Republic of the Philippines The defendant Emiliano J.
Valdez, in his amended answer, denied generally
SUPREME COURT
Manila
EN BANC
G.R. No. L-26278 August 4, 1927
LEON SIBAL , plaintiff-appellant,
vs.
EMILIANO J. VALDEZ ET AL., defendants.
EMILIANO J. VALDEZ, appellee.
J. E. Blanco for appellant.
Felix B. Bautista and Santos and Benitez for appellee.
JOHNSON, J.:
The action was commenced in the Court of First Instance of the Province of
Tarlac on the 14th day of December 1924. The facts are about as conflicting
as it is possible for facts to be, in the trial causes.
As a first cause of action the plaintiff alleged that the defendant Vitaliano
Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of
execution issued by the Court of First Instance of Pampanga, attached and
sold to the defendant Emiliano J. Valdez the sugar cane planted by the
plaintiff and his tenants on seven parcels of land described in the complaint
in the third paragraph of the first cause of action; that within one year from
the date of the attachment and sale the plaintiff offered to redeem said sugar
cane and tendered to the defendant Valdez the amount sufficient to cover the
price paid by the latter, the interest thereon and any assessments or taxes
which he may have paid thereon after the purchase, and the interest
corresponding thereto and that Valdez refused to accept the money and to
return the sugar cane to the plaintiff.
As a second cause of action, the plaintiff alleged that the defendant Emiliano
J. Valdez was attempting to harvest the palay planted in four of the seven
parcels mentioned in the first cause of action; that he had harvested and
taken possession of the palay in one of said seven parcels and in another
parcel described in the second cause of action, amounting to 300 cavans;
and that all of said palay belonged to the plaintiff.
Plaintiff prayed that a writ of preliminary injunction be issued against the
defendant Emiliano J. Valdez his attorneys and agents, restraining them (1)
from distributing him in the possession of the parcels of land described in the
complaint; (2) from taking possession of, or harvesting the sugar cane in
question; and (3) from taking possession, or harvesting the palay in said
parcels of land. Plaintiff also prayed that a judgment be rendered in his favor
and against the defendants ordering them to consent to the redemption of
the sugar cane in question, and that the defendant Valdez be condemned to
pay to the plaintiff the sum of P1,056 the value of palay harvested by him in
the two parcels above-mentioned ,with interest and costs.
On December 27, 1924, the court, after hearing both parties and upon
approval of the bond for P6,000 filed by the plaintiff, issued the writ of
preliminary injunction prayed for in the complaint.
and specifically each and every allegation of the complaint and step up the
following defenses:
(a) That the sugar cane in question had the nature of personal
property and was not, therefore, subject to redemption;
(b) That he was the owner of parcels 1, 2 and 7 described in the first
cause of action of the complaint;
(c) That he was the owner of the palay in parcels 1, 2 and 7; and
(d) That he never attempted to harvest the palay in parcels 4 and 5.
The defendant Emiliano J. Valdez by way of counterclaim, alleged that by
reason of the preliminary injunction he was unable to gather the sugar cane,
sugar-cane shoots (puntas de cana dulce) palay in said parcels of land,
representing a loss to him of P8,375.20 and that, in addition thereto, he
suffered damages amounting to P3,458.56. He prayed, for a judgment (1)
absolving him from all liability under the complaint; (2) declaring him to be the
absolute owner of the sugar cane in question and of the palay in parcels 1, 2
and 7; and (3) ordering the plaintiff to pay to him the sum of P11,833.76,
representing the value of the sugar cane and palay in question, including
damages.
Upon the issues thus presented by the pleadings the cause was brought on
for trial. After hearing the evidence, and on April 28, 1926, the Honorable
Cayetano Lukban, judge, rendered a judgment against the plaintiff and in
favor of the defendants
(1) Holding that the sugar cane in question was personal property
and, as such, was not subject to redemption;
(2) Absolving the defendants from all liability under the complaint;
and
(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan
Sangalang and Marcos Sibal to jointly and severally pay to the
defendant Emiliano J. Valdez the sum of P9,439.08 as follows:
(a) P6,757.40, the value of the sugar cane;
(b) 1,435.68, the value of the sugar-cane shoots;
(c) 646.00, the value of palay harvested by plaintiff;
(d) 600.00, the value of 150 cavans of palay which the
defendant was not able to raise by reason of the injunction,
at P4 cavan. 9,439.08 From that judgment the plaintiff
appealed and in his assignments of error contends that the
lower court erred: (1) In holding that the sugar cane in
question was personal property and, therefore, not subject to
redemption;
(2) In holding that parcels 1 and 2 of the complaint belonged to
Valdez, as well as parcels 7 and 8, and that the palay therein was
planted by Valdez;
(3) In holding that Valdez, by reason of the preliminary injunction
failed to realized P6,757.40 from the sugar cane and P1,435.68 from
sugar-cane shoots (puntas de cana dulce);
 (4) In holding that, for failure of plaintiff to gather the sugar cane on
time, the defendant was unable to raise palay on the land, which
would have netted him the sum of P600; and.
(5) In condemning the plaintiff and his sureties to pay to the
defendant the sum of P9,439.08.
It appears from the record:
(1) That on May 11, 1923, the deputy sheriff of the Province of
Tarlac, by virtue of writ of execution in civil case No. 20203 of the
Court of First Instance of Manila (Macondray & Co., Inc. vs. Leon
Sibal),levied an attachment on eight parcels of land belonging to said
Leon Sibal, situated in the Province of Tarlac, designated in the
second of attachment as parcels 1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit B,
Exhibit 2-A).
(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight
parcels of land, at the auction held by the sheriff of the Province of
Tarlac, for the sum to P4,273.93, having paid for the said parcels
separately as follows (Exhibit C, and 2-A):
Parcel
1 .....................................................................
2 .....................................................................
3 .....................................................................
4 .....................................................................
5 .....................................................................
6 .....................................................................
7 with the house thereon ..........................
8 .....................................................................
==========
(3) That within one year from the sale of said parcel of land, and on
the 24th day of September, 1923, the judgment debtor, Leon Sibal,
paid P2,000 to Macondray & Co., Inc., for the account of the
redemption price of said parcels of land, without specifying the
particular parcels to which said amount was to applied. The
redemption price said eight parcels was reduced, by virtue of said
transaction, to P2,579.97 including interest (Exhibit C and 2).
The record further shows:
(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy
sheriff of the Province of Tarlac, by virtue of a writ of execution in civil
case No. 1301 of the Province of Pampanga (Emiliano J.
Valdez vs. Leon Sibal 1. the same parties in the present case),
attached the personal property of said Leon Sibal located in Tarlac,
among which was included the sugar cane now in question in the
seven parcels of land described in the complaint (Exhibit A).
(2) That on May 9 and 10, 1924, said deputy sheriff sold at public
auction said personal properties of Leon Sibal, including the sugar
cane in question to Emilio J. Valdez, who paid therefor the sum of
P1,550, of which P600 was for the sugar cane (Exhibit A).
(3) That on April 29,1924, said deputy sheriff, by virtue of said writ of
execution, also attached the real property of said Leon Sibal in
Tarlac, including all of his rights, interest and participation therein,
which real property consisted of eleven parcels of land and a house
and camarin situated in one of said parcels (Exhibit A).
(4) That on June 25, 1924, eight of said eleven parcels, including the
house and the camarin, were bought by Emilio J. Valdez at the
P1.00 auction held by the sheriff for the sum of P12,200. Said eight parcels
were designated in the certificate of sale as parcels 1, 3, 4, 5, 6, 7,
2,000.00
10 and 11. The house and camarin were situated on parcel 7 (Exhibit
A).
120.93
(5) That the remaining three parcels, indicated in the certificate of the
sheriff as parcels 2, 12, and 13, were released from the attachment
1,000.00 by virtue of claims presented by Agustin Cuyugan and Domiciano
Tizon (Exhibit A).
1.00
(6) That on the same date, June 25, 1924, Macondray & Co. sold
and conveyed to Emilio J. Valdez for P2,579.97 all of its rights and
1.00
interest in the eight parcels of land acquired by it at public auction
held by the deputy sheriff of Tarlac in connection with civil case No.
150.00 20203 of the Court of First Instance of Manila, as stated above. Said
amount represented the unpaid balance of the redemption price of
said eight parcels, after payment by Leon Sibal of P2,000 on
1,000.00
September 24, 1923, fro the account of the redemption price, as
stated above. (Exhibit C and 2).
The foregoing statement of facts shows:
4,273.93 (1) The Emilio J. Valdez bought the sugar cane in question, located
in the seven parcels of land described in the first cause of action of
the complaint at public auction on May 9 and 10, 1924, for P600.
(2) That on July 30, 1923, Macondray & Co. became the owner of
eight parcels of land situated in the Province of Tarlac belonging to
Leon Sibal and that on September 24, 1923, Leon Sibal paid to
 Macondray & Co. P2,000 for the account of the redemption price of
said parcels.
(3) That on June 25, 1924, Emilio J. Valdez acquired from
Macondray & Co. all of its rights and interest in the said eight parcels
of land.
(4) That on June 25, 1924, Emilio J. Valdez also acquired all of the
rights and interest which Leon Sibal had or might have had on said
eight parcels by virtue of the P2,000 paid by the latter to Macondray.
(5) That Emilio J. Valdez became the absolute owner of said eight
parcels of land.
The first question raised by the appeal is, whether the sugar cane in question
is personal or real property. It is contended that sugar cane comes under the
classification of real property as "ungathered products" in paragraph 2 of
article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates as
real property the following: Trees, plants, and ungathered products, while
they are annexed to the land or form an integral part of any immovable
property." That article, however, has received in recent years an
interpretation by the Tribunal Supremo de Espaa, which holds that, under
certain conditions, growing crops may be considered as personal property.
(Decision of March 18, 1904, vol. 97, Civil Jurisprudence of Spain.)
Manresa, the eminent commentator of the Spanish Civil Code, in discussing
section 334 of the Civil Code, in view of the recent decisions of the supreme
Court of Spain, admits that growing crops are sometimes considered and
treated as personal property. He says:
No creemos, sin embargo, que esto excluya la excepcionque
muchos autores hacen tocante a la venta de toda cosecha o de
parte de ella cuando aun no esta cogida (cosa frecuente con la uvay
y la naranja), y a la de lenas, considerando ambas como muebles. El
Tribunal Supremo, en sentencia de 18 de marzo de 1904, al
entender sobre un contrato de arrendamiento de un predio rustico,
resuelve que su terminacion por desahucio no extingue los derechos
del arrendario, para recolectar o percibir los frutos correspondientes
al ao agricola, dentro del que nacieron aquellos derechos, cuando
el arrendor ha percibido a su vez el importe de la renta integra
correspondiente, aun cuando lo haya sido por precepto legal durante
el curso del juicio, fundandose para ello, no solo en que de otra
suerte se daria al desahucio un alcance que no tiene, sino en que, y
esto es lo interesante a nuestro proposito, la consideracion de
inmuebles que el articulo 334 del Codigo Civil atribuge a los frutos
pendientes, no les priva del caracter de productos pertenecientes,
como tales, a quienes a ellos tenga derecho, Ilegado el momento de
su recoleccion.
xxx xxx xxx
Mas actualmente y por virtud de la nueva edicion de la Ley
Hipotecaria, publicada en 16 de diciembre de 1909, con las reformas
introducidas por la de 21 de abril anterior, la hipoteca, salvo pacto
expreso que disponga lo contrario, y cualquiera que sea la
naturaleza y forma de la obligacion que garantice, no comprende los
frutos cualquiera que sea la situacion en que se encuentre. (3
Manresa, 5. edicion, pags. 22, 23.)
From the foregoing it appears (1) that, under Spanish authorities, pending
fruits and ungathered products may be sold and transferred as personal
property; (2) that the Supreme Court of Spain, in a case of ejectment of a
lessee of an agricultural land, held that the lessee was entitled to gather the
products corresponding to the agricultural year, because said fruits did not go
with the land but belonged separately to the lessee; and (3) that under the
Spanish Mortgage Law of 1909, as amended, the mortgage of a piece of
land does not include the fruits and products existing thereon, unless the
contract expressly provides otherwise.
An examination of the decisions of the Supreme Court of Louisiana may give
us some light on the question which we are discussing. Article 465 of the
Civil Code of Louisiana, which corresponds to paragraph 2 of article 334 of
our Civil Code, provides: "Standing crops and the fruits of trees not gathered,
and trees before they are cut down, are likewise immovable, and are
considered as part of the land to which they are attached."
The Supreme Court of Louisiana having occasion to interpret that provision,
held that in some cases "standing crops" may be considered and dealt with
as personal property. In the case of Lumber Co. vs. Sheriff and Tax
Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the
Civil Code it is provided that 'standing crops and the fruits of trees not
gathered and trees before they are cut down . . . are considered as part of
the land to which they are attached, but the immovability provided for is only
one in abstracto and without reference to rights on or to the crop acquired by
others than the owners of the property to which the crop is attached. . . . The
existence of a right on the growing crop is a mobilization by anticipation, a
gathering as it were in advance, rendering the crop movable quoad the right
acquired therein. Our jurisprudence recognizes the possible mobilization of
the growing crop." (Citizens' Bank vs. Wiltz, 31 La. Ann., 244;
Porche vs. Bodin, 28 La., Ann., 761; Sandel vs. Douglass, 27 La. Ann., 629;
Lewis vs. Klotz, 39 La. Ann., 267.)
"It is true," as the Supreme Court of Louisiana said in the case of Porche vs.
Bodin (28 La. An., 761) that "article 465 of the Revised Code says that
standing crops are considered as immovable and as part of the land to which
they are attached, and article 466 declares that the fruits of an immovable
gathered or produced while it is under seizure are considered as making part
thereof, and incurred to the benefit of the person making the seizure. But the
evident meaning of these articles, is where the crops belong to the owner of
the plantation they form part of the immovable, and where it is seized, the
fruits gathered or produced inure to the benefit of the seizing creditor.
A crop raised on leased premises in no sense forms part of the
immovable. It belongs to the lessee, and may be sold by him,
whether it be gathered or not, and it may be sold by his judgment
 creditors. If it necessarily forms part of the leased premises the result
would be that it could not be sold under execution separate and
apart from the land. If a lessee obtain supplies to make his crop, the
factor's lien would not attach to the crop as a separate thing
belonging to his debtor, but the land belonging to the lessor would be
affected with the recorded privilege. The law cannot be construed so
as to result in such absurd consequences.
In the case of Citizen's Bank vs. Wiltz (31 La. Ann., 244)the court said:
If the crop quoad the pledge thereof under the act of 1874 was an
immovable, it would be destructive of the very objects of the act, it
would render the pledge of the crop objects of the act, it would
render the pledge of the crop impossible, for if the crop was an
inseparable part of the realty possession of the latter would be
necessary to that of the former; but such is not the case. True, by
article 465 C. C. it is provided that "standing crops and the fruits of
trees not gathered and trees before they are cut down are likewise
immovable and are considered as part of the land to which they are
attached;" but the immovability provided for is only one in
abstracto and without reference to rights on or to the crop acquired
by other than the owners of the property to which the crop was
attached. The immovability of a growing crop is in the order of things
temporary, for the crop passes from the state of a growing to that of
a gathered one, from an immovable to a movable. The existence of a
right on the growing crop is a mobilization by anticipation, a gathering
as it were in advance, rendering the crop movable quoad the right
acquired thereon. The provision of our Code is identical with the
Napoleon Code 520, and we may therefore obtain light by an
examination of the jurisprudence of France.
The rule above announced, not only by the Tribunal Supremo de Espaa but
by the Supreme Court of Louisiana, is followed in practically every state of
the Union.
From an examination of the reports and codes of the State of California and
other states we find that the settle doctrine followed in said states in
connection with the attachment of property and execution of judgment is, that
growing crops raised by yearly labor and cultivation are considered personal
property. (6 Corpuz Juris, p. 197; 17 Corpus Juris, p. 379; 23 Corpus Juris, p.
329: Raventas vs. Green, 57 Cal., 254; Norris vs. Watson, 55 Am. Dec., 161;
Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin on Sales, sec. 126;
McKenzie vs. Lampley, 31 Ala., 526; Crine vs. Tifts and Co., 65 Ga., 644;
Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich., 174; Freeman on
Execution, vol. 1, p. 438; Drake on Attachment, sec. 249; Mechem on Sales,
sec. 200 and 763.)
Mr. Mechem says that a valid sale may be made of a thing, which though not
yet actually in existence, is reasonably certain to come into existence as the
natural increment or usual incident of something already in existence, and
then belonging to the vendor, and then title will vest in the buyer the moment
the thing comes into existence. (Emerson vs. European Railway Co., 67 Me.,
387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63.) Things of this
nature are said to have a potential existence. A man may sell property of
which he is potentially and not actually possessed. He may make a valid sale
of the wine that a vineyard is expected to produce; or the gain a field may
grow in a given time; or the milk a cow may yield during the coming year; or
the wool that shall thereafter grow upon sheep; or what may be taken at the
next cast of a fisherman's net; or fruits to grow; or young animals not yet in
existence; or the good will of a trade and the like. The thing sold, however,
must be specific and identified. They must be also owned at the time by the
vendor. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)
It is contended on the part of the appellee that paragraph 2 of article 334 of
the Civil Code has been modified by section 450 of the Code of Civil
Procedure as well as by Act No. 1508, the Chattel Mortgage Law. Said
section 450 enumerates the property of a judgment debtor which may be
subjected to execution. The pertinent portion of said section reads as follows:
"All goods, chattels, moneys, and other property, both real and personal, * * *
shall be liable to execution. Said section 450 and most of the other sections
of the Code of Civil Procedure relating to the execution of judgment were
taken from the Code of Civil Procedure of California. The Supreme Court of
California, under section 688 of the Code of Civil Procedure of that state
(Pomeroy, p. 424) has held, without variation, that growing crops were
personal property and subject to execution.
Act No. 1508, the Chattel Mortgage Law, fully recognized that growing crops
are personal property. Section 2 of said Act provides: "All personal property
shall be subject to mortgage, agreeably to the provisions of this Act, and a
mortgage executed in pursuance thereof shall be termed a chattel
mortgage." Section 7 in part provides: "If growing crops be mortgaged the
mortgage may contain an agreement stipulating that the mortgagor binds
himself properly to tend, care for and protect the crop while growing.
It is clear from the foregoing provisions that Act No. 1508 was enacted on the
assumption that "growing crops" are personal property. This consideration
tends to support the conclusion hereinbefore stated, that paragraph 2 of
article 334 of the Civil Code has been modified by section 450 of Act No. 190
and by Act No. 1508 in the sense that "ungathered products" as mentioned in
said article of the Civil Code have the nature of personal property. In other
words, the phrase "personal property" should be understood to include
"ungathered products."
At common law, and generally in the United States, all annual crops
which are raised by yearly manurance and labor, and essentially owe
their annual existence to cultivation by man, . may be levied on as
personal property." (23 C. J., p. 329.) On this question Freeman, in
his treatise on the Law of Executions, says: "Crops, whether growing
or standing in the field ready to be harvested, are, when produced by
annual cultivation, no part of the realty. They are, therefore, liable to
voluntary transfer as chattels. It is equally well settled that they may
 be seized and sold under execution. (Freeman on Executions, vol. p.
438.)
We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code
has been modified by section 450 of the Code of Civil Procedure and by Act
No. 1508, in the sense that, for the purpose of attachment and execution,
and for the purposes of the Chattel Mortgage Law, "ungathered products"
have the nature of personal property. The lower court, therefore, committed
no error in holding that the sugar cane in question was personal property
and, as such, was not subject to redemption.
All the other assignments of error made by the appellant, as above stated,
relate to questions of fact only. Before entering upon a discussion of said
assignments of error, we deem it opportune to take special notice of the
failure of the plaintiff to appear at the trial during the presentation of evidence
by the defendant. His absence from the trial and his failure to cross-examine
the defendant have lent considerable weight to the evidence then presented
for the defense.
Coming not to the ownership of parcels 1 and 2 described in the first cause
of action of the complaint, the plaintiff made a futile attempt to show that said
two parcels belonged to Agustin Cuyugan and were the identical parcel 2
which was excluded from the attachment and sale of real property of Sibal to
Valdez on June 25, 1924, as stated above. A comparison of the description
of parcel 2 in the certificate of sale by the sheriff (Exhibit A) and the
description of parcels 1 and 2 of the complaint will readily show that they are
not the same.
The description of the parcels in the complaint is as follows:
1. La caa dulce sembrada por los inquilinos del ejecutado Leon
Sibal 1. en una parcela de terreno de la pertenencia del citado
ejecutado, situada en Libutad, Culubasa, Bamban, Tarlac, de unas
dos hectareas poco mas o menos de superficie.
2. La caa dulce sembrada por el inquilino del ejecutado Leon Sibal
1., Ilamado Alejandro Policarpio, en una parcela de terreno de la
pertenencia del ejecutado, situada en Dalayap, Culubasa, Bamban,
Tarlac de unas dos hectareas de superficie poco mas o menos." The
description of parcel 2 given in the certificate of sale (Exhibit A) is as
follows:
2a. Terreno palayero situado en Culubasa, Bamban, Tarlac, de
177,090 metros cuadrados de superficie, linda al N. con Canuto
Sibal, Esteban Lazatin and Alejandro Dayrit; al E. con Francisco
Dizon, Felipe Mau and others; al S. con Alejandro Dayrit, Isidro
Santos and Melecio Mau; y al O. con Alejandro Dayrit and Paulino
Vergara. Tax No. 2854, vador amillarado P4,200 pesos.
On the other hand the evidence for the defendant purported to show that
parcels 1 and 2 of the complaint were included among the parcels bought by
Valdez from Macondray on June 25, 1924, and corresponded to parcel 4 in
the deed of sale (Exhibit B and 2), and were also included among the parcels
bought by Valdez at the auction of the real property of Leon Sibal on June
25, 1924, and corresponded to parcel 3 in the certificate of sale made by the
sheriff (Exhibit A). The description of parcel 4 (Exhibit 2) and parcel 3 (Exhibit
A) is as follows:
Parcels No. 4. Terreno palayero, ubicado en el barrio de
Culubasa,Bamban, Tarlac, I. F. de 145,000 metros cuadrados de
superficie, lindante al Norte con Road of the barrio of Culubasa that
goes to Concepcion; al Este con Juan Dizon; al Sur con Lucio Mao
y Canuto Sibal y al Oeste con Esteban Lazatin, su valor amillarado
asciende a la suma de P2,990. Tax No. 2856.
As will be noticed, there is hardly any relation between parcels 1 and 2 of the
complaint and parcel 4 (Exhibit 2 and B) and parcel 3 (Exhibit A). But,
inasmuch as the plaintiff did not care to appear at the trial when the
defendant offered his evidence, we are inclined to give more weight to the
evidence adduced by him that to the evidence adduced by the plaintiff, with
respect to the ownership of parcels 1 and 2 of the compliant. We, therefore,
conclude that parcels 1 and 2 of the complaint belong to the defendant,
having acquired the same from Macondray & Co. on June 25, 1924, and
from the plaintiff Leon Sibal on the same date.
It appears, however, that the plaintiff planted the palay in said parcels and
harvested therefrom 190 cavans. There being no evidence of bad faith on his
part, he is therefore entitled to one-half of the crop, or 95 cavans. He should
therefore be condemned to pay to the defendant for 95 cavans only, at P3.40
a cavan, or the sum of P323, and not for the total of 190 cavans as held by
the lower court.
As to the ownership of parcel 7 of the complaint, the evidence shows that
said parcel corresponds to parcel 1 of the deed of sale of Macondray & Co,
to Valdez (Exhibit B and 2), and to parcel 4 in the certificate of sale to Valdez
of real property belonging to Sibal, executed by the sheriff as above stated
(Exhibit A). Valdez is therefore the absolute owner of said parcel, having
acquired the interest of both Macondray and Sibal in said parcel.
With reference to the parcel of land in Pacalcal, Tarlac, described in
paragraph 3 of the second cause of action, it appears from the testimony of
the plaintiff himself that said parcel corresponds to parcel 8 of the deed of
sale of Macondray to Valdez (Exhibit B and 2) and to parcel 10 in the deed of
sale executed by the sheriff in favor of Valdez (Exhibit A). Valdez is therefore
the absolute owner of said parcel, having acquired the interest of both
Macondray and Sibal therein.
In this connection the following facts are worthy of mention:
Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land
were attached under said execution. Said parcels of land were sold to
Macondray & Co. on the 30th day of July, 1923. Rice paid P4,273.93. On
September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 on the
redemption of said parcels of land. (See Exhibits B and C ).
Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was
attached, including the sugar cane in question. (Exhibit A) The said personal
property so attached, sold at public auction May 9 and 10, 1924. April 29,
1924, the real property was attached under the execution in favor of Valdez
8,900.80
(Exhibit A). June 25, 1924, said real property was sold and purchased by
============
Valdez (Exhibit A).
June 25, 1924, Macondray & Co. sold all of the land which they had In all other respects, the judgment appealed from is hereby affirmed, with
purchased at public auction on the 30th day of July, 1923, to Valdez. costs. So ordered.
As to the loss of the defendant in sugar cane by reason of the injunction, the Street, Malcolm, Villamor, Romualdez and Villa-Real., JJ., concur.
evidence shows that the sugar cane in question covered an area of 22
hectares and 60 ares (Exhibits 8, 8-b and 8-c); that said area would have
yielded an average crop of 1039 picos and 60 cates; that one-half of the SIBAL V. VALDEZ
quantity, or 519 picos and 80 cates would have corresponded to the 50 PHIL 512
defendant, as owner; that during the season the sugar was selling at P13 a
pico (Exhibit 5 and 5-A). Therefore, the defendant, as owner, would have
netted P 6,757.40 from the sugar cane in question. The evidence also shows FACTS:
that the defendant could have taken from the sugar cane 1,017,000 sugar- The Deputy Sheriff, through a writ of execution, attached the personal
cane shoots (puntas de cana) and not 1,170,000 as computed by the lower properties of Sibal, including the sugar cane in question in the 7 parcels of
court. During the season the shoots were selling at P1.20 a thousand land described in a complaint. The personal properties were then sold in
(Exhibits 6 and 7). The defendant therefore would have netted P1,220.40 public auction, including the sugar canes. Included also in those attached
from sugar-cane shoots and not P1,435.68 as allowed by the lower court. were real properties wherein 8 out of the 11 parcels of land, house
As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, and camarin were bought by Valdez through the public auction. He also
amounting to 190 cavans, one-half of said quantity should belong to the bought the sugar cane in question.
plaintiff, as stated above, and the other half to the defendant. The court erred
in awarding the whole crop to the defendant. The plaintiff should therefore
pay the defendant for 95 cavans only, at P3.40 a cavan, or P323 instead of HELD:
P646 as allowed by the lower court. Generally, sugar cane comes under the classification of ungathered
The evidence also shows that the defendant was prevented by the acts of products under real properties in the CC. However, under certain
the plaintiff from cultivating about 10 hectares of the land involved in the conditions, it may be considered as personal property. For purposes
litigation. He expected to have raised about 600 cavans of palay, 300 cavans of attachment and execution, as well as for the purposes of the
of which would have corresponded to him as owner. The lower court has Chattel Mortgage Law, ungathered products have the nature of personal
wisely reduced his share to 150 cavans only. At P4 a cavan, the palay would property.
have netted him P600.
In view of the foregoing, the judgment appealed from is hereby modified. The
plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos
Sibal are hereby ordered to pay to the defendant jointly and severally the # 2 Republic of the Philippines
sum of P8,900.80, instead of P9,439.08 allowed by the lower court, as SUPREME COURT
follows: Manila
FIRST DIVISION
P6,757.40 for the sugar cane;
G.R. No. 155076 February 27, 2006
LUIS MARCOS P. LAUREL, Petitioner,
1,220.40 for the sugar cane shoots;
vs.
HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial Court,
for the palay harvested by plaintiff in parcels 1 and
323.00 Makati City, Branch 150, PEOPLE OF THE PHILIPPINES& PHILIPPINE
2;
LONG DISTANCE TELEPHONE COMPANY, Respondents.
DECISION
600.00 for the palay which defendant could have raised.
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari of the Decision 1 of the Court
of Appeals (CA) in CA-G.R. SP No. 68841 affirming the Order issued by
Judge Zeus C. Abrogar, Regional Trial Court (RTC), Makati City, Branch
150, which denied the "Motion to Quash (With Motion to Defer Arraignment)"
in Criminal Case No. 99-2425 for theft.
Philippine Long Distance Telephone Company (PLDT) is the holder of a
legislative franchise to render local and international telecommunication
services under Republic Act No. 7082.2 Under said law, PLDT is authorized
to establish, operate, manage, lease, maintain and purchase
telecommunication systems, including transmitting, receiving and switching
stations, for both domestic and international calls. For this purpose, it has
installed an estimated 1.7 million telephone lines nationwide. PLDT also
offers other services as authorized by Certificates of Public Convenience and
Necessity (CPCN) duly issued by the National Telecommunications
Commission (NTC), and operates and maintains an International Gateway
Facility (IGF). The PLDT network is thus principally composed of the Public
Switch Telephone Network (PSTN), telephone handsets and/or
telecommunications equipment used by its subscribers, the wires and cables
linking said telephone handsets and/or telecommunications equipment,
antenna, the IGF, and other telecommunications equipment which provide
interconnections.3 1avvphil.net
PLDT alleges that one of the alternative calling patterns that constitute
network fraud and violate its network integrity is that which is known as
International Simple Resale (ISR). ISR is a method of routing and completing
international long distance calls using International Private Leased Lines
(IPL), cables, antenna or air wave or frequency, which connect directly to the
local or domestic exchange facilities of the terminating country (the country
where the call is destined). The IPL is linked to switching equipment which is
connected to a PLDT telephone line/number. In the process, the calls bypass
the IGF found at the terminating country, or in some instances, even those
from the originating country.4
One such alternative calling service is that offered by Baynet Co., Ltd.
(Baynet) which sells "Bay Super Orient Card" phone cards to people who call
their friends and relatives in the Philippines. With said card, one is entitled to
a 27-minute call to the Philippines for about 37.03 per minute. After dialing
the ISR access number indicated in the phone card, the ISR operator
requests the subscriber to give the PIN number also indicated in the phone
card. Once the callers identity (as purchaser of the phone card) is confirmed,
the ISR operator will then provide a Philippine local line to the requesting
caller via the IPL. According to PLDT, calls made through the IPL never pass
the toll center of IGF operators in the Philippines. Using the local line, the
Baynet card user is able to place a call to any point in the Philippines,
provided the local line is National Direct Dial (NDD) capable.5
PLDT asserts that Baynet conducts its ISR activities by utilizing an IPL to
course its incoming international long distance calls from Japan. The IPL is
linked to switching equipment, which is then connected to PLDT telephone
lines/numbers and equipment, with Baynet as subscriber. Through the use of
the telephone lines and other auxiliary equipment, Baynet is able to connect
an international long distance call from Japan to any part of the Philippines,
and make it appear as a call originating from Metro Manila. Consequently,
the operator of an ISR is able to evade payment of access, termination or
bypass charges and accounting rates, as well as compliance with the
regulatory requirements of the NTC. Thus, the ISR operator offers
international telecommunication services at a lower rate, to the damage and
prejudice of legitimate operators like PLDT.6
PLDT pointed out that Baynet utilized the following equipment for its ISR
activities: lines, cables, and antennas or equipment or device capable of
transmitting air waves or frequency, such as an IPL and telephone lines and
equipment; computers or any equipment or device capable of accepting
information applying the prescribed process of the information and supplying
the result of this process; modems or any equipment or device that enables a
data terminal equipment such as computers to communicate with other data
terminal equipment via a telephone line; multiplexers or any equipment or
device that enables two or more signals from different sources to pass
through a common cable or transmission line; switching equipment, or
equipment or device capable of connecting telephone lines; and software,
diskettes, tapes or equipment or device used for recording and storing
information.7
PLDT also discovered that Baynet subscribed to a total of 123 PLDT
telephone lines/numbers.8 Based on the Traffic Study conducted on the
volume of calls passing through Baynets ISR network which bypass the IGF
toll center, PLDT incurred an estimated monthly loss of
P10,185,325.96.9 Records at the Securities and Exchange Commission
(SEC) also revealed that Baynet was not authorized to provide international
or domestic long distance telephone service in the country. The following are
its officers: Yuji Hijioka, a Japanese national (chairman of the board of
directors); Gina C. Mukaida, a Filipina (board member and president); Luis
Marcos P. Laurel, a Filipino (board member and corporate secretary); Ricky
Chan Pe, a Filipino (board member and treasurer); and Yasushi Ueshima,
also a Japanese national (board member).
Upon complaint of PLDT against Baynet for network fraud, and on the
strength of two search warrants10 issued by the RTC of Makati, Branch 147,
National Bureau of Investigation (NBI) agents searched its office at the 7th
Floor, SJG Building, Kalayaan Avenue, Makati City on November 8, 1999.
Atsushi Matsuura, Nobuyoshi Miyake, Edourd D. Lacson and Rolando J.
Villegas were arrested by NBI agents while in the act of manning the
operations of Baynet. Seized in the premises during the search were
numerous equipment and devices used in its ISR activities, such as
multiplexers, modems, computer monitors, CPUs, antenna, assorted
computer peripheral cords and microprocessors, cables/wires, assorted
PLDT statement of accounts, parabolic antennae and voltage regulators.
State Prosecutor Ofelia L. Calo conducted an inquest investigation and
issued a Resolution11 on January 28, 2000, finding probable cause for theft
under Article 308 of the Revised Penal Code and Presidential Decree No.
40112against the respondents therein, including Laurel.
On February 8, 2000, State Prosecutor Calo filed an Information with the
RTC of Makati City charging Matsuura, Miyake, Lacson and Villegas with
theft under Article 308 of the Revised Penal Code. After conducting the
requisite preliminary investigation, the State Prosecutor filed an Amended
Information impleading Laurel (a partner in the law firm of Ingles, Laurel,
Salinas, and, until November 19, 1999, a member of the board of directors
and corporate secretary of Baynet), and the other members of the board of
directors of said corporation, namely, Yuji Hijioka, Yasushi Ueshima,
Mukaida, Lacson and Villegas, as accused for theft under Article 308 of the
Revised Penal Code. The inculpatory portion of the Amended Information
reads:
On or about September 10-19, 1999, or prior thereto, in Makati City, and
within the jurisdiction of this Honorable Court, the accused, conspiring and
confederating together and all of them mutually helping and aiding one
another, with intent to gain and without the knowledge and consent of the
Philippine Long Distance Telephone (PLDT), did then and there willfully,
unlawfully and feloniously take, steal and use the international long distance
calls belonging to PLDT by conducting International Simple Resale (ISR),
which is a method of routing and completing international long distance calls
using lines, cables, antennae, and/or air wave frequency which connect
directly to the local or domestic exchange facilities of the country where the
call is destined, effectively stealing this business from PLDT while using its
facilities in the estimated amount of P20,370,651.92 to the damage and
prejudice of PLDT, in the said amount.
CONTRARY TO LAW.13
Accused Laurel filed a "Motion to Quash (with Motion to Defer Arraignment)"
on the ground that the factual allegations in the Amended Information do not
constitute the felony of theft under Article 308 of the Revised Penal Code. He
averred that the Revised Penal Code, or any other special penal law for that
matter, does not prohibit ISR operations. He claimed that telephone calls with
the use of PLDT telephone lines, whether domestic or international, belong to
the persons making the call, not to PLDT. He argued that the caller merely
uses the facilities of PLDT, and what the latter owns are the
telecommunication infrastructures or facilities through which the call is made.
He also asserted that PLDT is compensated for the callers use of its facilities
by way of rental; for an outgoing overseas call, PLDT charges the caller per
minute, based on the duration of the call. Thus, no personal property was
stolen from PLDT. According to Laurel, the P20,370,651.92 stated in the
Information, if anything, represents the rental for the use of PLDT facilities,
and not the value of anything owned by it. Finally, he averred that the
allegations in the Amended Information are already subsumed under the
Information for violation of Presidential Decree (P.D.) No. 401 filed and
pending in the Metropolitan Trial Court of Makati City, docketed as Criminal
Case No. 276766.
The prosecution, through private complainant PLDT, opposed the
motion,14 contending that the movant unlawfully took personal property
belonging to it, as follows: 1) intangible telephone services that are being
offered by PLDT and other telecommunication companies, i.e., the
connection and interconnection to their telephone lines/facilities; 2) the use of
those facilities over a period of time; and 3) the revenues derived in
connection with the rendition of such services and the use of such facilities. 15
The prosecution asserted that the use of PLDTs intangible telephone
services/facilities allows electronic voice signals to pass through the same,
and ultimately to the called partys number. It averred that such
service/facility is akin to electricity which, although an intangible property,
may, nevertheless, be appropriated and be the subject of theft. Such service
over a period of time for a consideration is the business that PLDT provides
to its customers, which enables the latter to send various messages to
installed recipients. The service rendered by PLDT is akin to merchandise
which has specific value, and therefore, capable of appropriation by another,
as in this case, through the ISR operations conducted by the movant and his
co-accused.
The prosecution further alleged that "international business calls and
revenues constitute personal property envisaged in Article 308 of the
Revised Penal Code." Moreover, the intangible telephone services/facilities
belong to PLDT and not to the movant and the other accused, because they
have no telephone services and facilities of their own duly authorized by the
NTC; thus, the taking by the movant and his co-accused of PLDT services
was with intent to gain and without the latters consent.
The prosecution pointed out that the accused, as well as the movant, were
paid in exchange for their illegal appropriation and use of PLDTs telephone
services and facilities; on the other hand, the accused did not pay a single
centavo for their illegal ISR operations. Thus, the acts of the accused were
akin to the use of a "jumper" by a consumer to deflect the current from the
house electric meter, thereby enabling one to steal electricity. The
prosecution emphasized that its position is fortified by the Resolutions of the
Department of Justice in PLDT v. Tiongson, et al. (I.S. No. 97-0925) and in
PAOCTF-PLDT v. Elton John Tuason, et al. (I.S. No. 2000-370) which were
issued on August 14, 2000 finding probable cause for theft against the
respondents therein.
On September 14, 2001, the RTC issued an Order16 denying the Motion to
Quash the Amended Information. The court declared that, although there is
no law that expressly prohibits the use of ISR, the facts alleged in the
Amended Information "will show how the alleged crime was committed by
conducting ISR," to the damage and prejudice of PLDT.
Laurel filed a Motion for Reconsideration17 of the Order, alleging that
international long distance calls are not personal property, and are not
capable of appropriation. He maintained that business or revenue is not
considered personal property, and that the prosecution failed to adduce proof
of its existence and the subsequent loss of personal property belonging to
another. Citing the ruling of the Court in United States v. De
Guzman,18 Laurel averred that the case is not one with telephone calls which
originate with a particular caller and terminates with the called party. He
insisted that telephone calls are considered privileged communications under
the Constitution and cannot be considered as "the property of PLDT." He
further argued that there is no kinship between telephone calls and electricity
or gas, as the latter are forms of energy which are generated and
consumable, and may be considered as personal property because of such
characteristic. On the other hand, the movant argued, the telephone
business is not a form of energy but is an activity.
In its Order19 dated December 11, 2001, the RTC denied the movants
Motion for Reconsideration. This time, it ruled that what was stolen from
PLDT was its "business" because, as alleged in the Amended Information,
the international long distance calls made through the facilities of PLDT
formed part of its business. The RTC noted that the movant was charged
with stealing the business of PLDT. To support its ruling, it cited Strochecker
v. Ramirez,20where the Court ruled that interest in business is personal
property capable of appropriation. It further declared that, through their ISR
operations, the movant and his co-accused deprived PLDT of fees for
international long distance calls, and that the ISR used by the movant and his
co-accused was no different from the "jumper" used for stealing electricity.
Laurel then filed a Petition for Certiorari with the CA, assailing the Order of
the RTC. He alleged that the respondent judge gravely abused his discretion
in denying his Motion to Quash the Amended Information.21 As gleaned from
the material averments of the amended information, he was charged with
stealing the international long distance calls belonging to PLDT, not its
business. Moreover, the RTC failed to distinguish between the business of
PLDT (providing services for international long distance calls) and the
revenues derived therefrom. He opined that a "business" or its revenues
cannot be considered as personal property under Article 308 of the Revised
Penal Code, since a "business" is "(1) a commercial or mercantile activity
customarily engaged in as a means of livelihood and typically involving some
independence of judgment and power of decision; (2) a commercial or
industrial enterprise; and (3) refers to transactions, dealings or intercourse of
any nature." On the other hand, the term "revenue" is defined as "the income
that comes back from an investment (as in real or personal property); the
annual or periodical rents, profits, interests, or issues of any species of real
or personal property."22
Laurel further posited that an electric companys business is the production
and distribution of electricity; a gas companys business is the production
and/or distribution of gas (as fuel); while a water companys business is the
production and distribution of potable water. He argued that the "business" in
all these cases is the commercial activity, while the goods and merchandise
are the products of such activity. Thus, in prosecutions for theft of certain
forms of energy, it is the electricity or gas which is alleged to be stolen and
not the "business" of providing electricity or gas. However, since a telephone
company does not produce any energy, goods or merchandise and merely
renders a service or, in the words of PLDT, "the connection and
interconnection to their telephone lines/facilities," such service cannot be the
subject of theft as defined in Article 308 of the Revised Penal Code.23
He further declared that to categorize "business" as personal property under
Article 308 of the Revised Penal Code would lead to absurd consequences;
in prosecutions for theft of gas, electricity or water, it would then be
permissible to allege in the Information that it is the gas business, the electric
business or the water business which has been stolen, and no longer the
merchandise produced by such enterprise.24
Laurel further cited the Resolution of the Secretary of Justice in Piltel v.
Mendoza,25 where it was ruled that the Revised Penal Code, legislated as it
was before present technological advances were even conceived, is not
adequate to address the novel means of "stealing" airwaves or airtime. In
said resolution, it was noted that the inadequacy prompted the filing of
Senate Bill 2379 (sic) entitled "The Anti-Telecommunications Fraud of 1997"
to deter cloning of cellular phones and other forms of communications fraud.
The said bill "aims to protect in number (ESN) (sic) or Capcode, mobile
identification number (MIN), electronic-international mobile equipment
identity (EMEI/IMEI), or subscriber identity module" and "any attempt to
duplicate the data on another cellular phone without the consent of a public
telecommunications entity would be punishable by law."26 Thus, Laurel
concluded, "there is no crime if there is no law punishing the crime."
On August 30, 2002, the CA rendered judgment dismissing the
petition.27 The appellate court ruled that a petition for certiorari under Rule 65
of the Rules of Court was not the proper remedy of the petitioner. On the
merits of the petition, it held that while business is generally an activity
which is abstract and intangible in form, it is nevertheless considered
"property" under Article 308 of the Revised Penal Code. The CA opined that
PLDTs business of providing international calls is personal property which
may be the object of theft, and cited United States v. Carlos28 to support such
conclusion. The tribunal also cited Strochecker v. Ramirez,29 where this
Court ruled that one-half interest in a days business is personal property
under Section 2 of Act No. 3952, otherwise known as the Bulk Sales Law.
The appellate court held that the operations of the ISR are not subsumed in
the charge for violation of P.D. No. 401.
Laurel, now the petitioner, assails the decision of the CA, contending that -
THE COURT OF APPEALS ERRED IN RULING THAT THE
PERSONAL PROPERTY ALLEGEDLY STOLEN PER THE
INFORMATION IS NOT THE "INTERNATIONAL LONG DISTANCE
CALLS" BUT THE "BUSINESS OF PLDT."
THE COURT OF APPEALS ERRED IN RULING THAT THE TERM
"BUSINESS" IS PERSONAL PROPERTY WITHIN THE MEANING
OF ART. 308 OF THE REVISED PENAL CODE.30
Petitioner avers that the petition for a writ of certiorari may be filed to nullify
an interlocutory order of the trial court which was issued with grave abuse of
discretion amounting to excess or lack of jurisdiction. In support of his
petition before the Court, he reiterates the arguments in his pleadings filed
before the CA. He further claims that while the right to carry on a business or
an interest or participation in business is considered property under the New
Civil Code, the term "business," however, is not. He asserts that the
Philippine Legislature, which approved the Revised Penal Code way back in
January 1, 1932, could not have contemplated to include international long
distance calls and "business" as personal property under Article 308 thereof.
In its comment on the petition, the Office of the Solicitor General (OSG)
maintains that the amended information clearly states all the essential
elements of the crime of theft. Petitioners interpretation as to whether an
"international long distance call" is personal property under the law is
inconsequential, as a reading of the amended information readily reveals that
specific acts and circumstances were alleged charging Baynet, through its
officers, including petitioner, of feloniously taking, stealing and illegally using
international long distance calls belonging to respondent PLDT by conducting
ISR operations, thus, "routing and completing international long distance
calls using lines, cables, antenna and/or airwave frequency which connect
directly to the local or domestic exchange facilities of the country where the
call is destined." The OSG maintains that the international long distance calls
alleged in the amended information should be construed to mean "business"
of PLDT, which, while abstract and intangible in form, is personal property
susceptible of appropriation.31 The OSG avers that what was stolen by
petitioner and his co-accused is the business of PLDT providing international
long distance calls which, though intangible, is personal property of the
PLDT.32
For its part, respondent PLDT asserts that personal property under Article
308 of the Revised Penal Code comprehends intangible property such as
electricity and gas which are valuable articles for merchandise, brought and
sold like other personal property, and are capable of appropriation. It insists
that the business of international calls and revenues constitute personal
property because the same are valuable articles of merchandise. The
respondent reiterates that international calls involve (a) the intangible
telephone services that are being offered by it, that is, the connection and
interconnection to the telephone network, lines or facilities; (b) the use of its
telephone network, lines or facilities over a period of time; and (c) the income
derived in connection therewith.33
PLDT further posits that business revenues or the income derived in
connection with the rendition of such services and the use of its telephone
network, lines or facilities are personal properties under Article 308 of the
Revised Penal Code; so is the use of said telephone services/telephone
network, lines or facilities which allow electronic voice signals to pass
through the same and ultimately to the called partys number. It is akin to
electricity which, though intangible property, may nevertheless be
appropriated and can be the object of theft. The use of respondent PLDTs
telephone network, lines, or facilities over a period of time for consideration is
the business that it provides to its customers, which enables the latter to
send various messages to intended recipients. Such use over a period of
time is akin to merchandise which has value and, therefore, can be
appropriated by another. According to respondent PLDT, this is what actually
happened when petitioner Laurel and the other accused below conducted
illegal ISR operations.34
The petition is meritorious.
The issues for resolution are as follows: (a) whether or not the petition for
certiorari is the proper remedy of the petitioner in the Court of Appeals; (b)
whether or not international telephone calls using Bay Super Orient Cards
through the telecommunication services provided by PLDT for such calls, or,
in short, PLDTs business of providing said telecommunication services, are
proper subjects of theft under Article 308 of the Revised Penal Code; and (c)
whether or not the trial court committed grave abuse of discretion amounting
to excess or lack of jurisdiction in denying the motion of the petitioner to
quash the amended information.
On the issue of whether or not the petition for certiorari instituted by the
petitioner in the CA is proper, the general rule is that a petition for certiorari
under Rule 65 of the Rules of Court, as amended, to nullify an order denying
a motion to quash the Information is inappropriate because the aggrieved
party has a remedy of appeal in the ordinary course of law. Appeal and
certiorari are mutually exclusive of each other. The remedy of the aggrieved
party is to continue with the case in due course and, when an unfavorable
judgment is rendered, assail the order and the decision on appeal. However,
if the trial court issues the order denying the motion to quash the Amended
Information with grave abuse of discretion amounting to excess or lack of
jurisdiction, or if such order is patently erroneous, or null and void for being
contrary to the Constitution, and the remedy of appeal would not afford
adequate and expeditious relief, the accused may resort to the extraordinary
remedy of certiorari.35 A special civil action for certiorari is also available
where there are special circumstances clearly demonstrating the inadequacy
of an appeal. As this Court held in Bristol Myers Squibb (Phils.), Inc. v.
Viloria:36
Nonetheless, the settled rule is that a writ of certiorari may be granted in
cases where, despite availability of appeal after trial, there is at least a prima
facie showing on the face of the petition and its annexes that: (a) the trial
court issued the order with grave abuse of discretion amounting to lack of or
in excess of jurisdiction; (b) appeal would not prove to be a speedy and
adequate remedy; (c) where the order is a patent nullity; (d) the decision in
the present case will arrest future litigations; and (e) for certain
considerations such as public welfare and public policy.37
In his petition for certiorari in the CA, petitioner averred that the trial court
committed grave abuse of its discretion amounting to excess or lack of
jurisdiction when it denied his motion to quash the Amended Information
despite his claim that the material allegations in the Amended Information do
not charge theft under Article 308 of the Revised Penal Code, or any offense
for that matter. By so doing, the trial court deprived him of his constitutional
right to be informed of the nature of the charge against him. He further
averred that the order of the trial court is contrary to the constitution and is,
thus, null and void. He insists that he should not be compelled to undergo the
rigors and tribulations of a protracted trial and incur expenses to defend
himself against a non-existent charge.
Petitioner is correct.
An information or complaint must state explicitly and directly every act or
omission constituting an offense38 and must allege facts establishing conduct
that a penal statute makes criminal;39 and describes the property which is the
subject of theft to advise the accused with reasonable certainty of the
accusation he is called upon to meet at the trial and to enable him to rely on
the judgment thereunder of a subsequent prosecution for the same
offense.40 It must show, on its face, that if the alleged facts are true, an
offense has been committed. The rule is rooted on the constitutional right of
the accused to be informed of the nature of the crime or cause of the
accusation against him. He cannot be convicted of an offense even if proven
unless it is alleged or necessarily included in the Information filed against
him.
As a general prerequisite, a motion to quash on the ground that the
Information does not constitute the offense charged, or any offense for that
matter, should be resolved on the basis of said allegations whose truth and
veracity are hypothetically committed;41 and on additional facts admitted or
not denied by the prosecution.42 If the facts alleged in the Information do not
constitute an offense, the complaint or information should be quashed by the
court.43
We have reviewed the Amended Information and find that, as mentioned by
the petitioner, it does not contain material allegations charging the petitioner
of theft of personal property under Article 308 of the Revised Penal Code. It,
thus, behooved the trial court to quash the Amended Information. The Order
of the trial court denying the motion of the petitioner to quash the Amended
Information is a patent nullity.
On the second issue, we find and so hold that the international telephone
calls placed by Bay Super Orient Card holders, the telecommunication
services provided by PLDT and its business of providing said services are
not personal properties under Article 308 of the Revised Penal Code. The
construction by the respondents of Article 308 of the said Code to include,
within its coverage, the aforesaid international telephone calls,
telecommunication services and business is contrary to the letter and intent
of the law.
The rule is that, penal laws are to be construed strictly. Such rule is founded
on the tenderness of the law for the rights of individuals and on the plain
principle that the power of punishment is vested in Congress, not in the
judicial department. It is Congress, not the Court, which is to define a crime,
and ordain its punishment.44 Due respect for the prerogative of Congress in
defining crimes/felonies constrains the Court to refrain from a broad
interpretation of penal laws where a "narrow interpretation" is appropriate.
The Court must take heed to language, legislative history and purpose, in
order to strictly determine the wrath and breath of the conduct the law
forbids.45 However, when the congressional purpose is unclear, the court
must apply the rule of lenity, that is, ambiguity concerning the ambit of
criminal statutes should be resolved in favor of lenity.46
Penal statutes may not be enlarged by implication or intent beyond the fair
meaning of the language used; and may not be held to include offenses
other than those which are clearly described, notwithstanding that the Court
may think that Congress should have made them more
comprehensive.47 Words and phrases in a statute are to be construed
according to their common meaning and accepted usage.
As Chief Justice John Marshall declared, "it would be dangerous, indeed, to
carry the principle that a case which is within the reason or
mischief of a statute is within its provision, so far as to punish a crime not
enumerated in the statute because it is of equal atrocity, or of kindred
character with those which are enumerated.48 When interpreting a criminal
statute that does not explicitly reach the conduct in question, the Court
should not base an expansive reading on inferences from subjective and
variable understanding.49
Article 308 of the Revised Penal Code defines theft as follows:
Art. 308. Who are liable for theft. Theft is committed by any person who,
with intent to gain but without violence, against or intimidation of persons nor
force upon things, shall take personal property of another without the latters
consent.
The provision was taken from Article 530 of the Spanish Penal Code which
reads:
1. Los que con nimo de lucrarse, y sin violencia o intimidacin en las
personas ni fuerza en las cosas, toman las cosas muebles ajenas sin la
voluntad de su dueo.50
For one to be guilty of theft, the accused must have an intent to steal (animus
furandi) personal property, meaning the intent to deprive another of his
ownership/lawful possession of personal property which intent is apart from
and concurrently with the general criminal intent which is an essential
element of a felony of dolo (dolus malus).
An information or complaint for simple theft must allege the following
elements: (a) the taking of personal property; (b) the said property belongs to
another; (c) the taking be done with intent to gain; and (d) the taking be
accomplished without the use of violence or intimidation of person/s or force
upon things.51
One is apt to conclude that "personal property" standing alone, covers both
tangible and intangible properties and are subject of theft under the Revised
Penal Code. But the words "Personal property" under the Revised Penal
Code must be considered in tandem with the word "take" in the law. The
statutory definition of "taking" and movable property indicates that, clearly,
not all personal properties may be the proper subjects of theft. The general
rule is that, only movable properties which have physical or material
existence and susceptible of occupation by another are proper objects of
theft.52 As explained by Cuelo Callon: "Cosa juridicamente es toda sustancia
corporal, material, susceptible de ser aprehendida que tenga un valor
cualquiera."53
According to Cuello Callon, in the context of the Penal Code, only those
movable properties which can be taken and carried from the place they are
found are proper subjects of theft. Intangible properties such as rights and
ideas are not subject of theft because the same cannot be "taken" from the
place it is found and is occupied or appropriated.
Solamente las cosas muebles y corporales pueden ser objeto de hurto. La
sustraccin de cosas inmuebles y la cosas incorporales (v. gr., los derechos,
las ideas) no puede integrar este delito, pues no es posible asirlas, tomarlas,
para conseguir su apropiacin. El Codigo emplea la expresin "cosas
mueble" en el sentido de cosa que es susceptible de ser llevada del lugar
donde se encuentra, como dinero, joyas, ropas, etctera, asi que su
concepto no coincide por completo con el formulado por el Codigo civil (arts.
335 y 336).54
Thus, movable properties under Article 308 of the Revised Penal Code
should be distinguished from the rights or interests to which they relate. A
naked right existing merely in contemplation of law, although it may be very
valuable to the person who is entitled to exercise it, is not the subject of theft
or larceny.55 Such rights or interests are intangible and cannot be "taken" by
another. Thus, right to produce oil, good will or an interest in business, or the
right to engage in business, credit or franchise are properties. So is the credit
line represented by a credit card. However, they are not proper subjects of
theft or larceny because they are without form or substance, the mere
"breath" of the Congress. On the other hand, goods, wares and merchandise
of businessmen and credit cards issued to them are movable properties with
physical and material existence and may be taken by another; hence, proper
subjects of theft.
There is "taking" of personal property, and theft is consummated when the
offender unlawfully acquires possession of personal property even if for a
short time; or if such property is under the dominion and control of the thief.
The taker, at some particular amount, must have obtained complete and
absolute possession and control of the property adverse to the rights of the
owner or the lawful possessor thereof.56 It is not necessary that the property
be actually carried away out of the physical possession of the lawful
possessor or that he should have made his escape with it. 57 Neither
asportation nor actual manual possession of property is required.
