averred, inter alia, that Garcia's claim
over the land is belied by the fact that it is not among the
properties owned by his mother listed in the Inventory of
Real Estate filed at the then CFI of Pasay City, Branch 27, in
SP Proc. No. 2917-P, "In the Matter of the Intestate Estate of
Remedios T. Garcia Petition for Letters of Administration,
Pedro V. Garcia Petitioner-Administrator.
The Magpayos, on the other hand, asserted that title over
the land was transferred to them by Mrs. Magpayo's parents
to enable them (Magpayos) to borrow from PBCom.
Garcia filed a Motion for Summary Judgment praying that
judgment be rendered in his favor to which PBCom counter-
motioned that judgment should be rendered in its favor.
The court a quo denied the motion for summary judgment on
the ground that PBCom raised in its answer both factual and
legal issues which could only be ventilated in a full-blown
trial.
The court a quo, however, later issued a summary
judgment.2
In its summary judgment, the lower court held that the mortgage
executed by the Magpayo spouses in favor of PBCom was void. It
found that:
. . . [A]t the time that the defendants Magpayo spouses
executed the mortgage in favor of the defendant PBCom on
March 5, 1981, the said spouses were not yet the owners of
the property. This finding is evident from the other
undisputed fact that a new Torrens title was issued to the
defendants Magpayo spouses only on March 9, 1981 . . . .
47
 The Magpayo spouses could not have acquired the said
property merely by the execution of the Deed of Sale
because the property was in the possession of the plaintiff.
The vendor, Pedro V. Garcia, was not in possession and
hence could not deliver the property merely by the execution
of the document (MANALILI V. CESAR, 39 PHIL. 134). The
conclusion is therefore inescapable that the said mortgage is
null and void for lack of one of the essential elements of a
mortgage as required by Art. 2085 of our Civil Code . . . .3
Thus, it invalidated the foreclosure sale and nullified TCT No. 138233
issued to PBCom. Dissatisfied, PBCom appealed. In reversing the trial
court, the Court of Appeals held:
(P)laintiff-appellee's assertion that ownership over the
disputed property was not transmitted to his sister and her
husband-Magpayo spouses at the time of the execution of
the Deed of Sale as he was still in actual and adverse
possession thereof does not lie.
For in his complaint, plaintiff-appellee alleged that he
entered into possession of the disputed property only upon
the demise of his mother, from whom he alleges to have
inherited it but who was not the registered owner of the
property, that is, on October 31, 1980 (Certificate of Death,
p. 17, Records), by which admission he is bound. Since the
execution of the deed of sale by Atty. Pedro V. Garcia in
favor of the Magpayos took place earlier or on August 1,
1980, then contrary to his claim, plaintiff-appellee was not in
possession of the property at the time of the execution of
said public instrument.
Furthermore, it appearing that the vendor Atty. Garcia had
control of the property which was registered in his name and
that the deed of sale was likewise registered, then the sale
was consummated and the Magpayos were free to exercise
the attributes of ownership including the right to mortgage
the land.
When the land is registered in the vendor's name, and the
public instrument of sale is also registered, the sale may be
considered consummated and the buyer may exercise the
actions of an owner (Tolentino, Commentaries and
Jurisprudence on the Civil Code of the Philippines, 1992 Ed.,
p. 55).
That the Magpayos' title, TCT No. S-108412, was issued
four (4) days following the execution of the deed of real
estate mortgage is of no moment, for registration under the
Torrens system does not vest ownership but is intended
merely to confirm and register the title which one may
already have on the land (Municipality of Victorias v. Court of
Appeals, 149 SCRA 32, 44-45 [1987]).
Petitioner Garcia moved for a reconsideration of above decision which
was denied. He now comes before us raising the following errors
committed by the Court Appeals:
I the property. At the time of the alleged sale to the Magpayo
The respondent Court of Appeals has departed from the accepted and
usual course of proceedings when it decided the appeal subject of this
case based on issues which were raised neither in the trial court nor in
the appellant's brief.
II
The Court of Appeals decided the appeal in a manner not in accord
with applicable jurisprudence when it disregarded the admissions of
the private respondents and, despite ruling that Summary Judgment
was proper, made its own findings of facts which were contrary to the
said admissions.
III
The Decision of the respondent Court of Appeals was not in accord
with established jurisprudence and even contradicts itself, as far as the
issue of the propriety of the Summary Judgment is concerned.
The petition has no merit.
Anent the first assignment of error, petitioner alleged that the Court of
Appeals resolved the issues "ownership" and "possession" though they
were not raised by PBCom in its appellant's brief. The allegation is
belied by page 17 of PBCom's appellate brief, viz.:
Due to the wrong cited case, the trial court opined
erroneously that "Magpayo Spouses could not have acquired
the property merely by the execution of the deed of sale
because the property was in the possession of the plaintiff"
(Order, p. 10).
Again, the trial court could not distinguish ownership from
possession. Ownership and possession are two entirely
different legal concepts.
Plaintiff-appellee's possession as found by the trial court,
started only "at the time of the filing of the complaint in this
present case up to the present." (page 2, Summary
Judgment).
Assuming that to be true, plaintiff-appellee's possession
which started only in 1986 could not ripen into ownership. He
has no valid title thereto. His possession in fact was that of
an intruder, one done in bad faith (to defeat PBCom's Writ of
Possession). His possession is certainly not in the concept
of an owner. This is so because as early as 1981, title
thereto was registered in the name of the Magpayo Spouses
which title was subsequently cancelled when the property
was purchased by PBCom in a public auction sale resulting
in the issuance of title in favor of the latter in 1985.
Anent the second-assignment of error, petitioner contends that the
following facts were admitted by the parties in the trial court:
1. The petitioner is a compulsory heir of the late spouses
Atty. Pedro V. Garcia and Remedios Tablan Garcia;
2. The property subject of this dispute was previously the
conjugal property of the said spouses;
3. The petitioner and his family have been and are
continuously to the present in actual physical possession of
spouses, petitioner was in possession of the property;
4. When his mother Remedios Tablan (sic) Garcia died,
sometime in October, 1980, he became, by operation of law,
a co-owner of the property;
5. Atty. Pedro V. Garcia, at the time of the execution of the
instrument in favor of the Magpayo spouses was not in
possession of the subject property.4
48
We reject the contention of petitioner for a perusal of the records
shows that these alleged admitted facts are his own paraphrased
portions of the findings of fact listed by the trial court in the summary
judgment.5 Indeed petitioner did not cite any page number of the
records or refer to any documentary Exhibit to prove how and who
admitted the said facts.
Petitioner's third assignment of error that he alone as plaintiff in the trial
court is entitled to a summary judgment merits scant attention. A
summary judgment is one granted by the court, upon motion by either
party, for an expeditious settlement of the case, there appearing from
the pleadings, depositions, admissions, and affidavits that no important
questions or issues of fact are involved (except the determination of
the amount of damages) and that therefore the moving party is entitled
to a judgment as a matter of law.6 Under Rule 34, either party may
move for a summary judgment — the claimant by virtue of Section 1
and the defending party by virtue of Section 2, viz.:
Sec. 1. Summary judgment for claimant. — A party seeking
to recover upon a claim, counter-claim, or cross-claim or to
obtain a declaratory relief may, at any time after the pleading
in answer thereto has been served, move with supporting
affidavits for a summary judgment in his favor upon all or any
part thereof.
Sec. 2. Summary judgment for defending party. — A party
against whom a claim, counterclaim, or cross-claim is
asserted or a declaratory relief is sought may, at any time,
move with supporting affidavits for a summary judgment in
his favor as to all or any part thereof.
It is true that petitioner made the initial move for summary judgment.
Nonetheless, PBCom likewise moved for a summary judgment with
supporting affidavit and documentary exhibits, to wit:
COUNTER-MOTION FOR SUMMARY JUDGMENT
PBCom Is Entitled To A Summary Judgment
The procedure for summary judgment may be availed of also
by the defending parties who may be the object of
unfounded claims as clearly shown in Sections 1 and 2 of
Rule 34.
xxx xxx xxx
WHEREFORE, it is respectfully prayed of this Honorable
Court to render summary judgment in PBCom's favor by
DISMISSING plaintiff's Complaint as well as Sps. Magpayo's
Cross-Claim for being sham and frivolous.7
Needless to state, there was no error on the part of the appellate court
in resorting to summary judgment as prayed for by both parties.
We stress again that possession and ownership are distinct legal
concepts. Ownership exists when a thing pertaining to one person is
completely subjected to his will in a manner not prohibited by law and
consistent with the rights of others.8 Ownership confers certain rights to
the owner, one of which is the right to dispose of the thing by way of
sale.9 Atty. Pedro Garcia and his wife Remedios exercised their right to
dispose of what they owned when they sold the subject property to the
Magpayo spouses. On the other hand, possession is defined as the
holding of a thing or the enjoyment of a right.10 Literally, to possess
means to actually and physically occupy a thing with or without right.
Possession may be had in one of two ways: possession in the concept
of an owner and possession of a holder.11 "A possessor in the concept
of an owner may be the owner himself or one who claims to be
so."12 On the other hand, "one who possesses as a mere holder
acknowledges in another a superior right which he believes to be
ownership, whether his belief be right or wrong."13 The records show
that petitioner occupied the property not in the concept of an owner for
his stay was merely tolerated by his parents. We held in Caniza
v. Court of Appeals 14 that an owner's act of allowing another to occupy
his house, rent-free does not create a permanent and indefeasible right
of possession in the latter's favor. Consequently, it is of no moment
that petitioner was in possession of the property at the time of the sale
to the Magpayo spouses. It was not a hindrance to a valid transfer of
ownership. On the other hand, petitioner's subsequent claim of
ownership as successor to his mother's share in the conjugal asset is
belied by the fact that the property was not included in the inventory of
the estate submitted by his father to the intestate court. This buttresses
the ruling that indeed the property was no longer considered owned by
petitioner's parents. We also uphold the Court of Appeals in holding
that the mortgage to PBCom by the Magpayo spouses is valid
notwithstanding that the transfer certificate of title over the property
was issued to them after the mortgage contract was entered into.
Registration does not confer ownership, it is merely evidence of such
ownership over a particular property.15 The deed of sale operates as a
formal or symbolic delivery of the property sold and authorizes the
buyer to use the document as proof of ownership.16 All said, the
Magpayo spouses were already the owners when they mortgaged the
property to PBCom.17
IN VIEW WHEREOF, the decision of the Court of Appeals in CA-G.R.
No. 44707 is AFFIRMED. Costs against petitioner.1âwphi1.nêt
SO ORDERED.
Davide, Jr., C.J., Kapunan, Pardo and Ynares-Santiago, JJ., concur.
Footnotes
1
The decision reversed the summary judgment rendered by
Branch 57 of the Regional Trial Court of Makati in favor of
petitioner Jose Ma. T. Garcia in Civil Case No. 13607.
6
Army and Navy Club of Manila, Inc. v. Court of Appeals
271 SCRA 36 (April 8, 1997); see also Philippine National
Bank v. Noah's Ark Sugar Refinery, 226 SCRA 36 (1993);
Mercado v. Court of Appeals, 162 SCRA 75 (1988); Vergara,
Sr. v. Suelto, 156 SCRA 753 (1987).
7
Comment with Counter-Motion for Summary Judgment, 5;
Original Record, p. 201.
8
Arturo Tolentino, Commentaries and Jurisprudence on the
Civil Code of the Philippines, p. 45 (Vol. II 1992).
9
Other rights pertaining to ownership are the right to enjoy
the thing owned; to receive from the thing what it produces;
to consume the thing by its use; and the right to exclude
other persons from possession thereof, supra.
15
Vda. de Cabrera v. Court of Appeals, 267 SCRA 339
(1997); Halili v. National Labor Relations Commission, 257
SCRA 174 (1996).
16
Manuel R. Dulay Enterprises, Inc. vs. Court of Appeals,
225 SCRA 678 (1993).
17
The New Civil Code provides:
49
 Art. 2085. The following requisites are essential to
the contracts of pledge and mortgage:
(1) That they be constituted to secure
the fulfillment of a principal obligation;
(2) THAT THE PLEDGOR OR
MORTGAGOR BE THE ABSOLUTE
OWNER OF THE THING PLEDGED
OR MORTGAGED;
(3) That the person constituting the
pledge or mortgage have the free
disposal of their property, and in the
absence thereof, that they be legally
authorized for the purpose.
Third persons who are not parties to the principal
obligation may secure the latter by pledging or
mortgaging their own property.
G.R. No. 130316 January 24, 2007
ERNESTO V. YU and ELSIE O. YU, Petitioners,
vs.
BALTAZAR PACLEB,1 Respondent.
DECISION
CORONA, J.:
The present petition filed under Rule 45 of the Rules of Court
originated from an action for forcible entry and damages filed by
petitioners Ernesto and Elsie Yu against respondent Baltazar Pacleb.
The antecedent facts follow.
Sometime in September 1992, Ruperto Javier allegedly offered to sell
Lot No. 6853-D to petitioners for P75 per sq.m.lawphil.net The lot was
approximately 18,000 square meters and was located in Barangay
Langkaan, Dasmariñas, Cavite. Javier supposedly purchased the lot
from one Rebecca del Rosario who, in turn, acquired it from
respondent and his wife. The title of the property (Transfer Certificate
of Title [TCT] No. T-118375), however, remained in the names of
respondent and his wife. The instruments in support of the series of
alleged sales were not registered.
On September 11, 1992, petitioners accepted the offer and gave
Javier P200,000 as downpayment for the lot. Javier then delivered his
supposed muniments of title to petitioners. After the execution of a
contract to sell, he formally turned over the property to petiti oners.
At the time of the turn-over, a portion of the lot was occupied by
Ramon C. Pacleb, respondent’s son, and his wife as tenants. On
September 12, 1992, Ramon and his wife allegedly surrendered
possession of their portion to petitioners. Later on, petitioners
appointed Ramon as their trustee over the subject lot.
Aside from taking possession of the property, petitioners also caused
the annotation on TCT No. T-118375 of a decision rendered in their
favor in Civil Case No. 741-93.2 This decision attained finality on April
19, 1995.
Petitioners alleged that they exercised ownership rights as well as
enjoyed open, public and peaceful possession over the property from
September 12, 1992 until the early part of September 1995. During this
time, respondent was in the United States.
Upon respondent’s return to the Philippines in May 1995, he allegedly
entered the property by means of force, threat, intimidation, strategy
and stealth thereby ousting petitioners and their trustee, Ramon.
Despite repeated demands, respondent, asserting his rights as
registered owner of the property, refused to vacate the premises and
surrender its possession to petitioners.
Petitioners filed an action for forcible entry3 in the Municipal Trial Court
(MTC) of Dasmariñas, Cavite on November 23, 1995. Respondent filed
an answer with compulsory counterclaim dated December 8, 1995.
After the issues were joined, the MTC required the submission of the
parties’ position papers at a preliminary conference on March 11,
1996. Respondent failed to comply.
On June 17, 1996, the MTC ruled:
WHEREFORE, in view of the foregoing, the [respondent] and other
persons claiming right under him are hereby ordered to surrender
physical possession of Lot No. 6853-D in favor of the [petitioners] and
to pay the sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS
as attorney’s fees.
SO ORDERED.4
On appeal,5 the Regional Trial Court (RTC) of Imus, Cavite rendered a
decision affirming the MTC decision in toto.6
Respondent elevated his case to the Court of Appeals (CA)7 which
rendered the assailed decision on March 18, 1997:
WHEREFORE, the Petition is GRANTED; the Decision dated October
25, 1996 of the [RTC] of Imus, Cavite in Civil Case No. 052-96 and the
Decision of the [MTC] of Dasmariñas, Cavite in Civil Case No. 182 are
SET ASIDE; and Civil Case No. 182 for Forcible Entry and Damages is
hereby ordered DISMISSED. No pronouncement as to costs.
SO ORDERED.8
In a resolution dated August 20, 1997, the CA denied petitioners’
motion for reconsideration for lack of merit.
Before us now come petitioners who claim that the appellate court
erred in finding that respondent had prior physical possession of the
subject property.lawphil.net
"In an action for forcible entry, the plaintiff must prove that he was in
prior possession of the land or building and that he was deprived
thereof by means of force, intimidation, threat, strategy or
stealth."9 The plaintiff, however, cannot prevail where it appears that,
as between himself and the defendant, the latter had possession
antedating his own.10 We are generally precluded in a Rule 45 petition
from reviewing factual evidence tracing the events prior to the first act
of spoliation.11 However, the conflicting factual findings of the MTC and
RTC on one hand, and the CA on the other, require us to make an
exception.
We overrule petitioners’ contentions.
The Civil Code states that possession is the holding of a thing or the
enjoyment of a right.12 In the grammatical sense, to possess means to
have, to actually and physically occupy a thing, with or without
right.13 "Possession always includes the idea of occupation x x x. It is
50
not necessary that the person in possession should himself be the
occupant. The occupancy can be held by another in his
name."14 Without occupancy, there is no possession.15
Two things are paramount in possession.16 First, there must be
occupancy, apprehension or taking. Second, there must be intent to
possess (animus possidendi).17
Here, petitioners failed to establish that they had prior physical
possession to justify a ruling in their favor in the complaint for forcible
entry against respondent.
In the decision in Civil Case No. 741-93 (a case for specific
performance and damages against Javier, the alleged vendor of the lot
in question) upon which petitioners based their right to possess in the
first place, the trial court categorically stated:
The [petitioners were never placed] in possession of the subject
property on which [was] planned to be [site of] a piggery, nor [were
they] given a clearance or certification from the Municipal Agrarian
Reform Officer.18(emphasis ours)
The claim that the lot was turned over to petitioners in 1992 was self-
serving in the face of this factual finding. On the other hand, the tax
declarations and receipts in the name of respondent in 1994 and 1995
established the possession of respondent.19 The payment of real
estate tax is one of the most persuasive and positive indications
showing the will of a person to possess in concepto de dueño or with
claim of ownership.20
"[P]ossession in the eyes of the law does not mean that a man has to
have his feet on every square meter of the ground before he is
deemed in possession."21 In this case, Ramon, as respondent’s son,
was named caretaker when respondent left for the United States in
1983.22 Due to the eventual loss of trust and confidence in Ramon,
however, respondent transferred the administration of the land to his
other son, Oscar, in January 1995 until his return in May 1995. 23 In
other words, the subject land was in the possession of the
respondent’s sons during the contested period.
