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[ G.R. No. 9069, March 31, 1915 ]

THE MUNICIPALITY OF CAVITE, PLAINTIFF AND APPELLANT, VS. HILARIA ROJAS AND HER HUSBAND TIUNG SIUKO, ALIAS SLWA, DEFENDANTS AND APPELLEES.

TORRES, J.:

Appeal filed through bill of exceptions by the Attorney-General, representing the plaintiff municipality of Cavite, from the judgment of March 27, 1913, whereby the Honorable Herbert D. Gale, judge, dismissed the complaint with costs against the plaintiff party, declaring that the said municipality had no right to require that the defendants vacate the land in question.

By an instrument dated December 5, 1911, afterwards amended on March 14, 1912, the provincial fiscal of Cavite, representing the municipality of that name, filed a

complaint in the Court of First Instance of said province alleging that the plaintiff municipal corporation, duly organized and constituted in accordance with Act No. 82, and as the successor to the rights said entity had under the late Spanish government, and by virtue of Act No. 1039, had exclusive right, control and administration over the streets, lanes, plazas, and public places of the municipality of Cavite; that the defendants, by virtue of a lease secured from the plaintiff municipality, occupy a parcel of land 93 square meters in area that forms part of the public plaza known under the name of Soledad, belonging to the municipality of Cavite, the defendants having constructed thereon a house, through payment to the plaintiff for occupation thereof of a rental of P5.58 a quarter in advance, said defendants being furthermore obligated to vacate the leased land within sixty days subsequent to plaintiff's demand to that effect; that the defendants have been required by the municipality to vacate and deliver possession of the said land, but more than the sixty days within which they ought to have vacated it have elapsed without their having done so to date; that the lease secured from the municipality of Cavite, by virtue whereof the defendants occupy the land that is the subject matter of the complaint, is ultra vires and therefore ipso facto null and void and of no force or effect, for the said land is an integral portion of a public plaza of public domain and use, and the municipal council of Cavite has never at any time had any power of authority to withdraw it from public use and to lease it to a private party for his own use, and so the defendants have never had any right to occupy or to retain the said land under leasehold, or in any other way, their occupation of the parcel being furthermore illegal; and therefore prayed that judgment be rendered declaring that possession of the said land lies with the plaintiff and ordering the defendants to vacate the land and deliver possession thereof to said plaintiff, with the costs against the defendants.

The demurrer filed to the foregoing complaint having been overruled, with exception on the part of the defendants, in their answer of April 10, 1912, they admitted some of the allegations contained in the complaint but denied that the parcel of land which they occupy and to which the complaint refers forms an integral part of Plaza Soledad, or that the lease secured by them from the municipality of Cavite was null and void and ultra vires, stating if they refused to vacate said land it was because they had acquired the right of possession thereof. As a special defense they alleged that, according to the lease, they could only be ordered to vacate the land leased when the plaintiff municipality might need it for decoration or other public use, which does not apply in the present case; and in a cross-complaint they alleged that on the land which is the subject matter of the complaint the defendants have erected a house of strong materials, assessed at P3,000, which was constructed under a license secured from the plaintiff municipality; that if they should be ordered to vacate the said land they would suffer damages to the extent of P3,000, wherefore they prayed that they be absolved from the complaint, or in the contrary case that the plaintiff be sentenced to indemnify them in the sum of P3,000 as damages, and to

pay the costs.

After a hearing of the case, wherein both parties submitted parol and documentary evidence, the court rendered the judgment that has been mentioned, whereto counsel for the municipality excepted and in writing asked for a reopening of the case and the holding of a new trial. This motion was denied, with exception on the part of the appellant, and the corresponding bill of exceptions was filed, approved and forwarded to the clerk of this court.

It is duly proven in the record that, upon presentation of an application by Hilaria Rojas, the municipal council of Cavite by resolution No. 10, dated July 3, 1907, Exhibit C, leased to the said Rojas some 70 or 80 square meters of Plaza Soledad, on condition that she pay rent quarterly in advance according to the schedule fixed in Ordinance No. 43, series of 1903, and that she obligate herself to vacate said land within sixty days subsequent to notification to that effect. The record shows (receipts, Exhibit 1) that she has paid the land tax on the house erected on the lot.

The boundary line between the properties of the municipality of Cavite and the naval reservation, as fixed in Act No. 1039 of the Philippine Commission, appears in the plan prepared by a naval engineer and submitted as evidence by the plaintiff, Exhibit C of civil case No. 724 of the Cavite court and registered in this court as No. 9071. According to said plan, defendant's house is erected on a plat of ground that forms part of the promenade called Plaza Soledad, and this was also so proven by the testimony of the plaintiff's witnesses.

By section 3 of the said Act No. i039, passed January 12, 1904, the Philippine Commission granted to the municipality of Cavite all the land included in the tract called. Plaza Soledad. In the case of Nicolas vs. Jose (6 Phil. Rep., 589), wherein the municipality of Cavite, represented by its president Catalino Nicolas, sought inscription in its name of the land comprised in the said Plaza Soledad, with objection on the part of Maria Jose et al. who occupied some parts thereof with their houses and who also sought that inscription be decreed in their name of the parcels of land in this plaza occupied by them, this court decided that neither the municipality nor the objectors were entitled to inscription, for with respect to the objectors said plaza belonged to the municipality of Cavite and with respect to the latter the said Plaza Soledad was not transferable property of that municipality to be inscribed in its name, because the intention of Act No. 1039 was that the said plaza and other places therein enumerated should be kept open for public transit; wherefore there can be no doubt that the defendant has no right to continue to occupy the land of the municipality leased by her, for it is an integral portion of Plaza Soledad," which is for public use and is reserved for the common benefit.

According to article 344 of the Civil Code: "Property for public use in provinces and

in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by said towns or provinces."

The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in 1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for private use the plaintiff municipality exceeded its authority in the exercise of its powers by executing a contract over a thing of which it could not dispose, nor is it empowered so to do.

The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man may be the object of a contract, and plazas and streets are outside of this commerce, as was decided by the supreme court of Spain in its decision of February 12, 1895, which says: "Communal things that cannot be sold because they are by their very nature outside of commerce are those for public use, such as the plazas, streets, common lands, rivers, fountains, etc."

Therefore, it must be concluded that the contract, Exhibit C, whereby the municipality of Cavite leased to Hilaria Rojas a portion of the Plaza Soledad is null and void and of no force or effect, because it is contrary to the law and the thing leased cannot be the object of a contract. On the hypothesis that the said lease is null and void in accordance with the provisions of article 1303 of the Civil Code, the defendant must restore and deliver possession of the land described in the complaint to the municipality of Cavite, which in its turn must restore to the said defendant all the sums it may have received from her in the nature of rentals just as soon as she restores the land improperly leased. For the same reasons as have been set forth, and as said contract is null and void in its origin, it can produce no effect and consequently the defendant is not entitled to claim that the plaintiff municipality indemnify her for the damages she may suffer by the removal of her house from the said land.

For all the foregoing reasons we must reverse the judgment appealed from and declare, as we do declare, that the land occupied by Hilaria Rojas forms part of the public plaza called Soledad, and as the lease of said parcel of land is null and void, we order the defendant to vacate it and release the land in question within thirty days, leaving it cleared as it was before her occupation. There is no ground for the indemnity sought in the nature of damages, but the municipality must in its turn restore to the defendant the rentals collected; without special finding as to the costs.

So ordered.

Arellano, C. J., Johnson and Araullo, JJ., concur.Moreland, J., concurs in the result.

[ G.R. No. 155650, July 20, 2006 ]

MANILA INTERNATIONAL AIRPORT AUTHORITY, PETITIONER, VS. COURT OF APPEALS, CITY OF PARAÑAQUE, CITY MAYOR OF PARAÑAQUE, SANGGUNIANG PANGLUNGSOD NG PARAÑAQUE, CITY ASSESSOR OF PARAÑAQUE, AND CITY TREASURER OF PARAÑAQUE, RESPONDENTS.

CARPIO, J.:

The Antecedents

Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Parañaque City under Executive Order No. 903, otherwise known as the Revised Charter of the Manila International Airport Authority ("MIAA Charter"). Executive Order No. 903 was issued on 21 July

1983 by then President Ferdinand E. Marcos. Subsequently, Executive Order Nos. 909[1] and 298[2] amended the MIAA Charter.

As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land,[3] including the runways and buildings ("Airport Lands and Buildings") then under the Bureau of Air Transportation.[4] The MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved by the President of the Philippines.[5]

On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The OGCC opined that the Local Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of Parañaque to pay the real estate tax imposed by the City. MIAA then paid some of the real estate tax already due.

On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable years 1992 to 2001. MIAA's real estate tax delinquency is broken down as follows:

TAX DECLARA

TION

TAXABLE

YEAR

TAX DUE PENALTY TOTAL

E-016-01370 1992-2001

19,558,160.00

11,201,083.20

30,789,243.20

E-016-01374 1992-2001

111,689,424.90

68,149,479.59

179,838,904.49

E-016-01375 1992-2001

20,276,058.00

12,371,832.00

32,647,890.00

E-016-01376 1992-2001

58,144,028.00

35,477,712.00

93,621,740.00

E-016-01377 1992-2001

18,134,614.65

11,065,188.59

29,199,803.24

E-016-01378 1992-2001

111,107,950.40

67,794,681.59

178,902,631.99

E-016-01379 1992-2001

4,322,340.00

2,637,360.00

6,959,700.00

E-016-01380 1992-2001

7,776,436.00

4,744,944.00

12,521,380.00

*E-016-013-85

1998-2001

6,444,810.00

2,900,164.50

9,344,974.50

*E-016-01387

1998-2001

34,876,800.00

5,694,560.00

50,571,360.00

*E-016-01396

1998-2001 75,240.00 33,858.00 109,098.00

GRAND TOTAL

P392,435,861.95

P232,070,863.47

P624,506,725.42

1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75#9476101 for P28,676,480.00#9476103 for P49,115.00[6]

On 17 July 2001, the City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Parañaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061.

On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC pointed out that Section 206 of the Local Government Code requires persons exempt from real estate tax to show proof of exemption. The OGCC opined that Section 21 of the MIAA Charter is the proof that MIAA is exempt from real estate tax.

On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary injunction or temporary restraining order. The petition sought to restrain the City of Parañaque from imposing real estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings. The petition was docketed as CA-G.R. SP No. 66878.

On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day reglementary period. The Court of Appeals also denied on 27 September 2002 MIAA's motion for reconsideration and supplemental motion for reconsideration. Hence, MIAA filed on 5 December 2002 the present petition for review.[7]

Meanwhile, in January 2003, the City of Parañaque posted notices of auction sale at the Barangay Halls of Barangays Vitalez, Sto. Niño, and Tambo, Parañaque City; in the public market of Barangay La Huerta; and in the main lobby of the Parañaque City Hall. The City of Parañaque published the notices in the 3 and 10 January 2003 issues of the Philippine Daily Inquirer, a newspaper of general circulation in the Philippines. The notices announced the public auction sale of the Airport Lands and Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at the Legislative Session Hall Building of Parañaque City.

A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The motion sought to restrain respondents - the City of Parañaque, City Mayor of Parañaque, Sangguniang Panglungsod ng Parañaque, City Treasurer of Parañaque, and the City Assessor of Parañaque ("respondents") - from auctioning the Airport Lands and Buildings.

On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The Court ordered respondents to cease and desist from selling at public auction the Airport Lands and Buildings. Respondents received the TRO on the same day that the Court issued it. However, respondents received the TRO only at 1:25 p.m. or three hours after the conclusion of the public auction.

On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.

On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive issued during the hearing, MIAA, respondent City of Parañaque, and the Solicitor General subsequently submitted their respective Memoranda.

MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the name of MIAA. However, MIAA points out that it cannot claim ownership over these properties since the real owner of the Airport Lands and Buildings is the Republic of the Philippines. The MIAA Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the general public. Since the Airport Lands and Buildings are devoted to public use and public service, the ownership of these properties remains with the State. The Airport Lands and Buildings are thus inalienable and are not subject to real estate tax by local governments.

MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the payment of real estate tax. MIAA insists that it is also exempt from real estate tax under Section 234 of the Local Government Code because the Airport Lands and Buildings are owned by the Republic. To justify the exemption, MIAA

invokes the principle that the government cannot tax itself. MIAA points out that the reason for tax exemption of public property is that its taxation would not inure to any public advantage, since in such a case the tax debtor is also the tax creditor.

Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax exemption privileges of "government-owned and-controlled corporations" upon the effectivity of the Local Government Code. Respondents also argue that a basic rule of statutory construction is that the express mention of one person, thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax.

Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos[8] where we held that the Local Government Code has withdrawn the exemption from real estate tax granted to international airports. Respondents further argue that since MIAA has already paid some of the real estate tax assessments, it is now estopped from claiming that the Airport Lands and Buildings are exempt from real estate tax.

The Issue

This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws. If so exempt, then the real estate tax assessments issued by the City of Parañaque, and all proceedings taken pursuant to such assessments, are void. In such event, the other issues raised in this petition become moot.

The Court's Ruling

We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local governments.

First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax.

1. MIAA is Not a Government-Owned or Controlled Corporation

Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt from real estate tax. Respondents claim that the deletion of the phrase "any government-owned or controlled so exempt by its charter" in Section 234(e) of the Local Government Code withdrew the real estate tax exemption of government-

owned or controlled corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real Property Tax Code enumerating the entities exempt from real estate tax.

There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows:SEC. 2. General Terms Defined. - x x x x

(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x. (Emphasis supplied)A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. Section 10 of the MIAA Charter[9] provides:SECTION 10. Capital. - The capital of the Authority to be contributed by the National Government shall be increased from Two and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to consist of:

(a) The value of fixed assets including airport facilities, runways and equipment and such other properties, movable and immovable[,] which may be contributed by the National Government or transferred by it from any of its agencies, the valuation of which shall be determined jointly with the Department of Budget and Management and the Commission on Audit on the date of such contribution or transfer after making due allowances for depreciation and other deductions taking into account the loans and other liabilities of the Authority at the time of the takeover of the assets and other properties;

(b) That the amount of P605 million as of December 31, 1986 representing about seventy percentum (70%) of the unremitted share of the National Government from 1983 to 1986 to be remitted to the National Treasury as provided for in Section 11 of E. O. No. 903 as amended, shall be converted into the equity of the National Government in the Authority. Thereafter, the Government contribution to the capital of the Authority shall be provided in the General Appropriations Act.Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.

Section 3 of the Corporation Code[10] defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.

MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury.[11] This prevents MIAA from qualifying as a non-stock corporation.

Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government?

MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government "instrumentality" as follows:SEC. 2. General Terms Defined. - x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate

powers. Thus, MIAA exercises the governmental powers of eminent domain,[12] police authority[13] and the levying of fees and charges.[14] At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order."[15]

Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National Government machinery although not integrated with the department framework. The MIAA Charter expressly states that transforming MIAA into a "separate and autonomous body"[16] will make its operation more "financially viable."[17]

Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock corporations, which is a necessary condition before an agency or instrumentality is deemed a government-owned or controlled corporation. Examples are the Mactan International Airport Authority, the Philippine Ports Authority, the University of the Philippines and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they are not organized as stock or non-stock corporations as required by Section 2(13) of the Introductory Provisions of the Administrative Code. These government instrumentalities are sometimes loosely called government corporate entities. However, they are not government-owned or controlled corporations in the strict sense as understood under the Administrative Code, which is the governing law defining the legal relationship and status of government entities.

A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which states:SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:

x x x x

(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units. (Emphasis and underscoring supplied)Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers of local governments, local governments may only exercise such power "subject to such guidelines and limitations as the Congress may provide."[18]

When local governments invoke the power to tax on national government

instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax national government instrumentalities.

Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax-liability of such agencies.[19]

There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another.

There is also no reason for local governments to tax national government instrumentalities for rendering essential public services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax government instrumentalities for the delivery of essential public services for sound and compelling policy considerations. There must be express language in the law empowering local governments to tax national government instrumentalities. Any doubt whether such power exists is resolved against local governments.

Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the Code, local governments cannot tax national government instrumentalities. As this Court held in Basco v. Philippine Amusements and Gaming Corporation:The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)

This doctrine emanates from the "supremacy" of the National Government over local governments.

"Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch, in that way (taxation) at least, the

instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)

Otherwise, mere creatures of theState can defeat National policies thru extermination of what local authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US 42).

The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it. [20]

2. Airport Lands and Buildings of MIAA are Owned by the Republic

a. Airport Lands and Buildings are of Public Dominion

The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. The Civil Code provides:ARTICLE 419. Property is either of public dominion or of private ownership.

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

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

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

ARTICLE 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property.

ARTICLE 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State.No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like "roads, canals, rivers, torrents, ports and bridges constructed by the State," are owned by the State. The term "ports" includes seaports and airports. The MIAA Airport Lands and Buildings constitute a "port" constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State

or the Republic of the Philippines.

The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. The operation by the government of a tollway does not change the character of the road as one for public use. Someone must pay for the maintenance of the road, either the public indirectly through the taxes they pay the government, or only those among the public who actually use the road through the toll fees they pay upon using the road. The tollway system is even a more efficient and equitable manner of taxing the public for the maintenance of public roads.

The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one "intended for public use." Even if the government collects toll fees, the road is still "intended for public use" if anyone can use the road under the same terms and conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can use the road, the speed restrictions and other conditions for the use of the road do not affect the public character of the road.

The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for public use. Such fees are often termed user's tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility. A user's tax is more equitable " a principle of taxation mandated in the 1987 Constitution.[21]

The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the Philippines for both international and domestic air traffic,"[22] are properties of public dominion because they are intended for public use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines.

b. Airport Lands and Buildings are Outside the Commerce of Man

The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are outside the commerce of man. The Court has ruled repeatedly that properties of public dominion are outside the commerce of man. As

early as 1915, this Court already ruled in Municipality of Cavite v. Rojas that properties devoted to public use are outside the commerce of man, thus:According to article 344 of the Civil Code: "Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by said towns or provinces."

The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in 1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for private use the plaintiff municipality exceeded its authority in the exercise of its powers by executing a contract over a thing of which it could not dispose, nor is it empowered so to do.

The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man may be the object of a contract, and plazas and streets are outside of this commerce, as was decided by the supreme court of Spain in its decision of February 12, 1895, which says: "Communal things that cannot be sold because they are by their very nature outside of commerce are those for public use, such as the plazas, streets, common lands, rivers, fountains, etc." (Emphasis supplied) [23]

Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the commerce of man:xxx Town plazas are properties of public dominion, to be devoted to public use and to be made available to the public in general. They are outside the commerce of man and cannot be disposed of or even leased by the municipality to private parties. While in case of war or during an emergency, town plazas may be occupied temporarily by private individuals, as was done and as was tolerated by the Municipality of Pozorrubio, when the emergency has ceased, said temporary occupation or use must also cease, and the town officials should see to it that the town plazas should ever be kept open to the public and free from encumbrances or illegal private constructions.[24] (Emphasis supplied)The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale.[25]

Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Parañaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax.

Before MIAA can encumber[26] the Airport Lands and Buildings, the President must first withdraw from public use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141, which "remains to this day the existing general law governing the classification and disposition of lands of the public domain other than timber and mineral lands,"[27] provide:SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources, the President may designate by proclamation any tract or tracts of land of the public domain as reservations for the use of the Republic of the Philippines or of any of its branches, or of the inhabitants thereof, in accordance with regulations prescribed for this purposes, or for quasi-public uses or purposes when the public interest requires it, including reservations for highways, rights of way for railroads, hydraulic power sites, irrigation systems, communal pastures or lequas communales, public parks, public quarries, public fishponds, working men's village and other improvements for the public benefit.

SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-three shall be non-alienable and shall not be subject to occupation, entry, sale, lease, or other disposition until again declared alienable under the provisions of this Act or by proclamation of the President. (Emphasis and underscoring supplied)Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these properties remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings are inalienable in their present status as properties of public dominion, they are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership remains with the State or the Republic of the Philippines.

The authority of the President to reserve lands of the public domain for public use, and to withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which states:SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government. - (1) The President shall have the power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public purpose indicated until otherwise provided by law or proclamation;

x x x x. (Emphasis supplied)There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or presidential proclamation from public use, they are properties of public dominion, owned by the Republic and outside the commerce of man.

c. MIAA is a Mere Trustee of the Republic

MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic, thus:SEC. 48. Official Authorized to Convey Real Property. - Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines, by the President, unless the authority therefor is expressly vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of conveyance.[28]

d. Transfer to MIAA was Meant to Implement a Reorganization

The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the Bureau of Air Transportation of the Department of Transportation and Communications. The MIAA Charter provides:SECTION 3. Creation of the Manila International Airport Authority. - x x x x

The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. (Emphasis supplied)

SECTION 22. Transfer of Existing Facilities and Intangible Assets. - All existing public airport facilities, runways, lands, buildings and other property, movable or immovable, belonging to the Airport, and all assets, powers, rights, interests and privileges belonging to the Bureau of Air Transportation relating to airport works

or air operations, including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority. (Emphasis supplied)

SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air Transportation and Transitory Provisions. - The Manila International Airport including the Manila Domestic Airport as a division under the Bureau of Air Transportation is hereby abolished.

x x x x.The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash, promissory notes or even stock since MIAA is not a stock corporation.

The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and Buildings to MIAA, thus:WHEREAS, the Manila International Airport as the principal airport of the Philippines for both international and domestic air traffic, is required to provide standards of airport accommodation and service comparable with the best airports in the world;

WHEREAS, domestic and other terminals, general aviation and other facilities, have to be upgraded to meet the current and future air traffic and other demands of aviation in Metro Manila;

WHEREAS, a management and organization study has indicated that the objectives of providing high standards of accommodation and service within the context of a financially viable operation, will best be achieved by a separate and autonomous body; and

WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, the President of the Philippines is given continuing authority to reorganize the National Government, which authority includes the creation of new entities, agencies and instrumentalities of the Government[.] (Emphasis supplied)The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAA's assets adverse to the Republic.

The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines." This only means that the Republic retained the beneficial ownership of the Airport Lands and Buildings because under Article 428 of the Civil Code, only the "owner has the right to x x x dispose of a thing." Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own the Airport Lands and Buildings.

At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the Republic paying MIAA any consideration. Under Section 3 of the MIAA Charter, the President is the only one who can authorize the sale or disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands and Buildings belong to the Republic.

e. Real Property Owned by the Republic is Not Taxable

Section 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned by the Republic of the Philippines." Section 234(a) provides:SEC. 234. Exemptions from Real Property Tax. - The following are exempted from payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;

x x x. (Emphasis supplied)This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing "[t]axes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x." The real properties owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the National Government. The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax.

The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption only if the "beneficial use thereof has been granted, for consideration or otherwise, to a taxable person." MIAA, as a

government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties subject to real estate tax.

However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land area for a consideration to a taxable person and therefore such land area is subject to real estate tax. In Lung Center of the Philippines v. Quezon City, the Court ruled:Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes.[29]

3. Refutation of Arguments of Minority

The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local Government Code of 1991 withdrew the tax exemption of "all persons, whether natural or juridical" upon the effectivity of the Code. Section 193 provides:SEC. 193. Withdrawal of Tax Exemption Privileges - Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions are hereby withdrawn upon effectivity of this Code. (Emphasis supplied)The minority states that MIAA is indisputably a juridical person. The minority argues that since the Local Government Code withdrew the tax exemption of all juridical persons, then MIAA is not exempt from real estate tax. Thus, the minority declares:It is evident from the quoted provisions of the Local Government Code that the withdrawn exemptions from realty tax cover not just GOCCs, but all persons. To repeat, the provisions lay down the explicit proposition that the withdrawal of realty tax exemption applies to all persons. The reference to or the inclusion of GOCCs is only clarificatory or illustrative of the explicit provision.

The term "All persons" encompasses the two classes of persons recognized under our laws, natural and juridical persons. Obviously, MIAA is not a natural person. Thus, the determinative test is not just whether MIAA is a GOCC, but whether MIAA is a juridical person at all. (Emphasis and underscoring in the original)

The minority posits that the "determinative test" whether MIAA is exempt from local taxation is its status - whether MIAA is a juridical person or not. The minority also insists that "Sections 193 and 234 may be examined in isolation from Section 133(o) to ascertain MIAA's claim of exemption."

The argument of the minority is fatally flawed. Section 193 of the Local Government Code expressly withdrew the tax exemption of all juridical persons "[u]nless otherwise provided in this Code." Now, Section 133(o) of the Local Government Code expressly provides otherwise, specifically prohibiting local governments from imposing any kind of tax on national government instrumentalities. Section 133(o) states:SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:

x x x x

(o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local government units. (Emphasis and underscoring supplied)By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national government instrumentalities like the MIAA. Local governments are devoid of power to tax the national government, its agencies and instrumentalities. The taxing powers of local governments do not extend to the national government, its agencies and instrumentalities, "[u]nless otherwise provided in this Code" as stated in the saving clause of Section 133. The saving clause refers to Section 234(a) on the exception to the exemption from real estate tax of real property owned by the Republic.

The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons are subject to tax by local governments. The minority insists that the juridical persons exempt from local taxation are limited to the three classes of entities specifically enumerated as exempt in Section 193. Thus, the minority states:x x x Under Section 193, the exemption is limited to (a) local water districts; (b) cooperatives duly registered under Republic Act No. 6938; and (c) non-stock and non-profit hospitals and educational institutions. It would be belaboring the obvious why the MIAA does not fall within any of the exempt entities under Section 193. (Emphasis supplied)The minority's theory directly contradicts and completely negates Section 133(o) of the Local Government Code. This theory will result in gross absurdities. It will make the national government, which itself is a juridical person, subject to tax by local

governments since the national government is not included in the enumeration of exempt entities in Section 193. Under this theory, local governments can impose any kind of local tax, and not only real estate tax, on the national government.

Under the minority's theory, many national government instrumentalities with juridical personalities will also be subject to any kind of local tax, and not only real estate tax. Some of the national government instrumentalities vested by law with juridical personalities are: Bangko Sentral ng Pilipinas,[30] Philippine Rice Research Institute,[31] Laguna Lake

Development Authority,[32] Fisheries Development Authority,[33] Bases Conversion Development Authority,[34] Philippine Ports Authority,[35] Cagayan de Oro Port Authority,[36] San Fernando Port Authority,[37] Cebu Port Authority,[38] and Philippine National Railways.[39]

The minority's theory violates Section 133(o) of the Local Government Code which expressly prohibits local governments from imposing any kind of tax on national government instrumentalities. Section 133(o) does not distinguish between national government instrumentalities with or without juridical personalities. Where the law does not distinguish, courts should not distinguish. Thus, Section 133(o) applies to all national government instrumentalities, with or without juridical personalities. The determinative test whether MIAA is exempt from local taxation is not whether MIAA is a juridical person, but whether it is a national government instrumentality under Section 133(o) of the Local Government Code. Section 133(o) is the specific provision of law prohibiting local governments from imposing any kind of tax on the national government, its agencies and instrumentalities.

Section 133 of the Local Government Code starts with the saving clause "[u]nless otherwise provided in this Code." This means that unless the Local Government Code grants an express authorization, local governments have no power to tax the national government, its agencies and instrumentalities. Clearly, the rule is local governments have no power to tax the national government, its agencies and instrumentalities. As an exception to this rule, local governments may tax the national government, its agencies and instrumentalities only if the Local Government Code expressly so provides.

The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the Code, which makes the national government subject to real estate tax when it gives the beneficial use of its real properties to a taxable entity. Section 234(a) of the Local Government Code provides:SEC. 234. Exemptions from Real Property Tax - The following are exempted from payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.

x x x. (Emphasis supplied)Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The exception to this exemption is when the government gives the beneficial use of the real property to a taxable entity.

The exception to the exemption in Section 234(a) is the only instance when the national government, its agencies and instrumentalities are subject to any kind of tax by local governments. The exception to the exemption applies only to real estate tax and not to any other tax. The justification for the exception to the exemption is that the real property, although owned by the Republic, is not devoted to public use or public service but devoted to the private gain of a taxable person.

The minority also argues that since Section 133 precedes Section 193 and 234 of the Local Government Code, the later provisions prevail over Section 133. Thus, the minority asserts:x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an accepted rule of construction, in case of conflict the subsequent provisions should prevail. Therefore, MIAA, as a juridical person, is subject to real property taxes, the general exemptions attaching to instrumentalities under Section 133(o) of the Local Government Code being qualified by Sections 193 and 234 of the same law. (Emphasis supplied)The minority assumes that there is an irreconcilable conflict between Section 133 on one hand, and Sections 193 and 234 on the other. No one has urged that there is such a conflict, much less has any one presented a persuasive argument that there is such a conflict. The minority's assumption of an irreconcilable conflict in the statutory provisions is an egregious error for two reasons.

First, there is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly admits its subordination to other provisions of the Code when Section 193 states "[u]nless otherwise provided in this Code." By its own words, Section 193 admits the superiority of other provisions of the Local Government Code that limit the exercise of the taxing power in Section 193. When a provision of law grants a power but withholds such power on certain matters, there is no conflict between the grant of power and the withholding of power. The grantee of the power simply cannot exercise the power on matters withheld from its power.

Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local Government Units." Section 133 limits the grant to local governments of the power to tax, and not merely the exercise of a delegated power to tax. Section 133

states that the taxing powers of local governments "shall not extend to the levy" of any kind of tax on the national government, its agencies and instrumentalities. There is no clearer limitation on the taxing power than this.

Since Section 133 prescribes the "common limitations" on the taxing powers of local governments, Section 133 logically prevails over Section 193 which grants local governments such taxing powers. By their very meaning and purpose, the "common limitations" on the taxing power prevail over the grant or exercise of the taxing power. If the taxing power of local governments in Section 193 prevails over the limitations on such taxing power in Section 133, then local governments can impose any kind of tax on the national government, its agencies and instrumentalities - a gross absurdity.

Local governments have no power to tax the national government, its agencies and instrumentalities, except as otherwise provided in the Local Government Code pursuant to the saving clause in Section 133 stating "[u]nless otherwise provided in this Code." This exception " which is an exception to the exemption of the Republic from real estate tax imposed by local governments - refers to Section 234(a) of the Code. The exception to the exemption in Section 234(a) subjects real property owned by the Republic, whether titled in the name of the national government, its agencies or instrumentalities, to real estate tax if the beneficial use of such property is given to a taxable entity.

The minority also claims that the definition in the Administrative Code of the phrase "government-owned or controlled corporation" is not controlling. The minority points out that Section 2 of the Introductory Provisions of the Administrative Code admits that its definitions are not controlling when it provides:SEC. 2. General Terms Defined. - Unless the specific words of the text, or the context as a whole, or a particular statute, shall require a different meaning:

x x x xThe minority then concludes that reliance on the Administrative Code definition is "flawed."

The minority's argument is a non sequitur. True, Section 2 of the Administrative Code recognizes that a statute may require a different meaning than that defined in the Administrative Code. However, this does not automatically mean that the definition in the Administrative Code does not apply to the Local Government Code. Section 2 of the Administrative Code clearly states that "unless the specific words x x x of a particular statute shall require a different meaning," the definition in Section 2 of the Administrative Code shall apply. Thus, unless there is specific language in the Local Government Code defining the phrase "government-owned or controlled corporation" differently from the definition in the Administrative Code,

the definition in the Administrative Code prevails.

The minority does not point to any provision in the Local Government Code defining the phrase "government-owned or controlled corporation" differently from the definition in the Administrative Code. Indeed, there is none. The Local Government Code is silent on the definition of the phrase "government-owned or controlled corporation." The Administrative Code, however, expressly defines the phrase "government-owned or controlled corporation." The inescapable conclusion is that the Administrative Code definition of the phrase "government-owned or controlled corporation" applies to the Local Government Code.

The third whereas clause of the Administrative Code states that the Code "incorporates in a unified document the major structural, functional and procedural principles and rules of governance." Thus, the Administrative Code is the governing law defining the status and relationship of government departments, bureaus, offices, agencies and instrumentalities. Unless a statute expressly provides for a different status and relationship for a specific government unit or entity, the provisions of the Administrative Code prevail.