Constructive possession of the thief of the property is enough. 58
The essence of the element is the taking of a thing out of the possession of
the owner without his privity and consent and without animus revertendi. 59
Taking may be by the offenders own hands, by his use of innocent persons
without any felonious intent, as well as any mechanical device, such as an
access device or card, or any agency, animate or inanimate, with intent to
gain. Intent to gain includes the unlawful taking of personal property for the
purpose of deriving utility, satisfaction, enjoyment and pleasure.60
We agree with the contention of the respondents that intangible properties
such as electrical energy and gas are proper subjects of theft. The reason for
this is that, as explained by this Court in United States v. Carlos 61 and United
States v. Tambunting,62 based on decisions of the Supreme Court of Spain
and of the courts in England and the United States of America, gas or
electricity are capable of appropriation by another other than the owner. Gas
and electrical energy may be taken, carried away and appropriated. In
People v. Menagas,63 the Illinois State Supreme Court declared that
electricity, like gas, may be seen and felt. Electricity, the same as gas, is a
valuable article of merchandise, bought and sold like other personal property
and is capable of appropriation by another. It is a valuable article of
merchandise, bought and sold like other personal property, susceptible of
being severed from a mass or larger quantity and of being transported from
place to place. Electrical energy may, likewise, be taken and carried away. It
is a valuable commodity, bought and sold like other personal property. It may
be transported from place to place. There is nothing in the nature of gas used
for illuminating purposes which renders it incapable of being feloniously
taken and carried away.
In People ex rel Brush Electric Illuminating Co. v. Wemple,64 the Court of
Appeals of New York held that electric energy is manufactured and sold in
determinate quantities at a fixed price, precisely as are coal, kerosene oil,
and gas. It may be conveyed to the premises of the consumer, stored in cells
of different capacity known as an accumulator; or it may be sent through a
wire, just as gas or oil may be transported either in a close tank or forced
through a pipe. Having reached the premises of the consumer, it may be
used in any way he may desire, being, like illuminating gas, capable of being
transformed either into heat, light, or power, at the option of the purchaser. In
Woods v. People,65 the Supreme Court of Illinois declared that there is
nothing in the nature of gas used for illuminating purposes which renders it
incapable of being feloniously taken and carried away. It is a valuable article
of merchandise, bought and sold like other personal property, susceptible of
being severed from a mass or larger quantity and of being transported from
place to place.
Gas and electrical energy should not be equated with business or services
provided by business entrepreneurs to the public. Business does not have an
exact definition. Business is referred as that which occupies the time,
attention and labor of men for the purpose of livelihood or profit. It embraces
everything that which a person can be employed.66 Business may also mean
employment, occupation or profession. Business is also defined as a
commercial activity for gain benefit or advantage.67 Business, like services in
business, although are properties, are not proper subjects of theft under the
Revised Penal Code because the same cannot be "taken" or "occupied." If it
were otherwise, as claimed by the respondents, there would be no juridical
difference between the taking of the business of a person or the services
provided by him for gain, vis--vis, the taking of goods, wares or
merchandise, or equipment comprising his business.68 If it was its intention to
include "business" as personal property under Article 308 of the Revised
Penal Code, the Philippine Legislature should have spoken in language that
is clear and definite: that business is personal property under Article 308 of
the Revised Penal Code.69
We agree with the contention of the petitioner that, as gleaned from the
material averments of the Amended Information, he is charged of "stealing
the international long distance calls belonging to PLDT" and the use thereof,
through the ISR. Contrary to the claims of the OSG and respondent PLDT,
the petitioner is not charged of stealing P20,370,651.95 from said
respondent. Said amount of P20,370,651.95 alleged in the Amended
Information is the aggregate amount of access, transmission or termination
charges which the PLDT expected from the international long distance calls
of the callers with the use of Baynet Super Orient Cards sold by Baynet Co.
Ltd.
In defining theft, under Article 308 of the Revised Penal Code, as the taking
of personal property without the consent of the owner thereof, the Philippine
legislature could not have contemplated the human voice which is converted
into electronic impulses or electrical current which are transmitted to the
party called through the PSTN of respondent PLDT and the ISR of Baynet
Card Ltd. within its coverage. When the Revised Penal Code was approved,
on December 8, 1930, international telephone calls and the transmission and
routing of electronic voice signals or impulses emanating from said calls,
through the PSTN, IPL and ISR, were still non-existent. Case law is that,
where a legislative history fails to evidence congressional awareness of the
scope of the statute claimed by the respondents, a narrow interpretation of
the law is more consistent with the usual approach to the construction of the
statute. Penal responsibility cannot be extended beyond the fair scope of the
statutory mandate.70
Respondent PLDT does not acquire possession, much less, ownership of the
voices of the telephone callers or of the electronic voice signals or current
emanating from said calls. The human voice and the electronic voice signals
or current caused thereby are intangible and not susceptible of possession,
occupation or appropriation by the respondent PLDT or even the petitioner,
for that matter. PLDT merely transmits the electronic voice signals through its
facilities and equipment. Baynet Card Ltd., through its operator, merely
intercepts, reroutes the calls and passes them to its toll center. Indeed, the
parties called receive the telephone calls from Japan.
In this modern age of technology, telecommunications systems have become
so tightly merged with computer systems that it is difficult to know where one
starts and the other finishes. The telephone set is highly computerized and
allows computers to communicate across long distances.71 The
instrumentality at issue in this case is not merely a telephone but a telephone
inexplicably linked to a computerized communications system with the use of
Baynet Cards sold by the Baynet Card Ltd. The corporation uses computers,
modems and software, among others, for its ISR.72
The conduct complained of by respondent PLDT is reminiscent of
"phreaking" (a slang term for the action of making a telephone system to do
something that it normally should not allow by "making the phone company
bend over and grab its ankles"). A "phreaker" is one who engages in the act
of manipulating phones and illegally markets telephone services.73 Unless
the phone company replaces all its hardware, phreaking would be impossible
to stop. The phone companies in North America were impelled to replace all
their hardware and adopted full digital switching system known as the
Common Channel Inter Office Signaling. Phreaking occurred only during the
1960s and 1970s, decades after the Revised Penal Code took effect.
The petitioner is not charged, under the Amended Information, for theft of
telecommunication or telephone services offered by PLDT. Even if he is, the
term "personal property" under Article 308 of the Revised Penal Code cannot
be interpreted beyond its seams so as to include "telecommunication or
telephone services" or computer services for that matter. The word "service"
has a variety of meanings dependent upon the context, or the sense in which
it is used; and, in some instances, it may include a sale. For instance, the
sale of food by restaurants is usually referred to as "service," although an
actual sale is involved.74 It may also mean the duty or labor to be rendered
by one person to another; performance of labor for the benefit of another.75 In
the case of PLDT, it is to render local and international telecommunications
services and such other services as authorized by the CPCA issued by the
NTC. Even at common law, neither time nor services may be taken and
occupied or appropriated.76 A service is generally not considered property
and a theft of service would not, therefore, constitute theft since there can be
no caption or asportation.77 Neither is the unauthorized use of the equipment
and facilities of PLDT by the petitioner theft under the aforequoted provision
of the Revised Penal Code.78
If it was the intent of the Philippine Legislature, in 1930, to include services to
be the subject of theft, it should have incorporated the same in Article 308 of
the Revised Penal Code. The Legislature did not. In fact, the Revised Penal
Code does not even contain a definition of services.
If taking of telecommunication services or the business of a person, is to be
proscribed, it must be by special statute79 or an amendment of the Revised
Penal Code. Several states in the United States, such as New York, New
Jersey, California and Virginia, realized that their criminal statutes did not
contain any provisions penalizing the theft of services and passed laws
defining and penalizing theft of telephone and computer services. The
Pennsylvania Criminal Statute now penalizes theft of services, thus:
(a) Acquisition of services. --
(1) A person is guilty of theft if he intentionally obtains services for himself or
for another which he knows are available only for compensation, by
deception or threat, by altering or tampering with the public utility meter or
measuring device by which such services are delivered or by causing or
permitting such altering or tampering, by making or maintaining any
unauthorized connection, whether physically, electrically or inductively, to a
distribution or transmission line, by attaching or maintaining the attachment
of any unauthorized device to any cable, wire or other component of an
electric, telephone or cable television system or to a television receiving set
connected to a cable television system, by making or maintaining any
unauthorized modification or alteration to any device installed by a cable
television system, or by false token or other trick or artifice to avoid payment
for the service.
In the State of Illinois in the United States of America, theft of labor or
services or use of property is penalized:
(a) A person commits theft when he obtains the temporary use of property,
labor or services of another which are available only for hire, by means of
threat or deception or knowing that such use is without the consent of the
person providing the property, labor or services.
In 1980, the drafters of the Model Penal Code in the United States of
America arrived at the conclusion that labor and services, including
professional services, have not been included within the traditional scope of
the term "property" in ordinary theft statutes. Hence, they decided to
incorporate in the Code Section 223.7, which defines and penalizes theft of
services, thus:
(1) A person is guilty of theft if he purposely obtains services which he knows
are available only for compensation, by deception or threat, or by false token
or other means to avoid payment for the service. "Services" include labor,
professional service, transportation, telephone or other public service,
accommodation in hotels, restaurants or elsewhere, admission to exhibitions,
use of vehicles or other movable property. Where compensation for service
is ordinarily paid immediately upon the rendering of such service, as in the
case of hotels and restaurants, refusal to pay or absconding without payment
or offer to pay gives rise to a presumption that the service was obtained by
deception as to intention to pay; (2) A person commits theft if, having control
over the disposition of services of others, to which he is not entitled, he
knowingly diverts such services to his own benefit or to the benefit of another
not entitled thereto.
Interestingly, after the State Supreme Court of Virginia promulgated its
decision in Lund v. Commonwealth,80declaring that neither time nor services
may be taken and carried away and are not proper subjects of larceny, the
General Assembly of Virginia enacted Code No. 18-2-98 which reads:
Computer time or services or data processing services or information or data
stored in connection therewith is hereby defined to be property which may be
the subject of larceny under 18.2-95 or 18.2-96, or embezzlement under
18.2-111, or false pretenses under 18.2-178.
In the State of Alabama, Section 13A-8-10(a)(1) of the Penal Code of
Alabama of 1975 penalizes theft of services:
"A person commits the crime of theft of services if: (a) He intentionally
obtains services known by him to be available only for compensation by
deception, threat, false token or other means to avoid payment for the
services "
In the Philippines, Congress has not amended the Revised Penal Code to
include theft of services or theft of business as felonies. Instead, it approved
a law, Republic Act No. 8484, otherwise known as the Access Devices
Regulation Act of 1998, on February 11, 1998. Under the law, an access
device means any card, plate, code, account number, electronic serial
number, personal identification number and other telecommunication
services, equipment or instrumentalities-identifier or other means of account
access that can be used to obtain money, goods, services or any other thing
of value or to initiate a transfer of funds other than a transfer originated solely
by paper instrument. Among the prohibited acts enumerated in Section 9 of
the law are the acts of obtaining money or anything of value through the use
of an access device, with intent to defraud or intent to gain and fleeing
thereafter; and of effecting transactions with one or more access devices
issued to another person or persons to receive payment or any other thing of
value. Under Section 11 of the law, conspiracy to commit access devices
fraud is a crime. However, the petitioner is not charged of violation of R.A.
8484.
Significantly, a prosecution under the law shall be without prejudice to any
liability for violation of any provisions of the Revised Penal Code inclusive of
theft under Rule 308 of the Revised Penal Code and estafa under Article 315
of the Revised Penal Code. Thus, if an individual steals a credit card and
uses the same to obtain services, he is liable of the following: theft of the
credit card under Article 308 of the Revised Penal Code; violation of Republic
Act No. 8484; and estafa under Article 315(2)(a) of the Revised Penal Code
with the service provider as the private complainant. The petitioner is not
charged of estafa before the RTC in the Amended Information.
Section 33 of Republic Act No. 8792, Electronic Commerce Act of 2000
provides:
Sec. 33. Penalties. The following Acts shall be penalized by fine and/or
imprisonment, as follows:
a) Hacking or cracking which refers to unauthorized access into or
interference in a computer system/server or information and communication
system; or any access in order to corrupt, alter, steal, or destroy using a
computer or other similar information and communication devices, without
the knowledge and consent of the owner of the computer or information and
communications system, including the introduction of computer viruses and
the like, resulting on the corruption, destruction, alteration, theft or loss of
electronic data messages or electronic documents shall be punished by a
minimum fine of One hundred thousand pesos (P100,000.00) and a
maximum commensurate to the damage incurred and a mandatory
imprisonment of six (6) months to three (3) years.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The
assailed Orders of the Regional Trial Court and the Decision of the Court of
Appeals are REVERSED and SET ASIDE. The Regional Trial Court is
directed to issue an order granting the motion of the petitioner to quash the
Amended Information.
SO ORDERED.
LAUREL vs. ABROGARFacts:
On or about September 10-19, 1999, or prior thereto in Makati City, the
accused, conspiringandconfederating together and all of them mutually
helping and aiding one another, with intenttogain and without the knowledge
and consent of the Philippine Long Distance Telephone(PLDT),did then and
there willfully, unlawfully and feloniously take, steal and use theinternational
longdistance calls belonging to PLDT by conducting International
SimpleResale (ISR), which is amethod of routing and completing
international long distance callsusing lines, cables, antenae,and/or air wave
frequency which connect directly to the local or domestic exchange facilities
of the country where the call is destined, effectively stealing thisbusiness
from PLDT while using itsfacilities in the estimated amount of
P20,370,651.92 to thedamage and prejudice of PLDT, inthe said amount.
Issue:
Whether international long distance calls and the business of
providingtelecommunication ortelephone services are considered as
personal properties subjected totheft.
Held:
In the instant case, the act of conducting ISR operations by illegally
connecting variousequipment or apparatus to private respondent PLDTs
telephone system, through whichpetitioneris able to resell or re-route
international long distance calls using respondentPLDTs facilitiesconstitutes
all three acts of subtraction mentioned above.
ACCORDINGLY
, the motion for reconsideration is
GRANTED
. The assailedDecision is
RECONSIDERED and SET ASIDE
. The Decision of the Court of Appeals affirming the Orderissued by Judge
Zeus C. Abrogar of the Regional TrialCourt of Makati City, which denied the
Motion toQuash (With Motion to Defer Arraignment) for theft, is
AFFIRMED
. The caseisremanded to the trial court and the Public Prosecutor of Makati
City is hereby
DIRECTED
to amend the Amended Information to show that the property subject of the
theftwere servicesand business of the private offended party
#3 Wednesday, May 16, 2012
City of Manila vs. Garcia, et al., No. L-26053, 19 SCRA 413 , February 21, 1967
Posted by Alchemy Business Center and Marketing Consultancy at 9:06
PMLabels: 19 SCRA 413, 1967, City of Manila vs. Garcia, Civil Law
Review, et al., February 21, No. L-26053
City of Manila vs. Garcia, et al., No. L-26053, 19 SCRA 413 , February 21,
1967
G.R. No. L-26053 February 21, 1967
CITY OF MANILA, plaintiff-appellee,
vs.
GERARDO GARCIA CARMENCITA VILLANUEVA, MODESTA
PARAYNO NARCISO PARAYNO, JUAN ASPERAS, MARIA TABIA
SIMEON DILIMAN, AQUILINO BARRIOS LEONORA RUIZ, LAUREANO
DIZO, BERNABE AYUDA LEOGARDA DE LOS SANTOS, ISABELO
OBAOB ANDREA RIPARIP, JOSE BARRIENTOS, URBANO
RAMOS,1 ELENA RAMOS, ESTEFANIA NEPACINA, MODESTA
SANCHEZ, MARCIAL LAZARO, MARCIANA ALANO, HONORIO BERIO
SEDORA ORAYLE, GLORIA VELASCO, WILARICO RICAMATA,
BENEDICTO DIAZ, ANA DEQUIZ (MRS.) ALUNAN, LORENZO
CARANDANG, JUAN PECAYO, FELICIDAD MIRANDA EMIGDIO
EGIPTO, defendants-appellants.
Mauricio Z. Alunan for defendants-appellants.
City Fiscal's Office for plaintiff-appellee.
SANCHEZ, J.:
Plaintiff City of Manila is owner of parcels of land, forming one compact area,
bordering Kansas, Vermont and Singalong streets in Malate, Manila, and
covered by Torrens Titles Nos. 49763, 37082 and 37558. Shortly after
liberation from 1945 to 1947, defendants entered upon these premises
without plaintiff's knowledge and consent. They built houses of second-class
materials, again without plaintiff's knowledge and consent, and without the
necessary building permits from the city. There they lived thru the years to
the present.
In November, 1947, the presence of defendants having previously been
discovered, defendants Felicidad Miranda (Emigdio Egipto), Modesta C.
Parayno, Benedicto Diaz, Laureano Dizo, Jose Barrientos, Elena Ramos,
Estefania Nepacina, Modesta Sanchez, Honorio Berio, Gloria Velasco, Ana
Dequis Alunan and Benedicto Ofiaza (predecessor of defendant Carandang)
were given by Mayor Valeriano E. Fugoso written permits each labeled
"lease contract" to occupy specific areas in the property upon conditions
therein set forth. Defendants Isabelo Obaob and Gerardo Garcia (in the
name of Marta A. Villanueva) received their permits from Mayor Manuel de la
Fuente on January 29 and March 18, respectively, both of 1948. The rest of
the 23 defendants exhibited none.
For their occupancy, defendants were charged nominal rentals.1wph1.t
Following are the rentals due as of February, 1962:
Area Monthly Amt. due from
NAME
in Rental date of
 sq.m. delinquency Epifanio de los Santos Elementary School is close, though not contiguous, to
to Feb. 1962 the property. Came the need for this school's expansion; it became pressing.
On September 14, 1961, plaintiff's City Engineer, pursuant to the Mayor's
1. Gerardo Garcia 66.00 P7.92 P1,628.97 directive to clear squatters' houses on city property, gave each of defendants
thirty (30) days to vacate and remove his construction or improvement on the
2. Modesta C. Parayno 87.75 10.53 379.08 premises. This was followed by the City Treasurer's demand on each
3. Juan Asperas 39.00 4.68 9.36 defendant, made in February and March, 1962, for the payment of the
amount due by reason of the occupancy and to vacate in fifteen (15) days.
4. Maria Tabia 35.20 5.76 570.24 Defendants refused. Hence, this suit to recover possession.2
The judgment below directed defendants to vacate the premises; to pay the
5. Aquilino Barrios amounts heretofore indicated opposite their respective names; and to pay
54.00 4.32 99.36
(Leonora Ruiz) their monthly rentals from March, 1962, until they vacate the said premises,
6. Laureano Dizo 35.00 2.80 22.40 and the costs. Defendants appealed.
1. We are called upon to rule on the forefront question of whether the trial
7. Bernabe Ayuda 39.60 3.17 323.34 court properly found that the city needs the premises for school purposes.
The city's evidence on this point is Exhibit E, the certification of the
8. Isabelo Obaob 75.52 9.06 208.38
Chairman, Committee on Appropriations of the Municipal Board. That
9. Jose Barrientos 39.53 4.74 744.18 document recites that the amount of P100,000.00 had been set aside in
Ordinance 4566, the 1962-1963 Manila City Budget, for the construction of
10. Cecilia Manzano in an additional building of the Epifanio de los Santos Elementary School. It is
lieu of Urbano Ramos Paid up to indeed correct to say that the court below, at the hearing, ruled out the
(deceased) 46.65 5.60 Feb. 1962. admissibility of said document. But then, in the decision under review, the
trial judge obviously revised his views. He there declared that there was need
11. Elena Ramos 34.80 2.78 186.26
for defendants to vacate the premises for school expansion; he cited the very
12. Estefania Nepacina 41.80 3.34 504.34 document, Exhibit E, aforesaid.
It is beyond debate that a court of justice may alter its ruling while the case is
13. Modesta Sanchez 33.48 2.68 444.88 within its power, to make it conformable to law and justice.3 Such was done
here. Defendants' remedy was to bring to the attention of the court its
14. Marcial Lazaro 22.40 1.79 688.32
contradictory stance. Not having done so, this Court will not reopen the case
15. Marciana Alano 25.80 2.06 255.44 solely for this purpose.4
Anyway, elimination of the certification, Exhibit E, as evidence, would not
16. Honorio Berio 24.00 1.92 188.16 profit defendants. For, in reversing his stand, the trial judge could well have
17. Gloria Velasco 32.40 2.59 56.98 taken because the was duty bound to take judicial notice5 of Ordinance
4566. The reason being that the city charter of Manila requires all courts
18. Wilarico Ricamata 45.83 3.67 739.68 sitting therein to take judicial notice of all ordinances passed by the municipal
board of Manila.6And, Ordinance 4566 itself confirms the certification
Paid up to aforesaid that an appropriation of P100,000.00 was set aside for the
19. Benedicto Diaz 40.20 4.82
March 1962. "construction of additional building" of the Epifanio de los Santos Elementary
20. Ana Dequis Alunan 64.26 7.71 30.84 School.
Furthermore, defendants' position is vulnerable to assault from a third
21. Lorenzo Carandang 45.03 5.40 437.40 direction. Defendants have absolutely no right to remain in the premises. The
excuse that they have permits from the mayor is at best flimsy. The permits
22. Juan N. Pecayo 25.52 3.06 30.60 to occupy are recoverable on thirty days' notice. They have been asked to
23. Felicidad Miranda 48.02 5.76 132.48 leave; they refused to heed. It is in this factual background that we say that
the city's need for the premises is unimportant. The city's right to throw
P7,580.69 defendants out of the area cannot be gainsaid. The city's dominical right to
possession is paramount. If error there was in the finding that the city needs
the land, such error is harmless and will not justify reversal of the judgment
below.7
2. But defendants insist that they have acquired the legal status of tenants.
They are wrong.
They entered the land, built houses of second-class materials thereon
without the knowledge and consent of the city. Their homes were erected
without city permits.
These constructions are illegal. In a language familiar to all, defendants are
squatters:
Since the last global war, squatting on another's property in this country has
become a widespread vice. It was and is a blight. Squatters' areas pose
problems of health, sanitation. They are breeding places for crime. They
constitute proof that respect for the law and the rights of others, even those
of the government, are being flouted. Knowingly, squatters have embarked
on the pernicious act of occupying property whenever and wherever
convenient to their interests without as much as leave, and even against
the will, of the owner. They are emboldened seemingly because of their
belief that they could violate the law with impunity. The pugnaciousness of
some of them has tied up the hands of legitimate owners. The latter are thus
prevented from recovering possession by peaceful means. Government
lands have not been spared by them. They know, of course, that intrusion
into property, government or private, is wrong. But, then, the mills of justice
grind slow, mainly because of lawyers who, by means, fair or foul, are quite
often successful in procuring delay of the day of reckoning. Rampancy of
forcible entry into government lands particularly, is abetted by the apathy of
some public officials to enforce the government's rights. Obstinacy of these
squatters is difficult to explain unless it is spawned by official tolerance, if not
outright encouragement or protection. Said squatters have become
insensible to the difference between right and wrong. To them, violation of
law means nothing. With the result that squatting still exists, much to the
detriment of public interest. It is high time that, in this aspect, sanity and the
rule of law be restored. It is in this environment that we look into the validity
of the permits granted defendants herein.
These permits, erroneously labeled "lease" contracts, were issued by the
mayors in 1947 and 1948 when the effects of the war had simmered down
and when these defendants could have very well adjusted themselves. Two
decades have now elapsed since the unlawful entry. Defendants could have,
if they wanted to, located permanent premises for their abode. And yet,
usurpers that they are, they preferred to remain on city property.
Defendants' entry as aforesaid was illegal. Their constructions are as illegal,
without permits.8 The city charter enjoins the mayor to "safeguard all the
lands" of the City of Manila.9
Surely enough, the permits granted did not "safeguard" the city's land in
question. It is our considered view that the Mayor of the City of Manila cannot
legalize forcible entry into public property by the simple expedient of giving
permits, or, for that matter, executing leases.
Squatting is unlawful and no amount of acquiescence on the part of the city
officials will elevate it into a lawful act. In principle, a compound of illegal
entry and official permit to stay is obnoxious to our concept of proper official
norm of conduct. Because, such permit does not serve social justice; it
fosters moral decadence. It does not promote public welfare; it abets
disrespect for the law. It has its roots in vice; so it is an infected bargain.
Official approval of squatting should not, therefore, be permitted to obtain in
this country where there is an orderly form of government.
We, accordingly, rule that the Manila mayors did not have authority to give
permits, written or oral, to defendants, and that the permits herein granted
are null and void.
3. Let us look into the houses and constructions planted by defendants on
the premises. They clearly hinder and impair the use of that property for
school purposes. The courts may well take judicial notice of the fact that
housing school children in the elementary grades has been and still is a
perennial problem in the city. The selfish interests of defendants must have
to yield to the general good. The public purpose of constructing the school
building annex is paramount.10
In the situation thus obtaining, the houses and constructions aforesaid
constitute public nuisance per se. And this, for the reason that they hinder
and impair the use of the property for a badly needed school building, to the
prejudice of the education of the youth of the land.11 They shackle the hands
of the government and thus obstruct performance of its constitutionally
ordained obligation to establish and maintain a complete and adequate
system of public education, and more, to "provide at least free public primary
instruction".12
Reason dictates that no further delay should be countenanced. The public
nuisance could well have been summarily abated by the city authorities
themselves, even without the aid of the courts.13
4. Defendants challenge the jurisdiction of the Court of First Instance of
Manila. They say that the case should have been started in the municipal
court. They prop up their position by the averment that notice for them to
vacate was only served in September, 1961, and suit was started in July,
1962. Their legal ground is Section 1, Rule 70 of the Rules of Court. We
have reached the conclusion that their forcible entry dates back to the period
from 1945 to 1947. That entry was not legalized by the permits. Their
possession continued to remain illegal from incipiency. Suit was filed long
after the one-year limitation set forth in Section 1 of Rule 70. And the Manila
Court of First Instance has jurisdiction.14
Upon the premises, we vote to affirm the judgment under review. Costs
against defendants-appellants. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P.,
Zaldivar and Castro, JJ., concur.

City of Manila vs
. HERRERA, HERMITO HERRERA, JOSE L. CASTILLO, LILLA MACEDA
Garcia Facts:
Plaintiff City of Manila is owner of parcels of land, forming one compact area,
covered by Torrens Titles Nos. 49763, 37082 and 37558. Shortly after
liberation from 1945 to 1947, defendants entered upon these premises
without plaintiff's knowledge and consent. They built houses of second-class
materials, again without plaintiff's knowledge and consent, and without the
necessary building permits from the city. In November, 1947, the presence of
defendants having previously been discovered, were given by Mayor
Valeriano E. Fugoso written permits
each labeled "lease contract"
to occupy specific areas in the property upon conditions therein set forth. For
their occupancy, defendants were charged nominal rentals. Epifanio de los
Santos Elementary School which is close, though not contiguous, to the
property, were in need of expansion. On September 14, 1961, plaintiff's City
Engineer, pursuant to the Mayor's directive to clear squatters' houses on city
property, gave each of defendants thirty (30) days to vacate and remove his
construction or improvement on the premises. This was followed by the City
Treasurer's demand on each defendant, made in February and March, 1962,
for the payment of the amount due by reason of the occupancy and to
vacate in fifteen (15) days. Defendants refused. Hence, this suit to recover
possession.
2 two parcels of land, Lots 1 and 2, located in Banadero, Tanauan, Batangas,
The lower court ruled in favor of the plaintiff. Hence, the defendants appeal.
Issue:
Whether or not the squatters may be ejected
Held: Yes
... Defendants have absolutely no right to remain in the premises. The
excuse that they have permits from the mayor is at best flimsy. The permits
to occupy are recoverable on thirty days' notice. They have been asked to
leave; they refused to heed. It is in this factual background that we say that
the city's need for the premises is unimportant. The city's right to throw
defendants
#4 SECOND DIVISION
[G.R. No. L-69002. June 30, 1988.]