Petitioners cite an alleged document (Kusangloob na Pagsasauli ng
Lupang Sakahan at Pagpapahayag ng Pagtalikod sa Karapatan) dated
March 10, 1995 executed by them and Ramon to prove a turn over of
possession. They also seek to prove their exercise of rights over the
land through alleged frequent visits and the designation of Ramon as
their own trustee as declared in a joint affidavit attached to their
position paper filed with the MTC. These instruments, however, fail to
convince us of petitioners’ actual occupancy of the subject land. First,
petitioners themselves acknowledged that Ramon and his wife
occupied part of the land as tenants of respondent. Second, Ramon, a
mere tenant, had no authority to sign such document dated March 10,
1995 waiving all rights to the land. Third, there was no clear proof in
the records of the appointment of Ramon as petitioners’ trustee save
their self-serving statements to this effect. Finally, at the time
the Kusangloob na Pagsasauli document was executed, the caretaker
of the land was no longer Ramon but Oscar.24
Most important, the title of the land in question (TCT No. T-118375)
remained in the name of respondent.25 "As the registered owner,
petitioner had a right to the possession of the property, which is one of
the attributes of ownership."26 The Civil Code states:
Art. 538. Possession as a fact cannot be recognized at the same time
in two different personalities except in the cases of co-possession.
Should a question arise regarding the fact of possession, the present
possessor shall be preferred; if there are two possessors, the one
longer in possession; if the dates of the possession are the same, the
one who presents a title; and if all these conditions are equal, the thing
shall be placed in judicial deposit pending determination of its
possession or ownership through proper proceedings.
In view of the evidence establishing respondent’s continuing
possession of the subject property, petitioners’ allegation that
respondent deprived them of actual possession by means of force,
intimidation and threat was clearly untenable. In Gaza v. Lim, we held
that:
Where a dispute over possession arises between two persons, the
person first having actual possession is the one who is entitled to
maintain the action granted by law; otherwise, a mere usurper without
any right whatever, might enter upon the property of another and, by
allowing himself to be ordered off, could acquire the right to maintain
the action of forcible entry and detainer, however momentary his
intrusion might have been.27
WHEREFORE, the petition is hereby DENIED. The decision of the
Court of Appeals dated March 18, 1997 in CA-G.R. SP No. 42604
is AFFIRMED.
Costs against petitioners.
SO ORDERED.
Footnotes
1
Baltazar Pacleb passed away during the pendency of this
petition. He was substituted by his surviving spouse,
Antonieta S. Pacleb, and by his children with his first wife,
Angelita Chan Pacleb: Lorna Pacleb-Guerrero, Florencio C.
Pacleb and Myrla C. Pacleb.
2
On April 20, 1993, petitioner Ernesto Yu filed an action for
specific performance and damages against Javier, vendor of
the lot, because of Javier’s failure to comply with certain
conditions of their "Contract to Sell" dated September 11,
1992. In a decision dated September 8, 1994, RTC Branch
22 of Imus, Cavite held:
WHEREFORE, judgment is hereby rendered for
[petitioner Ernesto] and against [Javier] based on
the sale of subject parcel of land to the former who
is entitled thereby to the ownership and
possession thereof from [Javier] x x x . (Annex
"J," rollo, p. 88)
The finality of the decision in Civil Case No. 741-
93 was annotated at the back of TCT No. T-
118375. (Annex "K," rollo, at the back of p. 90)
3
The case was docketed as Civil Case No. 182.
4
Penned by Judge Lorinda B. Toledo-Mupas of MTC
Dasmariñas, Cavite; Annex "A," rollo, pp. 34-35.
5
The appealed case was docketed as Appealed Civil Case
No. 052-96.
6
Penned by Judge Cesar A. Mangrobang of Branch 22 of
RTC Imus, Cavite; Annex "B," rollo, pp. 36-37.
8
Penned by Associate Justice Fidel P. Purisima (a retired
Associate Justice of this Court) and concurred in by
Associate Justices Angelina Sandoval-Gutierrez (now
Associate Justice of this Court) and Conrado M. Vasquez Jr.
51
 of the Second Division of the Court of Appeals; Annex
"C," rollo, pp. 40-43.
13
Tolentino, Commentaries and Jurisprudence on the Civil
Code of the Philippines 238 (Central Professional Books,
Inc., Quezon City, Philippines) (1992).
16
Id., at 238. Paras provided a third element of possession.
According to him, "possession must be by virtue of one’s
own right," as an owner or by virtue of a right derived from
the owner such as that of a tenant. (Paras, Civil Code of the
Philippines Annotated 412 [Rex Book Store, Manila,
Philippines] [1999])
17
"The animus possidendi may be contradicted and rebutted
by evidence which tends to prove that the person under
whose power or control the thing in question appears to be,
does not in fact exercise the power or control and does not
intend to do so." (Tolentino, supra note 13, at 239)
G.R. No. L-18536 March 31, 1965
JOSE B. AZNAR, plaintiff-appellant,
vs.
RAFAEL YAPDIANGCO, defendant-appellee;
TEODORO SANTOS, intervenor-appellee.
Florentino M. Guanlao for plaintiff-appellant.
Rafael Yapdiangco in his own behalf as defendant-appellee.
Lorenzo Sumulong, R. B. Hilao and B. S. Felipe for intervenor-
appellee.
REGALA, J.:
This is an appeal, on purely legal questions, from a decision of the
Court of First Instance of Quezon City, Branch IV, declaring the
intervenor-appellee, Teodoro Santos, entitled to the possession of the
car in dispute.
The records before this Court disclose that sometime in May, 1959,
Teodoro Santos advertised in two metropolitan papers the sale of his
FORD FAIRLANE 500. In the afternoon of May 28, 1959, a certain L.
De Dios, claiming to be a nephew of Vicente Marella, went to the
Santos residence to answer the ad. However, Teodoro Santos was out
during this call and only the latter's son, Irineo Santos, received and
talked with De Dios. The latter told the young Santos that he had come
in behalf of his uncle, Vicente Marella, who was interested to buy the
advertised car.
On being informed of the above, Teodoro Santos instructed his son to
see the said Vicente Marella the following day at his given address:
1642 Crisostomo Street, Sampaloc, Manila. And so, in the morning of
May 29, 1959, Irineo Santos went to the above address. At this
meeting, Marella agreed to buy the car for P14,700.00 on the
understanding that the price would be paid only after the car had been
registered in his name.
Irineo Santos then fetched his father who, together with L. De Dios,
went to the office of a certain Atty. Jose Padolina where the deed of
the sale for the car was executed in Marella's favor. The parties to the
contract thereafter proceeded to the Motor Vehicles Office in Quezon
City where the registration of the car in Marella's name was effected.
Up to this stage of the transaction, the purchased price had not been
paid.
From the Motor Vehicles Office, Teodoro Santos returned to his house.
He gave the registration papers and a copy of the deed of sale to his
son, Irineo, and instructed him not to part with them until Marella shall
have given the full payment for the car. Irineo Santos and L. De Dios
then proceeded to 1642 Crisostomo Street, Sampaloc, Manila where
the former demanded the payment from Vicente Marella. Marella said
that the amount he had on hand then was short by some P2,000.00
and begged off to be allowed to secure the shortage from a sister
supposedly living somewhere on Azcarraga Street, also in Manila.
Thereafter, he ordered L. De Dios to go to the said sister and
suggested that Irineo Santos go with him. At the same time, he
requested the registration papers and the deed of sale from Irineo
Santos on the pretext that he would like to show them to his lawyer.
Trusting the good faith of Marella, Irineo handed over the same to the
latter and thereupon, in the company of L. De Dios and another
unidentified person, proceeded to the alleged house of Marella's sister.
At a place on Azcarraga, Irineo Santos and L. De Dios alighted from
the car and entered a house while their unidentified companion
remained in the car. Once inside, L. De Dios asked Irineo Santos to
wait at the sala while he went inside a room. That was the last that
Irineo saw of him. For, after a considerable length of time waiting in
vain for De Dios to return, Irineo went down to discover that neither the
car nor their unidentified companion was there anymore. Going back to
the house, he inquired from a woman he saw for L. De Dios and he
was told that no such name lived or was even known therein.
Whereupon, Irineo Santos rushed to 1642 Crisostomo to see Marella.
He found the house closed and Marella gone. Finally, he reported the
matter to his father who promptly advised the police authorities.
That very same day, or on the afternoon of May 29, 1959 Vicente
Marella was able to sell the car in question to the plaintiff-appellant
herein, Jose B. Aznar, for P15,000.00. Insofar as the above incidents
are concerned, we are bound by the factual finding of the trial court
that Jose B. Aznar acquired the said car from Vicente Marella in good
faith, for a valuable consideration and without notice of the defect
appertaining to the vendor's title.
While the car in question was thus in the possession of Jose B. Aznar
and while he was attending to its registration in his name, agents of the
Philippine Constabulary seized and confiscated the same in
consequence of the report to them by Teodoro Santos that the said car
was unlawfully taken from him.
In due time, Jose B. Aznar filed a complaint for replevin against
Captain Rafael Yapdiangco, the head of the Philippine Constabulary
unit which seized the car in question Claiming ownership of the
vehicle, he prayed for its delivery to him. In the course of the litigation,
however, Teodoro Santos moved and was allowed to intervene by the
lower court.
At the end of the trial, the lower court rendered a decision awarding the
disputed motor vehicle to the intervenor-appellee, Teodoro Santos. In
brief, it ruled that Teodoro Santos had been unlawfully deprived of his
personal property by Vicente Marella, from whom the plaintiff-appellant
traced his right. Consequently, although the plaintiff-appellant acquired
the car in good faith and for a valuable consideration from Vicente
Marella, the said decision concluded, still the intervenor-appellee was
entitled to its recovery on the mandate of Article 559 of the New Civil
Code which provides:
ART. 559. The possession of movable property acquired in
good faith is equivalent to title. Nevertheless, one who lost
any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has
been unlawfully deprived, has acquired it in good faith at a
public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
From this decision, Jose B. Aznar appeals.
52
The issue at bar is one and simple, to wit: Between Teodoro Santos
and the plaintiff-appellant, Jose B. Aznar, who has a better right to the
possession of the disputed automobile?
We find for the intervenor-appellee, Teodoro Santos.
The plaintiff-appellant accepts that the car in question originally
belonged to and was owned by the intervenor-appellee, Teodoro
Santos, and that the latter was unlawfully deprived of the same by
Vicente Marella. However, the appellant contends that upon the facts
of this case, the applicable provision of the Civil Code is Article 1506
and not Article 559 as was held by the decision under review. Article
1506 provides:
ART. 1506. Where the seller of goods has a voidable title
thereto, but his, title has not been voided at the time of the
sale, the buyer acquires a good title to the goods, provided
he buys them in good faith, for value, and without notice of
the seller's defect of title.
The contention is clearly unmeritorious. Under the aforequoted
provision, it is essential that the seller should have a voidable title at
least. It is very clearly inapplicable where, as in this case, the seller
had no title at all.
Vicente Marella did not have any title to the property under litigation
because the same was never delivered to him. He sought ownership or
acquisition of it by virtue of the contract. Vicente Marella could have
acquired ownership or title to the subject matter thereof only by the
delivery or tradition of the car to him.
Under Article 712 of the Civil Code, "ownership and other real rights
over property are acquired and transmitted by law, by donation, by
testate and intestate succession, and in consequence of certain
contracts, by tradition." As interpreted by this Court in a host of cases,
by this provision, ownership is not transferred by contract merely but
by tradition or delivery. Contracts only constitute titles or rights to the
transfer or acquisition of ownership, while delivery or tradition is the
mode of accomplishing the same (Gonzales v. Rojas, 16 Phil. 51;
Ocejo, Perez and Co. v. International Bank, 37 Phil. 631, Fidelity and
Deposit Co. v. Wilson, 8 Phil. 51; Kuenzle & Streiff v. Wacke &
Chandler, 14 Phil. 610; Easton v. Diaz Co., 32 Phil. 180).
For the legal acquisition and transfer of ownership and other
property rights, the thing transferred must be delivered,
inasmuch as, according to settled jurisprudence, the tradition
of the thing is a necessary and indispensable requisite in the
acquisition of said ownership by virtue of contract. (Walter
Laston v. E. Diaz & Co. & the Provincial Sheriff of
Albay, supra.)
So long as property is not delivered, the ownership over it is
not transferred by contract merely but by delivery. Contracts
only constitute titles or rights to the transfer or acquisition of
ownership, while delivery or tradition is the method of
accomplishing the same, the title and the method of
acquiring it being different in our law. (Gonzales v. Roxas, 16
Phil. 51)
In the case on hand, the car in question was never delivered to the
vendee by the vendor as to complete or consummate the transfer of
ownership by virtue of the contract. It should be recalled that while
there was indeed a contract of sale between Vicente Marella and
Teodoro Santos, the former, as vendee, took possession of the subject
matter thereof by stealing the same while it was in the custody of the
latter's son.
There is no adequate evidence on record as to whether Irineo Santos
voluntarily delivered the key to the car to the unidentified person who
went with him and L. De Dios to the place on Azcarraga where a sister
of Marella allegedly lived. But even if Irineo Santos did, it was not the
delivery contemplated by Article 712 of the Civil Code. For then, it
would be indisputable that he turned it over to the unidentified
companion only so that he may drive Irineo Santos and De Dios to the
said place on Azcarraga and not to vest the title to the said vehicle to
him as agent of Vicente Marella. Article 712 above contemplates that
the act be coupled with the intent of delivering the thing. (10 Manresa
132)
The lower court was correct in applying Article 559 of the Civil Code to
the case at bar, for under it, the rule is to the effect that if the owner
has lost a thing, or if he has been unlawfully deprived of it, he has a
right to recover it, not only from the finder, thief or robber, but also from
third persons who may have acquired it in good faith from such finder,
thief or robber. The said article establishes two exceptions to the
general rule of irrevindicability, to wit, when the owner (1) has lost the
thing, or (2) has been unlawfully deprived thereof. In these cases, the
possessor cannot retain the thing as against the owner, who may
recover it without paying any indemnity, except when the possessor
acquired it in a public sale. (Del Rosario v. Lucena, 8 Phil. 535; Varela
v. Finnick, 9 Phil. 482; Varela v. Matute, 9 Phil. 479; Arenas v.
Raymundo, 19 Phil. 46. Tolentino, id., Vol. II, p. 261.)
In the case of Cruz v. Pahati, et al., 52 O.G. 3053 this Court has
already ruled
that —
Under Article 559 of the new Civil Code, a person illegally
deprived of any movable may recover it from the person in
possession of the same and the only defense the latter may
have is if he has acquired it in good faith at a public sale, in
which case, the owner cannot obtain its return without
reimbursing the price paid therefor. In the present case,
plaintiff has been illegally deprived of his car through the
ingenious scheme of defendant B to enable the latter to
dispose of it as if he were the owner thereof. Plaintiff,
therefore, can still recover possession of the car even if it is
in the possession of a third party who had acquired it in good
faith from defendant B. The maxim that "no man can transfer
to another a better title than he had himself" obtains in the
civil as well as in the common law. (U.S. v. Sotelo, 28 Phil.
147)
Finally, the plaintiff-appellant here contends that inasmuch as it was
the intervenor-appellee who had caused the fraud to be perpetrated by
his misplaced confidence on Vicente Marella, he, the intervenor-
appellee, should be made to suffer the consequences arising
therefrom, following the equitable principle to that effect. Suffice it to
say in this regard that the right of the owner to recover personal
property acquired in good faith by another, is based on his being
dispossessed without his consent. The common law principle that
where one of two innocent persons must suffer by a fraud perpetrated
by another, the law imposes the loss upon the party who, by his
misplaced confidence, has enabled the fraud to be committed, cannot
be applied in a case which is covered by an express provision of the
new Civil Code, specifically Article 559. Between a common law
principle and a statutory provision, the latter must prevail in this
jurisdiction. (Cruz v. Pahati, supra)
UPON ALL THE FOREGOING, the instant appeal is hereby dismissed
and the decision of the lower court affirmed in full. Costs against the
appellant.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera,
Paredes, Dizon, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.
53
G.R. No. L-8257 April 13, 1956
JOSE R. CRUZ, plaintiff-appellant,
vs.
REYNALDO PAHATI, ET AL., defendants-appellees.
Panganiban Law Offices and Arsenio Roldan for appellant.
Carlos, Laurea, Fernando and Padilla for appellees.
BAUTISTA ANGELO, J.:
This is an action of replevin instituted by plaintiff in the Court of Firts
Instance of Manila to recover the possession of an automobile and
certain amount as damages and attorney's fees resulting from his
illegal deprivation thereof.
The original defendants were Reynaldo Pahati and Felixberto Bulahan
but, upon amendment of the complaint, Jesusito Belizo was included
as party defendant who was summoned by publication because his
whereabouts were not known. Belizo failed to appear or answer the
complaint and so he was declared default.
Pahati admitted having bought the automobile from Bulahan, for the
sum of P4,900 which he paid in check. When the Manila Police
Department impounded the automobile, he cancelled the sale and
stopped the payment of the check and as a result he returned the
automobile to Bulahan who in turned surrended the check for
cancellation. He set up a counterclaim for the sum of P2,000 as
attorney's fees.
Bulahan on his part claims that he acquired the automobile from
Jesusito Belizo for value and without having any knowledge of any
defect in the title of the latter; that plaintiff had previously acquired title
to said automobile by purchase from Belizo as evidenced by a deed of
sale executed to that effect; that later plaintiff delivered the possession
of the automobile to Belizo for resale and to facilitate it he gave the
latter a letter of authority to secure a new certificate of registration in
his name (plaintiff's) and that by having clothed Belizo with an apparent
ownership or authority to sell the automobile, plaintiff is now estopped
to deny such ownership or authority. Bulahan claims that between two
innocent parties, he who gave occasion, through his conduct, to the
falsification committed by Belizo, should be the one to suffer the loss
and this one is the plaintiff. Bulahan also set up a counterclaim for
P17,000 as damages and attorney's fees.
After the presentation of the evidence, the court rendered judgment
declaring defendant Bulahan entitled to the automobile in question and
consequently ordered the plaintiff to return it to said defendant and,
upon his failure to do so, to pay him the sum of P4,900, with legal
interest from the date of the decision. The claim for damages and
attorney's fees of Bulahan was denied. Defendant Belizo was however
ordered to indemnify the plaintiff in the amount of P4,900 and pay the
sum of P5,000 as moral damages. The counterclaim of defendant
Pahati was denied for lack of evidence. The case was taken directly to
this Court by the plaintiff.