The minority also contends that the phrase "government-owned or controlled corporation" should apply only to corporations organized under the Corporation Code, the general incorporation law, and not to corporations created by special charters. The minority sees no reason why government corporations with special charters should have a capital stock. Thus, the minority declares:I submit that the definition of "government-owned or controlled corporations" under the Administrative Code refer to those corporations owned by the government or its instrumentalities which are created not by legislative enactment, but formed and organized under the Corporation Code through registration with the Securities and Exchange Commission. In short, these are GOCCs without original charters.

x x x x

It might as well be worth pointing out that there is no point in requiring a capital structure for GOCCs whose full ownership is limited by its charter to the State or Republic. Such GOCCs are not empowered to declare dividends or alienate their capital shares.The contention of the minority is seriously flawed. It is not in accord with the Constitution and existing legislations. It will also result in gross absurdities.

First, the Administrative Code definition of the phrase "government-owned or controlled corporation" does not distinguish between one incorporated under the Corporation Code or under a special charter. Where the law does not distinguish, courts should not distinguish.

Second, Congress has created through special charters several government-owned corporations organized as stock corporations. Prime examples are the Land Bank of the Philippines and the Development Bank of the Philippines. The special charter[40] of the Land Bank of the Philippines provides:SECTION 81. Capital. - The authorized capital stock of the Bank shall be nine billion pesos, divided into seven hundred and eighty million common shares with a par value of ten pesos each, which shall be fully subscribed by the Government, and one hundred and twenty million preferred shares with a par value of ten pesos each, which shall be issued in accordance with the provisions of Sections seventy-seven and eighty-three of this Code. (Emphasis supplied)Likewise, the special charter[41] of the Development Bank of the Philippines provides:SECTION 7. Authorized Capital Stock " Par value. " The capital stock of the Bank shall be Five Billion Pesos to be divided into Fifty Million common shares with par value of P100 per share. These shares are available for subscription by the National Government. Upon the effectivity of this Charter, the National Government shall subscribe to Twenty-Five Million common shares of stock worth Two Billion Five Hundred Million which shall be deemed paid for by the Government with the net asset values of the Bank remaining after the transfer of assets and liabilities as provided in Section 30 hereof. (Emphasis supplied)Other government-owned corporations organized as stock corporations under their special charters are the Philippine Crop Insurance Corporation,[42] Philippine International Trading Corporation,[43] and the Philippine National Bank[44] before it was reorganized as a stock corporation under the Corporation Code. All these government-owned corporations organized under special charters as stock corporations are subject to real estate tax on real properties owned by them. To rule that they are not government-owned or controlled corporations because they are not registered with the Securities and Exchange Commission would remove them from the reach of Section 234 of the Local Government Code, thus exempting them from real estate tax.

Third, the government-owned or controlled corporations created through special charters are those that meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is that the government-owned or controlled corporation must be established for the common good. The second condition is that the government-owned or controlled corporation must meet the test of economic viability. Section 16, Article XII of the 1987 Constitution provides:SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. (Emphasis and underscoring supplied)

The Constitution expressly authorizes the legislature to create "government-owned or controlled corporations" through special charters only if these entities are required to meet the twin conditions of common good and economic viability. In other words, Congress has no power to create government-owned or controlled corporations with special charters unless they are made to comply with the two conditions of common good and economic viability. The test of economic viability applies only to government-owned or controlled corporations that perform economic or commercial activities and need to compete in the market place. Being essentially economic vehicles of the State for the common good " meaning for economic development purposes " these government-owned or controlled corporations with special charters are usually organized as stock corporations just like ordinary private corporations.

In contrast, government instrumentalities vested with corporate powers and performing governmental or public functions need not meet the test of economic viability. These instrumentalities perform essential public services for the common good, services that every modern State must provide its citizens. These instrumentalities need not be economically viable since the government may even subsidize their entire operations. These instrumentalities are not the "government-owned or controlled corporations" referred to in Section 16, Article XII of the 1987 Constitution.

Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested with corporate powers but performing essential governmental or public functions. Congress has plenary authority to create government instrumentalities vested with corporate powers provided these instrumentalities perform essential government functions or public services. However, when the legislature creates through special charters corporations that perform economic or commercial activities, such entities " known as "government-owned or controlled corporations" " must meet the test of economic viability because they compete in the market place.

This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and similar government-owned or controlled corporations, which derive their income to meet operating expenses solely from commercial transactions in competition with the private sector. The intent of the Constitution is to prevent the creation of government-owned or controlled corporations that cannot survive on their own in the market place and thus merely drain the public coffers.

Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional Commission the purpose of this test, as follows:MR. OPLE: Madam President, the reason for this concern is really that when the government creates a corporation, there is a sense in which this corporation becomes

exempt from the test of economic performance. We know what happened in the past. If a government corporation loses, then it makes its claim upon the taxpayers" money through new equity infusions from the government and what is always invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the entire government, about P28 billion of this will go into equity infusions to support a few government financial institutions. And this is all taxpayers" money which could have been relocated to agrarian reform, to social services like health and education, to augment the salaries of grossly underpaid public employees. And yet this is all going down the drain.

Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the responsibility of meeting the market test so that they become viable. And so, Madam President, I reiterate, for the committee's consideration and I am glad that I am joined in this proposal by Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the common good.[45]

Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987 Constitution of the Republic of the Philippines: A Commentary:The second sentence was added by the 1986 Constitutional Commission. The significant addition, however, is the phrase "in the interest of the common good and subject to the test of economic viability." The addition includes the ideas that they must show capacity to function efficiently in business and that they should not go into activities which the private sector can do better. Moreover, economic viability is more than financial viability but also includes capability to make profit and generate benefits not quantifiable in financial terms.[46] (Emphasis supplied)Clearly, the test of economic viability does not apply to government entities vested with corporate powers and performing essential public services. The State is obligated to render essential public services regardless of the economic viability of providing such service. The non-economic viability of rendering such essential public service does not excuse the State from withholding such essential services from the public.

However, government-owned or controlled corporations with special charters, organized essentially for economic or commercial objectives, must meet the test of economic viability. These are the government-owned or controlled corporations that are usually organized under their special charters as stock corporations, like the Land Bank of the Philippines and the Development Bank of the Philippines. These are the government-owned or controlled corporations, along with government-owned or controlled corporations organized under the Corporation Code, that fall under the definition of "government-owned or controlled corporations" in Section 2(10) of the Administrative Code.

The MIAA need not meet the test of economic viability because the legislature did not create MIAA to compete in the market place. MIAA does not compete in the market place because there is no competing international airport operated by the private sector. MIAA performs an essential public service as the primary domestic and international airport of the Philippines. The operation of an international airport requires the presence of personnel from the following government agencies:

1. The Bureau of Immigration and Deportation, to document the arrival and departure of passengers, screening out those without visas or travel documents, or those with hold departure orders;

2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited importations;

3. The quarantine office of the Department of Health, to enforce health measures against the spread of infectious diseases into the country;

4. The Department of Agriculture, to enforce measures against the spread of plant and animal diseases into the country;

5. The Aviation Security Command of the Philippine National Police, to prevent the entry of terrorists and the escape of criminals, as well as to secure the airport premises from terrorist attack or seizure;

6. The Air Traffic Office of the Department of Transportation and Communications, to authorize aircraft to enter or leave Philippine airspace, as well as to land on, or take off from, the airport; and

7. The MIAA, to provide the proper premises - such as runway and buildings - for the government personnel, passengers, and airlines, and to manage the airport operations.

All these agencies of government perform government functions essential to the operation of an international airport.

MIAA performs an essential public service that every modern State must provide its citizens. MIAA derives its revenues principally from the mandatory fees and charges MIAA imposes on passengers and airlines. The terminal fees that MIAA charges every passenger are regulatory or administrative fees[47] and not income from commercial transactions.

MIAA falls under the definition of a government instrumentality under Section 2(10) of the Introductory Provisions of the Administrative Code, which provides:SEC. 2. General Terms Defined. - x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by

law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)The fact alone that MIAA is endowed with corporate powers does not make MIAA a government-owned or controlled corporation. Without a change in its capital structure, MIAA remains a government instrumentality under Section 2(10) of the Introductory Provisions of the Administrative Code. More importantly, as long as MIAA renders essential public services, it need not comply with the test of economic viability. Thus, MIAA is outside the scope of the phrase "government-owned or controlled corporations" under Section 16, Article XII of the 1987 Constitution.

The minority belittles the use in the Local Government Code of the phrase "government-owned or controlled corporation" as merely "clarificatory or illustrative." This is fatal. The 1987 Constitution prescribes explicit conditions for the creation of "government-owned or controlled corporations." The Administrative Code defines what constitutes a "government-owned or controlled corporation." To belittle this phrase as "clarificatory or illustrative" is grave error.

To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity.

Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides:Art. 420. The following things are property of public dominion:

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

(2) Those which belong to the State, without being for public use, and are intended

for some public service or for the development of the national wealth. (Emphasis supplied)The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and Buildings of MIAA are intended for public use, and at the very least intended for public service. Whether intended for public use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government Code.

4. Conclusion

Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal relation and status of government units, agencies and offices within the entire government machinery, MIAA is a government instrumentality and not a government-owned or controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a government instrumentality is not a taxable person because it is not subject to "[t]axes, fees or charges of any kind" by local governments. The only exception is when MIAA leases its real property to a "taxable person" as provided in Section 234(a) of the Local Government Code, in which case the specific real property leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and Buildings leased to taxable persons like private parties are subject to real estate tax by the City of Parañaque.

Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use, are properties of public dominion and thus owned by the State or the Republic of the Philippines. Article 420 specifically mentions "ports x x x constructed by the State," which includes public airports and seaports, as properties of public dominion and owned by the Republic. As properties of public dominion owned by the Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real estate tax under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled that properties of public dominion are not subject to execution or foreclosure sale.

WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of Appeals of 5 October 2001 and 27 September 2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and Buildings of the Manila International Airport Authority EXEMPT from the real estate tax imposed by the City of Parañaque. We declare VOID all the real estate tax assessments, including the final notices of real estate tax delinquencies, issued by the City of Parañaque on the Airport Lands and Buildings of the Manila International Airport Authority, except for the portions that the Manila International Airport Authority has leased to

private parties. We also declare VOID the assailed auction sale, and all its effects, of the Airport Lands and Buildings of the Manila International Airport Authority.

No costs.

SO ORDERED.

Panganiban, C.J., Puno, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Corona, Carpio-Morales, Chico-Nazario, Garcia, and Velasco, Jr. JJ., concur.Austria-Martinez, Callejo, Sr., JJ., separate opinion.Azcuna, J., on leave.Tinga, J., dissenting opinion.

[ G.R. No. L-12958, May 30, 1960 ]

FAUSTINO IGNACIO, APPLICANT AND APPELLANT, VS. THE DIRECTOR OF LANDS AND LAUREANO VALERIANO, OPPOSITORS

AND APPELLEES.

MONTEMAYOR, J.:

Faustino Ignacio is appealing the decision of the Court of First Instance of Rizal, dismissing his application for the registration of a parcel of land.

On January 25, 1950, Ignacio filed an application for the registration of a parcel of land (mangrove), situated in barrio Gasac, Navotas, Rizal, with an area of 37,877 square meters. Later, he amended his application by alleging among others that he owned the parcel applied for by right of accretion. To the application, the Director of Lands, Laureano Valeriano and Domingo Gutierrez filed oppositions. Gutierrez later withdrew his opposition. The Director of Lands claimed the parcel applied for as a portion of the public domain, for the reason that neither the applicant nor his predecessor-in-interest possessed sufficient title thereto, not having acquired it either by composition title from the Spanish government or by possessory information title under the Royal Decree of February 13, 1894, and that he had not possessed the same openly, continuously and adversely under a bona fide claim of ownership since July 26, 1894. In his turn, Valeriano alleged that he was holding the land by virtue of a permit granted him by the Bureau of Fisheries, issued on January 13, 1947, and approved by the President.

It is not disputed that the land applied for adjoins a parcel owned by the applicant which he had acquired from the Government by virtue of a free patent title in 1936. It has also been established that the parcel in question was formed by accretion and alluvial deposits caused by the action of the Manila Bay which borders it on the southwest. Applicant Ignacio claims that he had occupied the land since 1935, planting it with api-api trees, and that his possession thereof had been continuous, adverse and public for a period of twenty years until said possession was disturbed by oppositor Valeriano.

On the other hand, the Director of Lands sought to prove that the parcel is foreshore land% covered by the ebb and flow of the tide and, therefore, formed part of the public domain.

After hearing, the trial court dismissed the application, holding that the parcel formed part of the public domain. In his appeal, Ignacio assigns the following errors:

"I. The lower court erred in holding that the land in question, altho an accretion to the land of the applicant-appellant, does not belong to him but forms part of the public domain.

"II. Granting that the land in question forms part of the public domain, the lower court nevertheless erred in not declaring the same to be the property of the applicant-appellant, the said land not being necessary for any public use or purpose and in not ordering at the same time its registration in the name of applicant-appellant in the present registration proceedings.

"III. The lower court erred in not holding that the land in question now belongs to the applicant-appellant by virtue of acquisitive prescription, the said land having ceased to be of the public domain and became the private or patrimonial property of the State.

"IV. The lower court erred in not holding that the oppositor Director of Lands is now in estoppel from claiming the land in question as a land of the public domain."

Appellant contends that the parcel belongs to him by the law of accretion, having been formed by gradual deposit Inaction of the Manila Bay, and he cites Article 457 of the New Civil Code (Article 366, Old Civil Code), which provides that:

"To the owners of lands adjoining the banks of rivers belong the accretion which they gradually receive from the effects of the current of the waters."

The article cited is clearly inapplicable because it refers to accretion or deposits on the banks of rivers, while the accretion in the present case was caused by action of the Manila Bay.

Appellant next contends that Articles 1, 4 and 5 of the Law of Waters are not applicable because they refer to accretions formed by the sea, and that Manila Bay cannot be considered as a sea. We find said contention untenable. A bay is a part of the sea, being a mere indentation of the same:

"Bay.—An opening into the land where the water is shut in on all sides except at the entrance; an inlet of the sea; an arm of the sea, distinct from a river, a bending or curbing of the shore of the sea or of a lake." 7 C.J. 1013-1014 (Cited in Francisco, Philippine Law of Waters and Water Rights p. 6)

Moreover, this Tribunal has in some cases applied the Law of Waters on Lands bordering Manila Bay. (See the cases of Ker & Co. vs. Cauden, 6 Phil., 732, involving a parcel of land bounded on the sides by Manila Bay, where it was held that such land formed by the action of the sea is property of the State; Francisco vs. Government of the P.I., 28 Phil., 505, involving a land claimed by a private person and subject to the ebb and flow of the tides of the Manila Bay).

Then the applicant argues that granting that the land in question formed part of the public domain, having been gained from the sea, the trial court should have declared the same no longer necessary for any public use or purpose, and therefore, became disposable and available for private ownership. Article 4 of the Law of Waters of 1866 reads thus:

"Art. 4. Lands added to the shores by accretions and alluvial deposits caused by the action of the sea, form part of the public domain. When they are no longer washed by the waters of the sea and are not necessary for purposes of public utility, or for the establishment of special industries, or for the coastguard service, the Government shall declare them to be the property of the owners of the estates adjacent thereto and as increment thereof."

Interpreting Article 4 of the Law of Waters of 1866, in the case of Natividad vs. Director of Lands, (CA) 37 Off. Gaz., 2905, it was there held that:

"Article 4 of the Law of Waters of 1866 provides that when a portion of the shore is no longer washed by the waters of the sea and is not necessary for purposes of public utility, or for the establishment of special industries, or for coastguard service, the government shall declare it to be the property of the owners of the estates adjacent thereto and as an increment thereof. We believe that only the executive and possibly the legislative departments have the authority and the power to make the declaration that any land so gained by the sea, is not necessary for purposes of public utility, or for the establishment of special industries, or for coast-guard service. If no such declaration has been made by said departments, the lot in question forms part of the public domain." (Natividad vs. Director of Lands, supra.)

The reason for this pronouncement, according to this Tribunal in the case of Vicente Joven y Monteverde vs. Director of Lands, 93 Phi]., 134, (cited in Velayo's Digest, Vol. I, p. 52).

