Property Course Outline Part 1

I. Classification Cases

Manila ,EN BANC, G.R. No. 92013 July 25, 1990

SALVADOR H. LAUREL, petitioner, vs.RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as Secretary of Foreign Affairs, and CATALINO MACARAIG, as Executive Secretary, respondents.G.R. No. 92047 July 25, 1990DIONISIO S. OJEDA, petitioner, vs.EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as members of the PRINCIPAL AND BIDDING COMMITTEES ON THE UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT PROPERTIES IN JAPAN,respondents.Arturo M. Tolentino for petitioner in 92013.

GUTIERREZ, JR., J.:

These are two petitions for prohibition seeking to enjoin respondents, their representatives and agents from proceeding with the bidding for the sale of the 3,179 square meters of land at 306 Roppongi, 5-Chome Minato-ku Tokyo, Japan scheduled on February 21, 1990. We granted the prayer for a temporary restraining order effective February 20, 1990. One of the petitioners (in G.R. No. 92047) likewise prayes for a writ of mandamus to compel the respondents to fully disclose to the public the basis of their decision to push through with the sale of the Roppongi property inspire of strong public opposition and to explain the proceedings which effectively prevent the participation of Filipino citizens and entities in the bidding process.

The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court on March 13, 1990. After G.R. No. 92047, Ojeda v. Secretary Macaraig, et al. was filed, the respondents were required to file a comment by the Court's resolution dated February 22, 1990. The two petitions were consolidated on March 27, 1990 when the memoranda of the parties in the Laurel case were deliberated upon.

The Court could not act on these cases immediately because the respondents filed a motion for an extension of thirty (30) days to file comment in G.R. No. 92047, followed by a second motion for an extension of another thirty (30) days which we granted on May 8, 1990, a third motion for extension of time granted on May 24, 1990 and a fourth motion for extension of time which we granted on June 5, 1990 but calling the attention of the respondents to the length of time the petitions have been pending. After the comment was filed, the petitioner in G.R. No. 92047 asked for thirty (30) days to file a reply. We noted his motion and resolved to decide the two (2) cases.

I

The subject property in this case is one of the four (4) properties in Japan acquired by the Philippine government under the Reparations Agreement entered into with Japan on May 9, 1956, the other lots being:

(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area of approximately 2,489.96 square meters, and is at present the site of the Philippine Embassy Chancery;

(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72 square meters and categorized as a commercial lot now being used as a warehouse and parking lot for the consulate staff; and

(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a residential lot which is now vacant.

The properties and the capital goods and services procured from the Japanese government for national development projects are part of the indemnification to the Filipino people for their losses in life and property and their suffering during World War II.

The Reparations Agreement provides that reparations valued at $550 million would be payable in twenty (20) years in accordance with annual schedules of procurements to be fixed by the Philippine and Japanese governments (Article 2, Reparations Agreement). Rep. Act No. 1789, the Reparations Law, prescribes the national policy on procurement and utilization of reparations and development loans. The procurements are divided into those for use by the government sector and those for private parties in projects as the then National Economic Council shall determine. Those intended for the private sector shall be made available by sale to Filipino citizens or to one hundred (100%) percent Filipino-owned entities in national development projects.

The Roppongi property was acquired from the Japanese government under the Second Year Schedule and listed under the heading "Government Sector", through Reparations Contract No. 300 dated June 27, 1958. The Roppongi property consists of the land and building "for the Chancery of the Philippine Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As intended, it became the site of the Philippine Embassy until the latter was transferred to Nampeidai on July 22, 1976 when the Roppongi building needed major repairs. Due to the failure of our government to provide necessary funds, the Roppongi property has remained undeveloped since that time.

A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to Japan, Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese firm - Kajima Corporation — which shall construct two (2) buildings in Roppongi and one (1) building in Nampeidai and renovate the present Philippine Chancery in Nampeidai. The consideration of the construction would be the lease to the foreign corporation of one (1) of the buildings to be constructed in Roppongi and the two (2) buildings in Nampeidai. The other building in Roppongi shall then be used as the Philippine Embassy Chancery. At the end of the lease period, all the three leased buildings shall be occupied and used by the Philippine government. No change of ownership or title shall occur. (See Annex "B" to Reply to Comment) The Philippine government retains the title all throughout the lease period and thereafter. However, the government has not acted favorably on this proposal which is pending approval and ratification between the parties. Instead, on August 11, 1986, President Aquino created a committee to study the disposition/utilization of Philippine government properties in Tokyo and Kobe, Japan through Administrative Order No. 3, followed by Administrative Orders Numbered 3-A, B, C and D.

On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino citizens or entities to avail of separations' capital goods and services in the event of sale, lease or disposition. The four properties in Japan including the Roppongi were specifically mentioned in the first "Whereas" clause.

Amidst opposition by various sectors, the Executive branch of the government has been pushing, with great vigor, its decision to sell the reparations properties starting with the Roppongi lot. The property has twice been set for bidding at a minimum floor price of $225 million. The first bidding was a failure since only one bidder qualified. The second one, after postponements, has not yet materialized. The last scheduled bidding on February 21, 1990 was restrained by his Court. Later, the rules on bidding were changed such that the $225 million floor price became merely a suggested floor price.

The Court finds that each of the herein petitions raises distinct issues. The petitioner in G.R. No. 92013 objects to the alienation of the Roppongi property to anyone while the petitioner in G.R. No. 92047 adds as a principal objection the alleged unjustified bias of the Philippine government in favor of selling the property to non-Filipino citizens and entities. These petitions have been consolidated and are resolved at the same time for the objective is the same - to stop the sale of the Roppongi property.

The petitioner in G.R. No. 92013 raises the following issues:

(1) Can the Roppongi property and others of its kind be alienated by the Philippine Government?; and

(2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to sell the Roppongi property?

Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of the government to alienate the Roppongi property assails the constitutionality of Executive Order No. 296 in making the property available for sale to non-Filipino citizens and entities. He also questions the bidding procedures of the Committee on the Utilization or Disposition of Philippine Government Properties in Japan for being discriminatory against Filipino citizens and Filipino-owned entities by denying them the right to be informed about the bidding requirements.

II

In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related lots were acquired as part of the reparations from the Japanese government for diplomatic and consular use by the Philippine government. Vice-President Laurel states that the Roppongi property is classified as one of public dominion, and not of private ownership under Article 420 of the Civil Code (See infra).

The petitioner submits that the Roppongi property comes under "property intended for public service" in paragraph 2 of the above provision. He states that being one of public dominion, no ownership by any one can attach to it, not even by the State. The Roppongi and related properties were acquired for "sites for chancery, diplomatic, and consular quarters, buildings and other improvements" (Second Year Reparations Schedule). The petitioner states that they continue to be intended for a necessary service. They are held by the State in anticipation of an opportune use. (Citing 3 Manresa 65-66). Hence, it cannot be appropriated, is outside the commerce of man, or to put it in more simple terms, it cannot be alienated nor be the subject matter of contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]). Noting the non-use of the Roppongi property at the moment, the petitioner avers that the same remains property of public dominion so long as the government has not used it for other purposes nor adopted any measure constituting a removal of its original purpose or use.

The respondents, for their part, refute the petitioner's contention by saying that the subject property is not governed by our Civil Code but by the laws of Japan where the property is located. They rely upon the rule oflex situs which is used in determining the applicable law regarding the acquisition, transfer and devolution of the title to a property. They also invoke Opinion No. 21, Series of 1988, dated January 27, 1988 of the Secretary of Justice which used the lex situs in explaining the inapplicability of Philippine law regarding a property situated in Japan.

The respondents add that even assuming for the sake of argument that the Civil Code is applicable, the Roppongi property has ceased to become property of public dominion. It has become patrimonial property because it has not been used for public service or for diplomatic purposes for over thirteen (13) years now (Citing Article 422, Civil Code) and because the intention by the Executive Department and the Congress to convert it to private use has been manifested by overt acts, such as, among others: (1) the transfer of the Philippine Embassy to Nampeidai (2) the issuance of administrative orders for the possibility of alienating the four government properties in Japan; (3) the issuance of Executive Order No. 296; (4) the enactment by the Congress of Rep. Act No. 6657 [the Comprehensive Agrarian Reform Law]

on June 10, 1988 which contains a provision stating that funds may be taken from the sale of Philippine properties in foreign countries; (5) the holding of the public bidding of the Roppongi property but which failed; (6) the deferment by the Senate in Resolution No. 55 of the bidding to a future date; thus an acknowledgment by the Senate of the government's intention to remove the Roppongi property from the public service purpose; and (7) the resolution of this Court dismissing the petition in Ojeda v. Bidding Committee, et al., G.R. No. 87478 which sought to enjoin the second bidding of the Roppongi property scheduled on March 30, 1989.

III

In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the constitutionality of Executive Order No. 296. He had earlier filed a petition in G.R. No. 87478 which the Court dismissed on August 1, 1989. He now avers that the executive order contravenes the constitutional mandate to conserve and develop the national patrimony stated in the Preamble of the 1987 Constitution. It also allegedly violates:

(1) The reservation of the ownership and acquisition of alienable lands of the public domain to Filipino citizens. (Sections 2 and 3, Article XII, Constitution; Sections 22 and 23 of Commonwealth Act 141).i•t•c-aüsl

(2) The preference for Filipino citizens in the grant of rights, privileges and concessions covering the national economy and patrimony (Section 10, Article VI, Constitution);

(3) The protection given to Filipino enterprises against unfair competition and trade practices;

(4) The guarantee of the right of the people to information on all matters of public concern (Section 7, Article III, Constitution);

(5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned by Filipino citizens of capital goods received by the Philippines under the Reparations Act (Sections 2 and 12 of Rep. Act No. 1789); and

(6) The declaration of the state policy of full public disclosure of all transactions involving public interest (Section 28, Article III, Constitution).

Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional executive order is a misapplication of public funds He states that since the details of the bidding for the Roppongi property were never publicly disclosed until February 15, 1990 (or a few days before the scheduled bidding), the bidding guidelines are available only in Tokyo, and the accomplishment of requirements and the selection of qualified bidders should be done in Tokyo, interested Filipino citizens or entities owned by them did not have the chance to comply with Purchase Offer Requirements on the Roppongi. Worse, the Roppongi shall be sold for a minimum price of $225 million from which price capital gains tax under Japanese law of about 50 to 70% of the floor price would still be deducted.

IV

The petitioners and respondents in both cases do not dispute the fact that the Roppongi site and the three related properties were through reparations agreements, that these were assigned to the government sector and that the Roppongi property itself was specifically designated under the Reparations Agreement to house the Philippine Embassy.

The nature of the Roppongi lot as property for public service is expressly spelled out. It is dictated by the terms of the Reparations Agreement and the corresponding contract of procurement which bind both the Philippine government and the Japanese government.

There can be no doubt that it is of public dominion unless it is convincingly shown that the property has become patrimonial. This, the respondents have failed to do.

As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be alienated. Its ownership is a special collective ownership for general use and enjoyment, an application to the satisfaction of collective needs, and resides in the social group. The purpose is not to serve the State as a juridical person, but the citizens; it is intended for the common and public welfare and cannot be the object of appropration. (Taken from 3 Manresa, 66-69; cited in Tolentino, Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol. II, p. 26).

The applicable provisions of the Civil Code are:

ART. 419. Property is either of public dominion or of private ownership.

ART. 420. The following things are property of public dominion

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

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

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

The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code as property belonging to the State and intended for some public service.

Has the intention of the government regarding the use of the property been changed because the lot has been Idle for some years? Has it become patrimonial?

The fact that the Roppongi site has not been used for a long time for actual Embassy service does not automatically convert it to patrimonial property. Any such conversion happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A property continues to be part of the public domain, not available for private appropriation or ownership until there is a formal declaration on the part of the government to withdraw it from being such (Ignacio v. Director of Lands, 108 Phil. 335 [1960]).

The respondents enumerate various pronouncements by concerned public officials insinuating a change of intention. We emphasize, however, that an abandonment of the intention to use the Roppongi property for public service and to make it patrimonial property under Article 422 of the Civil Code must be definiteAbandonment cannot be inferred from the non-use alone specially if the non-use was attributable not to the government's own deliberate and indubitable will but to a lack of financial support to repair and improve the property (See Heirs of Felino Santiago v. Lazaro, 166 SCRA 368 [1988]). Abandonment must be a certain and positive act based on correct legal premises.

A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the Roppongi property's original purpose. Even the failure by the government to repair the building in Roppongi is not abandonment since as earlier stated, there simply was a shortage of government funds. The recent Administrative Orders authorizing a study of the status and conditions of government properties in Japan were merely directives for investigation but did not in any way signify a clear intention to dispose of the properties.

Executive Order No. 296, though its title declares an "authority to sell", does not have a provision in its text expressly authorizing the sale of the four properties procured from Japan for the government sector. The executive order does not declare that the properties lost their public character. It merely intends to make the properties available to foreigners and not to Filipinos alone in case of a sale, lease or other disposition. It merely eliminates the restriction under Rep. Act No. 1789 that reparations goods may be sold only to Filipino citizens and one hundred (100%) percent Filipino-owned entities. The text of Executive Order No. 296 provides:

Section 1. The provisions of Republic Act No. 1789, as amended, and of other laws to the contrary notwithstanding, the above-mentioned properties can be made available for sale, lease or any other manner of disposition to non-Filipino citizens or to entities owned by non-Filipino citizens.

Executive Order No. 296 is based on the wrong premise or assumption that the Roppongi and the three other properties were earlier converted into alienable real properties. As earlier stated, Rep. Act No. 1789 differentiates the procurements for the government sector and the private sector (Sections 2 and 12, Rep. Act No. 1789). Only the private sector properties can be sold to end-users who must be Filipinos or entities owned by Filipinos. It is this nationality provision which was amended by Executive Order No. 296.

Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the sources of funds for its implementation, the proceeds of the disposition of the properties of the Government in foreign countries, did not withdraw the Roppongi property from being classified as one of public dominion when it mentions Philippine properties abroad. Section 63 (c) refers to properties which are alienable and not to those reserved for public use or service. Rep Act No. 6657, therefore, does not authorize the Executive Department to sell the Roppongi property. It merely enumerates possible sources of future funding to augment (as and when needed) the Agrarian Reform Fund created under Executive Order No. 299. Obviously any property outside of the commerce of man cannot be tapped as a source of funds.

The respondents try to get around the public dominion character of the Roppongi property by insisting that Japanese law and not our Civil Code should apply.

It is exceedingly strange why our top government officials, of all people, should be the ones to insist that in the sale of extremely valuable government property, Japanese law and not Philippine law should prevail. The Japanese law - its coverage and effects, when enacted, and exceptions to its provision — is not presented to the Court It is simply asserted that the lex loci rei sitae or Japanese law should apply without stating what that law provides. It is a ed on faith that Japanese law would allow the sale.

We see no reason why a conflict of law rule should apply when no conflict of law situation exists. A conflict of law situation arises only when: (1) There is a dispute over the title or ownership of an immovable, such that the capacity to take and transfer immovables, the formalities of conveyance, the essential validity and effect of the transfer, or the interpretation and effect of a conveyance, are to be determined (See Salonga,Private International Law, 1981 ed., pp. 377-383); and (2) A foreign law on land ownership and its conveyance is asserted to conflict with a domestic law on the same matters. Hence, the need to determine which law should apply.

In the instant case, none of the above elements exists.

The issues are not concerned with validity of ownership or title. There is no question that the property belongs to the Philippines. The issue is the authority of the respondent officials to validly dispose of property belonging to the State. And the validity of the procedures adopted to effect its sale. This is governed by Philippine Law. The rule of lex situs does not apply.

The assertion that the opinion of the Secretary of Justice sheds light on the relevance of the lex situs rule is misplaced. The opinion does not tackle the alienability of the real properties procured through reparations nor the existence in what body of the authority to sell them. In discussing who are capable of acquiring the lots, the Secretary merely explains that it is the foreign law which should determine who can acquire the properties so that the constitutional limitation on acquisition of lands of the public domain to Filipino citizens and entities wholly owned by Filipinos is inapplicable. We see no point in belaboring whether or not this opinion is correct. Why should we discuss who can acquire the Roppongi lot when there is no showing that it can be sold?

The subsequent approval on October 4, 1988 by President Aquino of the recommendation by the investigating committee to sell the Roppongi property was premature or, at the very least, conditioned on a valid change in the public character of the Roppongi property. Moreover, the approval does not have the force and effect of law since the President already lost her legislative powers. The Congress had already convened for more than a year.

Assuming for the sake of argument, however, that the Roppongi property is no longer of public dominion, there is another obstacle to its sale by the respondents.

There is no law authorizing its conveyance.

Section 79 (f) of the Revised Administrative Code of 1917 provides

Section 79 (f ) Conveyances and contracts to which the Government is a party. — In cases in which the Government of the Republic of the Philippines is a party to any deed or other instrument conveying the title to real estate or to any other property the value of which is in excess of one hundred thousand pesos, the respective Department Secretary shall prepare the necessary papers which, together with the proper recommendations, shall be submitted to the Congress of the Philippines for approval by the same. Such deed, instrument, or contract shall be executed and signed by the President of the Philippines on behalf of the Government of the Philippines unless the Government of the Philippines unless the authority therefor be expressly vested by law in another officer. (Emphasis supplied)

The requirement has been retained in Section 48, Book I of the Administrative Code of 1987 (Executive Order No. 292).

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:

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

(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)

It is not for the President to convey valuable real property of the government on his or her own sole will. Any such conveyance must be authorized and approved by a law enacted by the Congress. It requires executive and legislative concurrence.

Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the sale of the Roppongi property does not withdraw the property from public domain much less authorize its sale. It is a mere

resolution; it is not a formal declaration abandoning the public character of the Roppongi property. In fact, the Senate Committee on Foreign Relations is conducting hearings on Senate Resolution No. 734 which raises serious policy considerations and calls for a fact-finding investigation of the circumstances behind the decision to sell the Philippine government properties in Japan.

The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass upon the constitutionality of Executive Order No. 296. Contrary to respondents' assertion, we did not uphold the authority of the President to sell the Roppongi property. The Court stated that the constitutionality of the executive order was not the real issue and that resolving the constitutional question was "neither necessary nor finally determinative of the case." The Court noted that "[W]hat petitioner ultimately questions is the use of the proceeds of the disposition of the Roppongi property." In emphasizing that "the decision of the Executive to dispose of the Roppongi property to finance the CARP ... cannot be questioned" in view of Section 63 (c) of Rep. Act No. 6657, the Court did not acknowledge the fact that the property became alienable nor did it indicate that the President was authorized to dispose of the Roppongi property. The resolution should be read to mean that in case the Roppongi property is re-classified to be patrimonial and alienable by authority of law, the proceeds of a sale may be used for national economic development projects including the CARP.

Moreover, the sale in 1989 did not materialize. The petitions before us question the proposed 1990 sale of the Roppongi property. We are resolving the issues raised in these petitions, not the issues raised in 1989.

Having declared a need for a law or formal declaration to withdraw the Roppongi property from public domain to make it alienable and a need for legislative authority to allow the sale of the property, we see no compelling reason to tackle the constitutional issues raised by petitioner Ojeda.

The Court does not ordinarily pass upon constitutional questions unless these questions are properly raised in appropriate cases and their resolution is necessary for the determination of the case (People v. Vera, 65 Phil. 56 [1937]). The Court will not pass upon a constitutional question although properly presented by the record if the case can be disposed of on some other ground such as the application of a statute or general law (Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909], Railroad Commission v. Pullman Co., 312 U.S. 496 [1941]).

The petitioner in G.R. No. 92013 states why the Roppongi property should not be sold:

The Roppongi property is not just like any piece of property. It was given to the Filipino people in reparation for the lives and blood of Filipinos who died and suffered during the Japanese military occupation, for the suffering of widows and orphans who lost their loved ones and kindred, for the homes and other properties lost by countless Filipinos during the war. The Tokyo properties are a monument to the bravery and sacrifice of the Filipino people in the face of an invader; like the monuments of Rizal, Quezon, and other Filipino heroes, we do not expect economic or financial benefits from them. But who would think of selling these monuments? Filipino honor and national dignity dictate that we keep our properties in Japan as memorials to the countless Filipinos who died and suffered. Even if we should become paupers we should not think of selling them. For it would be as if we sold the lives and blood and tears of our countrymen. (Rollo- G.R. No. 92013, p.147)

The petitioner in G.R. No. 92047 also states:

Roppongi is no ordinary property. It is one ceded by the Japanese government in atonement for its past belligerence for the valiant sacrifice of life and limb and for deaths, physical dislocation and economic devastation the whole Filipino people endured in World War II.

It is for what it stands for, and for what it could never bring back to life, that its significance today remains undimmed, inspire of the lapse of 45 years since the war ended, inspire of the passage of 32 years since the property passed on to the Philippine government.

Roppongi is a reminder that cannot — should not — be dissipated ... (Rollo-92047, p. 9)

It is indeed true that the Roppongi property is valuable not so much because of the inflated prices fetched by real property in Tokyo but more so because of its symbolic value to all Filipinos — veterans and civilians alike. Whether or not the Roppongi and related properties will eventually be sold is a policy determination where both the President and Congress must concur. Considering the properties' importance and value, the laws on conversion and disposition of property of public dominion must be faithfully followed.

WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of prohibition is issued enjoining the respondents from proceeding with the sale of the Roppongi property in Tokyo, Japan. The February 20, 1990 Temporary Restraining Order is made PERMANENT.

SO ORDERED.

Melencio-Herrera, Paras, Bidin, Griño-Aquino and Regalado, JJ., concur.

Separate Opinions 

CRUZ, J., concurring:

I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add the following observations only for emphasis.

It is clear that the respondents have failed to show the President's legal authority to sell the Roppongi property. When asked to do so at the hearing on these petitions, the Solicitor General was at best ambiguous, although I must add in fairness that this was not his fault. The fact is that there is -no such authority. Legal expertise alone cannot conjure that statutory permission out of thin air.

Exec. Order No. 296, which reads like so much legislative, double talk, does not contain such authority. Neither does Rep. Act No. 6657, which simply allows the proceeds of the sale of our properties abroad to be used for the comprehensive agrarian reform program. Senate Res. No. 55 was a mere request for the deferment of the scheduled sale of tile Roppongi property, possibly to stop the transaction altogether; and ill any case it is not a law. The sale of the said property may be authorized only by Congress through a duly enacted statute, and there is no such law.

Once again, we have affirmed the principle that ours is a government of laws and not of men, where every public official, from the lowest to the highest, can act only by virtue of a valid authorization. I am happy to note that in the several cases where this Court has ruled against her, the President of the Philippines has submitted to this principle with becoming grace.

 

PADILLA, J., concurring:

I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few observations which could help in further clarifying the issues.

Under our tripartite system of government ordained by the Constitution, it is Congress that lays down or determines policies. The President executes such policies. The policies determined by Congress are embodied in legislative enactments that have to be approved by the President to become law. The President, of course, recommends to Congress the approval of policies but, in the final analysis, it is Congress that is the policy - determining branch of government.

The judiciary interprets the laws and, in appropriate cases, determines whether the laws enacted by Congress and approved by the President, and presidential acts implementing such laws, are in accordance with the Constitution.

The Roppongi property was acquired by the Philippine government pursuant to the reparations agreement between the Philippine and Japanese governments. Under such agreement, this property was acquired by the Philippine government for a specific purpose, namely, to serve as the site of the Philippine Embassy in Tokyo, Japan. Consequently, Roppongi is a property of public dominion and intended for public service, squarely falling within that class of property under Art. 420 of the Civil Code, which provides:

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

(1) ...

(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (339a)

Public dominion property intended for public service cannot be alienated unless the property is first transformed into private property of the state otherwise known as patrimonial property of the state. 1 The transformation of public dominion property to state patrimonial property involves, to my mind, a policy decision. It is a policy decision because the treatment of the property varies according to its classification. Consequently, it is Congress which can decide and declare the conversion of Roppongi from a public dominion property to a state patrimonial property. Congress has made no such decision or declaration.

Moreover, the sale of public property (once converted from public dominion to state patrimonial property) must be approved by Congress, for this again is a matter of policy (i.e. to keep or dispose of the property). Sec. 48, Book 1 of the Administrative Code of 1987 provides:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:

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

(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)

But the record is bare of any congressional decision or approval to sell Roppongi. The record is likewise bare of any congressional authority extended to the President to sell Roppongi thru public bidding or otherwise.

It is therefore, clear that the President cannot sell or order the sale of Roppongi thru public bidding or otherwise without a prior congressional approval, first, converting Roppongi from a public dominion property to a state patrimonial property, and, second, authorizing the President to sell the same.

ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the temporary restraining order earlier issued by this Court.

 

SARMIENTO, J., concurring:

The central question, as I see it, is whether or not the so-called "Roppongi property' has lost its nature as property of public dominion, and hence, has become patrimonial property of the State. I understand that the parties are agreed that it was property intended for "public service" within the contemplation of paragraph (2), of Article 430, of the Civil Code, and accordingly, land of State dominion, and beyond human commerce. The lone issue is, in the light of supervening developments, that is non-user thereof by the National Government (for diplomatic purposes) for the last thirteen years; the issuance of Executive Order No. 296 making it available for sale to any interested buyer; the promulgation of Republic Act No. 6657, the Comprehensive Agrarian Reform Law, making available for the program's financing, State assets sold; the approval by the President of the recommendation of the investigating committee formed to study the property's utilization; and the issuance of Resolution No. 55 of the Philippine Senate requesting for the deferment of its disposition it, "Roppongi", is still property of the public dominion, and if it is not, how it lost that character.

When land of the public dominion ceases to be one, or when the change takes place, is a question our courts have debated early. In a 1906 decision, 1 it was held that property of the public dominion, a public plaza in this instance, becomes patrimonial upon use thereof for purposes other than a plaza. In a later case, 2 this ruling was reiterated. Likewise, it has been held that land, originally private property, has become of public dominion upon its donation to the town and its conversion and use as a public plaza. 3 It is notable that under these three cases, the character of the property, and any change occurring therein, depends on the actual use to which it is dedicated. 4

Much later, however, the Court held that "until a formal declaration on the part of the Government, through the executive department or the Legislative, to the effect that the land . . . is no longer needed for [public] service- for public use or for special industries, [it] continue[s] to be part of the public [dominion], not available for private expropriation or ownership." 5 So also, it was ruled that a political subdivision (the City of Cebu in this case) alone may declare (under its charter) a city road abandoned and thereafter, to dispose of it. 6

In holding that there is "a need for a law or formal declaration to withdraw the Roppongi property from public domain to make it alienable and a land for legislative authority to allow the sale of the property" 7 the majority lays stress to the fact that: (1) An affirmative act — executive or legislative — is necessary to reclassify property of the public dominion, and (2) a legislative decree is required to make it alienable. It also clears the uncertainties brought about by earlier interpretations that the nature of property-whether public or patrimonial is predicated on the manner it is actually used, or not used, and in the same breath, repudiates the Government's position that the continuous non-use of "Roppongi", among other arguments, for "diplomatic purposes", has turned it into State patrimonial property.

I feel that this view corresponds to existing pronouncements of this Court, among other things, that: (1) Property is presumed to be State property in the absence of any showing to the contrary; 8 (2) With respect to forest lands, the same continue to be lands of the public dominion unless and until reclassified by the Executive Branch of the Government; 9 and (3) All natural resources, under the Constitution, and subject to exceptional cases, belong to the State. 10

I am elated that the Court has banished previous uncertainties.

FELICIANO, J., dissenting

With regret, I find myself unable to share the conclusions reached by Mr. Justice Hugo E. Gutierrez, Jr.

For purposes of this separate opinion, I assume that the piece of land located in 306 Roppongi, 5-Chome, Minato-ku Tokyo, Japan (hereinafter referred to as the "Roppongi property") may be characterized as property of public dominion, within the meaning of Article 420 (2) of the Civil Code:

[Property] which belong[s] to the State, without being for public use, and are intended for some public service -.

It might not be amiss however, to note that the appropriateness of trying to bring within the confines of the simple threefold classification found in Article 420 of the Civil Code ("property for public use property "intended for some public service" and property intended "for the development of the national wealth") all property owned by the Republic of the Philippines whether found within the territorial boundaries of the Republic or located within the territory of another sovereign State, is not self-evident. The first item of the classification property intended for public use — can scarcely be properly applied to property belonging to the Republic but found within the territory of another State. The third item of the classification property intended for the development of the national wealth is illustrated, in Article 339 of the Spanish Civil Code of 1889, by mines or mineral properties. Again, mineral lands owned by a sovereign State are rarely, if ever, found within the territorial base of another sovereign State. The task of examining in detail the applicability of the classification set out in Article 420 of our Civil Code to property that the Philippines happens to own outside its own boundaries must, however, be left to academicians.

For present purposes, too, I agree that there is no question of conflict of laws that is, at the present time, before this Court. The issues before us relate essentially to authority to sell the Roppongi property so far as Philippine law is concerned.

The majority opinion raises two (2) issues: (a) whether or not the Roppongi property has been converted into patrimonial property or property of the private domain of the State; and (b) assuming an affirmative answer to (a), whether or not there is legal authority to dispose of the Roppongi property.

I

Addressing the first issue of conversion of property of public dominion intended for some public service, into property of the private domain of the Republic, it should be noted that the Civil Code does not address the question of who has authority to effect such conversion. Neither does the Civil Code set out or refer to anyprocedure for such conversion.

Our case law, however, contains some fairly explicit pronouncements on this point, as Justice Sarmiento has pointed out in his concurring opinion. In Ignacio v. Director of Lands (108 Phils. 335 [1960]), petitioner Ignacio argued that if the land in question formed part of the public domain, the trial court should have declared the same no longer necessary for public use or public purposes and which would, therefore, have become disposable and available for private ownership. Mr. Justice Montemayor, speaking for the Court, said:

Article 4 of the Law of Waters of 1866 provides that when a portion of the shore is no longer washed by the waters of the sea and is not necessary for purposes of public utility, or for the establishment of special industries, or for coast-guard service, the government shall declare it to be the property of the owners of the estates adjacent thereto and as an increment thereof. We believe that only the executive and possibly the legislative

departments have the authority and the power to make the declaration that any land so gained by the sea, is not necessary for purposes of public utility, or for the establishment of special industries, or for coast-guard service. If no such declaration has been made by said departments, the lot in question forms part of the public domain. (Natividad v. Director of Lands, supra.)