The lower court found that the automobile in question was originally
owned by the Nothern Motors, Inc. which later sold it to Chinaman Lu
Dag. This Chinaman sold it afterwards to Jesusito Belizo and the latter
in turn sold it to plaintiff. Belizo was then a dealer in second hand cars.
One year thereafter, Belizo offered the plaintiff to sell the automobile
for him claiming to have a buyer for it. Plaintiff agreed. At that time,
plaintiff's certificate of registration was missing and, upon the
suggestion of Belizo, plaintiff wrote a letter addressed to the Motor
Section of the Bureau of Public Works for the issuance of a new
registration certificate alleging as reason the loss of the one previously
issued to him and stating that he was intending to sell his car. This
letter was delivered to Belizo on March 3, 1952. He also turned over
Belizo the automobile on the latter's pretext that he was going to show
it to a prospective buyer. On March 7, 1952, the letter was falsified and
converted into an authorized deed of sale in favor of Belizo by erasing
a portion thereof and adding in its place the words "sold the above car
to Mr. Jesusito Belizo of 25 Valencia, San Francisco del Monte, for
Five Thousand Pesos (P5,000)." Armed with this deed of sale, Belizo
succeeded in ontaining a certificate of registration in his name on the
same date, March 7, 1952, and also on the same date, Belizo sold the
car to Felixberto Bulahan who in turn sold it to Reynaldo Pahati, a
second hand car dealer. These facts show that the letter was falsified
by Belizo to enable him to sell the car to Bulahan for a valuable
consideration.
This is a case which involves a conflict of rights of two persons who
claim to be the owners of the same property; plaintiff and defendant
Bulahan. Both were found by the lower court to be innocent and to
have acted in good faith. They were found to be the victims of Belizo
who falsified the letter given him by plaintiff to enable him to sell the
car of Bulahan for profit. Who has, therefore, a better right of the two
over the car?.
The law applicable to the case is Article 559 of the new Civil Code
which provides:
ART. 559. The possession of movable property acquired in
good faith is equivalent to a title. Nevertheless, one who has
lost any movable or has been unlawfully deprived thereof,
may recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has
been unlawfully deprived, has acquired it in good faith at a
public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
It appears that "one who has lost any movable or has been unlawfully
deprived thereof, may recover it from the person in possession of the
same" and the only defense the latter may have is if he "has acquired it
in good faith at a public sale" in which case "the owner cannot obtain
its return without reimbursing the price paid therefor." And
supplementing this provision, Article 1505 of the same Code provides
that "where goods are sold by a person who is not the owner thereof,
and who does not sell them under authority or with the consent of the
owner, the buyer acquires no better title to the goods than the seller
had, unless the owner of the goods is by his conduct precluded from
denying the seller's authority to sell.
Applying the above legal provisions to the facts of this case, one is
inevitably led to the conclusion that plaintiff has a better right to the car
in question than defendant Bulahan for it cannot be disputed that
plaintiff had been illegally deprived thereof because of the ingenious
scheme utilized by Belizo to enable him to dispose of it as if he were
the owner thereof. Plaintiff therefore can still recover the possession of
the car even if defendant Bulahan had acted in good faith in
purchasing it from Belizo. Nor can it be pretended that the conduct of
plaintiff in giving Belizo a letter to secure the issuance of a new
certificate of registration constitutes a sufficient defense that would
preclude recovery because of the undisputed fact that that letter was
falsified and this fact can be clearly seen by a cursory examination of
the document. If Bulahan had been more diligent he could have seen
that the pertinent portion of the letter had been erased which would
have placed him on guard to make an inquiry as regards the authority
of Belizo to sell the car. This he failed to do.
The right of the plaintiff to the car in question can also be justified
under the doctrine laid down in U. S. vs. Sotelo, 28 Phil., 147. This is a
case of estafa wherein one Sotelo misappropriated a ring belonging to
Alejandra Dormir. In the course of the decision, the Court said that
"Whoever may have been deprived of his property in consequence of a
crime is entitled to the recovery thereof, even if such property is in the
possession of a third party who acquired it by legal means other than
those expressly stated in Article 464 of the Civil Code" (p. 147), which
54
refers to property pledged in the "Monte de Piedad", an establishment
organized under the authority of the Government. The Court further
said: It is a fundamental principle of our law of personal property that
no man can be divested of it without his own consent; consequently,
even an honest purchaser, under a defective title, cannot resist the
claim of the true owner. The maxim that 'No man can transfer a better
title than he has himself "obtain in the civil as well as in the common
law." (p. 158).
Counsel for appellee places much reliance on the common law
principle that "Where one of two innocent parties must suffer by a fraud
perpetrated by another, the law imposes the loss upon the party who,
by his misplaced confidence, has enabled the fraud to be committed"
(Sager vs. W. T. Rawleight Co. 153 Va. 514, 150 S. E. 244, 66 A.L.R.
305), and contends that, as between plaintiff and Bulahan, the former
should bear the loss because of the confidence he reposed in Belizo
which enabled the latter to commit the falsification. But this principle
cannot be applied to this case which is coverred by an express
provision of our new Civil Code. Between a common law principle and
a statutory provision, the latter must undoubtedly prevail in this
jurisdiction. Moreover we entertain serious doubt if, under the
circumstances obtaining, Bulahan may be considered more innocent
than the plaintiff in dealing with the car in question. We prefer not to
elaborate on this matter it being necessary considering the conclusion
we have reached.
Wherefore, the decision appealed from is reversed. The Court declares
plaintiff to be entitled to recover the car in question, and orders
defendant Jesusito Belizo to pay him the sum of P5,000 as moral
damages, plus P2,000 as attorney's fees. The Court absolves
defendant Bulahan and Pahati from the complaint as regards the claim
for damages, reserving to Bulahan whatever action he may deem
proper to take against Jesusito Belizo. No costs.
Paras, C. J., Bengzon, Padilla, Montemayor, Jugo, Labrador,
Concepcion, Reyes, J. B. L., and Endencia, JJ.,concur.
Reyes, A., J., concur in the result.
G.R. No. 80298 April 26, 1990
EDCA PUBLISHING & DISTRIBUTING CORP., petitioner,
vs.
THE SPOUSES LEONOR and GERARDO SANTOS, doing business
under the name and style of "SANTOS BOOKSTORE," and THE
COURT OF APPEALS, respondents.
Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson
for petitioner.
Cendana Santos, Delmundo & Cendana for private respondents.
CRUZ, J.:
The case before us calls for the interpretation of Article 559 of the Civil
Code and raises the particular question of when a person may be
deemed to have been "unlawfully deprived" of movable property in the
hands of another. The article runs in full as follows:
Art. 559. The possession of movable property acquired in
good faith is equivalent to a title. Nevertheless, one who has
lost any movable or has been unlawfully deprived thereof,
may recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has
been unlawfully deprived has acquired it in good faith at a
public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
The movable property in this case consists of books, which were
bought from the petitioner by an impostor who sold it to the private
respondents. Ownership of the books was recognized in the private
respondents by the Municipal Trial Court, 1 which was sustained by the
Regional Trial Court, 2 which was in turn sustained by the Court of
Appeals. 3 The petitioner asks us to declare that all these courts have
erred and should be reversed.
This case arose when on October 5, 1981, a person identifying himself
as Professor Jose Cruz placed an order by telephone with the
petitioner company for 406 books, payable on delivery. 4 EDCA
prepared the corresponding invoice and delivered the books as
ordered, for which Cruz issued a personal check covering the
purchase price of P8,995.65. 5 On October 7, 1981, Cruz sold 120 of
the books to private respondent Leonor Santos who, after verifying the
seller's ownership from the invoice he showed her, paid him
P1,700.00. 6
Meanwhile, EDCA having become suspicious over a second order
placed by Cruz even before clearing of his first check, made inquiries
with the De la Salle College where he had claimed to be a dean and
was informed that there was no such person in its employ. Further
verification revealed that Cruz had no more account or deposit with the
Philippine Amanah Bank, against which he had drawn the payment
check. 7 EDCA then went to the police, which set a trap and arrested
Cruz on October 7, 1981. Investigation disclosed his real name as
Tomas de la Peña and his sale of 120 of the books he had ordered
from EDCA to the private respondents. 8
On the night of the same date, EDCA sought the assistance of the
police in Precinct 5 at the UN Avenue, which forced their way into the
store of the private respondents and threatened Leonor Santos with
prosecution for buying stolen property. They seized the 120 books
without warrant, loading them in a van belonging to EDCA, and
thereafter turned them over to the petitioner. 9
Protesting this high-handed action, the private respondents sued for
recovery of the books after demand for their return was rejected by
EDCA. A writ of preliminary attachment was issued and the petitioner,
after initial refusal, finally surrendered the books to the private
respondents. 10 As previously stated, the petitioner was successively
rebuffed in the three courts below and now hopes to secure relief from
us.
To begin with, the Court expresses its disapproval of the arbitrary
action of the petitioner in taking the law into its own hands and forcibly
recovering the disputed books from the private respondents. The
circumstance that it did so with the assistance of the police, which
should have been the first to uphold legal and peaceful processes, has
compounded the wrong even more deplorably. Questions like the one
at bar are decided not by policemen but by judges and with the use not
of brute force but of lawful writs.
Now to the merits
It is the contention of the petitioner that the private respondents have
not established their ownership of the disputed books because they
have not even produced a receipt to prove they had bought the stock.
This is unacceptable. Precisely, the first sentence of Article 559
provides that "the possession of movable property acquired in good
faith is equivalent to a title," thus dispensing with further proof.
The argument that the private respondents did not acquire the books in
good faith has been dismissed by the lower courts, and we agree.
Leonor Santos first ascertained the ownership of the books from the
EDCA invoice showing that they had been sold to Cruz, who said he
55
was selling them for a discount because he was in financial need.
Private respondents are in the business of buying and selling books
and often deal with hard-up sellers who urgently have to part with their
books at reduced prices. To Leonor Santos, Cruz must have been only
one of the many such sellers she was accustomed to dealing with. It is
hardly bad faith for any one in the business of buying and selling books
to buy them at a discount and resell them for a profit.
But the real issue here is whether the petitioner has been unlawfully
deprived of the books because the check issued by the impostor in
payment therefor was dishonored.
In its extended memorandum, EDCA cites numerous cases holding
that the owner who has been unlawfully deprived of personal property
is entitled to its recovery except only where the property was
purchased at a public sale, in which event its return is subject to
reimbursement of the purchase price. The petitioner is begging the
question. It is putting the cart before the horse. Unlike in the cases
invoked, it has yet to be established in the case at bar that EDCA has
been unlawfully deprived of the books.
The petitioner argues that it was, because the impostor acquired no
title to the books that he could have validly transferred to the private
respondents. Its reason is that as the payment check bounced for lack
of funds, there was a failure of consideration that nullified the contract
of sale between it and Cruz.
The contract of sale is consensual and is perfected once agreement is
reached between the parties on the subject matter and the
consideration. According to the Civil Code:
Art. 1475. The contract of sale is perfected at the moment
there is a meeting of minds upon the thing which is the
object of the contract and upon the price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing
the form of contracts.
xxx xxx xxx
Art. 1477. The ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive
delivery thereof.
Art. 1478. The parties may stipulate that ownership in the
thing shall not pass to the purchaser until he has fully paid
the price.
It is clear from the above provisions, particularly the last one quoted,
that ownership in the thing sold shall not pass to the buyer until full
payment of the purchase only if there is a stipulation to that effect.
Otherwise, the rule is that such ownership shall pass from the vendor
to the vendee upon the actual or constructive delivery of the thing
sold even if the purchase price has not yet been paid.
Non-payment only creates a right to demand payment or to rescind the
contract, or to criminal prosecution in the case of bouncing checks. But
absent the stipulation above noted, delivery of the thing sold will
effectively transfer ownership to the buyer who can in turn transfer it to
another.
In Asiatic Commercial Corporation v. Ang,11 the plaintiff sold some
cosmetics to Francisco Ang, who in turn sold them to Tan Sit Bin.
Asiatic not having been paid by Ang, it sued for the recovery of the
articles from Tan, who claimed he had validly bought them from Ang,
paying for the same in cash. Finding that there was no conspiracy
between Tan and Ang to deceive Asiatic the Court of Appeals
declared:
Yet the defendant invoked Article 464 12 of the Civil Code
providing, among other things that "one who has been
unlawfully deprived of personal property may recover it from
any person possessing it." We do not believe that the plaintiff
has been unlawfully deprived of the cartons of Gloco Tonic
within the scope of this legal provision. It has voluntarily
parted with them pursuant to a contract of purchase and
sale. The circumstance that the price was not subsequently
paid did not render illegal a transaction which was valid and
legal at the beginning.
In Tagatac v. Jimenez,13 the plaintiff sold her car to Feist, who sold it to
Sanchez, who sold it to Jimenez. When the payment check issued to
Tagatac by Feist was dishonored, the plaintiff sued to recover the
vehicle from Jimenez on the ground that she had been unlawfully
deprived of it by reason of Feist's deception. In ruling for Jimenez, the
Court of Appeals held:
The point of inquiry is whether plaintiff-appellant Trinidad C.
Tagatac has been unlawfully deprived of her car. At first
blush, it would seem that she was unlawfully deprived
thereof, considering that she was induced to part with it by
reason of the chicanery practiced on her by Warner L. Feist.
Certainly, swindling, like robbery, is an illegal method of
deprivation of property. In a manner of speaking, plaintiff-
appellant was "illegally deprived" of her car, for the way by
which Warner L. Feist induced her to part with it is illegal and
is punished by law. But does this "unlawful deprivation"
come within the scope of Article 559 of the New Civil Code?
xxx xxx xxx
. . . The fraud and deceit practiced by Warner L. Feist
earmarks this sale as a voidable contract (Article 1390
N.C.C.). Being a voidable contract, it is susceptible of either
ratification or annulment. If the contract is ratified, the action
to annul it is extinguished (Article 1392, N.C.C.) and the
contract is cleansed from all its defects (Article 1396,
N.C.C.); if the contract is annulled, the contracting parties
are restored to their respective situations before the contract
and mutual restitution follows as a consequence (Article
1398, N.C.C.).
However, as long as no action is taken by the party entitled,
either that of annulment or of ratification, the contract of sale
remains valid and binding. When plaintiff-appellant Trinidad
C. Tagatac delivered the car to Feist by virtue of said
voidable contract of sale, the title to the car passed to Feist.
Of course, the title that Feist acquired was defective and
voidable. Nevertheless, at the time he sold the car to Felix
Sanchez, his title thereto had not been avoided and he
therefore conferred a good title on the latter, provided he
bought the car in good faith, for value and without notice of
the defect in Feist's title (Article 1506, N.C.C.). There being
no proof on record that Felix Sanchez acted in bad faith, it is
safe to assume that he acted in good faith.
The above rulings are sound doctrine and reflect our own interpretation
of Article 559 as applied to the case before us.
Actual delivery of the books having been made, Cruz acquired
ownership over the books which he could then validly transfer to the
private respondents. The fact that he had not yet paid for them to
EDCA was a matter between him and EDCA and did not impair the title
acquired by the private respondents to the books.
56
One may well imagine the adverse consequences if the phrase
"unlawfully deprived" were to be interpreted in the manner suggested
by the petitioner. A person relying on the seller's title who buys a
movable property from him would have to surrender it to another
person claiming to be the original owner who had not yet been paid the
purchase price therefor. The buyer in the second sale would be left
holding the bag, so to speak, and would be compelled to return the
thing bought by him in good faith without even the right to
reimbursement of the amount he had paid for it.
It bears repeating that in the case before us, Leonor Santos took care
to ascertain first that the books belonged to Cruz before she agreed to
purchase them. The EDCA invoice Cruz showed her assured her that
the books had been paid for on delivery. By contrast, EDCA was less
than cautious — in fact, too trusting in dealing with the impostor.
Although it had never transacted with him before, it readily delivered
the books he had ordered (by telephone) and as readily accepted his
personal check in payment. It did not verify his identity although it was
easy enough to do this. It did not wait to clear the check of this
unknown drawer. Worse, it indicated in the sales invoice issued to him,
by the printed terms thereon, that the books had been paid for on
delivery, thereby vesting ownership in the buyer.
Surely, the private respondent did not have to go beyond that invoice
to satisfy herself that the books being offered for sale by Cruz
belonged to him; yet she did. Although the title of Cruz was presumed
under Article 559 by his mere possession of the books, these being
movable property, Leonor Santos nevertheless demanded more proof
before deciding to buy them.
It would certainly be unfair now to make the private respondents bear
the prejudice sustained by EDCA as a result of its own
negligence.1âwphi1 We cannot see the justice in transferring EDCA's
loss to the Santoses who had acted in good faith, and with proper care,
when they bought the books from Cruz.
While we sympathize with the petitioner for its plight, it is clear that its
remedy is not against the private respondents but against Tomas de la
Peña, who has apparently caused all this trouble. The private
respondents have themselves been unduly inconvenienced, and for
merely transacting a customary deal not really unusual in their kind of
business. It is they and not EDCA who have a right to complain.
WHEREFORE, the challenged decision is AFFIRMED and the petition
is DENIED, with costs against the petitioner.
Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur.
G.R. No. 124699 July 31, 2003
BOGO-MEDELLIN MILLING CO., INC., Petitioner,
vs.
COURT OF APPEALS AND HEIRS OF MAGDALENO VALDEZ
SR., Respondents.
DECISION
CORONA, J.:
This is an appeal by certiorari under Rule 45 of the Rules of Court
seeking to annul and set aside the decision1dated November 17, 1995
of the Court of Appeals, Tenth Division, which reversed the
decision2 dated November 27, 1991 of the Regional Trial Court of Cebu
City, Branch IX, which ruled in favor of herein petitioner, Bogo-Medellin
Milling Company, Inc. and dismissed herein private respondents'
complaint for payment of compensation and/or recovery of possession
of real property and damages with application for restraining order or
preliminary injunction; and its resolution dated March 2, 1996 denying
petitioner's motion for reconsideration.
The antecedent facts follow.
Magdaleno Valdez, Sr., father of herein private respondents Sergio
Valdez, Angelina Valdez-Novabos, Teresita Argawanon-Mangubat and
Daylinda Argawanon-Melendres (hereafter the heirs), purchased from
Feliciana Santillan, on December 9, 1935, a parcel of unregistered
land covered by Tax Declaration No. 3935 with an area of one hectare,
34 ares and 16 centares, located in Barrio Dayhagon, Medellin,
Cebu.3 He took possession of the property and declared it for tax
purposes in his name.4
Prior to the sale, however, the entire length of the land from north to
south was already traversed in the middle by railroad tracks owned by
petitioner Bogo-Medellin Milling Co., Inc. (hereafter Bomedco). The
tracks were used for hauling sugar cane from the fields to petitioner’s
sugar mill.