"* * * is undoubtedly that the courts are neither primarily called upon, nor indeed in a position to determine whether any public land are to be used for the purposes specified in Article 4 of the Law of Waters."

Consequently, until a formal declaration on the part of the Government, through the executive department or the Legislature, to the effect that the land in question is no longer needed for coast guard service, for public use or for special industries, they continue to be part of the public domain, not available for private appropriation or ownership.

Appellant next contends that he had acquired the parcel in question through acquisitive prescription, having possessed the same for over ten years. In answer, suffice it to say that land of the public domain is not subject to ordinary prescription. In the case of Insular Government vs. Aldecoa & Co., 19 Phil., 505, this Court said:

"The occupation or material possession of any land formed upon the shore by accretion, without previous permission from the proper authorities, although the

occupant may have held the same as owner for seventeen years and constructed a wharf on the land, is illegal and is a mere detainer, inasmuch as such land is outside of the sphere of commerce; it pertains to the national domain; it is intended for public uses and for the benefit of those who live nearby."

We deem it unnecessary to discuss the other points raised in the appeal.

In view of the foregoing, the appealed decision is hereby affirmed, with costs.

Paras, C. J., Bengzon, Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, and Gutierrez David, JJ., concur.

[ G.R. No. L-40474, August 29, 1975 ]

CEBU OXYGEN & ACETYLENE CO., INC., PETITIONER, VS. HON. PASCUAL A. BERCILLES, PRESIDING JUDGE, BRANCH XV, 14TH

JUDICIAL DISTRICT, AND JOSE L. ESPELETA, ASSISTANT PROVINCIAL FISCAL, PROVINCE OF CEBU, REPRESENTING THE

SOLICITOR GENERAL'S OFFICE AND THE BUREAU OF LANDS, RESPONDENTS.

CONCEPCION, JR., J.:

This is a petition for the review of the order of the Court of First Instance of Cebu dismissing petitioner's application for registration of title over a parcel of land situated in the City of Cebu.

The parcel of land sought to be registered was originally a portion of M. Borces Street, Mabolo, Cebu City. On September 23, 1968, the City Council of Cebu, through Resolution No. 2193, approved on October 3, 1968, declared the terminal portion of M. Borces Street, Mabolo, Cebu City, as an abandoned road, the same not being included in the City Development Plan.[1] Subsequently, on December 19, 1968, the City Council of Cebu passed Resolution No. 2755, authorizing the Acting City Mayor to sell the land through a public bidding.[2] Pursuant thereto, the lot was awarded to the herein petitioner being the highest bidder and on March 3, 1969, the City of Cebu, through the Acting City Mayor, executed a deed of absolute sale to the herein petitioner for a total consideration of P10,800.00.[3] By virtue of the aforesaid deed of absolute sale, the petitioner filed an application with the Court of First Instance of Cebu to have its title to the land registered.[4]

On June 26, 1974, the Assistant Provincial Fiscal of Cebu filed a motion to dismiss the application on the ground that the property sought to be registered being a public road intended for public use is considered part of the public domain and therefore outside the commerce of man. Consequently, it cannot be subject to registration by any private individual.[5]

After hearing the parties, on October 11, 1974 the trial court issued an order dismissing the petitioner's application for registration of title.[6] Hence, the instant petition for review.

For the resolution of this case, the petitioner poses the following questions:

(1) Does the City Charter of Cebu City (Republic Act No. 3857) under Section 31, paragraph 34, give the City of Cebu the valid right to declare a road as abandoned? and(2) Does the declaration of the road, as abandoned, make it the patrimonial property of the City of Cebu which may be the subject of a common contract?

[[[[[[

(1) The pertinent portions of the Revised Charter of Cebu City provides:

"Section 31. Legislative Powers. Any provision. of law and executive order to the contrary notwithstanding, the City Council shall have the following legislative powers:x x x x x x x x x(34) x x x; to close any city road, street or alley, boulevard, avenue, park or square. Property thus withdrawn from public servitude may be used or conveyed for any purpose for which other real property belonging to the City may be lawfully used or conveyed."

From the foregoing, it is undoubtedly clear that the City of Cebu is empowered to close a city road or street. In the case of Favis vs. City of Baguio,[7] where the power of the City Council of Baguio City to close city streets and to vacate or withdraw the same from public use was similarly assailed, this Court said:

"5. So it is, that appellant may not challenge the city council's act of withdrawing a strip of Lapu-Lapu Street at its dead end from public use and converting the remainder thereof into an alley. These are acts well within the ambit of the power to close a city street. The city council, it would seem to us, is the authority competent to determine whether or not a certain property is still necessary for public use."Such power to vacate a street or alley is discretionary. And the discretion will not ordinarily be controlled or interfered with by the courts, absent a plain case of abuse or fraud or collusion. Faithfulness to the public trust will be presumed. So the fact that some private interests may be served incidentally will not invalidate the vacation ordinance."(2) Since that portion of the city street subject of petitioner's application for registration of title was withdrawn from public use, it follows that such withdrawn portion becomes patrimonial property which can be the object of an ordinary contract.

Article 422 of the Civil Code expressly provides that "Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State."

Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and unequivocal terms, states that: "Property thus withdrawn from public servitude may be used or conveyed for any purpose for which other real property belonging to the City may be lawfully used or conveyed."

[

Accordingly, the withdrawal of the property in question from public use and its subsequent sale to the petitioner is valid. Hence, the petitioner has a registerable title over the lot in question.

WHEREFORE, the order dated October 11, 1974, rendered by the respondent court in Land Reg. Case No. N-948, LRC Rec. No. N-44531 is hereby set aside, and the respondent court is hereby ordered to proceed with the hearing of the petitioner's application for registration of title.

SO ORDERED.

Makalintal, C.J., Fernando, (Chairman), Barredo, and Aquino, JJ., concur.

G.R. No. L-7909             January 18, 1957

CIPRIANO E UNSON, petitioner-appellant, vs.HON. ARSENIO H. LACSON, as Mayor of the City of Manila, and GENATO COMMERCIAL CORPORATION, respondents-appellees.

Plantilla, Unson and Limjoco for appellant.City Fiscal Eugenio Angeles and Assistant City Fiscal Arsenio Nañawa for appellee Mayor Lacson.Arturo A. Alafriz for appellee Genato Commercial Corporation.

CONCEPCION, J.:

This is an action to annual a municipal ordinance and cancel a contract of lease of part of "Callejon de Carmen," in the City of Manila. Its Mayor and the Genato Commercial Corporation — hereinafter referred to as Genato, for the sake of brevity — lessor and lessee, respectively, under said contract, are the respondents herein. After due trial, the Court of First Instance of Manila rendered a decision dismissing the petition, with costs against the petitioner, who has appealed from said decision. The case is before us the validity of a municipal ordinance is involved therein.

Petitioner, Cipriano E. Unson, is the owner of Lot No. 10, Block 2537, of the Cadastral Survey of the City of Manila, with an area of 1,537.20 square meters, more or less. It is bounded, on the North, by R. Hidalgo Streets; on the East or Northeast, by Lot No. 12, belonging to Genato, and, also, by a narrow strip of land running eastward (from 1.68 to 2.87 meters in width and from 29.90 to 28.4 meters in lenght), known as Lot No. 11 (of about 123.7 squares meters), which the City of Manila regards as its patrimonial property; on the West, by private property whose owner is not named in the record; and on the South or Southeast, by a strip of land, narrower than Lot 11, running from East to West (about 1.68 meters in which in width and 26.14 meters in lenght, or an area of about 45 square meters, more or less), known as Lot No. 9, which is also claimed by said City as its patrimonial property. Immediately South of this Lot No. 9 is the Northern half of Callejon del Carmen, which is separated from its Southern half by the Estro de San Sebastian. Several structures exist on the lot of petitioner Unson. There is a sizeable building on the Northern part, adjoining R. Hidalgo Street, and a small building — known as "Commerce Building" — on the Southern portion, which adjoins the aforesaid Lot No. 9. Unson's lot is, and for several years has been leased to the National Government, for use by the "Mapa High School", as "Rizal Annex" thereof, which has an enrollment of over 1,500 students.

On or about September 28, 1951, the Municipal Board of Manila passed Ordinance No. 3470 withdrawing said Northern portion of Callejon del Carmen from public use, declaring it patrimonial property of the City and authorizing its lease to Genato. The ordinance provides:

SECTION 1. Those portions of the Callejon del Carmen, Quiapo, having an aggregate area of 709.27 square meters and adjacent to the premises of the Genato Commercial Corporation, are hereby withdrawn from public use.

SEC. 2. The above piece of land described in Section 1 hereof is hereby declared as patrimonial property of the government of the City of Manila.

SEC. 3. The lessee of the aforesaid city property with an aggregate area of 709.27 square meters to Genato Commercial Corporation at a monthly rental of P0.20 per square meters is hereby authorized.

SEC. 4. This Ordinance shall take effect upon its approval. (Exhibit 2-A, p. 10, Folder of Exhs.)

Upon approval of this ordinance by the City Mayor, the lease contract therein mentioned (pp. 13-21, Record on Appeal) was entered into and Genato constructed a building on said portion of Callejon del Carmen, at a distance of about 0.765 meter from the Southern boundary of said Lot No. 9. This strip of Callejon del Carmen and said Lot No. 9 thus form an open space of about 2.445 meters in width, more or less, separating said building constructed by Genato and the "Commerce Building" on Unson's lot. Prior thereto, the latter had, on its Southern boundary, two (2) exits on Callejon del Carmen, which exits had to be closed upon the construction of said building by Genato. Hence, alleging that Ordinance No. 3470 and the aforementioned contract of lease with Genato are illegal, petitioner instituted this action, with the prayer

(a) That respondent Genato Commercial Corporation be immediately enjoined from doing further work in the construction of a wall/or building on that portion of Callejon del Carmen leased to them immediately upon the petitioner's filing a nominal bond of P500.00, in such other amount as the court may fix;

(b) That, after trial, the injunction above-mentioned be made permanent, and ordering the respondent Genato Commercial Corporation to remove whatever construction has been done by them on said property;

(c) That, also after trial, the Hon. Arsenio H. Lacson, Mayor of the City of Manila, be ordered to cancel or revoke the building permit and the lease granted to him over the Callejon del Carmen to the Genato Commercial Corporation;

(d) That respondents be ordered to pay the costs of this suit: and for whatever equitable relief this Honorable Court may deem just and proper under the premises. (Record on Appeal, p. 5).

The respondents filed their respective answers maintaining the legality of the municipal ordinance and the contract of lease in question, and, after due trial, the lower court rendered its aforementioned decision dismissing the case, upon the ground that as owner of Callejon del Carmen, the City of Manila "has full authority

to withdraw such alley from public use and to convert it into patrimonial property" and that

. . . The City of Manila as owner has the right to use and to dispose of such alley without other limitations that those established by law (Article 428, New Civil Code), so that when the city of Manila withdrew it from public use and converted it into patrimonial property, it simply exercised its right of ownership. The fact that in the Manila Charter there is no provision authorizing the Municipal Board to withdraw from public use a street and to convert it into patrimonial property, can not be construed to mean that the Municipal Board has no right at all to do so. That would be a negation of its right of ownership. Section 18, letter (x),of the Manila Charter gives the Municipal Board power and authority to lay out, construct and improve streets, avenues, alleys, sidewalks, etc. and as corollary to that right is the right to close a street and to convert it into patrimonial property.

Furthermore, Ordinance No. 3470 of the Municipal Board was submitted to and approved by the National Planning Commission. This body was created by an executive order of the President of the Republic, and vested with the power and authority to lay out, construct, vacate, and close streets, avenues, sidewalks, etc. Assuming that the power and authority to vacate or close a street rest with the State, this power as delegated to the National Planning Commission by the President in the exercise of his emergency power, and when this body approved said ordinance, it did so in the exercise of the power delegated to it by the State. Hence the validity of the ordinance is unquestionable. (Record on Appeal, pp. 27-29.)

Hence, this appeal taken by petitioner Unson, who insists that said Municipal Ordinance No. 3470 is illegal and, accordingly, that the aforementioned contract of lease between Genato and the City of Manila is null and void.

In this connection, respondents have been unable to cite any legal provision specifically vesting in the City of Manila the power to close Callejon del Carmen. Indeed, section 18 (x) of Republic Act No. 409 — upon which appellees rely — authorizes the Municipal Board of Manila, "subject to the provisions of existing laws, to provide for the laying out, construction and improvement . . . of streets, avenues, alleys . . . and other public places," but it says nothing about the closing of any such places. The significance of this silence becomes apparent when contrasted with section 2246 of the Revised Administrative Code, explicitly vesting in municipal councils of regularly organized municipalities the power to close any municipal road, street, alley, park or square, provided that persons prejudiced thereby are duly indemnified, and that the previous approval of the Department Head shall

have been secured. The express grant of such power to the aforementioned municipalities and the absence of said grant to the City of Manila lead to no other conclusion than that the power was intended to be withheld from the latter.

Incidentally, said section 2246 refutes the view, set forth in the decision appealed from, to the effect that the power to withdraw a public street from public use is incidental to the alleged right of ownership of the City of Manila, and that the authority to close a thorough fare is a corollary to the right to open the same. If the ownership of the public road carried with it necessarily the unqualified right of a municipal corporation to close it, by withdrawing the same from public use, then Congress would have no power to require, as a condition sine qua non, to the exercise of such right, either the prior approval of the Department Head or the payment of indemnity to the persons injured thereby. Again, pursuant to section 2243 of the Revised Administrative Code, the municipal council of regular municipalities shall have authority, among others:

(a) To establish and maintain municipal roads, streets, alleys, sidewalks, plazas, parks, playgrounds, levees, and canals.

If, as the lower court held, the power to "construct" an alley entailed the authority to "close" it, then section 2246, above referred to, would have been unnecessary. To our mind, the main flaw in appellees' pretense and in the position taken by his Honor, the trial Judge, is one of perspective. They failed to note that municipal corporations in the Philippines are mere creatures of Congress; that, as such, said corporations possess, and may exercise, only such power as Congress may deem to fit to grant thereto; that charters of municipal corporations should not be construed in the same manner as constitutions;1 and that doubts, on the powers of such corporations, must be resolved in favor of the State, and against the grantee.2

Lastly, the authority of the local governments to enact municipal ordinances is subject to the general limitation that the same shall not be "repugnant to law". This is so by specific provision of section 2238 of the Revised Administrative Code, as well as because Congress must be presumed to have withheld from municipal corporations, as its agents or delegates, the authority to defeat, set at naughty or nullify its own acts (of Congress)unless the contrary appears in the most explicit, indubitable, and unequivocal manner — and it does no so appear in the case at bar. What is more, section 18(x) of Republic Act No. 409, positively declares that the power of the City of Manila to provide for the construction of streets and alleys shall be "subject to the provisions of existing law. . . .

However, the ordinance and the contract of the lease under consideration are inconsistent with Article 638 of the Civil Code of the Philippines, the first paragraph of which reads:

The banks of rivers and streams, even in case they are of private ownership, are subject throughout their entire length and within a zone of three meters along their margins, to the easement of the public use in the general interest of navigation, float age, fishing and salvage.

Obviously, the building constructed by Genato on the portion of Callejon del Carmen in dispute renders it impossible for the public to use the zone of three meters along the Northern margin of the Estero de San Sebastian for the purposes set forth in said Article 638. We are not unmindful of the cases of Ayala de Roxas vs. City of Manila (6 Phil., 251) and Chang Hang Ling vs. City of Manila (9 Phil., 215), in which this Court refused to enforce a similar easement — provided for in Article 553 of the Civil Code of Spain — upon private property adjoining the Estero de Sibacong and the Estero de la Quinta, respectively. The decisions in said cases were predicated, however, upon the fact that, under the Spanish Law of Waters, "the power of the administration do not extend to the establishment of new easements upon private property but simply to preserve old ones," and that, pursuant to the Philippine Bill (Act of Congress of July 1, 1902) and Article 349 of the Civil Code of Spain, no one shall be deprived of his property, except by competent authority and with sufficient cause of public utility, always after proper indemnity. These considerations are inapplicable to the case at bar, for, as regards Callejon del Carmen, the aforementioned easement of public use is not new. Besides, said alley is not private property. It belongs to the State.3 And, even if it were — for it is not — patrimonial property of the City of Manila, the same — as a creature of Congress, which may abolish said municipal corporation and assume the power to administer directly the patrimony of the City, for the benefit of its inhabitants — cannot so use or dispose of said alley as to defeat the policy set forth in the said Article 638 by the very legal creator of said political unit. (III Dillon on Municipal Corporations, pp. 1769-1771, 1781-1783,1803-1804.)