The reason for this pronouncement, according to this Tribunal in the case of Vicente Joven y Monteverde v. Director of Lands, 93 Phil., 134 (cited in Velayo's Digest, Vol. 1, p. 52).

... is undoubtedly that the courts are neither primarily called upon, nor indeed in a position to determine whether any public land are to be used for the purposes specified in Article 4 of the Law of Waters. Consequently, until a formal declaration on the part of the Government, through the executive department or the Legislature, to the effect that the land in question is no longer needed for coast-guard service, for public use or for special industries, they continue to be part of the public domain not available for private appropriation or ownership. (108 Phil. at 338-339; emphasis supplied)

Thus, under Ignacio, either the Executive Department or the Legislative Department may convert property of the State of public dominion into patrimonial property of the State. No particular formula or procedure of conversion is specified either in statute law or in case law. Article 422 of the Civil Code simply states that: "Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State". I respectfully submit, therefore, that the only requirement which is legitimately imposable is that the intent to convert must be reasonably clear from a consideration of the acts or acts of the Executive Department or of the Legislative Department which are said to have effected such conversion.

The same legal situation exists in respect of conversion of property of public dominion belonging to municipal corporations, i.e., local governmental units, into patrimonial property of such entities. In CebuOxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City Council of Cebu by resolution declared a certain portion of an existing street as an abandoned road, "the same not being included in the city development plan". Subsequently, by another resolution, the City Council of Cebu authorized the acting City Mayor to sell the land through public bidding. Although there was no formal and explicit declaration of conversion of property for public use into patrimonial property, the Supreme Court said:

xxx xxx xxx

(2) Since that portion of the city street subject of petitioner's application for registration of title was withdrawn from public use, it follows that such withdrawn portion becomes patrimonial property which can be the object of an ordinary contract.

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

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

Accordingly, the withdrawal of the property in question from public use and its subsequent sale to the petitioner is valid. Hence, the petitioner has a registrable title over the lot in question. (66 SCRA at 484-; emphasis supplied)

Thus, again as pointed out by Sarmiento J., in his separate opinion, in the case of property owned by municipal corporations simple non-use or the actual dedication of public property to some use other than "public use" or some "public service", was sufficient legally to convert such property into patrimonial property (Municipality of Oas v. Roa, 7 Phil. 20 [1906]- Municipality of Hinunganan v. Director of Lands 24 Phil. 124 [1913]; Province of Zamboanga del Norte v. City of Zamboanga, 22 SCRA 1334 (1968).

I would also add that such was the case not only in respect of' property of municipal corporations but also in respect of property of the State itself. Manresa in commenting on Article 341 of the 1889 Spanish Civil Code which has been carried over verbatim into our Civil Code by Article 422 thereof, wrote:

La dificultad mayor en todo esto estriba, naturalmente, en fijar el momento en que los bienes de dominio publico dejan de serlo. Si la Administracion o la autoridad competente legislative realizan qun acto en virtud del cual cesa el destino o uso publico de los bienes de que se trata naturalmente la dificultad queda desde el primer momento resuelta. Hay un punto de partida cierto para iniciar las relaciones juridicas a que pudiera haber lugar Pero puede ocurrir que no haya taldeclaracion expresa, legislativa or administrativa, y, sin embargo, cesar de hecho el destino publico de los bienes; ahora bien, en este caso, y para los efectos juridicos que resultan de entrar la cosa en el comercio de los hombres,' se entedera que se ha verificado la conversion de los bienes patrimoniales?

El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por la afirmativa, y por nuestra parte creemos que tal debe ser la soluciion. El destino de las cosas no depende tanto de una declaracion expresa como del uso publico de las mismas, y cuanda el uso publico cese con respecto de determinados bienes, cesa tambien su situacion en el dominio publico. Si una fortaleza en ruina se abandona y no se repara, si un trozo de la via publica se abandona tambien por constituir otro nuevo an mejores condiciones....ambos bienes cesan de estar Codigo, y leyes especiales mas o memos administrativas. (3 Manresa, Comentarios al Codigo Civil Espanol, p. 128 [7a ed.; 1952) (Emphasis supplied)

The majority opinion says that none of the executive acts pointed to by the Government purported, expressly or definitely, to convert the Roppongi property into patrimonial property — of the Republic. Assuming that to be the case, it is respectfully submitted that cumulative effect of the executive acts here involved was to convert property originally intended for and devoted to public service into patrimonial property of the State, that is, property susceptible of disposition to and appropration by private persons. These executive acts, in their totality if not each individual act, make crystal clear the intent of the Executive Department to effect such conversion. These executive acts include:

(a) Administrative Order No. 3 dated 11 August 1985, which created a Committee to study the disposition/utilization of the Government's property in Japan, The Committee was composed of officials of the Executive Department: the Executive Secretary; the Philippine Ambassador to Japan; and representatives of the Department of Foreign Affairs and the Asset Privatization Trust. On 19 September 1988, the Committee recommended to the President the sale of one of the lots (the lot specifically in Roppongi) through public bidding. On 4 October 1988, the President approved the recommendation of the Committee.

On 14 December 1988, the Philippine Government by diplomatic note informed the Japanese Ministry of Foreign Affairs of the Republic's intention to dispose of the property in Roppongi. The Japanese Government through its Ministry of Foreign Affairs replied that it interposed no objection to such disposition by the Republic. Subsequently, the President and the Committee informed the leaders of the House of Representatives and of the Senate of the Philippines of the proposed disposition of the Roppongi property.

(b) Executive Order No. 296, which was issued by the President on 25 July 1987. Assuming that the majority opinion is right in saying that Executive Order No. 296 is insufficient to authorize the sale of the Roppongi property, it is here submitted with respect that Executive Order No. 296 is more than sufficient to indicate anintention to convert the property previously devoted to public service into patrimonial property that is capable of being sold or otherwise disposed of

(c) Non-use of the Roppongi lot for fourteen (14) years for diplomatic or for any other public purposes. Assuming (but only arguendo) that non-use does not, by itself, automatically convert the property into patrimonial property. I respectfully urge that prolonged non-use, conjoined with the other factors here listed, was legally effective to convert the lot in Roppongi into patrimonial property of the State. Actually, as already pointed out, case law involving property of municipal corporations is to the effect that simple non-use or the actual dedication of public property to some use other than public use or public service, was sufficient to convert such property into patrimonial property of the local governmental entity concerned. Also as pointed out above, Manresa reached the same conclusion in respect of conversion of property of the public domain of the State into property of the private domain of the State.

The majority opinion states that "abandonment cannot be inferred from the non-use alone especially if the non-use was attributable not to the Government's own deliberate and indubitable will but to lack of financial support to repair and improve the property" (Majority Opinion, p. 13). With respect, it may be stressed that there is no abandonment involved here, certainly no abandonment of property or of property rights. What is involved is the charge of the classification of the property from property of the public domain into property of the private domain of the State. Moreover, if for fourteen (14) years, the Government did not see fit to appropriate whatever funds were necessary to maintain the property in Roppongi in a condition suitable for diplomatic representation purposes, such circumstance may, with equal logic, be construed as a manifestation of the crystalizing intent to change the character of the property.

(d) On 30 March 1989, a public bidding was in fact held by the Executive Department for the sale of the lot in Roppongi. The circumstance that this bidding was not successful certainly does not argue against an intent to convert the property involved into property that is disposable by bidding.

The above set of events and circumstances makes no sense at all if it does not, as a whole, show at least the intent on the part of the Executive Department (with the knowledge of the Legislative Department) to convert the property involved into patrimonial property that is susceptible of being sold.

II

Having reached an affirmative answer in respect of the first issue, it is necessary to address the second issue of whether or not there exists legal authority for the sale or disposition of the Roppongi property.

The majority opinion refers to Section 79(f) of the Revised Administrative Code of 1917 which reads as follows:

SEC. 79 (f). Conveyances and contracts to which the Government is a party. — In cases in which the Government of the Republic of the Philippines is a party to any deed or other instrumentconveying the title to real estate or to any other property the value of which is in excess of one hundred thousand pesos, the respective Department Secretary shall prepare the necessary papers which, together with the proper recommendations, shall be submitted to the Congress of the Philippines for approval by the same. Such deed, instrument, or contract shall be executed and signed by the President of the Philippines on behalf of the Government of the Philippines unless the authority therefor be expressly vested by law in another officer. (Emphasis supplied)

The majority opinion then goes on to state that: "[T]he requirement has been retained in Section 4, Book I of the Administrative Code of 1987 (Executive Order No. 292)" which reads:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:

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

(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)

Two points need to be made in this connection. Firstly, the requirement of obtaining specific approval of Congress when the price of the real property being disposed of is in excess of One Hundred Thousand Pesos (P100,000.00) under the Revised Administrative Code of 1917, has been deleted from Section 48 of the 1987 Administrative Code. What Section 48 of the present Administrative Code refers to is authorization by law for the conveyance. Section 48 does not purport to be itself a source of legal authority for conveyance of real property of the Government. For Section 48 merely specifies the official authorized to execute and sign on behalf of the Government the deed of conveyance in case of such a conveyance.

Secondly, examination of our statute books shows that authorization by law for disposition of real property of the private domain of the Government, has been granted by Congress both in the form of (a) a general, standing authorization for disposition of patrimonial property of the Government; and (b) specific legislation authorizing the disposition of particular pieces of the Government's patrimonial property.

Standing legislative authority for the disposition of land of the private domain of the Philippines is provided by Act No. 3038, entitled "An Act Authorizing the Secretary of Agriculture and Natural Resources to Sell or Lease Land of the Private Domain of the Government of the Philippine Islands (now Republic of the Philippines)", enacted on 9 March 1922. The full text of this statute is as follows:

Be it enacted by the Senate and House of Representatives of the Philippines in Legislature assembled and by the authority of the same:

SECTION 1. The Secretary of Agriculture and Natural Resources (now Secretary of the Environment and Natural Resources) is hereby authorized to sell or lease land of the private domain of the Government of the Philippine Islands, or any part thereof, to such persons, corporations or associations as are, under the provisions of Act Numbered Twenty-eight hundred and seventy-four, (now Commonwealth Act No. 141, as amended) known as the Public Land Act, entitled to apply for the purchase or lease or agricultural public land.

SECTION 2. The sale of the land referred to in the preceding section shall, if such land is agricultural, be made in the manner and subject to the limitations prescribed in chapters five and six, respectively, of said Public Land Act, and if it be classified differently, in conformity with the provisions of chapter nine of said Act: Provided, however, That the land necessary for the public service shall be exempt from the provisions of this Act.

SECTION 3. This Act shall take effect on its approval.

Approved, March 9, 1922. (Emphasis supplied)

Lest it be assumed that Act No. 3038 refers only to agricultural lands of the private domain of the State, it must be noted that Chapter 9 of the old Public Land Act (Act No. 2874) is now Chapter 9 of the present Public Land Act (Commonwealth Act No. 141, as amended) and that both statutes refer to: "any tract of land of the public domain which being neither timber nor mineral land, is intended to be used for residential purposes or for commercial or industrial purposes other than agricultural" (Emphasis supplied).i•t•c-aüsl In other words, the statute covers the sale or lease or residential, commercial or industrial land of the private domain of the State.

Implementing regulations have been issued for the carrying out of the provisions of Act No. 3038. On 21 December 1954, the then Secretary of Agriculture and Natural Resources promulgated Lands Administrative Orders Nos. 7-6 and 7-7 which were entitled, respectively: "Supplementary Regulations Governing the Sale of the Lands of the Private Domain of the Republic of the Philippines"; and "Supplementary Regulations Governing the Lease of Lands of Private Domain of the Republic of the Philippines" (text in 51 O.G. 28-29 [1955]).

It is perhaps well to add that Act No. 3038, although now sixty-eight (68) years old, is still in effect and has not been repealed. 1

Specific legislative authorization for disposition of particular patrimonial properties of the State is illustrated by certain earlier statutes. The first of these was Act No. 1120, enacted on 26 April 1904, which provided for the disposition of the friar lands, purchased by the Government from the Roman Catholic Church, to bona fide settlers and occupants thereof or to other persons. In Jacinto v. Director of Lands (49 Phil. 853 [1926]), these friar lands were held to be private and patrimonial properties of the State. Act No. 2360, enacted on -28 February 1914, authorized the sale of the San Lazaro Estate located in the City of Manila, which had also been purchased by the Government from the Roman Catholic Church. In January 1916, Act No. 2555 amended Act No. 2360 by including therein all lands and buildings owned by the Hospital and the Foundation of San Lazaro theretofor leased by private persons, and which were also acquired by the Philippine Government.

After the enactment in 1922 of Act No. 3038, there appears, to my knowledge, to be only one statute authorizing the President to dispose of a specific piece of property. This statute is Republic Act No. 905, enacted on 20 June 1953, which authorized the

President to sell an Identified parcel of land of the private domain of the National Government to the National Press Club of the Philippines, and to other recognized national associations of professionals with academic standing, for the nominal price of P1.00. It appears relevant to note that Republic Act No. 905 was not an outright disposition in perpetuity of the property involved- it provided for reversion of the property to the National Government in case the National Press Club stopped using it for its headquarters. What Republic Act No. 905 authorized was really a donation, and not a sale.

The basic submission here made is that Act No. 3038 provides standing legislative authorization for disposition of the Roppongi property which, in my view, has been converted into patrimonial property of the Republic. 2

To some, the submission that Act No. 3038 applies not only to lands of the private domain of the State located in the Philippines but also to patrimonial property found outside the Philippines, may appear strange or unusual. I respectfully submit that such position is not any more unusual or strange than the assumption that Article 420 of the Civil Code applies not only to property of the Republic located within Philippine territory but also to property found outside the boundaries of the Republic.

It remains to note that under the well-settled doctrine that heads of Executive Departments are alter egos of the President (Villena v. Secretary of the Interior, 67 Phil. 451 [1939]), and in view of the constitutional power of control exercised by the President over department heads (Article VII, Section 17,1987 Constitution), the President herself may carry out the function or duty that is specifically lodged in

the Secretary of the Department of Environment and Natural Resources (Araneta v. Gatmaitan 101 Phil. 328 [1957]). At the very least, the President retains the power to approve or disapprove the exercise of that function or duty when done by the Secretary of Environment and Natural Resources.

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

For all the foregoing, I vote to dismiss the Petitions for Prohibition in both G.R. Nos. 92013 and 92047.

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

Separate Opinions

CRUZ, J., concurring:

I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add the following observations only for emphasis.

It is clear that the respondents have failed to show the President's legal authority to sell the Roppongi property. When asked to do so at the hearing on these petitions, the Solicitor General was at best ambiguous, although I must add in fairness that this was not his fault. The fact is that there is -no such authority. Legal expertise alone cannot conjure that statutory permission out of thin air.

Exec. Order No. 296, which reads like so much legislative, double talk, does not contain such authority. Neither does Rep. Act No. 6657, which simply allows the proceeds of the sale of our properties abroad to be used for the comprehensive agrarian reform program. Senate Res. No. 55 was a mere request for the deferment of the scheduled sale of tile Roppongi property, possibly to stop the transaction altogether; and ill any case it is not a law. The sale of the said property may be authorized only by Congress through a duly enacted statute, and there is no such law.

Once again, we have affirmed the principle that ours is a government of laws and not of men, where every public official, from the lowest to the highest, can act only by virtue of a valid authorization. I am happy to note that in the several cases where this Court has ruled against her, the President of the Philippines has submitted to this principle with becoming grace.

PADILLA, J., concurring:

I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few observations which could help in further clarifying the issues.

Under our tripartite system of government ordained by the Constitution, it is Congress that lays down or determines policies. The President executes such policies. The policies determined by Congress are embodied in legislative enactments that have to be approved by the President to become law. The President, of course, recommends to Congress the approval of policies but, in the final analysis, it is Congress that is the policy - determining branch of government.

The judiciary interprets the laws and, in appropriate cases, determines whether the laws enacted by Congress and approved by the President, and presidential acts implementing such laws, are in accordance with the Constitution.

The Roppongi property was acquired by the Philippine government pursuant to the reparations agreement between the Philippine and Japanese governments. Under such agreement, this property was acquired by the Philippine government for a specific purpose, namely, to serve as the site of the Philippine Embassy in Tokyo, Japan. Consequently, Roppongi is a property of public dominion and intended for public service, squarely falling within that class of property under Art. 420 of the Civil Code, which provides:

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

(1) ...

(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (339a)

Public dominion property intended for public service cannot be alienated unless the property is first transformed into private property of the state otherwise known as patrimonial property of the state. 1 The transformation of public dominion property to state patrimonial property involves, to my mind, a policy decision. It is a policy decision because the treatment of the property varies according to its classification. Consequently, it is Congress which can decide and declare the conversion of Roppongi from a public dominion property to a state patrimonial property. Congress has made no such decision or declaration.

Moreover, the sale of public property (once converted from public dominion to state patrimonial property) must be approved by Congress, for this again is a matter of policy (i.e. to keep or dispose of the property). Sec. 48, Book 1 of the Administrative Code of 1987 provides:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:

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

(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)

But the record is bare of any congressional decision or approval to sell Roppongi. The record is likewise bare of any congressional authority extended to the President to sell Roppongi thru public bidding or otherwise.

It is therefore, clear that the President cannot sell or order the sale of Roppongi thru public bidding or otherwise without a prior congressional approval, first, converting Roppongi from a public dominion property to a state patrimonial property, and, second, authorizing the President to sell the same.

ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the temporary restraining order earlier issued by this Court.

 

SARMIENTO, J., concurring:

The central question, as I see it, is whether or not the so-called "Roppongi property' has lost its nature as property of public dominion, and hence, has become patrimonial property of the State. I understand that the parties are agreed that it was property intended for "public service" within the contemplation of paragraph (2), of Article 430, of the Civil Code, and accordingly, land of State dominion, and beyond human commerce. The lone issue is, in the light of supervening developments, that is non-user thereof by the National Government (for diplomatic purposes) for the last thirteen years; the issuance of Executive Order No. 296 making it available for sale to any interested buyer; the promulgation of Republic Act No. 6657, the Comprehensive Agrarian Reform Law, making available for the program's financing, State assets sold; the approval by the President of the recommendation of the investigating committee formed to study the property's utilization; and the issuance of Resolution No. 55 of the Philippine Senate requesting for the deferment of its disposition it, "Roppongi", is still property of the public dominion, and if it is not, how it lost that character.

When land of the public dominion ceases to be one, or when the change takes place, is a question our courts have debated early. In a 1906 decision, 1 it was held that property of the public dominion, a public plaza in this instance, becomes patrimonial upon use thereof for purposes other than a plaza. In a later case, 2 this ruling was reiterated. Likewise, it has been held that land, originally private property, has become of public dominion upon its donation to the town and its conversion and use as a public plaza. 3 It is notable that under these three cases, the character of the property, and any change occurring therein, depends on the actual use to which it is dedicated. 4

Much later, however, the Court held that "until a formal declaration on the part of the Government, through the executive department or the Legislative, to the effect that the land . . . is no longer needed for [public] service- for public use or for special industries, [it] continue[s] to be part of the public [dominion], not available for private expropriation or ownership." 5 So also, it was ruled that a political subdivision (the City of Cebu in this case) alone may declare (under its charter) a city road abandoned and thereafter, to dispose of it. 6

In holding that there is "a need for a law or formal declaration to withdraw the Roppongi property from public domain to make it alienable and a land for legislative authority to allow the sale of the property" 7 the majority lays stress to the fact that: (1) An affirmative act — executive or legislative — is necessary to reclassify property of the public dominion, and (2) a legislative decree is required to make it alienable. It also clears the uncertainties brought about by earlier interpretations that the nature of property-whether public or patrimonial is predicated on the manner it is actually used, or not used, and in the same breath, repudiates the Government's position that the continuous non-use of "Roppongi", among other arguments, for "diplomatic purposes", has turned it into State patrimonial property.

I feel that this view corresponds to existing pronouncements of this Court, among other things, that: (1) Property is presumed to be State property in the absence of any showing to the contrary; 8 (2) With respect to forest lands, the same continue to be lands of the public dominion unless and until reclassified by the Executive Branch of the Government; 9 and (3) All natural resources, under the Constitution, and subject to exceptional cases, belong to the State. 10

I am elated that the Court has banished previous uncertainties.

 

FELICIANO, J., dissenting

With regret, I find myself unable to share the conclusions reached by Mr. Justice Hugo E. Gutierrez, Jr.

For purposes of this separate opinion, I assume that the piece of land located in 306 Roppongi, 5-Chome, Minato-ku Tokyo, Japan (hereinafter referred to as the "Roppongi property") may be characterized as property of public dominion, within the meaning of Article 420 (2) of the Civil Code:

[Property] which belong[s] to the State, without being for public use, and are intended for some public service -.

It might not be amiss however, to note that the appropriateness of trying to bring within the confines of the simple threefold classification found in Article 420 of the Civil Code ("property for public use property "intended for some public service" and property intended "for the development of the national wealth") all property owned by the Republic of the Philippines whether found within the territorial boundaries of the Republic or located within the territory of another sovereign State, is not self-evident. The first item of the classification property intended for public use — can scarcely be properly applied to property belonging to the Republic but found within the territory of another State. The third item of the classification property intended for the development of the national wealth is illustrated, in Article 339 of the Spanish Civil Code of 1889, by mines or mineral properties. Again, mineral lands owned by a sovereign State are rarely, if ever, found within the territorial base of another sovereign State. The task of examining in detail the applicability of the classification set out in Article 420 of our Civil Code to property that the Philippines happens to own outside its own boundaries must, however, be left to academicians.

For present purposes, too, I agree that there is no question of conflict of laws that is, at the present time, before this Court. The issues before us relate essentially to authority to sell the Roppongi property so far as Philippine law is concerned.

The majority opinion raises two (2) issues: (a) whether or not the Roppongi property has been converted into patrimonial property or property of the private domain of the State; and (b) assuming an affirmative answer to (a), whether or not there is legal authority to dispose of the Roppongi property.

I

Addressing the first issue of conversion of property of public dominion intended for some public service, into property of the private domain of the Republic, it should be noted that the Civil Code does not address the question of who has authority to effect such conversion. Neither does the Civil Code set out or refer to anyprocedure for such conversion.

Our case law, however, contains some fairly explicit pronouncements on this point, as Justice Sarmiento has pointed out in his concurring opinion. In Ignacio v. Director of Lands (108 Phils. 335 [1960]), petitioner Ignacio argued that if the land in question formed part of the public domain, the trial court should have declared the same no longer necessary for public use or public purposes and which would, therefore, have become disposable and available for private ownership. Mr. Justice Montemayor, speaking for the Court, said:

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

The reason for this pronouncement, according to this Tribunal in the case of Vicente Joven y Monteverde v. Director of Lands, 93 Phil., 134 (cited in Velayo's Digest, Vol. 1, p. 52).

... is undoubtedly that the courts are neither primarily called upon, nor indeed in a position to determine whether any public land are to be used for the purposes specified in Article 4 of the Law of Waters. Consequently, until a formal declaration on the part of the Government, through the executive department or the Legislature, to the effect that the land in question is no longer needed for coast-guard service, for public use or for special industries, they continue to be part of the public domain not available for private appropriation or ownership. (108 Phil. at 338-339; emphasis supplied)

Thus, under Ignacio, either the Executive Department or the Legislative Department may convert property of the State of public dominion into patrimonial property of the State. No particular formula or procedure of conversion is specified either in statute law or in case law. Article 422 of the Civil Code simply states that: "Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State". I respectfully submit, therefore, that the only requirement which is legitimately imposable is that the intent to convert must be reasonably clear from a consideration of the acts or acts of the Executive Department or of the Legislative Department which are said to have effected such conversion.

The same legal situation exists in respect of conversion of property of public dominion belonging to municipal corporations, i.e., local governmental units, into patrimonial property of such entities. In CebuOxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City Council of Cebu by resolution declared a certain portion of an existing street as an abandoned road, "the same not being included in the city development plan". Subsequently, by another resolution, the City Council of Cebu authorized the acting City Mayor to sell the land through public bidding. Although there was no formal and explicit declaration of conversion of property for public use into patrimonial property, the Supreme Court said:

xxx xxx xxx

(2) Since that portion of the city street subject of petitioner's application for registration of title was withdrawn from public use, it follows that such withdrawn portion becomes patrimonial property which can be the object of an ordinary contract.

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

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

Accordingly, the withdrawal of the property in question from public use and its subsequent sale to the petitioner is valid. Hence, the petitioner has a registrable title over the lot in question. (66 SCRA at 484-; emphasis supplied)

Thus, again as pointed out by Sarmiento J., in his separate opinion, in the case of property owned by municipal corporations simple non-use or the actual dedication of public property to some use other than "public use" or some "public service", was sufficient legally to convert such property into patrimonial property (Municipality of Oas v. Roa, 7 Phil. 20 [1906]- Municipality of Hinunganan v. Director of Lands 24 Phil. 124 [1913]; Province of Zamboanga del Norte v. City of Zamboanga, 22 SCRA 1334 (1968).

I would also add that such was the case not only in respect of' property of municipal corporations but also in respect of property of the State itself. Manresa in commenting on Article 341 of the 1889 Spanish Civil Code which has been carried over verbatim into our Civil Code by Article 422 thereof, wrote:

La dificultad mayor en todo esto estriba, naturalmente, en fijar el momento en que los bienes de dominio publico dejan de serlo. Si la Administracion o la autoridad competente legislative realizan qun acto en virtud del cual cesa el destino o uso publico de los bienes de que se trata naturalmente la dificultad queda desde el primer momento resuelta. Hay un punto de partida cierto para iniciar las relaciones juridicas a que pudiera haber lugar Pero puede ocurrir que no haya taldeclaracion expresa, legislativa or administrativa, y, sin embargo, cesar de hecho el destino publico de los bienes; ahora bien, en este caso, y para los efectos juridicos que resultan de entrar la cosa en el comercio de los hombres,' se entedera que se ha verificado la conversion de los bienes patrimoniales?

El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por la afirmativa, y por nuestra parte creemos que tal debe ser la soluciion. El destino de las cosas no depende tanto de una declaracion expresa como del uso publico de las mismas, y cuanda el uso publico cese con respecto de determinados bienes, cesa tambien su situacion en el dominio publico. Si una fortaleza en ruina se abandona y no se repara, si un trozo de la via publica se abandona tambien por constituir otro nuevo an mejores condiciones....ambos bienes cesan de estar Codigo, y leyes especiales mas o memos administrativas. (3 Manresa, Comentarios al Codigo Civil Espanol, p. 128 [7a ed.; 1952) (Emphasis supplied)

The majority opinion says that none of the executive acts pointed to by the Government purported, expressly or definitely, to convert the Roppongi property into patrimonial property — of the Republic. Assuming that to be the case, it is respectfully submitted that cumulative effect of the executive acts here involved was to convert property originally intended for and devoted to public service into patrimonial property of the State, that is, property susceptible of disposition to and appropration by private persons. These executive acts, in their totality if not each individual act, make crystal clear the intent of the Executive Department to effect such conversion. These executive acts include:

(a) Administrative Order No. 3 dated 11 August 1985, which created a Committee to study the disposition/utilization of the Government's property in Japan, The Committee was composed of officials of the Executive Department: the Executive Secretary; the Philippine Ambassador to Japan; and representatives of the Department of Foreign Affairs and the Asset Privatization Trust. On 19 September 1988, the Committee recommended to the President the sale of one of the lots (the lot specifically in Roppongi) through public bidding. On 4 October 1988, the President approved the recommendation of the Committee.

On 14 December 1988, the Philippine Government by diplomatic note informed the Japanese Ministry of Foreign Affairs of the Republic's intention to dispose of the property in Roppongi. The Japanese Government through its Ministry of Foreign Affairs replied that it interposed no objection to such disposition by the Republic. Subsequently, the President and the Committee informed the leaders of the House of Representatives and of the Senate of the Philippines of the proposed disposition of the Roppongi property.

(b) Executive Order No. 296, which was issued by the President on 25 July 1987. Assuming that the majority opinion is right in saying that Executive Order No. 296 is insufficient to authorize the sale of the Roppongi property, it is here submitted with respect that Executive Order No. 296 is more than sufficient to indicate anintention to convert the property previously devoted to public service into patrimonial property that is capable of being sold or otherwise disposed of

(c) Non-use of the Roppongi lot for fourteen (14) years for diplomatic or for any other public purposes. Assuming (but only arguendo) that non-use does not, by itself, automatically convert the property into patrimonial property. I respectfully urge that prolonged non-use, conjoined with the other factors here listed, was legally effective to convert the lot in Roppongi into patrimonial property of the State. Actually, as already pointed out, case law involving property of municipal corporations is to the effect that simple

non-use or the actual dedication of public property to some use other than public use or public service, was sufficient to convert such property into patrimonial property of the local governmental entity concerned. Also as pointed out above, Manresa reached the same conclusion in respect of conversion of property of the public domain of the State into property of the private domain of the State.

The majority opinion states that "abandonment cannot be inferred from the non-use alone especially if the non-use was attributable not to the Government's own deliberate and indubitable will but to lack of financial support to repair and improve the property" (Majority Opinion, p. 13). With respect, it may be stressed that there is no abandonment involved here, certainly no abandonment of property or of property rights. What is involved is the charge of the classification of the property from property of the public domain into property of the private domain of the State. Moreover, if for fourteen (14) years, the Government did not see fit to appropriate whatever funds were necessary to maintain the property in Roppongi in a condition suitable for diplomatic representation purposes, such circumstance may, with equal logic, be construed as a manifestation of the crystalizing intent to change the character of the property.

(d) On 30 March 1989, a public bidding was in fact held by the Executive Department for the sale of the lot in Roppongi. The circumstance that this bidding was not successful certainly does not argue against an intent to convert the property involved into property that is disposable by bidding.

The above set of events and circumstances makes no sense at all if it does not, as a whole, show at least the intent on the part of the Executive Department (with the knowledge of the Legislative Department) to convert the property involved into patrimonial property that is susceptible of being sold.

II

Having reached an affirmative answer in respect of the first issue, it is necessary to address the second issue of whether or not there exists legal authority for the sale or disposition of the Roppongi property.