REPUBLIC OF THE PHILIPPINES, Petitioner, v. AMANDA LAT VDA. DE
CASTILLO, FLORENCIO T. CASTILLO, SOLEDAD LOTA CASTILLO,
CARLOS L. CASTILLO, NIEVES KATIGBAK CASTILLO, MARIANO L.
CASTILLO, HIPOLITA DYTIAPCO CASTILLO, AIDA CASTILLO
CASTILLO, TERESITA L. CASTILLO, REGISTER OF DEEDS OF
BATANGAS and THE INTERMEDIATE APPELLATE
COURT, Respondents.
Castro, Nardo, Quintanilla, Gonzales & Macatangay Law Office
for Respondents.
DECISION
PARAS, J.:
This is a petition for review on certiorari of the April 26, 1984 Decision of the
then Intermediate Appellate Court ** reversing the February 6, 1976 Decision
of the then Court of First Instance of Batangas, Branch VI, in Civil Case No.
2044.
The antecedental facts of this case, as found by the then Intermediate
Appellate Court, are as follows:jgc:chanrobles.com.ph
"Sometime in 1951, the late Modesto Castillo applied for the registration of
described in Plan Psu-119166, with a total area of 39,755 square meters. In
a decision dated August 31, 1951, the said Modesto Castillo, married to
Amanda Lat, was declared the true and absolute owner of the land with the
improvements thereon, for which Original Certificate of Title No. 0-665 was
issued to him by the Register of Deeds at Batangas, Batangas, on February
7, 1952. By virtue of an instrument dated March 18, 1960, the said Lots 1
and 2 covered by Original Certificate of Title No. 0-665, together with Lot No.
12374 covered by Transfer Certificate of Title No. 3254-A and Lot No. 12377
covered by Transfer Certificate of Title No. 3251-A, were consolidated and
sub-divided into Lots 1 to 9 under Pcs-1046. After the death of Modesto
Castillo, or on August 31, 1960, Amanda Lat Vda. de Castillo, Et Al.,
executed a deed of partition and assumption of mortgage in favor of
Florencio L. Castillo, Et Al., as a result of which Original Certificate of Title
No. D-665 was cancelled, and in lieu thereof, new transfer certificates of title
were issued to Florencio L. Castillo, Et Al., to wit: Transfer Certificate of Title
No. 21703 (Lot 4) (and) Transfer Certificate of Title No. 21704 to Florencio
Castillo (Lot 5); Transfer Certificate of Title No. T-21708 to Carlos L. Castillo
(Lot 7); Transfer Certificate of Title No. T-21712 to Mariano L. Castillo (Lot 6);
Transfer Certificate of Title No. T-21713 to Jose L. Castillo (Lot 9); Transfer
Certificate of Title No. T-21718 to Aida C. Herrera (Lot 2); and Transfer
Certificate of Title No. T-21727 to Teresita L. Castillo (Lot 8).
"The Republic of the Philippines filed Civil Case No. 2044 with the lower
court for the annulment of the certificates of title issued to defendants
Amanda Lat Vda. de Castillo, Et Al., as heirs/successors of Modesto Castillo,
and for the reversion of the lands covered thereby (Lots 1 and 2, Psu-
119166) to the State. It was alleged that said lands had always formed part
of the Taal Lake, washed and inundated by the waters thereof, and being of
public ownership, it could not be the subject of registration as private
property. Appellants herein, defendants below, alleged in their answer that
the Governments action was already barred by the decision of the
registration court; that the action has prescribed; and that the government
was estopped from questioning the ownership and possession of
appellants."cralaw virtua1aw library
After trial, the then Court of First Instance of Batangas, Branch VI, presided
over by Honorable Benjamin Relova, in a Decision dated February 6, 1976
(Record on Appeal, pp. 62-69), ruled in favor of herein petitioner Republic of
the Philippines. The decretal portion of the said decision,
reads:jgc:chanrobles.com.ph
"WHEREFORE, the Register of Deeds of Batangas is hereby ordered to
cancel Original Certificate of Title No. 0-665 in the name of Modesto Castillo
and the subsequent Transfer of Certificates of Title issued over the property
in the names of the defendants. Lots Nos. 1 and 2 of Plan Psu-119166 are
hereby declared public lands belonging to the state. Without pronouncement
as to costs."cralaw virtua1aw library
The Court of Appeals, on appeal, in a Decision promulgated on April 26,
1984, reversed and set aside the appealed decision, and dismissed the
complaint (Record, pp. 31-41). Herein petitioner filed a Motion for
Reconsideration (Record, pp. 42-51), but the same was denied in a
Resolution promulgated on October 12, 1984 (Record, p. 52). Hence, the
instant petition.chanroblesvirtualawlibrary
The sole issue raised in this case is whether or not the decision of the Land
Registration Court involving shore lands constitutes res adjudicata.
There is no question that one of the requisites of res judicata is that the court
rendering the final judgment must have jurisdiction over the subject matter
(Ramos v. Pablo, 146 SCRA 24 [1986]; that shores are properties of the
public domain intended for public use (Article 420, Civil Code) and, therefore,
not registrable. Thus, it has long been settled that portions of the foreshore or
of the territorial waters and beaches cannot be registered. Their inclusion in a
certificate of title does not convert the same into properties of private
ownership or confer title upon the registrant (Republic v. Ayala y Cia, 14
SCRA, 259 [1965], citing the cases of Dizon, Et. Al. v. Bayona, Et Al., 98
Phil. 943; and Dizon, Et. Al. v. Rodriguez, Et Al., 13 SCRA 704).
But an important bone of contention is the nature of the lands involved in this
case.
Petitioner contends "that Lots 1 and 2, PSU-119166 had always formed part
of the Taal Lake, washed and inundated by the waters thereof.
Consequently, the same were not subject to registration, being outside the
commerce of men; and that since the lots in litigation are of public domain
(Art. 502), par. 4 Civil Code) the registration court (of 1951) did not have
jurisdiction to adjudicate said lands as private property, hence, res judicata
does not apply. (Rollo, pp. 37-38).
The Government presented both oral and documentary evidence.
As summarized by the Intermediate Appellate Court (now Court of Appeals),
the testimonies of the witnesses for the petitioner are as
follows:jgc:chanrobles.com.ph
"1. Rosendo Arcenas, a Geodetic Engineer connected with the Bureau of
Lands since 1951, testified to the effect that Lots 1 and 2 Psu-119166, which
are the lots in question, adjoin the cadastral survey of Tanauan, Batangas
(Cad. 168); that the original boundary of the original cadastral survey was
foreshore land as indicated on the plan; that the cadastral survey of Tanauan
was executed sometime in 1923; that the first survey executed of the land
after 1923 was the one executed in 1948 under Plan Psu-119166; that in the
relocation survey of the disputed lots in 1962 under SWO-40601, said lots
were annotated on the plan as claimed by the Republic of the Philippines in
the same manner that it was so annotated in Plan Psu-119166, thus showing
that the Government was the only claimant of the land during the survey in
1948; that during the relocation survey made in 1962, old points cannot be
identified or located because they were under water by about forty
centimeters; that during the ocular inspection of the premises on November
23, 1970, he found that 2 monuments of the lots in question were washed out
by the waters of the Baloyboy Creek; that he also found duck pens along the
lots in question; that there are houses in the premises as well as some
camotes and bananas; and that he found also some shells (suso) along the
banks of the Taal lake (Tsn, Nov. 16, 1970, pp. 13-21; Feb. 16, 1971, pp. 4-
36).
"2. Braulio Almendral testified to the effect that he is a resident of Tanauan,
Batangas, near the Taal lake; that like himself there are other occupants of
the land among whom are Atanacio Tironas, Gavino Mendoza, Juliano
Tirones, Agapito Llarena, etc.; that it was they who filled up the area to make
it habitable; that they filled up the area with shells and sand; that their
occupation is duck raising; and that the Castillos never stayed in or occupied
the premises (Tsn, Nov. 16, 1970, pp. 32-50).
"3. Arsenio Ibay, a Geodetic Engineer connected with the Bureau of Lands
since 1968, also testified to the effect that in accordance with the cadastral
plan of Tanauan, the only private claim of Sixto Castillo referred to Lots 1006
to 1008; that the Castillos never asserted any private claim to the lots in
question during the cadastral survey; that in the preparation of plan Psu-
119166, Lots 12374 and 12377 were made as reference to conform to
previously approved plans; that lot 12374 is a portion of cadastral lot 10107,
SWO-86738 while Lot 22377 is a portion of Lot 10108 of the same plan (Tsn,
Nov. 25, 1970, pp. 115-137).chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
"4. Jose Isidro, a Land Investigator of the Bureau of Lands, testified to the
effect that pursuant to the order of the Director of Lands, he, together with
Engineer Rufino Santiago and the barrio captain of Tanauan, Batangas,
conducted an investigation of the land in question; that he submitted a report
of investigation, dated October 19, 1970 (Exh. H-1); that portions of the lot in
question were covered by public land applications filed by the occupants
thereof; that Engineer Santiago also submitted a report (Exh. H-8); that he
had notified Dr. Mariano Castillo before conducting the investigation (Tsn,
Nov. 25, 1970, pp. 137-162).
"5. Rufino Santiago, another Geodetic Engineer connected with the Bureau
of Lands, testified to the effect that on October 19, 1970, he submitted a
report of investigation regarding the land in question; that he noted on the
plan Exhibit H-9 the areas on which the houses of Severo Alcantara and
others were built; that he found that the land was planted to coconuts which
are about 15 years old; that the land is likewise improved with rice puddies;
that the occupants thereof are duck raisers; that the area had been elevated
because of the waste matters and duck feeds that have accumulated on the
ground through the years (Tsn, Nov. 26, 1970, pp. 163-196).
"6. Pablo Tapia, Barrio Captain of Tanauan, Batangas, since 1957, testified
to the effect that the actual occupants of Lots 1 and 2 are Atanacio Tirones,
etc.; that during the war the water line reached up to a point marked Exhibit
A-9 and at present the water has receded to a point up to Exhibit A-12; that
the reasons why the waters of Taal lake have receded to the present level is
because of the fillings made by the people living in Lots 1 and 2; that there
are several duck pens all over the place; that the composition of the soil in a
mixture of mud and duck feeds; that improvements consist of bananas,
bamboos and palay; that the shoreline is not even in shape because of the
Baloyboy Creek; that the people in the area never came to know about the
registration case in which the lots in question were registered; that the people
living in the area, even without any government aid, helped one another in
the construction of irrigated rice paddies; that he helped them file their public
land applications for the portions occupied by them; that the Castillos have
never been in possession of the premises; that the people depend upon duck
raising as their means of their livelihood; that Lots 1 and 2 were yet inexistent
during the Japanese occupation; and that the people started improving the
area only during liberation and began to build their houses thereon." (Tsn,
Nov. 26, 1970, pp. 197-234)
Among the exhibits formally offered by the Government are: the Original Plan
of Tanauan, Batangas, particularly the Banader Estate, the Original Plan of
PSU-119166, Relocation-Verification Survey Plan, maps, and reports of
Geodetic Engineers, all showing the original shoreline of the disputed areas
and the fact that the properties in question were under water at the time and
are still under water especially during the rainy season (Hearing, March 17,
1971, TSN, pp. 46-47).
On the other hand, private respondents maintain that Lots 1 and 2 have
always been in the possession of the Castillo family for more than 76 years
and that their possession was public, peaceful, continuous, and adverse
against the whole world and that said lots were not titled during the cadastral
survey of Tanauan, because they were still under water as a result of the
eruption of Taal Volcano on May 5, 1911 and that the inundation of the land
in question by the waters of Taal Lake was merely accidental and does not
affect private respondents ownership and possession thereof pursuant to
Article 778 of the Law of Waters. They finally insisted that this issue of facts
had been squarely raised at the hearing of the land registration case and,
therefore, res judicata (Record on Appeal, pp. 63-64). They submitted oral
and documentary evidence in support of their claim.chanrobles virtual
lawlibrary
Also summarized by respondent Appellate Court, the testimonies of the
witnesses of private respondents are as follows:jgc:chanrobles.com.ph
"1. Silvano Reano, testified to the effect that he was the overseer of the
property of the late Modesto Castillo located at Banadero, Tanauan,
Batangas since 1944 to 1965; that he also knows Lots 1 and 2, the parcels of
land in question, since he was managing said property; that the occupants of
said Lots 1 and 2 were engaged in duck raising; that those occupants were
paying the Castillos certain amount of money because their animals used to
get inside the lots in question; that he was present during the survey of the
land in 1948; and that aside from the duck pens which are built in the
premises, the land is planted to rice (Tsn, April 14, 1971, pp. 62-88).
"2. Dr. Mariano Castillo, testified to the effect that the late Modesto Castillo
was a government official who held high positions in the Government; and
that upon his death the land was subdivided among his legal heirs."
(Appellees Brief, pp. 4-9)
As above-stated, the trial court decided the case in favor of the government
but the decision was reversed on appeal by the Court of Appeals.
A careful study of the merits of their varied contentions readily shows that the
evidence for the government has far outweighed the evidence for the private
respondents. Otherwise stated, it has been satisfactorily established as
found by the trial court, that the properties in question were the shorelands of
Taal Lake during the cadastral survey of 1923.
Explaining the first survey of 1923, which showed that Lots 1 and 2 are parts
of the Taal Lake, Engineer Rosendo Arcenas testified as
follows:jgc:chanrobles.com.ph
"ATTY. AGCAOILI:chanrob1es virtual 1aw library
Q Now, you mentioned Engineer that a subject matter of that plan which
appears to be Lots 1 and 2 are adjoining cadastral lots of the Tanauan
Cadastre, now, will you please state to the Court what is the basis of that
statement of yours?
A The basis of that statement is the plan itself, because there is here an
annotation that the boundary on the northeastern side is Tanauan Cadastre
168 which indicates that the boundary of the original cadastral survey of
Tanauan Cadastre way back in the year 1923 adjoins a foreshore land which
is also indicated in this plan as foreshore lands of Taal lake, sir.
x x x verification-relocation plan previously submitted." (Re-Verification-Relocation
"Q Now, on this plan Exhibit "A-2", there are two lots indicated, namely, Lots
12374 and 12377, what do these lots represent?
A This is the cadastral lot executed in favor of a certain Modesto Castillo that
corresponds to Lots 12374 and another Lot 12377, sir.
Q At the time this survey plan Psu-119166 and marked as Exhibit "A-2" was
executed in 1948, were these lots 1 and 2 , already in existence as part of
the cadastral survey?
A No, sir, because there is already a foreshore boundary.
Q Do I understand from you Mr. Witness at the time of the survey of this land
these two lots form part of this portion?
A Yes, sir.
Q When again was the cadastral survey of Tanauan, Batangas, executed if
you know?
A In the year 1923, sir." (Hearing of Nov. 16, 1970, TSN pp. 15-17).
Such fact was further verified in the Verification-Relocation Survey of 1948
by Engineer Arcenas who conducted said survey himself and reported the
following:jgc:chanrobles.com.ph
"That as per original plan Psu-119166, it appears that Lot 1 and Lot 2, Psu-
119166 surveyed and approved in the name of Modesto Castillo is a portion
of Taal Lake and as such it appears to be under water during the survey of
cadastral Lot No. 12374 and Lot No. 12377, which was surveyed and
approved in the name of Modesto Castillo under Cad. 168. To support this
theory is the annotation appearing and printed along lines 2-3-4-5 of Lot 1,
Psu-119166 and along lines 4-5-6 of Lot 2, Psu-119166 which notations
clearly indicates that such boundary of property was a former shorelines of
Taal Lake, in other words, it was the extent of cultivation being the shorelines
and the rest of the area going to the southwestern direction are already
covered by water level.chanrobles virtual lawlibrary
"Another theory to bolster and support this idea is the actual location now in
the verification-relocation survey of a known geographic point were Barrio
Boundary Monument (BBM N. 22) is under water level quite for sometimes
as evidence by earthworks (collection of mud) that amount over its surface
by eighty (80) centimeters below the ground, see notation appearing on
Survey Exhibits, pp. 64-65).
Said surveys were further confirmed by the testimonies of witnesses to the
effect that from 1950 to 1969, during rainy season, the water of Taal lake
even went beyond the questioned lots; and that the water, which was about
one (1) foot, stayed up to more or less two (2) to three (3) months
(Testimonies of Braulio Almendral and Anastacio Tirones, both residents of
Banadero, Tanauan, Batangas (Hearing of Nov. 16, 1970, TSN, pp. 41-42
and Hearing of Nov. 23, 1970, TSN, pp. 93, 98-99, respectively). In the
Relocation Survey of 1962, there were no definite boundary or area of Lots 1
and 2 because a certain point is existing which was under water by 40
centimeters (Testimony of Engineer Arcena, Hearing of Nov. 16, 1970, TSN,
p. 20).
Lakeshore land or lands adjacent to the lake, like the lands in question must
be differentiated from foreshore land or that part of the land adjacent to the
sea which is alternately covered and left dry by the ordinary flow of the tides
(Castillo, Law on Natural Resources, Fifth Edition, 1954, p. 67).
Such distinction draws importance from the fact that accretions on the bank
of a lake, like Laguna de Bay, belong to the owners of the estate to which
they have been added (Govt. v. Colegio de San Jose, 53 Phil. 423) while
accretion on a sea bank still belongs to the public domain, and is not
available for private ownership until formally declared by the government to
be no longer needed for public use (Ignacio v. Director of Lands, 108 Phil.
335 [1960]).
But said distinction will not help private respondents because there is no
accretion shown to exist in the case at bar. On the contrary, it was
established that the occupants of the lots who were engaged in duck raising
filled up the area with shells and sand to make it habitable.
The defense of long possession is likewise not available in this case
because, as already ruled by this Court, mere possession of land does not by
itself automatically divest the land of its public character (Cuevas v. Pineda,
143 SCRA 674 [1968]).
PREMISES CONSIDERED, the April 26, 1984 Decision of the then
Intermediate Appellate Court is hereby SET ASIDE and REVERSED and the
February 6, 1976 Decision of the then Court of First Instance of Batangas is
hereby AFFIRMED and REINSTATED.chanrobles.com.ph : virtual law library
SO ORDERED.
Yap (C.J.), Padilla and Sarmiento, JJ., concur.
Melencio-Herrera, J., I reserve my vote.
# 5 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. Nos. L-45338-39 July 31, 1991
REPUBLIC OF THE PHILIPPINES, petitioner-appellee,
vs.
POLICARPIO GONZALES and AUGUSTO JOSUE, respondents-
appellants.
Jose Z. Galsim for respondent-appellant P. Gonzales.
Jaime G. Manzano for appellant A. Josue.
FELICIANO, J.:p
The Republic of the Philippines is the owner of two (2) parcels of land
situated in Taong Malabon, Metro Manila and designated as Lots 1 and 2 of
Plan MR-1018-D. Lot I which adjoins F. Sevilla Boulevard has an area of 605
square meters; Lot 2, an interior lot abutting F. Sevilla Boulevard only on its
northern portion, is 664 square meters in area. This piece of property was
formerly a deep swamp until the occupants thereof, among them appellants
Policarpio Gonzales and Augusta Josue, started filling it. Each of appellants
who are brothers-in-law, constructed a mixed residential and commercial
building on the interior part of Lot 2.
On 14 April 1955, then President Ramon Magsaysay issued Proclamation
No. 144, entitled "Reserving for Street Widening and Parking Space
Purposes Certain Parcels of the Public Domain Situated in the Municipality of
Malabon, Province of Rizal, Island of Luzon." 1 Lots 1 and 2 were specifically
withdrawn from sale or settlement and reserved for the purposes mentioned
in the Proclamation.
The Municipal Council of Malabon then passed Resolutions 2 authorizing the
filing of ejectment cases against appellants so that Proclamation No, 144
could be implemented. On 23 June 1955, the Assistant Provincial Fiscal of
Pasig, Rizal filed separate complaints against appellants for the recovery of
the portions of Lot 2 they were occupying.
Appellants disputed the light of the Government to recover the land occupied
by them. In his answer, Policarpio Gonzales claimed (1) that Lot 2 was
covered by a lease application, and later a miscellaneous sales application,
filed before the Bureau of Lands; (2) that he had a municipal permit to
construct a building as well as a business license duly issued by the Office of
the Mayor of Malabon; and (3) that the lot occupied by him was not needed
by the Municipality of Malabon in the widening of F. Sevilla Boulevard. The
defenses interposed by Augusto Josue were substantially similar to those
raised by Policarpio Gonzales.
Upon agreement of the parties, the separate cases were tried jointly. On 28
January 1967, the trial court, presided over by then Judge Cecilia Muoz-
Palma, rendered a decision with the following dispositive portion:
WHEREFORE, finding the complaints to be justified and
meritorious, this Court orders defendants Policarpio
Gonzales and Augusto Josue and/or their agents,
representatives, successors-in-interest to vacate Lots 1 and
2 of Plan MR1018-D as described in the complaint, and to
remove at their expense their respective buildings and/or
improvements erected and existing on said lots, and restore
the possession thereof to the Republic of the Philippines,
and to pay the corresponding costs in the respective cases.
SO ORDERED. 3
Appellants appealed to the Court of Appeals. In a Resolution dated 1
December 1976, the Court of Appeals, speaking through Mr. Justice Luis B.
Reyes, certified the consolidated cases to this Court since the appeals raised
only a question of law, that is, whether Presidential Proclamation No. 144
was valid or not. 4
Although appellants filed separate briefs before the Court of Appeals, their
common defense was presented and discussed in very similar language:
Stripped of surplusage, it is respectfully submitted that
Proclamation No. 144 dated April 14, 1955 of the President
of the Philippines, more particularly that portion which
withdrew from sale and settlement the land in question and
reserving [the] same for parking space purposes, is not in
accordance with Section 83 of the Public Land Law,
Commonwealth Act No. 141, and therefore, invalid. Under
said law "parking space" is not one of those reservations for
public benefit which the President of the Philippines may
designate by proclamation from any tracts of land of the
public domain. The reservation for "parking lots" under the
presidential proclamation in question is not required by
public interest, nor it is for the benefit of the public, because
only those who have cars can use the parking lot. Public use
or public benefit must be for the general public and not a use
by or for particular persons. The essential feature of public
use is that it should not be confined to privileged individuals,
but open to the general public. This is not so of the parking
space as contemplated by the presidential proclamation in
question. (Citations omitted.)
Section 83 of Commonwealth Act No. 141, known as the Public Land Law
provides:
Upon the recommendation of the Secretary of Agriculture
and Commerce [now Secretary of Environment and Natural
Resources], the President may designate by proclamation
any tract or tracts of land of the public domain as reservation
for the use of the Commonwealth of the Philippines [now
Republic of the Philippines] or of any of its branches, or of
the inhabitants thereof, in accordance with regulations
prescribed for this purpose, or for quasi-public uses or
purposes when the public interest requires
it, including reservations for highways, rights of way for
railroads, hydraulic power sites, irrigation systems,
communal pastures or leguas comunales, public parks,
public quarries, public fishponds, workingmen's village
and other improvements for the public benefit. (Emphasis
supplied)
Appellants urge this Court to declare Proclamation No. 144 invalid. They
contend that the setting aside of the lots occupied by them for parking space
purposes does not redound to the public benefit as required under Section
83 of the Public Land Act. They claim that only certain privileged individuals,
i.e., those who have cars, can avail of the parking facility without any
advantage accruing to the general public.
As observed by the trial court, Proclamation No. 144 was issued by then
President Ramon Magsaysay in response to several resolutions passed by
the Municipal Council of Malabon, Rizal, which had become particularly
aware of the increasing vehicular traffic and congestion along F. Sevilla
Boulevard. 5 The Municipal Council had proposed to widen F. Sevilla
Boulevard and at the same time, to reserve an area for parking space to
ease up traffic problems, in anticipation of the completion of the then
proposed market and slaughterhouse located to the west of F. Sevilla
Boulevard. In this day and age, it is hardly open to debate that the public has
much to gain from the proposed widening of F. Sevilla Boulevard and from
establishment of a municipal parking area. Indiscriminate parking along F.
Sevilla Boulevard and other main thoroughfares was prevalent; this, of
course, caused the build up of traffic in the surrounding area to the great
discomfort and inconvenience of the public who use the streets. Traffic
congestion constitutes a threat to the health, welfare, safety and convenience
of the people and it can only be substantially relieved by widening streets
and providing adequate parking areas.
Under the Land Transportation and Traffic Code, parking in designated areas
along public streets or highways is allowed 6 which clearly indicates that
provision for parking spaces serves a useful purpose. In other jurisdictions
where traffic is at least as voluminous as here, the provision by municipal
governments of parking space is not limited to parking along public streets or
highways. There has been a marked trend to build off-street parking facilities
with the view to removing parked cars from the streets. While the provision of
off-street parking facilities or carparks has been commonly undertaken by
private enterprise, municipal governments have been constrained to put up
carparks in response to public necessity where private enterprise had failed
to keep up with the growing public demand. American courts have upheld the
right of municipal governments to construct off-street parking facilities as
clearly redounding to the public benefit. 7
Appellants, however, allege that the benefits, if any, that may be derived from
the proposed street-widening and parking space will be confined to people
who have cars, hence there would be lacking the essential feature of
property reserved for public use or benefit. Appellants would restrict property
reserved for public use or benefit to include only property susceptible of
being utilized by a generally unlimited number of people. The conception
urged by appellants is both flawed and obsolete since the number of users is
not the yardstick in determining whether property is properly reserved for
public use or public benefit. In the first place, Section 83 above speaks not
only of use by a local government but also of "quasi-public uses or
purposes." To constitute public use, the public in general should have equal
or common rights to use the land or facility involved on the same terms,
however limited in number the people who can actually avail themselves of it
at a given time. 8 There is nothing in Proclamation No. 144 which excludes
non-car-owners from using a widened street or a parking area should they in
fact happen to be driving cars; the opportunity to avail of the use thereof
remains open for the public in general.
Besides, the benefits directly obtained by car-owners do not determine either
the validity or invalidity of Proclamation No. 144. What is important are the
long-term benefits which the proposed street widening and parking areas
make available to the public in the form of enhanced, safe and orderly
transportation on land. This is the kind of public benefit envisioned by the
Municipal Council of Malabon, Rizal and which was sought to be promoted
by the President in issuing Proclamation No. 144.
We believe and so hold that Proclamation No. 144 was lawful and valid.
Proclamation No. 144 specifically provided that the withdrawal of Lots No. 1
and 2 shall be subject to existing private rights, if any there be. Prior to the
issuance of Proclamation No. 144, appellants had applied for miscellaneous
sales applications over the lots respectively occupied by them. Insofar as
appellant Policarpio Gonzales is concerned, it is not disputed that he had
acknowledged the ownership of the National Government of the land applied
for by him. 9Although not expressly stated, Augusto Josue must be deemed
to have similarly admitted that ownership by the National Government since
he filed a miscellaneous sales application with the Bureau of Lands, an
agency of the Government, an application which can only be filed in respect
of tracts of public land, not private land.
The miscellaneous sales application, however, of appellant Policarpio
Gonzales had not been approved by the Bureau of Lands at the time
Proclamation No. 144 was issued; the land therefore retained its character as
land of the public domain. Upon the other hand, the miscellaneous sales
application of appellant Augusto Josue had already been rejected in an
Order of the Director of Lands dated 8 January 1954. 10 Accordingly, no
private rights had accrued and become vested in appellants. In both cases,
the lots remained public lands and were in fact subject to the free disposition
and control of the Government.
Appellants allege having built mixed residential and commercial buildings on
Lot 2. The evidence of record discloses that appellants had secured the
appropriate municipal permits or licenses therefor, that is, for the construction
of said buildings as well as the carrying on of business therein. However,
since the lease, sale or any other form of concession or disposition and
management of lands of the public domain was directly under the executive
control of the Director of Lands, 11 and not of local government officials, the
Malabon Municipal Mayor must be held to have exceeded his authority in
allowing the use of lands of the public domain to appellants by constructing
thereon commercial and residential use buildings, or any other kind of
building for that matter.