It is urged, however, that the absence of authority of the Municipal Board of Manila has been cured by the fact that Ordinance no. 3470 had been approved by the National Urban Planning Commission. This pretense in untenable for:

1. In the case of the University of the East vs. The City of Manila (96 Phil., 316), decided on December 23, 1954, we held, in effect, that the grant of powers to the National Urban Planning Commission, under Executive Orders Nos. 98 and 367, amounted to an undue delegation of legislative powers, for lack of "specific

standards and limitations to guide the commission in the exercise of the wide discretion granted to it."

2. Said Commission created by the Executive Order No. 98, dated March 11, 1946, pursuant to the emergency powers of the President under Commonwealth Act No. 671, could not possibly confer upon the City of Manila any power denied thereto by its New Charter — Republic Act No. 409 — not only because said emergency powers became inoperative as soon as Congress met in regular sessions after the liberation of the Philippines (Araneta vs. Dinglasan, Rodriguez vs. Treasurer of the Philippines, Guerrero vs. Com. of Customs, and Barredo vs. Commission on Elections, 45 Off. Gaz., 4411, 4419; Rodriguez vs. Gella, 49 Off. Gaz., 465), but, also, because in case of conflict between said executive order, dated March 11, 1946, and the aforementioned Republic Act. No. 409, which was approved, and became effective, on June 18, 1949, the latter must prevail, being posterior in point of time, as well as act of the principal (in relation to the emergency powers delegated to the President, by Commonwealth Act No. 671), which must prevail over that of the agent.

3. Pursuant to said executive order, the acts of the municipal corporations, relative to the reconstruction and development of urban areas — even if within the scope of the general authority vested in said local governments by the charters thereof — shall be ineffective unless approved by the National Urban Planning Commission, or in accordance with the plans adopted or regulations issued by the same. In other words, the purpose of said executive order was not to enlarge the powers of local governments, but to qualify and limit the same, with a view to accomplishing a coordinated, adjusted, harmonious reconstruction and development of said urban areas.

4. Properties devoted to public use, such as public streets, alleys and parks are presumed to belong to the State. Municipal corporations may not acquire the same, as patrimonial property, without a grant from the National Government, the title of which may not be divested by prescription (Municipality of Tigbauan vs. Director of Lands, 35 Phil., 584). Hence, such corporations may not register a public plaza (Nicolas vs. Jose, 6 Phil., 598). A local government may not even lease the same (Municipality of Cavite vs. Rojas, 30 Phil., 602). Obviously, it may not establish title thereto, adverse to the State, by withdrawing the plaza — and, hence, an alley — from public use and declaring the same to be patrimonial property of the municipality or city concerned, without express, or, at least, clear grant of authority therefor by Congress.

5. In fact, the Department of Engineering and Public Works of the City of Manila had objected to the lease in question, upon the ground that Callejon del Carmen is

communal property. In its 1st indorsement of June 4, 1953, to the City of Mayor, said department used the following language:

1. Records in the present lease of Genato Commercial Corporation of a portion of City property measuring 709.27 square meters, more or less, show that this Office had consistently been strongly against the lessee of this City property. Even before the passage of Ordinance No. 3470 (withdrawing from public use those portions of Callejon del Carmen, Quiapo, adjacent to the premises of Genato Commercial Corporations; declaring the same as patrimonial property of the government of the City of Manila and authorizing the lease of said City property with an aggregate area of 709.27 square meters to Genato Commercial Corporation at a monthly rental of P0.20 per square meter), this office had voiced its vigorous protest to the lease of this City property to Genato Commercial Corporation several times, in view of the fact that the lots applied for are communal property which can not be leased or otherwise disposed of (Cavite vs. Roxas, 30 Phil., 602). This Office had registered its strong objection to the lease of this property as per our 2nd Indorsement dated Aug. 2, 1951, 4th Indorsement dated August 7, 1951 and 3rd Indorsement dated August 27, 1951, all of which were submitted by this Office prior to the enactment of Ordinance 3470 on September 28,1951 and its subsequent approval on October 3, 1951. . . . It can, therefore, clearly be seen from the foregoing, that this Office had been strongly against the lease of this City property in view of the fact that this is a communal property. The property herein applied by Mr. Francisco G. Genato is also communal property of the City of Manila and disapproval of the same is strongly recommended. (Exhibit C, pp. 4-5, par. 1, Folder of Exhibits; emphasis supplied.)

Wherefore, the decision appealed from is hereby reversed and another one shall be entered declaring Ordinance No. 3470, as well as the contract of the lease in dispute, null and void, with costs against the respondents. It is so ordered.

Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Reyes, J.B.L., and Endencia, JJ., concur.

[ G.R. No. L-24440, June 30, 1969 ]

THE PROVINCE OF ZAMBOANGA DEL NORTE, PLAINTIFF-APPELLEE, VS. CITY OF ZAMBOANGA, SECRETARY OF FINANCE AND COMMISSIONER OF INTERNAL

REVENUE, DEFENDANTS-APPELLANTS.

REYES, J.B.L., J.:

Professing respect for the principles enunciated by this Court in its decision of 28 March 1968, in Case G. R. No. L-24440, entitled Province of Zamboanga del Norte vs. City of Zamboanga, et al.,[1] the appellant City seeks reconsideration of our decision in so far as the latter declares that Republic Act 3039 is unconstitutional and void in so far as the same seeks to deprive the Province of Zamboanga del Norte of its shares in the 26 lots situated within the City of Zamboanga, and hereinafter enumerated, without just compensation, for the reason that said 26 lots are patrimonial

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property of the old Province of Zamboanga. Said 26 lots are declared in the main decision to be the following:

" TCT Number Lot Number Use5577. . . . . . . . . . . . . 177 . . . . . . . . . . . . . Mydro, Magay13198 . . . . . . . . . . . 127-D . . . . . . . . . . . San Roque5569 . . . . . . . . . . . . 169 . . . . . . . . . . . . . Burleigh[2]

5558 . . . . . . . . . . . . 175 . . . . . . . . . . . . . Vacant5559 . . . . . . . . . . . . 188 . . . . . . . . . . . . . “5560 . . . . . . . . . . . . 183 . . . . . . . . . . . . . “5561 . . . . . . . . . . . . 186 . . . . . . . . . . . . . “5563. . . . . . . . . . . . . 191 . . . . . . . . . . . . . “5566 . . . . . . . . . . . . 176 . . . . . . . . . . . . . “5568 . . . . . . . . . . . . 179 . . . . . . . . . . . . . “5574 . . . . . . . . . . . . 196 . . . . . . . . . . . . . “5575 . . . . . . . . . . . . 181-A . . . . . . . . . . . “5576 . . . . . . . . . . . . 181-B . . . . . . . . . . . ”5578 . . . . . . . . . . . . 182 . . . . . . . . . . . . . “5579 . . . . . . . . . . . . 197 . . . . . . . . . . . . . “5580 . . . . . . . . . . . . 195 . . . . . . . . . . . . . “5581 . . . . . . . . . . . . 159-B . . . . . . . . . . . “5582 . . . . . . . . . . . . 194 . . . . . . . . . . . . . “5584 . . . . . . . . . . . . 190 . . . . . . . . . . . . . ”5588 . . . . . . . . . . . . 184 . . . . . . . . . . . . . “5589 . . . . . . . . . . . . 187 . . . . . . . . . . . . . ”5590 . . . . . . . . . . . . 189 . . . . . . . . . . . . . ”5591 . . . . . . . . . . . . 192 . . . . . . . . . . . . . “5592 . . . . . . . . . . . . 193 . . . . . . . . . . . . . “5593 . . . . . . . . . . . . 185 . . . . . . . . . . . . . “7379 . . . . . . . . . . . . 4147 . . . . . . . . . . . . “

The movant City contends that the 26 lots aforestated were not patrimonial property of the former Province of Zamboanga, for the reason that said 26 lots have always been used for public purposes, such as school sites, playgrounds and athletic fields for schools.

To bolster its contention, the City of Zamboanga submitted photographs, plans and a sworn certification of its City Engineer to the effect that:

(a)   Twenty-one lots (Nos. 17, 177, 179, 181-A, 181-B, 182 to 197) are part and parcel of the Zamboanga Trade School;

(b)   Three lots (Nos. 169, 175 and 176) are part and parcel of the Zamboanga Normal College;

(c)   Lot No. 127-D is the Pasonanca Elementary School;

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(d)   Lot No. 4147 is the Bolong Elementary School;

(e)   Lot No. 159-B is part and parcel of the Baliwasan Elementary School.

Appellant City of Zamboanga, therefore, prays that the main decision be partly reconsidered and that all title to, and ownership of, the 26 lots be declared to have been validly vested in said City free of charge by Republic Act No. 3039.

The motion for reconsideration is vigorously opposed by plaintiff-appellee Province of Zamboanga del Norte, which contends that the evidence sought to be filed by the appellant City is not newly discovered evidence and is, therefore, inadmissible at this stage of the proceedings. Alternatively, the appellee Province of Zamboanga contends that the 26 lots are vacant, or that the buildings existing thereon were constructed in bad faith; and that the said Province has additional evidence to show that most of these properties are not actually devoted to public use or governmental purposes.

Considering that both contending parties are actually subdivisions of one entity, the Republic of the Philippines, so that public interest is involved and demands that the issues presented be determined speedily without regard to technicalities, the Court resolved that, in the interest of justice and equity, its main decision and that of the court below be reconsidered and set aside, in so far as they affect the twenty-six lots heretofore enumerated, and the monetary indemnities awarded. Instead, the records are ordered remanded to the court of origin for a new trial, wherein the parties shall be given opportunity to adduce and submit any evidence in their possession to show whether or not the 26 lots aforesaid were or were not actually devoted to public use or governmental purposes prior to the enactment of Republic Act No. 3039. Thereafter, the Court of First Instance shall decide the issues anew, taking into account the evidence submitted by the parties and the principles of law laid down by this Supreme Court in its main decision of the present case, dated 28 March 1968.

SO ORDERED. No costs.

Concepcion, C.J., Makalintal, Zaldivar, Sanchez, Ruiz Castro, Fernando, Capistrano, Teehankee, and Barredo, JJ., concur.Dizon, J., did not take part.

[ G. R. No. 5631, October 17, 1910 ]

THE MUNICIPALITY OF CATBALOGAN, PETITIONER AND APPELLEE, VS. THE DIRECTOR OF LANDS, OPPONENT AND APPELLANT.

TORRES, J.:

On June 19, 1908,  the municipal president of the  pueblo of Catbalogan, Province of Samar,  filed, in the name of the municipality, an application  with the Court of Land  Registration in which he asked for the registration, in conformity with the Land Registration Act, of a parcel of land of which the said municipality was the absolute owner, bounded on the north  by calle Corto  south of  the  church square, on the east by Second Avenue, on the south by land belonging to Smith, Bell & Co.,

and on the west by First Avenue; the application states that the said land has an area of 666.60 square meters and its description  and boundaries are given in detail in the map attached to the  application, which sets forth that the property described  was appraised at the last assessment levied for the  purpose of the payment of the land tax, and that there is no encumbrance  on it; that no one other than the applicant, to the latter's best knowledge and belief, has any right or interest therein; that the said land was acquired by possession  and material occupation for  a large number of years and is  at present occupied by the  applicant as a municipal corporation duly organized; and that, in the unlikely  event of the  denial  of the said application, made in accordance with the Land Registration Act, the applicant invokes the benefits of chapter 6 of Act No. 926, since the said corporation has been in possession of the land mentioned, which is entirely surrounded by  a fence, and has been  cultivating it  for  a  great many years.

On March 18, 1909, the Attorney-General,  in representation of the Director of Lands, filed a writing opposing the registration solicited  and alleged that the land in question belonged to the United States and was  under the control of the Government  of the Philippine Islands.  He asked that the applicant's prayer be denied and that, in case the said property should be  declared  to belong to  the Insular Government, the same be awarded to it, together with the issuance thereto of the proper certificate of registration.

The  case having been heard  on March 22, 23, and 24, 1909, and oral evidence adduced by both parties, the judge, on the 24th of the said month, overruled the opposition of the Director of Lands, and decreed,  after a declaration of general default, that the property in question be awarded to the applicant, the municipality of Catbalogan,  and be registered in its name.  The Attorney-General,  in representation of the Director of Lands, excepted to this ruling and  announced his purpose of filing a bill of exceptions. He asked at the same time for a new trial on the grounds that  the findings  of fact  of the court were openly  and manifestly contrary to the weight of the evidence, and  that the latter did not justify the said decision which, he alleged, was  contrary to law.  This motion was denied and exception  was taken thereto by the Attorney-General,  who  duly presented the required bill of exceptions which was certified and forwarded to this court.

The question submitted to the  decision of this court, through the appeal raised by the Attorney-General in representation  of  the  Director of  Lands, is  whether  the lot occupied by the court-house of the municipality of Catbalogan, of the Island and Province of Samar, belongs to the said  municipality  or is state land under the control of the Insular Government.

In  order to  obtain a better understanding of the  final conclusion to be established in this decision,  it is  meet to state: That for the purpose of the establishment  of  new

pueblos in this  Archipelago, at the beginning of its occupation  by the Spaniards, an endeavor was always made to find, in favorable places, a nucleus of inhabitants and, later, near  the pueblos already  established, barrios, which ordinarily served as a basis for  the  formation  of other  new pueblos that  became as populated as the centers  on which they were dependent.

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

Law 6, title 5, book 4, of the Recompilation of the Laws of the Indies, provides, among other things:"That within the boundaries which may be assigned to it, there must be at least thirty residents,  and each one of them must have a house," etc.

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

"Whoever wishes to undertake to establish a new town in the manner provided for, of not more  than thirty nor less than  ten residents,  shall be granted the time and territory  necessary for the  purpose and under the same conditions."It may be affirmed that years afterwards all the  modern pueblos of the Archipelago  were formed  by taking as a basis for their establishment the  barrios already populated by a large number of  residents who, under the agreement to build the church of the  new  pueblo, the court-house, and afterwards the schoolhouse, obtained from the General Government  the administrative separation of their barrio from the  pueblo on which it depended and in whose territory it was previously comprised.  In such cases procedure analogous to that  prescribed by the Laws of the Indies was observed.

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

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

"The district or territory to be given for settlement by composition shall be allotted in the following manner. There shall first be set apart the portion  required for the lots  of the pueblo,  the exido or public  lands, and pastures amply sufficient for the stock which the residents may have, and as much more as propios del lugar or common lands of the locality; the rest of the territory and district shall be divided into four parts - one of them, of his choice, shall be for him who takes upon himself the obligation to found the pueblo, and the other three shall be apportioned equally among the settlers."Law  8, of the same title and book, prescribes,  among other things:"That, between the main  square and the church, there shall be constructed the casas reales or municipal buildings, the cabildo,  concejo, customs buildings," etc.Law 14 of the said title and book, also directs among other things:"That the viceroys shall have set aside such lands as  to them appear suitable as the common lands  {propios) of the pueblos that have none, therewith to assist in the payment of the salaries of the corregidores, and sufficient public lands (exidos) and pasture lands as provided for and prescribed by law."Law  1, title 13 of the aforesaid  book, provides the following:"Such viceroys and governors as have due authority shall designate to each villa and  lugar newly founded and settled the lands and lots which they may need and may be given to them, without detriment to a third party, as propios, and a statement  shall be sent to us of what was designated and given to each,  in order that we may have such  action approved."The municipality of Catbalogan, as the provincial  seat of Samar, must have been the first and oldest pueblo established in the said province and has been occupying, if not since time immemorial, as affirmed in the application, at least for a long period of years,  some forty or forty-five years according to the evidence given  at trial, the lot in litigation on  which it  had built the successive court-house buildings constructed  for  the  public service of the head municipal authority and his council.  Some of these buildings were burned and others were ruined by typhoons.  The court-house building aforesaid has been used and enjoyed quietly and peaceably and without  any opposition up to the present time, wherefore it is to be  presumed that, on founding the pueblo and on proceeding to designate and demarcate the area of land to be  occupied by the town of Catbalogan, with its square, streets, church, and other public buildings, the said lot was also designated' as a site for the municipal or court building, in accordance with the laws herein before mentioned, and that the adjudication of the lot to the municipality  for  its  court-house  was  duly confirmed  by the Spanish Government,  as must be  inferred,  in  view of the continuous possession for so long a time up to the present; nor does the record show that the court-house of the said pueblo was ever built on any  other lot  than the one in question.