When Magdaleno Valdez, Sr. passed away in 1948, herein private
respondents inherited the land. However, unknown to them, Bomedco
was able to have the disputed middle lot which was occupied by the
railroad tracks placed in its name in the Cadastral Survey of Medellin,
Cebu in 1965. The entire subject land was divided into three, namely,
Cadastral Lot Nos. 953, 954 and 955. Lot Nos. 953 and 955 remained
in the name of private respondents. However, Lot No. 954, the narrow
lot where the railroad tracks lay, was claimed by Bomedco as its own
and was declared for tax purposes in its name. 5
It was not until 1989 when private respondents discovered the
aforementioned claim of Bomedco on inquiry with the Bureau of Lands.
Through their lawyer, they immediately demanded the legal basis for
Bomedco's claim over Cadastral Lot No. 954 but their letter of inquiry
addressed to petitioner went unheeded, as was their subsequent
demand for payment of compensation for the use of the land. 6
On June 8, 1989, respondent heirs filed a "Complaint for Payment of
Compensation and/or Recovery of Possession of Real Property and
Damages with Application for Restraining Order/Preliminary Injunction"
against Bomedco before the Regional Trial Court of
Cebu.7 Respondent heirs alleged that, before she sold the land to
Valdez, Sr. in 1935, Santillan granted Bomedco, in 1929, a railroad
right of way for a period of 30 years. When Valdez, Sr. acquired the
land, he respected the grant. The right of way expired sometime in
1959 but respondent heirs allowed Bomedco to continue using the land
because one of them was then an employee of the company.8
In support of the complaint, they presented an ancient document ― an
original copy of the deed of sale written in Spanish and dated
December 9, 19359 ― to evidence the sale of the land to Magdaleno
Valdez, Sr.; several original real estate tax receipts10 including Real
Property Tax Receipt No. 393511 dated 1922 in the name of Graciano
de los Reyes, husband of Feliciana Santillan, and Real Property Tax
Receipt No. 0949112 dated 1963 in the name of Magdaleno Valdez, Sr.
Magdaleno Valdez, Jr. also testified for the plaintiffs during the trial.
On the other hand, Bomedco’s principal defense was that it was the
owner and possessor of Cadastral Lot No. 954, having allegedly
bought the same from Feliciana Santillan in 1929, prior to the sale of
the property by the latter to Magdaleno Valdez, Sr. in 1935. It also
contended that plaintiffs’ claim was already barred by prescription and
laches because of Bomedco’s open and continuous possession of the
property for more than 50 years.
Bomedco submitted in evidence a Deed of Sale13 dated March 18,
1929; seven real estate tax receipts14 for the property covering the
period from 1930 to 1985; a 1929 Survey Plan of private land for Bogo-
Medellin Milling Company;15 a Survey Notification Card;16 Lot Data
57
Computation for Lot No. 954;17 a Cadastral Map for Medellin
Cadastre18 as well as the testimonies of Vicente Basmayor, Geodetic
Engineer and property custodian for Bomedco, and Rafaela A. Belleza,
Geodetic Engineer and Chief of the Land Management Services of the
DENR, Region VIII.
In its decision dated November 27, 1991, the trial court19 rejected
Bomedco's defense of ownership on the basis of a prior sale, citing
that its evidence – a xerox copy of the Deed of Sale dated March 18,
1929 – was inadmissible and had no probative value. Not only was it
not signed by the parties but defendant Bomedco also failed to present
the original copy without valid reason pursuant to Section 4, Rule 130
of the Rules of Court.20
Nonetheless, the trial court held that Bomedco had been in possession
of Cadastral Lot No. 954 in good faith for more than 10 years, thus, it
had already acquired ownership of the property through acquisitive
prescription under Article 620 of the Civil Code. It explained:
Under Article 620 of the Civil Code, CONTINUOUS and APPARENT
easements can be acquired by prescription after ten (10) years. The
"apparent" characteristic of the questioned property being used by
defendant as an easement is no longer at issue, because plaintiffs
themselves had acknowledged that the existence of the railway tracks
of defendant Bomedco was already known by the late Magdaleno
Valdez, herein plaintiffs’ predecessor-in-interest, before the late
Magdaleno Valdez purchased in 1935 from the late Feliciana Santillan
the land described in the Complaint where defendant’s railway tracks is
traversing [sic] (TSN of February 5, 1991, pp. 7-8). As to the continuity
of defendant’s use of the strip of land as easement is [sic] also
manifest from the continuous and uninterrupted occupation of the
questioned property from 1929 up to the date of the filing of the instant
Complaint. In view of the defendant’s UNINTERRUPTED possession
of the strip of land for more than fifity (50) years, the Supreme Court’s
ruling in the case of Ronquillo, et al. v. Roco, et al. (103 Phil 84) is not
applicable. This is because in said case the easement in question was
a strip of dirt road whose possession by the dominant estate occurs
only everytime said dirt road was being used by the dominant estate.
Such fact would necessarily show that the easement’s possession by
the dominant estate was never continuous. In the instant case
however, there is clear continuity of defendant’s possession of the strip
of land it had been using as railway tracks. Because the railway tracks
which defendant had constructed on the questioned strip of land had
been CONTINUOUSLY occupying said easement. Thus, defendant
Bomedco’s apparent and continuous possession of said strip of land in
good faith for more than ten (10) years had made defendant owner of
said strip of land traversed by its railway tracks. Because the railway
tracks which defendant had constructed on the questioned strip of land
had been continuously occupying said easement [sic]. Thus, defendant
Bomedco’s apparent and continuous possession of said strip of land in
good faith for more than ten (10) years had made defendant owner of
said strip of land traversed by its railway tracks.
Respondent heirs elevated the case to the Court of Appeals which
found that Bomedco did not acquire ownership over the lot. It
consequently reversed the trial court. In its decision dated November
17, 1995, the appellate court held that Bomedco only acquired an
easement of right of way by unopposed and continuous use of the
land, but not ownership, under Article 620 of the Civil Code.
The appellate court further ruled that Bomedco’s claim of a prior sale to
it by Feliciana Santillan was untrue. Its possession being in bad faith,
the applicable prescriptive period in order to acquire ownership over
the land was 30 years under Article 1137 of the Civil Code. Adverse
possession of the property started only in 1965 when Bomedco
registered its claim in the cadastral survey of Medellin. Since only 24
years from 1965 had elapsed when the heirs filed a complaint against
Bomedco in 1989, Bomedco’s possession of the land had not yet
ripened into ownership.
And since there was no showing that respondent heirs or their
predecessor-in-interest was ever paid compensation for the use of the
land, the appellate court awarded compensation to them, to be
computed from the time of discovery of the adverse acts of Bomedco.
Its motion for reconsideration having been denied by the appellate
court in its resolution dated March 22, 1996, Bomedco now interposes
before us this present appeal by certiorari under Rule 45, assigning the
following errors:
I
THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR WHEN IT REVERSED AND SET ASIDE THE
TRIAL COURT’S DECISION DISMISSING PRIVATE
RESPONDENT’S COMPLAINT.
II
THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR WHEN IT ORDERED THE PETITIONER TO PAY
THE PRIVATE RESPONDENT THE REASONABLE VALUE
OF LOT 954 AND THE AMOUNT OF TEN THOUSAND
(₱10,000.00) PESOS AS REASONABLE ATTORNEY’S
FEES.
Petitioner Bomedco reiterates its claim of ownership of the
land through extraordinary acquisitive prescription under Article 1137
of the Civil Code and laches to defeat the claim for compensation or
recovery of possession by respondent heirs. It also submits a third
ground originally tendered by the trial court ― acquisition of the
easement of right of way by prescription under Article 620 of the Civil
Code.
Extraordinary Acquisitive Prescription
Under Art. 1137 of the Civil Code
Petitioner’s claim of ownership through extraordinary acquisitive
prescription under Article 1137 of the Civil Code cannot be sustained.
There is no dispute that the controversial strip of land has been in the
continuous possession of petitioner since 1929. But possession, to
constitute the foundation of a prescriptive right, must be possession
under a claim of title, that is, it must be adverse.21 Unless coupled with
the element of hostility towards the true owner, possession, however
long, will not confer title by prescription.22
After a careful review of the records, we are inclined to believe the
version of respondent heirs that an easement of right of way was
actually granted to petitioner for which reason the latter was able to
occupy Cadastral Lot No. 954. We cannot disregard the fact that, for
the years 1930, 1937, 1949, 1962 and 1963, petitioner unequivocally
declared the property to be a "central railroad right of way" or "sugar
central railroad right of way" in its real estate tax receipts when it could
have declared it to be "industrial land" as it did for the years 1975 and
1985.23 Instead of indicating ownership of the lot, these receipts
showed that all petitioner had was possession by virtue of the right of
way granted to it. Were it not so and petitioner really owned the land,
petitioner would not have consistently used the phrases "central
railroad right of way" and "sugar central railroad right of way" in its tax
declarations until 1963. Certainly an owner would have found no need
for these phrases. A person cannot have an easement on his own
land, since all the uses of an easement are fully comprehended in his
general right of ownership.24
While it is true that, together with a person’s actual and adverse
possession of the land, tax declarations constitute strong evidence of
ownership of the land occupied by him,25 this legal precept does not
58
apply in cases where the property is declared to be a mere easement
of right of way.
An easement or servitude is a real right, constituted on the corporeal
immovable property of another, by virtue of which the owner has to
refrain from doing, or must allow someone to do, something on his
property, for the benefit of another thing or person. It exists only when
the servient and dominant estates belong to two different owners. It
gives the holder of the easement an incorporeal interest on the land
but grants no title thereto. Therefore, an acknowledgment of the
easement is an admission that the property belongs to another. 26
Having held the property by virtue of an easement, petitioner cannot
now assert that its occupancy since 1929 was in the concept of an
owner. Neither can it declare that the 30-year period of extraordinary
acquisitive prescription started from that year.
Petitioner, however, maintains that even if a servitude was merely
imposed on the property in its favor, its possession immediately
became adverse to the owner in the late 1950’s when the grant was
alleged by respondent heirs to have expired. It stresses that, counting
from the late 1950’s (1959 as found by the trial court), the 30-year
extraordinary acquisitive prescription had already set in by the time
respondent heirs made a claim against it in their letters dated March 1
and April 6, 1989.
We do not think so. The mere expiration of the period of easement in
1959 did not convert petitioner’s possession into an adverse one. Mere
material possession of land is not adverse possession as against the
owner and is insufficient to vest title, unless such possession is
accompanied by the intent to possess as an owner.27 There should be
a hostile use of such a nature and exercised under such circumstances
as to manifest and give notice that the possession is under a claim of
right.
In the absence of an express grant by the owner, or conduct by
petitioner sugar mill from which an adverse claim can be implied, its
possession of the lot can only be presumed to have continued in the
same character as when it was acquired (that is, it possessed the land
only by virtue of the original grant of the easement of right of way), 28 or
was by mere license or tolerance of the owners (respondent heirs). 29 It
is a fundamental principle of law in this jurisdiction that acts of
possessory character executed by virtue of license or tolerance of the
owner, no matter how long, do not start the running of the period of
prescription.30
After the grant of easement expired in 1959, petitioner never
performed any act incompatible with the ownership of respondent heirs
over Cadastral Lot No. 954. On the contrary, until 1963, petitioner
continued to declare the "sugar central railroad right of way" in its
realty tax receipts, thereby doubtlessly conceding the ownership of
respondent heirs. Respondents themselves were emphatic that they
simply tolerated petitioner’s continued use of Cadastral Lot No. 954 so
as not to jeopardize the employment of one of their co-heirs in the
sugar mill of petitioner.31
The only time petitioner assumed a legal position adverse to
respondents’ was when it filed a claim over the property in 1965 during
the cadastral survey of Medellin. Since then (1965) and until the filing
of the complaint for the recovery of the subject land before the RTC of
Cebu in 1989, only 24 years had lapsed. Since the required 30-year
extraordinary prescriptive period had not yet been complied with in
1989, petitioner never acquired ownership of the subject land.
Laches
Neither can petitioner find refuge in the principle of laches. It is not just
the lapse of time or delay that constitutes laches. The essence of
laches is the failure or neglect, for an unreasonable and unexplained
length of time, to do that which, through due diligence, could or should
have been done earlier, thus giving rise to a presumption that the party
entitled to assert it had either abandoned or declined to assert it. 32
Its essential elements are: (a) conduct on the part of the defendant, or
of one under whom he claims, giving rise to the situation complained
of; (b) delay in asserting complainant’s rights after he had knowledge
of defendant’s acts and after he has had the opportunity to sue; (c)
lack of knowledge or notice by defendant that the complainant will
assert the right on which he bases his suit; and (d) injury or prejudice
to the defendant in the event the relief is accorded to the
complainant.33
The second element (which in turn has three aspects) is lacking in the
case at bar. These aspects are: (a) knowledge of defendant's action,
(b) opportunity to sue defendant after obtaining such knowledge and
(c) delay in the filing of such suit.34
Records show that respondent heirs only learned about petitioner’s
claim on their property when they discovered the inscription for the
cadastral survey in the records of the Bureau of Lands in 1989.
Respondents lost no time in demanding an explanation for said claim
in their letters to the petitioner dated March 1, 1989 and April 6, 1989.
When petitioner ignored them, they instituted their complaint before the
Regional Trial Court of Cebu City on June 8, 1989.
Petitioner’s reliance on Caro vs. Court of Appeals 35 and Vda. de
Alberto vs. Court of Appeals 36 is misplaced. There, laches was applied
to bar petitioners from questioning the ownership of the disputed
properties precisely because they had knowledge of the adverse
claims on their properties yet tarried for an extraordinary period of time
before taking steps to protect their rights.
Further, there is no absolute rule on what constitutes laches. It is a rule
of equity and applied not to penalize neglect or sleeping on one’s rights
but rather to avoid recognizing a right when to do so would result in a
clearly unfair situation. The question of laches is addressed to the
sound discretion of the court and each case must be decided
according to its particular circumstances.37 It is the better rule that
courts, under the principle of equity, should not be guided or bound
strictly by the statute of limitations or the doctrine of laches if wrong or
injustice will result.
It is clear that petitioner never acquired ownership over Cadastral Lot
No. 954 whether by extraordinary acquisitive prescription or by laches.
Acquisition of Easement of Right of Way By
Prescription Under Art. 620 of the Civil Code
Petitioner contends that, even if it failed to acquire ownership of the
subject land, it nevertheless became legally entitled to the easement of
right of way over said land by virtue of prescription under Article 620 of
the Civil Code:
Continuous and apparent easements are acquired either by virtue of a
title or by prescription of ten years.
The trial court and the Court of Appeals both upheld this view for the
reason that the railroad right of way was, according to
them, continuous and apparent in nature. The more or less permanent
railroad tracks were visually apparent and they continuously occupied
the subject strip of land from 1959 (the year the easement granted by
Feliciana Santillan to petitioner expired). Thus, with the lapse of the 10-
year prescriptive period in 1969, petitioner supposedly acquired the
easement of right of way over the subject land.
Following the logic of the courts a quo, if a road for the use of vehicles
or the passage of persons is permanently cemented or asphalted, then
59
the right of way over it becomes continuous in nature. The reasoning is
erroneous.
Under civil law and its jurisprudence, easements are either continuous
or discontinuous according to the manner they are exercised, not
according to the presence of apparent signs or physical indications of
the existence of such easements. Thus, an easement is continuous if
its use is, or may be, incessant without the intervention of any act of
man, like the easement of drainage;38 and it is discontinuous if it is
used at intervals and depends on the act of man, like the easement of
right of way.39
The easement of right of way is considered discontinuous because it is
exercised only if a person passes or sets foot on somebody else’s
land. Like a road for the passage of vehicles or persons, an easement
of right of way of railroad tracks is discontinuous because the right is
exercised only if and when a train operated by a person passes over
another's property. In other words, the very exercise of the servitude
depends upon the act or intervention of man which is the very essence
of discontinuous easements.
The presence of more or less permanent railroad tracks does not in
any way convert the nature of an easement of right of way to one that
is continuous. It is not the presence of apparent signs or physical
indications showing the existence of an easement, but rather
the manner of exercise thereof, that categorizes such easement into
continuous or discontinuous. The presence of physical or visual signs
only classifies an easement into apparent or non-apparent. Thus, a
road (which reveals a right of way) and a window (which evidences a
right to light and view) are apparent easements, while an easement of
not building beyond a certain height is non-apparent.40
In Cuba, it has been held that the existence of a permanent railway
does not make the right of way a continuous one; it is only apparent.
Therefore, it cannot be acquired by prescription.41 In Louisiana, it has
also been held that a right of passage over another's land cannot be
claimed by prescription because this easement is discontinuous and
can be established only by title.42
In this case, the presence of railroad tracks for the passage of
petitioner’s trains denotes the existence of an apparent but
discontinuous easement of right of way. And under Article 622 of the
Civil Code, discontinuous easements, whether apparent or not, may be
acquired only by title. Unfortunately, petitioner Bomedco never
acquired any title over the use of the railroad right of way whether by
law, donation, testamentary succession or contract. Its use of the right
of way, however long, never resulted in its acquisition of the easement
because, under Article 622, the discontinuous easement of a railroad
right of way can only be acquired by title and not by
prescription.1âwphi1
To be sure, beginning 1959 when the original 30-year grant of right of
way given to petitioner Bomedco expired, its occupation and use of
Cadastral Lot No. 954 came to be by mere tolerance of the respondent
heirs. Thus, upon demand by said heirs in 1989 for the return of the
subject land and the removal of the railroad tracks, or, in the
alternative, payment of compensation for the use thereof, petitioner
Bomedco which had no title to the land should have returned the
possession thereof or should have begun paying compensation for its
use.
But when is a party deemed to acquire title over the use of such land
(that is, title over the easement of right of way)? In at least two cases,
we held that if: (a) it had subsequently entered into a contractual right
of way with the heirs for the continued use of the land under the
principles of voluntary easements or (b) it had filed a case against the
heirs for conferment on it of a legal easement of right of way under
Article 629 of the Civil Code, then title over the use of the land is
deemed to exist. The conferment of a legal easement of right of way
under Article 629 is subject to proof of the following:
(1) it is surrounded by other immovables and has no
adequate outlet to a public highway;
(2) payment of proper indemnity;
(3) the isolation is not the result of its own acts; and
(4) the right of way claimed is at the point least prejudicial to
the servient estate, and, insofar as consistent with this rule,
the distance from the dominant estate to the highway is the
shortest.43
None of the above options to acquire title over the railroad right of way
was ever pursued by petitioner despite the fact that simple
resourcefulness demanded such initiative, considering the importance
of the railway tracks to its business. No doubt, it is unlawfully
occupying and using the subject strip of land as a railroad right of way
without valid title yet it refuses to vacate it even after demand of the
heirs. Furthermore, it tenaciously insists on ownership thereof despite
a clear showing to the contrary.