Sometime after Proclamation No. 144 was issued by the President,
appellants brought their predicament to the attention of the President. The
then Presidential Complaints and Action Committee ("PCAC") conducted an
investigation on the basis of which it eventually recommended the exclusion
from the reservation of the lots affected, in line with the "Land for the
Landless" policy of President Magsaysay's administration. 12 The then
Secretary of Agriculture and Natural Resources similarly recommended the
exclusion of the portion of Lot 2 occupied by appellants and forwarded to the
Office of the President a draft of a proposed amendment of Proclamation No.
144 specifically excluding Lot 2 from the scope of application thereof .The
amendment, however, remained merely a proposal for failure on the part of
the President of the Philippines to act favorably thereon.
WHEREFORE, the Petition for Review is hereby DENIED for lack of merit.
The Decision dated 28 January 1967 of then Court of First Instance of Rizal,
Branch 1 is hereby AFFIRMED. Costs against appellants.
SO ORDERED.
Fernan C.J., Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur.
Republic v. Gonzales13 SCRA 633G.R. NO. L-17962 April 30, 1965Facts
:Defendant-appellant, Blas Gonzales is a private concessionaire in the US
military Base at Clark Field,Angeles City, who is engaged in the manufacture
of furniture and, per agreement with base authorities, suppliedthem with his
manufactured articles.The BIR discovered that for the years 1946-47,
appellant have undeclared income for the two yearscausing deficiency in its
tax dues. Despite the demand of the BIR to pay its tax due, appellant failed
to do so. Indefense, appellant claim that as a concessionaire in an American
Air Base, he is not subject to Philippine Tax lawspursuant to the US-Phil.
Military Bases Agreement.
Issue
:Is appellant is exempt from taxes?
Ruling
:No. A Filipino concessionaire in an American Air Base is subject to
Philippine Income Tax laws under theUS-Phil Military Bases Agreement. Non
in the provisions of the agreement shields a concessionaire, like
theappellant, from the payment of the income tax. For one thing, even the
exemption in favor of members of the USarmed forces and nationals of the
US does not include income derived from Philippine sources
# 6. THIRD DIVISION
[G.R. No. 100709. November 14, 1997]
REPUBLIC OF THE PHILIPPINES, represented by the DIRECTOR OF
LANDS, petitioner, vs. COURT OF APPEALS, JOSEFINA L.
MORATO, SPOUSES NENITA CO and ANTONIO QUILATAN AND
THE REGISTER OF DEEDS OF QUEZON
PROVINCE, respondents.
DECISION
PANGANIBAN, J.:
Will the lease and/or mortgage of a portion of a realty acquired through
free patent constitute sufficient ground for the nullification of such land
grant? Should such property revert to the State once it is invaded by the sea
and thus becomes foreshore land?
The Case
These are the two questions raised in the petition before us assailing
the Court of Appeals[1] Decision in CA-G.R. CV No. 02667 promulgated on
June 13, 1991 which answered the said questions in the
negative.[2] Respondent Courts Decision dismissed[3] petitioners appeal and
affirmed in toto the decision of the Regional Trial Court[4] of Calauag,
Quezon, dated December 28, 1983 in Civil Case No. C-608. In turn, the
Regional Trial Courts decision dismissed petitioners complaint for
cancellation of the Torrens Certificate of Title of Respondent Morato and for
reversion of the parcel of land subject thereof to the public domain.
The Facts
The petition of the solicitor general, representing the Republic of the
Philippines, recites the following facts:[5]
Sometime in December, 1972, respondent Morato filed a Free Patent
Application No. III-3-8186-B on a parcel of land with an area of 1,265 square
meters situated at Pinagtalleran, Calauag, Quezon. On January 16, 1974,
the patent was approved and the Register of Deeds of Quezon at Lucena
City issued on February 4, 1974 Original Certificate of Title No. P-
17789. Both the free patent and the title specifically mandate that the land
shall not be alienated nor encumbered within five (5) years from the date of
the issuance of the patent (Sections 118 and 124 of CA No. 141, as
amended).
Subsequently, the District Land Officer in Lucena City, acting upon reports
that respondent Morato had encumbered the land in violation of the condition
of the patent, conducted an investigation. Thereafter, it was established that
the subject land is a portion of the Calauag Bay, five (5) to six (6) feet deep
under water during high tide and two (2) feet deep at low tide, and not
suitable to vegetation. Moreover, on October 24, 1974, a portion of the land
was mortgaged by respondent Morato to respondents Nenita Co and Antonio
Quilatan for P10,000.00 (pp. 2, 25, Folder of Exhibits). The spouses Quilatan
constructed a house on the land. Another portion of the land was leased to
Perfecto Advincula on February 2, 1976 at P100.00 a month, where a
warehouse was constructed.
On November 5, 1978, petitioner filed an amended complaint against
respondents Morato, spouses Nenita Co and Antonio Quilatan, and the
Register of Deeds of Quezon for the cancellation of title and reversion of a
parcel of land to the public domain, subject of a free patent in favor of
respondent Morato, on the grounds that the land is a foreshore land and was
mortgaged and leased within the five-year prohibitory period (p. 46,
Records).
After trial, the lower court, on December 28, 1983, rendered a decision
dismissing petitioners complaint. In finding for private respondents, the lower
court ruled that there was no violation of the 5-year period ban against
alienating or encumbering the land, because the land was merely leased and
not alienated. It also found that the mortgage to Nenita Co and Antonio
Quilatan covered only the improvement and not the land itself.
On appeal, the Court of Appeals affirmed the decision of the trial
court. Thereafter, the Republic of the Philippines filed the present petition.[6]
The Issues
Petitioner alleges that the following errors were committed by
Respondent Court:[7]
I
Respondent Court erred in holding that the patent granted and certificate of
title issued to Respondent Morato cannot be cancelled and annulled since
the certificate of title becomes indefeasible after one year from the issuance
of the title.
II
Respondent Court erred in holding that the questioned land is part of a
disposable public land and not a foreshore land.
The Courts Ruling
The petition is meritorious.
First Issue: Indefeasibility of a Free Patent Title
In resolving the first issue against petitioner, Respondent Court held: [8]
x x x. As ruled in Heirs of Gregorio Tengco vs. Heirs of Jose Alivalas, 168
SCRA 198. x x. The rule is well-settled that an original certificate of title
issued on the strength of a homestead patent partakes of the nature of a
certificate of title issued in a judicial proceeding, as long as the land disposed
of is really part of the disposable land of the public domain, and becomes
indefeasible and incontrovertible upon the expiration of one year from the
date of promulgation of the order of the Director of Lands for the issuance of
the patent. (Republic v. Heirs of Carle, 105 Phil. 1227 (1959); Ingaran
v. Ramelo, 107 Phil. 498 (1960); Lopez v. Padilla, (G.R. No. L-27559, May
18, 1972, 45 SCRA 44). A homestead patent, one registered under the Land
Registration Act, becomes as indefeasible as a Torrens Title. (Pamintuan
v. San Agustin, 43 Phil. 558 (1982); El Hogar Filipino v. Olviga, 60 Phil. 17
(1934); Duran v. Oliva, 113 Phil. 144 (1961); Pajomayo v. Manipon, G.R. No.
L-33676, June 30, 1971, 39 SCRA 676). (p. 203).
Again, in Lopez vs. Court of Appeals, 169 SCRA 271, citing Iglesia ni Cristo
v. Hon. Judge, CFI of Nueva Ecija, Branch I, (123 SCRA 516 (1983) and
Pajomayo, et al. v. Manipon, et al. (39 SCRA 676 (1971) held that once a
homestead patent granted in accordance with the Public Land Act is
registered pursuant to Section 122 of Act 496, the certificate of title issued in
virtue of said patent has the force and effect of a Torrens Title issued under
the Land Registration Act.
Indefeasibility of the title, however, may not bar the State, thru the Solicitor
General, from filing an action for reversion, as ruled in Heirs of Gregorio
Tengo v. Heirs of Jose Aliwalas, (supra), as follows:
But, as correctly pointed out by the respondent Court of Appeals, Dr.
Aliwalas title to the property having become incontrovertible, such may no
longer be collaterally attacked. If indeed there had been any fraud or
misrepresentation in obtaining the title, an action for reversion instituted by
the Solicitor General would be the proper remedy (Sec. 101, C.A. No. 141;
Director of Lands v. Jugado, G.R. No. L-14702, May 21, 1961, 2 SCRA 32;
Lopez v. Padilla, supra). (p. 204).
Petitioner contends that the grant of Free Patent (IV-3) 275 and the
subsequent issuance of Original Certificate of Title No. P-17789 to
Respondent Josefina L. Morato were subject to the conditions provided for in
Commonwealth Act (CA) No. 141. It alleges that on October 24, 1974, or
nine (9) months and eight (8) days after the grant of the patent, Respondent
Morato, in violation of the terms of the patent, mortgaged a portion of the
land to Respondent Nenita Co, who thereafter constructed a house
thereon. Likewise, on February 2, 1976 and within the five-year prohibitory
period, Respondent Morato leased a portion of the land to Perfecto Advincula
at a monthly rent of P100.00 who, shortly thereafter, constructed a house of
concrete materials on the subject land.[9] Further, petitioner argues that the
defense of indefeasibility of title is inaccurate. The original certificate of title
issued to Respondent Morato contains the seeds of its own cancellation:
such certificate specifically states on its face that it is subject to the
provisions of Sections 118, 119, 121, 122, 124 of CA No. 141, as
amended.[10]
Respondent Morato counters by stating that although a portion of the
land was previously leased, it resulted from the fact that Perfecto Advincula
built a warehouse in the subject land without [her] prior consent. The
mortgage executed over the improvement cannot be considered a violation
of the said grant since it can never affect the ownership. [11] She states
further:
x x x. the appeal of the petitioner was dismissed not because of the principle
of indefeasibility of title but mainly due to failure of the latter to support and
prove the alleged violations of respondent Morato. The records of this case
will readily show that although petitioner was able to establish that Morato
committed some acts during the prohibitory period of 5 years, a perusal
thereof will also show that what petitioner was able to prove never
constituted a violation of the grant.[12]
Respondent-Spouses Quilatan, on the other hand, state that the
mortgage contract they entered into with Respondent Morato can never be
considered as [an] alienation inasmuch as the ownership over the property
remains with the owner.[13] Besides, it is the director of lands and not the
Republic of the Philippines who is the real party in interest in this case,
contrary to the provision of the Public Land Act which states that actions for
reversion should be instituted by the solicitor general in the name of Republic
of the Philippines.[14]
We find for petitioner.
Quoted below are relevant sections of Commonwealth Act No. 141,
otherwise known as the Public Land Act:
Sec. 118. Except in favor of the Government or any of its branches, units or
institutions, or legally constituted banking corporations, lands acquired under
free patent or homestead provisions shall not be subject to encumbrance or
alienation from the date of the approval of the application and for a term of
five years from and after the date of issuance of the patent or grant nor shall
they become liable to the satisfaction of any debt contracted prior to the
expiration of said period; but the improvements or crops on the land may be
mortgaged or pledged to qualified persons, associations, or corporations.
No alienation, transfer, or conveyance of any homestead after five years and
before twenty-five years after issuance of title shall be valid without the
approval of the Secretary of Agriculture and Natural Resources, which
approval shall not be denied except on constitutional and legal grounds.(As
amended by Com. Act No. 456, approved June 8, 1939.)
xxxxxxxxx
Sec. 121. Except with the consent of the grantee and the approval of the
Secretary of Agriculture and Natural Resources, and solely for educational,
religious, or charitable purposes or for a right of way, no corporation,
association, or partnership may acquire or have any right, title, interest, or
property right whatsoever to any land granted under the free patent,
homestead, or individual sale provisions of this Act or to any permanent
improvement on such land. (As amended by Com. Act No. 615, approved
May 5, 1941)
Sec. 122. No land originally acquired in any manner under the provisions of
this Act, nor any permanent improvement on such land, shall be
encumbered, alienated or transferred, except to persons, corporations,
association, or partnerships who may acquire lands of the public domain
under this Act or to corporations organized in the Philippines authorized
therefore by their charters.
Except in cases of hereditary successions, no land or any portion thereof
originally acquired under the free patent, homestead, or individual sale
provisions of this Act, or any permanent improvement on such land, shall be
transferred or assigned to any individual, nor shall such land or any
permanent improvement thereon be leased to such individual, when the area
of said land, added to that of his own, shall exceed one hundred and forty-
four hectares. Any transfer, assignment, or lease made in violation hereto
shall be null and void. (As amended by Com. Act No. 615, Id.)
xxxxxxxxx
Sec. 124. Any acquisition, conveyance, alienation, transfer, or other contract
made or executed in violation of any of the provisions of sections one
hundred and eighteen, one hundred and twenty, one hundred and twenty-
one, one hundred and twenty-two, and one hundred and twenty-three of this
Act shall be unlawful and null and void from its execution and shall produce
the effect of annulling and cancelling the grant, title, patent, or permit
originally issued, recognized or confirmed, actually or presumptively, and
cause the reversion of the property and its improvements to the State.
(Underscoring supplied.)
The foregoing legal provisions clearly proscribe the encumbrance of a
parcel of land acquired under a free patent or homestead within five years
from the grant of such patent. Furthermore, such encumbrance results in the
cancellation of the grant and the reversion of the land to the public
domain. Encumbrance has been defined as [a]nything that impairs the use or
transfer of property; anything which constitutes a burden on the title; a
burden or charge upon property; a claim or lien upon property. It may be a
legal claim on an estate for the discharge of which the estate is liable; an
embarrassment of the estate or property so that it cannot be disposed of
without being subject to it; an estate, interest, or right in lands, diminishing
their value to the general owner; a liability resting upon an estate. [15] Do the
contracts of lease and mortgage executed within five (5) years from the
issuance of the patent constitute an encumbrance and violate the terms and
conditions of such patent? Respondent Court answered in the negative:[16]
From the evidence adduced by both parties, it has been proved that the area
of the portion of the land, subject matter of the lease contract (Exh. B)
executed by and between Perfecto Advincula and Josefina L. Morato is only
10 x 12 square meters, whereas the total area of the land granted to Morato
is 1,265 square meters. It is clear from this that the portion of the land leased
by Advincula does not significantly affect Moratos ownership and
possession. Above all, the circumstances under which the lease was
executed do not reflect a voluntary and blatant intent to violate the conditions
provided for in the patent issued in her favor. On the contrary, Morato was
compelled to enter into that contract of lease out of sympathy and the
goodness of her heart to accommodate a fellow man. x x x
It is indisputable, however, that Respondent Morato cannot fully use or
enjoy the land during the duration of the lease contract. This restriction on
the enjoyment of her property sufficiently meets the definition of an
encumbrance under Section 118 of the Public Land Act, because such
contract impairs the use of the property by the grantee. In a contract of lease
which is consensual, bilateral, onerous and commutative, the owner
temporarily grants the use of his or her property to another who undertakes
to pay rent therefor.[17] During the term of the lease, the grantee of the patent
cannot enjoy the beneficial use of the land leased. As already observed, the
Public Land Act does not permit a grantee of a free patent from encumbering
any portion of such land. Such encumbrance is a ground for the nullification
of the award.
Moratos resort to equity, i.e. that the lease was executed allegedly out
of the goodness of her heart without any intention of violating the law, cannot
help her.Equity, which has been aptly described as justice outside legality, is
applied only in the absence of, and never against, statutory law or judicial
rules of procedure.Positive rules prevail over all abstract arguments based
on equity contra legem.[18]
Respondents failed to justify their position that the mortgage should not
be considered an encumbrance. Indeed, we do not find any support for such
contention.The questioned mortgage falls squarely within the term
encumbrance proscribed by Section 118 of the Public Land Act.[19] Verily, a
mortgage constitutes a legal limitation on the estate, and the foreclosure of
such mortgage would necessarily result in the auction of the property. [20]
Even if only part of the property has been sold or alienated within the
prohibited period of five years from the issuance of the patent, such
alienation is a sufficient cause for the reversion of the whole estate to the
State. As a condition for the grant of a free patent to an applicant, the law
requires that the land should not be encumbered, sold or alienated within five
years from the issuance of the patent. The sale or the alienation of part of the
homestead violates that condition.[21]
The prohibition against the encumbrance -- lease and mortgage
included -- of a homestead which, by analogy applies to a free patent, is
mandated by the rationale for the grant, viz.:[22]
It is well-known that the homestead laws were designed to distribute
disposable agricultural lots of the State to land-destitute citizens for their
home and cultivation. Pursuant to such benevolent intention the State
prohibits the sale or encumbrance of the homestead (Section 116) within five
years after the grant of the patent. After that five-year period the law impliedly
permits alienation of the homestead; but in line with the primordial purpose to
favor the homesteader and his family the statute provides that such
alienation or conveyance (Section 117) shall be subject to the right of
repurchase by the homesteader, his widow or heirs within five years. This
section 117 is undoubtedly a complement of section 116. It aims to preserve
and keep in the family of the homesteader that portion of public land which
the State had gratuitously given to him. It would, therefore, be in keeping with
this fundamental idea to hold, as we hold, that the right to repurchase exists
not only when the original homesteader makes the conveyance, but also
when it is made by his widow or heirs. This construction is clearly deducible
from the terms of the statute.
By express provision of Section 118 of Commonwealth Act 141 and in
conformity with the policy of the law, any transfer or alienation of a free
patent or homestead within five years from the issuance of the patent is
proscribed. Such transfer nullifies said alienation and constitutes a cause for
the reversion of the property to the State.
The prohibition against any alienation or encumbrance of the land grant
is a proviso attached to the approval of every application.[23] Prior to the
fulfillment of the requirements of law, Respondent Morato had only an
inchoate right to the property; such property remained part of the public
domain and, therefore, not susceptible to alienation or
encumbrance. Conversely, when a homesteader has complied with all the
terms and conditions which entitled him to a patent for [a] particular tract of
public land, he acquires a vested interest therein and has to be regarded an
equitable owner thereof.[24] However, for Respondent Moratos title of
ownership over the patented land to be perfected, she should have complied
with the requirements of the law, one of which was to keep the property for
herself and her family within the prescribed period of five (5) years. Prior to
the fulfillment of all requirements of the law, Respondent Moratos title over
the property was incomplete. Accordingly, if the requirements are not
complied with, the State as the grantor could petition for the annulment of the
patent and the cancellation of the title.
Respondent Morato cannot use the doctrine of the indefeasibility of her
Torrens title to bar the state from questioning its transfer or
encumbrance. The certificate of title issued to her clearly stipulated that its
award was subject to the conditions provided for in Sections 118, 119, 121,
122 and 124 of Commonwealth Act (CA) No. 141. Because she violated
Section 118, the reversion of the property to the public domain necessarily
follows, pursuant to Section 124.
Second Issue: Foreshore Land Reverts to the Public Domain
There is yet another reason for granting this petition.
Although Respondent Court found that the subject land was foreshore
land, it nevertheless sustained the award thereof to Respondent Morato: [25]
First of all, the issue here is whether the land in question, is really part of the
foreshore lands. The Supreme Court defines foreshore land in the case of
Republic vs. Alagad, 169 SCRA 455, 464, as follows:
Otherwise, where the rise in water level is due to, the extraordinary action of
nature, rainful, for instance, the portions inundated thereby are not
considered part of the bed or basin of the body of water in question. It cannot
therefore be said to be foreshore land but land outside of the public
dominion, and land capable of registration as private property.
A foreshore land, on the other hand has been defined as follows:
... that part of (the land) which is between high and low water and left dry by
the flux and reflux of the tides x x x x (Republic vs. C.A., Nos. L-43105, L-
43190, August 31, 1984, 131 SCRA 532; Government vs. Colegio de San
Jose, 53 Phil 423)
The strip of land that lies between the high and low water marks and that is
alternatively wet and dry according to the flow of the tide. (Rep. vs. CA,
supra, 539).
The factual findings of the lower court regarding the nature of the parcel
of land in question reads:
Evidence disclose that the marginal area of the land radically changed
sometime in 1937 up to 1955 due to a strong earthquake followed by
frequent storms eventually eroding the land. From 1955 to 1968, however,
gradual reclamation was undertaken by the lumber company owned by the
Moratos. Having thus restored the land thru mostly human hands employed
by the lumber company, the area continued to be utilized by the owner of the
sawmill up to the time of his death in 1965. On or about March 17, 1973,
there again was a strong earthquake unfortunately causing destruction to
hundreds of residential houses fronting the Calauag Bay including the
Santiago Building, a cinema house constructed of concrete materials. The
catastrophe totally caused the sinking of a concrete bridge at Sumulong river
also in the municipality of Calauag, Quezon.
On November 13, 1977 a typhoon code named Unding wrought havoc as it
lashed the main land of Calauag, Quezon causing again great erosion this
time than that which the area suffered in 1937. The Court noted with the
significance of the newspaper clipping entitled Baryo ng Mangingisda Kinain
ng Dagat (Exh. 11).
xxxxxxxxx
Evidently this was the condition of the land when on or about December 5,
1972 defendant Josefina L. Morato filed with the Bureau of Lands her free
patent application. The defendant Josefina Morato having taken possession
of the land after the demise of Don Tomas Morato, she introduced
improvement and continued developing the area, planted it to coconut
trees. Having applied for a free patent, defendant had the land area surveyed
and an approved plan (Exh. 9) based on the cadastral survey as early as
1927 (Exh. 10) was secured. The area was declared for taxation purposes in
the name of defendant Josefina Morato denominated as Tax Declaration No.
4115 (Exh. 8) and the corresponding realty taxes religiously paid as shown
by Exh. 8-A). (pp. 12-14, DECISION).
Being supported by substantial evidence and for failure of the appellant to
show cause which would warrant disturbance, the afore-cited findings of the
lower court, must be respected.
Petitioner correctly contends, however, that Private Respondent Morato
cannot own foreshore land:
Through the encroachment or erosion by the ebb and flow of the tide, a
portion of the subject land was invaded by the waves and sea
advances.During high tide, at least half of the land (632.5 square meters) is 6
feet deep under water and three (3) feet deep during low tide. The Calauag
Bay shore has extended up to a portion of the questioned land.
While at the time of the grant of free patent to respondent Morato, the land
was not reached by the water, however, due to gradual sinking of the land
caused by natural calamities, the sea advances had permanently invaded a
portion of subject land. As disclosed at the trial, through the testimony of the
court-appointed commissioner, Engr. Abraham B. Pili, the land was under
water during high tide in the month of August 1978.The water margin covers
half of the property, but during low tide, the water is about a kilometer (TSN,
July 19, 1979, p. 12). Also, in 1974, after the grant of the patent, the land was
covered with vegetation, but it disappeared in 1978 when the land was
reached by the tides (Exhs. E-1; E-14).In fact, in its decision dated December
28, 1983, the lower court observed that the erosion of the land was caused
by natural calamities that struck the place in 1977 (Cf. Decision, pp. 17-
18).[26]
Respondent-Spouses Quilatan argue, however, that it is unfair and
unjust if Josefina Morato will be deprived of the whole property just because
a portion thereof was immersed in water for reasons not her own doing. [27]
As a general rule, findings of facts of the Court of Appeals are binding
and conclusive upon this Court, unless such factual findings are palpably
unsupported by the evidence on record or unless the judgment itself is based
on a misapprehension of facts.[28] The application for a free patent was made
in 1972. From the undisputed factual findings of the Court of Appeals,
however, the land has since become foreshore. Accordingly, it can no longer
be subject of a free patent under the Public Land Act. Government of the
Philippine Islands vs. Cabagis[29] explained the rationale for this proscription:
Article 339, subsection 1, of the Civil Code, reads:
Art. 339. Property of public ownership is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, riverbanks, shores, roadsteads, and
that of a similar character.
********
Article 1, case 3, of the Law of Waters of August 3, 1866, provides as
follows:
ARTICLE 1. The following are part of the national domain open to public use:
********
3. The Shores. By the shore is understood that space covered and
uncovered by the movement of the tide. Its interior or terrestrial limit is the
line reached by the highest equinoctal tides. Where the tides are not
appreciable, the shore begins on the land side at the line reached by the sea
during ordinary storms or tempests.
In the case of Aragon vs. Insular Government (19 Phil. 223), with reference
to article 339 of the Civil Code just quoted, this Court said:
We should not be understood, by this decision, to hold that in a case of
gradual encroachment or erosion by the ebb and flow of the tide, private
property may not become property of public ownership. as defined in article
339 of the code, where it appear that the owner has to all intents and
purposes abandoned it and permitted it to be totally destroyed, so as to
become a part of the playa (shore of the sea), rada (roadstead), or the like. *
**
In the Enciclopedia Jurdica Espaola, volume XII, page 558, we read the
following:
With relative frequency the opposite phenomenon occurs; that is, the sea
advances and private properties are permanently invaded by the waves, and
in this case they become part of the shore or beach. They then pass to the
public domain, but the owner thus dispossessed does not retain any right to
the natural products resulting from their new nature; it is a de facto case of
eminent domain, and not subject to indemnity.
In comparison, Article 420 of the Civil Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use,
and are intended for some public service or for the development
of the national wealth.
When the sea moved towards the estate and the tide invaded it, the
invaded property became foreshore land and passed to the realm of the
public domain. In fact, the Court in Government vs. Cabangis[30] annulled the
registration of land subject of cadastral proceedings when the parcel
subsequently became foreshore land.[31] In another case, the Court voided
the registration decree of a trial court and held that said court had no
jurisdiction to award foreshore land to any private person or entity. [32] The
subject land in this case, being foreshore land, should therefore be returned
to the public domain.
WHEREFORE, the petition is GRANTED. This Court
hereby REVERSES and SETS ASIDE the assailed Decision of Respondent
Court and ORDERS the CANCELLATION of Free Patent No. (IV-3) 275
issued to Respondent Morato and the subsequent Original Certificate of Title
No. P-17789. The subject land therefore REVERTS to the State. No costs.
SO ORDERED.
Romero, Melo, and Francisco, JJ., concur.
Narvasa, C.J., (Chairman), on leave.
REPUBLIC V. CA
FACTS:
Respondent Morato filed a free patent application on a parcel of land, which
was approved and issued an original certificate of title. Both the free patent
and title specifically mandate that the land shall not be alienated nor
encumbered within 5 years from the date of the issuance of the patent. The
District Land Officer, acting upon reports that Morato had encumbered the
land and upon finding that the subject land is submerged in water during high
tide and low tide, filed a complaint for cancellation of the title and reversion of
the parcel of land to the public domain. RTC dismissed the complaint. CA
affirmed.
ISSUE:
1. Whether or not respondent violated the free patent condition prohibiting
encumbering the land within the 5-year period?
2. Whether or not the land is of public domain?
HELD
1. Yes. Public Land Act Sec. 18 provides thatlands acquired under free
patent or homestead provisions shall not be subject to encumbrance or
alienation from the date of approval of the application and for a term of 5
years from and after the date of issuance of the patent or grantThe
contracts of lease and mortgage executed by Morato constitute an
encumbrance as contemplated by section 18 of the Public Land Act because
such contracts impair the use of the property.
2. Yes. Based from the facts, the land is clearly foreshore as it is subject to
the ebb and flow of the tide. When the sea moved towards the estate and the
tide invaded it, the invaded property became foreshore land and passed to
the realm of the public domain. In Government v. Cabangis, the Court
annulled the registration of land subject of cadastral proceedings when the
parcel subsequently became foreshore land. In another case, the Court
voided the registration decree of a trial court and held that said court had no
jurisdiction to award foreshore land to any private person or entity. The
subject land in this case, being foreshore land should therefor be returned to
the public domain.
# 7 Chavez v PEA and AMARI G.R. No. 133250. July 9, 2002.
7/7/2010
0 Comments
Facts: 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, lease and sell any and all kinds of lands." 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" under the Manila-Cavite Coastal Road and Reclamation Project
(MCCRRP).
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
Paraaque 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, Paraaque City.