The majority opinion refers to Section 79(f) of the Revised Administrative Code of 1917 which reads as follows:

SEC. 79 (f). Conveyances and contracts to which the Government is a party. — In cases in which the Government of the Republic of the Philippines is a party to any deed or other instrumentconveying the title to real estate or to any other property the value of which is in excess of one hundred thousand pesos, the respective Department Secretary shall prepare the necessary papers which, together with the proper recommendations, shall be submitted to the Congress of the Philippines for approval by the same. Such deed, instrument, or contract shall be executed and signed by the President of the Philippines on behalf of the Government of the Philippines unless the authority therefor be expressly vested by law in another officer. (Emphasis supplied)

The majority opinion then goes on to state that: "[T]he requirement has been retained in Section 4, Book I of the Administrative Code of 1987 (Executive Order No. 292)" which reads:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:

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

(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)

Two points need to be made in this connection. Firstly, the requirement of obtaining specific approval of Congress when the price of the real property being disposed of is in excess of One Hundred Thousand Pesos (P100,000.00) under the Revised Administrative Code of 1917, has been deleted from Section 48 of the 1987 Administrative Code. What Section 48 of the present Administrative Code refers to is authorization by law for the conveyance. Section 48 does not purport to be itself a source of legal authority for conveyance of real property of the Government. For Section 48 merely specifies the official authorized to execute and sign on behalf of the Government the deed of conveyance in case of such a conveyance.

Secondly, examination of our statute books shows that authorization by law for disposition of real property of the private domain of the Government, has been granted by Congress both in the form of (a) a general, standing authorization for disposition of patrimonial property of the Government; and (b) specific legislation authorizing the disposition of particular pieces of the Government's patrimonial property.

Standing legislative authority for the disposition of land of the private domain of the Philippines is provided by Act No. 3038, entitled "An Act Authorizing the Secretary of Agriculture and Natural Resources to Sell or Lease Land of the Private Domain of the Government of the Philippine Islands (now Republic of the Philippines)", enacted on 9 March 1922. The full text of this statute is as follows:

Be it enacted by the Senate and House of Representatives of the Philippines in Legislature assembled and by the authority of the same:

SECTION 1. The Secretary of Agriculture and Natural Resources (now Secretary of the Environment and Natural Resources) is hereby authorized to sell or lease land of the private domain of the Government of the Philippine Islands, or any part thereof, to such persons, corporations or associations as are, under the provisions of Act Numbered Twenty-eight hundred and seventy-four, (now Commonwealth Act No. 141, as amended) known as the Public Land Act, entitled to apply for the purchase or lease or agricultural public land.

SECTION 2. The sale of the land referred to in the preceding section shall, if such land is agricultural, be made in the manner and subject to the limitations prescribed in chapters five and six, respectively, of said Public Land Act, and if it be classified differently, in conformity with the provisions of chapter nine of said Act: Provided, however, That the land necessary for the public service shall be exempt from the provisions of this Act.

SECTION 3. This Act shall take effect on its approval.

Approved, March 9, 1922. (Emphasis supplied)

Lest it be assumed that Act No. 3038 refers only to agricultural lands of the private domain of the State, it must be noted that Chapter 9 of the old Public Land Act (Act No. 2874) is now Chapter 9 of the present Public Land Act (Commonwealth Act No. 141, as amended) and that both statutes refer to: "any tract of land of the public domain which being neither timber nor mineral land, is intended to be used for residential purposes or for commercial or industrial purposes other than agricultural" (Emphasis supplied). In other words, the statute covers the sale or lease or residential, commercial or industrial land of the private domain of the State.

Implementing regulations have been issued for the carrying out of the provisions of Act No. 3038. On 21 December 1954, the then Secretary of Agriculture and Natural Resources promulgated Lands

Administrative Orders Nos. 7-6 and 7-7 which were entitled, respectively: "Supplementary Regulations Governing the Sale of the Lands of the Private Domain of the Republic of the Philippines"; and "Supplementary Regulations Governing the Lease of Lands of Private Domain of the Republic of the Philippines" (text in 51 O.G. 28-29 [1955]).

It is perhaps well to add that Act No. 3038, although now sixty-eight (68) years old, is still in effect and has not been repealed. 1

Specific legislative authorization for disposition of particular patrimonial properties of the State is illustrated by certain earlier statutes. The first of these was Act No. 1120, enacted on 26 April 1904, which provided for the disposition of the friar lands, purchased by the Government from the Roman Catholic Church, to bona fide settlers and occupants thereof or to other persons. In Jacinto v. Director of Lands (49 Phil. 853 [1926]), these friar lands were held to be private and patrimonial properties of the State. Act No. 2360, enacted on -28 February 1914, authorized the sale of the San Lazaro Estate located in the City of Manila, which had also been purchased by the Government from the Roman Catholic Church. In January 1916, Act No. 2555 amended Act No. 2360 by including therein all lands and buildings owned by the Hospital and the Foundation of San Lazaro theretofor leased by private persons, and which were also acquired by the Philippine Government.

After the enactment in 1922 of Act No. 3038, there appears, to my knowledge, to be only one statute authorizing the President to dispose of a specific piece of property. This statute is Republic Act No. 905, enacted on 20 June 1953, which authorized the

President to sell an Identified parcel of land of the private domain of the National Government to the National Press Club of the Philippines, and to other recognized national associations of professionals with academic standing, for the nominal price of P1.00. It appears relevant to note that Republic Act No. 905 was not an outright disposition in perpetuity of the property involved- it provided for reversion of the property to the National Government in case the National Press Club stopped using it for its headquarters. What Republic Act No. 905 authorized was really a donation, and not a sale.

The basic submission here made is that Act No. 3038 provides standing legislative authorization for disposition of the Roppongi property which, in my view, has been converted into patrimonial property of the Republic. 2

To some, the submission that Act No. 3038 applies not only to lands of the private domain of the State located in the Philippines but also to patrimonial property found outside the Philippines, may appear strange or unusual. I respectfully submit that such position is not any more unusual or strange than the assumption that Article 420 of the Civil Code applies not only to property of the Republic located within Philippine territory but also to property found outside the boundaries of the Republic.

It remains to note that under the well-settled doctrine that heads of Executive Departments are alter egos of the President (Villena v. Secretary of the Interior, 67 Phil. 451 [1939]), and in view of the constitutional power of control exercised by the President over department heads (Article VII, Section 17,1987 Constitution), the President herself may carry out the function or duty that is specifically lodged in the Secretary of the Department of Environment and Natural Resources (Araneta v. Gatmaitan 101 Phil. 328 [1957]). At the very least, the President retains the power to approve or disapprove the exercise of that function or duty when done by the Secretary of Environment and Natural Resources.

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

For all the foregoing, I vote to dismiss the Petitions for Prohibition in both G.R. Nos. 92013 and 92047.

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

EN BANCG.R. No. L-40411             August 7, 1935DAVAO SAW MILL CO., INC., plaintiff-appellant, vs.APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees.Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.J.W. Ferrier for appellees.

MALCOLM, J.:

The issue in this case, as announced in the opening sentence of the decision in the trial court and as set forth by counsel for the parties on appeal, involves the determination of the nature of the properties described in the complaint. The trial judge found that those properties were personal in nature, and as a consequence absolved the defendants from the complaint, with costs against the plaintiff.

The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However, the land upon which the business was conducted belonged to another person. On the land the sawmill company erected a building which housed the machinery used by it. Some of the implements thus used were clearly personal property, the conflict concerning machines which were placed and mounted on foundations of cement. In the contract of lease between the sawmill company and the owner of the land there appeared the following provision:

That on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by the party of the second part shall pass to the exclusive ownership of the party of the first part without any obligation on its part to pay any amount for said improvements and buildings; also, in the event the party of the second part should leave or abandon the land leased before the time herein stipulated, the improvements and buildings shall likewise pass to the ownership of the party of the first part as though the time agreed upon had expired: Provided, however, That the machineries and accessories are not included in the improvements which will pass to the party of the first part on the expiration or abandonment of the land leased.

In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in that action; a writ of execution issued thereon, and the properties now in question were levied upon as personalty by the sheriff. No third party claim was filed for such properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein. Indeed the bidder, which was the plaintiff in that action, and the defendant herein having consummated the sale, proceeded to take possession of the machinery and other properties described in the corresponding certificates of sale executed in its favor by the sheriff of Davao.

As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a number of occasions treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of such persons is the appellee by assignment from the original mortgages.

Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of —

1. Land, buildings, roads and constructions of all kinds adhering to the soil;

x x x           x x x           x x x

5. Machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade of industry.

Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt that the trial judge and appellees are right in their appreciation of the legal doctrines flowing from the facts.

In the first place, it must again be pointed out that the appellant should have registered its protest before or at the time of the sale of this property. It must further be pointed out that while not conclusive, the characterization of the property as chattels by the appellant is indicative of intention and impresses upon the property the character determined by the parties. In this connection the decision of this court in the case of Standard Oil Co. of New Yorkvs. Jaramillo ( [1923], 44 Phil., 630), whether obiter dicta or not, furnishes the key to such a situation.

It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is machinery which is involved; moreover, machinery not intended by the owner of any building or land for use in connection therewith, but intended by a lessee for use in a building erected on the land by the latter to be returned to the lessee on the expiration or abandonment of the lease.

A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was held that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner. In the opinion written by Chief Justice White, whose knowledge of the Civil Law is well known, it was in part said:

To determine this question involves fixing the nature and character of the property from the point of view of the rights of Valdes and its nature and character from the point of view of Nevers & Callaghan as a judgment creditor of the Altagracia Company and the rights derived by them from the execution levied on the machinery placed by the corporation in the plant. Following the Code Napoleon, the Porto Rican Code treats as immovable (real) property, not only land and buildings, but also attributes immovability in some cases to property of a movable nature, that is, personal property, because of the destination to which it is applied. "Things," says section 334 of the Porto Rican Code, "may be immovable either by their own nature or by their destination or the object to which they are applicable." Numerous illustrations are given in the fifth subdivision of section 335, which is as follows: "Machinery, vessels, instruments or implements intended by the owner of the tenements for the industrial or works that they may carry on in any building or upon any land and which tend directly to meet the needs of the said industry or works." (See also Code Nap., articles 516, 518 et seq. to and inclusive of article 534, recapitulating the things which, though in themselves movable, may be immobilized.) So far as the subject-matter with which we are dealing — machinery placed in the plant — it is plain, both under the provisions of the Porto Rican Law and of the Code Napoleon, that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant. Such result would not be accomplished, therefore, by the placing of machinery in a plant by a tenant or a usufructuary or any person having only a temporary right. (Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and decisions quoted in Fuzier-Herman ed. Code Napoleon under articles 522 et seq.) The distinction rests, as pointed out by Demolombe, upon the fact that one only having a temporary right to the possession or enjoyment of property is not presumed by the law to have applied movable property belonging to him so as to deprive him of it by causing it by an act of immobilization to become the property of another. It

follows that abstractly speaking the machinery put by the Altagracia Company in the plant belonging to Sanchez did not lose its character of movable property and become immovable by destination. But in the concrete immobilization took place because of the express provisions of the lease under which the Altagracia held, since the lease in substance required the putting in of improved machinery, deprived the tenant of any right to charge against the lessor the cost such machinery, and it was expressly stipulated that the machinery so put in should become a part of the plant belonging to the owner without compensation to the lessee. Under such conditions the tenant in putting in the machinery was acting but as the agent of the owner in compliance with the obligations resting upon him, and the immobilization of the machinery which resulted arose in legal effect from the act of the owner in giving by contract a permanent destination to the machinery.

x x x           x x x           x x x

The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the Altagracia Company, being, as regards Nevers & Callaghan, movable property, it follows that they had the right to levy on it under the execution upon the judgment in their favor, and the exercise of that right did not in a legal sense conflict with the claim of Valdes, since as to him the property was a part of the realty which, as the result of his obligations under the lease, he could not, for the purpose of collecting his debt, proceed separately against. (Valdes vs. Central Altagracia [192], 225 U.S., 58.)

Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this instance to be paid by the appellant.

Villa-Real, Imperial, Butte, and Goddard, JJ., concur.EN BANCG.R. No. 133250           July 9, 2002FRANCISCO I. CHAVEZ, petitioner, vs.PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT CORPORATION, respondents.

CARPIO, J.:

This is an original Petition for Mandamus with prayer for a writ of preliminary injunction and a temporary restraining order. The petition seeks to compel the Public Estates Authority ("PEA" for brevity) to disclose all facts on PEA's then on-going renegotiations with Amari Coastal Bay and Development Corporation ("AMARI" for brevity) to reclaim portions of Manila Bay. The petition further seeks to enjoin PEA from signing a new agreement with AMARI involving such reclamation.

The Facts

On November 20, 1973, the government, through the Commissioner of Public Highways, signed a contract with the Construction and Development Corporation of the Philippines ("CDCP" for brevity) to reclaim certain foreshore and offshore areas of Manila Bay. The contract also included the construction of Phases I and II of the Manila-Cavite Coastal Road. CDCP obligated itself to carry out all the works in consideration of fifty percent of the total reclaimed land.

On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree No. 1084 creating PEA. PD No. 1084 tasked PEA "to reclaim land, including foreshore and submerged areas," and "to develop, improve, acquire, x x x lease and sell any and all kinds of lands."1 On the same date, then President Marcos issued Presidential Decree No. 1085 transferring to PEA the "lands reclaimed in the

foreshore and offshore of the Manila Bay"2 under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP).

On December 29, 1981, then President Marcos issued a memorandum directing PEA to amend its contract with CDCP, so that "[A]ll future works in MCCRRP x x x shall be funded and owned by PEA." Accordingly, PEA and CDCP executed a Memorandum of Agreement dated December 29, 1981, which stated:

"(i) CDCP shall undertake all reclamation, construction, and such other works in the MCCRRP as may be agreed upon by the parties, to be paid according to progress of works on a unit price/lump sum basis for items of work to be agreed upon, subject to price escalation, retention and other terms and conditions provided for in Presidential Decree No. 1594. All the financing required for such works shall be provided by PEA.

x x x

(iii) x x x CDCP shall give up all its development rights and hereby agrees to cede and transfer in favor of PEA, all of the rights, title, interest and participation of CDCP in and to all the areas of land reclaimed by CDCP in the MCCRRP as of December 30, 1981 which have not yet been sold, transferred or otherwise disposed of by CDCP as of said date, which areas consist of approximately Ninety-Nine Thousand Four Hundred Seventy Three (99,473) square meters in the Financial Center Area covered by land pledge No. 5 and approximately Three Million Three Hundred Eighty Two Thousand Eight Hundred Eighty Eight (3,382,888) square meters of reclaimed areas at varying elevations above Mean Low Water Level located outside the Financial Center Area and the First Neighborhood Unit."3

On January 19, 1988, then President Corazon C. Aquino issued Special Patent No. 3517, granting and transferring to PEA "the parcels of land so reclaimed under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP) containing a total area of one million nine hundred fifteen thousand eight hundred ninety four (1,915,894) square meters." Subsequently, on April 9, 1988, the Register of Deeds of the Municipality of Parañaque issued Transfer Certificates of Title Nos. 7309, 7311, and 7312, in the name of PEA, covering the three reclaimed islands known as the "Freedom Islands" located at the southern portion of the Manila-Cavite Coastal Road, Parañaque City. The Freedom Islands have a total land area of One Million Five Hundred Seventy Eight Thousand Four Hundred and Forty One (1,578,441) square meters or 157.841 hectares.

On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for brevity) with AMARI, a private corporation, to develop the Freedom Islands. The JVA also required the reclamation of an additional 250 hectares of submerged areas surrounding these islands to complete the configuration in the Master Development Plan of the Southern Reclamation Project-MCCRRP. PEA and AMARI entered into the JVA through negotiation without public bidding.4 On April 28, 1995, the Board of Directors of PEA, in its Resolution No. 1245, confirmed the JVA.5On June 8, 1995, then President Fidel V. Ramos, through then Executive Secretary Ruben Torres, approved the JVA.6

On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege speech in the Senate and denounced the JVA as the "grandmother of all scams." As a result, the Senate Committee on Government Corporations and Public Enterprises, and the Committee on Accountability of Public Officers and Investigations, conducted a joint investigation. The Senate Committees reported the results of their investigation in Senate Committee Report No. 560 dated September 16, 1997.7 Among the conclusions of their report are: (1) the reclaimed lands PEA seeks to transfer to AMARI under the JVA are lands of the public domain which the government has not classified as alienable lands and therefore PEA cannot alienate these lands; (2) the certificates of title covering the Freedom Islands are thus void, and (3) the JVA itself is illegal.

On December 5, 1997, then President Fidel V. Ramos issued Presidential Administrative Order No. 365 creating a Legal Task Force to conduct a study on the legality of the JVA in view of Senate Committee Report No. 560. The members of the Legal Task Force were the Secretary of Justice,8 the Chief Presidential Legal Counsel,9 and the Government Corporate Counsel.10 The Legal Task Force upheld the legality of the JVA, contrary to the conclusions reached by the Senate Committees.11

On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that there were on-going renegotiations between PEA and AMARI under an order issued by then President Fidel V. Ramos. According to these reports, PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo and retired Navy Officer Sergio Cruz composed the negotiating panel of PEA.

On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition with Application for the Issuance of a Temporary Restraining Order and Preliminary Injunction docketed as G.R. No. 132994 seeking to nullify the JVA. The Court dismissed the petition "for unwarranted disregard of judicial hierarchy, without prejudice to the refiling of the case before the proper court."12

On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a taxpayer, filed the instant Petition for Mandamus with Prayer for the Issuance of a Writ of Preliminary Injunction and Temporary Restraining Order. Petitioner contends the government stands to lose billions of pesos in the sale by PEA of the reclaimed lands to AMARI. Petitioner prays that PEA publicly disclose the terms of any renegotiation of the JVA, invoking Section 28, Article II, and Section 7, Article III, of the 1987 Constitution on the right of the people to information on matters of public concern. Petitioner assails the sale to AMARI of lands of the public domain as a blatant violation of Section 3, Article XII of the 1987 Constitution prohibiting the sale of alienable lands of the public domain to private corporations. Finally, petitioner asserts that he seeks to enjoin the loss of billions of pesos in properties of the State that are of public dominion.

After several motions for extension of time,13 PEA and AMARI filed their Comments on October 19, 1998 and June 25, 1998, respectively. Meanwhile, on December 28, 1998, petitioner filed an Omnibus Motion: (a) to require PEA to submit the terms of the renegotiated PEA-AMARI contract; (b) for issuance of a temporary restraining order; and (c) to set the case for hearing on oral argument. Petitioner filed a Reiterative Motion for Issuance of a TRO dated May 26, 1999, which the Court denied in a Resolution dated June 22, 1999.

In a Resolution dated March 23, 1999, the Court gave due course to the petition and required the parties to file their respective memoranda.

On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement ("Amended JVA," for brevity). On May 28, 1999, the Office of the President under the administration of then President Joseph E. Estrada approved the Amended JVA.

Due to the approval of the Amended JVA by the Office of the President, petitioner now prays that on "constitutional and statutory grounds the renegotiated contract be declared null and void."14

The Issues

The issues raised by petitioner, PEA15 and AMARI16 are as follows:

I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE PETITION ARE MOOT AND ACADEMIC BECAUSE OF SUBSEQUENT EVENTS;

II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO OBSERVE THE PRINCIPLE GOVERNING THE HIERARCHY OF COURTS;

III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES;

IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT;

V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES OFFICIAL INFORMATION ON ON-GOING NEGOTIATIONS BEFORE A FINAL AGREEMENT;

VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE AGREEMENT FOR THE TRANSFER TO AMARI OF CERTAIN LANDS, RECLAIMED AND STILL TO BE RECLAIMED, VIOLATE THE 1987 CONSTITUTION; AND

VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE ISSUE OF WHETHER THE AMENDED JOINT VENTURE AGREEMENT IS GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT.

The Court's Ruling

First issue: whether the principal reliefs prayed for in the petition are moot and academic because of subsequent events.

The petition prays that PEA publicly disclose the "terms and conditions of the on-going negotiations for a new agreement." The petition also prays that the Court enjoin PEA from "privately entering into, perfecting and/or executing any new agreement with AMARI."

PEA and AMARI claim the petition is now moot and academic because AMARI furnished petitioner on June 21, 1999 a copy of the signed Amended JVA containing the terms and conditions agreed upon in the renegotiations. Thus, PEA has satisfied petitioner's prayer for a public disclosure of the renegotiations. Likewise, petitioner's prayer to enjoin the signing of the Amended JVA is now moot because PEA and AMARI have already signed the Amended JVA on March 30, 1999. Moreover, the Office of the President has approved the Amended JVA on May 28, 1999.

Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply fast-tracking the signing and approval of the Amended JVA before the Court could act on the issue. Presidential approval does not resolve the constitutional issue or remove it from the ambit of judicial review.

We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the President cannot operate to moot the petition and divest the Court of its jurisdiction. PEA and AMARI have still to implement the Amended JVA. The prayer to enjoin the signing of the Amended JVA on constitutional grounds necessarily includes preventing its implementation if in the meantime PEA and AMARI have signed one in violation of the Constitution. Petitioner's principal basis in assailing the renegotiation of the JVA is its violation of Section 3, Article XII of the Constitution, which prohibits the government from alienating lands of the public domain to private corporations. If the Amended JVA indeed violates the Constitution, it is the duty of the Court to enjoin its implementation, and if already implemented, to annul the effects of such unconstitutional contract.

The Amended JVA is not an ordinary commercial contract but one which seeks to transfer title and ownership to 367.5 hectares of reclaimed lands and submerged areas of Manila Bay to a single private corporation. It now becomes more compelling for the Court to resolve the issue to insure the government itself does not violate a provision of the Constitution intended to safeguard the national patrimony. Supervening events, whether intended or accidental, cannot prevent the Court from rendering a decision if there is a grave violation of the Constitution. In the instant case, if the Amended JVA runs counter to the Constitution, the Court can still prevent the transfer of title and ownership of alienable lands of the public

domain in the name of AMARI. Even in cases where supervening events had made the cases moot, the Court did not hesitate to resolve the legal or constitutional issues raised to formulate controlling principles to guide the bench, bar, and the public.17

Also, the instant petition is a case of first impression. All previous decisions of the Court involving Section 3, Article XII of the 1987 Constitution, or its counterpart provision in the 1973 Constitution,18 covered agricultural lands sold to private corporations which acquired the lands from private parties. The transferors of the private corporations claimed or could claim the right to judicial confirmation of their imperfect titles19 under Title II of Commonwealth Act. 141 ("CA No. 141" for brevity). In the instant case, AMARI seeks to acquire from PEA, a public corporation, reclaimed lands and submerged areas for non-agricultural purposes by purchase under PD No. 1084 (charter of PEA) and Title III of CA No. 141. Certain undertakings by AMARI under the Amended JVA constitute the consideration for the purchase. Neither AMARI nor PEA can claim judicial confirmation of their titles because the lands covered by the Amended JVA are newly reclaimed or still to be reclaimed. Judicial confirmation of imperfect title requires open, continuous, exclusive and notorious occupation of agricultural lands of the public domain for at least thirty years since June 12, 1945 or earlier. Besides, the deadline for filing applications for judicial confirmation of imperfect title expired on December 31, 1987.20

Lastly, there is a need to resolve immediately the constitutional issue raised in this petition because of the possible transfer at any time by PEA to AMARI of title and ownership to portions of the reclaimed lands. Under the Amended JVA, PEA is obligated to transfer to AMARI the latter's seventy percent proportionate share in the reclaimed areas as the reclamation progresses. The Amended JVA even allows AMARI to mortgage at any time the entirereclaimed area to raise financing for the reclamation project.21

Second issue: whether the petition merits dismissal for failing to observe the principle governing the hierarchy of courts.

PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly from the Court. The principle of hierarchy of courts applies generally to cases involving factual questions. As it is not a trier of facts, the Court cannot entertain cases involving factual issues. The instant case, however, raises constitutional issues of transcendental importance to the public.22 The Court can resolve this case without determining any factual issue related to the case. Also, the instant case is a petition for mandamus which falls under the original jurisdiction of the Court under Section 5, Article VIII of the Constitution. We resolve to exercise primary jurisdiction over the instant case.

Third issue: whether the petition merits dismissal for non-exhaustion of administrative remedies.

PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose publicly certain information without first asking PEA the needed information. PEA claims petitioner's direct resort to the Court violates the principle of exhaustion of administrative remedies. It also violates the rule that mandamus may issue only if there is no other plain, speedy and adequate remedy in the ordinary course of law.

PEA distinguishes the instant case from Tañada v. Tuvera23 where the Court granted the petition for mandamus even if the petitioners there did not initially demand from the Office of the President the publication of the presidential decrees. PEA points out that in Tañada, the Executive Department had an affirmative statutory duty under Article 2 of the Civil Code24 and Section 1 of Commonwealth Act No. 63825 to publish the presidential decrees. There was, therefore, no need for the petitioners in Tañada to make an initial demand from the Office of the President. In the instant case, PEA claims it has no affirmative statutory duty to disclose publicly information about its renegotiation of the JVA. Thus, PEA asserts that the Court must apply the principle of exhaustion of administrative remedies to the instant case in view of the failure of petitioner here to demand initially from PEA the needed information.

The original JVA sought to dispose to AMARI public lands held by PEA, a government corporation. Under Section 79 of the Government Auditing Code,26 the disposition of government lands to private parties requires public bidding. PEA was under a positive legal duty to disclose to the public the terms and conditions for the sale of its lands. The law obligated PEA to make this public disclosure even without demand from petitioner or from anyone. PEA failed to make this public disclosure because the original JVA, like the Amended JVA, was the result of a negotiated contract, not of a public bidding. Considering that PEA had an affirmative statutory duty to make the public disclosure, and was even in breach of this legal duty, petitioner had the right to seek direct judicial intervention.

Moreover, and this alone is determinative of this issue, the principle of exhaustion of administrative remedies does not apply when the issue involved is a purely legal or constitutional question.27 The principal issue in the instant case is the capacity of AMARI to acquire lands held by PEA in view of the constitutional ban prohibiting the alienation of lands of the public domain to private corporations. We rule that the principle of exhaustion of administrative remedies does not apply in the instant case.

Fourth issue: whether petitioner has locus standi to bring this suit

PEA argues that petitioner has no standing to institute mandamus proceedings to enforce his constitutional right to information without a showing that PEA refused to perform an affirmative duty imposed on PEA by the Constitution. PEA also claims that petitioner has not shown that he will suffer any concrete injury because of the signing or implementation of the Amended JVA. Thus, there is no actual controversy requiring the exercise of the power of judicial review.

The petitioner has standing to bring this taxpayer's suit because the petition seeks to compel PEA to comply with its constitutional duties. There are two constitutional issues involved here. First is the right of citizens to information on matters of public concern. Second is the application of a constitutional provision intended to insure the equitable distribution of alienable lands of the public domain among Filipino citizens. The thrust of the first issue is to compel PEA to disclose publicly information on the sale of government lands worth billions of pesos, information which the Constitution and statutory law mandate PEA to disclose. The thrust of the second issue is to prevent PEA from alienating hundreds of hectares of alienable lands of the public domain in violation of the Constitution, compelling PEA to comply with a constitutional duty to the nation.

Moreover, the petition raises matters of transcendental importance to the public. In Chavez v. PCGG,28 the Court upheld the right of a citizen to bring a taxpayer's suit on matters of transcendental importance to the public, thus -

"Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the Marcoses is an issue of 'transcendental importance to the public.' He asserts that ordinary taxpayers have a right to initiate and prosecute actions questioning the validity of acts or orders of government agencies or instrumentalities, if the issues raised are of 'paramount public interest,' and if they 'immediately affect the social, economic and moral well being of the people.'

Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest, when the proceeding involves the assertion of a public right, such as in this case. He invokes several decisions of this Court which have set aside the procedural matter of locus standi, when the subject of the case involved public interest.

x x x

In Tañada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution of the laws, he need not show that he has any legal or special interest

in the result of the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a right then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to be valid and enforceable must be published in the Official Gazette or otherwise effectively promulgated. In ruling for the petitioners' legal standing, the Court declared that the right they sought to be enforced 'is a public right recognized by no less than the fundamental law of the land.'

Legaspi v. Civil Service Commission, while reiterating Tañada, further declared that 'when a mandamus proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general 'public' which possesses the right.'

Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned contract for the development, management and operation of the Manila International Container Terminal, 'public interest [was] definitely involved considering the important role [of the subject contract] . . . in the economic development of the country and the magnitude of the financial consideration involved.' We concluded that, as a consequence, the disclosure provision in the Constitution would constitute sufficient authority for upholding the petitioner's standing.

Similarly, the instant petition is anchored on the right of the people to information and access to official records, documents and papers — a right guaranteed under Section 7, Article III of the 1987 Constitution. Petitioner, a former solicitor general, is a Filipino citizen. Because of the satisfaction of the two basic requisites laid down by decisional law to sustain petitioner's legal standing, i.e. (1) the enforcement of a public right (2) espoused by a Filipino citizen, we rule that the petition at bar should be allowed."

We rule that since the instant petition, brought by a citizen, involves the enforcement of constitutional rights - to information and to the equitable diffusion of natural resources - matters of transcendental public importance, the petitioner has the requisite locus standi.

Fifth issue: whether the constitutional right to information includes official information on on-going negotiations before a final agreement.

Section 7, Article III of the Constitution explains the people's right to information on matters of public concern in this manner:

"Sec. 7. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law." (Emphasis supplied)

The State policy of full transparency in all transactions involving public interest reinforces the people's right to information on matters of public concern. This State policy is expressed in Section 28, Article II of the Constitution, thus:

"Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest." (Emphasis supplied)

These twin provisions of the Constitution seek to promote transparency in policy-making and in the operations of the government, as well as provide the people sufficient information to exercise effectively other constitutional rights. These twin provisions are essential to the exercise of freedom of expression. If

the government does not disclose its official acts, transactions and decisions to citizens, whatever citizens say, even if expressed without any restraint, will be speculative and amount to nothing. These twin provisions are also essential to hold public officials "at all times x x x accountable to the people,"29 for unless citizens have the proper information, they cannot hold public officials accountable for anything. Armed with the right information, citizens can participate in public discussions leading to the formulation of government policies and their effective implementation. An informed citizenry is essential to the existence and proper functioning of any democracy. As explained by the Court inValmonte v. Belmonte, Jr.30 –

"An essential element of these freedoms is to keep open a continuing dialogue or process of communication between the government and the people. It is in the interest of the State that the channels for free political discussion be maintained to the end that the government may perceive and be responsive to the people's will. Yet, this open dialogue can be effective only to the extent that the citizenry is informed and thus able to formulate its will intelligently. Only when the participants in the discussion are aware of the issues and have access to information relating thereto can such bear fruit."

PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations the right to information is limited to "definite propositions of the government." PEA maintains the right does not include access to "intra-agency or inter-agency recommendations or communications during the stage when common assertions are still in the process of being formulated or are in the 'exploratory stage'."

Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage or before the closing of the transaction. To support its contention, AMARI cites the following discussion in the 1986 Constitutional Commission:

"Mr. Suarez. And when we say 'transactions' which should be distinguished from contracts, agreements, or treaties or whatever, does the Gentleman refer to the steps leading to the consummation of the contract, or does he refer to the contract itself?

Mr. Ople: The 'transactions' used here, I suppose is generic and therefore, it can cover both steps leading to a contract and already a consummated contract, Mr. Presiding Officer.

Mr. Suarez: This contemplates inclusion of negotiations leading to the consummation of the transaction.

Mr. Ople: Yes, subject only to reasonable safeguards on the national interest.

Mr. Suarez: Thank you."32 (Emphasis supplied)

AMARI argues there must first be a consummated contract before petitioner can invoke the right. Requiring government officials to reveal their deliberations at the pre-decisional stage will degrade the quality of decision-making in government agencies. Government officials will hesitate to express their real sentiments during deliberations if there is immediate public dissemination of their discussions, putting them under all kinds of pressure before they decide.

We must first distinguish between information the law on public bidding requires PEA to disclose publicly, and information the constitutional right to information requires PEA to release to the public. Before the consummation of the contract, PEA must, on its own and without demand from anyone, disclose to the public matters relating to the disposition of its property. These include the size, location, technical description and nature of the property being disposed of, the terms and conditions of the disposition, the parties qualified to bid, the minimum price and similar information. PEA must prepare all these data and disclose them to the public at the start of the disposition process, long before the consummation of the contract, because the Government Auditing Code requires public bidding. If PEA fails to make this disclosure, any citizen can demand from PEA this information at any time during the bidding process.

Information, however, on on-going evaluation or review of bids or proposals being undertaken by the bidding or review committee is not immediately accessible under the right to information. While the evaluation or review is still on-going, there are no "official acts, transactions, or decisions" on the bids or proposals. However, once the committee makes its official recommendation, there arises a "definite proposition" on the part of the government. From this moment, the public's right to information attaches, and any citizen can access all the non-proprietary information leading to such definite proposition. In Chavez v. PCGG,33 the Court ruled as follows:

"Considering the intent of the framers of the Constitution, we believe that it is incumbent upon the PCGG and its officers, as well as other government representatives, to disclose sufficient public information on any proposed settlement they have decided to take up with the ostensible owners and holders of ill-gotten wealth. Such information, though, must pertain to definite propositions of the government, not necessarily to intra-agency or inter-agency recommendations or communications during the stage when common assertions are still in the process of being formulated or are in the "exploratory" stage. There is need, of course, to observe the same restrictions on disclosure of information in general, as discussed earlier – such as on matters involving national security, diplomatic or foreign relations, intelligence and other classified information." (Emphasis supplied)

Contrary to AMARI's contention, the commissioners of the 1986 Constitutional Commission understood that the right to information "contemplates inclusion of negotiations leading to the consummation of the transaction."Certainly, a consummated contract is not a requirement for the exercise of the right to information. Otherwise, the people can never exercise the right if no contract is consummated, and if one is consummated, it may be too late for the public to expose its defects.1âwphi1.nêt

Requiring a consummated contract will keep the public in the dark until the contract, which may be grossly disadvantageous to the government or even illegal, becomes a fait accompli. This negates the State policy of full transparency on matters of public concern, a situation which the framers of the Constitution could not have intended. Such a requirement will prevent the citizenry from participating in the public discussion of any proposedcontract, effectively truncating a basic right enshrined in the Bill of Rights. We can allow neither an emasculation of a constitutional right, nor a retreat by the State of its avowed "policy of full disclosure of all its transactions involving public interest."

The right covers three categories of information which are "matters of public concern," namely: (1) official records; (2) documents and papers pertaining to official acts, transactions and decisions; and (3) government research data used in formulating policies. The first category refers to any document that is part of the public records in the custody of government agencies or officials. The second category refers to documents and papers recording, evidencing, establishing, confirming, supporting, justifying or explaining official acts, transactions or decisions of government agencies or officials. The third category refers to research data, whether raw, collated or processed, owned by the government and used in formulating government policies.

The information that petitioner may access on the renegotiation of the JVA includes evaluation reports, recommendations, legal and expert opinions, minutes of meetings, terms of reference and other documents attached to such reports or minutes, all relating to the JVA. However, the right to information does not compel PEA to prepare lists, abstracts, summaries and the like relating to the renegotiation of the JVA.34 The right only affords access to records, documents and papers, which means the opportunity to inspect and copy them. One who exercises the right must copy the records, documents and papers at his expense. The exercise of the right is also subject to reasonable regulations to protect the integrity of the public records and to minimize disruption to government operations, like rules specifying when and how to conduct the inspection and copying.35

The right to information, however, does not extend to matters recognized as privileged information under the separation of powers.36 The right does not also apply to information on military and diplomatic secrets, information affecting national security, and information on investigations of crimes by law enforcement

agencies before the prosecution of the accused, which courts have long recognized as confidential.37 The right may also be subject to other limitations that Congress may impose by law.

There is no claim by PEA that the information demanded by petitioner is privileged information rooted in the separation of powers. The information does not cover Presidential conversations, correspondences, or discussions during closed-door Cabinet meetings which, like internal deliberations of the Supreme Court and other collegiate courts, or executive sessions of either house of Congress,38 are recognized as confidential. This kind of information cannot be pried open by a co-equal branch of government. A frank exchange of exploratory ideas and assessments, free from the glare of publicity and pressure by interested parties, is essential to protect the independence of decision-making of those tasked to exercise Presidential, Legislative and Judicial power.39 This is not the situation in the instant case.

We rule, therefore, that the constitutional right to information includes official information on on-going negotiationsbefore a final contract. The information, however, must constitute definite propositions by the government and should not cover recognized exceptions like privileged information, military and diplomatic secrets and similar matters affecting national security and public order.40 Congress has also prescribed other limitations on the right to information in several legislations.41

Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of lands, reclaimed or to be reclaimed, violate the Constitution.

The Regalian Doctrine

The ownership of lands reclaimed from foreshore and submerged areas is rooted in the Regalian doctrine which holds that the State owns all lands and waters of the public domain. Upon the Spanish conquest of the Philippines, ownership of all "lands, territories and possessions" in the Philippines passed to the Spanish Crown.42 The King, as the sovereign ruler and representative of the people, acquired and owned all lands and territories in the Philippines except those he disposed of by grant or sale to private individuals.

The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting, however, the State, in lieu of the King, as the owner of all lands and waters of the public domain. The Regalian doctrine is the foundation of the time-honored principle of land ownership that "all lands that were not acquired from the Government, either by purchase or by grant, belong to the public domain."43 Article 339 of the Civil Code of 1889, which is now Article 420 of the Civil Code of 1950, incorporated the Regalian doctrine.

Ownership and Disposition of Reclaimed Lands

The Spanish Law of Waters of 1866 was the first statutory law governing the ownership and disposition of reclaimed lands in the Philippines. On May 18, 1907, the Philippine Commission enacted Act No. 1654 which provided for the lease, but not the sale, of reclaimed lands of the government to corporations and individuals. Later, on November 29, 1919, the Philippine Legislature approved Act No. 2874, the Public Land Act, which authorized the lease, but not the sale, of reclaimed lands of the government to corporations and individuals. On November 7, 1936, the National Assembly passed Commonwealth Act No. 141, also known as the Public Land Act, which authorized the lease, but not the sale, of reclaimed lands of the government to corporations and individuals. CA No. 141 continues to this day as the general law governing the classification and disposition of lands of the public domain.

The Spanish Law of Waters of 1866 and the Civil Code of 1889

Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters within the maritime zone of the Spanish territory belonged to the public domain for public use.44 The Spanish Law of Waters of 1866 allowed the reclamation of the sea under Article 5, which provided as follows:

"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the provinces, pueblos or private persons, with proper permission, shall become the property of the party constructing such works, unless otherwise provided by the terms of the grant of authority."

Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party undertaking the reclamation, provided the government issued the necessary permit and did not reserve ownership of the reclaimed land to the State.

Article 339 of the Civil Code of 1889 defined property of public dominion as follows:

"Art. 339. Property of public dominion is –

1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, riverbanks, shores, roadsteads, and that of a similar character;

2. That belonging exclusively to the State which, without being of general public use, is employed in some public service, or in the development of the national wealth, such as walls, fortresses, and other works for the defense of the territory, and mines, until granted to private individuals."

Property devoted to public use referred to property open for use by the public. In contrast, property devoted to public service referred to property used for some specific public service and open only to those authorized to use the property.

Property of public dominion referred not only to property devoted to public use, but also to property not so used but employed to develop the national wealth. This class of property constituted property of public dominion although employed for some economic or commercial activity to increase the national wealth.

Article 341 of the Civil Code of 1889 governed the re-classification of property of public dominion into private property, to wit:

"Art. 341. Property of public dominion, when no longer devoted to public use or to the defense of the territory, shall become a part of the private property of the State."

This provision, however, was not self-executing. The legislature, or the executive department pursuant to law, must declare the property no longer needed for public use or territorial defense before the government could lease or alienate the property to private parties.45

Act No. 1654 of the Philippine Commission

On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the lease of reclaimed and foreshore lands. The salient provisions of this law were as follows:

"Section 1. The control and disposition of the foreshore as defined in existing law, and the title to all Government or public lands made or reclaimed by the Government by dredging or filling or otherwise throughout the Philippine Islands, shall be retained by the Government without prejudice to vested rights and without prejudice to rights conceded to the City of Manila in the Luneta Extension.

Section 2. (a) The Secretary of the Interior shall cause all Government or public lands made or reclaimed by the Government by dredging or filling or otherwise to be divided into lots or blocks, with the necessary streets and alleyways located thereon, and shall cause plats and plans of such surveys to be prepared and filed with the Bureau of Lands.

(b) Upon completion of such plats and plans the Governor-General shall give notice to the public that such parts of the lands so made or reclaimed as are not needed for public purposes will be leased for commercial and business purposes, x x x.

x x x

(e) The leases above provided for shall be disposed of to the highest and best bidder therefore, subject to such regulations and safeguards as the Governor-General may by executive order prescribe." (Emphasis supplied)

Act No. 1654 mandated that the government should retain title to all lands reclaimed by the government. The Act also vested in the government control and disposition of foreshore lands. Private parties could lease lands reclaimed by the government only if these lands were no longer needed for public purpose. Act No. 1654 mandated public bidding in the lease of government reclaimed lands. Act No. 1654 made government reclaimed lands sui generis in that unlike other public lands which the government could sell to private parties, these reclaimed lands were available only for lease to private parties.

Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866. Act No. 1654 did not prohibit private parties from reclaiming parts of the sea under Section 5 of the Spanish Law of Waters. Lands reclaimed from the sea by private parties with government permission remained private lands.

Act No. 2874 of the Philippine Legislature

On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public Land Act.46 The salient provisions of Act No. 2874, on reclaimed lands, were as follows:

"Sec. 6. The Governor-General, upon the recommendation of the Secretary of Agriculture and Natural Resources, shall from time to time classify the lands of the public domain into –

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands, x x x.

Sec. 7. For the purposes of the government and disposition of alienable or disposable public lands, the Governor-General, upon recommendation by the Secretary of Agriculture and Natural Resources, shall from time to time declare what lands are open to disposition or concession under this Act."

Sec. 8. Only those lands shall be declared open to disposition or concession which have been officially delimited or classified x x x.

x x x

Sec. 55. Any tract of land of the public domain which, being neither timber nor mineral land, shall be classified as suitable for residential purposes or for commercial, industrial, or other productive purposes other than agricultural purposes, and shall be open to disposition or concession, shall be disposed of under the provisions of this chapter, and not otherwise.

Sec. 56. The lands disposable under this title shall be classified as follows:

(a) Lands reclaimed by the Government by dredging, filling, or other means;

(b) Foreshore;

(c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable lakes or rivers;

(d) Lands not included in any of the foregoing classes.

x x x.

Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six shall be disposed of to private parties by lease only and not otherwise, as soon as the Governor-General, upon recommendation by the Secretary of Agriculture and Natural Resources, shall declare that the same are not necessary for the public service and are open to disposition under this chapter. The lands included in class (d) may be disposed of by sale or lease under the provisions of this Act." (Emphasis supplied)

Section 6 of Act No. 2874 authorized the Governor-General to "classify lands of the public domain into x x x alienable or disposable"47 lands. Section 7 of the Act empowered the Governor-General to "declare what lands are open to disposition or concession." Section 8 of the Act limited alienable or disposable lands only to those lands which have been "officially delimited and classified."

Section 56 of Act No. 2874 stated that lands "disposable under this title48 shall be classified" as government reclaimed, foreshore and marshy lands, as well as other lands. All these lands, however, must be suitable for residential, commercial, industrial or other productive non-agricultural purposes. These provisions vested upon the Governor-General the power to classify inalienable lands of the public domain into disposable lands of the public domain. These provisions also empowered the Governor-General to classify further such disposable lands of the public domain into government reclaimed, foreshore or marshy lands of the public domain, as well as other non-agricultural lands.

Section 58 of Act No. 2874 categorically mandated that disposable lands of the public domain classified as government reclaimed, foreshore and marshy lands "shall be disposed of to private parties by lease only and not otherwise." The Governor-General, before allowing the lease of these lands to private parties, must formally declare that the lands were "not necessary for the public service." Act No. 2874 reiterated the State policy to lease and not to sell government reclaimed, foreshore and marshy lands of the public domain, a policy first enunciated in 1907 in Act No. 1654. Government reclaimed, foreshore and marshy lands remained sui generis, as the only alienable or disposable lands of the public domain that the government could not sell to private parties.

The rationale behind this State policy is obvious. Government reclaimed, foreshore and marshy public lands for non-agricultural purposes retain their inherent potential as areas for public service. This is the reason the government prohibited the sale, and only allowed the lease, of these lands to private parties. The State always reserved these lands for some future public service.

Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore and marshy lands into other non-agricultural lands under Section 56 (d). Lands falling under Section 56 (d) were the only lands for non-agricultural purposes the government could sell to private parties. Thus, under Act No. 2874, the government could not sell government reclaimed, foreshore and marshy lands to private parties, unless the legislature passed a law allowing their sale.49

Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant to Section 5 of the Spanish Law of Waters of 1866. Lands reclaimed from the sea by private parties with government permission remained private lands.

Dispositions under the 1935 Constitution

On May 14, 1935, the 1935 Constitution took effect upon its ratification by the Filipino people. The 1935 Constitution, in adopting the Regalian doctrine, declared in Section 1, Article XIII, that –

"Section 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government established under this Constitution. Natural resources, with the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for the exploitation, development, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for another twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases beneficial use may be the measure and limit of the grant." (Emphasis supplied)

The 1935 Constitution barred the alienation of all natural resources except public agricultural lands, which were the only natural resources the State could alienate. Thus, foreshore lands, considered part of the State's natural resources, became inalienable by constitutional fiat, available only for lease for 25 years, renewable for another 25 years. The government could alienate foreshore lands only after these lands were reclaimed and classified as alienable agricultural lands of the public domain. Government reclaimed and marshy lands of the public domain, being neither timber nor mineral lands, fell under the classification of public agricultural lands.50 However, government reclaimed and marshy lands, although subject to classification as disposable public agricultural lands, could only be leased and not sold to private parties because of Act No. 2874.

The prohibition on private parties from acquiring ownership of government reclaimed and marshy lands of the public domain was only a statutory prohibition and the legislature could therefore remove such prohibition. The 1935 Constitution did not prohibit individuals and corporations from acquiring government reclaimed and marshy lands of the public domain that were classified as agricultural lands under existing public land laws. Section 2, Article XIII of the 1935 Constitution provided as follows:

"Section 2. No private corporation or association may acquire, lease, or hold public agricultural lands in excess of one thousand and twenty four hectares, nor may any individual acquire such lands by purchase in excess of one hundred and forty hectares, or by lease in excess of one thousand and twenty-four hectares, or by homestead in excess of twenty-four hectares. Lands adapted to grazing, not exceeding two thousand hectares, may be leased to an individual, private corporation, or association." (Emphasis supplied)

Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58 of Act No. 2874 to open for sale to private parties government reclaimed and marshy lands of the public domain. On the contrary, the legislature continued the long established State policy of retaining for the government title and ownership of government reclaimed and marshy lands of the public domain.

Commonwealth Act No. 141 of the Philippine National Assembly

On November 7, 1936, the National Assembly approved Commonwealth Act No. 141, also known as the Public Land Act, which compiled the then existing laws on lands of the public domain. CA No. 141, as

amended, remains to this day the existing general law governing the classification and disposition of lands of the public domain other than timber and mineral lands.51

Section 6 of CA No. 141 empowers the President to classify lands of the public domain into "alienable or disposable"52 lands of the public domain, which prior to such classification are inalienable and outside the commerce of man. Section 7 of CA No. 141 authorizes the President to "declare what lands are open to disposition or concession." Section 8 of CA No. 141 states that the government can declare open for disposition or concession only lands that are "officially delimited and classified." Sections 6, 7 and 8 of CA No. 141 read as follows:

"Sec. 6. The President, upon the recommendation of the Secretary of Agriculture and Commerce, shall from time to time classify the lands of the public domain into –

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands,

and may at any time and in like manner transfer such lands from one class to another,53 for the purpose of their administration and disposition.

Sec. 7. For the purposes of the administration and disposition of alienable or disposable public lands, the President, upon recommendation by the Secretary of Agriculture and Commerce, shall from time to time declare what lands are open to disposition or concession under this Act.

Sec. 8. Only those lands shall be declared open to disposition or concession which have been officially delimited and classified and, when practicable, surveyed, and which have not been reserved for public or quasi-public uses, nor appropriated by the Government, nor in any manner become private property, nor those on which a private right authorized and recognized by this Act or any other valid law may be claimed, or which, having been reserved or appropriated, have ceased to be so. x x x."

Thus, before the government could alienate or dispose of lands of the public domain, the President must first officially classify these lands as alienable or disposable, and then declare them open to disposition or concession. There must be no law reserving these lands for public or quasi-public uses.

The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy lands of the public domain, are as follows:

"Sec. 58. Any tract of land of the public domain which, being neither timber nor mineral land, is intended to be used for residential purposes or for commercial, industrial, or other productive purposes other than agricultural, and is open to disposition or concession, shall be disposed of under the provisions of this chapter and not otherwise.

Sec. 59. The lands disposable under this title shall be classified as follows:

(a) Lands reclaimed by the Government by dredging, filling, or other means;

(b) Foreshore;

(c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable lakes or rivers;

(d) Lands not included in any of the foregoing classes.

Sec. 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to any person, corporation, or association authorized to purchase or lease public lands for agricultural purposes. x x x.

Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine shall be disposed of to private parties by lease only and not otherwise, as soon as the President, upon recommendation by the Secretary of Agriculture, shall declare that the same are not necessary for the public service and are open to disposition under this chapter. The lands included in class (d) may be disposed of by sale or lease under the provisions of this Act." (Emphasis supplied)

Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution, Section 58 of Act No. 2874 prohibiting the sale of government reclaimed, foreshore and marshy disposable lands of the public domain. All these lands are intended for residential, commercial, industrial or other non-agricultural purposes. As before, Section 61 allowed only the lease of such lands to private parties. The government could sell to private parties only lands falling under Section 59 (d) of CA No. 141, or those lands for non-agricultural purposes not classified as government reclaimed, foreshore and marshy disposable lands of the public domain. Foreshore lands, however, became inalienable under the 1935 Constitution which only allowed the lease of these lands to qualified private parties.

Section 58 of CA No. 141 expressly states that disposable lands of the public domain intended for residential, commercial, industrial or other productive purposes other than agricultural "shall be disposed of under the provisions of this chapter and not otherwise." Under Section 10 of CA No. 141, the term "disposition" includes lease of the land. Any disposition of government reclaimed, foreshore and marshy disposable lands for non-agricultural purposes must comply with Chapter IX, Title III of CA No. 141,54 unless a subsequent law amended or repealed these provisions.

In his concurring opinion in the landmark case of Republic Real Estate Corporation v. Court of Appeals,55Justice Reynato S. Puno summarized succinctly the law on this matter, as follows:

"Foreshore lands are lands of public dominion intended for public use. So too are lands reclaimed by the government by dredging, filling, or other means. Act 1654 mandated that the control and disposition of the foreshore and lands under water remained in the national government. Said law allowed only the 'leasing' of reclaimed land. The Public Land Acts of 1919 and 1936 also declared that the foreshore and lands reclaimed by the government were to be "disposed of to private parties by lease only and not otherwise." Before leasing, however, the Governor-General, upon recommendation of the Secretary of Agriculture and Natural Resources, had first to determine that the land reclaimed was not necessary for the public service. This requisite must have been met before the land could be disposed of. But even then, the foreshore and lands under water were not to be alienated and sold to private parties. The disposition of the reclaimed land was only by lease. The land remained property of the State." (Emphasis supplied)

As observed by Justice Puno in his concurring opinion, "Commonwealth Act No. 141 has remained in effect at present."

The State policy prohibiting the sale to private parties of government reclaimed, foreshore and marshy alienable lands of the public domain, first implemented in 1907 was thus reaffirmed in CA No. 141 after the 1935 Constitution took effect. The prohibition on the sale of foreshore lands, however, became a constitutional edict under the 1935 Constitution. Foreshore lands became inalienable as natural resources of the State, unless reclaimed by the government and classified as agricultural lands of the public domain, in which case they would fall under the classification of government reclaimed lands.

After the effectivity of the 1935 Constitution, government reclaimed and marshy disposable lands of the public domain continued to be only leased and not sold to private parties.56 These lands remained sui generis, as the only alienable or disposable lands of the public domain the government could not sell to private parties.

Since then and until now, the only way the government can sell to private parties government reclaimed and marshy disposable lands of the public domain is for the legislature to pass a law authorizing such sale. CA No. 141 does not authorize the President to reclassify government reclaimed and marshy lands into other non-agricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the only alienable or disposable lands for non-agricultural purposes that the government could sell to private parties.

Moreover, Section 60 of CA No. 141 expressly requires congressional authority before lands under Section 59 that the government previously transferred to government units or entities could be sold to private parties. Section 60 of CA No. 141 declares that –

"Sec. 60. x x x The area so leased or sold shall be such as shall, in the judgment of the Secretary of Agriculture and Natural Resources, be reasonably necessary for the purposes for which such sale or lease is requested, and shall not exceed one hundred and forty-four hectares: Provided, however, That this limitation shall not apply to grants, donations, or transfers made to a province, municipality or branch or subdivision of the Government for the purposes deemed by said entities conducive to the public interest;but the land so granted, donated, or transferred to a province, municipality or branch or subdivision of the Government shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its title, except when authorized by Congress: x x x." (Emphasis supplied)

The congressional authority required in Section 60 of CA No. 141 mirrors the legislative authority required in Section 56 of Act No. 2874.

One reason for the congressional authority is that Section 60 of CA No. 141 exempted government units and entities from the maximum area of public lands that could be acquired from the State. These government units and entities should not just turn around and sell these lands to private parties in violation of constitutional or statutory limitations. Otherwise, the transfer of lands for non-agricultural purposes to government units and entities could be used to circumvent constitutional limitations on ownership of alienable or disposable lands of the public domain. In the same manner, such transfers could also be used to evade the statutory prohibition in CA No. 141 on the sale of government reclaimed and marshy lands of the public domain to private parties. Section 60 of CA No. 141 constitutes by operation of law a lien on these lands.57

In case of sale or lease of disposable lands of the public domain falling under Section 59 of CA No. 141, Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA No. 141 provide as follows:

"Sec. 63. Whenever it is decided that lands covered by this chapter are not needed for public purposes, the Director of Lands shall ask the Secretary of Agriculture and Commerce (now the Secretary of Natural Resources) for authority to dispose of the same. Upon receipt of such authority, the Director of Lands shall give notice by public advertisement in the same manner as in the case of leases or sales of agricultural public land, x x x.

Sec. 67. The lease or sale shall be made by oral bidding; and adjudication shall be made to the highest bidder. x x x." (Emphasis supplied)

Thus, CA No. 141 mandates the Government to put to public auction all leases or sales of alienable or disposable lands of the public domain.58

Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the Spanish Law of Waters of 1866. Private parties could still reclaim portions of the sea with government permission. However, the reclaimed land could become private land only if classified as alienable agricultural land of the public domain open to disposition under CA No. 141. The 1935 Constitution prohibited the alienation of all natural resources except public agricultural lands.

The Civil Code of 1950

The Civil Code of 1950 readopted substantially the definition of property of public dominion found in the Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950 state that –

"Art. 420. The following things are property of public dominion:

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

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

x x x.

Art. 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State."

Again, the government must formally declare that the property of public dominion is no longer needed for public use or public service, before the same could be classified as patrimonial property of the State.59 In the case of government reclaimed and marshy lands of the public domain, the declaration of their being disposable, as well as the manner of their disposition, is governed by the applicable provisions of CA No. 141.

Like the Civil Code of 1889, the Civil Code of 1950 included as property of public dominion those properties of the State which, without being for public use, are intended for public service or the "development of the national wealth." Thus, government reclaimed and marshy lands of the State, even if not employed for public use or public service, if developed to enhance the national wealth, are classified as property of public dominion.

Dispositions under the 1973 Constitution

The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the Regalian doctrine. Section 8, Article XIV of the 1973 Constitution stated that –

"Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, wildlife, and other natural resources of the Philippines belong to the State. With the exception of agricultural, industrial or commercial, residential, and resettlement lands of the public domain, natural resources shall not be alienated, and no license, concession, or lease for the exploration, development, exploitation, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for not more than twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases, beneficial use may be the measure and the limit of the grant." (Emphasis supplied)

The 1973 Constitution prohibited the alienation of all natural resources with the exception of "agricultural, industrial or commercial, residential, and resettlement lands of the public domain." In contrast, the 1935

Constitution barred the alienation of all natural resources except "public agricultural lands." However, the term "public agricultural lands" in the 1935 Constitution encompassed industrial, commercial, residential and resettlement lands of the public domain.60 If the land of public domain were neither timber nor mineral land, it would fall under the classification of agricultural land of the public domain. Both the 1935 and 1973 Constitutions, therefore, prohibited the alienation of all natural resources except agricultural lands of the public domain.

The 1973 Constitution, however, limited the alienation of lands of the public domain to individuals who were citizens of the Philippines. Private corporations, even if wholly owned by Philippine citizens, were no longer allowed to acquire alienable lands of the public domain unlike in the 1935 Constitution. Section 11, Article XIV of the 1973 Constitution declared that –

"Sec. 11. The Batasang Pambansa, taking into account conservation, ecological, and development requirements of the natural resources, shall determine by law the size of land of the public domain which may be developed, held or acquired by, or leased to, any qualified individual, corporation, or association, and the conditions therefor. No private corporation or association may hold alienable lands of the public domain except by lease not to exceed one thousand hectares in area nor may any citizen hold such lands by lease in excess of five hundred hectares or acquire by purchase, homestead or grant, in excess of twenty-four hectares. No private corporation or association may hold by lease, concession, license or permit, timber or forest lands and other timber or forest resources in excess of one hundred thousand hectares. However, such area may be increased by the Batasang Pambansa upon recommendation of the National Economic and Development Authority." (Emphasis supplied)

Thus, under the 1973 Constitution, private corporations could hold alienable lands of the public domain only through lease. Only individuals could now acquire alienable lands of the public domain, and private corporations became absolutely barred from acquiring any kind of alienable land of the public domain. The constitutional ban extended to all kinds of alienable lands of the public domain, while the statutory ban under CA No. 141 applied only to government reclaimed, foreshore and marshy alienable lands of the public domain.

PD No. 1084 Creating the Public Estates Authority

On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No. 1084 creating PEA, a wholly government owned and controlled corporation with a special charter. Sections 4 and 8 of PD No. 1084, vests PEA with the following purposes and powers:

"Sec. 4. Purpose. The Authority is hereby created for the following purposes:

(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other means, or to acquire reclaimed land;

(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands, buildings, estates and other forms of real property, owned, managed, controlled and/or operated by the government;

(c) To provide for, operate or administer such service as may be necessary for the efficient, economical and beneficial utilization of the above properties.

Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying out the purposes for which it is created, have the following powers and functions:

(a)To prescribe its by-laws.

x x x

(i) To hold lands of the public domain in excess of the area permitted to private corporations by statute.

(j) To reclaim lands and to construct work across, or otherwise, any stream, watercourse, canal, ditch, flume x x x.

x x x

(o) To perform such acts and exercise such functions as may be necessary for the attainment of the purposes and objectives herein specified." (Emphasis supplied)

PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the public domain. Foreshore areas are those covered and uncovered by the ebb and flow of the tide.61 Submerged areas are those permanently under water regardless of the ebb and flow of the tide.62 Foreshore and submerged areas indisputably belong to the public domain63 and are inalienable unless reclaimed, classified as alienable lands open to disposition, and further declared no longer needed for public service.

The ban in the 1973 Constitution on private corporations from acquiring alienable lands of the public domain did not apply to PEA since it was then, and until today, a fully owned government corporation. The constitutional ban applied then, as it still applies now, only to "private corporations and associations." PD No. 1084 expressly empowers PEA "to hold lands of the public domain" even "in excess of the area permitted to private corporations by statute." Thus, PEA can hold title to private lands, as well as title to lands of the public domain.