We thus uphold the grant by the Court of Appeals of attorney’s fees in
the amount of ₱10,000 considering the evident bad faith of petitioner in
refusing respondents’ just and lawful claims, compelling the latter to
litigate.44
WHEREFORE, the petition is DENIED. The appealed decision dated
November 17, 1995 and resolution dated March 2, 1996 of the Court of
Appeals are AFFIRMED with MODIFICATION. Petitioner Bogo-
Medellin Milling Company, Inc. is hereby ordered to vacate the subject
strip of land denominated as Cadastral Lot No. 954, remove its railway
tracks thereon and return its possession to the private respondents,
the heirs of Magdaleno Valdez, Sr. It is also hereby ordered to pay
private respondents attorney's fees in the amount of ₱10,000.
SO ORDERED.
G.R. No. L-17482 March 31, 1966
GENOVEVA R. JABONETE, ET AL., plaintiffs,
vs.
JULIANA MONTEVERDE, ET AL., defendants,
ANTONIO LEGASPI, respondent-appellant,
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner-appellee,
MRS. LUZ ARCILLA, petitioner-intervenor-appellee.
Zuño and Mojica for the respondents-appellants.
Jesus Avanceña for the plaintiffs.
REGALA, J.:
This is an appeal from an order of the Court of First Instance of Davao,
dated March 11, 1960, finding the respondent-appellant, Antonio
Legaspi, guilty of contempt of court, and imposing upon him a fine of
P100.
On March 11, 1954, the Court of First Instance of Davao, in view of its
finding in Case No. 824, entitled Jabonete vs. Monteverde, et al., that
Antonio Legaspi acquired the lot in question with the knowledge that a
"gravamen" or easement of right of way existed thereon, promulgated
a decision the dispositive portion of which reads:
Ordena al demandado Antonio Legaspi la demolicion de la
parte del corral construido a lo largo de su terreno que
impide a lote demandantes tener acceso con la vereda que
communica con la carretera principal, Tomas Claudio.
60
 Declara que los demandantes tienen derecho el uso de la
vereda (Exh. A-3), de 3 metros de ancho, unico paso que
disponen para communicarse con la Calle Tomas Claudio,
para el paso de sus jeeps, y los vehiculos, reparados que
entran y salen del taller de reparacion de aquellos.
The respondent-appellant received a copy of the decision on May 12,
1954. Two days later, May 14, 1954 he filed his notice of appeal
therefrom. On May 21, 1954 however, upon a previous motion of the
plaintiffs, the lower court issued an order granting discretionary
execution of the said decision. In view of this last mentioned order, the
plaintiffs immediately proceeded to the premises in question and
opened in the fence of the defendant Antonio Legaspi a sufficient
opening for the passage of men and vehicles. Even then, however, the
defendant filed with the court below on that very same day, May 21,
1954, a motion for the reconsideration of the order granting
discretionary execution. Thereafter, and upon the lower court's
suggestion, the parties entered into an amicable agreement which was
later embodied in an order or "auto" dated May 24, 1954, to wit:
A raiz de la mocion del demandado pidiendo antre otras
cosas, la reconsideracion de la orden de ejecucion de la
decision dictada en esta causa, el 22 del Mayo de 1954, el
Juez que preside esta sala se constituyo para una
inspeccion ocular en el lugar en conflicto.
Durante la inspeccion ocular, los demandantes y
demandado, Antonio Legaspi, llegaron a un acuerdo:
1. Los demandantes no instalaran en su terreno su taller de
reparacion de vehiculos de motor.
2. Los demandantes pueden construir su garaje dentro de
su terreno para su jeep (AC), pero no los tendran parados
en la calle privada del demandados construida por este en
su terreno a lo largo del terreno de los demandantes;
3. Los demandantes contribuiran a prorata con el
demandado los gastos de reparacion de la calle privada
construida por el referido demandado en su terreno a lo
largo del terreno de los demandantes.1äwphï1.ñët
4. El demandado, Antonio Legaspi, permitira el uso y paso
en la calle privada construida por el en su terreno a lo largo
del terreno de los demandantes, a estos, su familia, sus
amigos, chofers, servidumbre y de sus jeeps.
5. Para los fines del uso de la calle, el demandado permitira
a los demandantes, frente de la casa de estos, abrir una
puerta de 4 metros de ancho en el corral construido por el
demandado que separa la calle privada y el terreno de los
demandantes, a su (demandantes) costa; sus hojas tendran
por dentro, que los demandantes tendran cerradas para
evitar que los niños, hijos de los inquilinos del demandado
tengan acceso a los jeeps de los demandantes, cuyo garaje
tendran dentro de su (demandantes) terreno.
El Juzgado ordena a las partes litigantes complan
estrictamente con lo estipulado; de los contrario, los mismos
estaran sujetos a las ordenes de este Juzgado.
As a result of the above agreement and Order of May 24, 1954, the
defendant abandoned the prosecution of his appeal. At the same time,
both parties complied with its terms until the plaintiffs, unable to
continue with their repair shop, transferred to another place in
December 1959 whereupon the defendant reconstructed his fence and
its footing, closing thereby the opening previously made by the
plaintiffs.
In the course of time, the plaintiffs' lot was foreclosed by the
Development Bank of the Philippines (DBP) which, later still, conveyed
it under a conditional sale to Mrs. Luz Arcilla. On her acquisition of the
said lot, Mrs. Arcilla demanded of the defendant the re-opening of the
fence in question as it was her plan to construct her house in the said
lot. When the defendant refused, the Development Bank filed with the
lower court a petition to hold the said defendant in contempt. To this
petition, Mrs. Luz Arcilla later intervened and was so allowed by the
lower court. The Development Bank of the Philippines and Mrs. Luz
Arcilla contended that the refusal of the defendant to cause or allow
the making of an opening in his fence was a defiance of the said
court's decision of March 11, 1954 and was, therefore, contemptuous.
After due hearing, the lower court sustained the petitioners and found
the defendant guilty of contempt with orders "to pay a fine of One
Hundred Pesos (P100.00) and to open the vereda or alley leading to
the lot owned by the Development Bank of the Philippines and
conveyed to Mrs. Luz S. Arcilla under a conditional deed of sale,
otherwise he should be imprisoned until he does so." Thus, the instant
appeal.
The respondent-appellant maintains that the lower court erred in
finding him guilty of contempt because:
1. The decision of March 11, 1954 was novated by the order
of May 24, 1954. Consequently, he could not have violated
the former decree since with its novation it ceased to have
any legal effect.
2. Even assuming that the said decision was not novated by
the subsequent order of May 24, 1954, still he could not be
deemed to have violated the said decision because the
same never became final and executory. The respondent-
appellant argued that since the decision of March 11, 1954
ordered the opening of a right of way in his property without
providing for this corresponding compensation to him,
contrary to Article 649 of the Civil Code,1 there was in the
said decision "a void which ought to be filled or to be done in
order to completely dispose of the case. It was not clear,
specific and definitive," and consequently, a judgment that
could not have acquired finality.
3. The right to file contempt proceedings against him, with
respect to the decrees contained in the decision of March
11, 1954, has prescribed. The respondent-appellant
conceded that there is no prescriptive period for the
institution of contempt proceedings. However, he contended
that inasmuch as contempt under Rule 64 of the Rules of
Court is punishable by arresto mayor, it should prescribe in
five years just as crimes for which the said penalty is
imposed prescribe, under the Penal Code, in five years.
Without passing on the merits or demerits of the foregoing arguments,
this Court believes that the order finding the respondent-appellant
guilty of contempt should be reversed. It is clear that the order of May
24, 1954 superseded and was fully intended by the lower court to
modify or stand in substitution of the decision of March 11, 1954. More
than the expression of the parties amicable agreement on the dispute,
the said order was the lower court's resolution of the respondent-
appellant's motion for reconsideration of the decision of March 11,
1954. In the determination, therefore, of the said appellant's obligation
relative to the easement in question, the latter and not the decision of
March 11, 1954 is the proper point in reference.
Under the aforesaid order of May 24, 1954, the easement awarded or
secured by the lower court to the plaintiffs was strictly a personal one.
The right of way granted was expressly limited to the latter and their
"family, friends, drivers, servants and jeeps." In the very language of
the agreement the following appears:
61
 El demandado Antonio Legaspi, permitira el uso y paso en la
calle privada construida por el en su terreno a lo largo del
terreno de los demandantes, a estos, su familia, sus amigos,
chofers, servidumbre y de sus jeeps.
The servitude established was clearly for the benefit alone of the
plaintiffs and the persons above enumerated and it is clear that the
lower court, as well as the parties addressed by the said order, did not
intend the same to pass on to the plaintiffs'
successors-in-interest. In other words, the right acquired by the original
plaintiffs was a personal servitude under Article 614 of the Civil Code,
and not a predial servitude that inures to the benefit of whoever owns
the dominant estate.
In resisting the extension of the aforementioned easement to the latter,
the plaintiffs' successors-in-interest, the respondent-appellant,
therefore, was not defying the decision of March 11, 1954 which was
then no longer subsisting, nor the order of May 24, 1954 since the said
successors-in-interest had no right thereunder.
Another evidence that the servitude in question was personal to the
plaintiffs is the fact that the same was granted to the latter without any
compensation to the respondent-appellant.
Wherefore, the order of the lower court dated March 11, 1960 finding
the respondent-appellant guilty of contempt is hereby reversed, without
pronouncement as to costs.
Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Makalintal,
Bengzon, J.P., Zaldivar and Sanchez, JJ., concur.
Bautista Angelo and Dizon, JJ., took no part.
Footnotes
1
ART. 649. "The owner, or any person who by virtue of a real
right may cultivate or use any immovable, which is
surrounded by other immovables pertaining to other persons
without adequate outlet to a public highway, is entitled to
demand a right of way through the neighboring estates, after
the payment of the proper indemnity."
G.R. No. 90596 April 8, 1991
SOLID MANILA CORPORATION, petitioner,
vs.
BIO HONG TRADING CO., INC. and COURT OF
APPEALS, respondents.
Balgos & Perez for petitioner.
Alfredo G. de Guzman for private respondent.
SARMIENTO, J.:
This is an appeal filed by way of a petition for review
on certiorari under Rule 45 of the Rules of Court.
The petitioner raises two questions: (1) whether or not the Court of
Appeals1 erred in reversing the trial court which had rendered
summary judgment; and (2) whether or not it erred in holding that an
easement had been extinguished by merger.
We rule for the petitioner on both counts.
It appears that the petitioner is the owner of a parcel of land located in
Ermita, Manila, covered by Transfer Certificate of Title No. 157750 of
the Register of Deeds of Manila. The same lies in the vicinity of
another parcel, registered in the name of the private respondent
corporation under Transfer Certificate of Title No. 128784.
The private respondent's title came from a prior owner, and in their
deed of sale, the parties thereto reserved as an easement of way:
. . .a portion thereof measuring NINE HUNDRED
FOURTEEN SQUARE METERS, more or less, had been
converted into a private alley for the benefit of neighboring
estates, this being duly annotated at the back of the covering
transfer Certificate of title per regulations of the Office of the
City Engineer of Manila and that the three meterwide portion
of said parcel along the Pasig River, with an area of ONE
HUNDRED SEVENTY NINE (179) SQUARE METERS,
more or less, had actually been expropriated by the City
Government, and developed pursuant to the beautification
drive of the Metro Manila Governor. (p. 3, Record).2
As a consequence, an annotation was entered in the private
respondent's title, as follows:
Entry No. 7712/T-5000 –– CONSTRUCTION OF PRIVATE
ALLEY –– It is hereby made of record that a construction of
private alley has been undertaken on the lot covered by this
title from Concepcion Street to the interior of the aforesaid
property with the plan and specification duly approved by the
City Engineer subject to the following conditions to wit: (1)
That the private alley shall be at least three (3) meters in
width; (2) That the alley shall not be closed so long as
there's a building exists thereon (sic); (3) That the alley shall
be open to the sky; (4) That the owner of the lot on which
this private alley has been constituted shall construct the
said alley and provide same with concrete canals as per
specification of the City Engineer; (5) That the maintenance
and upkeep of the alley shall be at the expense of the
registered owner; (6) That the alley shall remain open at all
times, and no obstructions whatsoever shall be placed
thereon; (7) That the owner of the lot on which the alley has
been constructed shall allow the public to use the same, and
allow the City to lay pipes for sewer and drainage purposes,
and shall not act (sic) for any indemnity for the use thereof;
and (8) That he shall impose upon the vendee or new owner
of the property the conditions abovementioned; other
conditions set forth in Doc. No. 4236, Page No. 11, Book No.
84 of Nicasio P. Misa, Not. Pub. of Manila.3
The petitioner claims that ever since, it had (as well as other residents
of neighboring estates) made use of the above private alley and
maintained and contributed to its upkeep, until sometime in 1983,
when, and over its protests, the private respondent constructed steel
gates that precluded unhampered use.
On December 6, 1984, the petitioner commenced suit for injunction
against the private respondent, to have the gates removed and to allow
full access to the easement.
The court a quo shortly issued ex parte an order directing the private
respondent to open the gates. Subsequently, the latter moved to have
the order lifted, on the grounds that: (1) the easement referred to has
been extinguished by merger in the same person of the dominant and
servient estates upon the purchase of the property from its former
owner; (2) the petitioner has another adequate outlet; (3) the petitioner
has not paid any indemnity therefor; and (4) the petitioner has not
shown that the right-of-way lies at the point least prejudicial to the
servient estate.
62
The private respondent's opposition notwithstanding, the trial court
issued a "temporary writ of preliminary injunction to continue up to the
final termination of the case upon its merits upon the posting of a
P5,000.00 bond by the plaintiff.4 (the petitioner herein).
Thereafter, the respondent corporation answered and reiterated its
above defenses.
On April 15, 1986, the petitioner moved for summary judgment and the
court a quo ruled on the same as follows:
In view of the foregoing, this Court finds it unnecessary to try this case
on the merit (sic) and hereby resolve (sic) to grant the plaintiffs motion
for summary judgment. (pp. 15-107, Record).5
On January 19, 1987, the trial court rendered judgment against the
private respondent, the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered making
permanent the temporary mandatory injunction, that had
been issued against the defendant, and for the defendant to
pay the plaintiff the costs of this suit.
The defendant's counterclaim against the plaintiff is hereby
dismissed, for lack of merit. (Summary Judgment, p. 6).6
The private respondent appealed to the respondent Court of Appeals.
Meanwhile, the private respondent itself went to the Regional Trial
Court on a petition for the cancellation of the annotation in question.
The court granted cancellation, for which the petitioner instituted CA-
G.R. SP No. 13421 of the respondent Court of Appeals which ordered
the restoration of the annotation "without prejudice [to] the final
outcome of7 the private respondent's own appeal (subject of this
petition).
In reversing the trial court which had, as earlier mentioned, rendered
summary judgment, the respondent Court of Appeals held that the
summary judgment was improper and that the lower court erroneously
ignored the defense set up by the private respondent that the
easement in question had been extinguished. According to the
Appellate Court, an easement is a mere limitation on ownership and
that it does not impair the private respondent's title, and that since the
private respondent had acquired title to the property, "merger" brought
about an extinguishment of the easement.
The petitioner submits that the respondent Court of Appeals erred,
because the very deed of sale executed between the private
respondent and the previous owner of the property "excluded" the alley
in question, and that in any event, the intent of the parties was to retain
the "alley" as an easement notwithstanding the sale.
As already stated at the outset, the Court finds merit in the petition.
There is no question that an easement, as described in the deed of
sale executed between the private respondent and the seller, had been
constituted on the private respondent's property, and has been in fact
annotated at the back of Transfer Certificate of Title No. 128784.
Specifically, the same charged the private respondent as follows: "(6)
That the alley shall remain open at all times, and no obstructions
whatsoever shall be placed thereon; (7) That the owner of the lot on
which the alley has been constructed shall allow the public to use the
same, and allow the City to lay pipes for sewer and drainage purposes,
and shall not [ask] for any indemnity for the use thereof. . ."8 Its act,
therefore, of erecting steel gates across the alley was in defiance of
these conditions and a violation of the deed of sale, and, of course, the
servitude of way.
The Court then is of the opinion that injunction was and is proper and
in denying injunctive relief on appeal, the respondent Appellate Court
committed an error of judgment and law.
It is hardly the point, as the Court of Appeals held, that the private
respondent is the owner of the portion on which the right-of-way had
been established and that an easement can not impair ownership. The
petitioner is not claiming the easement or any part of the property as its
own, but rather, it is seeking to have the private respondent respect the
easement already existing thereon. The petitioner is moreover agreed
that the private respondent has ownership, but that nonetheless, it has
failed to observe the limitation or encumbrance imposed on the same
There is therefore no question as to ownership. The question is
whether or not an easement exists on the property, and as we
indicated, we are convinced that an easement exists.
It is true that the sale did include the alley. On this score, the Court
rejects the petitioner's contention that the deed of sale "excluded" it,
because as a mere right-of-way, it can not be separated from the
tenement and maintain an independent existence. Thus:
Art. 617. Easements are inseparable from the estate to
which they actively or passively belong.9
Servitudes are merely accessories to the tenements of which they form
part.10 Although they are possessed of a separate juridical existence,
as mere accessories, they can not, however, be alienated11 from the
tenement, or mortgaged separately.12
The fact, however, that the alley in question, as an easement, is
inseparable from the main lot is no argument to defeat the petitioner's
claims, because as an easement precisely, it operates as a limitation
on the title of the owner of the servient estate, specifically, his right to
use (jus utendi).