PEA and AMARI entered into the JVA through negotiation without public
bidding. On April 28, 1995, the Board of Directors of PEA, in its Resolution
No. 1245, confirmed the JVA. On June 8, 1995, then President Fidel V.
Ramos, through then Executive Secretary Ruben Torres, approved the JVA.
The Senate Committees reported the results of their investigation in
Senate Committee Report No. 560 dated September 16, 1997. 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, the Chief
Presidential Legal Counsel, and the Government Corporate Counsel. The
Legal Task Force upheld the legality of the JVA, contrary to the conclusions
reached by the Senate Committees.
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.
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."
Issue: The issues raised by petitioner, PEA and AMARI are as follows:
1. Whether the reliefs prayed for are moot and academic because of
subsequent events;
2. Whether the petition should be dismissed for failing to observe the
principle of governing the heirarchy of courts;
3. Whether the petition should be dismissed for non-exhaustion of
administrative remedies;
4. Whether petitioner has locus standi;
5. Whether the constitutional right to information includes information on
on-going neogtiations BEFORE a final agreement;
6. 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
7. Whether the Court has jurisdiction over the issue whether the amended
JVA is grossly disadvantageous to the government
Held: 1. We rule that the signing and 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 the Section 3, Article
XII of the Constitution, which prohibits the government from alienating lands
of the public domain to private corporations. 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.
Also, the instant petition is a case of first impression being a wholly
government owned corporation performing public as well as proprietary
functions. All previous decisions of the Court involving Section 3, Article XII
of the 1987 Constitution, or its counterpart provision in the 1973 Constitution,
covered agricultural lands sold to private corporations which acquired the
lands from private parties.
Lastly, there is a need to resolve immediately the constitutional issue
raised in this petition because of the possible transfer at any time by PEA to
AMARI of title and ownership to portions of the reclaimed lands. Under the
Amended JVA, PEA is obligated to transfer to AMARI the latter's seventy
percent proportionate share in the reclaimed areas as the reclamation
progresses, The Amended JVA even allows AMARI to mortgage at any time
the entire reclaimed area to raise financing for the reclamation project.
2. The instant case, however, raises constitutional issues of
transcendental importance to the public. 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.
3. 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 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.
The principle of exhaustion of administrative remedies does not apply
when the issue involved is a purely legal or constitutional question. 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.
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 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.
4. 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.'
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.
5. 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: 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."
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.
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.
 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.
6. 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.
"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.
Act No. 2874 of the Philippine Legislature
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.
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.
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 1987 Constitution continues the State policy in the 1973 Constitution
banning private corporations from acquiring any kind of alienable land of the
public domain. Like the 1973 Constitution, the 1987 Constitution allows
private corporations to hold alienable lands of the public domain only through
lease. As in the 1935 and 1973 Constitutions, the general law governing the
lease to private corporations of reclaimed, foreshore and marshy alienable
lands of the public domain is still CA No. 141.
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.
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. 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 . . . owned by the State" forming part of
the public domain, and are inalienable pursuant to Section 2, Article XII of the
1987 Constitution.
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.
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." 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 . . . 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.
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:... "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."
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.
The failure of public bidding on December 10, 1991, involving only 407.84
hectares, is not a valid justification for a negotiated sale of 750 hectares,
almost double the area publicly auctioned.
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 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.
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. This scheme can even be applied to
alienable agricultural lands of the public domain since PEA can "acquire . . .
any and all kinds of lands."
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.
7. 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 the trier of facts,
and this last issue involves a determination of factual matters
# 8 SECOND DIVISION
[G.R. No. 123586. August 12, 2004]
SPOUSES BEDER MORANDARTE and MARINA FEBRERA, petitioners,
vs. COURT OF APPEALS, REPUBLIC OF THE PHILIPPINES, and
SPOUSES VIRGINIO B. LACAYA and NENITA
LACAYA, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules
of Court which seeks the reversal of the Decision,[1] dated August 23, 1995,
of the Court of Appeals (CA for brevity) in CA-G.R. CV No. 36258, affirming
the Decision, dated November 5, 1991, rendered by the Regional Trial Court
(Branch 7), Dipolog City, Zamboanga del Norte (RTC for brevity) in Civil
Case No. 3890, declaring Free Patent No. (IX-8) 785[2] and Original
Certificate of Title No. P-21972, in the name of petitioner Beder Morandarte
(Morandarte for brevity), and all its derivative titles, null and void ab initio.
The factual antecedents are as follows:
Morandarte filed an application for free patent, dated December 5, 1972,
before the Bureau of Lands, Dipolog City District Land Office (BOL for
brevity), covering a parcel of land located at Sta. Filomena, Dipolog City with
an area of 4.5499 hectares and described as a portion of Lot 1038 of Dipolog
Cadastre No. 85.[3]
 On July 27, 1976, the District Land Officer of the BOL approved the free
patent application of Morandarte and directed the issuance of a free patent in
his favor.[4]Accordingly, Free Patent No. (IX-8) 785 for Lot No. 7, Csd-09-05-
00078-D was issued in the name of Morandarte. On September 20, 1976,
the Register of Deeds of Zamboanga del Norte issued the corresponding
Original Certificate of Title No. (P-21972) 5954.[5]
Subsequently, Morandarte caused a subdivision survey of the lot,
dividing the same into Lot No. 6781-A, with an area of 13,939 square meters,
and Lot No. 6781-B, with an area of 32,819 square meters. As a result of the
subdivision survey, Transfer Certificates of Title Nos. T-1835 and T-1836
covering Lots 6781-A and 6781-B, respectively, were issued in favor of
Morandarte on May 12, 1980 by the Registry of Deeds of Dipolog City. [6]
On May 22, 1981, Morandarte and his wife, Marina Febrera, executed a
real estate mortgage over Lot 6781-B, subject of TCT No. 1836, in favor of
the Development Bank of the Philippines, Dipolog City branch (DBP for
brevity), in consideration of a loan in the amount of P52,160.00.[7]
More than ten years after the issuance of the OCT in Morandartes
name, or on March 19, 1987, respondent Republic of the Philippines
(Republic for brevity), represented by the Director of Lands, filed before the
RTC a Complaint for Annulment of Title and Reversion against the
Morandarte spouses, the Register of Deeds of Zamboanga del Norte, the
Register of Deeds of Dipolog City, and DBP, docketed as Civil Case No.
3890.[8]
The Republic alleged that the BOL found that the subject land includes
a portion of the Miputak River which cannot be validly awarded as it is
outside the commerce of man and beyond the authority of the BOL to
dispose of. It claimed that the Morandarte spouses deliberately and
intentionally concealed such fact in the application to ensure approval
thereof. Considering that the Morandarte spouses are guilty of fraud and
misrepresentation in the procurement of their title, the Republic stressed that
their title is void.[9]
The Register of Deeds of Dipolog City filed a Motion to Dismiss, dated
April 7, 1987, praying for the dismissal of the complaint as against her since
the complaint failed to state a claim against her.[10]
In their Answer dated April 13, 1987, the Morandarte spouses denied
the allegations of the complaint and claimed that they were able to secure
the title in accordance and in compliance with the requirements of the law.
They alleged that the land is a portion of inherited property from Antonio L.
Morandarte whose ownership thereof is covered by Tax Declaration No.
2296.
As regards the Miputak River, they argued that the river changed its
course brought about by the fact that a portion of the Miputak River was
leased by the Bureau of Fisheries (BOF for brevity) to a certain Aguido
Realiza whose rights were subsequently transferred to Virginio Lacaya. They
alleged that they indicated in their survey plan the actual location of the
Miputak River in relation to the property but the BOL returned the survey with
the directive that the existence of the river should not be indicated as the
original survey did not show its existence, to which they complied with by
submitting a new survey plan which did not indicate the existence of the river.
In the alternative, they alleged that inclusion of the Miputak River should
not render the title void; only the portion of the property covered by the
Miputak River should be nullified but their title to the remaining portion should
be maintained.[11]
For its part, DBP filed its Answer dated April 13, 1987 praying for the
dismissal of the complaint as against it since it had nothing to do with the
issuance of the title to the spouses.[12] DBP interposed a cross-claim against
the spouses for the payment of their outstanding obligations. [13] The
Morandarte spouses filed an Answer to the Crossclaim dated April 29,
1987.[14]
No answer was filed by the Register of Deeds of Zamboanga del Norte.
On March 4, 1988, upon prior leave of court, herein respondent spouses
Virginio B. Lacaya and Nenita Lacaya filed their Complaint-In-Intervention
which alleged that they are holders of a fishpond lease agreement covering a
fishpond area of about 5.0335 hectares, 1.2681 hectares of which have been
included in the title issued to the Morandarte spouses. Considering that the
land of the Morandarte spouses encroaches on the area leased to them, the
Lacaya spouses submit that the formers title thereto is void.[15]
In their Answer to the complaint-in-intervention, dated March 19, 1988,
the Morandarte spouses denied the allegations of the Lacaya
spouses.[16] They maintained that the portion of the fishpond originally
belonged to Antonio L. Morandarte, their predecessor-in-interest, and the
Lacaya spouses have never been in possession thereof but are actually
squatters therein.
On the other hand, the Republic, in its Answer to the complaint-in-
intervention, dated March 21, 1988, adopted the allegations of the complaint-
in-intervention to further support its claim that the title of the Morandarte
spouses is void.[17] The Lacaya spouses filed their Reply and Answer on
March 30, 1988, denying the arguments of the Morandarte spouses and
reiterating the allegations in their complaint-in-intervention.[18]
Following trial on the merits, on November 5, 1992, the RTC rendered a
Decision[19] in favor of the Republic and the Lacaya spouses. The RTC
declared that while fraud in the procurement of the title was not established
by the State, Morandartes title is, nonetheless, void because it includes a
portion of the Miputak River which is outside the commerce of man and
beyond the authority of the BOL to dispose of. In addition, the RTC sustained
the fishpond rights of the Lacaya spouses over a portion included in
Morandartes title based on a Deed of Transfer of Fishpond Rights from
Felipe B. Lacaya and a Fishpond Lease Agreement with the BOF.
The dispositive portion of the decision of the trial court reads:
WHEREFORE, judgment is hereby rendered:
1. Declaring null and void ab initio Free Patent No. (IX-5) (sic) 785
and Original Certificate of Title No. P-21972 in the name of
 Beder Morandarte, as well as all derivative titles issued
thereafter;
2. Ordering defendants spouses Beder Morandarte and Marina
Febrera to surrender their owners duplicate copies of Transfer
Certificate of Title Nos. T-1835 and T-1836, which were the
derivative titles of Original Certificate of Title No. P-21972;
3. Directing the Register of Deeds of Zamboanga del Norte to
cancel Original Certificate of Title No. P-21972 in the name of
Beder Morandarte, and the Register of Deeds of Dipolog City
to cancel Transfer Certificate of Title Nos. T-1835 and T-1836
in the name of the same defendant;
4. Ordering the reversion of the land in question to the state, free
from liens and encumbrances;
5. Enjoining defendants spouses Beder Morandarte and Marina
Febrera from exercising any act of ownership or possession of
the subject property;
6. Dismissing the Cross-Claim of defendant Development Bank of
the Philippines against Cross Defendants Spouses Beder
Morandarte and Marina Febrera, for being premature, but
ordering the latter cross defendants to give a substitute
security in favor of DBP as indicated in this decision;
7. Declaring valid and enforceable the Lease Agreement for a
period of twenty five years over the fishpond area of
Intervenors;
8. Denying Intervenors prayer for damages against defendants-
spouses Morandarte; and
9. Dismissing, for lack of merit, the counterclaim and prayer for
damages of defendants spouses Morandarte against the
Intervenors.
No costs against defendant-spouses Morandarte.
IT IS SO ORDERED.[20]
Dissatisfied, the Morandarte spouses appealed to the CA. [21] In a
Decision dated August 23, 1995, the CA affirmed the decision of the
RTC,[22] ratiocinating, as follows:
The present controversial Miputak River used to occupy the area adjacent to
the northern and western boundaries of Lot No. 6781 Cad-85 (Exh. J). As
time passed, it changed its course and occupies (sic) Lot No. 6781 Cad-85
(identical to Lot 7, Exh. H). This will explain Beder Morandartes argument
that when he applied for the Sales Patent Lot 7 (identical to Lot 6781), the
original technical description did not show the Miputak River. But it is
inescapable though, that while originally, Lot 6781 is not occupied by the
river, at the time that the Sales Application was filed by Beder Morandarte,
the Miputak River was actually occupying said Lot 6781 or Lot 7 covered by
his Sales Application and the titles sought to be annulled in this case.
Rivers and their natural beds are undoubtedly properties of public dominion
(Art. 502 par. 1, Civil Code of the Philippines). Whether navigable or not,
rivers belong to the public and cannot be acquired by prescription (Com vs.
Meneses, 38 O.G. 2839, Paras, Civil Code, p. 328, Vol. II, 12thEdition). In
fact, a stream located within private land is still property of public dominion,
even if the Torrens Title of the land does not show the existence of said
stream (Talion vs. Sec. of Public Works and Highways, L-24281, May 16,
1967; Paras, supra).
Correspondingly, Art. 462 of the same Civil Code provides:
Art. 462. Whenever a river, changing its course by natural causes, opens a
new bed through a private estate, this bed shall become of public dominion.
The rule is the same that even if the new bed is on private property. The bed
becomes property of public dominion. Just as the old bed had been of public
dominion before the abandonment, the new riverbed shall likewise be of
public dominion (Hilario vs. City of Manila, L-19570, April 27, 1967).[23]
On October 10, 1995, the Morandarte spouses filed a motion for
reconsideration.[24] In its Resolution dated January 19, 1996, the CA found no
justifiable cause or reason to modify or reverse its decision.[25]
Hence, the instant petition for review anchored on the following
assigned errors:
A.
RESPONDENT COURT COMMITTED A GRAVE ERROR OF LAW IN
APPLYING ARTICLE 462 OF THE CIVIL CODE TO THIS CASE WHEN THE
CHANGE IN COURSE OF THE OLD MIPUTAK RIVER WAS NOT DUE TO
NATURAL CAUSES BUT WAS ACCIDENTAL.
B.
ASSUMING ARGUENDO THAT THE CHANGE OF COURSE OF THE OLD
MIPUTAK RIVER WAS DUE TO NATURAL CAUSE ONLY A PORTION OF
THE SUBJECT PROPERTY OF PETITIONERS WAS AFFECTED
THEREBY SO THAT THE TITLE OF PETITIONERS TO THE REMAINING
PORTION IS VALID AND CANNOT BE NULLIFIED AS IT REMAINED
PRIVATE PROPERTY.
C.
RESPONDENT COURT GRAVELY ERRED IN ORDERING THE
REVERSION OF LOT 7, CSD-09-05-00078-D TO THE PUBLIC DOMAIN.
D.
RESPONDENT COURT GRAVELY ERRED IN NOT DECLARING AS NULL
AND VOID THE LEASE AGREEMENT EXECUTED IN FAVOR OF
INTERVENORS.
E.
RESPONDENT COURT GRAVELY ERRED IN NOT DISMISSING THE
COMPLAINT CONSIDERING THAT NO FRAUD OR
MISREPRESENTATION WAS EMPLOYED BY THE SPOUSES
MORANDARTE IN OBTAINING THE TITLE.[26]
The Morandarte spouses emphatically argue that the CA failed to take
into consideration the true state of the present Miputak River in relation to Lot
7. They contend that the Miputak River changed its course due to the closure
of the river bed through the construction of dikes by the Lacaya spouses,
forcing the river to be diverted into Lot 6781-B. Thus, they submit that the
applicable provision is Article 77 of the Law of Waters, which provides
that [l]ands accidentally inundated by the waters of lakes, or by creeks, rivers
and other streams shall continue to be the property of their respective
owners.
Furthermore, they staunchly claim that the Miputak River does not
actually correspond to Lot 7. The Miputak River occupies only 12,162 square
meters of Lot 7 which has an area of 45,499 square meters. Also, they insist
that the lower courts made capital, albeit erroneously, of their agreement to a
reversion. The reversion agreed to refers only to the 12,162 square meters
portion covered by the Miputak River, which should be voided, while the
portion unaffected by the Miputak River is valid and their title thereto should
be maintained and respected.
Moreover, they vigorously contend that the CA erred in sustaining the
validity of fishpond rights of the Lacaya spouses. They aver that the Lacaya
spouses violated the terms of the lease agreement by constructing dikes for
the fishponds which caused the Miputak River to traverse the property of the
Morandarte spouses.
Prefatorily, it must be stated that in petitions for review on certiorari, only
questions of law may be raised by the parties and passed upon by this
Court.[27] Factual findings of the trial court, when adopted and confirmed by
the CA, are binding and conclusive upon the Supreme Court and generally
will not be reviewed on appeal.[28] Inquiry upon the veracity of the CAs factual
findings and conclusion is not the function of the Supreme Court for the Court
is not a trier of facts.[29]
While this Court has recognized several exceptions to this rule, to wit:
(1) when the findings are grounded entirely on speculation, surmises, or
conjectures; (2) when the inference made is manifestly mistaken, absurd, or
impossible; (3) when there is grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; (5) when the findings of
facts are conflicting; (6) when in making its findings, the CA went beyond the
issues of the case, or its findings are contrary to the admissions of both the
appellant and the appellee; (7) when the findings are contrary to the trial
court; (8) when the findings are conclusions without citation of specific
evidence on which they are based; (9) when the facts set forth in the petition
as well as in the petitioners main and reply briefs are not disputed by the
respondent; (10) when the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on record; and (11)
when the CA manifestly overlooked certain relevant facts not disputed by the
parties, which, if properly considered, would justify a different
conclusion,[30] none of these exceptions find application here.
A complaint for reversion involves a serious controversy, involving a
question of fraud and misrepresentation committed against the government
and it seeks the return of the disputed portion of the public domain. It seeks
to cancel the original certificate of registration, and nullify the original
certificate of title, including the transfer certificate of title of the successors-in-
interest because the same were all procured through fraud and
misrepresentation.[31]
The State, as the party alleging that fraud and misrepresentation
attended the application for free patent, bears the burden of proof. The
circumstances evidencing fraud and misrepresentation are as varied as the
people who perpetrate it in each case. It assumes different shapes and forms
and may be committed in as many different ways. [32] Therefore, fraud and
misrepresentation are never presumed but must be proved by clear and
convincing evidence;[33] mere preponderance of evidence not even being
adequate.[34]
In this case, the State failed to prove that fraud and misrepresentation
attended the application for free patent. The RTC, in fact, recognized that no
fraud attended the application for free patent[35] but declared reversion based
on the judicial admission of the Morandarte spouses that reversion is
warranted due to the inalienability of the Miputak River. Ordinarily, a judicial
admission requires no proof and a party is precluded from denying it except
when it is shown that such admission was made through palpable mistake or
that no such admission was made.[36] In this case, the exception finds
application since the records lay bare that such admission was made through
mistake and not in the context it was considered. As reflected in the Order
dated May 25, 1998,[37] the Morandarte spouses essentially agreed only to a
reconveyance of the portion covering the Miputak River. Undoubtedly, such
acquiescence to return the portion covering the Miputak River is not, and
cannot be considered, an admission that fraud and misrepresentation
attended the application for free patent. This fact, standing alone, does not
prove fraud and misrepresentation.
Besides, it is undisputed that the original survey plan submitted by
Morandarte to the BOL reflected the true state of the Miputak River in Lot
1038 but the BOL did not approve the plan because a 1916 survey did not so
indicate the existence of a river traversing Lot 1038 such that Morandarte
was directed to submit an amended plan deleting the existence of the
Miputak River. This mothered the subsequent error of the BOL of approving
the amended plan as CAS-09-05-000078-D.
This error could have been discovered through a thorough ocular
inspection of the property claimed under the free patent application.
However, Aurelio F. Bureros, Hearing Officer I of the BOL, surprisingly failed
to notice the existence of the river traversing Lot 1038 in the field
investigation he conducted on January 10, 1976.[38]
Neither did Bureros note the 13,339 square meter portion already
covered by an existing fishpond lease agreement granted by the BOF in
favor of Felipe B. Lacaya, the predecessor-in-interest of the Lacaya
spouses.[39]
The records reveal that as early as 1948, 4.6784 hectares [40] of the
public land have been leased for fishpond purposes. Aguido S. Realiza was
the initial grantee of a fishpond lease agreement.[41] Amor A. Realiza,
Aguidos son, acquired his fishpond permit on May 29, 1953. [42] Amor A.
Realiza transferred his fishpond rights to Felipe B. Lacaya on May 14,
1956.[43] By 1960, the public land leased for fishpond purposes had increased
to 5.0335 hectares.[44] Felipe B. Lacaya transferred his fishpond rights to
Virgilio B. Lacaya on October 25, 1977.[45] Thus, the fishpond rights have
been in existence since 1948, prior to the 1972 free patent application of
Morandarte.
Regardless of the foregoing, Aurelio F. Bureros, concluded that
Morandarte is a qualified applicant and recommended that a free patent be
granted to him. This error culminated in the erroneous grant of a free patent
on July 27, 1976 covering the Miputak River and land subject of the fishpond
rights of Felipe B. Lacaya.[46]
Be that as it may, the mistake or error of the officials or agents of the
BOL in this regard cannot be invoked against the government with regard to
property of the public domain. It has been said that the State cannot be
estopped by the omission, mistake or error of its officials or agents.[47]
It is well-recognized that if a person obtains a title under the Public Land
Act which includes, by oversight, lands which cannot be registered under the
Torrens system, or when the Director of Lands did not have jurisdiction over
the same because it is a public domain, the grantee does not, by virtue of the
said certificate of title alone, become the owner of the land or property
illegally included.[48] Otherwise stated, property of the public domain is
incapable of registration and its inclusion in a title nullifies that title. [49]
The present controversy involves a portion of the public domain that
was merely erroneously included in the free patent. A different rule would
apply where fraud is convincingly shown. The absence of clear evidence of
fraud will not invalidate the entire title of the Morandarte spouses.
Accordingly, the 12,162-square meter portion traversed by the Miputak
River and the 13,339-square meter portion covered by the fishpond lease
agreement of the Lacaya spouses which were erroneously included in Free
Patent No. (IX-8) 785 and Original Certificate of Title No. P-21972 should be
reconveyed back to the State.
The Morandarte spouses cannot seek refuge in their claim that Antonio
A. Morandarte, their predecessor-in-interest, was already the owner of that
portion of Lot 1038 when the fishpond application of Aguido S. Realiza was
approved in 1948 because Lot 1038 was still part of the public domain then.
It was only in 1972, through Forestry Administrative Order No. 4-1257, which
was approved August 14, 1972, when Lot 1038 was declared alienable or
disposable property of the State.[50]
It is a settled rule that unless a public land is shown to have been
reclassified as alienable or actually alienated by the State to a private
person, that piece of land remains part of the public domain. Hence, Antonio
A. Morandartes occupation thereof, however long, cannot ripen into private
ownership.[51]
The Morandarte spouses also unsuccessfully harp on the inapplicability
of Article 462 of the Civil Code by claiming that the change of course of the
Miputak River was due to a man-made cause and not by natural means.
They offered no iota of evidence to substantiate this claim, other than the
bare testimony of Beder Morandarte. Neither is there proof that the
movement of the river was caused by accident or calamity, such as a
typhoon, and not by the natural movements thereof. General statements,
which are mere conclusions of law and not proofs, are unavailing and cannot
suffice.
Besides, at the time of the filing of the application for free patent in
1972, a portion of the Miputak River was already in its present course,
traversing Lot 1038, particularly Lot 7 of the amended plan submitted by
Morandarte.
We need not delve on the question of whether the Lacaya spouses
violated the terms of the fishpond lease agreement. It is not material in this
case in the sense that it was not made an issue by the parties. Neither is
there evidence to corroborate the bare allegation of petitioners that the
Lacaya spouses constructed dikes for the fishponds which caused the
Miputak River to traverse Lot 7. What is significant here is the established
fact that there was an existing fishpond lease agreement between Felipe
Lacaya and the Bureau of Fisheries at the time of Morandartes application
for free patent; in effect, proving that the area covering the fishpond belongs
to the Government and petitioners have no rights thereto.
In closing, we cannot but decry the carelessness of the BOL in having
issued the Free Patent in Morandartes favor which covered the Miputak
River and the fishpond rights of Felipe B. Lacaya. Surely, a more diligent
search into their records and thorough ocular inspection of Lot 7 would have
revealed the presence of the Miputak River traversing therein and an existing
fishpond right thereon. Had more vigilance been exercised by the BOL, the
government agency entrusted specifically with the task of administering and
disposing of public lands, the present litigation could have been averted.
WHEREFORE, the petition is partly GRANTED. The assailed Decision
of the Court of Appeals, dated August 23, 1995, in CA G.R. No. 36258 is
REVERSED insofar only as it affirmed the nullity of Free Patent No. (IX-8)
785 and Original Certificate of Title No. P-21972, in the name of petitioner
Beder Morandarte. In its stead, petitioners Spouses Beder Morandarte and
Marina Febrera are directed to reconvey to the respondent Republic of the
Philippines within thirty (30) days from the finality of this Decision the 12,162-
square meter portion traversed by the Miputak River and the 13,339-square
meter portion covered by the fishpond lease agreement of the Lacaya
spouses. No pronouncement as to costs.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.
# 9 THIRD DIVISION
[G.R. No. 136438. November 11, 2004]
TEOFILO C. VILLARICO, petitioner, vs. VIVENCIO SARMIENTO,
SPOUSES BESSIE SARMIENTO-DEL MUNDO & BETH DEL
 MUNDO, ANDOKS LITSON CORPORATION and MARITES
CARINDERIA, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari of the Decision[1] of the
Court of Appeals dated December 7, 1998 in CA-G.R. CV No. 54883,
affirming in toto the Decision[2] of the Regional Trial Court (RTC) of Paraaque
City, Branch 259, dated November 14, 1996, in Civil Case No. 95-044.
The facts of this case, as gleaned from the findings of the Court of
Appeals, are:
Teofilo C. Villarico, petitioner, is the owner of a lot in La Huerta,
Paraaque City, Metro Manila with an area of sixty-six (66) square meters and
covered by Transfer Certificate of Title (T.C.T.) No. 95453 issued by the
Registry of Deeds, same city.
Petitioners lot is separated from the Ninoy Aquino Avenue (highway) by
a strip of land belonging to the government. As this highway was elevated by
four (4) meters and therefore higher than the adjoining areas, the
Department of Public Works and Highways (DPWH) constructed stairways at
several portions of this strip of public land to enable the people to have
access to the highway.
Sometime in 1991, Vivencio Sarmiento, his daughter Bessie Sarmiento
and her husband Beth Del Mundo, respondents herein, had a building
constructed on a portion of said government land. In November that same
year, a part thereof was occupied by Andoks Litson Corporation and Marites
Carinderia, also impleaded as respondents.
In 1993, by means of a Deed of Exchange of Real Property, petitioner
acquired a 74.30 square meter portion of the same area owned by the
government. The property was registered in his name as T.C.T. No. 74430 in
the Registry of Deeds of Paraaque City.
In 1995, petitioner filed with the RTC, Branch 259, Paraaque City, a
complaint for accion publiciana against respondents, docketed as Civil Case
No. 95-044. He alleged inter alia that respondents structures on the
government land closed his right of way to the Ninoy Aquino Avenue; and
encroached on a portion of his lot covered by T.C.T. No. 74430.
Respondents, in their answer, specifically denied petitioners allegations,
claiming that they have been issued licenses and permits by Paraaque City
to construct their buildings on the area; and that petitioner has no right over
the subject property as it belongs to the government.
After trial, the RTC rendered its Decision, the dispositive portion of
which reads:
WHEREFORE, premises considered, judgment is hereby rendered:
1. Declaring the defendants to have a better right of
possession over the subject land except the portion thereof
covered by Transfer Certificate of Title No. 74430 of the
Register of Deeds of Paraaque;
2. Ordering the defendants to vacate the portion of the
subject premises described in Transfer Certificate of Title
No. 74430 and gives its possession to plaintiff; and
3. Dismissing the claim for damages of the plaintiff against
the defendants, and likewise dismissing the claim for
attorneys fees of the latter against the former.