In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the public domain, there must be legislative authority empowering PEA to sell these lands. This legislative authority is necessary in view of Section 60 of CA No.141, which states –

"Sec. 60. x x x; but the land so granted, donated or transferred to a province, municipality, or branch or subdivision of the Government shall not be alienated, encumbered or otherwise disposed of in a manner affecting its title, except when authorized by Congress; x x x." (Emphasis supplied)

Without such legislative authority, PEA could not sell but only lease its reclaimed foreshore and submerged alienable lands of the public domain. Nevertheless, any legislative authority granted to PEA to sell its reclaimed alienable lands of the public domain would be subject to the constitutional ban on private corporations from acquiring alienable lands of the public domain. Hence, such legislative authority could only benefit private individuals.

Dispositions under the 1987 Constitution

The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the Regalian doctrine. The 1987 Constitution declares that all natural resources are "owned by the State," and except for alienable agricultural lands of the public domain, natural resources cannot be alienated. Sections 2 and 3, Article XII of the 1987 Constitution state that –

"Section 2. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. x x x.

Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and national parks. Agricultural lands of the public domain may be further classified by law according to the uses which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof by purchase, homestead, or grant.

Taking into account the requirements of conservation, ecology, and development, and subject to the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public domain which may be acquired, developed, held, or leased and the conditions therefor." (Emphasis supplied)

The 1987 Constitution continues the State policy in the 1973 Constitution banning private corporations fromacquiring any kind of alienable land of the public domain. Like the 1973 Constitution, the 1987 Constitution allows private corporations to hold alienable lands of the public domain only through lease. As in the 1935 and 1973 Constitutions, the general law governing the lease to private corporations of reclaimed, foreshore and marshy alienable lands of the public domain is still CA No. 141.

The Rationale behind the Constitutional Ban

The rationale behind the constitutional ban on corporations from acquiring, except through lease, alienable lands of the public domain is not well understood. During the deliberations of the 1986 Constitutional Commission, the commissioners probed the rationale behind this ban, thus:

"FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5 which says:

`No private corporation or association may hold alienable lands of the public domain except by lease, not to exceed one thousand hectares in area.'

If we recall, this provision did not exist under the 1935 Constitution, but this was introduced in the 1973 Constitution. In effect, it prohibits private corporations from acquiring alienable public lands. But it has not been very clear in jurisprudence what the reason for this is. In some of the cases decided in 1982 and 1983, it was indicated that the purpose of this is to prevent large landholdings. Is that the intent of this provision?

MR. VILLEGAS: I think that is the spirit of the provision.

FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were instances where the Iglesia ni Cristo was not allowed to acquire a mere 313-square meter land where a chapel stood because the Supreme Court said it would be in violation of this." (Emphasis supplied)

In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional ban in this way:

"Indeed, one purpose of the constitutional prohibition against purchases of public agricultural lands by private corporations is to equitably diffuse land ownership or to encourage 'owner-cultivatorship and the economic family-size farm' and to prevent a recurrence of cases like the instant case. Huge landholdings by corporations or private persons had spawned social unrest."

However, if the constitutional intent is to prevent huge landholdings, the Constitution could have simply limited the size of alienable lands of the public domain that corporations could acquire. The Constitution could have followed the limitations on individuals, who could acquire not more than 24 hectares of

alienable lands of the public domain under the 1973 Constitution, and not more than 12 hectares under the 1987 Constitution.

If the constitutional intent is to encourage economic family-size farms, placing the land in the name of a corporation would be more effective in preventing the break-up of farmlands. If the farmland is registered in the name of a corporation, upon the death of the owner, his heirs would inherit shares in the corporation instead of subdivided parcels of the farmland. This would prevent the continuing break-up of farmlands into smaller and smaller plots from one generation to the next.

In actual practice, the constitutional ban strengthens the constitutional limitation on individuals from acquiring more than the allowed area of alienable lands of the public domain. Without the constitutional ban, individuals who already acquired the maximum area of alienable lands of the public domain could easily set up corporations to acquire more alienable public lands. An individual could own as many corporations as his means would allow him. An individual could even hide his ownership of a corporation by putting his nominees as stockholders of the corporation. The corporation is a convenient vehicle to circumvent the constitutional limitation on acquisition by individuals of alienable lands of the public domain.

The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a limited area of alienable land of the public domain to a qualified individual. This constitutional intent is safeguarded by the provision prohibiting corporations from acquiring alienable lands of the public domain, since the vehicle to circumvent the constitutional intent is removed. The available alienable public lands are gradually decreasing in the face of an ever-growing population. The most effective way to insure faithful adherence to this constitutional intent is to grant or sell alienable lands of the public domain only to individuals. This, it would seem, is the practical benefit arising from the constitutional ban.

The Amended Joint Venture Agreement

The subject matter of the Amended JVA, as stated in its second Whereas clause, consists of three properties, namely:

1. "[T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo Boulevard in Paranaque and Las Pinas, Metro Manila, with a combined titled area of 1,578,441 square meters;"

2. "[A]nother area of 2,421,559 square meters contiguous to the three islands;" and

3. "[A]t AMARI's option as approved by PEA, an additional 350 hectares more or less to regularize the configuration of the reclaimed area."65

PEA confirms that the Amended JVA involves "the development of the Freedom Islands and further reclamation of about 250 hectares x x x," plus an option "granted to AMARI to subsequently reclaim another 350 hectares x x x."66

In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84 hectares of the 750-hectare reclamation project have been reclaimed, and the rest of the 592.15 hectares are still submerged areas forming part of Manila Bay.

Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for PEA's "actual cost" in partially reclaiming the Freedom Islands. AMARI will also complete, at its own expense, the reclamation of the Freedom Islands. AMARI will further shoulder all the reclamation costs of all the other areas, totaling 592.15 hectares, still to be reclaimed. AMARI and PEA will share, in the proportion of 70 percent and 30 percent, respectively, the total net usable area which is defined in the Amended JVA as

the total reclaimed area less 30 percent earmarked for common areas. Title to AMARI's share in the net usable area, totaling 367.5 hectares, will be issued in the name of AMARI. Section 5.2 (c) of the Amended JVA provides that –

"x x x, PEA shall have the duty to execute without delay the necessary deed of transfer or conveyance of the title pertaining to AMARI's Land share based on the Land Allocation Plan. PEA, when requested in writing by AMARI, shall then cause the issuance and delivery of the proper certificates of title covering AMARI's Land Share in the name of AMARI, x x x; provided, that if more than seventy percent (70%) of the titled area at any given time pertains to AMARI, PEA shall deliver to AMARI only seventy percent (70%) of the titles pertaining to AMARI, until such time when a corresponding proportionate area of additional land pertaining to PEA has been titled." (Emphasis supplied)

Indisputably, under the Amended JVA AMARI will acquire and own a maximum of 367.5 hectares of reclaimed land which will be titled in its name.

To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint venture PEA's statutory authority, rights and privileges to reclaim foreshore and submerged areas in Manila Bay. Section 3.2.a of the Amended JVA states that –

"PEA hereby contributes to the joint venture its rights and privileges to perform Rawland Reclamation and Horizontal Development as well as own the Reclamation Area, thereby granting the Joint Venture the full and exclusive right, authority and privilege to undertake the Project in accordance with the Master Development Plan."

The Amended JVA is the product of a renegotiation of the original JVA dated April 25, 1995 and its supplemental agreement dated August 9, 1995.

The Threshold Issue

The threshold issue is whether AMARI, a private corporation, can acquire and own under the Amended JVA 367.5 hectares of reclaimed foreshore and submerged areas in Manila Bay in view of Sections 2 and 3, Article XII of the 1987 Constitution which state that:

"Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. x x x.

x x x

Section 3. x x x Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, x x x."(Emphasis supplied)

Classification of Reclaimed Foreshore and Submerged Areas

PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila Bay are alienable or disposable lands of the public domain. In its Memorandum,67 PEA admits that –

"Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as alienable and disposable lands of the public domain:

'Sec. 59. The lands disposable under this title shall be classified as follows:

(a) Lands reclaimed by the government by dredging, filling, or other means;

x x x.'" (Emphasis supplied)

Likewise, the Legal Task Force68 constituted under Presidential Administrative Order No. 365 admitted in its Report and Recommendation to then President Fidel V. Ramos, "[R]eclaimed lands are classified as alienable and disposable lands of the public domain."69 The Legal Task Force concluded that –

"D. Conclusion

Reclaimed lands are lands of the public domain. However, by statutory authority, the rights of ownership and disposition over reclaimed lands have been transferred to PEA, by virtue of which PEA, as owner, may validly convey the same to any qualified person without violating the Constitution or any statute.

The constitutional provision prohibiting private corporations from holding public land, except by lease (Sec. 3, Art. XVII,70 1987 Constitution), does not apply to reclaimed lands whose ownership has passed on to PEA by statutory grant."

Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila Bay are part of the "lands of the public domain, waters x x x and other natural resources" and consequently "owned by the State." As such, foreshore and submerged areas "shall not be alienated," unless they are classified as "agricultural lands" of the public domain. The mere reclamation of these areas by PEA does not convert these inalienable natural resources of the State into alienable or disposable lands of the public domain. There must be a law or presidential proclamation officially classifying these reclaimed lands as alienable or disposable and open to disposition or concession. Moreover, these reclaimed lands cannot be classified as alienable or disposable if the law has reserved them for some public or quasi-public use.71

Section 8 of CA No. 141 provides that "only those lands shall be declared open to disposition or concession which have been officially delimited and classified."72 The President has the authority to classify inalienable lands of the public domain into alienable or disposable lands of the public domain, pursuant to Section 6 of CA No. 141. In Laurel vs. Garcia,73 the Executive Department attempted to sell the Roppongi property in Tokyo, Japan, which was acquired by the Philippine Government for use as the Chancery of the Philippine Embassy. Although the Chancery had transferred to another location thirteen years earlier, the Court still ruled that, under Article 42274 of the Civil Code, a property of public dominion retains such character until formally declared otherwise. The Court ruled that –

"The fact that the Roppongi site has not been used for a long time for actual Embassy service does not automatically convert it to patrimonial property. Any such conversion happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A property continues to be part of the public domain, not available for private appropriation or ownership 'until there is a formal declaration on the part of the government to withdraw it from being such' (Ignacio v. Director of Lands, 108 Phil. 335 [1960]." (Emphasis supplied)

PD No. 1085, issued on February 4, 1977, authorized the issuance of special land patents for lands reclaimed by PEA from the foreshore or submerged areas of Manila Bay. On January 19, 1988 then President Corazon C. Aquino issued Special Patent No. 3517 in the name of PEA for the 157.84 hectares comprising the partially reclaimed Freedom Islands. Subsequently, on April 9, 1999 the Register of Deeds of the Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the name of PEA pursuant to

Section 103 of PD No. 1529 authorizing the issuance of certificates of title corresponding to land patents. To this day, these certificates of title are still in the name of PEA.

PD No. 1085, coupled with President Aquino's actual issuance of a special patent covering the Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085 and President Aquino's issuance of a land patent also constitute a declaration that the Freedom Islands are no longer needed for public service. The Freedom Islands are thus alienable or disposable lands of the public domain, open to disposition or concession to qualified parties.

At the time then President Aquino issued Special Patent No. 3517, PEA had already reclaimed the Freedom Islands although subsequently there were partial erosions on some areas. The government had also completed the necessary surveys on these islands. Thus, the Freedom Islands were no longer part of Manila Bay but part of the land mass. Section 3, Article XII of the 1987 Constitution classifies lands of the public domain into "agricultural, forest or timber, mineral lands, and national parks." Being neither timber, mineral, nor national park lands, the reclaimed Freedom Islands necessarily fall under the classification of agricultural lands of the public domain. Under the 1987 Constitution, agricultural lands of the public domain are the only natural resources that the State may alienate to qualified private parties. All other natural resources, such as the seas or bays, are "waters x x x owned by the State" forming part of the public domain, and are inalienable pursuant to Section 2, Article XII of the 1987 Constitution.

AMARI claims that the Freedom Islands are private lands because CDCP, then a private corporation, reclaimed the islands under a contract dated November 20, 1973 with the Commissioner of Public Highways. AMARI, citing Article 5 of the Spanish Law of Waters of 1866, argues that "if the ownership of reclaimed lands may be given to the party constructing the works, then it cannot be said that reclaimed lands are lands of the public domain which the State may not alienate."75 Article 5 of the Spanish Law of Waters reads as follows:

"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the provinces, pueblos or private persons, with proper permission, shall become the property of the party constructing such works, unless otherwise provided by the terms of the grant of authority." (Emphasis supplied)

Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from the sea only with "proper permission" from the State. Private parties could own the reclaimed land only if not "otherwise provided by the terms of the grant of authority." This clearly meant that no one could reclaim from the sea without permission from the State because the sea is property of public dominion. It also meant that the State could grant or withhold ownership of the reclaimed land because any reclaimed land, like the sea from which it emerged, belonged to the State. Thus, a private person reclaiming from the sea without permission from the State could not acquire ownership of the reclaimed land which would remain property of public dominion like the sea it replaced.76 Article 5 of the Spanish Law of Waters of 1866 adopted the time-honored principle of land ownership that "all lands that were not acquired from the government, either by purchase or by grant, belong to the public domain."77

Article 5 of the Spanish Law of Waters must be read together with laws subsequently enacted on the disposition of public lands. In particular, CA No. 141 requires that lands of the public domain must first be classified as alienable or disposable before the government can alienate them. These lands must not be reserved for public or quasi-public purposes.78 Moreover, the contract between CDCP and the government was executed after the effectivity of the 1973 Constitution which barred private corporations from acquiring any kind of alienable land of the public domain. This contract could not have converted the Freedom Islands into private lands of a private corporation.

Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing the reclamation of areas under water and revested solely in the National Government the power to reclaim lands. Section 1 of PD No. 3-A declared that –

"The provisions of any law to the contrary notwithstanding, the reclamation of areas under water, whether foreshore or inland, shall be limited to the National Government or any person authorized by it under a proper contract. (Emphasis supplied)

x x x."

PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because reclamation of areas under water could now be undertaken only by the National Government or by a person contracted by the National Government. Private parties may reclaim from the sea only under a contract with the National Government, and no longer by grant or permission as provided in Section 5 of the Spanish Law of Waters of 1866.

Executive Order No. 525, issued on February 14, 1979, designated PEA as the National Government's implementing arm to undertake "all reclamation projects of the government," which "shall be undertaken by the PEA or through a proper contract executed by it with any person or entity." Under such contract, a private party receives compensation for reclamation services rendered to PEA. Payment to the contractor may be in cash, or in kind consisting of portions of the reclaimed land, subject to the constitutional ban on private corporations from acquiring alienable lands of the public domain. The reclaimed land can be used as payment in kind only if the reclaimed land is first classified as alienable or disposable land open to disposition, and then declared no longer needed for public service.

The Amended JVA covers not only the Freedom Islands, but also an additional 592.15 hectares which are still submerged and forming part of Manila Bay. There is no legislative or Presidential act classifying these submerged areas as alienable or disposable lands of the public domain open to disposition. These submerged areas are not covered by any patent or certificate of title. There can be no dispute that these submerged areas form part of the public domain, and in their present state are inalienable and outside the commerce of man. Until reclaimed from the sea, these submerged areas are, under the Constitution, "waters x x x owned by the State," forming part of the public domain and consequently inalienable. Only when actually reclaimed from the sea can these submerged areas be classified as public agricultural lands, which under the Constitution are the only natural resources that the State may alienate. Once reclaimed and transformed into public agricultural lands, the government may then officially classify these lands as alienable or disposable lands open to disposition. Thereafter, the government may declare these lands no longer needed for public service. Only then can these reclaimed lands be considered alienable or disposable lands of the public domain and within the commerce of man.

The classification of PEA's reclaimed foreshore and submerged lands into alienable or disposable lands open to disposition is necessary because PEA is tasked under its charter to undertake public services that require the use of lands of the public domain. Under Section 5 of PD No. 1084, the functions of PEA include the following: "[T]o own or operate railroads, tramways and other kinds of land transportation, x x x; [T]o construct, maintain and operate such systems of sanitary sewers as may be necessary; [T]o construct, maintain and operate such storm drains as may be necessary." PEA is empowered to issue "rules and regulations as may be necessary for the proper use by private parties of any or all of the highways, roads, utilities, buildings and/or any of its propertiesand to impose or collect fees or tolls for their use." Thus, part of the reclaimed foreshore and submerged lands held by the PEA would actually be needed for public use or service since many of the functions imposed on PEA by its charter constitute essential public services.

Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government." The same section also states that "[A]ll reclamation projects shall be approved by the

President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or entity; x x x." Thus, under EO No. 525, in relation to PD No. 3-A and PD No.1084, PEA became the primary implementing agency of the National Government to reclaim foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as the government entity "to undertake the reclamation of lands and ensure their maximum utilization in promoting public welfare and interests."79 Since large portions of these reclaimed lands would obviously be needed for public service, there must be a formal declaration segregating reclaimed lands no longer needed for public service from those still needed for public service.1âwphi1.nêt

Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to or be owned by the PEA," could not automatically operate to classify inalienable lands into alienable or disposable lands of the public domain. Otherwise, reclaimed foreshore and submerged lands of the public domain would automatically become alienable once reclaimed by PEA, whether or not classified as alienable or disposable.

The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No. 525, vests in the Department of Environment and Natural Resources ("DENR" for brevity) the following powers and functions:

"Sec. 4. Powers and Functions. The Department shall:

(1) x x x

x x x

(4) Exercise supervision and control over forest lands, alienable and disposable public lands, mineral resources and, in the process of exercising such control, impose appropriate taxes, fees, charges, rentals and any such form of levy and collect such revenues for the exploration, development, utilization or gathering of such resources;

x x x

(14) Promulgate rules, regulations and guidelines on the issuance of licenses, permits, concessions, lease agreements and such other privileges concerning the development, exploration and utilization of the country's marine, freshwater, and brackish water and over all aquatic resources of the country and shall continue to oversee, supervise and police our natural resources; cancel or cause to cancel such privileges upon failure, non-compliance or violations of any regulation, order, and for all other causes which are in furtherance of the conservation of natural resources and supportive of the national interest;

(15) Exercise exclusive jurisdiction on the management and disposition of all lands of the public domain and serve as the sole agency responsible for classification, sub-classification, surveying and titling of lands in consultation with appropriate agencies."80 (Emphasis supplied)

As manager, conservator and overseer of the natural resources of the State, DENR exercises "supervision and control over alienable and disposable public lands." DENR also exercises "exclusive jurisdiction on the management and disposition of all lands of the public domain." Thus, DENR decides whether areas under water, like foreshore or submerged areas of Manila Bay, should be reclaimed or not. This means that PEA needs authorization from DENR before PEA can undertake reclamation projects in Manila Bay, or in any part of the country.

DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain. Hence, DENR decides whether reclaimed lands of PEA should be classified as alienable under Sections 681 and

782 of CA No. 141. Once DENR decides that the reclaimed lands should be so classified, it then recommends to the President the issuance of a proclamation classifying the lands as alienable or disposable lands of the public domain open to disposition. We note that then DENR Secretary Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the Revised Administrative Code and Sections 6 and 7 of CA No. 141.

In short, DENR is vested with the power to authorize the reclamation of areas under water, while PEA is vested with the power to undertake the physical reclamation of areas under water, whether directly or through private contractors. DENR is also empowered to classify lands of the public domain into alienable or disposable lands subject to the approval of the President. On the other hand, PEA is tasked to develop, sell or lease the reclaimed alienable lands of the public domain.

Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas does not make the reclaimed lands alienable or disposable lands of the public domain, much less patrimonial lands of PEA. Likewise, the mere transfer by the National Government of lands of the public domain to PEA does not make the lands alienable or disposable lands of the public domain, much less patrimonial lands of PEA.

Absent two official acts – a classification that these lands are alienable or disposable and open to disposition and a declaration that these lands are not needed for public service, lands reclaimed by PEA remain inalienable lands of the public domain. Only such an official classification and formal declaration can convert reclaimed lands into alienable or disposable lands of the public domain, open to disposition under the Constitution, Title I and Title III83of CA No. 141 and other applicable laws.84

PEA's Authority to Sell Reclaimed Lands

PEA, like the Legal Task Force, argues that as alienable or disposable lands of the public domain, the reclaimed lands shall be disposed of in accordance with CA No. 141, the Public Land Act. PEA, citing Section 60 of CA No. 141, admits that reclaimed lands transferred to a branch or subdivision of the government "shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its title, except when authorized by Congress: x x x."85 (Emphasis by PEA)

In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised Administrative Code of 1987, which states that –

"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following: x x x."

Thus, the Court concluded that a law is needed to convey any real property belonging to the Government. The Court declared that -

"It is not for the President to convey real property of the government on his or her own sole will. Any such conveyance must be authorized and approved by a law enacted by the Congress. It requires executive and legislative concurrence." (Emphasis supplied)

PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority allowing PEA to sell its reclaimed lands. PD No. 1085, issued on February 4, 1977, provides that –

"The land reclaimed in the foreshore and offshore area of Manila Bay pursuant to the contract for the reclamation and construction of the Manila-Cavite Coastal Road Project between the Republic of the Philippines and the Construction and Development Corporation of the Philippines dated November 20, 1973 and/or any other contract or reclamation covering the same area is hereby transferred, conveyed and assigned to the ownership and administration of the Public

Estates Authority established pursuant to PD No. 1084; Provided, however, That the rights and interests of the Construction and Development Corporation of the Philippines pursuant to the aforesaid contract shall be recognized and respected.

Henceforth, the Public Estates Authority shall exercise the rights and assume the obligations of the Republic of the Philippines (Department of Public Highways) arising from, or incident to, the aforesaid contract between the Republic of the Philippines and the Construction and Development Corporation of the Philippines.

In consideration of the foregoing transfer and assignment, the Public Estates Authority shall issue in favor of the Republic of the Philippines the corresponding shares of stock in said entity with an issued value of said shares of stock (which) shall be deemed fully paid and non-assessable.

The Secretary of Public Highways and the General Manager of the Public Estates Authority shall execute such contracts or agreements, including appropriate agreements with the Construction and Development Corporation of the Philippines, as may be necessary to implement the above.

Special land patent/patents shall be issued by the Secretary of Natural Resources in favor of the Public Estates Authority without prejudice to the subsequent transfer to the contractor or his assignees of such portion or portions of the land reclaimed or to be reclaimed as provided for in the above-mentioned contract. On the basis of such patents, the Land Registration Commission shall issue the corresponding certificate of title." (Emphasis supplied)

On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that -

"Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the PEA which shall be responsible for its administration, development, utilization or disposition in accordance with the provisions of Presidential Decree No. 1084. Any and all income that the PEA may derive from the sale, lease or use of reclaimed lands shall be used in accordance with the provisions of Presidential Decree No. 1084."

There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its reclaimed lands. PD No. 1085 merely transferred "ownership and administration" of lands reclaimed from Manila Bay to PEA, while EO No. 525 declared that lands reclaimed by PEA "shall belong to or be owned by PEA." EO No. 525 expressly states that PEA should dispose of its reclaimed lands "in accordance with the provisions of Presidential Decree No. 1084," the charter of PEA.

PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands x x x owned, managed, controlled and/or operated by the government."87 (Emphasis supplied) There is, therefore, legislative authority granted to PEA to sell its lands, whether patrimonial or alienable lands of the public domain. PEA may sell to private parties its patrimonial properties in accordance with the PEA charter free from constitutional limitations. The constitutional ban on private corporations from acquiring alienable lands of the public domain does not apply to the sale of PEA's patrimonial lands.

PEA may also sell its alienable or disposable lands of the public domain to private individuals since, with the legislative authority, there is no longer any statutory prohibition against such sales and the constitutional ban does not apply to individuals. PEA, however, cannot sell any of its alienable or disposable lands of the public domain to private corporations since Section 3, Article XII of the 1987 Constitution expressly prohibits such sales. The legislative authority benefits only individuals. Private corporations remain barred from acquiring any kind of alienable land of the public domain, including government reclaimed lands.

The provision in PD No. 1085 stating that portions of the reclaimed lands could be transferred by PEA to the "contractor or his assignees" (Emphasis supplied) would not apply to private corporations but only to individuals because of the constitutional ban. Otherwise, the provisions of PD No. 1085 would violate both the 1973 and 1987 Constitutions.

The requirement of public auction in the sale of reclaimed lands

Assuming the reclaimed lands of PEA are classified as alienable or disposable lands open to disposition, and further declared no longer needed for public service, PEA would have to conduct a public bidding in selling or leasing these lands. PEA must observe the provisions of Sections 63 and 67 of CA No. 141 requiring public auction, in the absence of a law exempting PEA from holding a public auction.88 Special Patent No. 3517 expressly states that the patent is issued by authority of the Constitution and PD No. 1084, "supplemented by Commonwealth Act No. 141, as amended." This is an acknowledgment that the provisions of CA No. 141 apply to the disposition of reclaimed alienable lands of the public domain unless otherwise provided by law. Executive Order No. 654,89 which authorizes PEA "to determine the kind and manner of payment for the transfer" of its assets and properties, does not exempt PEA from the requirement of public auction. EO No. 654 merely authorizes PEA to decide the mode of payment, whether in kind and in installment, but does not authorize PEA to dispense with public auction.

Moreover, under Section 79 of PD No. 1445, otherwise known as the Government Auditing Code, the government is required to sell valuable government property through public bidding. Section 79 of PD No. 1445 mandates that –

"Section 79. When government property has become unserviceable for any cause, or is no longer needed, it shall, upon application of the officer accountable therefor, be inspected by the head of the agency or his duly authorized representative in the presence of the auditor concerned and, if found to be valueless or unsaleable, it may be destroyed in their presence. If found to be valuable, it may be sold at public auction to the highest bidder under the supervision of the proper committee on award or similar body in the presence of the auditor concerned or other authorized representative of the Commission, after advertising by printed notice in the Official Gazette, or for not less than three consecutive days in any newspaper of general circulation, or where the value of the property does not warrant the expense of publication, by notices posted for a like period in at least three public places in the locality where the property is to be sold.In the event that the public auction fails, the property may be sold at a private sale at such price as may be fixed by the same committee or body concerned and approved by the Commission."

It is only when the public auction fails that a negotiated sale is allowed, in which case the Commission on Audit must approve the selling price.90 The Commission on Audit implements Section 79 of the Government Auditing Code through Circular No. 89-29691 dated January 27, 1989. This circular emphasizes that government assets must be disposed of only through public auction, and a negotiated sale can be resorted to only in case of "failure of public auction."

At the public auction sale, only Philippine citizens are qualified to bid for PEA's reclaimed foreshore and submerged alienable lands of the public domain. Private corporations are barred from bidding at the auction sale of any kind of alienable land of the public domain.

PEA originally scheduled a public bidding for the Freedom Islands on December 10, 1991. PEA imposed a condition that the winning bidder should reclaim another 250 hectares of submerged areas to regularize the shape of the Freedom Islands, under a 60-40 sharing of the additional reclaimed areas in favor of the winning bidder.92No one, however, submitted a bid. On December 23, 1994, the Government Corporate Counsel advised PEA it could sell the Freedom Islands through negotiation, without need of another public bidding, because of the failure of the public bidding on December 10, 1991.93

However, the original JVA dated April 25, 1995 covered not only the Freedom Islands and the additional 250 hectares still to be reclaimed, it also granted an option to AMARI to reclaim another 350 hectares. The original JVA, a negotiated contract, enlarged the reclamation area to 750 hectares.94 The failure of public bidding on December 10, 1991, involving only 407.84 hectares,95 is not a valid justification for a negotiated sale of 750 hectares, almost double the area publicly auctioned. Besides, the failure of public bidding happened on December 10, 1991, more than three years before the signing of the original JVA on April 25, 1995. The economic situation in the country had greatly improved during the intervening period.

Reclamation under the BOT Law and the Local Government Code

The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is absolute and clear: "Private corporations or associations may not hold such alienable lands of the public domain except by lease, x x x." Even Republic Act No. 6957 ("BOT Law," for brevity), cited by PEA and AMARI as legislative authority to sell reclaimed lands to private parties, recognizes the constitutional ban. Section 6 of RA No. 6957 states –

"Sec. 6. Repayment Scheme. - For the financing, construction, operation and maintenance of any infrastructure projects undertaken through the build-operate-and-transfer arrangement or any of its variations pursuant to the provisions of this Act, the project proponent x x x may likewise be repaid in the form of a share in the revenue of the project or other non-monetary payments, such as, but not limited to, the grant of a portion or percentage of the reclaimed land, subject to the constitutional requirements with respect to the ownership of the land: x x x." (Emphasis supplied)

A private corporation, even one that undertakes the physical reclamation of a government BOT project, cannot acquire reclaimed alienable lands of the public domain in view of the constitutional ban.

Section 302 of the Local Government Code, also mentioned by PEA and AMARI, authorizes local governments in land reclamation projects to pay the contractor or developer in kind consisting of a percentage of the reclaimed land, to wit:

"Section 302. Financing, Construction, Maintenance, Operation, and Management of Infrastructure Projects by the Private Sector. x x x

x x x

In case of land reclamation or construction of industrial estates, the repayment plan may consist of the grant of a portion or percentage of the reclaimed land or the industrial estate constructed."

Although Section 302 of the Local Government Code does not contain a proviso similar to that of the BOT Law, the constitutional restrictions on land ownership automatically apply even though not expressly mentioned in the Local Government Code.

Thus, under either the BOT Law or the Local Government Code, the contractor or developer, if a corporate entity, can only be paid with leaseholds on portions of the reclaimed land. If the contractor or developer is an individual, portions of the reclaimed land, not exceeding 12 hectares96 of non-agricultural lands, may be conveyed to him in ownership in view of the legislative authority allowing such conveyance. This is the only way these provisions of the BOT Law and the Local Government Code can avoid a direct collision with Section 3, Article XII of the 1987 Constitution.

Registration of lands of the public domain

Finally, PEA theorizes that the "act of conveying the ownership of the reclaimed lands to public respondent PEA transformed such lands of the public domain to private lands." This theory is echoed by

AMARI which maintains that the "issuance of the special patent leading to the eventual issuance of title takes the subject land away from the land of public domain and converts the property into patrimonial or private property." In short, PEA and AMARI contend that with the issuance of Special Patent No. 3517 and the corresponding certificates of titles, the 157.84 hectares comprising the Freedom Islands have become private lands of PEA. In support of their theory, PEA and AMARI cite the following rulings of the Court:

1. Sumail v. Judge of CFI of Cotabato,97 where the Court held –

"Once the patent was granted and the corresponding certificate of title was issued, the land ceased to be part of the public domain and became private property over which the Director of Lands has neither control nor jurisdiction."