As the petitioner indeed hastens to point out, the deed itself stipulated
that "a portion thereof [of the tenement] measuring NINE HUNDRED
FOURTEEN SQUARE METERS, more or less, had been converted
into a private alley for the benefit of the neighboring estates. . ."13 and
precisely, the former owner, in conveying the property, gave the private
owner a discount on account of the easement, thus:
WHEREAS, to compensate for the foregoing, the parties
hereto agreed to adjust the purchase price from THREE
MILLION SEVEN HUNDRED NINETY THOUSAND FOUR
HUNDRED FORTY PESOS (P3,790,440.) to THREE
MILLION FIVE HUNDRED THREE THOUSAND TWO
HUNDRED FORTY PESOS (P3,503,240.00)14
Hence, and so we reiterate, albeit the private respondent did acquire
ownership over the property –– including the disputed alley –– as a
result of the conveyance, it did not acquire the right to close that alley
or otherwise put up obstructions thereon and thus prevent the public
from using it, because as a servitude, the alley is supposed to be open
to the public.
The Court is furthermore of the opinion, contrary to that of the Court of
Appeals, that no genuine merger took place as a consequence of the
sale in favor of the private respondent corporation. According to the
Civil Code, a merger exists when ownership of the dominant and
servient estates is consolidated in the same person.15 Merger then, as
can be seen, requires full ownership of both estates.
One thing ought to be noted here, however. The servitude in question
is a personal servitude, that is to say, one constituted not in favor of a
particular tenement (a real servitude) but rather, for the benefit of the
general public.
63
Personal servitudes are referred to in the following article of the Civil
Code:
Art. 614. Servitudes may also be established for the benefit
of a community, or of one or more persons to whom the
encumbered estate does not belong.16
In a personal servitude, there is therefore no "owner of a dominant
tenement" to speak of, and the easement pertains to persons without a
dominant estate,17 in this case, the public at large.
Merger, as we said, presupposes the existence of a prior servient-
dominant owner relationship, and the termination of that relation leaves
the easement of no use. Unless the owner conveys the property in
favor of the public –– if that is possible –– no genuine merger can take
place that would terminate a personal easement.
For this reason, the trial court was not in error in rendering summary
judgment, and insofar as the respondent Court of Appeals held that it
(the trial court) was in error, the Court of Appeals is in error.
Summary judgments under Rule 34 of the Rules of Court are proper
where there is no genuine issue as to the existence of a material fact,
and the facts appear undisputed based on the pleadings, depositions,
admissions, and affidavits of record.18 In one case, this Court upheld a
decision of the trial court rendered by summary judgment on a claim
for money to which the defendant interposed the defense of payment
but which failed to produce receipts.19We held that under the
circumstances, the defense was not genuine but rather, sham, and
which justified a summary judgment. In another case, we rejected the
claim of acquisitive prescription over registered property and found it
likewise to be sham, and sustained consequently, a summary
judgment rendered because the title challenged was covered by a
Torrens Certificate and under the law, Torrens titles are
imprescriptible.20
We also denied reconveyance in one case and approved a summary
judgment rendered thereon, on the ground that from the records, the
plaintiffs were clearly guilty of laches having failed to act until after
twenty-seven years.21 We likewise allowed summary judgment and
rejected contentions of economic hardship as an excuse for avoiding
payment under a contract for the reason that the contract imposed
liability under any and all conditions.22
In the case at bar, the defense of merger is, clearly, not a valid
defense, indeed, a sham one, because as we said, merger is not
possible, and secondly, the sale unequivocally preserved the existing
easement. In other words, the answer does not, in reality, tender any
genuine issue on a material fact and can not militate against the
petitioner's clear cause of action.
As this Court has held, summary judgments are meant to rid a
proceeding of the ritual of a trial where, from existing records, 23 the
facts have been established, and trial would be futile.
What indeed, argues against the posturing of the private respondent –
– and consequently, the challenged holding of the respondent Court of
Appeals as well –– is the fact that the Court of Appeals itself had
rendered judgment, in its CA-G.R. No. 13421, entitled Solid Manila
Corporation v. Ysrael, in which it nullified the cancellation of the
easement annotated at the back of the private respondent's certificate
of title ordered by Judge Ysrael in LRC Case No. 273. As the petitioner
now in fact insists, the Court of Appeals' judgment, which was affirmed
by this Court in its Resolution dated December 14, 1988, in G.R. No.
83540, is at least, the law of the case between the parties, as "law of
the case" is known in law, e.g.:
xxx xxx xxx
Law of the case has been defined as the opinion delivered
on a former appeal. More specifically, it means that whatever
is once irrevocably established as the controlling legal rule of
decision between the same parties in the same case
continues to be the law of the case, whether correct on
general principles or not, so long as the facts on which such
decision was predicated continue to be the facts of the case
before the court. (21 C.J.S. 330) (Emphasis supplied).
It may be stated as a rule of general application that, where
the evidence on a second or succeeding appeal is
substantially the same as that on the first or preceding
appeal, all matters, questions, points, or issues adjudicated
on the prior appeal are the law of the case on all subsequent
appeals and will not be considered or readjudicated therein.
(5 C.J.S. 1267) (Emphasis supplied.)
In accordance with the general rule stated in Section 1821,
where, after a definite determination, the court has
remanded the cause for further action below, it will refuse to
examine question other than those arising subsequently to
such determination and remand, or other than the propriety
of the compliance with its mandate; and if the court below
has proceeded in substantial conformity to the directions of
the appellate court, its action will not be questioned on a
second appeal.
As a general rule a decision on a prior appeal of the same
case is held to be the law of the case whether that decision
is right or wrong, the remedy of the party deeming himself
aggrieved being to seek a rehearing. (5 C.J.S. 1276-77).
(Emphasis supplied.)
Questions necessarily involved in the decision on a former
appeal will be regarded as the law of the case on a
subsequent appeal, although the questions are not expressly
treated in the opinion of the court, as the presumption is that
all the facts in the case bearing on the point decided have
received due consideration whether all or none of them are
mentioned in the opinion. (5 C.J.S. 1286-87). (Emphasis
supplied.)24
CA-G.R. No. 13421 is the law of the case because clearly, it was
brought to determine the rights of the parties regarding the easement,
subject of the controversy in this case, although as a petition for
"cancellation of annotation" it may have, at a glance, suggested a
different cause of action.
And for reasons of fair play, the private respondent can not validly
reject CA-G.R. No. 13421 as the law of the case, after all, it was the
one that initiated the cancellation proceedings with the Regional Trial
Court in LRC No. 273 that precipitated that appeal. In the second
place, the proceedings for cancellation of annotation was in fact meant
to preempt the injunction decreed by the lower court in this case.
Plainly and simply, the private respondent is guilty of forum-shopping,
as we have described the term:
xxx xxx xxx
There is forum-shopping whenever, as a result of an adverse
opinion in one forum, a party seeks a favorable opinion
(other than by appeal or certiorari) in another. The principle
applies not only with respect to suits filed in the courts but
also in connection with litigations commenced in the courts
while an administrative proceeding is pending, as in this
case, in order to defeat administrative processes and in
anticipation of an unfavorable administrative ruling and a
favorable court ruling. This is specially so, as in this case,
where the court in which the second suit was brought, has
no jurisdiction.25
64
to which contempt is a penalty.26
As it happened, in its effort to shop for a friendly forum, the private
respondent found an unfriendly court and it can not be made to profit
from its act of malpractice by permitting it to downgrade its finality and
deny its applicability as the law of the case.
As a personal servitude, the right-of-way in question was established
by the will of the owner.
In the interesting case of North Negros Sugar Co., Inc. v.
Hidalgo,27 this Court, speaking through Justice Claro Recto, declared
that a personal servitude (also a right of way in that case) is
established by the mere "act"28 of the landowner, and is not
"contractual in the nature,"29 and a third party (as the petitioner herein
is a third party) has the personality to claim its benefits. In his separate
opinion, however, Justice Jose Laurel maintained that a personal or
voluntary servitude does require a contract and that "[t]he act of the
plaintiff in opening the private way here involved did not constitute an
offer . . . "30 and "[t]here being no offer, there could be no acceptance;
hence no contract."31
The Court sees no need to relive the animated exchanges between
two legal titans (they would contend even more spiritedly in the "larger"
world of politics) to whom present scholars perhaps owe their erudition
and who, because of the paths they have taken, have shaped history
itself; after all, and coming back to the case at bar, it is not disputed
that an easement has been constituted, whereas it was disputed in
North Negros' case. Rather, the question is whether it is still existing or
whether it has been extinguished. As we held, our findings is that it is
in existence and as a consequence, the private respondent can not bar
the public, by erecting an obstruction on the alley, from its use.
WHEREFORE, the petition is GRANTED. The decision of the Court of
Appeals is SET ASIDE and the decision of the Regional Trial Court is
hereby REINSTATED. The petitioner and its counsel are hereby
required to SHOW CAUSE why they should not be punished for
contempt of court, and also administratively dealt with in the case of
counsel, for forum shopping.
IT IS SO ORDERED.
G.R. No. L-14652 June 30, 1960
JUAN GARGANTOS, petitioner,
vs.
TAN YANON and THE COURT OF APPEALS, respondents.
Jose T. Nery for petitioner.
Constantino P. Tadena for respondents.
GUTIERREZ DAVID, J.:
Juan Gargantos appeals by certiorari from the decision of the Court of
Appeals reversing the judgment of the Court of First Instance of
Romblon.
The record discloses that the late Francisco Sanz was the former
owner of a parcel of land containing 888 square meters, with the
buildings and improvements thereon, situated in the poblacion of
Romblon. He subdivided the lot into three and then sold each portion
to different persons. One portion was purchased by Guillermo Tengtio
who subsequently sold it to Vicente Uy Veza. Another portion, with the
house of strong materials thereon, was sold in 1927 to Tan Yanon,
respondent herein. This house has on its northeastern side, doors and
windows over-looking the third portion, which, together with
the camarin and small building thereon, after passing through several
hands, was finally acquired by Juan Gargantos, petitioner herein.
On April 23, 1955, Gargantos applied to the Municipal Mayor for a
permit to demolish the roofing of the old camarin. The permit having
been granted, Gargantos tore down the roof of the camarin. On May
11, 1955, Gargantos asked the Municipal Council of Romblon for
another permit, this time in order to construct a combined residential
house and warehouse on his lot. Tan Yanon opposed approval of this
application.
Because both the provincial fiscal and district engineer of Romblon
recommended granting of the building permit to Gargantos, Tan Yanon
filed against Gargantos an action to restrain him from constructing a
building that would prevent plaintiff from receiving light and enjoying
the view trough the window of his house, unless such building is
erected at a distance of not less than three meters from the boundary
line between the lots of plaintiff and defendant, and to enjoin the
members of Municipal Council of Romblon from issuing the
corresponding building permit to defendant. The case as against the
members of the Municipal Council was subsequently dismissed with
concurrence of plaintiff's council. After trial, the Court of First Instance
of Romblon rendered judgment dismissing the complaint and ordering
plaintiff to pay defendant the sum of P12,500.00 by way of
compensatory, exemplary, moral and moderate damages.
On appeal, the Court of Appeals set aside the decision of the Court of
First Instance of Romblon and enjoined defendant from constructing
his building unless "he erects the same at a distance of not less than
three meters from the boundary line of his property, in conformity with
Article 673 of the New Civil Code."
So Juan Gargantos filed this petition for review of the appellate Court's
decision. The focal issue herein is whether the property of respondent
Tan Yanon has an easement of light and view against the property of
petitioner Gargantos.
The kernel of petitioner's argument is that respondent never acquired
any easement either by title or by prescription. Assuredly, there is no
deed establishing an easement. Likewise, neither petitioner nor his
predecessors-in-interest have ever executed any deed whereby they
recognized the existence of the easement, nor has there been final
judgment to that effect. Invoking our decision in Cortes vs. Yu-Tibo (2
Phil., 24), petitioner maintains that respondent has not acquired an
easement by prescription because he has never formally forbidden
petitioner from performing any act which would be lawful without the
easement, hence the prescriptive period never started.
It is obvious, however, that Article 538, O.C.C. (now Article 621,
N.C.C.) and the doctrine in the Yu-Tibo case are not applicable herein
because the two estates, that now owned by petitioner, and that owner
by respondent, were formerly owned by just one person, Francisco
Sanz. It was Sanz who introduced improvements on both properties.
On that portion presently belonging to respondent, he constructed a
house in such a way that the northeastern side thereof extends to the
wall of the camarin on the portion now belonging to petitioner. On said
northeastern side of the house, there are windows and doors which
serve as passages for light and view. These windows and doors were
in existence when respondent purchased the house and lot from Sanz.
The deed sale did not provide that the easement of light and view
would not be established. This then is precisely the case covered by
Article 541, O.C.C (now Article 624, N.C.C) which provides that the
existence of an apparent sign of easement between two estates,
established by the proprietor of both, shall be considered, if one of
them is alienated, as a title so that the easement will continue actively
and passively, unless at the time the ownership of the two estate is
divided, the contrary is stated in the deed of alienation of either of
them, or the sign is made to disappear before the instrument is
executed. The existence of the doors and windows on the northeastern
side of the aforementioned house, is equivalent to a title, for the visible
65
and permanent sign of an easement is the title that characterizes its
existence (Amor vs. Florentino, 74 Phil., 403). It should be noted,
however, that while the law declares that the easement is to "continue"
the easement actually arises for the first time only upon alienation of
either estate, inasmuch as before that time there is no easement to
speak of, there being but one owner of both estates (Articles 530,
O.C.C., now Articles 613, N.C.C).
We find that respondent Tan Yanon's property has an easement of
light and view against petitioner's property. By reason of his easement
petitioner cannot construct on his land any building unless he erects it
at a distance of not less than three meters from the boundary line
separating the two estates.
Wherefore, the appealed decision is hereby affirmed with costs against
petitioner.
G.R. No. L-3099 May 21, 1951
CIPRIANA GONZALES, plaintiff-appellee,
vs.
PURIFICACION, GUILLERMO, EUSTACIO AND FAUSTINA, all
surnamed DE DIOS, assisted by their guardian CARLOTA
INDUCIL defendants-appellants.
Celestino de Dios for appellants.
Rosendo Tansinsin for appellee.
BAUTISTA ANGELO, J.:
Plaintiff is the owner of a fishpond situated in the barrio of Bambang,
Bulacan, adjacent to the fishpond of defendants. The only source of
water of her fishpond is Kay Pateng River, to which it has neither
ingress nor egress, because it has been completely cut off from it by
the fishpond of the defendants. After the several attempts made by her
to obtain from the defendants a right of way to and from said river to
furnish a source of water to her fishpond proved futile, she filed the
present action in the Court of First Instance of Bulacan.
Upon agreement of the parties, the court designated one Felipe
Asuncion, a surveyor, to investigate the premises and study the most
convenient place through which an aqueduct may be constructed for
the supply of water needed by the fishpond of the plaintiff, who
accordingly investigated the property and submitted his report. After
the parties have presented their evidence, the court rendered
judgment, the dispositive part of which is as follows:
WHEREFORE the Court hereby renders judgment as
follows: (a) the plaintiff to have a right of passage for water
from the river Kay Pateng to her fishpond, on the northwest
side of the dyke represented by the line connecting corners
6 and 7 of Psu-27824 lot No. 8 of the Ariston de Dios, by
constructing a canal eight meters wide and about one
hundred meters long; (b) the plaintiff will construct at her
expense a similar dyke, of the same height and width
alongside the said canal opposite the old dyke; and (c) the
plaintiff pay the defendants the sum of Seven hundred and
ninety-eight pesos and sixteen centavos (798.16) as just
compensation including consequential damages. Without
pronouncement as to costs.
IT IS SO ORDERED.
Not satisfied with this judgment, defendants appealed to the Court of
Appeals, the latter court affirming the judgment with costs against the
appellants. The case now before us on by way of certiorari.
The only question which is presented to us for determination is
whether there is law which justifies the grant to the appellee of an
easement of water over the land of the appellants in order to give to
the appellee a source of water to irrigate her fishpond.
The Court of Appeals holds the view that the claim of the appellee
finds support in the provisions of articles 118 to 125 of the Law of
Waters 1866 and articles 557 and 558 of the Civil Code, which were
also relied upon by the court a quo. On this point the Court of Appeals
said: "A perusal of the provisions of the Law of Waters on this point
shows that the easement of aqueduct is granted for any of the
purposes mentioned in article 113 of said law, such as irrigation, public
bath, or use of factories and drainage. The provisions of the Civil Code
convey the same idea as to the use for which the right of way may be
needed. There is nothing, however, in the provisions of both the Law of
Waters and the Civil Code above mentioned, that prohibits the use of
water for purposes other than those mentioned in said laws. Plaintiff-
appellee has proven that she has the right to draw water from Kay
Pateng River to make her fishpond as productive as the other
surrounding fishponds."
We agree with the Court of Appeals that articles 557 and 558 of the
Civil Code can be invoked in support of the claim of the appellee.
Article 557 provides that "any person who wishes to use upon his own
land any water of which he may have the control is entitled to take it
through the intervening estates, subject to the obligation of
indemnifying the owners thereof." The phrase "of which he may have
the control" should be interpreted in connection with article 558 (1)
which means that he has a right to dispose of the water. This was
interpreted to mean one who has obtained from the government a
grant to use water from a river (Gonzales vs. Banzon, 51 Phil., 15).
The use to which the water may be applied must also be interpreted in
the same way: that the water be sufficient for the use intended
(558[1]). And according to Manresa "Puede el agua solicitarse para
cualquiera de los usos necesarios de la vida." (4 Manresa, 704, 3rd
Ed.). In fact these article were applied to a grant to use water from a
river for irrigation purposes in the case mentioned above.
But as to the second canal, however, the defendant Mariano
B. Banzon has filed a counterclaim alleging that he has
obtained from the Director of Public Works a grant to use 50
liters of water per second from the Talisay River to irrigate
his lands, and, in accordance with the provision of article 557
in connection with article 558 of the Civil Code, he asks that
he be authorized to open, maintain and preserve a canal
similar to the second one mentioned on plaintiff's land upon
payment of the proper indemnity to the plaintiff, alleging that
the place where said canal passes is the most convenient
and least onerous to third parties, and that there is no other
place more appropriate and less prejudicial.
The defendant Mariano B. Banzon undoubtedly has a right
to compulsory easement of aqueduct upon payment of
indemnity since, although he is not the owner of the waters
of the Talisay River, he can dispose of 50 liters of the same
per second, by virtue of the grant from the Director of Public
Works. This may be inferred from the provision of article 125
of the Law of Waters of August 3, 1866, which authorizes the
owner of the land on which it is sought to impose the
compulsory easement of aqueduct, to object when the
applicant is not the owner or grantee of the water.
To enjoy the right granted by article 557 of the Civil Code,
the requisites established in article 558 of the same code
must be complied with. (Gonzales vs. Banzon, supra).