Without pronouncement as to costs.
SO ORDERED.[3]
The trial court found that petitioner has never been in possession of any
portion of the public land in question. On the contrary, the defendants are the
ones who have been in actual possession of the area. According to the trial
court, petitioner was not deprived of his right of way as he could use the
Kapitan Tinoy Street as passageway to the highway.
On appeal by petitioner, the Court of Appeals issued its Decision
affirming the trial courts Decision in toto, thus:
WHEREFORE, the judgment hereby appealed from is hereby AFFIRMED in
toto, with costs against the plaintiff-appellant.
SO ORDERED.[4]
In this petition, petitioner ascribes to the Court of Appeals the following
assignments of error:
I
THE FINDINGS OF FACT OF THE HON. COURT OF APPEALS
CONTAINED A CONCLUSION WITHOUT CITATION OF SPECIFIC
EVIDENCE ON WHICH THE SAME WAS BASED.
II
THE HON. COURT OF APPEALS ERRED IN CONSIDERING THAT THE
ONLY ISSUE IN THIS CASE IS WHETHER OR NOT THE PLAINTIFF-
APPELLANT HAS ACQUIRED A RIGHT OF WAY OVER THE LAND OF
THE GOVERNMENT WHICH IS BETWEEN HIS PROPERTY AND THE
NINOY AQUINO AVENUE.
III
THE HON. COURT OF APPEALS ERRED IN CONCLUDING THAT ACCION
PUBLICIANA IS NOT THE PROPER REMEDY IN THE CASE AT BAR.
IV
THE HON. COURT OF APPEALS ERRED IN CONCLUDING THAT THE
EXISTENCE OF THE PLAINTIFF-APPELLANTS RIGHT OF WAY DOES
NOT CARRY POSSESSION OVER THE SAME.
V
THE HON. COURT OF APPEALS ERRED IN NOT RESOLVING THE ISSUE
OF WHO HAS THE BETTER RIGHT OF POSSESSION OVER THE
SUBJECT LAND BETWEEN THE PLAINTIFF-APPELLANT AND THE
DEFENDANT-APPELLEES.[5]
 In their comment, respondents maintain that the Court of Appeals did AFFIRMED with MODIFICATION in the sense that neither petitioner nor
not err in ruling that petitioners action for accion publiciana is not the proper respondents have a right of possession over the disputed lot where the
remedy in asserting his right of way on a lot owned by the government. stairways were built as it is a property of public dominion. Costs against
Here, petitioner claims that respondents, by constructing their buildings petitioner.
on the lot in question, have deprived him of his right of way and his right of SO ORDERED.
possession over a considerable portion of the same lot, which portion is Panganiban, (Chairman), Carpio Morales and Garcia, JJ., concur.
covered by his T.C.T. No. 74430 he acquired by means of exchange of real Corona, J., on leave.
property.
It is not disputed that the lot on which petitioners alleged right of way
exists belongs to the state or property of public dominion. Property of public
dominion is defined by Article 420 of the Civil Code as follows: #10 FIRST DIVISION
ART. 420. The following things are property of public dominion:
(1) Those intended for public use such as roads, canals, rivers, torrents, FRISCO F. DOMALSIN, G.R. No. 158687
ports and bridges constructed by the State, banks, shores, roadsteads, and Petitioner,
other of similar character. Present:
(2) Those which belong to the State, without being for public use, and are PANGANIBAN, C.J.
intended for some public service or for the development of the national Chairman,
wealth. YNARES-SANTIAGO,
Public use is use that is not confined to privileged individuals, but is - versus - AUSTRIA-MARTINEZ,
open to the indefinite public.[6] Records show that the lot on which the CALLEJO, SR.[1] and
stairways were built is for the use of the people as passageway to the CHICO-NAZARIO, JJ.
highway. Consequently, it is a property of public dominion.
Property of public dominion is outside the commerce of man and hence
it: (1) cannot be alienated or leased or otherwise be the subject matter of SPOUSES JUANITO VALENCIANO and Promulgated:
contracts; (2) cannot be acquired by prescription against the State; (3) is not AMALIA VALENCIANO,
subject to attachment and execution; and (4) cannot be burdened by any Respondents. January 25, 2006
voluntary easement.[7] x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
Considering that the lot on which the stairways were constructed is a
property of public dominion, it can not be burdened by a voluntary easement DECISION
of right of way in favor of herein petitioner. In fact, its use by the public is by
mere tolerance of the government through the DPWH. Petitioner cannot
appropriate it for himself. Verily, he can not claim any right of possession CHICO-NAZARIO, J.:
over it. This is clear from Article 530 of the Civil Code which provides: Before Us is a petition for review which seeks to set aside the decision [2] of
the Court of Appeals in CA-G.R. SP No. 69415 dated 20 August 2002 which
ART. 530. Only things and rights which are susceptible of being appropriated reversed and set aside the decision[3] of Branch 63 of the Regional Trial
may be the object of possession. Court (RTC) of La Trinidad, Benguet, in Civil Case No. 01-CV-1582(150)
dated 23 January 2002, which affirmed the decision[4] of the Municipal Circuit
Trial Court (MCTC) of Tuba-Sablan, Tuba, Benguet, in Civil Case No. 150
Accordingly, both the trial court and the Court of Appeals erred in ruling dated 20 November 2000, declaring petitioner Frisco F. Domalsin the actual
that respondents have better right of possession over the subject lot. possessor of the lot in dispute and ordering, inter alia, respondent spouses
However, the trial court and the Court of Appeals found that defendants Juanito and Amalia Valenciano to vacate and deliver the physical possession
buildings were constructed on the portion of the same lot now covered by thereof to the former, and its Resolution[5] dated 20 May 2003 denying
T.C.T. No. 74430 in petitioners name. Being its owner, he is entitled to its petitioners motion for reconsideration.
possession.
WHEREFORE, the petition is DENIED. The assailed Decision of the The respective allegations of the parties as contained in the complaint and
Court of Appeals dated December 7, 1998 in CA-G.R. CV No. 54883 is answer are substantially summarized by the Court of Appeals as follows:
 The property subject of this action for forcible entry
is a parcel of land located at sitio Riverside, Camp 3, Tuba,
Benguet. Respondent Frisco B. Domalsin claims to be the
lawful owner and possessor of said parcel of land since 1979
up to the present. He declared it for taxation purposes in
1983 as (per) Tax Declaration No. 9540 issued on
September 12, 1983 by the Municipal Assessor of Tuba
Benguet. He allegedly introduced improvements consisting
of levelling, excavation, riprapping of the earth and a private
road to the river, fruitbearing trees and other agricultural
plants of economic value. He was in continuous, adverse
possession and in the concept of an owner for the past
nineteen (19) years.
On August 1, 1998, petitioners Spouses Juanito
Valenciano and Amalia Valenciano (Sps. Valenciano, for
brevity) allegedly entered the premises to construct a
building made of cement and strong materials, without the
authority and consent of respondent, by means of force and
strategy, and without a building permit from the Department
of Public Works and Highways (DPWH, for brevity).
Respondent protested and demanded that petitioners Sps.
Valenciano halt construction of said building, but the latter
refused to do so. Hence, he filed the instant case.
Petitioners Sps. Valenciano, on the other hand,
claimed that the ongoing construction was with the consent
and conformity of the DPWH and in fact the improvements
found in the property were introduced by the residents
thereof, including its first residents, William and Gloria
Banuca, and not by respondent. The premises on which
petitioners Sps. Valenciano are constructing their house
were leveled after the earthquake in 1990 by the Banuca
spouses. Petitioners Sps. Valenciano are just starting the
construction because the permission was only given now by
Gloria Banuca.[6]
On 18 August 1998, petitioner filed before the MCTC of Tuba, Benguet, a
complaint for Forcible Entry with Prayer for Preliminary Mandatory Injunction
with Application for Issuance of a Temporary Restraining Order plus
Damages.[7] The complaint was amended on 27 August 1998.[8] Per Order
dated 19 August 1998, a Temporary Restraining Order (TRO) was issued
ordering respondents to desist and cease and refrain from continuing the
construction of a house on the land in question.[9]
On 27 August 1998, respondent spouses Juanito and Amalia Valenciano
filed their Answer with Opposition to the Prayer for Issuance of Writ of
Preliminary Injunction.[10] On 07 September 1998, they filed an Answer to the
Amended Complaint[11] to which petitioner filed a Reply.[12]
On 15 September 1998, the MCTC issued another TRO.[13]
The pre-trial order dated 6 November 1998 contained, among other things,
petitioners admission that he was temporarily not operating any business in
the area, and respondents admission regarding the issuance of Tax
Declarations on the property in dispute in petitioners name.[14]
Trial ensued. Petitioner presented Mariano Suyam and Tonsing Binay-an,
two of his former truck drivers from 1981 to 1985 in his business of hauling
sand, gravel and other aggregates at Riverside, Camp 3, Tuba, Benguet.
Mariano Suyam testified that sometime in 1981, petitioner caused
the construction of a private road leading to the Bued River from Kennon
Road. He added that petitioner constructed two houses, the first was located
along the road-right-of-way of Kennon Road where respondents are now
constructing their house, while the second was located below the private
road around 40 to 60 meters down from Kennon Road. He explained that the
first house was used for sleeping quarters and resting center for laborers,
while petitioner used the second one as his quarters. He said William Banuca
was hired as foreman in 1983 and that the latter and his family stayed in the
second house.
Tonsing Binay-an corroborated the testimony of Suyam as regards
the two houses constructed by petitioner and added that petitioner was the
manager of Salamander Enterprises and had a concession permit from the
Bureau of Mines to haul gravel and sand.
Petitioner testified that he is a lawyer-businessman formerly engaged
in trucking business, hauling sand and gravel, and operated under the name
Salamander Enterprises.[15] He narrated that while he was passing Kennon
Road, he discovered that a portion of the Bued River, Camp 3, Tuba
Benguet, can be a potential source of supplies for his business. Though the
area was steep and deep, he scouted a place where he can construct a road
from Kennon Road to the Bued River. In the course of cleaning the area, his
workers noticed that the place had been tilled. A certain Castillo Binay-an
appeared informing him that he was the occupant of the site of the proposed
private road. After agreeing on the consideration, the former executed a
Deed of Waiver and Quitclaim[16]over the land in his favor.
Thereafter, the Office of the Highway District Engineer of Baguio,
Ministry of Public Highways (now Department of Public Works and Highways
[DPWH]) issued a permit in favor of petitioner to extract construction
materials at Camp 3, Tuba, Benguet,[17] which was followed by the issuance
on 1 October 1981 of Commercial Permit No. 147 by the Office of the Mines
Regional Officer, Mineral Region No. 1, Bureau of Mines and Geo-Sciences
(Bureau of Mines).[18] The Commercial Permit, which was renewable every
year, was last renewed in 1987.[19]
Based on the Deed of Waiver and Quitclaim executed by Castillo
Binay-an, petitioner was able to apply for, and was issued, a tax declaration
over the land covering one hectare. Tax Declaration No. 9540[20] dated 12
September 1983 was issued to petitioner describing the land bounded on the
North by Bued River, on the South by Kennon Road, on the East by Kennon
Road, and on the West by a Creek. With the revision of the fair market value
and assessed value of lands, Tax Declaration No. 94-004-00327 dated 12
November 1994 was issued to him.[21] From 1983 up to 1998, petitioner has
been regularly paying real property taxes over the land.
Petitioner disclosed that in 1983, William Banuca applied for, and
was accepted, as foreman.[22] Due to the nature of his job, Banuca was
permitted to stay in the second house beside the private road.[23] Banuca now
lives permanently in said house after petitioner gave it to him. Petitioner
revealed that the houses his former laborers constructed were awarded to
them as a kind gesture to them. As to the land he occupied along the Kennon
Road where the first house was erected, he claims that same still belongs to
him. This house, which his laborers and drivers used as a resting area, was
cannibalized and leveled, and the land over which it once stood was taken
possession by respondents who are now building their house thereon.
Gloria Banuca testified for respondents. She disclosed that it was
she who invited respondents to come and reside at Riverside, Camp 3, Tuba,
Benguet. She said she knew petitioner to be engaged in the sand and gravel
business in Tuba, Benguet, from 1981 to 1985, and that the latter stopped in
1985 and never returned to haul sand and gravel at the Bued River. She
claimed she never saw petitioner introduce any improvements on the land he
claimed he bought from Castillo Binay-an, and that it was she and the other
residents who introduced the existing improvements.
She narrated that in 1983, she planted fruit-bearing trees in the area
where respondents were constructing their house which is located along the
Kennon Roads road-right-of-way, fronting petitioners property. After the
earthquake of 1990, the private road constructed by petitioner became
impassable and it was she who hired the equipment used to clear the same.
She even leveled the area where respondents were building their home.
Based on the ocular inspection, she said this area is within the 15-meter
radius from the center of the road. This area, she claims, was sold to her by
the Spouses Jularbal. However, the agreement between them shows that
what was sold to her were the improvements near her house which was 40
meters down from Kennon Road and the improvements along Kennon
Road.[24]
Agustin Domingo next testified for respondents. He testified that in
1986, upon the invitation of Gloria Banuca, he transferred his residence to
sitio Riverside because of its proximity to his place of work. He stayed there
for good and even buried his father near his house. He said that in 1990, the
private road constructed by petitioner was covered by boulders, soil and
rocks, and it was Mrs. Banuca who initiated the clearing of the road. Finally,
he declared that since 1986, he never saw petitioner introduce any
improvement in the area.
Respondent Juanito Valenciano revealed that he is the cousin of
Gloria Banuca. He narrated that in 1984, he went to Riverside to see the
latter whose husband, William Banuca, was working as foreman of petitioner.
At that time, the lot under litigation was still a hill. It was Gloria Banuca who
leveled the hill and told him to construct his house there. Finding the place to
be an ideal place to build his house, he paid the Banucas P10,000.00 for the
improvements.
He explained that before he started building his house, he sought the
permission of the Benguet District Engineer, DPWH, which the latter granted.
In August 1998, he received a notice[25] to stop and desist from continuing the
construction of a permanent one-storey house made of hollow blocks and
cement since the condition was only to utilize light materials. Thereafter, a
letter dated 22 January 1999 was sent to him informing him that the
temporary permit issued to him for the improvement/utilization of a portion of
the national road along Kennon Road had been revoked for non-submission
of the waiver as required by the Office of the District Engineer and his non-
compliance with the condition that no permanent structures are to be
constructed within the road-right-of-way. He, however, denied receiving said
letter.
Juan de Vera, a retired DPWH foreman, testified last for the
respondents. He claimed he witnessed the execution of the
document[26] regarding the sale by Adriano Jularbal to Gloria Banuca of
improvements found near the house of the latter in the amount of P1,000.00.
The MCTC found that what is being contested is the possession of a
portion of the road-right-of way of Kennon Road which is located in front of a
parcel of land that petitioner bought by way of Deed of Waiver and Quitclaim
from Castillo Binay-an. It held that petitioner had prior material possession
over the subject land. It ruled that the destruction of his house built thereon
by the earthquake in 1990, and later cannibalized without being
reconstructed was not tantamount to abandonment of the site by the
petitioner because it was destroyed by a fortuitous event which was beyond
his control. It explained that his possession over the land must be recognized
by respondents who came later after the earthquake. It brushed aside
respondents allegation that the land in dispute was abandoned by the latter
after he stopped operating his sand and gravel business in 1985 and never
returned anymore, and when the house erected on it was destroyed during
the 1990 earthquake, it was no longer reconstructed and was subsequently
leveled or demolished by Gloria Banuca. However, it pronounced that
respondents action to occupy the land was done in good faith considering
that their occupation of the land was with the assurance of the seller (Gloria
Banuca) and that they were armed with the permit issued by the DPWH for
him to construct his house thereon.
On 20 November 2000, the MCTC came out with its decision, the
decretal portion of which reads:
WHEREFORE PREMISES CONSIDERED, decision
is hereby rendered in favor of plaintiff, FRISCO DOMALSIN,
and against defendants, JUANITO VALENCIANO and
AMALIA VALENCIANO, with the following:
1. Order to declare the injunction permanent.
2. Order the plaintiff as the actual possessor of
the lot in question.
3. Order the defendant(s) to vacate and deliver
the physical possession voluntarily of the
disputed land to plaintiff within 60 days from
receipt of this decision.
4. Order defendant(s) to remove his structure
within from receipt of this decision.
5. Order the defendant(s) to (sic) plaintiff the
amount of P10,000.00, as litigation expenses.
6. Order defendant(s) to pay the cost of suit[27]
Respondents appealed the decision to the RTC.[28] In affirming the
decision in toto the RTC ratiocinated:
It may be well to consider that even after plaintiffs business
ceased operation, he religiously paid the taxes due thereon.
Appellants theory that the plaintiff-appellee abandoned the
property does not sit well and finds no support in the record.
Notice that since 1985 up to mid-1990, the Banucas never
laid claim over the property taking into consideration that
they were already residents of the place. This only goes to
show that they acknowledged and respected the prior
possession of the plaintiff-appellee. Besides, what right has
Gloria to cause the leveling of the property destroying the
natural contour thereof, to presume that plaintiff-appellee
abandoned it and to invite and allow other persons to settle
thereat? Absolutely none. Knowing fully well that the plaintiff-
appellee has prior possession of the property, Glorias
actions are unjustified, to say the least. Her consummated
act of leveling the property without the knowledge of the
plaintiff-appellee is viewed as a test to determine whether or
not the latter is still interested in the property. From then on
until 1998 (but before the construction), the Banucas still
recognize the plaintiffs possession. But as Gloria claims to
have heard no word from the plaintiff, she unilaterally
declared that the place is now abandoned as she invited and
allowed the defendants to live and construct their house
thereat.
Contrary to the assertion of the appellants, there was no
abandonment simply because plaintiff-appellee continuously
paid the corresponding taxes due thereon and that he
promptly objected to the construction of the defendants-
appellants house. These are clear manifestations of his
intention not to abandon the property. Sad to say though that
here is a former employer. By passing off such property to
be hers is so unkind, unfair and against social order. It is
very clear that the Banucas knew of the prior possession of
the plaintiff way back then so that they themselves never
personally build construction over the property. If they
honestly believe that they now own the land, why will they
still have to invite other people who are not their relatives to
settle thereat? Why the preference of strangers over
relatives? The Court does not believe that they did not
receive any compensation for having allowed strangers, the
defendants included, to settle on the land.
From all the foregoing, Gloria is clearly in bad faith. And her
being in bad faith must be corrected and if warranted, must
be meted appropriate penalty. If the Banucas are in bad
faith, then the appellants cannot have better rights either.
The Banucas transferred nothing to them. Defendants-
 appellants cannot even be considered as builders in good
faith. It must be noted that they were prohibited by the
plaintiff from going further but they ignored it. They shall lose
what was built (Art. 449, Civil Code). Again, if the Banucas
believe that they have an action or a right to deprive the
plaintiffs possession, why did they not invoke judicial
interference as required under Art. 536 of the same code?
Nonetheless, notwithstanding the fact of leveling without the
knowledge of the plaintiff-appellee, the same did not affect
his possession (Art. 537, Civil Code).[29]
Via a petition for review, respondents appealed to the Court of
Appeals. The Court of Appeals made a sudden turn-around and reversed the
decision under review. Its decision dated 20 August 2002 reads in part:
[T]here is a need to clarify a few things. What is undisputed
are the identity and nature of the property subject of the
action for forcible entry. The subject of the action concerns a
portion of the road-right-of-way along Kennon Road just
above the private road constructed by respondent. The
problem, however, is that petitioners Sps. Valenciano started
constructing a house on the same spot where a house
belonging to respondent once stood. Both parties are now
asserting that they are entitled to the possession of said lot.
But the decision of the lower court seems to imply that
respondents right to possess the subject property stems
from his acquisition of the one-hectare property below it.
That is not the case.
We must emphasize that the subject of the deed of quitclaim
and waiver of rights of Castillo Binay-an was not the road-
right-of-way but the sloping terrain below it. This was the
property acquired by the respondent to have access to the
sand and gravel on the Bued River. It did not include the
road-right-of-way. As regards Gloria Banucass claims, the
evidence show that her agreement with Jularbal involved
only the improvements near her residence down the private
road and not the road-right-of-way. Since the subject
property is a road-right-of-way, it forms part of the public
dominion. It is not susceptible to private acquisition or
ownership. Prolonged occupation thereof, improvements
introduced thereat or payment of the realty taxes thereon will
never ripen into ownership of said parcel of land. Thus, what
We have are two parties, neither of which can be owners,
only possessors of the subject property. Beyond these two,
only the government has a better right to the subject property
which right it may exercise at any time. This bears
emphasizing because if either party has possessory rights to
the subject property, it is not predicated on ownership but
only on their actual possession of the subject property.
xxxx
There is no doubt that respondent had prior physical
possession of the subject property. He entered and acquired
possession of the subject property when he built his house
thereon. The house was destroyed during the 1990
earthquake and respondent did not rebuild it. The mound on
which it stood was later leveled by Gloria Banuca and in
1998 petitioners Sps. Valenciano began construction thereat.
Petitioners Sps. Valenciano claim there was abandonment,
but the lower court ruled that respondent did not abandon
the subject property as he continued to pay the realty taxes
thereon and objected to petitioners Sps. Valencianos
construction. We believe, and so hold, that at this point in
time, it is immaterial whether or not there was abandonment
by respondent. The fact remains that Gloria Banuca took
possession of the subject property soon after the
earthquake. She leveled the mound and the ruins of
respondents house, yet respondent remained silent.
Respondent objected only after petitioners Sps. Valenciano
started construction of the house on the subject property.
Respondent cannot now interpose an action for forcible entry
against petitioners Sps. Valenciano, which he should have
filed against Gloria Banuca, petitioners Sps. Valencianos
predecessor-in-interest. But more than a year had passed
and his right to do so lapsed. Thus, respondents prior
possession is material only as against Gloria Banuca and
only within a period of one year from the time she wrested
possession of the property from respondent.
We view with distate Gloria Banucas ingratitude toward her
husbands former employer. Her actions smack of the
proverbial hand being offered in aid but the person to whom
it is offered would rather have the whole arm instead. This is
an instance where it is the employees who commit injustice
against their employer. Nonetheless, petitioners Sps.
Valenciano should not suffer because of Gloria Banucas
ingratitude for the former came across the property in good
faith.
 But respondent is also reminded that he only has himself to
blame. His failure to assert his right for an unreasonable and
unexplained length of time allowed Gloria Banuca to wrest
possession from him. Especially in this case where they do
not and cannot own the subject property, actual possession
becomes particularly important.[30]
The case was disposed as follows:
WHEREFORE, in view of the foregoing, the petition
is GRANTED and the decision of the Municipal Circuit Trial
Court of tuba-Sablan dated November 20, 2000 as affirmed
by the Regional Trial Court on January 23, 2002 is hereby
REVERSED and SET ASIDE.[31]
The Motion for Reconsideration filed by petitioner was denied in a
resolution[32] dated 20 May 2003.
Petitioner is now before us seeking redress. He assigns the following as the
errors committed by the Court of Appeals:
I.
THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT PRIVATE RESPONDENT (NOW
PETITIONER) FRISCO DOMALSIN ABANDONED THE
PROPERTY SUBJECT OF THE LITIGATION.
II.
THE HONORABLE COURT OF APPEALS ERRED IN
REVERSING AND SETTING ASIDE THE DECISION OF
THE REGIONAL TRIAL COURT OF LA TRINIDAD,
BENGUET, BRANCH 63 WHICH AFFIRMED THE
DECISION OF THE MUNICIPAL CIRCUIT TRIAL COURT
OF TUBA-SABLAN.
At the outset, it must be made clear that the property subject of this case is a
portion of the road-right-of way of Kennon Road which is located in front of a
parcel of land that petitioner bought by way of Deed of Waiver and Quitclaim
from Castillo Binay-an.[33] The admission[34] of petitioner in his Amended
Complaint that respondents started constructing a building within the Kennon
Road road-right-of-way belies his claim that the lot in question is his.
In light of this exposition, it is clear that neither the petitioner nor the
respondents can own nor possess the subject property the same being part
of the public dominion. Property of public dominion is defined by Article 420
of the Civil Code as follows:
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 other 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.
Properties of public dominion are owned by the
general public.[35] Public use is use that is not confined to privileged
individuals, but is open to the indefinite public.[36] As the land in controversy is
a portion of Kennon Road which is for the use of the people, there can be no
dispute that same is part of public dominion. This being the case, the parties
cannot appropriate the land for themselves. Thus, they cannot claim any right
of possession over it. This is clear from Article 530 of the Civil Code which
provides:
ART. 530. Only things and rights which are
susceptible of being appropriated may be the object of
possession.
Notwithstanding the foregoing, it is proper to discuss the position of
the Court of Appeals for comprehensive understanding of the facts and the
law involved.
Petitioner maintains that the Court of Appeals erred when it ruled that he
abandoned the land being disputed contrary to the rulings of the MCTC and
RTC. The MCTC found there was no abandonment of the land because the
house erected thereon was destroyed by a fortuitous event (earthquake),
while the RTC ruled there was no abandonment because petitioner paid
taxes due on the land and that he promptly objected to the construction of
respondents house which are clear manifestations of his intention not to
abandon the property.
A reading of the decision of the Court of Appeals shows that it did not
reverse the two lower courts on the issue of abandonment. It merely declared
that such issue is not material in the resolution of the case at bar. It faulted
petitioner for not asserting his right for a long time allowing Gloria Banuca to
wrest the possession of the land in question from petitioner by leveling the
house he built thereon and pronounced that actual possession becomes
important in a case where parties do not and cannot own the land in
question.
From the foregoing it appears that the Court of Appeals did not give weight or
importance to the fact that petitioner had prior physical possession over the
subject land. It anchored its decision on the fact that the parties do not and
cannot own the land and that respondents now have actual possession over
it.
Ejectment proceedings are summary proceedings intended to
provide an expeditious means of protecting actual possession or right to
possession of property. Title is not involved. The sole issue to be resolved is
the question as to who is entitled to the physical or material possession of
the premises or possession de facto.[37]
The Court of Appeals erred when it preferred the present and actual
possession of respondents vis--vis the prior possession of petitioner on the
ground that the parties do not and cannot own the lot in question. Regardless
of the actual condition of the title to the property, the party in peaceable, quiet
possession shall not be thrown out by a strong hand, violence or terror.
Neither is the unlawful withholding of property allowed. Courts will always
uphold respect for prior possession. Thus, a party who can prove prior
possession can recover such possession even against the owner himself.
Whatever may be the character of his possession, if he has in his favor prior
possession in time, he has the security that entitles him to remain on the
property until a person with a better right lawfully ejects him. [38]
The fact that the parties do not and cannot own the property under
litigation does not mean that the issue to be resolved is no longer priority of
possession. The determining factor for one to be entitled to possession will
be prior physical possession and not actual physical possession. Since title is
never in issue in a forcible entry case, the Court of Appeals should have
based its decision on who had prior physical possession. The main thing to
be proven in an action for forcible entry is prior possession and that same
was lost through force, intimidation, threat, strategy and stealth, so that it
behooves the court to restore possession regardless of title or ownership. [39]
Inasmuch as prior physical possession must be respected, the Court
of Appeals should have ruled squarely on the issue of abandonment because
it gave precedence to the actual present possession of respondents. If,
indeed, there was abandonment of the land under consideration by
petitioner, only then should respondents be given the possession of the
same since abandonment is one way by which a possessor may lose his
possession.[40]
Abandonment of a thing is the voluntary renunciation of all rights
which a person may have in a thing, with the intent to lose such thing. [41] A
thing is considered abandoned and possession thereof lost if the spes
recuperandi (the hope of recovery) is gone and the animus revertendi (the
intention of returning) is finally given up.[42]
In the case before us, we find that petitioner never abandoned the
subject land. His opposition to the construction of respondents house upon
learning of the same and the subsequent filing of the instant case are
clear indicia of non-abandonment; otherwise, he could have just allowed the
latter to continue with the construction. Moreover, the fact that the house
petitioner built was destroyed by the earthquake in 1990, was never rebuilt
nor repaired and that same was leveled to the ground by Gloria Banuca do
not signify abandonment. Although his house was damaged by the
earthquake, Gloria Banuca, the person who supposedly demolished said
house, had no right to do the same. Her act of removing the house and
depriving petitioner of possession of the land was an act of forcible entry.