It is to be noted that, in former times, the court-house buildings of  the pueblos were called casas reales  (royal buildings), undoubtedly for the purpose of giving greater

dignity  to the principle  of authority represented in them and inculcating respect among the  inhabitants of the pueblo toward the building w^iere the chief local authority exercised his governmental duties and  at the same time administered justice, for  the old pedaneos or petty mayors, later called capitanes or gobernadorcillos, while they had governmental powers, at  the same time  administered justice as local judges.

In paragraph 92  of the royal ordinances of February 26, 1768, the following appears, among other things:"And because, while there is a notable excess of pomp in the buildings of the ministers and parish priests, there is, on the other  hand,  great abandonment  of the casas reales which, as a general rule,  are not habitable on account of their uncomfortable and ruinous conditions, etc.,   *  *  * it is ordered that in all the pueblos, and especially in those of the seats of government, the native inhabitants thereof shall  erect  decent  and   convenient  municipal  buildings modeled  after the  plans  to  be furnished by the central government, and that therein the gobernador cillos shall have their court rooms and their jails for the security of prisoners, and all leaks and  other damages  shall be  repaired in time in order that, through neglect they may not cause greater detriment and expense."If the inhabitants of a pueblo, at the time of its foundation,  were obliged  to erect their casa  real  or municipal building, it is to be supposed that they built it on their own ground after a designation of the site had been made by the governmental  authority of the  province - a designation which had to be made, according to the Laws of the Indies, at the same time as that of the main plaza and of the site to be occupied by the temple or church, which latter building is so necessary  and indispensable for every pueblo as well as the casa real or court-house, since in them, respectively, divine worship is had and the local authorities perform their duties.   The land designated for the church is considered to belong thereto, and likewise the land intended for the court-house should  be deemed to be the property of the pueblo, awarded to it for the public uses of the municipality, since no  pueblo was able to exist administratively without having a church of its own and a court-house which should be the seat of its local authority and its municipal government.

It should be remembered that the court-house and  the church  of every  pueblo were always  built, in accordance with the provisions of the Laws of the Indies, on one of the sides of the plaza mayor or main square of the town, either together or the same side,  or  each  building on an opposite side; but  the said square nearly always occupies a central site within the territory of the pueblo, with the  frequent exception of where the town has extended toward only one end or side of the territory, in which event its main square ceased to be in the center of the town.  However, the said square was never located outside of the inhabited place, as were the commons and pasturages.  (Law 13, title 7, book 4, Recompilation of the Laws of the Indies.)

It  is of course to be presumed1, in accordance with the provisions of the laws aforementioned, that the main square of the pueblo of Catbalogan occupies nearly the central part of its territory, and that the lot on which were successively constructed the several court-houses which the said pueblo has had, is situated on one of the  sides of the said square and consequently in a central point  and not outside the town.  It can not, however, on account of this circumstance, be concluded that the said lot formed a part of the commons, exido, or the pasturage lands  of the said pueblo, but consisted of land which belonged to the pueblo and was legally acquired through the  distribution  and adjudication  of lots made at the beginning of its  foundation, as proved by the laws  hereinbefore quoted.

In  technical administrative terms  bienes propios are: Cultivated real properties, pasturages, houses or any other property which a city, village, or hamlet has for the  payment of the public expenses.  The administration of this class of property lay with the municipalities, and they could be alienated after proper procedure and authorization of the competent superior authorities in accordance with the administrative laws.

It is therefore  unquestionable that  the assets of each pueblo comprised  its bienes propios  and  the revenues  or products derived therefrom, and this fact is recognized  in the Ordenanza de Intendentes of  1786, the forty-seventh article of which reads:"The funds which any pueblo may have left over as an annual surplus from  the products  of its property and its taxes, after meeting the expenses specified in its own particular ordinance, shall be  invested in the purchase of real estate and revenue bearing investments, so that, having a sufficient income for the payment of its obligations and to aid in defraying its ordinary needs,  the excise taxes, which are always a burden to the public,  may be abolished; and in case  it should have no such taxes, nor annuities  to redeem on its common properties (propios), the said surplus shall be applied to promote establishments useful  to the pueblo and to its  province, or by investments  to  be previously proposed by the intendentes and approved by the junta superior."From the foregoing it is concluded that the land in question is the common property of the pueblo and is comprised within the patrimonial property of the municipality of Catbalogan, to  which it  was awarded for  the construction thereon of the court-house, on the demarcation and distribution being made of the lands which were to be occupied by the town in its development, in accordance with the provisions  of the  Laws of the  Indies,  and other complementary laws,  at a time when there was an excess of land and few inhabitants to occupy them.  It was for this reason that the royal  cedula  of October 15, 1754, directed that neither the possessors of unappropriated  crown lands, nor their successors  in interest, should  be  disturbed  or  denounced, although they had no titles, it being sufficient for them  to prove their prior possession to obtain a title by just prescription.

The said municipality is today in possession of the land in litigation,  as the owner thereof, under the protection of the civil and  administrative laws which guarantee the right of ownership of the corporations that are  capable  of contracting,  acquiring,  and  possessing  real  and  personal property.

Article 343 of the Civil Code  reads:"The property of provinces and of towns is divided into property for. public use and patrimonial property."Article 344 of the same  code prescribes:"Property for public use in provinces and in towns comprises the provincial and town roads, the squares,  streets, fountains, and public waters, the promenades, and public works of general service supported  by the said  towns or provinces.

"All other property possessed  by  either is patrimonial, and shall be governed by the provisions of this code, unless otherwise prescribed in special laws."Section 2 of Act No. 82, entitled "The Municipal Code," is as follows:"(a) Pueblos incorporated under  this Act shall be designated as municipalities (municipios), and shall be known respectively by the names heretofore  adopted.  Under such names they may sue and be sued, contract and be contracted with, acquire and hold real and personal property  for the general interests of the municipality, and exercise  all the powers hereinafter conferred  upon them.

"(b) All property  and  property  rights vested  in any pueblo under its former organization shall continue to be vested in  the  same  municipality after  its  incorporation under this Act."By this last-cited administrative Act the  rights of the old municipalities to acquire real and personal property, in accordance with their former organization, are recognized, and it is declared that the  said property and rights shall continue to pertain to the municipalities created in harmony with the provisions of the Municipal Code, on account of such property being the patrimonial property of the municipalities.

Under these principles, perfectly in accord with both the old and the mother legislation of  this country, the municipality of Catbalogan ought to be considered as the owner of the land in question, on account of the same having been awarded to it as its own, under its exclusive ownership,  on the founding of the pueblo, for the erection  of the court-house, the record of the case showing no proof nor data to the contrary.  As the plaintiff municipality, the applicant, has been occupying the property on which its court-house is situated during such a long space of time, much longer than that required for extraordinary prescription (art. 1959 of the Civil Code), it can not be denied that the presumption exists, in its favor, that .it has been holding the land in its character of owner, since the trial record exhibits no proof that any other parcel  of land, distinct from that in controversy, was awarded to the  said

municipality for the erection thereon of its court-house, a court-house and the land on which to build it being necessary and indispensable for the existence of the pueblo.

The  title under which the municipality  of Catbalogan holds and enjoys the said lot is the same as that under which it is recognized as a pueblo and under which the municipality is justified  in  its present occupancy  of the territory where the town is established with its streets, squares, and common lands (terreno comunal), a title identical with that now  held by the church, as a religious institution, to the land  now, occupied  by  the temple  that exists in the said pueblo.

At the time of the beginning of the foundation of the pueblo mentioned and of the distribution or allotment of the lands among its first inhabitants, who, in  accordance with the Laws of the Indies, must have numbered at least thirty men  with  their  respective families, for  the purpose  of founding a pueblo, perhaps none of them was provided with any particular title to accredit the fact that  this or  that parcel of land had fallen to him in the allotment.  Possibly the facts pertaining to the  distribution of the lands were entered in the record kept of the organization of the pueblo, if one such was made, for it must  be remembered that, in ancient times  and up to the  years immediately preceding the beginning of the nineteenth century, fewer records were made than in  modern times, and, besides,  the Laws of the Indies  themselves  recommended that,  in administrative proceedings, the institution of suits should  be avoided in so far as possible where verbal information and investigations could be had to enable proper action to be taken,

Besides the reasons hereinabove noted, there is that of the continuous and constant renovation of the personnel which composed the officials of a municipality in the Philippines, for the pedaneo or gobernadorcillo, his tenientes, judges, and other subordinates were first chosen  and  appointed annually, and later every two years; and, although in the beginning the capitan pedaneo of the pueblo may have had in his possession the record of the necessary concession and award of the land on which the court-house was built, and that of the pueblo of Catbalogan was constructed of stone, it would in nowise  be strange that, in spite  of the zeal and diligence which  may  have been  exercised by  his many successors, the said record or  title should have disappeared or been  destroyed  in the case of Catbalogan, during the lapse of  so long a time; indeed, it would be marvelous and extraordinary that  such a document should  exist, intrusted to the more or less diligent  care of so many  municipal officials who, at the most, occupied their offices but two years. It is certain, however, that the successive  court-houses which  the said pueblo has had have  occupied the  land in question  without opposition on the part of anyone, or of the state, and  including the  building which served as a court-house, together with the land on which it is built, as one of the properties which form the assets of the pueblo of Catbalogan, as they should  be classed, it is incontrovertible that the right

of the said  municipality therein must be respected, as the right of ownership is consecrated  and sanctioned by the  laws of every  civilized country  in the interest and  for the benefit of society, public order,  and civtt&ation itself.

As has been shown in the preceding paragraphs, the  land in litigation, which is a lot  occupied  by the court-house, anciently termed the casa real, of the pueblo of Catbalogan, pertains  to the said pueblo,  awarded to  the same, not gratuitously,  but on account of the necessity arising from its organization, and forms a  part, as a patrimonial property, of its municipal assets,  and therefore it  is not comprised within the common land (terreno comunal) which may have been granted to the said pueblo. Law 8, title 3, book 6 of the Recompilation of the Laws of the Indies, is not applicable to the question at issue with respect to the said land or  lot,  nor are the  provisions of article 53  of the ordinances of good government, before cited, of February 26, 1768, nor the subsequent royal decrees of February 28, August 1,  1883,  and of January 17, 1885, relative to the legua or terreno comunal; and, consequently, the doctrine laid down in the decision rendered in the case of The City of Manila vs. The Insular Government (10 Phil. Rep., 327) is likewise inapplicable, for the  reason  that  the  land in dispute is not that of a common, but of a building lot of which  the  pueblo of Catbalogan had absolute  need at the beginning of its organization for the erection thereon of its court-house.  This was duly  proved  at trial,  without possible contradiction.

Notwithstanding the number  of years during which the municipality  of Catbalogan has been in possession of the lot, once it has been shown by unquestionable evidence that the property was assigned to it as  its  own, in order that it might erect its court-house thereon,  as  it did do at the beginning of its foundation, and its possession  of the said land not being by  mere  unlawful occupation,  the  municipality has no need to rely upon the right of prescription, although, being entitled to acquire and  possess property in the character of  owner, according to its organic law, it is not understood  why it  could not acquire such right by prescription  in accordance with law, it being, as  it is, a juridical person susceptible of rights and duties.

The  present  case has nothing to do with any contract made by the  old  municipality of Catbalogan, nor administrative acts or procedure of the applicant  herein,  but relates to its right of ownership  in a  parcel of  land vested with the character of bien propio of its own, or patrimonial property; for  which  reason the doctrine established in the decision  rendered in the case of Aguado vs. The  City of Manila (9 Phil. Rep., 513) is also inapplicable, inasmuch as the said  municipality, in the exercise  of the right of ownership in its  own  property, has  ail independent personality of its own, recognized  by law, and does not act as a mere delegate of the central authority.

For  the foregoing reasons,  and  considering that  the municipality of Catbalogan is the owner  of the land occupied by its court-house and that it is entitled  to have the

said property registered in  its name in the Court of Land Registration,  it is proper, in our  opinion, to  affirm and we hereby affirm the judgment appealed from  in its present form.

Arellano, C.J., Moreland and Trent, JJ., concur.

January 4, 1911

G.R. No. 5542THE MUNICIPALITY OF TACLOBAN, applicant-appellee,vs.THE DIRECTOR OF LANDS, opponent-appellant.

Attorney-General Villamor for appellant.No appearance for appellee.

TORRES, J.:

On April 6, 1908, the municipal president of Tacloban, Province of Leyte, filed an application in the Court of Land Registration, in representation of the said municipality, soliciting the inscription in the registry, in conformity with the law, of a parcel of land which it was alleged belonged to the municipality mentioned, as absolute owner of the same, situated within the town proper of Tacloban, not comprised within the reservation, bounded on the north by the land owned by the Chinaman La Layco, on the south by Calle San Roque, on the east by the lands belonging to Hilarion Asuncion and the municipality referred to, and on the west by Calle Rizal. The application further recited that the land concerned contained an area of 4,054.85 square meters, the description and boundaries of which were given in detail in the accompanying plan; that the said land was appraised at the last assessment, for the purpose of the payment of the land tax, at $3,041, United States currency; that there was no incumbrance on the property, nor did any person have any right or interest therein, except the applicant; that it was acquired by being filed in by the municipality in 1893 and 1894; and that it was then occupied by the houses of Vicente Bagay, Victor Cipres, Cirila Almera, Sinforoso Labajo, Manuel Catalan, Hilaria Opiño, Dalmacio Agaton, Gervasio Brillantes, Manuel Padilla, Rosa Juson, and Teresa Escorial. The applicant furthermore stated that, in case of the remote possibility of his application not being admissible under the Land Registration Act, he would, as municipal president, claim the benefits offered by Chapter VI of Act No. 926, inasmuch as the municipality had been in possession of the land since 1893, had used it for building purposes for the past fifteen years, and the property was inclosed on two of its sides by buildings.

On June 8, by reason of the summons and publications made in connection with the action taken on the aforementioned application, the Attorney-General appeared in representation of the Director of Lands and opposed the applicant’s petition, on the ground that the land in question belonged to the Government of the United States and was under the control of the Government of these Islands, and asked that the registration applied for be denied.

The case came to trial on January 18, 1909; the court, in view of the oral evidence adduced by the applicant, rendered judgment by decreeing, after entry of the general default, the adjudication and registration of the property described in the application and plan aforementioned, in favor of the applicant, in conformity with the provisions of Act No. 926. To this judgment the Attorney-General took exception and moved for a new trial on the grounds that the court’s findings of fact were openly and manifestly contrary to the weight of the evidence and that the latter did not warrant the conclusions of the judgment, which judgment was contrary to law. This motion was overruled, exception was taken by the Solicitor-General and the proper bill of exceptions having been filed, the same was certified to and forwarded to the clerk of this court.

The land sought to be inscribed in the property registry by the municipality of Tacloban, was, prior to 1891-1892, a mangrove swamp which was inundated by the water of a nearby estero, although situated within the town proper, and was gradually filled in by order of the said municipality, between the years 1892 and 1894, when it was successively occupied by the houses of several of the residents of Tacloban, as the portions of the land were successively raised the level and freed from the water.

Since then, the municipality has exercised control over the said land and found it to its interest to collect rents from those who, without impediment of any kind, occupied it with their dwellings. Notwithstanding the efforts and labor expended by the municipality in improving the land for the benefit of the town, by reducing more and more the inundated area, and it is unquestionable that the said land, which was originally a mangrove swamp and was little by little converted into habitable ground, was and is unappropriated land belonging to the State; that it has not been granted or conveyed to any private party, nor to the municipality itself, without which condition it could not be considered as private property.