2. Lee Hong Hok v. David,98 where the Court declared -

"After the registration and issuance of the certificate and duplicate certificate of title based on a public land patent, the land covered thereby automatically comes under the operation of Republic Act 496 subject to all the safeguards provided therein."3. Heirs of Gregorio Tengco v. Heirs of Jose Aliwalas,99 where the Court ruled -

"While the Director of Lands has the power to review homestead patents, he may do so only so long as the land remains part of the public domain and continues to be under his exclusive control; but once the patent is registered and a certificate of title is issued, the land ceases to be part of the public domain and becomes private property over which the Director of Lands has neither control nor jurisdiction."

4. Manalo v. Intermediate Appellate Court,100 where the Court held –

"When the lots in dispute were certified as disposable on May 19, 1971, and free patents were issued covering the same in favor of the private respondents, the said lots ceased to be part of the public domain and, therefore, the Director of Lands lost jurisdiction over the same."

5.Republic v. Court of Appeals,101 where the Court stated –

"Proclamation No. 350, dated October 9, 1956, of President Magsaysay legally effected a land grant to the Mindanao Medical Center, Bureau of Medical Services, Department of Health, of the whole lot, validly sufficient for initial registration under the Land Registration Act. Such land grant is constitutive of a 'fee simple' title or absolute title in favor of petitioner Mindanao Medical Center. Thus, Section 122 of the Act, which governs the registration of grants or patents involving public lands, provides that 'Whenever public lands in the Philippine Islands belonging to the Government of the United States or to the Government of the Philippines are alienated, granted or conveyed to persons or to public or private corporations, the same shall be brought forthwith under the operation of this Act (Land Registration Act, Act 496) and shall become registered lands.'"

The first four cases cited involve petitions to cancel the land patents and the corresponding certificates of titlesissued to private parties. These four cases uniformly hold that the Director of Lands has no jurisdiction over private lands or that upon issuance of the certificate of title the land automatically comes under the Torrens System. The fifth case cited involves the registration under the Torrens System of a 12.8-hectare public land granted by the National Government to Mindanao Medical Center, a government unit under the Department of Health. The National Government transferred the 12.8-hectare public land to serve as the site for the hospital buildings and other facilities of Mindanao Medical Center, which performed a public service. The Court affirmed the registration of the 12.8-hectare public land in the name of Mindanao Medical Center under Section 122 of Act No. 496. This fifth case is an example of a public

land being registered under Act No. 496 without the land losing its character as a property of public dominion.

In the instant case, the only patent and certificates of title issued are those in the name of PEA, a wholly government owned corporation performing public as well as proprietary functions. No patent or certificate of title has been issued to any private party. No one is asking the Director of Lands to cancel PEA's patent or certificates of title. In fact, the thrust of the instant petition is that PEA's certificates of title should remain with PEA, and the land covered by these certificates, being alienable lands of the public domain, should not be sold to a private corporation.

Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant private or public ownership of the land. Registration is not a mode of acquiring ownership but is merely evidence of ownership previously conferred by any of the recognized modes of acquiring ownership. Registration does not give the registrant a better right than what the registrant had prior to the registration.102 The registration of lands of the public domain under the Torrens system, by itself, cannot convert public lands into private lands.103

Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the alienable land of the public domain automatically becomes private land cannot apply to government units and entities like PEA. The transfer of the Freedom Islands to PEA was made subject to the provisions of CA No. 141 as expressly stated in Special Patent No. 3517 issued by then President Aquino, to wit:

"NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the Philippines and in conformity with the provisions of Presidential Decree No. 1084, supplemented by Commonwealth Act No. 141, as amended, there are hereby granted and conveyed unto the Public Estates Authority the aforesaid tracts of land containing a total area of one million nine hundred fifteen thousand eight hundred ninety four (1,915,894) square meters; the technical description of which are hereto attached and made an integral part hereof." (Emphasis supplied)

Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered by PD No. 1084. Section 60 of CA No. 141 prohibits, "except when authorized by Congress," the sale of alienable lands of the public domain that are transferred to government units or entities. Section 60 of CA No. 141 constitutes, under Section 44 of PD No. 1529, a "statutory lien affecting title" of the registered land even if not annotated on the certificate of title.104 Alienable lands of the public domain held by government entities under Section 60 of CA No. 141 remain public lands because they cannot be alienated or encumbered unless Congress passes a law authorizing their disposition. Congress, however, cannot authorize the sale to private corporations of reclaimed alienable lands of the public domain because of the constitutional ban. Only individuals can benefit from such law.

The grant of legislative authority to sell public lands in accordance with Section 60 of CA No. 141 does not automatically convert alienable lands of the public domain into private or patrimonial lands. The alienable lands of the public domain must be transferred to qualified private parties, or to government entities not tasked to dispose of public lands, before these lands can become private or patrimonial lands. Otherwise, the constitutional ban will become illusory if Congress can declare lands of the public domain as private or patrimonial lands in the hands of a government agency tasked to dispose of public lands. This will allow private corporations to acquire directly from government agencies limitless areas of lands which, prior to such law, are concededly public lands.

Under EO No. 525, PEA became the central implementing agency of the National Government to reclaim foreshore and submerged areas of the public domain. Thus, EO No. 525 declares that –

"EXECUTIVE ORDER NO. 525

Designating the Public Estates Authority as the Agency Primarily Responsible for all Reclamation Projects

Whereas, there are several reclamation projects which are ongoing or being proposed to be undertaken in various parts of the country which need to be evaluated for consistency with national programs;

Whereas, there is a need to give further institutional support to the Government's declared policy to provide for a coordinated, economical and efficient reclamation of lands;

Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall be limited to the National Government or any person authorized by it under proper contract;

Whereas, a central authority is needed to act on behalf of the National Government which shall ensure a coordinated and integrated approach in the reclamation of lands;

Whereas, Presidential Decree No. 1084 creates the Public Estates Authority as a government corporation to undertake reclamation of lands and ensure their maximum utilization in promoting public welfare and interests; and

Whereas, Presidential Decree No. 1416 provides the President with continuing authority to reorganize the national government including the transfer, abolition, or merger of functions and offices.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution and pursuant to Presidential Decree No. 1416, do hereby order and direct the following:

Section 1. The Public Estates Authority (PEA) shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government. All reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or entity; Provided, that, reclamation projects of any national government agency or entity authorized under its charter shall be undertaken in consultation with the PEA upon approval of the President.

x x x ."

As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable lands of the public domain. Only when qualified private parties acquire these lands will the lands become private lands. In the hands of the government agency tasked and authorized to dispose of alienable of disposable lands of the public domain, these lands are still public, not private lands.

Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as well as "any and all kinds of lands." PEA can hold both lands of the public domain and private lands. Thus, the mere fact that alienable lands of the public domain like the Freedom Islands are transferred to PEA and issued land patents or certificates of title in PEA's name does not automatically make such lands private.

To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of alienable land of the public domain. PEA will simply turn around, as PEA has now done under the Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be reclaimed lands to a single private corporation in only one transaction. This scheme will effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos, now numbering over 80 million strong.

This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since PEA can "acquire x x x any and all kinds of lands." This will open the floodgates to corporations and even individuals acquiring hundreds of hectares of alienable lands of the public domain under the guise that in the hands of PEA these lands are private lands. This will result in corporations amassing huge landholdings never before seen in this country - creating the very evil that the constitutional ban was designed to prevent. This will completely reverse the clear direction of constitutional development in this country. The 1935 Constitution allowed private corporations to acquire not more than 1,024 hectares of public lands.105 The 1973 Constitution prohibited private corporations from acquiring any kind of public land, and the 1987 Constitution has unequivocally reiterated this prohibition.

The contention of PEA and AMARI that public lands, once registered under Act No. 496 or PD No. 1529, automatically become private lands is contrary to existing laws. Several laws authorize lands of the public domain to be registered under the Torrens System or Act No. 496, now PD No. 1529, without losing their character as public lands. Section 122 of Act No. 496, and Section 103 of PD No. 1529, respectively, provide as follows:

Act No. 496

"Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x Government of the Philippine Islands are alienated, granted, or conveyed to persons or the public or private corporations, the same shall be brought forthwith under the operation of this Act and shall become registered lands."

PD No. 1529

"Sec. 103. Certificate of Title to Patents. Whenever public land is by the Government alienated, granted or conveyed to any person, the same shall be brought forthwith under the operation of this Decree." (Emphasis supplied)

Based on its legislative history, the phrase "conveyed to any person" in Section 103 of PD No. 1529 includes conveyances of public lands to public corporations.

Alienable lands of the public domain "granted, donated, or transferred to a province, municipality, or branch or subdivision of the Government," as provided in Section 60 of CA No. 141, may be registered under the Torrens System pursuant to Section 103 of PD No. 1529. Such registration, however, is expressly subject to the condition in Section 60 of CA No. 141 that the land "shall not be alienated, encumbered or otherwise disposed of in a manner affecting its title, except when authorized by Congress." This provision refers to government reclaimed, foreshore and marshy lands of the public domain that have been titled but still cannot be alienated or encumbered unless expressly authorized by Congress. The need for legislative authority prevents the registered land of the public domain from becoming private land that can be disposed of to qualified private parties.

The Revised Administrative Code of 1987 also recognizes that lands of the public domain may be registered under the Torrens System. Section 48, Chapter 12, Book I of the Code states –

"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:

(1) x x x

(2) For property belonging to the Republic of the Philippines, but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality." (Emphasis supplied)

Thus, private property purchased by the National Government for expansion of a public wharf may be titled in the name of a government corporation regulating port operations in the country. Private property purchased by the National Government for expansion of an airport may also be titled in the name of the government agency tasked to administer the airport. Private property donated to a municipality for use as a town plaza or public school site may likewise be titled in the name of the municipality.106 All these properties become properties of the public domain, and if already registered under Act No. 496 or PD No. 1529, remain registered land. There is no requirement or provision in any existing law for the de-registration of land from the Torrens System.

Private lands taken by the Government for public use under its power of eminent domain become unquestionably part of the public domain. Nevertheless, Section 85 of PD No. 1529 authorizes the Register of Deeds to issue in the name of the National Government new certificates of title covering such expropriated lands. Section 85 of PD No. 1529 states –

"Sec. 85. Land taken by eminent domain. Whenever any registered land, or interest therein, is expropriated or taken by eminent domain, the National Government, province, city or municipality, or any other agency or instrumentality exercising such right shall file for registration in the proper Registry a certified copy of the judgment which shall state definitely by an adequate description, the particular property or interest expropriated, the number of the certificate of title, and the nature of the public use. A memorandum of the right or interest taken shall be made on each certificate of title by the Register of Deeds, and where the fee simple is taken, a new certificate shall be issued in favor of the National Government, province, city, municipality, or any other agency or instrumentality exercising such right for the land so taken. The legal expenses incident to the memorandum of registration or issuance of a new certificate of title shall be for the account of the authority taking the land or interest therein." (Emphasis supplied)

Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively private or patrimonial lands. Lands of the public domain may also be registered pursuant to existing laws.

AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the Freedom Islands or of the lands to be reclaimed from submerged areas of Manila Bay. In the words of AMARI, the Amended JVA "is not a sale but a joint venture with a stipulation for reimbursement of the original cost incurred by PEA for the earlier reclamation and construction works performed by the CDCP under its 1973 contract with the Republic." Whether the Amended JVA is a sale or a joint venture, the fact remains that the Amended JVA requires PEA to "cause the issuance and delivery of the certificates of title conveying AMARI's Land Share in the name of AMARI."107

This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which provides that private corporations "shall not hold such alienable lands of the public domain except by lease." The transfer of title and ownership to AMARI clearly means that AMARI will "hold" the reclaimed lands other than by lease. The transfer of title and ownership is a "disposition" of the reclaimed lands, a transaction considered a sale or alienation under CA No. 141,108 the Government Auditing Code,109 and Section 3, Article XII of the 1987 Constitution.

The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas form part of the public domain and are inalienable. Lands reclaimed from foreshore and submerged areas also form part of the public domain and are also inalienable, unless converted pursuant to law into alienable or disposable lands of the public domain. Historically, lands reclaimed by the government are sui generis, not available for sale to private parties unlike other alienable public lands. Reclaimed lands retain their inherent potential as areas for public use or public service. Alienable lands of the public domain, increasingly becoming scarce natural resources, are to be distributed equitably among our ever-growing population. To insure such equitable distribution, the 1973 and 1987 Constitutions have barred private corporations from acquiring any kind of alienable land of the public domain. Those who attempt to dispose of inalienable natural resources of the State, or seek to circumvent the constitutional ban on alienation of lands of the public domain to private corporations, do so at their own risk.

We can now summarize our conclusions as follows:

1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease these lands to private corporations but may not sell or transfer ownership of these lands to private corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership limitations in the 1987 Constitution and existing laws.

2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the public domain until classified as alienable or disposable lands open to disposition and declared no longer needed for public service. The government can make such classification and declaration only after PEA has reclaimed these submerged areas. Only then can these lands qualify as agricultural lands of the public domain, which are the only natural resources the government can alienate. In their present state, the 592.15 hectares of submerged areas are inalienable and outside the commerce of man.

3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34 hectares110 of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain.

4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares111 of still submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of the 1987 Constitution which prohibits the alienation of natural resources other than agricultural lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the government can classify the reclaimed lands as alienable or disposable, and further declare them no longer needed for public service. Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will be void in view of Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain.

Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under Article 1409112 of the Civil Code, contracts whose "object or purpose is contrary to law," or whose "object is outside the commerce of men," are "inexistent and void from the beginning." The Court must perform its duty to defend and uphold the Constitution, and therefore declares the Amended JVA null and void ab initio.

Seventh issue: whether the Court is the proper forum to raise the issue of whether the Amended JVA is grossly disadvantageous to the government.

Considering that the Amended JVA is null and void ab initio, there is no necessity to rule on this last issue. Besides, the Court is not a trier of facts, and this last issue involves a determination of factual matters.

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

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, and Corona, JJ., concur.

II. OwnershipCases Assigned

FIRST DIVISIONG..R. No. 132424             May 2, 2006SPOUSES BONIFACIO R. VALDEZ, JR. and VENIDA M. VALDEZ, Petitioners, vs.HON. COURT OF APPEALS, SPOUSES GABRIEL FABELLA and FRANCISCA FABELLA, Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

This petition for review under Rule 45 of the Rules of Court, filed by petitioners spouses Bonifacio R. Valdez, Jr. and Venida M. Valdez, seeks to nullify and set aside the 22 April 1997 decision1 and 30 January 1998 resolution of the Court of Appeals in CA-G.R. SP No. 43492, which reversed the judgment, dated 8 January 1997, of the Regional Trial Court of Antipolo, Rizal, Branch 74, in Civil Case No. 3607, which, in turn, affirmed in toto the decision rendered by the Municipal Trial Court of Antipolo, Rizal, Branch II, in Civil Case No. 2547.

This case originated from a complaint for unlawful detainer filed by petitioners Bonifacio and Venida Valdez against private respondents Gabriel and Francisca Fabella before the Municipal Trial Court of Antipolo, Rizal. The complaint alleges these material facts:

2. That plaintiffs are the registered owner[s] of a piece of residential lot denominated as Lot [N]o. 3 Blk 19 located at Carolina Executive Village, Brgy. Sta. Cruz, Antipolo, Rizal which [they] acquired from Carolina Realty, Inc. Sometime [i]n November 1992 by virtue of Sales Contract, xerox copy of which is hereto attached marked as Annex "A" and the xerox copy of the Torrens Certificate of Title in her name marked as Annex "B";

3. That defendants, without any color of title whatsoever occupie[d] the said lot by building their house in the said lot thereby depriving the herein plaintiffs rightful possession thereof;

4. That for several times, plaintiffs orally asked the herein defendants to peacefully surrender the premises to them, but the latter stubbornly refused to vacate the lot they unlawfully occupied;

5. That despite plaintiffs’ referral of the matter to the Barangay, defendants still refused to heed the plea of the former to surrender the lot peacefully;

6. That because of the unfounded refusal of the herein defendants to settle the case amicably, the Barangay Captain was forced to issue the necessary Certification to File Action in favor of the herein plaintiffs in order that the necessary cause of action be taken before the proper court, xerox copy of which is hereto attached marked as Annex "C";

7. That by reason of the deliberate, malicious and unfounded refusal of the defendants to vacate/surrender the premises in question, the herein plaintiffs were constrained to engage the professional services of counsel thus incurring expenses amounting to TEN THOUSAND PESOS (P10,000.00) representing acceptance fee and additional ONE THOUSAND PESOS (P1,000.00) per appearance, who on July 12, 1994 sent a formal demand was likewise ignored, (sic) copy of which is hereto attached as Annex "D";

8. That likewise by virtue of the adamant refusal of the defendants to vacate/surrender the said premises in question, plaintiff[s] suffered serious anxiety, sleepless nights, mental torture and moral erosion; x x x2

In their answer, private respondents contended that the complaint failed to state that petitioners had prior physical possession of the property or that they were the lessors of the former. In the alternative, private respondents claimed ownership over the land on the ground that they had been in open, continuous, and adverse possession thereof for more than thirty years, as attested by an ocular inspection report from the Department of Environment and Natural Resources. They also stressed that the complaint failed to comply with Supreme Court Circular No. 28-91 regarding affidavits against non-forum shopping.

The Municipal Trial Court (MTC) rendered a decision in favor of the petitioners, ordering private respondents to vacate the property and to pay rent for the use and occupation of the same plus attorney’s fees.

Private respondents appealed the MTC’s decision to the Regional Trial Court (RTC). The RTC, in a decision dated 8 January 1997, affirmed in toto the decision of the MTC.

Undeterred, the private respondents filed a petition for review with the Court of Appeals on 10 March 1997 questioning the decision of the RTC.

In a decision dated 22 April 1997, the Court of Appeals reversed and set aside the decision of the RTC. It held that petitioners failed to make a case for unlawful detainer because they failed to show that they had given the private respondents the right to occupy the premises or that they had tolerated private respondents’ possession of the same, which is a requirement in unlawful detainer cases. It added that the allegations in petitioners’ complaint lack jurisdictional elements for forcible entry which requires an allegation of prior material possession. The Court of Appeals ratiocinated thus:

An examination of the complaint reveals that key jurisdictional allegations that will support an action for ejectment are conspicuously lacking. In particular, an allegation of prior material possession is mandatory in forcible entry, xxx and the complaint is deficient in this respect. On the other hand, neither does there appear to be a case of unlawful detainer, since the private respondents failed to show that they had given the petitioners the right to occupy the premises, which right has now [been] extinguished.

x x x

In light of the foregoing, the conclusion is inevitable that the Municipal Trial Court before which the action for ejectment was filed had no jurisdiction over the case. Consequently, the dismissal thereof is in order.

WHEREFORE, the Petition is hereby GIVEN DUE COURSE, and GRANTED. The decision dated 08 January 1997 rendered by the respondent court is hereby REVERSED and SET ASIDE, and judgment is

hereby rendered DISMISSING the complaint in Civil Case No. 2547 of the Municipal Trial Court of Antipolo, Rizal for lack of jurisdiction.3

Petitioners filed a motion for reconsideration which was denied in a resolution dated 30 January 1998.4

Hence, the instant petition.

Petitioners submit the following issues for the Court’s consideration5:

A. WHETHER OR NOT THE ALLEGATIONS OF THE COMPLAINT CLEARLY MADE OUT A CASE FOR UNLAWFUL DETAINER.

B. WHETHER OR NOT BASED ON THE ALLEGATION(S) OF THE COMPLAINT, THE MUNICIPAL TRIAL COURT OF ANTIPOLO, RIZAL, CLEARLY HAS ORIGINAL JURISDICTION OVER THE INSTANT COMPLAINT FILED BEFORE IT.

Since the two issues are closely intertwined, they shall be discussed together.

In the main, petitioners claim that the averments of their complaint make out a case for unlawful detainer having alleged that private respondents unlawfully withheld from them the possession of the property in question, which allegation is sufficient to establish a case for unlawful detainer. They further contend that the summary action for ejectment is the proper remedy available to the owner if another occupies the land at the former’s tolerance or permission without any contract between the two as the latter is bound by an implied promise to vacate the land upon demand by the owner.

The petition is not meritorious.

Under existing law and jurisprudence, there are three kinds of actions available to recover possession of real property: (a) accion interdictal; (b) accion publiciana; and (c) accion reivindicatoria.6

Accion interdictal comprises two distinct causes of action, namely, forcible entry (detentacion) and unlawful detainer (desahuico).7 In forcible entry, one is deprived of physical possession of real property by means of force, intimidation, strategy, threats, or stealth whereas in unlawful detainer, one illegally withholds possession after the expiration or termination of his right to hold possession under any contract, express or implied.8 The two are distinguished from each other in that in forcible entry, the possession of the defendant is illegal from the beginning, and that the issue is which party has prior de facto possession while in unlawful detainer, possession of the defendant is originally legal but became illegal due to the expiration or termination of the right to possess.9

The jurisdiction of these two actions, which are summary in nature, lies in the proper municipal trial court or metropolitan trial court.10 Both actions must be brought within one year from the date of actual entry on the land, in case of forcible entry, and from the date of last demand, in case of unlawful detainer.11 The issue in said cases is the right to physical possession.

Accion publiciana is the plenary action to recover the right of possession which should be brought in the proper regional trial court when dispossession has lasted for more than one year.12 It is an ordinary civil proceeding to determine the better right of possession of realty independently of title.13 In other words, if at the time of the filing of the complaint more than one year had elapsed since defendant had turned plaintiff out of possession or defendant’s possession had become illegal, the action will be, not one of the forcible entry or illegal detainer, butan accion publiciana. On the other hand, accion reivindicatoria is an action to recover ownership also brought in the proper regional trial court in an ordinary civil proceeding.14

To justify an action for unlawful detainer, it is essential that the plaintiff’s supposed acts of tolerance must have been present right from the start of the possession which is later sought to be recovered.15 Otherwise, if the possession was unlawful from the start, an action for unlawful detainer would be an improper remedy.16 As explained in Sarona v. Villegas17:

But even where possession preceding the suit is by tolerance of the owner, still, distinction should be made.

If right at the incipiency defendant’s possession was with plaintiff’s tolerance, we do not doubt that the latter may require him to vacate the premises and sue before the inferior court under Section 1 of Rule 70, within one year from the date of the demand to vacate.

x x x x

A close assessment of the law and the concept of the word "tolerance" confirms our view heretofore expressed that such tolerance must be present right from the start of possession sought to be recovered, to categorize a cause of action as one of unlawful detainer - not of forcible   entry .  Indeed, to hold otherwise would espouse a dangerous doctrine. And for two reasons: First. Forcible entry into the land is an open challenge to the right of the possessor. Violation of that right authorizes the speedy redress – in the inferior court - provided for in the rules. If one year from the forcible entry is allowed to lapse before suit is filed, then the remedy ceases to be speedy; and the possessor is deemed to have waived his right to seek relief in the inferior court. Second, if a forcible entry action in the inferior court is allowed after the lapse of a number of years, then the result may well be that no action of forcible entry can really prescribe. No matter how long such defendant is in physical possession, plaintiff will merely make a demand, bring suit in the inferior court – upon a plea of tolerance to prevent prescription to set in - and summarily throw him out of the land. Such a conclusion is unreasonable. Especially if we bear in mind the postulates that proceedings of forcible entry and unlawful detainer are summary in nature, and that the one year time-bar to suit is but in pursuance of the summary nature of the action.18 (Underlining supplied)

It is the nature of defendant’s entry into the land which determines the cause of action, whether it is forcible entry or unlawful detainer. If the entry is illegal, then the action which may be filed against the intruder is forcible entry. If, however, the entry is legal but the possession thereafter becomes illegal, the case is unlawful detainer.

Indeed, to vest the court jurisdiction to effect the ejectment of an occupant, it is necessary that the complaint should embody such a statement of facts as brings the party clearly within the class of cases for which the statutes provide a remedy, as these proceedings are summary in nature.19 The complaint must show enough on its face the court jurisdiction without resort to parol testimony.20

The jurisdictional facts must appear on the face of the complaint. When the complaint fails to aver facts constitutive of forcible entry or unlawful detainer, as where it does not state how entry was affected or how and when dispossession started, the remedy should either be an accion publiciana or an accion reivindicatoria in the proper regional trial court.21 Thus, in Go, Jr. v. Court of Appeals,22 petitioners filed an unlawful detainer case against respondent alleging that they were the owners of the parcel of land through intestate succession which was occupied by respondent by mere tolerance of petitioners as well as their deceased mother. Resolving the issue on whether or not petitioners’ case for unlawful detainer will prosper, the court ruled23:

Petitioners alleged in their complaint that they inherited the property registered under TCT No. C-32110 from their parents; that possession thereof by private respondent was by tolerance of their mother, and after her death, by their own tolerance; and that they had served written demand on December, 1994, but that private respondent refused to vacate the property. x x x

It is settled that one whose stay is merely tolerated becomes a deforciant illegally occupying the land the moment he is required to leave. It is essential in unlawful detainer cases of this kind, that plaintiff’s supposed acts of tolerance must have been present right from the start of the possession which is later sought to be recovered. This is where petitioners’ cause of action fails. The appellate court, in full agreement with the MTC made the conclusion that the alleged tolerance by their mother and after her death, by them, was unsubstantiated. x x x

The evidence revealed that the possession of defendant was illegal at the inception and not merely tolerated as alleged in the complaint, considering that defendant started to occupy the subject lot and then built a house thereon without the permission and consent of petitioners and before them, their mother. xxx Clearly, defendant’s entry into the land was effected clandestinely, without the knowledge of the owners, consequently, it is categorized as possession by stealth which is forcible entry. As explained in Sarona vs. Villegas, cited in Muñoz vs. Court ofAppeals [224 SCRA 216 (1992)] tolerance must be present right from the start of possession sought to be recovered, to categorize a cause of action as one of unlawful detainer not of forcible entry x x x.

And in the case of Ten Forty Realty and Development Corp. v. Cruz,24 petitioner’s complaint for unlawful detainer merely contained the bare allegations that (1) respondent immediately occupied the subject property after its sale to her, an action merely tolerated by petitioner; and (2) her allegedly illegal occupation of the premises was by mere tolerance. The court, in finding that the alleged tolerance did not justify the action for unlawful detainer, held:

To justify an action for unlawful detainer, the permission or tolerance must have been present at the beginning of the possession. x x x

x x x x

In this case, the Complaint and the other pleadings do not recite any averment of fact that would substantiate the claim of petitioner that it permitted or tolerated the occupation of the property by Respondent Cruz. The complaint contains only bare allegations that 1) respondent immediately occupied the subject property after its sale to her, an action merely tolerated by petitioner; and 2) her allegedly illegal occupation of the premises was by mere tolerance.

These allegations contradict, rather than support, petitioner’s theory that its cause of action is for unlawful detainer.First, these arguments advance the view that respondent’s occupation of the property was unlawful at its inception.Second, they counter the essential requirement in unlawful detainer cases that petitioner’s supposed act of sufferance or tolerance must be present right from the start of a possession that is later sought to be recovered.25

In the instant case, the allegations in the complaint do not contain any averment of fact that would substantiate petitioners’ claim that they permitted or tolerated the occupation of the property by respondents. The complaint contains only bare allegations that "respondents without any color of title whatsoever occupies the land in question by building their house in the said land thereby depriving petitioners the possession thereof." Nothing has been said on how respondents’ entry was effected or how and when dispossession started. Admittedly, no express contract existed between the parties. This failure of petitioners to allege the key jurisdictional facts constitutive of unlawful detainer is fatal.26 Since the complaint did not satisfy the jurisdictional requirement of a valid cause for unlawful detainer, the municipal trial court had no jurisdiction over the case.27 It is in this light that this Court finds that the Court of Appeals correctly found that the municipal trial court had no jurisdiction over the complaint.

WHEREFORE, the petition is DENIED and the judgment of the Court of Appeals dismissing the complaint in Civil Case No. 2547 of the MTC Antipolo, Rizal for lack of jurisdiction is hereby AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

MINITA V. CHICO-NAZARIOAssociate Justice

WE CONCUR:

ARTEMIO V. PANGANIBANChief JusticeChairperson

CONSUELO YNARES-SANTIAGOAssociate Justice

MA. ALICIA AUSTRIA-MARTINEZAsscociate Justice

ROMEO J. CALLEJO, SR.Associate Justice

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ARTEMIO V. PANGANIBANChief Justice

FIRST DIVISIONG.R. No. L-26848 August 17, 1981CARIDAD O. DE GALLEGO, petitioner-appellant, vs.LAND AUTHORITY (Formerly Land Tenure Administration), oppositor-appellee.

 

GUERRERO, J.:

The petitioner herein, who is the registered owner of a parcel of land situated in the Municipality of Parañaque , Rizal and covered by TCT No. 46402 of the Registry of Deeds of Rizal, seeks the cancellation of the following 'CONDITIONS' appearing in the Memorandum of, Encumbrances of the aforementioned Transfer Certificate of Title No. 46402, to wit:

1. That the parcel of land described in this certificate of title, shall not be sold, assigned, encumbered, mortgaged or transferred, within the period of five (5) years from the date hereof without first obtaining the written consent of the Secretary of Agriculture and Natural Resources;

2. That except by hereditary succession, it shall not be conveyed, transferred to, assigned in favor of any person who is not landless and disqualified to acquire or own land in the Philippines;

3. That violation of either of the next two preceding paragraph shall be sufficient ground for the Secretary of Agriculture and Natural Resources or his duly authorized

representative to take such action as may be necessary for the reversion of the land to the government. (Doc. No. 1858, page 57, Book XXVI, S. of 1954 of Notary Public of Manila, Andres Urrutia) Date of instrument - June 28, 1954. Date of the inscription - June 30, 1954 - 10:10 a.m.