66
If a person who has obtained from the Government a grant to use
water a river from irrigation was given the right to construct a canal
over the intervening lands of other private owners upon payment of
indemnity, no valid reason is seen for not granting the same privilege
to the herein appellee who desires to draw water from a river for the
use of her fishpond. A fishpond comes within the classification of
agricultural land and is regarded as an important source of revenue
(Molina vs. Rafferty, 38 Phil. 167). It is generally constructed in low
lands or swampy places and draw its breadth of life from brooks and
rivers. It is just as rich and valuable as any piece of agricultural land
and in some regions it is regarded as the main source of wealth. It is
an undertaking to be encouraged and promoted, for it contributes to
the economic development of the people. Our law should be
interpreted in a sense that may give it life if it can be done without
doing violence to reason or to any rule of statutory construction.
There can, therefore, be no doubt with regard to the right of the
appellee to draw the water she needs for her fishpond through the land
of the defendants if she has obtained the necessary permit to use the
water from the Government. The law requires that this permit be
obtained from the Director of Public Works. (Sec. 14 of Act 2152, as
amended by Act 3208; The Philippine Sugar Estate Development
Co. vs. Unson and Williams, 53 Phil., 599.) While there is no proof to
this effect, at least this matter is not an issue in this case. This point is
not disputed. The only important question to be determine is how and
where the right should be exercised, but this is a question of fact which
the Court of Appeals has determined and which it is not now within our
province to pass upon. The finding of said Court on this matter is final.
Wherefore, the petition is hereby dismissed, without pronouncement as
to costs.
Paras, C.J., Feria, Pablo, Bengzon, Tuason and Montemayor,
JJ., concur.
G.R. No. L-21727 May 29, 1970
CRISPINA SALAZAR, petitioner,
vs.
GUILLERMO GUTIERREZ, and DAMASO MENDOZA, respondents.
Jaime L. Guerrero and Renato B. Bercades for petitioner.
Tañada, Teehankee & Carreon and Jose P. Santillan for respondents.
MAKALINTAL, J.:
Judgment was rendered by the Court of First Instance of Bataan (Civil
Case No. 2269) in favor of the plaintiff, Crispina Salazar, now
petitioner; on appeal by the defendants, Guillermo Gutierrez and
Damaso Mendoza, the Court of Appeals reversed (CA-G.R. No.
19489-R); and the plaintiff elevated the case to us for review
by certiorari.
Crispina Salazar is owner of a piece of land (Lot 436 of the Cadastral
Survey of Balanga) situated in Tuyo, Balanga, Bataan, covered by
Transfer Certificate of Title 1578 issued by the Register of Deeds of
the said province, and acquired by her from the Municipality of Balanga
on May 4, 1949. The lot is bounded on the northeast by Lot 361, on the
southeast by Sapang Tuyo, on the southwest by Lot 435, and on the
northwest by Lot 433.
Lot 433 was registered under the Torrens system on July 23, 1923,
with Original Certificate of Title 2162. Ownership passed to respondent
Guillermo Gutierrez by inheritance in 1927, and Transfer Certificate of
Title No. 1059 was issued in his name on June 11, 1928. No
annotation of any lien or encumbrance affecting the land appears on
either title.
Before the present controversy arose, Lot 436 and some of the
surrounding estates, including Lot 433, were irrigated with water
from Sapang Tuyo, a public stream, flowing through a dike that
traversed Lots 431, 434, 433 and 461. The portion of this dike that
passed through Lot 433 branched near the boundary between this lot
and Lot 434 into a canal which ran across the rest of Lot 433 up to Lot
436. It was with the water flowing through this canal that Lot 436 used
to be irrigated.
On February 24, 1953 respondent Damaso Mendoza, a lessee of Lot
433, demolished the said canal, thereby stopping the flow of the water
and depriving Crispina Salazar's Lot 436 of the irrigation facilities which
it had formerly enjoyed. Her requests that the canal be rebuilt and the
water flow restored having been turned down, Salazar commenced the
present suit on March 2, 1953, praying that these reliefs be granted her
by the Court and that the defendants be ordered to pay her actual
damages in the sum of P900, moral damages in the sum of P5,000,
and P1,000 for attorney's fees, plus costs.
The trial court issued a writ of preliminary injunction as prayed for by
the plaintiff, ordering the defendants to restore the demolished portion
of the canal and to refrain from again demolishing the same pending
trial, but the writ was dissolved on March 9, 1953, upon a counterbond
filed by the defendants. The latter answered with their own
counterclaim for damages, denied the substantial averments of the
complaint and put up a number of affirmative defenses.
After trial, the Court of First Instance of Bataan, finding that the
demolished canal had been in existence for more than thirty years and
that the big dike from which it extended had been constructed for the
use of Lot 436 as well as several other lots belonging to different
owners, rendered judgment on April 10, 1956, ordering the defendants
to restore at their expense the canal in question, to connect it with the
canal found in Lot 436 and to cause the corresponding annotation of
the encumbrance on Transfer Certificate of Title 1059 covering Lot
433; and ordering the defendants to pay the plaintiff the sum of P1,360
annually beginning the agricultural year 1956-1957 until the restoration
of the canal, P4,700 as actual damages, P5,000 as moral damages
and P1,000 as attorney's fees, plus costs.
On July 26, 1963, the Court of Appeals reversed the decision of the
Court of First Instance and held that since the easement of aqueduct
over Lot 433 for the benefit of Lot 436 was a voluntary one, the same
was extinguished when Lot 433 was registered on July 23, 1923 and
the corresponding certificate of title was issued without the annotation
of said easement as a subsisting encumbrance.
The respondents have raised a preliminary procedural question,
alleging that Section 1 of Rule 46 (now Section 1 of Rule 45), requiring
proof of service of a copy of the petition upon the Court of Appeals,
was not complied with. Such omission, however, is not of jurisdictional
import. In an appeal by certiorari upon a question of law, as
distinguished from an original petition for certiorari under Rule 65, the
Court of Appeals is merely a nominal party respondent. The original
parties in the trial court are the same parties in the appeal.
The main issue as set forth in the decision of the Court of Appeals is
the nature of the easement of aqueduct claimed by the petitioner. If
voluntary, according to the said Court, the easement was extinguished
upon the registration of Lot 433 in 1923, pursuant to Section 39 of Act
No. 496, which provides:
67
 But if there are easements or other rights
appurtenant to a parcel of registered land which
for any reason have failed to be registered, such
easements or rights shall remain so appurtenant
notwithstanding such failure and shall be held to
pass with the land until cut off or extinguished by
the registration of the servient estate, or in any
other manner. (Emphasis supplied).
In arriving at the conclusion that the easement in question was
voluntary and not legal or compulsory, the Court of Appeals took into
consideration the provisions of Articles 557 and 558 of the Spanish
Civil Code, now Articles 642 and 643 of the new Civil Code
respectively, as follows:
ART. 642. Any person who may wish to use upon
his own estate any water of which he can dispose
shall have the right to make it flow through the
intervening estates, with the obligation to
indemnify their owners, as well as the owners of
the lower estates upon which the waters may filter
or descend.
ART. 643. One desiring to make use of the right
granted in the preceding article is obliged:
(1) To prove that he can dispose of the water and
that it is sufficient for the use for which it is
intended;
(2) To show that the proposed right of way is the
most convenient and the least onerous to third
persons;
(3) To indemnify the owner of the servient estate
in the manner determined by the laws and
regulations.
Specifically the appellate court held that there is no evidence to show
that the petitioner has complied with the three requisites laid down in
Article 643 in order to entitle her to claim a legal easement of aqueduct
under Article 642. It bears repeating that the finding thus made,
although apparently factual in character, is premised upon supposed
absence of evidence, and therefore is reviewed by this Court if the
premise is clearly contradicted by the record or unjustified upon other
considerations which logically lead to a different conclusion, but which
the decision under review did not take into account.
On the first requisite of Article 643 — that the petitioner must prove
that he can dispose of the water and that it is sufficient for the use for
which it is intended — there is the statement of the trial court that the
disputed canal had been in existence since the Spanish regime, or at
least prior to the original registration of Lot 433 in 1923, and that of the
Court of Appeals itself confirmatory of this second alternative finding.
If, as thus found, the petitioner had been using water from Sapang
Tuyo to irrigate Lot 436 since she acquired said lot in 1949, as the
Municipality of Balanga had been doing before her, and that such use
had lasted continuously for at least thirty years, it is a fair presumption
that she had a right to do so and that the water she could dispose of
was sufficient for the purpose. Indeed it would be a superfluity to
require her to produce a permit from the proper authorities, for even
without it the right had already become vested both under Article 194
of the Spanish Law of Waters and under Article 504 of the Civil Code,
which respectively state:
ART. 194. Any person who has enjoyed the use of
public waters for a term of twenty years without
objection on the part of the authorities or of any
third person, shall continue in its enjoyment, even
though he may not be able to show that he
secured proper permission.
ART. 504. The use of public waters is acquired:
(1) By administrative concession;
(2) By prescription for ten years.
The extent of the rights and obligations of the use shall be that
established, in the first case, by the terms of the concession, and, in
the second case, by the manner and form, in which the waters have
been used.
The third requisite of Article 643 of the Civil Code refers to the matter
of indemnity to the owner of the servient estate. As correctly pointed
out by the petitioner it would be nigh impossible now to present actual
proof that such indemnity has been paid, considering the number of
years that have elapsed since the easement had first come into
existence and the subsequent changes in ownership of the lots
involved. It stands to reason, however, that if the easement had
continued for so long in fact, not only before Lot 433 was registered in
1923 but for thirty years thereafter, until cut off by the respondents in
1953 the legal requirement in question must have been complied with.
The other requisite of Article 643 is that "the proposed right of way is
the most convenient and the least onerous to third persons." The Court
of Appeals stated that the petitioner has not established this fact, and
that "her own evidence reveals that her lot is abutting Sapang Tuyo on
its southern boundary, where from she can easily and directly draw the
water necessary to irrigate her land." This statement is an
oversimplification. Proximity or abutment of a piece of land to a stream
does not necessarily carry with it the conclusion that water may
conveniently be drawn directly therefrom for irrigation. In the first place,
the petitioner has pointed out in her brief, without contradiction by the
respondents, that the portion of her land which abuts Sapang Tuyo is
precipice. Secondly, the trial court made an ocular inspection of the
premises and observed that the eastern and northeastern portions of
Lot 436 are lower than the southwestern, western and northwestern
(the point where Lot 436 adjoins Lot 433) portions of the same. Finally,
it would appear from the observation made by the same court that the
demolished canal is part of a system of conduits used to irrigate the
lands of the petitioner and the respondents as well as the surrounding
estates belonging to other owners, and that this system of conduits is
of a permanent nature. The trial court's description bears repeating:
At the ocular inspection conducted on September
22, 1953, it was found that the eastern and
northeastern portions of Lot No. 436 are lower
than the southern, western and northwestern
portions of the same; that about one-fourth (¼)
only of the lot is planted to palay and this palay is
yellowish, scarce and could hardly merit attention
to produce any substantial quantity of palay; that
this palay is planted in the eastern portion of the
same; that the palay planted on the land of
defendant Gutierrez and on the lot east of the land
of the plaintiff is luxuriant green and had all the
earmarks of producing a good harvest; that the
"pinitak" on the northwestern portion of the land of
the plaintiff is higher than the rest of the land; that
on this portion is found a canal about one and a
half (1-½) meters deep which canal runs south
and parallel to the boundary line of Lot 436 owned
by the plaintiff and Lot No. 435 and is one and a
half (1-½) meters from this boundary; that along
the southern boundary of Lot No. 433 that
separates it from Lot No. 436 is a "minangon" or a
dike and water flows continuously from one
'pinitak' to another of said Lot No. 433 up to a
68
 point between points "15" and "14" of said lot as
shown on Exhibit "A" ... that this water passes
from one "pinitak" to another through openings
made on the "pilapils" or small dikes that separate
the several "pinitaks" on this Lot No. 433; that the
western side of the canal that was demolished is
located on the boundary line of Lots Nos. 433 and
434 and this boundary line is higher and some
trees are found therein; that the new canal ... is
short and the old canal from point "13" to about
point "7" of Lot No. 433 on this exhibit is still in use
although it is not clean; that Lot No. 434 owned by
Antonio Mendoza is irrigated by two (2) pipes
coming from Lot No. 431 and by a canal that
comes from Lot No. 431 and by a canal that
comes from the main irrigation canal located on
the boundary line of these two (2) lots 431 and
434; that this main irrigation canal is the canal that
goes through Lot No. 443 ... which canal ends
farther east of Lot 448 ...; that this canal begins
from the dam farther west of these Lots Nos. 431,
434, 433 and 436.
xxx xxx xxx
The boundary line of the two (2) lots Nos. 433 and
434 shows that it is a "minangon", a dike. It is
extraordinarily high. From this situation, it can be
concluded that the canal along this boundary line
must be big. To irrigate the southern part of Lot
No. 433 would not require a big and permanent
canal if the same was used to irrigate the southern
part of Lot No. 433. Canal marked "W" which is a
substitute canal is small and shallow. From the
remnants of the old and demolished canal, it is
safe to assume that the canal has been in
existence for a long time as shown by some big
trees on the high "minangon." If it were to water
only the southern part of the lot as claimed by
defendants, it would have been the same in size
as the new canal mark "W" on Exhibit "A." The
construction of the new canal marked 'W' on the
exhibit is a feeble attempt to justify the alleged
purpose of the old canal, but this attempt at
coverage is laid bare by the existence of the old
canal that crossed Lot No. 433 ... Considering that
the southern portion of said lot is lower than the
rest of the same, the Court believes that the
openings on the dike of the old canal would be
sufficient to let water flow to the southern portions
of this lot. The western portion of this lot could
have been watered from the old canal ("X") or from
the existing canal ("Z") on Exhibit "A". That being
so, there is only one explanation why the old canal
("X") is in existence and that is for the use of Lot
No. 436 and other lots farther east of Lot No. 436.
It is a reasonable conclusion from the foregoing that the demolished
canal supplying water to Lot 436 of the petitioner was merely extension
of the system of conduits established long ago, considering that in view
of the topography of the area and the proximity of the said lot to the
main dike in Lot 433 it was more convenient to make the connection
therewith than to draw water directly from Sapang Tuyo. Article 118 of
the Spanish Law of Waters allows the creation of a compulsory
easement of aqueduct for the purpose of establishing or extending an
irrigation system, and there is nothing to the contrary in the Civil Code.
In any case the respondents are hardly in a position to avail of the
registration of Lot 433 in 1923 without the corresponding registration of
the easement on the title as an excuse to summarily terminate it thirty
years thereafter. The original registered owner allowed the easement
to continue in spite of such non-registration: the least that can be said
is that he either recognized its existence as a compulsory servitude on
his estate or voluntarily agreed to its establishment and continuance.
And the respondent Guillermo Gutierrez, as the successor-in-interest
to the, said owner by inheritance, is not an innocent third person who
could plead the absence of annotation on the title. Not only was he
aware of the existence of the easement when he inherited the property
in 1927, but he likewise allowed it to continue for twenty-six years after
he acquired title. He is bound both by the act of his predecessor and
by his own.
WHEREFORE, the decision of the Court of Appeals is set aside, and
that of the Court of First Instance of Bataan affirmed, with costs against
the respondents.
G.R. No. L-10619 February 28, 1958
LEOGARIO RONQUILLO, ET AL., plaintiffs-appellants,
vs.
JOSE ROCO, as Administrator of VICENTE, ROCO Y. DOMINGUEZ
ET AL., defendants-appellees.
Moises B. Cruz for appellants.
Vicente Roco, Jr. for appellees.
MONTEMAYOR, J.:
Involving as it does only a question of law, the present appeal from the
order of the Court of First Instance of Camarines Sur, dated March 6,
1955, dismissing the amended and supplemental complaint of plaintiffs
on motion of defendants that it did not state a cause of action, was
taken directly to this Court.
The facts and the issue involved in the appeal are well and correctly
stated in the appealed order, the pertinent portion of which we are
reproducing and making our own:
The amended and supplemental complaint alleged that the
plaintiffs have been in the continuous and uninterrupted use
of a road or passage way which traversed the land of the
defendants and their predecessors in interest, in going to
Igualdad Street and the market place of Naga City, from their
residential land and back, for more than 20 years; that the
defendants and the tenants of Vicente Roco, the
predecessors in interest of the said defendants have long
recognized and respected the private legal easement of road
right of way of said plaintiffs; that on May 12, 1953, the
defendants Jose Roco thru his co-defendants, Raymundo
Martinez and their men with malice aforethought and with a
view to obstructing the plaintiffs' private legal easement over
the property of the late Vicente Roco, started constructing a
chapel in the middle of the said right of way construction
actually impeded, obstructed and disturbed the continuous
exercise of the rights of the plaintiffs over said right of way;
that on July 10, 1954 the new defendants Natividad Roco
and Gregorio Miras, Jr. with the approval of the defendant,
Jose Roco and with the help of their men and laborers, by
means of force, intimidation, and threats, illegally and
violently planted wooden posts, fenced with barbed wire and
closed hermitically the road passage way and their right of
way in question against their protests and opposition,
thereby preventing them from going to or coming from their
homes to Igualdad Street and the public market of the City of
Naga.
It is very clear from the allegations of the plaintiffs in their
amended and supplemental complaint, that they claim to
69
 have acquired the easement of right of way over the land of
the defendants and the latter's predecessors in interest,
Vicente Roco, thru prescription by their continuous and
uninterrupted use of a narrow strip of land of the defendants
as passage way or road in going to Igualdad Street and the
public market of Naga City, from their residential land or
houses, and return.
The only question therefore to determine in this case, is
whether an easement of right of way can be acquired thru
prescription.
The dismissal was based on the ground that an easement of right of
way though it may be apparent is, nevertheless, discontinuous or
intermittent and, therefore, cannot be acquired through prescription,
but only by virtue of a title. Under old as well as the New Civil Code,
easements may be continuous discontinuous (intermittent), apparent
or non-apparent, discontinuous being those used at more or less long
intervals and which depend upon acts of man (Articles 532 and 615 of
the Old and New Civil Codes, respectively). Continuous and apparent
easements are acquired either, by title or prescription, continuous non-
apparent easements and discentinuous ones whether apparent or not,
may be acquired only by virtue of a title (Articles 537 and 539, and 620
and 622 of the Old and New Civil Codes, respectively).