It was not shown that any building belonging to the municipality of Tacloban and intended for the public service was erected on the said land, nor that the property had been conveyed to the aforementioned municipality to form a part of the municipal assets or estate; therefore it can not be considered as one of the patrimonial properties of the municipality, nor entered in the name of the same in the property registry.

The mere fact that the municipality of Tacloban continued to charge and collect rents from the persons who build houses upon the occupied portions of the said lands, is not proof that the municipality was the proprietor, for, as it had erected thereon no building intended for the service of the pueblo — a circumstance which, had it existed, would have led to the presumption that, in obtaining permission to erect the building, it also obtained a grant, if only an implied one, of the land, from the Government in the name of the State — in order that the said municipality may be deemed to be the owner of the land in question, it must prove that an express grant of the said land, as one of the properties that form a part of its patrimony, was made to it by the Government.

The municipality may be, at the most, usufructuary of the land in question, but not the proprietor thereof having the right to enter the same in the property registry.

It is true that the land herein concerned is neither mineral nor forest land, but is comprised within the term of agricultural land; yet the mere occupation of the said property by the municipality during more than ten years immediately preceding the passage of Act No. 926, which went into effect on July 26, 1904, can not serve as a

little whereby to acquire the ownership thereof pursuant to the provisions of paragraph 6 of section 54 of Act No. 926, inasmuch as, to do so, is necessary that the municipality shall have an implied or express grant from the Government, without the fulfillment of which requisite it can not be presumed that a municipality owns and holds in good faith realty admittedly belonging to the State, enabling it to convert the same into terreno propio so as to form a part of its estate or municipal assets.

The benefit granted by section 54 of the said Act, to foster agriculture and increase the wealth of the country, can not be deemed to be granted, according to economic principles, to the municipal corporations which, on account of their special conditions, to idiosyncrasy and character of the functions which they exercise, and because of the administrative missions which they have to fulfill in the name of the Government and at the same time in representation of the people who elected them, can not engage in agriculture and other pursuits, nor can they attend to the development, cultivation, or administration of agricultural land, and give special attention to other business, proper only for private parties, and other undertakings especially designed for their promotion, without serious detriment to the interests of the community.

Finally, it is to be noted that the said land situated within the town, is not common land or pasture land (terreno o’ dehesa comunal), because this class of land was usually laid off outside of the town; it had to be uncultivated land, and was granted for the pasturage of stock and for other needs of the pueblo, in accordance with an express provision of the law.

For the foregoing reasons, it is our opinion that the judgment appealed from should be reversed and the case dismissed, without special finding as to costs. So ordered.

Johnson, Carson, Moreland and Trent, JJ., concur.Arellano, C. J. and Mapa, J., dissent.

[ G.R. No. 7054, January 20, 1913 ]

MUNICIPALITY OF HINUNANGAN, PLAINTIFF AND APPELLEE, VS. THE DIRECTOR OP LANDS, DEFENDANT AND APPELLANT.

MORELAND, J.:

This is an appeal from the judgment of the Court of Land Registration, ordering the registration of the title of the petitioner to the lands described in the petition.  The appeal is taken by the Insular Government from the registration of the title of one of

the parcels of land only.  It is situated in the municipality of Hinunangan, Province of Leyte, and contains an  area of 10,328.8 square meters.  It is bounded on the northeast by the maritime zone; on the southeast by North America Street; on the southwest by Manilili Street, and on the northwest by San Isidro Labrador Street.  Upon this lot is built a stone fort which has stood there from time immemorial and was in times past used as a defense against the invasion of the Moros.

Formerly, as now, the defense of the national territory against invasion by foreign enemies rested upon the state and not upon the towns and villages and for this reason all of the defenses were constructed by the National Government.  In volume 2, book 3, title 7, law 1 of the Laws of the Indies appears the following:"We command that all the ground roundabout the castles and fortresses be clear and unoccupied, and if any building is erected within 306 paces of the wall or other building so strong that even at a greater distance it would prejudice the defenses, it shall be torn  down, and the owner of the same shall be paid from the Royal Treasury for the damages caused him."Book 4, title 7, law 12, reads as follows:"We order that, for the security and defense of the  cities as is now assured by the castles and fortresses, no building shall be erected within 300 paces of the walls or stockades of the new cities."Article 339 of the Civil Code is as follows, in  part:"ART. 339. The following are public property:

*    *      *        *      *      *      *       *

"2. That which belongs privately to the state, which is not for public use and which is destined for the public good or to increase the national riches, such as walls, fortresses and other constructions for the defense of the country, and the mines as long as no concession in regard to them is made."Article 341 of the Civil Code provides:"ART. 341. Public property, when it ceases to be used for the public good or for the necessities of the defense of the country, becomes a part of the property of the state."From these provisions it seems clear that the fortress in question was erected for the national defense and was a part of the property of the state destined and used for that purpose.  As a necessary result, the land upon which it stands must also have been dedicated to that purpose.

The fact that said fortress may not have been used for many years for the purposes for which it was originally built does not of necessity deprive the state of its ownership therein.  As we have seen, the Civil Code provides that, when the fortress ceases to be used for the purpose for which it was constructed, it becomes the property of the state in what may be called the private sense.  That the municipality may have exercised within recent years acts of ownership over the land by permitting

it to be occupied and consenting to the erection of private houses thereon does not determine necessarily that the land has become the property of the municipality.  We have held in several cases that, where the municipality has occupied lands distinctly for public purposes, such as for the municipal court house, the public school, the public market, of other necessary municipal building, we will, in the absence of proof to the contrary, presume a grant from the state in favor of the municipality; but, as indicated by the wording, that rule may be invoked only as to property which is used distinctly for  public purposes.  It cannot be applied against the state  when occupied for any other purpose.

The evidence does not disclose that the municipality has used the land for purposes distinctly public.

The judgment in relation to the parcel of land heretofore described is reversed and the petition as to that parcel dismissed.  In all other respects the judgment is affirmed.  So ordered.

Arellano, C. J., Torres, Mapa, Johnson, and Trent, JJ., concur.

[ G. R. No 24950, March 25, 1926 ]

VIUDA DE TAN TOCO, PLAINTIFF AND APPELLANT, VS. THE MUNICIPAL COUNCIL OF ILOILO, DEFENDANT AND APPELLEE.

D E C I S I O N

VILLAMOR, J.:

It appears from the record that  the widow of Tan Toco had sued the municipal council of  Iloilo for the amount of P42,966.40, being the purchase price of two strips of land, one on  Calle J. M. Basa  consisting of 592 square meters, and the otner  on Calle Aldiguer consisting  of 59 square meters, which  the municipality of  Iloilo had appropriated for widening said street.   The Court of First Instance of Iloilo sentenced the said  municipality to pay the  plaintiff the amount so claimed, plus the interest, and the said judgment was on appeal affirmed by this court.[1]

On account of lack of  funds the  municipality of Iloilo was unable to  pay the said judgment, wherefore  plaintiff had a writ of execution issue against the property of the said municipality, by virtue of which the sheriff attached two auto trucks used for  street sprinkling, one police patrol automobile, the police stations on Mabini  street, and in Molo and Mandurriao and the concrete structures, with the corresponding lots, used  as markets by  Iloilo, Molo, and Mandurriao.

After notice of the sale of said property had been  made, and a few days before the sale, the  provincial fiscal of Iloilo filed a motion with the Court of First Instance praying that the attachment on the said property be dissolved, that the said attachment be declared null and void as being illegal and violative of the rights of  the  defendant municipality.

Plaintiff's counsel objected to the fiscal's motion but the court, by order of August 12, 1925,  declared the attachment levied upon the aforementioned property of the defendant municipality null and void,  thereby dissolving  the said attachment.

From this order  the  plaintiff has appealed by bill  of exceptions.  The fundamental  question raised by appellant in her  four assignments  of error is whether or not the property levied upon is exempt from execution,

The municipal law, section 2165  of the  Administrative Code, provides that:"Municipalities are political bodies corporate, and as such are endowed with the faculties of municipal corporations, to be exercised by and through their respective municipal government in conformity with law.

"It shall be competent for them, in their proper corporate name, to sue and be sued, to contract and be contracted with, to acquire and hold real and personal property for municipal purposes, and generally to exercise the  powers hereinafter specified or otherwise conferred upon them by law."For the purposes  of the matter  here in question, the Administrative Code  does not specify the kind of property that a municipality may acquire.  However, article 343 of the Civil Code divides the property of provinces and towns (municipalities) into property  for  public use  and patrimonial property.  According to article 344  of the  same Code, provincial roads and foot-path, squares, streets, fountains, and public

waters,  drives and public improvements of general benefit built at the expense of the said towns or provinces, are property for public use.

All other property possessed by the said towns and provinces is patrimonial and shall be subject to the provisions of the Civil Code except as provided  by special laws.

Commenting upon article 344, Mr.  Manresa says that "In accordance with administrative  legislation" (Spanish) we must distinguish,  as  to  the patrimonial property of the towns, "between that of common benefit and that which  is private property of the town.  The first differs from  property for public use in that generally its enjoyment is less, as it is limited to neighbors or to a group or class thereof; and, furthermore, such use, more or less general, is not intrinsic with this kind  of property, for by its very nature it may be enjoyed as though  it were private property.  The  third group, that is, private property, is used in the name of the town or province by  the entities representing it and, like any private property, giving a source of revenue."

Such distinction,  however, is  of little practical importance in this jurisdiction in view of the different principles underlying the functions of a municipality under the American rule.  Notwithstanding this, we believe that the principle governing  property  of  the public domain of  the State is applicable to property for public use of the municipalities as said municipal property is similar in character.The principle  is that the property for public use of the State is not within the commerce of man and, consequently, is inalienable and not subject to  prescription.  Likewise, property for public  use of the municipality is not within the  commerce  of  man  so long as it  is used by the public and, consequently, said property is also inalienable.

The American Law is more explicit about this matter as expounded by McQuillin in Municipal Corporations, volume 3, paragraph 1160, where he says that:"State  statutes often  provide that court  houses,  jails and other buildings owned by municipalities and the lots on which they stand shall be exempt from attachment and execution.  But independent of  express  statutory exemption, as a general proposition,  property, real and personal, held by municipal corporations, in trust for the benefit of their inhabitants,  and used for public purposes, is  exempt.

"For example,  public buildings, school houses,  streets, squares, parks, wharves, engines and engine houses, and the like, are not subject to execution.  So city waterworks, and a stock of liquors carried in a town dispensary, are  exempt. The  reason for the exemption is obvious.  Municipal corporations  are created for public purposes and for the good of the  citizens in their aggregate or public capacity.  That they may properly discharge such public functions corporate property and revenues are essential, and to deny them these means the very purpose of their creation would

be materially impeded,  and in some instances practically destroy it. Respecting this subject the Supreme Court  of Louisiana remarked: 'On the  first view of this  question  there is something very repugnant to the moral  sense in  the  idea that a municipal corporation should contract debts, and that, having  no resources but the taxes which are due  to it, these should not be subjected by legal process to the satisfaction of its creditors.  This consideration, deduced from the principles of moral equity has only given way to the more enlarged contemplation of the great and paramount interests of public order and the principles of government.'

"It is generally held that property  owned by a municipality,  where not used for a public purpose but for quasi private  purposes,  is  subject to execution on a  judgment against  the municipality, and may be  sold.  This rule applies to  shares of stock owned by a municipal corporation, and the like.   But the mere fact that corporate property held for public uses is being temporarily used for private purposes does  not make it subject to execution.

"If municipal  property  exempt from  execution  is destroyed, the insurance money stands in lieu thereof and is also exempt.

"The members or inhabitants of a municipal corporation proper are not personally liable for the debts of the municipality,  except that in the New England States the individual liability of the inhabitant is generally maintained."In Corpus Juris, vol 23, page 355, the following is found:"Where property of a municipal or other public corporation is sought to be subjected to execution to satisfy judgments recovered against such corporation, the question as to whether such property is  leviable or not is to be determined by the usage and purposes for which it is held.  The rule is that property held for public uses, such as public buildings,  streets,  squares,  parks,  promenades, wharves, landing  places, fire engines, hose and hose carriages, engine houses,  public  markets, hospitals, cemeteries, and generally everything held for governmental purposes, is not subject to levy  and sale under execution against such corporation. The rule also applies to funds in the hands of a public officer. Likewise  it has been held that taxes  due to a municipal corporation or county cannot be seized under execution by a creditor of such  corporation.  But  where a  municipal corporation or county owns in its proprietary,  as distinguished from its public or  governmental capacity, property not useful or used for a public purpose but for quasi private purposes, the general rule is that such property may be seized and sold under  execution against the corporation, precisely as  similar property of individuals is  seized and sold.  But property held for public purposes is not subject to execution merely because it is temporarily  used for private purposes, although if the public use is wholly abandoned it becomes subject  to execution.  Whether or not property held as public property is necessary for the public use is a political, rather than a judicial question."

In the case of City of New Orleans vs. Louisiana Construction Co., Ltd. (140 U.  S., 654; 35 Law. ed., 556), it was held that a wharf for unloading sugar and molasses, open to the public, was property for the public use of the City of New Orleans and was not subject to attachment for the payment of the debts of the said city.

In that case it  was proven that the said wharf was a parcel of land adjacent to  the Mississippi  River where all shipments of sugar and molasses taken to New Orleans were unloaded.

That city leased the said wharf to  the Louisiana Construction Company, Ltd., in order that it might erect warehouses so that the merchandise upon discharge might not be spoiled by the elements.  The said company was given the privilege of charging certain fees for storing merchandise in the said warehouses  and the public in general had the right to unload sugar and molasses  there  by paying the required fees, 10 per cent of which was turned over to the city  treasury.

The United  States Supreme  Court  on  an appeal held that the wharf  was public property, that  it never ceased to be such in order to become private property of the city; wherefore the company could not levy execution upon the wharf in  order to collect the amount of the judgment rendered in favor thereof.

In the case  of Klein vs. City of New Orleans (98 U. S., 149; 25 Law.  ed., 430), the Supreme Court of the United States held that  a public wharf on the banks of the Mississippi River was public property and not subject to execution for the payment  of a debt of the City of New Orleans where said wharf was located.

In this  case a parcel of land adjacent to the Mississippi River, which formerly was the shore of the river and which later  enlarged itself by accession,  was converted  into a wharf by the city for public use, who charged a certain fee for its use.

It was held  that that land was public property as necessary as a  public, street  and was not subject to execution on account of the debts of the city.   It was further held that the fees collected were  also exempt from execution because they were a part of the income of the  city.

In the case of Tufexis vs. Olaguera and Municipal Council of Guinobatan  (32  Phil.,  654),  the question raised was whether for the payment of a debt to a third person  by the concessionaire of a public market, the said public market could  be attached and sold at public auction.   The Supreme Court held that:"Even though  a creditor is unquestionably entitled to recover out of  his  debtor's  property, yet when  among such property there is included the special right granted by the Government of  usufruct in a building  intended for a public service, and when this privilege is closely related to a service of a  public  character, such right of the

creditor to the collection  of  a  debt owed  him  by the debtor who enjoys the said  special privilege  of usufruct in a  public market is not  absolute and may be exercised only through the action of a court of justice with respect to the profits or revenue obtained  under the special  right of  usufruct enjoyed by debtor.

"The special  concession of the right of usufruct in a public market cannot be attached like any ordinary right, because that would be to permit a person who has contracted with the state or with  the administrative officials thereof to conduct and manage a service of a public character, to be substituted, without the knowledge and consent of  the administrative authorities, by one who took no part in  the contract, thus giving rise to the possibility of the regular course of a public service being disturbed by the more or less legal action of a grantee, to the prejudice of the state and the public interests.

"The privilege or franchise granted to a private person to enjoy the usufruct of a  public market cannot lawfully be attached and sold, and a  creditor of such person can recover his debt only out of the income or revenue obtained by the debtor from the enjoyment or usufruct of the said privilege, in the same manner that the rights of the creditors of a railroad company  can be  exercised and their credit collected only out of the gross receipts remaining  after deduction has been made therefrom of  the operating  expenses of the road.   (Law of November 12, 1869, extended to the overseas  provinces by the royal order of August 3, 1886.)"For the reasons contained in the authorities above quoted we believe that this court would have reached the  same conclusion  if the debtor had been the municipality of Guinobatan and the public market had been levied upon by virtue of the execution.