In her Petition for Cancellation of Encumbrance filed with the Court of First Instance of Rizal, Branch 7, in LRC Case No. 458, it is alleged that the said conditions were entered on June 30, 1954 and a period of five (5) years have since then elapsed so that Condition No. 1 has long become academic; that the aforestated parcel of land formerly formed part of a tract of land which the Government acquired for subdivision into residential lots with the principal objective of distributing the same to the landless and thereby allow more people to have their own homes for which reason, Conditions Nos. 2 and 3 above were entered as encumbrances on the said certificate of title; that the area wherein the above-mentioned parcel of land is comprised has since become commercial community, fronting, as it does, the Manila Bay, and not only said parcel of land but the immediate vicinity thereof now contain improvements devoted purely to commercial purposes that by reason of the foregoing, the objective of the Government in imposing Conditions Nos. (2) and (3) above has lost its meaning inasmuch as the value of said property has become prohibitive to any landless who desire to establish his home therein; that to allow the said Conditions to remain and to affect said parcel of land will only be a deterrent to the economic development and progress of the country; and that in line with the country's program of economic development, therefore, said Conditions should be eliminated.

Respondent opposed the Petition for Cancellation insofar as Conditions Nos. (2) and (3) are concerned on the ground that Condition No. 2 carries with it no prescriptive period at all and the same is considered perpetual in character and any subsequent transactions or dealings involving the land in question must necessarily be with the written consent and permission of the Land Authority, and that Condition No. 3 is likewise perpetual in character. Respondent, however, agrees that Condition No. 1 may be cancelled since it carries the five-year prescriptive period.

In his Order dated July 19, 1966, Presiding Judge Francisco dela Rosa, finding the grounds relied upon in the Opposition to be well- taken, denied the Petition for lack of merit.

Petitioner thru Counsel filed a Motion for Reconsideration, alleging among others, that subsequent to the filing of the Opposition, counsel made representations with the respondent for a withdrawal of the Opposition in line with the position taken by the same office in connection with G.L.R.O. Record No. 7672 of the Court of First Instance of Rizal, Pasig, Branch X entitled, "Sotera Duavit Vda. de Bautista, et al., petitioners," wherein no opposition was filed by the Land Authority to a similar petition for the reason that the property involved was already commercial so that the Land Authority cannot maintain inconsistent position, otherwise it may be guilty of discrimination, arbitrariness, or grave abuse of its official discretion.

Petitioner further pointed out that as to the fact that the land in question is a commercial property and is situated in a commercial territory, namely, fronting the Roxas Boulevard, Parañaque , Rizal, three has been no controversy and the court can take judicial notice thereof as a matter of common knowledge, as in fact the property is presently occupied by the night-club "E L MUNDO" and is classified for real estate taxation as commercial.

It is likewise insisted by petitioner that the primary intention of the restriction against transfers or conveyances of the property except to the landless and except by hereditary succession in order to insure that more people shall own residential homes, has been lost by the transformation of the property from residential to commercial since the landless who may want to establish their residential homes can no longer afford to pay the commercial price of this commercial property and following the principle that "when the reason for the law ceases," the said restriction should be eliminated to allow the aforementioned property to contribute to the economic development of the country.

The attention of the court a quo was also called to the fact that the petitioner who is the wife of former Ambassador Manuel Gallego, is not a landless individual, nor was she landless at the time when the said property was acquired by her, the fact being that the restriction refers only to voluntary conveyances and did not comprehend sales by public auction, as in the particular case, where the petitioner came to own the property as the highest bidder in a foreclosure sale by reason of a mortgage thereon. Petitioner concludes that accordingly, the restriction cannot be intrinsically intended to limit the ownership of this type of property to only the landless where it may be acquired by a landed owner thru an involuntary sale.

The court denied the Motion for Reconsideration in its Order of September 8, 1966, hence the present appeal to this Court.

Petitioner submits a lone assignment of error, and that is, that the trial court erred in denying the petition for cancellation and in denying the motion for reconsideration.

In Petitioner's Brief, it is pointed out that the Order dated July 19, 1966 denying the Petition for Cancellation, as well as the Order of September 8, 1966 denying the Motion for Reconsideration, did not express the reasons in support of said Order. Petitioner argues that Condition No. (1) in the Memorandum of Encumbrances of TCT No. 46402 had long become academic because five years have already elapsed from the date the said annotation was made on June 30, 1954, inasmuch as the Petition for Cancellation was filed on February 11, 1966, almost twelve years after the entry of such condition.

Oppositor Land Authority does not oppose the cancellation of Condition No. (1), hence, finding the said cancellation to be in order, the said condition is hereby ordered cancelled.

Petitioner further contends that Conditions No. (2) and (3) have lost any sound basis in that while the subject parcel of land was originally a residential lot, the classification of the property had been changed to that of commercial, as evidenced by the present tax declaration thereof (Exhibit "B"). According to petitioner, the original intention of the controverted condition to restrict ownership of subject property by people who could utilize the same as their residence has lost its meaning for the said property has gone beyond the reach of any individual to acquire for purely residential purposes.

It is likewise claimed that the inhibition in Condition No. (2) is not entirely absolute because a person who is not landless may still properly acquire the said property in a foreclosure of a mortgage thereon, as in the instant case where petitioner, who is the wife of former Ambassador Manuel V. Gallego, is not landless and had acquired the subject property, not by voluntary conveyance in her favor but as the highest bidder in the public auction sale thereof in relation to a foreclosure of a mortgage involving the said property, which argument assumes that Condition No. (2) limits the restriction only to a conventional or voluntary sale, transfer or assignment of the property, excluding mortgage or encumbrance whereas Condition No. (1) inhibits not only the sale but also the encumbrance or mortgage of the subject land.

Petitioner's contentions are without merit and We reject the same.

Conditions No. (2) and (3) are found or provided in Section 17 and 18 of Land Registration Order No. R-3 under the subject "Rules and Regulations Governing the Acquisition and Disposition of Landed Estate," approved November 15, 1951 by the Secretary of Agriculture and Natural Resources. These sections provide as follows:

16. Prohibition to Alienate.-The applicant shall not sell, assign, encumber, mortgage or transfer, his rights under the agreement to sell or in the property subject thereof without first obtaining the written consent of the Secretary of Agriculture and Natural Resources and this condition shall subsist until the lapse of five (5) years from the date of the execution of the final deed of sale in his favor and shall be annotated as an encumbrance on the certificate of title of the property that may be issued in his favor.

17. Conveyance of Lands, Covered by Final Deeds of Sale.- Except by hereditary succession, no lands acquired hereunder shall be transferred or assigned to any individual unless he be landless and not otherwise disqualified from acquiring and owning lands in the Philippines. This prohibition shall be made a condition in all deeds of sale and shall be annotated as encumbrance in the certificate of title.

18. Violation of the two preceding paragraphs: its effect.-Any sale, assignment, encumbrance, mortgage, or transfer made in violation of the provisions of the next two preceding paragraphs hereof is null and void, and shall be sufficient ground for the Secretary of Agriculture and Natural Resources to cancel the deed of sale and to order the reversion of the land to the government and the forfeiture of whatever payments made on account thereof. In case, however, a deed of sale has already been issued, the violation of the said provisions shall be sufficient ground for the Secretary of Agriculture and Natural Resources to take appropriate action in court with a view to obtaining the reversion of the land involved to the government. All lands reverted to the government shall be disposed of as vacant lot.

It is pertinent to state here that pursuant to the provisions of Section 4, Article XIII of the 1935 Constitution of the Philippines which mandated that Congress may authorize, upon payment of just compensation, the expropriation of land to be subdivided into small lots and conveyed at cost to individuals, Commonwealth Act 539 enacted May 26, 1940, authorized the President of the Philippines to acquire private lands or any interest therein, thru purchase or expropriation and to subdivided the same into home lots or small farms for resale at reasonable prices and under such conditions as he may fix to their bonafide tenants or occupants or to private individuals who will work the lands themselves and who are qualified to acquire and own lands in the Philippines (Section 1, Commonwealth Act 539). And under Section 2 of the same Act, the President may designate any department, bureau, office, or instrumentality of the National Government, or he may organize a new agency to carry out the objectives of the Act, and for tills purpose, the agency so created or designated shall be considered a public corporation. Commonwealth Act 539 amended Commonwealth Act No. 20, as amended by Commonwealth Act 260, and Commonwealth Act No. 378, as amended by Commonwealth Act 420.

As indicated earlier, Sections 16, 17 and 18 of Lands Administrative Order No. R-3 dated October 19, 1951 are the sources which gave rise to the annotation of Conditions Nos. 1, 2 and 3 on the title of subject property. The said Order was published in the Official Gazette of December, 1951, pp. 6075 to 6078, Volume 47, No. 12, and has the force and effect of law. (Javillonar vs. Land Tenure Administration, G. R. No. 10303, Aug. 22,1958,104 Phil. 323)

As the Administrative Order itself provides, the rules and regulations governing the acquisition and disposition of private estates were promulgated for the information and guidance of all concerned "(p)ursuant to the provisions of section 4, article XIII of the Constitution of the Philippines, section 79 (B) of the Revised Administrative Code, and Executive Order No. 376, dated November 28, 1950."

Conditions Nos. 2 and 3, having been imposed pursuant to an Administrative Order which has the force and effect of the law, are therefore binding upon any person who acquires title to the same, it appearing that said Conditions are annotated as encumbrances on the back of the Certificate of Title of the land. Moreover, the said Conditions are not contrary to law, morals, customs, or public policy. In fact, these Conditions had been imposed in order to implement more effectively the main purpose of the constitutional provision which is to break up landed estates into reasonably small portions and to discourage the concentration of excessive landed wealth in an entity or a few individuals, (Republic vs. Baylosis, 96 Phil. 461) Incidentally, the New Constitution of 1973 provided a modification of the original provision in the 1935 Constitution, thus: "The National Assembly may authorize, upon payment of just compensation, the expropriation of private lands to be subdivided into small lots and conveyed at cost todeserving citizens.

These two encumbrances or Conditions annotated on the back of TCT 46402 imposed by and pursuant to the Administrative Order of the Secretary of Agriculture and Natural Resources may not, therefore, be cancelled for under Section 39 of the Land Registration Act,

Every person receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land who takes a certificate of title for value in good faith shall hold the same free of all encumbrance except those noted on said certificate, and any of the following encumbrances which may be subsisting, namely:

First. Liens, claims, or rights arising or existing under the laws or Constitution of the United States or of the Philippine Islands which the statutes of the Philippine Islands cannot require to appear of record in the registry:

Second. Taxes within two years after same become due and payable;

Third. An public highway, way, private way established by law, or any Government irrigation canal or lateral thereof, where the certificate of title does not state that the boundaries of such highway, way, or irrigation canal or lateral thereof, have been determined.

But if there are easements or other rights. appurtenant to a parcel of registered land which for any reason have failed to be registered, such easements or rights shall remain so appurtenant notwithstanding such failure, and shall be held to pass with the land until cut off or extinguished by the registration of the servient estate, or in any other manner. (As amended by Act No. 2011, and Sec. 4, Act No. 3621.)

Presidential Decree No. 1529, amending and codifying the laws relative to registration of property and for other purposes, promulgated June 11, 1978, substantially contains the same provision under Section 44 thereof, which provides:

Every registered owner receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land taking a certificate of title for value and in good faith, shall hold the same free from all encumbrances except those noted on said certificate and any of the following encumberances which may be subsisting, namely:

First. Liens, claims or rights arising or existing under the laws and Constitution of the Philippines which are not by law required to appear of record in the Registry of Deeds in order to be valid against subsequent purchasers or encumbrances of record;

Second. Unpaid real estate taxes levied and assessed within two years immediately preceding the acquisition of any right over the land by an innocent purchaser for value, without prejudice to the right of the government to collect taxes payable before that period from the delinquent taxpayer alone;

Third. Any public highway or private way established or recognized by law, or any government irrigation canal or lateral thereof. if the certificate of title does not state that the boundaries of such highway or irrigation canal or lateral thereof have been determined;

Fourth. Any disposition of the property or limitation on the use thereof by virtue of, or pursuant to, Presidential Decree No. 27 or any other law or regulations on agrarian reform.

Until and unless the law, or the Administrative Order which has the force and effect of law, is repealed, amended, or otherwise, altered or modified, the said encumbrances must remain, notwithstanding the contention of petitioner that a previous governor of the Land Authority had not opposed a similar petition for cancellation in Sotera Duavit Vda. de Bautista and Jaime Bautista, G.L.R.O. Record No. 7672 of the Court of First Instance of Rizal, Branch X, for a wrong act cannot be cured by the commission of another wrong. laws are repealed only by subsequent ones and their violation or non-observance shall not be excused by disuse, or customs or practice to the contrary. (Article 7, New Civil Code)

Neither can petitioner's arguments that the lot in question contains improvements, a nightclub devoted to a purely commercial purpose, that the value of the land has become prohibitive to any landless who desires to establish his house thereon, that to allow the said Conditions to remain and to affect said parcel of land will only be a deterrent to the economic development and progress of the country and that in line with the country's program of economic development, said Conditions should be eliminated, be sustained. The courts are not concerned with the wisdom, necessity or propriety of the law, for these are the particular province of the legislative. As this Court said in Morfe vs. Mutuc, L-20387, January 31, 1968, 22 SCRA 424, 450, speaking thru Justice (now Chief Justice) Fernando citing Angara vs. Electoral Commission, 63 Phil. 139, "It is well to remember, that this Court, in the language of Justice Laurel, 'does not pass upon questions of wisdom, justice or expediency of legislation.' "

WHEREFORE, IN VIEW OF THE FOREGOING, the Orders appealed from dated July 19, 1966 and September 8, 1966 are hereby MODIFIED in the sense that Condition No. (1) inscribed as an encumbrance in Transfer Certificate of Title No. 46402 (Rizal Registry) covering Lot 4, Block 4, Psd-10988 Baclaran, Estate, Baclaran, Parañaque , Rizal, under the name of petitioner Caridad O. de Gallego, is hereby ordered cancelled, the five-year period stated therein having already expired, and that Conditions No. (2) and (3) shall remain as they are.

No costs.

SO ORDERED.

Makasiar, Fernandez and Melencio-Herrera. JJ., concur.

Teehankee, Acting C.J., concur in the result.

Part 3 ( C.O.P.)

III. Right of accession(no cases assigned)

III. Quieting of Title

FIRST DIVISIONG.R. No. L-61647 October 12, 1984REPUBLIC OF THE PHILIPPINES (DIRECTOR OF LANDS), petitioner, vs.THE HON. COURT OF APPEALS, BENJAMIN TANCINCO, AZUCENA TANCINCO REYES, MARINA TANCINCO IMPERIAL and MARIO C. TANCINCO, respondents.The Solicitor General for petitioner.Martin B. Laurea for respondents.

 

GUTIERREZ, JR., J.:ñé+.£ªwph!1

This is a petition for certiorari to set aside the decision of the respondent Court of Appeals (now Intermediate Appellate Court) affirming the decision of the Court of First Instance of Bulacan, Fifth Judicial District, Branch VIII, which found that Lots 1 and 2 of Plan Psu-131892 are accretion to the land covered by Transfer Certificate of Title No. 89709 and ordered their registration in the names of the private respondents.

Respondents Benjamin Tancinco, Azucena Tancinco Reyes, Marina (should be "Maria") Tancinco Imperial and Mario C. Tancinco are registered owners of a parcel of land covered by Transfer Certificate of Title No. T-89709 situated at Barrio Ubihan, Meycauayan, Bulacan bordering on the Meycauayan and Bocaue rivers.

On June 24, 1973, the private respondents filed an application for the registration of three lots adjacent to their fishpond property and particularly described as follows: têñ.£îhqwâ£

Lot 1-Psu-131892 (Maria C. Tancinco)

A parcel of land (lot 1 as shown on plan Psu-131892), situated in the Barrio of Ubihan, Municipality of Meycauayan, Province of Bulacan. Bounded on the NE., along line 1-2, by Lot 3 of plan Psu-131892; on the SE., along lines 2-3-4, by Meycauayan River; on the S.W., along fines 4-5-6-7-8-9, by Bocaue River; on the NE., along line 9-10, by property of Joaquina Santiago; on the E., NE., and NW., along lines 10-11-12-1, by property of Mariano Tancinco (Lot 2, Psu-111877). ... containing an area of THIRTY THREE THOUSAND NINE HUNDRED THIRTY SEVEN (33,937) SQUARE METERS. ...

Lot 2-Psu-131892 (Maria C. Tancinco)

A parcel of land (Lot 2 as shown on plan Psu-131892), situated in the Barrio of Ubihan, Municipality of Meycauayan, Province of Bulacan. Bounded on the E., along line 1-2, by property of Rafael Singson; on the S., along line 2-3, by Meycauayan River; on the SW., along line 3-4, by Lot 3 of plan Psu-131892; and on the N., along line 4-1, by property of Mariano Tancinco (Lot 1, Psu-111877). ... containing an area of FIVE THOUSAND FOUR HUNDRED FIFTY THREE (5,453) SQUARE METERS. ...

Lot 3-Psu-131892 (Maria C. Tancinco)

A parcel of land (Lot 3 as shown on plan Psu-131892), situated in the Barrio of Ubihan, Municipality of Meycauayan, Province of Bulacan. Bounded on the NE., along line 1-2, by property of Mariano Tancinco (Lot 1, Psu-111877); and along line 2-3, by Lot 2 of plan Psu-131892; on the S., along line 3-4, by Meycauayan River, on the SW., along line 4-5, by Lot 1 of plan Psu-131892; and along line 5-6 by property of Mariano Tancinco (Lot 2, Psu-111877), and on the NW., along line 6-1, by property of Joaquina Santiago. ... containing an area of ONE THOUSAND NINE HUNDRED EIGHTY FIVE (1,985) SQUARE METERS. ...

On April 5, 1974, Assistant Provincial Fiscal Amando C. Vicente, in representation of the Bureau of Lands filed a written opposition to the application for registration.

On March 6, 1975, the private respondents filed a partial withdrawal of the application for registration with respect to Lot 3 of Plan Psu-131892 in line with the recommendation of the Commissioner appointed by the Court.

On March 7, 1975, Lot 3 was ordered withdrawn from the application and trial proceeded only with respect to Lots 1 and 2 covered by Plan Psu-131892.

On June 26, 1976, the lower court rendered a decision granting the application on the finding that the lands in question are accretions to the private respondents' fishponds covered by Transfer Certificate of Title No. 89709. The dispositive portion of the decision reads: têñ.£îhqwâ£

WHEREFORE, it appearing that Lots 1 & 2 of plan Psu-131892 (Exh. H) are accretions to the land covered by Transfer Certificate of Title No. 89709 of the Register of Deeds of Bulacan, they belong to the owner of said property. The Court, therefore, orders the registration of lots 1 & 2 situated in the barrio of Ubihan, municipality of Meycauayan, province of Bulacan, and more particularly described in plan Psu-131892 (Exh. H) and their accompanying technical descriptions (Exhs. E, E-1) in favor of Benjamin Tancinco, married to Alma Fernandez and residing at 3662 Heatherdown, Toledo, Ohio 43614 U.S.A.; Azucena Tancinco Reyes, married to Alex Reyes, Jr., residing at 4th St., New Manila, Quezon City; Marina Tancinco Imperial, married to Juan Imperial, residing at Pasay Road, Dasmariñas Village, Makati, Rizal; and Mario C. Tancinco, married to Leticia Regidor, residing at 1616 Cypress St., Dasmariñas Village, Makati, Rizal, all of legal age, all Filipino citizens.

On July 30, 1976, the petitioner Republic appealed to the respondent Court of Appeals.

On August, 19, 1982, the respondent Court rendered a decision affirming in toto the decision of the lower court. The dispositive portion of the decision reads: têñ.£îhqwâ£

DAHIL DITO, ang hatol na iniakyat ay sinasangayunan at pinagtitibay sa kanyang kabuuan nang walang bayad.

The rule that the findings of fact of the trial court and the Court of Appeals are binding upon this Court admits of certain exceptions. Thus in Carolina Industries Inc. v. CMS Stock Brokerage, Inc. (97 SCRA 734) we held that this Court retains the power to review and rectify the findings of fact of said courts when (1) the conclusion is a finding grounded entirely on speculations, surmises and conjectures; (2) when the inference made is manifestly mistaken, absurd, and impossible; (3) where there is grave abuse of discretion, (4) when the judgment is based on a misapprehension of facts; and (5) when the court, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee.

There are facts and circumstances in the record which render untenable the findings of the trial court and the Court of Appeals that the lands in question are accretions to the private respondents' fishponds.

The petitioner submits that there is no accretion to speak of under Article 457 of the New Civil Code because what actually happened is that the private respondents simply transferred their dikes further down the river bed of the Meycauayan River, and thus, if there is any accretion to speak of, it is man-made and artificial and not the result of the gradual and imperceptible sedimentation by the waters of the river.

On the other hand, the private respondents rely on the testimony of Mrs. Virginia Acuña to the effect that: têñ.£îhqwâ£

xxx xxx xxx

... when witness first saw the land, namely, Lots 1 & 2, they were already dry almost at the level of the Pilapil of the property of Dr. Tancinco, and that from the boundaries of the

lots, for about two (2) arms length the land was still dry up to the edge of the river; that sometime in 1951, a new Pilapil was established on the boundaries of Lots 1 & 2 and soil from the old Pilapil was transferred to the new Pilapil and this was done sometime in 1951; that the new lots were then converted into fishpond, and water in this fishpond was two (2) meters deep on the side of the Pilapil facing the fishpond ... .

The private respondents submit that the foregoing evidence establishes the fact of accretion without human intervention because the transfer of the dike occurred after the accretion was complete.

We agree with the petitioner.

Article 457 of the New Civil Code provides: têñ.£îhqwâ£

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 above-quoted article requires the concurrence of three requisites before an accretion covered by this particular provision is said to have taken place. They are (1) that the deposit be gradual and imperceptible; (2) that it be made through the effects of the current of the water; and (3) that the land where accretion takes place is adjacent to the banks of rivers.

The requirement that the deposit should be due to the effect of the current of the river is indispensable. This excludes from Art. 457 of the New Civil Code all deposits caused by human intervention. Alluvion must be the exclusive work of nature. In the instant case, there is no evidence whatsoever to prove that the addition to the said property was made gradually through the effects of the current of the Meycauayan and Bocaue rivers. We agree with the observation of the Solicitor General that it is preposterous to believe that almost four (4) hectares of land came into being because of the effects of the Meycauayan and Bocaue rivers. The lone witness of the private respondents who happens to be their overseer and whose husband was first cousin of their father noticed the four hectare accretion to the twelve hectare fishpond only in 1939. The respondents claim that at this point in time, accretion had already taken place. If so, their witness was incompetent to testify to a gradual and imperceptible increase to their land in the years before 1939. However, the witness testified that in that year, she observed an increase in the area of the original fishpond which is now the land in question. If she was telling the truth, the accretion was sudden. However, there is evidence that the alleged alluvial deposits were artificial and man-made and not the exclusive result of the current of the Meycauayan and Bocaue rivers. The alleged alluvial deposits came into being not because of the sole effect of the current of the rivers but as a result of the transfer of the dike towards the river and encroaching upon it. The land sought to be registered is not even dry land cast imperceptibly and gradually by the river's current on the fishpond adjoining it. It is under two meters of water. The private respondents' own evidence shows that the water in the fishpond is two meters deep on the side of the pilapil facing the fishpond and only one meter deep on the side of the pilapil facing the river

The reason behind the law giving the riparian owner the right to any land or alluvion deposited by a river is to compensate him for the danger of loss that he suffers because of the location of his land. If estates bordering on rivers are exposed to floods and other evils produced by the destructive force of the waters and if by virtue of lawful provisions, said estates are subject to incumbrances and various kinds of easements, it is proper that the risk or danger which may prejudice the owners thereof should be compensated by the right of accretion. (Cortes v. City of Manila, 10 Phil. 567). Hence, the riparian owner does not acquire the additions to his land caused by special works expressly intended or designed to bring about accretion. When the private respondents transferred their dikes towards the river bed, the dikes were meant for reclamation purposes and not to protect their property from the destructive force of the waters of the river.

We agree with the submission of the Solicitor General that the testimony of the private respondents' lone witness to the effect that as early as 1939 there already existed such alleged alluvial deposits, deserves no merit. It should be noted that the lots in question were not included in the survey of their adjacent property conducted on May 10, 1940 and in the Cadastral Survey of the entire Municipality of Meycauayan conducted between the years 1958 to 1960. The alleged accretion was declared for taxation purposes only in 1972 or 33 years after it had supposedly permanently formed. The only valid conclusion therefore is that the said areas could not have been there in 1939. They existed only after the private respondents transferred their dikes towards the bed of the Meycauayan river in 1951. What private respondents claim as accretion is really an encroachment of a portion of the Meycauayan river by reclamation.

The lower court cannot validly order the registration of Lots 1 & 2 in the names of the private respondents. These lots were portions of the bed of the Meycauayan river and are therefore classified as property of the public domain under Article 420 paragraph 1 and Article 502, paragraph 1 of the Civil Code of the Philippines. They are not open to registration under the Land Registration Act. The adjudication of the lands in question as private property in the names of the private respondents is null and void.

WHEREFORE, the instant petition is GRANTED. The decision appealed from is hereby REVERSED and SET ASIDE. The private respondents are ordered to move back the dikes of their fishponds to their original location and return the disputed property to the river to which it belongs.

SO ORDERED.1äwphï1.ñët

Teehankee, Actg. C.J., Melencio-Herrera, Plana, Relova and De la Fuente, JJ., concur.

FIRST DIVISIONG.R. No. L-57348 May 16, 1985FRANCISCO DEPRA, plaintiff-appellee, vs.AGUSTIN DUMLAO, defendant-appellant.Roberto D. Dineros for plaintiff-appellee.Veil D. Hechanova for defendant-appellant.

MELENCIO-HERRERA, J.:

This is an appeal from the Order of the former Court of First Instance of Iloilo to the then Court of Appeals, which the latter certified to this instance as involving pure questions of law

Plaintiff-appellee, Francisco Depra, is the owner of a parcel of land registered under Transfer Certificate of Title No. T3087, known as Lot No. 685, situated in the municipality of Dumangas, Iloilo, with an area of approximately 8,870 square meters. Agustin Dumlao, defendant-appellant, owns an adjoining lot, designated as Lot No. 683, with an approximate area of 231 sq. ms.

Sometime in 1972, when DUMLAO constructed his house on his lot, the kitchen thereof had encroached on an area of thirty four (34) square meters of DEPRA's property, After the encroachment was discovered in a relocation survey of DEPRA's lot made on November 2,1972, his mother, Beatriz Depra after writing a demand letter asking DUMLAO to move back from his encroachment, filed an action for Unlawful Detainer on February 6,1973 against DUMLAO in the Municipal Court of of Dumangas, docketed as Civil Case No 1, Said complaint was later amended to include DEPRA as a party plain. plaintiff.

After trial, the Municipal Court found that DUMLAO was a builder in good faith, and applying Article 448 of the Civil Code, rendered judgment on September 29, 1973, the dispositive portion of which reads:

Ordering that a forced lease is created between the parties with the plaintiffs, as lessors, and the defendants as lessees, over the disputed portion with an area of thirty four (34) square meters, the rent to be paid is five (P5.00) pesos a month, payable by the lessee to the lessors within the first five (5) days of the month the rent is due; and the lease shall commence on the day that this decision shall have become final.

From the foregoing judgment, neither party appeal so that, ff it were a valid judgment, it would have ordinarily lapsed into finality, but even then, DEPRA did not accept payment of rentals so that DUMLAO deposited such rentals with the Municipal Court.

On July 15,1974, DEPRA filed a Complaint for Quieting of Title against DUMLAO before the then Court of First Instance of Iloilo, Branch IV (Trial Court), involving the very same 34 square meters, which was the bone of contention in the Municipal Court. DUMLAO, in his Answer, admitted the encroachment but alleged, in the main, that the present suit is barred by res judicata by virtue of the Decision of the Municipal Court, which had become final and executory.

After the case had been set for pre-trial, the parties submitted a Joint Motion for Judgment based on the Stipulation of Facts attached thereto. Premised thereon, the Trial Court on October 31, 1974, issued the assailed Order, decreeing:

WHEREFORE, the Court finds and so holds that the thirty four (34) square meters subject of this litigation is part and parcel of Lot 685 of the Cadastral Survey of Dumangas of which the plaintiff is owner as evidenced by Transfer Certificate of Title No. 3087 and such plaintiff is entitled to possess the same.

Without pronouncement as to costs.

SO ORDERED.

Rebutting the argument of res judicata relied upon by DUMLAO, DEPRA claims that the Decision of the Municipal Court was null and void ab initio because its jurisdiction is limited to the sole issue of possession, whereas decisions affecting lease, which is an encumbrance on real property, may only be rendered by Courts of First Instance.

Addressing out selves to the issue of validity of the Decision of the Municipal Court, we hold the same to be null and void. The judgment in a detainer case is effective in respect of possession only (Sec. 7, Rule 70, Rules of Court). 1 The Municipal Court over-stepped its bounds when it imposed upon the parties a situation of "forced lease", which like "forced co-ownership" is not favored in law. Furthermore, a lease is an interest in real property, jurisdiction over which belongs to Courts of First Instance (now Regional Trial Courts) (Sec. 44(b), Judiciary Act of 1948; 2 Sec. 19 (2) Batas Pambansa Blg. 129). 3 Since the Municipal Court, acted without jurisdiction, its Decision was null and void and cannot operate as res judicata to the subject complaint for Queting of Title. Besides, even if the Decision were valid, the rule on res judicata would not apply due to difference in cause of action. In the Municipal Court, the cause of action was the deprivation of possession, while in the action to quiet title, the cause of action was based on ownership. Furthermore, Sec. 7, Rule 70 of the Rules of Court explicitly provides that judgment in a detainer case "shall not bar an action between the same parties respecting title to the land. " 4

Conceded in the Stipulation of Facts between the parties is that DUMLAO was a builder in good faith. Thus,

8. That the subject matter in the unlawful detainer case, Civil Case No. 1, before the Municipal Court of Dumangas, Iloilo involves the same subject matter in the present case, the Thirty-four (34) square meters portion of land and built thereon in good faith is a

portion of defendant's kitchen and has been in the possession of the defendant since 1952 continuously up to the present; ... (Emphasis ours)

Consistent with the principle that our Court system, like any other, must be a dispute resolving mechanism, we accord legal effect to the agreement of the parties, within the context of their mutual concession and stipulation. They have, thereby, chosen a legal formula to resolve their dispute to appeal ply to DUMLAO the rights of a "builder in good faith" and to DEPRA those of a "landowner in good faith" as prescribed in Article 448. Hence, we shall refrain from further examining whether the factual situations of DUMLAO and DEPRA conform to the juridical positions respectively defined by law, for a "builder in good faith" under Article 448, a "possessor in good faith" under Article 526 and a "landowner in good faith' under Article 448.