Both Manresa and Sanchez Roman are of the opinion the easement of
right of way is a discontinuous one:
En cambio, las servidumbres discontinues se ejercitan por
un hecho del hombre, y precisamente por eso son y tienen
que ser discontinuas, porque es imposible fisicamente que
su uso sea incesante. Asi, la servidumbre de paso es
discontinua, porque no es posible que el hombre este
pasando continuamente por el camino, vereda o senda de
que se trate. (4 Manresa, Codigo Civil Español, 5th ed, p.
529).
. . . "5º Por razon de los modos de disfrutar las
servidumbres, en continuas y discontinuas (1).
Las continuasson aquelles cuyo uso es o puede ser
incesante, sin la intervencion de ningun hecho del hombre,
como son las de luces y otras de la misma especie; y
las discontinuas, las que se usan intervalos, mas o menos
largos, y dependen de actos del hombre, como las de sen
senda, carrera y otras de esta clase. (3 Sanchez Roman,
Derecho Civil, p. 488).
Under the provisions of the Civil Code, old and new, particularly the
articles thereof aforecited, it would therefore appear that the easement
of right of way may not be acquired through prescription. Even Article
1959 of the Old Civil Code providing for prescription of ownership and
other real rights in real property, excludes therefrom the exception
established by Article 539, referring to discontinuous easements, such
as, easement of right of way. (Bargayo vs. Camumot, 40 Phil., 857,
867).
In the case of Cuayong vs. Benedicto, 37 Phil., 781 where the point in
issue was whether or not vested rights in a right of way can be
acquired through user from time immemorial, this Court said:
It is evident, therefore, that no vested right by user from time
immemorial had been acquired by plaintiffs at the time the
Civil Code took effect. Under that Code (Article 539) ino
discontinuous easement could be acquired by prescription in
any event.
However, in the case of Municipality of Dumangas is Bishop of Jaro,
34 Phil., 545, this same Tribunal held that the continued use by the
public of a path over land adjoining the Catholic church in going to and
from said church through its side door, has given the church the right
to such use by prescription, and that because of said use by the public,
an easement of right of way over said land has been acquired by
prescription, not only by the church, but also by the public, which
without objection or protest on the part of the owner of said land, had
continually availed itself of the easement.
The minority of which the writer of this opinion is a part, believes that
the easement of right of way may now be acquired through
prescription, at least since the introduction into this jurisdiction of the
special law on prescription through the Old Code of Civil Procedure,
Act No. 190. Said law, particularly, Section 41 thereof, makes no
distinction as to the real rights which are subject to prescription, and
there would appear to be no valid reason, at least to the writer of this
opinion, why the continued use of a path or a road or right of way by
the party, specially by the public, for ten years or more, not by mere
tolerance of the owner of the land, but through adverse use of it,
cannot give said party a vested right to such right of way through
prescription.
The uninterrupted and continuous enjoyment of a right of
way necessary to constitute adverse possession does not
require the use thereof every day for the statutory period, but
simply the exercise of the right more or less frequently
according to the nature of the use. (17 Am. Jur. 972)
Even under the case of Cuaycong vs. Benedicto (supra), this Tribunal
insinuated the rule that no discontinuous easement, like an easement
of right of way, may, under Article 539 of the Old Civil Code, be
acquired, might possibly have been changed by the provisions of the
Code of Civil Procedure relative to prescription.
. . . Assuming, without deciding, that this rule has been
changed by the provisions of the present Code of Civil
Procedure relating to prescription, and that since its
enactment discontinuous easement of acquired by
prescription, it is clear that this would not by avail plaintiffs.
The Code of Civil Procedure went into effect on October 1,
1901. The term of prescription for the acquisition of right in
real estate is fixed by the Code (section 41) at ten years.
The evidence shows that in February, 1911, before the
expiration of the term of ten years since the time the Code of
Civil Procedure took effect, the defendants interrupted the
use of the road by plaintiffs by constructing and maintaining
a toll gate on, it collecting toll from persons making use of it
with carts and continued to do so until they were enjoin by
the granting of the preliminary injunction by the trial court in
December 1912. . . (Cuayong vs. Benedicto, 37 Phil., 781,
796).
Professor Tolentino in his Commentaries and Jurisprudence on the
Civil Code, Vol. I, p. 340, would appear to be of the opinion that under,
the provision of the Code of Civil Procedure relative to prescription,
even discontinuous easements, like the easement right of way, may be
acquired through prescription:
. . . "It is submitted that under Act No. 190, even
discontinuous servitudes can be acquired by prescription,
provided it can be shown that the servitude was actual,
open, public, continuous, under a claim of title exclusive of
any other right and adverse to all other claimants'."
However, the opinion of the majority must prevail, and it is held that
under the present law, particularly, the provisions of the Civil Code, old
and new, unless and until the same is changed or clarified, the
easement of right of way may not be acquired through prescription.
In view of the foregoing, the order appealed from is hereby affirmed.
No costs.
70
Bengzon, Bautista Angelo, Labrador, Concepcion, Endencia, and
Felix, JJ., concur.
Padilla, J., concurs in the result.
Separate Opinions
REYES, J.B.L., J., concurring:
I would like to elaborate my reasons for concurring with the majority in
declaring the easement of right of way not acquirable by prescription.
The essence of this easement ("servidumbre de paso") lies in the
power of the dominant owner to cross or traverse the servient
tenement without being prevented or disturbed by its owner. As a
servitude, it is a limitation on the servient owner's rights of ownership,
because it restricts his right to exclude others from his property. But
such limitation exists only when the dominant owner actually crosser,
or passes over the servient estate; because when he does not, the
servient owner's right of exclusion is perfect and undisturbed. Since the
dominant owner can not be continually and uninterruptedly crossing
the servient estate, but can do so only at intervals, the easement is
necessarily of an intermittent or discontinuous nature.
Because possession of a right consists in the enjoyment of that right
(old Civil Code, Art. 430; Art. 423, new Civil Code) and to enjoy a right
is to exercise it, it follows that the possession (enjoyment or exercise)
of a right of way is intermittent and discontinuous. From this premise, it
is inevitable to conclude, with Manresa and Sanchez Roman, that such
easement can not be acquired by acquisitive prescription (adverse
possession) because the latter requires that the possession
be continuous or uninterrupted (old Civil Code, Art. 1941; new Civil
Code, Art. 1118).
The Code of Civil Procedure (Act 190) did not change the situation.
Observe that its section 41, in conferring prescriptive title upon "ten
years adverse possession" qualifies it by the succeeding words
"uninterruptedly continued for ten years which is the same condition of
continuity that is exacted by the Civil Code.
SEC. 41. Title to Land by Prescription. — Ten years actual
adverse possession by any person claiming to be the owner
for that time of any land or interest in land, uninterruptedly
continued for ten years by occupancy, descent, grants, or
otherwise, in whatever way such occupancy may have
commenced or continued, shall vest in every actual
occupant or possessor of such land a full and complete title,
saving to the persons under disabilities the rights secured
the next section. In order to constitute such title by
prescription or adverse possession, the possession by the
claimant or by the person under or through whom he
claims must have been actual, open, public, continous,
under a claim of title exclusive of any other right and adverse
to all other claimants. But failure to occupy or cultivate land
solely by reason of war shall not be deemed to constitute an
interruption of possession of the claimant, and his title by
prescription shall he complete, if in other regrets perfect,
notwithstanding such failure to occupy or cultivate the land
during the continuance of war.
The case of Municipality of Dumangas vs. Bishop of Jaro, 34 Phil. 541,
does not, if properly analyzed, constitute authority to hold that the
easement of right of way is acquirable by prescription or adverse
possession. The Court there said:
The record shows that the church of the pueblo of
Dumangas was constructed in or about the year 1987; that
wall on the southeast side adjoins the building lot in
question; and that since the construction of the church there
has been a side door in this wall through which the
worshippers attending divine service enter and leave, they
having to pass over and cross the land in question. It is
therefore to be presumed that the use of said side door also
carries with it the use by faithful Catholics of the municipal
land over which they have had to pass in order to gain
access to said place of worship, and, as this use of the land
has been continuous, it is evident that the Church has
acquired a right to such use by prescription, in view of the
time that has elapsed since the church was built and
dedicated to religious worship, during which period the
municipality has not prohibited the passage over the land by
the persons who attend services customarily held in said
church.
The record does not disclose the date when the Government
ceded to the Church the land on which the church building
was afterwards erected, nor the date of the laying out of the
adjacent square that is claimed by the municipality and on
which the side door of the church, which is used as an
entrance by the people who frequent this building, gives.
There are good grounds for presuming that in apportioning
lands at the time of the establishment of the pueblo of
Dumangas and in designating the land adjacent to the
church as a public square, this latter was impliedly
encumbered with the easement of a right of way to allow the
public to enter and leave the church — a case provided for
by article 567 of the Civil Code — for the municipality has
never erected any building or executed any work which
would have obstructed the passage and access to the side
door of the church, and the public has been enjoying the
right of way over the land in question for an almost
immemorable length of time. Therefore an easement of right
of way over said land has been acquired by prescription, not
only by the church, but also by the public which, without
objection or protest, has continually availed itself of the
easement in question. (34 Phil., pp. 545-546).
It will be seen that the ratio decidendi of that case lies in the application
of Article 567 of the old Civil Code that provides as follows:
ART. 567. When an estate acquired by purchase, exchange,
or partition is enclosed by other estates of the vendor,
exchanger, or co-owner, the latter shall be obliged to grant a
right of way without indemnity, in the absence of an
agreement to the contrary.
Bearing in mind the provisions of the article quoted in relation to the
wording of the decision in the Dumangas case, it can be seen that
what the court had in mind is that when the Spanish Crown
apportioned the land occupied by the Church of Dumangas, it impliedly
burdened the neighboring public square (which was also Crown
property at the time) with an easement of right of way to allow the
public to enter and leave the church, because without such easement
the grant in favor of ecclesiastical authorities would be irrisory: what
would be the use of constructing a church if no one could enter it?
Now, if there was an implied grant of the right of way by the Spanish
Crown, it was clearly unnecessary to justify the existence of the
easement through prescriptive acquisition. Why then does the decision
repeatedly speak of prescription? Plainly, the word "prescription" was
used in the decision not in the sense of adverse possession for ten or
thirty years, but in the sense of "immemorial usage" that under the
law anterior to the Civil Code of 1889, was one of the ways in which
the servitude of right of way could be acquired.1 This view is confirmed
by the fact that throughout the passages hereinabove quoted, the
court's decision stresses that the people of Dumangas have been
passing over the public square to go to church since the town was
founded and the church was built, an "almost immemorable length of
time." It would seem that the term "priscription" used in said case was
merely a loose expression that is apt to mislead unless the court's
reasoning is carefully analyzed.
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Since 1889, however, the Civil Code repealed the prior legislation; and
thereafter the right of way could only be acquired by title and not by
adverse possession (usucapio), saving those servitudes already
acquired before the Code came into effect (Decisions, Supreme Court
of Spain 27 Oct. 1900, 1st February 1912; 11 May 1927, and 7
January 1920).
Paras, C.J. and Reyes A., J., concur.
Footnotes
1 property; third, that the isolation of the subject lot was not caused by
In fact, the Siete Partidas. (law 25, Title 31, of the Third
Partida), in treating of this servitude declared that to this
servitude by lapse of time "ha menester que aya usado
dellas — tanto tiempo de que non se puedan acordar los
omes quanto ha que lo comenzaran usar".
G.R. No. 198594
HELEN CALIMOSO, MARILYN P. CALIMOSO and LIBY P.
CALIMOSO, Petitioners,
vs.
AXEL D. ROULLO, Respondent.
DECISION
BRION, J.:
Before us is a petition for review on certiorari1 assailing the December
15, 2010 decision2 and the August 23, 2011 resolution3 of the Court of
Appeals (CA), Cebu City, in CA-G.R. CEB CV No. 00834. The CA
affirmed the decision of the Regional Trial Court (RTC), Branch 29,
Iloilo City, in Civil Case No. CEB-23858 that ordered the
establishment of an "easement of right of way" in favor of respondent
Axel D. Roullo.
Facts of the Case
In his Complaint4 for Easement of Right of Way, the respondent mainly
alleged: that he is the owner of Lot 1462-C-15 situated in Brgy.
Sambag, Jaro, Iloilo City; that his lot is isolated by several surrounding
estates, including Lot 1454-B-256 owned by petitioners Helen, Marilyn,
and Liby, all surnamed Calimoso; that he needs a right-of-way in order
to have access to a public road; and that the shortest and most
convenient access to the nearest public road, i.e., Fajardo Subdivision
Road, passes through the petitioners’ lot.
The petitioners objected to the establishment of the easement because
it would cause substantial damage to the two (2) houses already
standing on their property. They alleged that the respondent has other
right-of-way alternatives, such as the existing wooden bridge
over Sipac Creek bounding the respondent’s lot on the northeast; that
the bridge, if made concrete, could provide ingress or egress to the
Fajardo Subdivision Road.
Due to the respondent’s allegedly malicious and groundless suit, the
petitioners claimed entitlement to the following awards: P100,000.00
as moral damages, P30,000.00 as exemplary damages, P50,000.00
as attorney’s fees, P1,000.00 as appearance fee, and P15,000.00 as
litigation expenses.
In a decision dated September 29, 2003, the RTC granted the
respondent’s complaint and ordered the petitioners to provide the
respondent an easement of right-of-way "measuring 14 meters in
length and 3 meters in width (42 square meters, more or less) over Lot
1454-B-25, specifically at the portion adjoining the bank of Sipac
Creek." Accordingly, the RTC ordered the respondent to pay the
petitioners proper indemnity in the amount of "Php1,500.00 per square
meter of the portion of the lot subject of the easement." The petitioners
appealed the RTC’s decision to the CA.
The CA, in its assailed December 15, 2010 decision, affirmed in
toto the RTC’s decision and held that all the requisites for the
establishment of a legal or compulsory easement of right-of-way were
present in the respondent’s case: first, that the subject lot is indeed
surrounded by estates owned by different individuals and the
respondent has no access to any existing public road; second, that the
respondent has offered to compensate the petitioners for the
establishment of the right-of-way through the latter’s
the respondent as he purchased the lot without any adequate ingress
or egress to a public highway; and, fourth and last, given the
available options for the right-of-way, the route that passes through
the petitioners’ lot requires the shortest distance to a public road
and can be established at a point least prejudicial to the
petitioners’ property.
The petitioners moved to reconsider the CA’s decision arguing that,
while the establishment of the easement through their lot provided for
the shortest route, the adjudged right-of-way would cause severe
damage not only to the nipa hut situated at the corner of the
petitioners’ lot, but also to the bedroom portion of the other concrete
house that stood on the property. The CA, however, did not consider
the petitioners’ arguments on the ground that the matters alleged were
not raised or proven before the trial court, thus, it denied the
petitioners’ motion for reconsideration.
The petitioners filed the present petition for review on certiorari raising
the issues of: (a) whether the respondent has met all the requisites for
the establishment of a legal easement of right-of-way on Lot 1454-B-25
owned by the petitioners, (b) whether the establishment of the right-of-
way on the petitioners’ lot is at the point least prejudicial to the servient
estate, and (c) whether a right-of-way can be established through other
lots surrounding the respondent’s property other than through the
petitioners’ property.
OUR RULING
We disagree with the CA finding that all the requisites for the
valid establishment of an easement of right-of-way are present in
this case.
To be entitled to an easement of right-of-way, the following requisites
should be met:
"1. The dominant estate is surrounded by other immovables
and has no adequate outlet to a public highway;
2. There is payment of proper indemnity;
3. The isolation is not due to the acts of the proprietor of the
dominant estate; and
4. The right-of-way claimed is at the point least prejudicial to
the servient estate; and insofar as consistent with this rule,
where the distance from the dominant estate to a public
highway may be the shortest."7
The immovable in whose favor the easement is established is called
the dominant estate, and the property subject to the easement is called
the servient estate.8 Here, the respondent’s lot is the dominant estate
and the petitioners’ lot is the servient estate.
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That the respondent’s lot is surrounded by several estates and has no
access to a public road are undisputed.1âwphi1 The only question
before this Court is whether the right-of- way passing through the
petitioners’ lot satisfies the fourth requirement of being established at
the point least prejudicial to the servient estate.
Three options were then available to the respondent for the demanded
right-of-way: the first option is to traverse directly through the
petitioners’ property, which route has an approximate distance of
fourteen (14) meters from the respondent’s lot to the Fajardo
Subdivision Road; the second option is to pass through two vacant
lots (Lots 1461-B-1 and 1461-B-2) located on the southwest of the
respondent’s lot, which route has an approximate distance of forty-
three (43) meters to another public highway, the Diversion Road; and
the third option is to construct a concrete bridge over Sipac Creek
and ask for a right-of-way on the property of a certain Mr. Basa in order
to reach the Fajardo Subdivision Road.
Among the right-of-way alternatives, the CA adopted the first
option, i.e., passing through the petitioner’s lot, because it offered
the shortest distance (from the respondent’s lot) to the Fajardo
Subdivision Road and the right-of-way would only affect the "nipa hut"
standing on the petitioners’ property. The CA held that the
establishment of the easement through the petitioners’ lot was more
practical, economical, and less burdensome to the parties.
Article 650 of the Civil Code provides that the easement of right-of-way
shall be established at the point least prejudicial to the servient estate,
and, insofar as consistent with this rule, where the distance from the
dominant estate to a public highway may be the shortest. Under this
guideline, whenever there are several tenements surrounding the
dominant estate, the right-of-way must be established on the tenement
where the distance to the public road or highway is shortest and where
the least damage would be caused. If these two criteria (shortest
distance and least damage) do not concur in a single tenement, we
have held in the past that the least prejudice criterion must
prevail over the shortest distance criterion.9
In this case, the establishment of a right-of-way through the petitioners’
lot would cause the destruction of the wire fence and a house on the
petitioners’ property.10 Although this right-of-way has the shortest
distance to a public road, it is not the least prejudicial considering the
destruction pointed out, and that an option to traverse two vacant lots
without causing any damage, albeit longer, is available.
We have held that "mere convenience for the dominant estate is not
what is required by law as the basis of setting up a compulsory
easement;"11 that "a longer way may be adopted to avoid injury to the
servient estate, such as when there are constructions or walls which
can be avoided by a round-about way."12
WHEREFORE, we hereby GRANT the present petition for review
on certiorari and REVERSE and SET ASIDE the decision dated
December 15, 2010, and resolution dated August 23, 2011, of the
Court of Appeals in CA-G.R. CEB CV No. 00834. The complaint for the
easement of right- of-way is DISMISSED without prejudice to another
complaint that the respondent may file against the proper party or
parties based on the terms of this Decision.
Costs against respondent Axel D. Roullo.
SO ORDERED.
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