It is evident that the movable and immovable property of a municipality, necessary for governmental purposes, may not be attached and sold for the  payment of a judgment against the municipality.  The supreme reason for this rule is the  character of the  public use to which such kind of property is devoted.  The necessity for government service justifies that the property of public use of the municipality be exempt from execution just as it is necessary to exempt certain property of private individuals in accordance with section 452 of the Code of Civil Procedure.

Even the municipal income, according to the above quoted authorities, is exempt from levy and execution.  In volume 1, page 467, Municipal Corporations by Dillon we find that:"Municipal corporations are instituted by the supreme authority of a state for the public good.  They exercise, by delegation from the legislature,  a portion of the sovereign power.   The main object of their creation is to act as administrative agencies for the state, and to provide for the police  and local  government of certain designated civil divisions  of its territory.  To this end they are Invested with certain governmental powers and charged with civil, political, and municipal duties.   To

enable them beneficially to exercise these powers and discharge these  duties, they are clothed with the authority to raise revenues, chiefly by taxation, and subordinated by other modes, as by licenses, fines, and penalties.  The revenue of the public corporation is the essential  means by which it is enabled to perform its appointed  work.   Deprived  of  its regular  and adequate supply of revenue, such a corporation is practically destroyed,  and the  ends  of its erection thwarted.  Based upon considerations of this character, it is the settled doctrine of the law that not only the public-property but also the taxes and public revenues of such corporations  cannot be seized under execution against them, either in the treasury or  when  in transit  to  it.   Judgments rendered for taxes, and the proceeds  of such  judgments in the hands of officers of the law, are  not subject to execution unless so declared by statute.  The doctrine of the inviolability of the public revenues by the creditor is maintained, although the corporation is in debt, and has no means of payment but the taxes which it  is  authorized to collect."Another error  assigned by counsel for appellant is the holding of the  court a quo that the proper remedy for collecting the judgment in favor  of  the plaintiff was by way of mandamus.

While this question is not  necessarily included  in  the one which is the subject of this appeal, yet we believe that the holding of the trial court,  assigned as error by appellant's  counsel, is true when, after a judgment is  rendered against a  municipality, it  has  no property subject to execution.  This doctrine is maintained by  Dillon  (Municipal Corporations, vol. 4, par. 1507,  5th ed.) based upon the decisions of several States of the Union upholding the same principle and which are cited on page 2679 of the aforesaid work.   In this sense this assignment of error, we believe, is groundless.

By  virtue of all the foregoing, the judgment  appealed from should be and is hereby affirmed with costs against the appellant.   So ordered.

Avanceña,  C.  J., Street, Malcolm, Ostrand, Johns,  Romualdez, and Villa-Real, JJ., concur.

[ G.R. No. L-4012, June 30, 1952 ]

MUNICIPALITY OF BATANGAS, PLAINTIFF AND CROSS-DEFENDANT AND APPELLEE, VS. ALBINO N. CANTOS, JULIA B. CANTOS,

ANACLETO BERAÑA AND HILARIA GAMBOA, DEFENDANTS AND APPELLANTS, ALBINO N. CANTOS AND JULIA B. CANTOS, CROSS-

PLAINTIFFS. JOSE CAEDO, ET ALS., CROSS-DEFENDANTS AND

APPELLEES.

BAUTISTA ANGELO, J.:

This is an action for specific performance brought by the municipality of Batangas against the spouses Albino N. Cantos and Julia B. Cantos, as principals, and Anacleto Beraña and Hilaria Gamboa, as sureties, to compel the latter "to remove the Cine Batangas Building from the public school site situated on the parcel of land" belonging to the municipality at their expense, and to recover the sum of P2,000 as liquidated damages.

Defendants answered the complaint setting up certain special defenses and a counter-claim. In the counter-claim, defendants included as cross-defendants Jose Caedo, Pedro M. Berberabe, Roman L. Perez, Olegario B. Cantos, Jose M. Montalvo, Atilano Magadia, Juan Buenafe, Francisco Atienza, Gabriel D. Gomez, Esteban R. Luna, Francisco Medrano and Federico Blay, the first two as former mayors of the municipality of Batangas and the rest as the acting mayor, vice-mayor and councilors of the same municipality, respectively. In the counter-claim, it is prayed that the plaintiff and the cross-defendants be sentenced to pay the sum of P10,000 as punitive damages, and the sum of P200 daily from August 16, 1946, until the possession of Cine Batangas has been actually returned to the defendants, as actual damages.

On October 17, 1947, defendants filed a motion to dismiss alleging as main reason the fact that the nature of the complaint is one of unlawful detainer and as such the case comes within the exclusive jurisdiction of the justice of the peace court, to which plaintiff filed an opposition, and this motion was denied in an order of November 27, 1947, the court holding that the cause of action alleged in the complaint is not one of unlawful detainer but of specific performance of the contract entered into on October 27, 1945.

On June 14, 1948, after trial, the court rendered judgment as prayed for in the complaint. From this judgment the defendant took the case to the Court of Appeals, which, however, certified it to this Court upon the ground that one of the questions raised by the appellants in their brief is whether the present action is one of illegal detainer which places this case within the exclusive jurisdiction of the justice of the peace court of Batangas, or one which comes within the jurisdiction of the Court of First Instance, a jurisdictional issue which should be passed upon by this Court.

The principal allegations of the complaint are: plaintiff is the owner of a parcel of land situated in the province of Batangas, which is the site of the Batangas Elementary School No. 2; this property was acquired by plaintiff sometime inn 1908

or 1909 for the purpose of devoting it exclusively to school purposes, but the building existing thereon was burned on December 26, 1941; in view of the offer of spouses Albino N. Cantos and Julia L. Cantos to lease for a period of five years a portion of said site consisting of 800 square meters on which they planned to erect a cinematograph building for Japanese propaganda, the municipal council of Batangas approved resolution No. 20 whereby said offer was accepted subject to the following conditions: the municipality of Batangas can cancel the contract "at any time the government finds a need for the said site", in which caae the lessee should give up the land leased, and upon remove the building constructed thereon, and upon failure on his part to do so, the municipal government will have the right to demolish the building at the expense of the lessee or claim ownership over said building; on July 1, 1943, a contract of lease was entered into between the municipality of Batangas and Albino N. Cantos embodying the terms and conditions specified in said resolution No. 20; after the execution of said contract, Albino N. Cantos constructed a cinematograph building on the portion of the school site covered 4 by the lease; on October 27, 1945, another agreement was entered into between the municipality of Batangas and the spouses Cantos whereby the latter agreed to vacate the site occupied by the building beginning April 1, 1946, and to definitely remove the building therefrom at their expense on April 15, 1946, and to insure the due fulfilment of this agreement the spouses Cantos, as principals, and their co-defendants Anacleto Beraña and Hilaria Gamboa, as sureties, executed a bond in favor of the municipality whereby they bound themselves to strictly comply with the conditions stipulated, and in case of court action to pay the sum of P2,000 as liquidated damages; the spouses Cantos failed to remove the building as agreed upon, and so on August 10, 1946, said spouses were served with notice by the municipality informing them of the imperative necessity to remove the building in view of the urgent need it has of the site for school purposes; and as said spouses failed to heed the demand, the present action was brought.

The counterclaim of the defendants contains the following averments: plaintiff municipality is the owner of a parcel of land situated in a commercial zone on which it built a school building known as Batangas Elementary School No. 2; this property was not appropriate for school purposes as the motor and other vehicular traffic along the streets bordering the same endanger the lives of the children attending the school and so the Division Superintendent of schools recommended that it be sold and another more suitable property be acquired for school purposes; sometime in April, 1940, the spouses Cantos offered to buy the property for P30,000; this offer was rejected in Resolutions Nos. 132 and 136 of the municipal council of Batangas, but later the action was reconsidered and Resolution No. 126 was approved recommending the sale at public auction of the property for the sum of P30,000, but before the sale could be carried out war broke out; on April 9, 1943, Resolution No. 20 was approved authorizing the lease of a portion of the property to spouses Cantos for a period of five years at a yearly rental of P120, and on July 1, 1943, the

corresponding contract of lease was executed; spouses Cantos constructed a theater building thereon and equipped the same with the necessary cinematograph machinery and accessories, and after its construction, it was operated and opened to the public until shortly before the liberation of the Philippines in the early part of 1945, spouses Cantos sought to retake possession of the building, but acting mayor Jose Caedo, instead of acceding to the request, denounced the theater as enemy property as a result of which it was taken possession of by the United States Military authorities; after certain efforts on their part, the spouses were able to regain possession of the theater from thes military authorities and applied to the municipal authorities of Batangas for a permit to resume the operation oif the theater, but far from granting their request, the then mayor Pedro M. Berberabe referred the matter to the municipal council which on October 16, 1945, approved Resolution No. 24 declaring null and void the contract of lease entered on July 1, 1943, and on October 26, 1945, said spouses were obliged to execute a contract whereby they promised to demolish the building on or before April 15, 1946 (Exhibit "B"); considering said contract exhibit "B" to be null and void because their consent was obtained through fraud, deceit 34 and intimidation, spouses Cantos refrained from demolishing the theater as stipulated and informed the municipal authorities of their decision accordingly; and because of this attitude of spouses Cantos, the municipal authorities made use of the police force to take possession of the theater and placed guards thereon with instructions not to permit the spouses to enter it thus preventing them from enjoying a right which by law belongs to them.

These special defenses are practically reiterated in this appeal by appellants with the addition of the ground invoked in their motion to dismiss to the effect that this case, being one of unlawful detainer, comes within the exclusive jurisdiction of the justice of the peace court of Batangas.

The claim that the nature of the action instituted by the plaintiff is one of unlawful detainer is not well taken. A mere perusal of the complaint will clearly show that its purpose is to exact specific performance of the contract entered into by the plaintiff and the spouses Cantos on October 27, 1945, whereby the latter bound themselves to vacate the premises leased and to remove the building they had constructed thereon on or before April 15, 1946. There is no allegation in the complaint that the defendants are still in possession of the premises leased which would necessitate their ejection therefrom so much so that in the prayer the only relief invoked by the plaintiff is an injunction directed against said spouses, including their bondsmen, ordering them to remove the building they had constructed thereon at their expense in accordance with their stipulation. That this is exactly the situation of the parties is well understood by the defendants so much so that in their answer, far from alleging the defense of Jurisdiction, they concentrated their effort in disputing the validity of the contract exhibit "B" upon the plea that it was executed by the spouses Cantos through force, deceit and intimidation. It was only later when they thought of

invoking this defense in a separate motion to dismiss. Another circumstance which negatives their contention that the nature of this action is one of unlawful detainer is their express allegation in their answer that the plaintiff had already taken possession of the leased premises, including the theater, when the municipal authorities came to realize that the defendants adopted an unflinching determination not to demolish the theater because of their belief that said contract was illegal and has no binding effect upon them. The attitude of the defendants in bringing into this case the cross-defendants who intervened in the execution of the disputed contract in an attempt to make them responsible for certain punitive damages they have allegedly suffered, furnishes another proof of their understanding that the nature of the action is really one of specific performance. We are, therefore, of the opinion that the lower court did not err in denying the motion to dismiss.

Defendants contend that Resolution No. 24 approved by the municipal council of Batangas on October 16, 1945, declaring null and void the contract of lease exhibit "1", entered into on July 1, 1943, on the ground that the property in question is of public use, and cannot be the subject of a private contract as decided by the Supreme Court in Cavite vs. Rojas, 30 Phil. 603, has been illegally approved, and as a corollary the contract exhibit "B" which was subsequently entered into in line with the suggestion contained in resolution No. 24, is also null and void, and they predicate their contention upon the ground that the property in question has already become patrimonial or private property of the municipality of Batangas for the reason that said municipality has long abandoned its plan of using it for school purposes because it was not appropriate for school in view of its proximity to the street and the danger it offers to the lives of the school children. They contend that if that property is to be considered patrimonial or private property of the municipality, the resulting conclusion is that the contract exhibit nl" is valid and binding, whereas the contract exhibit "B" is null and void. And said contract exhibit "B" being null and void, there is no contract to enforce and so the complaint must fail for lack of sufficient cause of action.

The claim that the leased premises have ceased to be public property and have become patrimonial or private property of the municipality of Batangas has no foundation in fact nor in law. The evidence shows that the leased premises were only a portion of a parcel of land owned by the municipality of Batangas containing an area of about 7,104 square meters on which the municipality had built prior to the war a school building which was known as the Batangas Elementary School No. 2. This property has always been devoted to school purposes. It is true that the school building was destroyed or burned by the retreating Philippine-American Forces on December 26, 1941, and for that reason the Division Superintendent of Schools has recommended that the property be sold and another one be acquired which is more suitable for school purposes and, in line with said recommendation, the municipal council of Batangas recommended its sale for the sum of P30,000; but war broke out

and the sale was never carried out. The offer of spouses Cantos to purchase it was never accepted. The plan to buy a new lot did not materialize. Then this plan was abandoned and immediately after liberation the municipal authorities decided to resume its previous plan of using the property for school purposes. On the face of these facts, which stand undisputed, no other feasible conclusion can be drawn than that the property continued to be as it was before, one dedicated to public use, a purpose which was later reiterated by the municipal authorities after liberation. The mere attempt to sell the property with the idea of acquiring another one more suitable for school purposes did not have the effect of destroying its nature as to convert it into a patrimonial or private property of the municipality.

Granting, for the sake of argument, that Resolution No. 24 did not have the effect of nullifying the contract of lease exhibit "1", or that it was not novated by the subsequent contract entered into between the parties on October 27, 1945, as claimed by the defendants, the situation obtaining would be the same from the point of view of the plaintiff in view of the fact that under said contract exhibit "1" the defendants Cantos have expressly agreed to lease the property subject to the express condition that the municipality can rescind or annul the same "at any time that the municipality of Batangas would need the aforementioned site leased for any important purpose which may arise during the duration of the contract". It appears that immediately after liberation, the municipal authorities of Batangas decided to resume their school activities as a means to restore normalcy to the life of the people and demanded from the spouses Cantos the return of the property because it was urgently needed for school purposes, and it cannot be denied that this is an important purpose which squarely comes within the purview of the contract fif the parties. Whether this case is viewed under the original contract exhibit "1", or under the subsequent contract exhibit "B", concluded between the municipality of Batangas and the spouses Cantos, the right of the municipality to terminate the contract of lease and to demand from the defendants the removal of the building they had constructed on the leased premises is clear and cannot be disputed. We are, however, of the opinion that the contract exhibit "B" is valid and binding because the same has been entered into voluntarily and merely as a concession on the part of the municipality to give to the spouses Cantos an opportunity to remove the building within a reasonable time and as their interest and convenience may warrant. Their contention that they executed said contract through force, deceit and intimidation is not supported by any evidence. Rather the evidence shows that said contract is but a mere implementation of the original contract wherein the municipality served notice upon the defendants of its desire to terminate the lease as early as possible and to have the property returned in the same condition as it was before. We do not find any error in the decision of the lower court.

Wherefore, the decision appealed from is hereby affirmed, with costs against the appellants.

Paras, C. J., Feria, Pablo, Bengzon, Padilla, Montemayor, and Labrador, JJ., concur.Tuason, J., concurs.

LIST OF CASES

o Municipality of Cavite vs. Rojas 30 Phil 602

o MIAA vs. CA 495 SCRA 591

o Ignacio vs. Dir. of Lands, May 30, 1960

o Cebu Oxygen & Acetylene Co., Inc. vs. Bercilles, 66 SCRA

o Unson vs. Lacson, 100 Phil 695

o Municipality of Oas vs. Roa, 7 Phil 20

o Province of Zamboanga del Norte vs. City of Zamboanga, 33 SCRA 1334

o Municipality of Catbalogan vs. Director of Lands, 17 Phil 216

o Municipality of Tacloban vs. Director of Lands, 17 Phil 426Hinunangan vs. Dir. of Lands, 24 Phil 124

o Vda. de Tantoco vs. Municipal Council of Iloilo, 49 Phil 152

o Municipality of Batangas vs. Cantos, 91 Phil 514