In regards to builders in good faith, Article 448 of the Civil Code provides:

ART. 448. The owner of the land on which anything has been built sown or planted in good faith,

shall have the right

to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or

to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent.

However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof (Paragraphing supplied)

Pursuant to the foregoing provision, DEPRA has the option either to pay for the encroaching part of DUMLAO's kitchen, or to sell the encroached 34 square meters of his lot to DUMLAO. He cannot refuse to pay for the encroaching part of the building, and to sell the encroached part of his land, 5 as he had manifested before the Municipal Court. But that manifestation is not binding because it was made in a void proceeding.

However, the good faith of DUMLAO is part of the Stipulation of Facts in the Court of First Instance. It was thus error for the Trial Court to have ruled that DEPRA is "entitled to possession," without more, of the disputed portion implying thereby that he is entitled to have the kitchen removed. He is entitled to such removal only when, after having chosen to sell his encroached land, DUMLAO fails to pay for the same. 6 In this case, DUMLAO had expressed his willingness to pay for the land, but DEPRA refused to sell.

The owner of the building erected in good faith on a land owned by another, is entitled to retain the possession of the land until he is paid the value of his building, under article 453 (now Article 546). The owner of the land, upon the other hand, has the option, under article 361 (now Article 448), either to pay for the building or to sell his land to the owner of the building. But he cannot as respondents here did refuse both to pay for the building and to sell the land and compel the owner of the building to remove it from the land where it erected. He is entitled to such remotion only when, after having chosen to sell his land. the other party fails to pay for the same (italics ours).

We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners to remove their buildings from the land belonging to plaintiffs-respondents only because the latter chose neither to pay for such buildings nor to sell the land, is null and void, for it amends substantially the judgment sought to be executed and is. furthermore, offensive to articles 361 (now Article 448) and 453 (now Article 546) of the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605, 608[1946]).

A word anent the philosophy behind Article 448 of the Civil rode.

The original provision was found in Article 361 of the Spanish Civil Code; which provided:

ART. 361. The owner of land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the work, sowing or planting, after the payment of the indemnity stated in Articles 453 and 454, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent.

As will be seen, the Article favors the owner of the land, by giving him one of the two options mentioned in the Article. Some commentators have questioned the preference in favor of the owner of the land, but Manresa's opinion is that the Article is just and fair.

. . . es justa la facultad que el codigo da al dueno del suelo en el articulo 361, en el caso de edificacion o plantacion? Algunos comentaristas la conceptuan injusta, y como un extraordinario privilegio en favor de la propiedad territorial. Entienden que impone el Codigo una pena al poseedor de buena fe y como advierte uno de los comentaristas aludidos 'no se ve claro el por que de tal pena . . . al obligar al que obro de buena fe a quedarse con el edificio o plantacion, previo el pago del terreno que ocupa, porque si bien es verdad que cuando edifico o planto demostro con este hecho, que queria para si el edificio o plantio tambien lo es que el que edifico o planto de buena fe lo hizo en la erronea inteligencia de creerse dueno del terreno Posible es que, de saber lo contrario, y de tener noticia de que habia que comprar y pagar el terreno, no se hubiera decidido a plantar ni a edificar. La ley obligandole a hacerlo fuerza su voluntad, y la fuerza por un hecho inocente de que no debe ser responsable'. Asi podra suceder pero la realidad es que con ese hecho voluntario, aunque sea inocente, se ha enriquecido torticeramente con perjuicio de otro a quien es justo indemnizarle,

En nuestra opinion, el Codigo ha resuelto el conflicto de la manera mas justa y equitativa y respetando en lo possible el principio que para la accesion se establece en el art. 358. 7

Our own Code Commission must have taken account of the objections to Article 361 of the Spanish Civil Code. Hence, the Commission provided a modification thereof, and Article 448 of our Code has been made to provide:

ART. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.

Additional benefits were extended to the builder but the landowner retained his options.

The fairness of the rules in Article 448 has also been explained as follows:

Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the sower to pay for the proper rent. It is the owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382; Co Tao vs. Chan Chico, G.R. No. 49167, April 30, 1949; Article applied: see Cabral, et al vs. Ibanez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050). 8

WHEREFORE, the judgment of the trial Court is hereby set aside, and this case is hereby ordered remanded to the Regional Trial Court of Iloilo for further proceedings consistent with Articles 448 and 546 of the Civil Code, as follows:

1. The trial Court shall determine

a) the present fair price of DEPRA's 34 square meter area of land;

b) the amount of the expenses spent by DUMLAO for the building of the kitchen;

c) the increase in value ("plus value") which the said area of 34 square meters may have acquired by reason thereof, and

d) whether the value of said area of land is considerably more than that of the kitchen built thereon.

2. After said amounts shall have been determined by competent evidence, the Regional, Trial Court shall render judgment, as follows:

a) The trial Court shall grant DEPRA a period of fifteen (15) days within which to exercise his option under the law (Article 448, Civil Code), whether to appropriate the kitchen as his own by paying to DUMLAO either the amount of tile expenses spent by DUMLAO f or the building of the kitchen, or the increase in value ("plus value") which the said area of 34 square meters may have acquired by reason thereof, or to oblige DUMLAO to pay the price of said area. The amounts to be respectively paid by DUMLAO and DEPRA, in accordance with the option thus exercised by written notice of the other party and to the Court, shall be paid by the obligor within fifteen (15) days from such notice of the option by tendering the amount to the Court in favor of the party entitled to receive it;

b) The trial Court shall further order that if DEPRA exercises the option to oblige DUMLAO to pay the price of the land but the latter rejects such purchase because, as found by the trial Court, the value of the land is considerably more than that of the kitchen, DUMLAO shall give written notice of such rejection to DEPRA and to the Court within fifteen (15) days from notice of DEPRA's option to sell the land. In that event, the parties shall be given a period of fifteen (15) days from such notice of rejection within which to agree upon the terms of the lease, and give the Court formal written notice of such agreement and its provisos. If no agreement is reached by the parties, the trial Court, within fifteen (15) days from and after the termination of the said period fixed for negotiation, shall then fix the terms of the lease, provided that the monthly rental to be

fixed by the Court shall not be less than Ten Pesos (P10.00) per month, payable within the first five (5) days of each calendar month. The period for the forced lease shall not be more than two (2) years, counted from the finality of the judgment, considering the long period of time since 1952 that DUMLAO has occupied the subject area. The rental thus fixed shall be increased by ten percent (10%) for the second year of the forced lease. DUMLAO shall not make any further constructions or improvements on the kitchen. Upon expiration of the two-year period, or upon default by DUMLAO in the payment of rentals for two (2) consecutive months, DEPRA shall be entitled to terminate the forced lease, to recover his land, and to have the kitchen removed by DUMLAO or at the latter's expense. The rentals herein provided shall be tendered by DUMLAO to the Court for payment to DEPRA, and such tender shall constitute evidence of whether or not compliance was made within the period fixed by the Court.

c) In any event, DUMLAO shall pay DEPRA an amount computed at Ten Pesos (P10.00) per month as reasonable compensation for the occupancy of DEPRA's land for the period counted from 1952, the year DUMLAO occupied the subject area, up to the commencement date of the forced lease referred to in the preceding paragraph;

d) The periods to be fixed by the trial Court in its Precision shall be inextendible, and upon failure of the party obliged to tender to the trial Court the amount due to the obligee, the party entitled to such payment shall be entitled to an order of execution for the enforcement of payment of the amount due and for compliance with such other acts as may be required by the prestation due the obligee.

No costs,

SO ORDERED.

Teehankee, Actg. C.J., Plana, Relova, De la Fuente and Alampay, JJ., concur.

Gutierrez, Jr., * J., took no part.

 

 THIRD DIVISION[G.R. No. 108894.  February 10, 1997]TECNOGAS PHILIPPINES MANUFACTURING CORPORATION, petitioner, vs. COURT OF APPEALS (FORMER SPECIAL SEVENTEENTH DIVISION) and EDUARDO UY, respondents.

D E C I S I O N

PANGANIBAN, J.:

The parties in this case are owners of adjoining lots in Parañaque, Metro Manila.  It was discovered in a survey that a portion of a building of petitioner, which was presumably constructed by its predecessor-in-interest, encroached on a portion of the lot owned by private respondent.  What are the rights and obligations of the parties?  Is petitioner considered a builder in bad faith because, as held by respondent Court, he is “presumed to know the metes and bounds of his property as described in his certificate of title”?  Does petitioner succeed into the good faith or bad faith of his predecessor-in-interest which presumably constructed the building?

These are the questions raised in the petition for review of the Decision[1] dated August 28, 1992, in CA-G.R. CV No. 28293 of respondent Court[2] where the disposition reads:[3]

“WHEREFORE, premises considered, the Decision of the Regional Trial Court is hereby reversed and set aside and another one entered -

1.  Dismissing the complaint for lack of cause of action;

2.  Ordering Tecnogas to pay the sum of P2,000.00 per month as reasonable rental from October 4, 1979 until appellee vacates the land;

3.  To remove the structures and surrounding walls on the encroached area;

4.  Ordering appellee to pay the value of the land occupied by the two-storey building;

5.  Ordering appellee to pay the sum of  P20,000.00 for  and as attorney’s fees;

6.  Costs against appellee.”

Acting on the motions for reconsideration of both petitioner and private respondent, respondent Court ordered the deletion of paragraph 4 of the dispositive portion in an Amended Decision dated February 9, 1993, as follows:[4]

“WHEREFORE, premises considered, our decision of August 28, 1992 is hereby modified deleting paragraph 4 of the dispositive portion of our decision which reads:

‘4.           Ordering appellee to pay the value of the land occupied by the two-storey building.’

The motion for reconsideration of appellee is hereby DENIED for lack of merit.”

The foregoing Amended Decision is also challenged in the instant petition.

The Facts

The facts are not disputed.  Respondent Court merely reproduced the factual findings of the trial court, as follows:[5]

“That plaintiff (herein petitioner) which is a corporation duly organized and existing under and by virtue of Philippine laws is the registered owner of a parcel of land situated in Barrio San Dionisio, Parañaque, Metro Manila known as Lot 4331-A (should be 4531-A) of Lot 4531 of the Cadastral Survey of Parañaque, Metro Manila, covered by Transfer Certificate of Title No. 409316 of the Registry of Deeds of the Province of Rizal; that said land was purchased by plaintiff from Pariz Industries, Inc. in 1970, together with all the buildings and improvements including the wall existing thereon; that the defendant (herein private respondent) is the registered owner of a parcel of land known as Lot No. 4531-B of Lot 4531 of the Cadastral Survey of Parañaque, LRC (GLRO) Rec. No. 19645 covered by Transfer Certificate of Title No. 279838, of the Registry of Deeds for the Province of Rizal; that said land which adjoins plaintiff’s land was purchased by defendant from a certain Enrile Antonio also in 1970; that in 1971, defendant purchased another lot also adjoining plaintiff’s land from a certain Miguel Rodriguez and the same was registered in defendant’s name under Transfer Certificate of Title No. 31390, of the Registry of Deeds for the Province of Rizal; that portions of the buildings and wall bought by plaintiff together with the land from Pariz Industries are occupying a portion of defendant’s adjoining land; that upon learning of the encroachment or occupation by its buildings and wall of a portion of defendant’s land, plaintiff offered to buy from defendant that particular portion of defendant’s land occupied by portions of its buildings and wall with an area of 770 square meters, more or less, but defendant, however, refused the offer.  In 1973, the parties

entered into a private agreement before a certain Col. Rosales in Malacañang, wherein plaintiff agreed to demolish the wall at the back portion of its land thus giving to defendant possession of a portion of his land previously enclosed by plaintiff’s wall; that defendant later filed a complaint before the office of Municipal Engineer of Parañaque, Metro Manila as well as before the Office of the Provincial Fiscal of Rizal against plaintiff in connection with the encroachment or occupation by plaintiff’s buildings and walls of a portion of its land but said complaint did not prosper; that defendant dug or caused to be dug a canal along plaintiff’s wall, a portion of which collapsed in June, 1980, and led to the filing by plaintiff of the supplemental complaint in the above-entitled case and a separate criminal complaint for malicious mischief against defendant and his wife which ultimately resulted into the conviction in court of defendant’s wife for the crime of malicious mischief; that while trial of the case was in progress, plaintiff filed in Court a formal proposal for settlement of the case but said proposal, however, was ignored by defendant.”

After trial on the merits, the Regional Trial Court[6] of Pasay City, Branch 117, in Civil Case No. PQ-7631-P, rendered a decision dated December 4, 1989 in favor of petitioner who was the plaintiff therein.  The dispositive portion reads:[7]

”WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant and ordering the latter to sell to plaintiff that portion of land owned by him and occupied by portions of plaintiff’s buildings and wall at the price of P2,000.00 per square meter and to pay the former:

1.  The sum of P44,000.00 to compensate for the losses in materials and properties incurred by plaintiff through thievery as a result of the destruction of its wall;

2.  The sum of P7,500.00 as and by way of attorney’s fees; and

3.  The costs of this suit.”

Appeal was duly interposed with respondent Court, which as previously stated, reversed and set aside the decision of the Regional Trial Court and rendered the assailed Decision and Amended Decision.  Hence, this recourse under Rule 45 of the Rules of Court.

The Issues

The petition raises the following issues:[8]

“(A)

Whether or not the respondent Court of Appeals erred in holding the petitioner a builder in bad faith because it is ‘presumed to know the metes and bounds of his property.’

(B)

Whether or not the respondent Court of Appeals erred when it used the amicable settlement between the petitioner and the private respondent, where both parties agreed to the demolition of the rear portion of the fence, as estoppel amounting to recognition by petitioner of respondent’s right over his property including the portions of the land where the other structures and the building stand, which were not included in the settlement.

(C)

Whether or not the respondent Court of Appeals erred in ordering the removal of the ‘structures and surrounding walls on the encroached area’ and in withdrawing its earlier ruling in its August 28, 1992 decision for the petitioner ‘to pay for the value of the land occupied’ by the building, only because the private respondent has ‘manifested its choice to demolish’ it despite the absence of compulsory sale where the builder fails to pay for the land, and which ‘choice’ private respondent deliberately deleted from its September 1, 1980 answer to the supple-mental complaint in the Regional Trial Court.”

In its Memorandum, petitioner poses the following issues:

“A

The time when to determine the good faith of the builder under Article 448 of the New Civil Code, is reckoned during the period when it was actually being built; and in a case where no evidence was presented nor introduced as to the good faith or bad faith of the builder at that time, as in this case, he must be presumed to be a ‘builder in good faith,’ since ‘bad faith cannot be presumed.’[9]

B.

In a specific ‘boundary overlap situation’ which involves a builder in good faith, as in this case, it is now well settled that the lot owner, who builds on the adjacent lot is not charged with ‘constructive notice’ of the technical metes and bounds contained in their torrens titles to determine the exact and precise extent of his boundary perimeter.[10]

C.

The respondent court’s citation of the twin cases of Tuason & Co. v. Lumanlan and Tuason & Co. v. Macalindong is not the ‘judicial authority’ for a boundary dispute situation between adjacent torrens titled lot owners, as the facts of the present case do notfall within nor square with the involved principle of a dissimilar case.[11]

D.

Quite contrary to respondent Uy’s reasoning, petitioner Tecnogas continues to be a builder in good faith, even if it subsequently built/repaired the walls/other permanent structures thereon while the case a quo was pending and even while respondent sent the petitioner many letters/filed cases thereon.[12]

D. (E.)

The amicable settlement between the parties should be interpreted as a contract and enforced only in accordance with its explicit terms, and not over and beyond that agreed upon; because the courts do not have the power to create a contract nor expand its scope.[13]

E. (F.)

As a general rule, although the landowner has the option to choose between: (1) ‘buying the building built in good faith’, or (2) ‘selling the portion of his land on which stands the building’ under Article 448 of the Civil Code; the first option is not absolute, because an exception thereto, once it would be impractical for the landowner to choose to exercise the first alternative, i.e. buy that portion of the house standing on his land, for the whole building might be rendered useless.  The workable solution is for him to select the second alternative, namely, to sell to the builder that part of his land on which was constructed a portion of the house.”[14]

Private respondent, on the other hand, argues that the petition is “suffering from the following flaws:[15]

1.  It did not give the exact citations of cases decided by the Honorable Supreme Court that allegedly contradicts the ruling of the Hon. Court of Appeals based on the doctrine laid down in Tuason vs. Lumanlan case citing also Tuason vs. Macalindong case (Supra).

2.  Assuming that the doctrine in the alleged Co Tao vs. Chico case is contradictory to the doctrine in Tuason vs. Lumanlan and Tuason vs. Macalindong, the two cases being more current, the same should prevail.”

Further, private respondent contends that the following “unmistakably” point to the bad faith of petitioner: (1) private respondent’s purchase of the two lots, “was ahead of the purchase by petitioner of the building and lot from Pariz Industries”; (2) the declaration of the General Manager of Tecnogas that the sale between petitioner and Pariz Industries “was not registered” because of some problems with China Banking Corporation; and (3) the Deed of Sale in favor of petitioner was registered in its name only in “the month of May 1973.”[16]

The Court’s Ruling

The petition should be granted.

Good Faith or Bad Faith

Respondent Court, citing the cases of  J. M. Tuason & Co., Inc. vs. Vda. de Lumanlan[17] and J. M. Tuason & Co., Inc. vs. Macalindong,[18] ruled that petitioner “cannot be considered in good faith” because as a land owner, it is “presumed to know the metes and bounds of his own property, specially if the same are reflected in a properly issued certificate of title.  One who erroneously builds on the adjoining lot should be considered a builder in (b)ad (f)aith, there being presumptive knowledge of the Torrens title, the area, and the extent of the boundaries.”[19]

We disagree with respondent Court.  The two cases it relied upon do not support its main pronouncement that a registered owner of land has presumptive knowledge of the metes and bounds of its own land, and is therefore in bad faith if he mistakenly builds on an adjoining land.  Aside from the fact that those cases had factual moorings radically different from those obtaining here, there is nothing in those cases which would suggest, however remotely, that bad faith is imputable to a registered owner of land when a part of his building encroaches upon a neighbor’s land, simply because he is supposedly presumed to know the boundaries of his land as described in his certificate of title.  No such doctrinal statement could have been made in those cases because such issue was not before the Supreme Court.  Quite the contrary, we have rejected such a theory in Co Tao vs. Chico,[20] where we held that unless one is versed in the science of surveying, “no one can determine the precise extent or location of his property by merely examining his paper title.”

There is no question that when petitioner purchased the land from Pariz Industries, the buildings and other structures were already in existence.  The record is not clear as to who actually built those structures, but it may well be assumed that petitioner’s predecessor-in-interest, Pariz Industries, did so.  Article 527 of the Civil Code presumes good faith, and since no proof exists to show that the encroachment over a narrow, needle-shaped portion of private respondent’s land was done in bad faith by the builder of the encroaching structures, the latter should be presumed to have built them in good faith.[21] It is presumed that possession continues to be enjoyed in the same character in which it was acquired, until the contrary is proved.[22] Good faith consists in the belief of the builder that the land he is

building on is his, and his ignorance of any defect or flaw in his title.[23] Hence, such good faith, by law, passed on to Pariz’s successor, petitioner in this case.  Further, “(w)here one derives title to property from another, the act, declaration, or omission of the latter, while holding the title, in relation to the property, is evidence against the former.”[24]And possession acquired in good faith does not lose this character except in case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully.[25] The good faith ceases from the moment defects in the title are made known to the possessor, by extraneous evidence or by suit for recovery of the property by the true owner.[26]

Recall that the encroachment in the present case was caused by a very slight deviation of the erected wall (as fence) which was supposed to run in a straight line from point 9 to point 1 of petitioner’s lot.  It was an error which, in the context of the attendant facts, was consistent with good faith.  Consequently, the builder, if sued by the aggrieved landowner for recovery of possession, could have invoked the provisions of Art. 448 of the Civil Code, which reads:

”The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent.  However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees.  In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity.  The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.”

The obvious benefit to the builder under this article is that, instead of being outrightly ejected from the land, he can compel the landowner to make a choice between the two options: (1) to appropriate the building by paying the indemnity required by law, or (2) sell the land to the builder.  The landowner cannot refuse to exercise either option and compel instead the owner of the building to remove it from the land.[27]

The question, however, is whether the same benefit can be invoked by petitioner who, as earlier stated, is not the builder of the offending structures but possesses them as buyer.

We answer such question in the affirmative.

In the first place, there is no sufficient showing that petitioner was aware of the encroachment at the time it acquired the property from Pariz Industries.  We agree with the trial court that various factors in evidence adequately show petitioner’s lack of awareness thereof.  In any case, contrary proof has not overthrown the presumption of good faith under Article 527 of the Civil Code, as already stated, taken together with the disputable presumptions of the law on evidence. These presumptions state, under Section 3 (a) of Rule 131 of the Rules of Court, that the person is innocent of a crime or wrong; and under Section 3 (ff) of Rule 131, that the law has been obeyed.  In fact, private respondent Eduardo Uy himself was unaware of such intrusion into his property until after 1971 when he hired a surveyor, following his purchase of another adjoining lot, to survey all his newly acquired lots.  Upon being apprised of the encroachment, petitioner immediately offered to buy the area occupied by its building -- a species of conduct consistent with good faith.

In the second place, upon delivery of the property by Pariz Industries, as seller, to the petitioner, as buyer, the latter acquired ownership of the property.  Consequently and as earlier discussed, petitioner is deemed to have stepped into the shoes of the seller in regard to all rights of ownership over the immovable sold, including the right to compel the private respondent to exercise either of the two options provided under Article 448 of the Civil Code.

Estoppel

Respondent Court ruled that the amicable settlement entered into between petitioner and private respondent estops the former from questioning the private respondent’s “right” over the disputed

property.  It held that by undertaking to demolish the fence under said settlement, petitioner recognized private respondent’s right over the property, and “cannot later on compel” private respondent “to sell to it the land since” private respondent “is under no obligation to sell.”[28]

We do not agree.  Petitioner cannot be held in estoppel for entering into the amicable settlement, the pertinent portions of which read:[29]

”That the parties hereto have agreed that the rear portion of the fence that separates the property of the complainant and respondent shall be demolished up to the back of the building housing the machineries which demolision (sic) shall be undertaken by the complainant at anytime.

That the fence which serve(s) as a wall housing the electroplating machineries shall not be demolished in the mean time which portion shall be subject to negotiation by herein parties.”

From the foregoing, it is clear that petitioner agreed only to the demolition of a portion of the wall separating the adjoining properties of the parties -- i.e. “up to the back of the building housing the machineries.”  But that portion of the fence which served as the wall housing the electroplating machineries was not to be demolished.  Rather, it was to “be subject to negotiation by herein parties.”  The settlement may have recognized the ownership of private respondent but such admission cannot be equated with bad faith.  Petitioner was only trying to avoid a litigation, one reason for entering into an amicable settlement.

As was ruled in Osmeña vs. Commission on Audit,[30]

“A compromise is a bilateral act or transaction that is expressly acknowledged as a juridical agreement by the Civil Code and is therein dealt with in some detail.  `A compromise,’ declares Article 2208 of said Code, `is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced.’

xxx                xxx       xxx

The Civil Code not only defines and authorizes compromises, it in fact encourages them in civil actions.  Art. 2029 states that `The Court shall endeavor to persuade the litigants in a civil case to agree upon some fair compromise.’  x x x.”

In the context of the established facts, we hold that petitioner did not lose its rights under Article 448 of the Civil Code on the basis merely of the fact that some years after acquiring the property in good faith, it learned about -- and aptly recognized -- the right of private respondent to a portion of the land occupied by its building.  The supervening awareness of the encroachment by petitioner does not militate against its right to claim the status of a builder in good faith.  In fact, a judicious reading of said Article 448 will readily show that the landowner’s exercise of his option can only take place after the builder shall have come to know of the intrusion -- in short, when both parties shall have become aware of it.  Only then will the occasion for exercising the option arise, for it is only then that both parties will have been aware that a problem exists in regard to their property rights.

Options of Private Respondent

What then is the applicable provision in this case which private respondent may invoke as his remedy:  Article  448   or  Article  450[31] of the Civil Code?

In view of the good faith of both petitioner and private respondent, their rights and obligations are to be governed by Art. 448.  The essential fairness of this codal provision has been pointed out by Mme. Justice Ameurfina Melencio-Herrera, citing Manresa and applicable precedents, in the case of Depra vs. Dumlao,[32] to wit:

“Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land.  In view of the impracticality of creating a state of forced co-ownership, the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the sower to pay the proper rent.  It is the owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382; Co Tao vs. Chan Chico, G. R. No. 49167, April 30, 1949; Article applied; see Cabral, et al. vs. Ibanez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050).”

The private respondent’s insistence on the removal of the encroaching structures as the proper remedy, which respondent Court sustained in its assailed Decisions, is thus legally flawed.  This is not one of the remedies bestowed upon him by law.  It would be available only if and when he chooses to compel the petitioner to buy the land at a reasonable price but the latter fails to pay such price.[33] This has not taken place.  Hence, his options are limited to:  (1) appropriating the encroaching portion of petitioner’s building after payment of proper indemnity, or (2) obliging the latter to buy the lot occupied by the structure.  He cannot exercise a remedy of his own liking.

Neither is petitioner’s prayer that private respondent be ordered to sell the land[34] the proper remedy.  While that was dubbed as the “more workable solution” in Grana and Torralba vs. The Court of Appeals, et al.,[35] it was not the relief granted in that case as the landowners were directed to exercise “within 30 days from this decision their option to either buy the portion of the petitioners’ house on their land or sell to said petitioners the portion of their land on which it stands.”[36] Moreover, in Grana and Torralba, the area involved was only 87 square meters while this case involves 520 square meters[37].  In line with the case of Depra vs. Dumlao,[38] this case will have to be remanded to the trial court for further proceedings to fully implement the mandate of Art. 448.  It is a rule of procedure for the Supreme Court to strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation.[39]

Petitioner, however, must also pay the rent for the property occupied by its building as prescribed by respondent Court from October 4, 1979, but only up to the date private respondent serves notice of its option upon petitioner and the trial court; that is, if such option is for private respondent to appropriate the encroaching structure.  In such event, petitioner would have a right of retention which negates the obligation to pay rent.[40] The rent should however continue if the option chosen is compulsory sale, but only up to the actual transfer of ownership.

The award of attorney’s fees by respondent Court against petitioner is unwarranted since the action appears to have been filed in good faith.  Besides, there should be no penalty on the right to litigate.[41]

WHEREFORE, premises considered, the petition is hereby GRANTED and the assailed Decision and the Amended Decision are REVERSED and SET ASIDE.  In accordance with the case of Depra vs. Dumlao,[42] this case is REMANDED to the Regional Trial Court of Pasay City, Branch 117, for further proceedings consistent with Articles 448 and 546 [43] of the Civil Code, as follows:

The trial court shall determine:

a)           the present fair price of private respondent’s 520 square-meter area of land;

b)      the increase in value (“plus value”) which the said area of 520 square meters may have acquired by reason of the existence of the portion of the building on the area;

c)           the fair market value of the encroaching portion of the building; and

d)      whether the value of said area of land is considerably more than the fair market value of the portion of the building thereon.

2.  After said amounts shall have been determined by competent evidence, the regional trial court shall render judgment as follows:

a)  The private respondent shall be granted a period of fifteen (15) days within which to exercise his option under the law (Article 448, Civil Code), whether to appropriate the portion of the building as his own by paying to petitioner its fair market value,or to oblige petitioner to pay the price of said area.  The amounts to be respectively paid by petitioner and private respondent, in accordance with the option thus exercised by written notice of the other party and to the court, shall be paid by the obligor within fifteen (15) days from such notice of the option by tendering the amount to the trial court in favor of the party entitled to receive it;

b)  If private respondent exercises the option to oblige petitioner to pay the price of the land but the latter rejects such purchase because, as found by the trial court, the value of the land is considerably more than that of the portion of the building, petitioner shall give written notice of such rejection to private respondent and to the trial court within fifteen (15) days from notice of private respondent’s option to sell the land.  In that event, the parties shall be given a period of fifteen (15) days from such notice of rejection within which to agree upon the terms of the lease, and give the trial court formal written notice of the agreement and its provisos.  If no agreement is reached by the parties, the trial court, within fifteen (15) days from and after the termination of the said period fixed for negotiation, shall then fix the terms of the lease provided that the monthly rental to be fixed by the Court shall not be less than two thousand pesos (P2,000.00) per month, payable within the first five (5) days of each calendar month.  The period for the forced lease shall not be more than two (2) years, counted from the finality of the judgment, considering the long period of time since 1970 that petitioner has occupied the subject area.  The rental thus fixed shall be increased by ten percent (10%) for the second year of the forced lease.  Petitioner shall not make any further constructions or improvements on the building.  Upon expiration of the two-year period, or upon default by petitioner in the payment of rentals for two (2) consecutive months, private respondent shall be entitled to terminate the forced lease, to recover his land, and to have the portion of the building removed by petitioner or at latter’s expense.  The rentals herein provided shall be tendered by petitioner to the trial court for payment to private respondent, and such tender shall constitute evidence of whether or not compliance was made within the period fixed by the said court.

c)  In any event, petitioner shall pay private respondent an amount computed at two thousand pesos (P2,000.00) per month as reasonable compensation for the occupancy of private respondent’s land for the period counted from October 4, 1979, up to the date private respondent serves notice of its option to appropriate the encroaching structures, otherwise up to the actual transfer of ownership to petitioner or, in case a forced lease has to be imposed, up to the commencement date of the forced lease referred to in the preceding paragraph;

d)  The periods to be fixed by the trial court in its decision shall be non-extendible, and upon failure of the party obliged to tender to the trial court the amount due to the obligee, the party entitled to such payment shall be entitled to an order of execution for the enforcement of payment of the amount due and for compliance with such other acts as may be required by the prestation due the obligee.

No costs.

SO ORDERED.

Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

V. Co-ownership

(No assigned cases)

VI. Possession

(No assigned cases)

VII. Usufruct

VIII. Easement or servitudes

(No assigned cases)