The entry of respondents in 1998 was likewise an act of forcible entry.
The next question is: Was the action filed the correct one and was it
timely filed?
Well-settled is the rule that what determines the nature of the action
as well as the court which has jurisdiction over the case are the allegations in
the complaint.[43] In actions for forcible entry, the law tells us that two
allegations are mandatory for the municipal court to acquire jurisdiction: First,
the plaintiff must allege prior physical possession of the property. Second, he
must also allege that he was deprived of his possession by any of the means
provided for in Section 1, Rule 70 of the Rules of Court.[44] To effect the
ejectment of an occupant or deforciant on the land, the complaint should
embody such a statement of facts as to bring the party clearly within the
class of cases for which the statutes provide a remedy, as these proceedings
are summary in nature. The complaint must show enough on its face to give
the court jurisdiction without resort to parol evidence.[45]
A look at the Amended Complaint filed by petitioner clearly shows a
case for forcible entry. Petitioner alleged therein that he has been in
possession of the subject land for the last nineteen years and that
respondents, in the first week of August 1998, without his permission and
consent, entered the land by means of force, strategy and stealth and started
the construction of a building thereon; and upon being informed thereof, he
requested them to stop their construction but respondents refused to vacate
the land forcing him to file the instant case to recover possession thereof.
The Court of Appeals pronounced that petitioner cannot interpose an
action for forcible entry against respondents and that the same should have
been filed against Gloria Banuca. It added that the right to file against the
latter had already lapsed because more than a year had passed by from the
time she wrestled possession of the property from the petitioner.
We find such pronouncement to be flawed. An action of forcible entry
and detainer may be maintained only against one in possession at the
commencement of the action, and not against one who does not in fact hold
the land.[46] Under Section 1,[47] Rule 70 of the Rules of Court, the action may
be filed against persons unlawfully withholding or depriving possession or
any person claiming under them. Considering that respondents are the ones
in present actual possession and are depriving petitioner of the possession of
the land in question, it is proper that they be the ones to be named
defendants in the case. The fact that Gloria Banuca was supposedly the one
who first committed forcible entry when she allegedly demolished the house
of petitioner does not make her the proper party to be sued because she is
no longer in possession or control of the land in controversy.
As regards the timeliness of the filing of the case for forcible entry,
we find that same was filed within the one-year prescriptive period. We have
ruled that where forcible entry was made clandestinely, the one-year
prescriptive period should be counted from the time the person deprived of
possession demanded that the deforciant desist from such dispossession
when the former learned thereof.[48] As alleged by petitioner in the Amended
Complaint, he was deprived of his possession over the land by force,
strategy and stealth. Considering that one of the means employed was
stealth because the intrusion was done by respondents without his
knowledge and consent, the one-year period should be counted from the
time he made the demand to respondents to vacate the land upon learning of
such dispossession. The record shows that upon being informed that
respondents were constructing a building in the subject land sometime in the
first week of August 1998, petitioner immediately protested and advised the
former to stop; but to no avail. The one-year period within which to file the
forcible entry case had not yet expired when the ejectment suit was filed on
18 August 1998 with the MCTC.
Despite the foregoing findings, this Court finds that the MCTC and
the RTC, as well as the Court of Appeals, to be in error when they
respectively declared that petitioner and respondents to be entitled to the
possession of the land in dispute. The parties should not be permitted to take
possession of the land, much more, claim ownership thereof as said lot is
part of the public dominion.
WHEREFORE, the foregoing considered, the instant petition is hereby
PARTIALLY GRANTED. Nonetheless, there being a finding that the subject
property is a part of the public dominion, of which neither party is entitled to
own nor possess, the decisions of the Court of Appeals dated 20 August
2002, the Regional Trial Court of La Trinidad, Benguet, dated 23 January
2002, and the Municipal Circuit Trial Court of Tuba-Sablan, Tuba, Benguet,
dated 20 November 2000 are SET ASIDE. Respondents Juanito and Amalia
Valenciano are ordered to remove their structure on the subject land within
sixty (60) days from receipt of this decision, and to vacate and deliver the
physical possession thereof to the Office of the District Engineer, Benguet
Engineering District, Department of Public Works and Highways.
DOMALSIN v VELECIANO (Spouses)
QUICK FACTS & RULE: Domalsin saw a possible source of supplies for his
business at Bued River while passing Kennon Road. He bought a parcel of
land there that included a road-right-of-way along Kennon Road. He built a
road towards said river and 2 houses on the lot. 1 house was for his laborers
and the 2nd was his. He gave 2nd house to his employee (Banuca). He
stopped operating his business and never returned there. There was an
earthquake. It destroyed the 1st house. Banuca said Domalsin abandoned
the place. Banuca sold 1st house to Respondent Spouses. Who is the owner
of road-right-of-way along Kennon Road where the 1st house is situated? NO
ONE. Its PUBLIC PROPERTY.
DETAILED FACTS:
1. The property subject of this action for forcible entry is a parcel of
land at sitio Riverside, Benguet. Domalsin claims to be the lawful
owner and possessor for 19 years. He declared it for taxation
purposes and allegedly introduced improvements (e.g. road, trees)
a. In 1998, Spouses allegedly entered the premises to
construct a building without consent of Domalsin and without
a building permit from the DPWH. Domalsin protested and
demanded that Sps. halt construction but they refused.
b. Sps. claimed that the ongoing construction was with the
consent of DPWH and in fact the improvements found in the
property were introduced by the residents thereof, including
its first residents, William and Gloria Banuca, and not by
Domalsin.
2. Domalsin testified that he is a lawyer-businessman formerly
engaged in trucking business, hauling sand and gravel. While he
was passing Kennon Road, he discovered that a portion of the Bued
River, can be a potential source of supplies for his business. He
scouted a place where he can construct a road from Kennon Road
to the Bued River. In the course of cleaning the area, his workers
 noticed that the place had been tilled. A certain Castillo Binay-an
appeared informing him that he was the occupant of the site of the
proposed private road. After agreeing on the consideration, the
former executed a Deed over the land in his favor. Thereafter,
Domalsin obtained necessary permits to extract construction
materials.
3. Apart from construction of the road, Domalsin constructed 2 houses,
the first was located along the road-right-of-way of Kennon Road
while the second was located below the private road few meters
down from Kennon Road. The first house was used for sleeping
quarters and resting center for laborers, while the second one as
petitioners quarters.
4. Domalsin hired William Banuca who applied for foreman. Due to the
nature of his job, Banuca was permitted to stay in the second house
beside the private road. Banuca now lives permanently in said
house after petitioner gave it to him. Petitioner revealed that the
houses his former laborers constructed were awarded to them as a
kind gesture to them. As to the land he occupied along the Kennon
Road where the first house was erected, he claims that same still
belongs to him. This house, which his laborers and drivers used as
a resting area, was cannibalized and leveled, and the land over
which it once stood was taken possession by respondent sps. who
are now building their house thereon.
5. Gloria Banuca, wife of William, said that it was she who invited
respondents to come and reside there. She said that Domalsin
abandoned the lot as he stopped working on it and never
returned. She claimed that after an earthquake, the private road
constructed by Domalsin became impassable and it was she who
hired the equipment used to clear the same.
6. MCTC found that what is being contested is the possession of a
portion of the road-right-of way of Kennon Road which is located in
front of a parcel of land that Domalsin bought from Castillo Binay-
an. It ruled that although the house was not reconstructed after the
earthquake, it was not tantamount to abandonment because it was
destroyed by a fortuitous event. It explained that his possession
over the land must be recognized by respondents who came later
after the earthquake. However, it pronounced that respondents
spouses action to occupy the land was done in good faith
considering that their occupation was with the assurance of the
seller (Gloria Banuca) and that they were armed with the DPWH
permit. MCTC came out with its decision in favor of DOMALSIN, and
against defendants, spouses VALENCIANO and ordered latter to
vacate and pay. Appeal by latter to RTC denied.
7. It may be well to consider that even after plaintiffs business ceased
operation, he religiously paid the taxes due thereon. Appellants
theory that the plaintiff-appellee abandoned the property finds no
support in the record. Knowing fully well that Domalsin has prior
possession of the property, Glorias actions are unjustified. But as
Gloria claims to have heard no word from the plaintiff, she
unilaterally declared that the place is now abandoned as she invited
and allowed the defendant spouses to live and construct their
house. Gloria is clearly in bad faith. If the Banucas are in bad faith,
then the spouses cannot have better rights either. The Banucas
transferred nothing to them. Defendants-appellants cannot even be
considered as builders in good faith. It must be noted that they were
prohibited by the plaintiff from going further but they ignored it. They
shall lose what was built (Art. 449, Civil Code). Notwithstanding the
fact of leveling without the knowledge of Domalsin, the same did not
affect his possession (Art. 537, Civil Code)
8. CA REVERSED the MCTC and RTC decision saying:
a. We must emphasize that the subject of the deed of quitclaim
and waiver of rights of Castillo Binay-an was not the road-
right-of-way but the sloping terrain below it. This was the
property acquired by the respondent to have access to the
sand and gravel on the Bued River. It did not include the
road-right-of-way. Since the subject property is a road-right-
of-way, it forms part of the public dominion. It is not
susceptible to private acquisition or ownership. Prolonged
occupation thereof, improvements introduced or payment of
the realty taxes thereon will never ripen into ownership of
said parcel of land. Thus, what We have are two parties,
neither of which can be owners, only possessors of the
subject property. Beyond these two, only the government
has a better right to the subject property which right it may
exercise at any time.
b. Domalsin objected only after petitioners Sps. Valenciano
started construction of the house. He cannot now interpose
an action for forcible entry against petitioners Sps.
Valenciano, which he should have filed against Gloria
Banuca. But more than a year had passed and his right to
do so lapsed. Thus, Domalsins prior possession is material
only as against Gloria Banuca and only within a period of
one year from the time she wrested possession of the
property from respondent.
c. Nonetheless, Sps. Valenciano should not suffer
because of Gloria Banucas ingratitude to her
husbands former employer.
ISSUES: WON CA ERRED IN HOLDING THAT DOMALSIN ABANDONED
THE PROPERTY. CA ERRED IN REVERSING THE DECISION OF MCTC &
RTC. WHO IS THE RIGHTFUL OWNER OF THE PROPERTY?

HELD: CA, MCTC, & RTC are in error.
RATIO: At the outset, it must be made clear that the property subject
of this case is a portion of the road-right-of way of Kennon Road
which is located in front of a parcel of land that petitioner bought by
way of Deed of Waiver and Quitclaim from Castillo Binay-an. The
admission of petitioner in his Amended Complaint that respondents
started constructing a building within the Kennon Road road-right-
of-way belies his claim that the lot in question is his.
Property Is Part Of Public Dominion! Cant Be Owned By Individual
It is clear that neither the petitioner nor the respondents can own nor
possess the subject property the same being part of the public
dominion under Article 420 of the Civil Code. Properties of public
dominion are owned by the general public. Public use is use that is
not confined to privileged individuals, but is open to the
indefinite public. As the land in controversy is a portion of Kennon
Road which is for the use of the people, there can be no dispute that
same is part of public dominion. This being the case, the parties
cannot appropriate the land for themselves. Thus, they cannot claim
any right of possession over it. This is clear from Article 530 of the
Civil Code which provides: Only things and rights which are
susceptible of being appropriated may be the object of possession.
Assuming Arguendo It Was Not Public Dominion, There Was No
Abandonment
MCTC found there was no abandonment of the land because the
house was destroyed by a fortuitous event (earthquake)
While RTC ruled there was no abandonment because petitioner paid
taxes due on the land and that he promptly objected to the
construction of respondents house which are clear manifestations of
his intention not to abandon the property.
CA shows that it did not reverse the two lower courts on the issue of
abandonment. It merely declared that such issue is not material. It
faulted petitioner for not asserting his right for a long time. CA did not
give weight to the fact that petitioner had prior physical possession
over the subject land. CA erred when it preferred the present and
actual possession of respondents vis--vis the prior possession of
petitioner on the ground that the parties do not and cannot own the
lot in question. Regardless of the actual condition of the title, Courts
will always uphold respect for prior possession.
The fact that the parties do not and cannot own the property does
not mean that the issue to be resolved is no longer priority of
possession. The determining factor for one to be entitled to
possession will be prior physical possession and not actual physical
possession.
If, indeed, there was abandonment of the land under consideration
by petitioner, only then should respondents be given the possession
of the same since abandonment is one way by which a possessor
may lose his possession. But, we find that petitioner never
abandoned the subject land. His opposition to the construction
and the subsequent filing of the instant case are clear indicia of non-
abandonment. The fact that the house built was destroyed and was
never rebuilt do not signify abandonment. Gloria Banuca, the person
who supposedly demolished said house, had no right to do the
same. Her act was an act of forcible entry. The entry of respondents
in 1998 was likewise an act of forcible entry.
Court finds that the MCTC and the RTC, as well as the Court of Appeals,
to be in error when they respectively declared that petitioner and
respondents to be entitled to the possession of the land in dispute. The
parties should not be permitted to take possession of the land, much
more, claim ownership thereof as said lot is part of the public dominion.
Dispositive: WHEREFORE, instant petition is PARTIALLY
GRANTED. Nonetheless, there being a finding that the subject property is a
part of the public dominion, of which neither party is entitled to own nor
possess, the decisions of the CA, RTC, and MCTC are SET
ASIDE. Respondent spouses are ordered to remove their structure on the
subject land within (60) days from receipt of this decision, and to vacate and
deliver the physical possession to DPWH.
# 11 MIAA v. Court of Appeals
G.R. No. 155650, July 20, 2006
Carpio, J.
Facts:
The Manila International Airport Authority (MIAA) operates the Ninoy
AquinoInternational Airport (NAIA) Complex in Paraaque City under
Executive Order No. 903 (MIAACharter), as amended. As such operator, it
administers the land, improvements andequipment within the NAIA Complex.
In March 1997, the Office of the Government CorporateCounsel (OGCC)
issued Opinion No. 061 to the effect that the Local Government Code of
1991 (LGC) withdrew the exemption from real estate tax granted to MIAA
under Section 21of its Charter. Thus, MIAA paid some of the real estate tax
already due. In June 2001, it receivedFinal Notices of Real Estate Tax
Delinquency from the City of Paraaque for the taxableyears 1992 to 2001.
The City Treasurer subsequently issued notices of levy and warrants of levy
on the airport lands and buildings.At the instance of MIAA, the OGCC issued consideration. As longas the airport lands and buildings are reserved for
Opinion No. 147 clarifying Opinion No. 061,pointing out that Sec. 206 of the public use, their ownership remains withthe State. Unless the President
LGC requires persons exempt from real estate tax to showproof of issues a proclamation withdrawing these properties frompublic use, they
exemption. According to the OGCC, Sec. 21 of the MIAA Charter is the proof remain properties of public dominion. As such, they are inalienable,
thatMIAA is exempt from real estate tax. MIAA, thus, filed a petition with the hence,they are not subject to levy on execution or foreclosure sale, and they
Court of Appealsseeking to restrain the City of Paraaque from imposing real are exempt from realestate tax.However, portions of the airport lands and
estate tax on, levying against,and auctioning for public sale the airport lands buildings that MIAA leases to privateentities are not exempt from real estate
and buildings, but this was dismissed forhaving been filed out of time.Hence, tax. In such a case, MIAA has granted the beneficialuse of such portions for
MIAA filed this petition for review, pointing out that it is exempt from a consideration to a taxable person.
realestate tax under Sec. 21 of its charter and Sec. 234 of the LGC. It
invokes the principle thatthe government cannot tax itself as a justification for
exemption, since the airport lands andbuildings, being devoted to public use # 12 FIRST DIVISION
and public service, are owned by the Republic of thePhilippines. On the other
hand, the City of Paraaque invokes Sec. 193 of the LGC, whichexpressly PHILIPPINE FISHERIES G.R. No. 150301
withdrew the tax exemption privileges of government-owned and DEVELOPMENT AUTHORITY,
controlledcorporations (GOCC) upon the effectivity of the LGC.It asserts that Petitioner, Present:
an international airport is not among the exceptions mentioned in thesaid
law. Meanwhile, the City of Paraaque posted and published notices - versus - PUNO, C.J., Chairperson,
announcing thepublic auction sale of the airport lands and buildings. In the SANDOVAL-GUTIER
afternoon before the scheduledpublic auction, MIAA applied with the Court THE HONORABLE COURT OF AZCUNA,
for the issuance of a TRO to restrain the auctionsale. The Court issued a APPEALS, THE HONORABLE CORONA, and
TRO on the day of the auction sale, however, the same wasreceived only by REGIONAL TRIAL COURT, GARCIA, JJ.
the City of Paraaque three hours after the sale. BRANCH 169, MALABON, METRO
Issue: MANILA, THE MUNICIPALITY OF
Whether or not the airport lands and buildings of MIAA are exempt from real NAVOTAS, METRO MANILA, Promulgated:
estatetax? HON. FLORANTE M. BARREDO,
Held: in his official capacity as Municipal
The airport lands and buildings of MIAA are exempt from real estate tax Treasurer of Navotas, Metro Manila,
imposed bylocal governments. Sec. 243(a) of the LGC exempts from real and HON. NORBERTO E. AZARCON, October 2, 2007
estate tax any real propertyowned by the Republic of the Philippines. This in his capacity as Chairman of the
exemption should be read in relation with Sec.133(o) of the LGC, which Public Auction Sale Committee of
provides that the exercise of the taxing powers of localgovernments shall not Navotas, Metro Manila,
extend to the levy of taxes, fees or charges of any kind on theNational Respondents.
Government, its agencies and instrumentalities. X -------------------------------------------------------------------------------------- X

These provisions recognize the basic principle that local governments

cannot tax thenational government, which historically merely delegated to
local governments the power totax. The rule is that a tax is never presumed
and there must be clear language in the lawimposing the tax. This rule
applies with greater force when local governments seek to taxnational
government instrumentalities. Moreover, a tax exemption is construed
liberally infavor of national government instrumentalities.MIAA is not a
GOCC, but an instrumentality of the government. The Republic remains the
beneficial owner of the properties. MIAA itself is ownedsolely by the
Republic. At any time, the President can transfer back to the Republic title
tothe airport lands and buildings without the Republic paying MIAA any
DECISION
AZCUNA, J.:
This is a petition for review[1] of the decision and resolution of the
Court of Appeals (CA), dated July 19, 2001 and September 19, 2001,
respectively, in CA-G.R. CV No. 42472, entitled Philippine Fisheries
Development Authority v. The Municipality of Navotas, Metro Manila, et al.
The facts appear as follows:
The controversy arose when respondent Municipality of Navotas assessed
the real estate taxes allegedly due from petitioner Philippine Fisheries
Development Authority (PFDA) for the period 1981-1990 on properties under
its jurisdiction, management and operation located inside the Navotas
Fishing Port Complex (NFPC).
The assessed taxes had remained unpaid despite the demands made by the
municipality which prompted it, through Municipal Treasurer Florante M.
Barredo, to give notice to petitioner on October 29, 1990 that the NFPC will
be sold at public auction on November 30, 1990 in order that the municipality
will be able to collect on petitioners delinquent realty taxes which, as of June
30, 1990, amounted to P23,128,304.51, inclusive of penalties.
Petitioner sought the deferment of the auction sale claiming that the NFPC is
owned by the Republic of the Philippines, and pursuant to Presidential
Decree (P.D.) No. 977, it (PFDA) is not a taxable entity.
In view of the refusal of PFDA to pay the assessed realty taxes, the
matter was referred to the Department of Finance (DOF). On July 14,
1990 the DOF stated that:
This Department takes cognizance of the allegations
of [the Office of the Mayor of Navotas] that PFDA has leased
its properties to beneficial users, such as businessmen,
private persons and entities who are taxable persons. For
this reason, it is imperative that the Municipality should
conduct an ocular inspection on the real properties (land and
building owned by PFDA) in order to identify the properties
actually leased and the taxable persons enjoying the
beneficial use thereof. The ocular inspection is necessary for
reason that the real properties, the use of which has been
granted to taxable persons, for consideration or otherwise,
are subject to the payment of real property taxes which must
be paid by the grantees pursuant to the provisions of the
Real Property Tax Code, as amended.
Therefore, it is imperative to determine who the
actual users of the properties concerned [are]. If used by a
non-taxable person other than PFDA itself, it remains to be
non-taxable. Otherwise, if said properties are being used by
taxable persons, same becomes taxable properties. For this
purpose, it is also incumbent upon PFDA to furnish the
Municipality copies of the deed of lease or other relevant
documents showing the leased properties and their
beneficial users for proper assessment.[2]
Notwithstanding the DOFs instruction, respondent Municipality
proceeded to publish the notice of sale of NFPC in the November 2,
1990 issue of Balita, a local newspaper.
On November 19, 1990, petitioner instituted Civil Case No. 1524 in the
Regional Trial Court (RTC) of Malabon, Metro Manila against respondent
Municipality, its Municipal Treasurer and the Chairman of the Public Auction
Sale Committee. Petitioner asked the RTC to enjoin the auction of the NFPC
on the ground that the properties comprising the NFPC are owned by the
Republic of the Philippines and are, thus, exempt from taxation. According to
petitioner, only a small portion of NFPC which had been leased to private
parties may be subjected to real property tax which should be paid by the
latter.
Respondent Municipality, on the other hand, insisted that: 1) the real
properties within NFPC are owned entirely by petitioner which, despite the
opportunity given, had failed to submit proof to the Municipal Assessor that
the properties are indeed owned by the Republic of the Philippines; 2) if the
properties in question really belong to the government, then the complaint
should have been instituted in the name of the Republic of the Philippines,
represented by the Office of the Solicitor General; and 3) the complaint is
fatally defective because of non-compliance with a condition precedent,
which is, payment of the disputed tax assessment under protest.
On December 8, 1990, the RTC issued a writ of preliminary
injunction enjoining respondent Municipality from proceeding with the public
auction.
On February 19, 1993, however, the RTC dismissed the case and dissolved
the writ of preliminary injunction, thus:
[T]he plaintiff [petitioner] failed to present convincing
evidence to support its claim of realty tax exemption and
ownership of the property by the Republic of the Philippines
as mandated by Sec. 9 of P.D. 464. Notwithstanding receipt
of the notices of tax assessments from the defendants
[public respondent], the plaintiff did not avail of the remedies
under the law by raising on appeal the said tax assessments
to the Local Board of Assessment Appeals, then to the
Central Board of Assessment Appeals and ultimately, to the
Court of Tax Appeals. Instead, the plaintiff continuously
ignored the notices of tax assessments on the pretext that
the properties inside the NFPC are exempt from payment of
real estate taxes as they are owned by the Republic of
the Philippines. Assailing the validity of the tax assessments
of the NFPC properties is not the proper recourse for the
 plaintiff but to pay first the tax assessments under protest
and then raise the same on appeal to the Local Board of
Assessment Appeals, then to the Central Board of
Assessment Appeals, then ultimately, to the Court of Tax
Appeals pursuant to the Real Property Tax Code.
The plaintiff failed in this regard, hence the Municipality,
exercising its power to assess and collect taxes on real
properties within its jurisdiction, did the right thing, that is, to
schedule the NFPC properties for public auction.
Furthermore, while the plaintiff is insisting that the NFPC
properties are owned by the Republic of the Philippines, and
is therefore exempt from payment of real estate taxes, yet it
admitted that there are those lessees who leased portion[s]
of the complex, and [it was] even willing to submit [a] list of
these lessees for proper tax assessments.
...
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the defendant [public
respondent Municipality of Navotas] and against the plaintiff,
ordering:
1. The DISMISSAL of this case;
2. The preliminary injunction previously
issued in this case DISSOLVED; and
3. The plaintiff to pay the defendant
[public respondent] Municipality the sum of P13,767.00 as
actual damages.
SO ORDERED.[3]
The CA affirmed the ruling of the RTC in a Decision dated July 19, 2001, the
pertinent portions of which read:
The thrust of appellant PFDAs arguments has shoved to the
fore the fact that the 67-hectare land on which the NFPC
Navotas Fishing Port Complex stands was reclaimed from
the sea which explains why it was bounded on the North by
the Manila Bay, on the East by Roxas Boulevard, on the
South by the Manila Bay and on the West, by the
breakwater. Even the Municipalitys counsel, Atty. Victorino
Landas; Assessor, Arturo Coronel; and Treasurer, Florante
Barredo have admitted that much, as pointed out by
PFDA.[4] Such being the origin of the land, its ownership by
the State as property of public dominion[5] can hardly be
disputed.
The reclaimed land; breakwaters; piers; wharves and
quaywalls; and, fish market building forming part of the
Navotas Fish Port were furthermore certified by the
Undersecretary of Public Works and Highways[6] as
belonging to the national government since they were built
using the proceeds of the loan agreement entered into by
and between the Republic of the Philippines and the Asian
Development Bank on December 12, 1971.[7]
On August 11, 1976, the Philippine Fish Marketing Authority
(PFMA) was created as a body corporate by P.D. No. 977 to
carry out
the policy of the Government to promote the development of
the fishing industry and improve efficiency in the handling,
preserving, marketing and distribution of fish and
fishery/aquatic products through the establishment and
operation of fish markets and the efficient operation of fishing
ports harbors and other marketing facilities.[8]
...
The PFMA was furthermore extended exemption from the
payment of income tax in this tenor:
The authority shall be exempted from the payment of income
tax.
The foregoing exemption may, however, be entirely
or partly lifted by the President of the Philippines, upon
recommendation of the Secretary of Finance, not earlier than
five years from the approval of this Decree, if the President
shall find the authority to be self-sustaining and financially
capable to pay such tax after providing for debt service
requirements of the authority and its projected capital and
operating expenditures.[9]
Meanwhile, harbor operations at the Navotas Fishing Port
Complex (NFPC) commenced on January 15, 1997 while the
market operation started on April 3, 1977.
On February 8, 1982, P.D. No. 977 was amended by
Executive Order No. 772. Insofar as material to the case at
bar, the salient features of the amendments introduced by
the E.O. are:
(a) The creation of the Philippine Fisheries Development
Authority (PFDA) to replace the Philippine Fish
Marketing Authority (PFMA).
...
(b) The capitalization of the PFDA has included the
Navotas Fishing Port Complex (NFPC).
...
(c) The NFPC has been transferred to the exclusive
jurisdiction, control, administration, and supervision of
the PFDA.
...
There can, therefore, [be] no escaping the conclusion that
the appellant PFDA became the owner of the Navotas
Fishing Port Complex as of February 8, 1982. It cannot be
any sooner because under P.D. No. 977, the NFPC was not
made part of the capital of the Philippine Fish Marketing
Authority (PFMA), PFDAs predecessor, as only the Navotas
Fish Landing was made part of such capital while the
Navotas Fishing Port and Fish Market were transferred
merely to the exclusive jurisdiction, control, administration,
and supervision of the PFMA. It was not then altogether
clear if the Navotas Fishing Port Complex (NFPC) was
conveyed to the PFMA.
...
Indeed, it is quite true that a property continues to be part of
the public domain, and not available for alienation, private
appropriation or ownership, until it is withdrawn from being
such by the Government through the Executive Department
or the Legislative,[10] and that it is not for the President to
convey valuable real property of the Government on his own
sole will as any such conveyance requires executive and
legislative concurrence.[11]
But the stark reality is that at the time E.O. No, 772 was
issued on February 8, 1982, President Marcos was
exercising both executive and legislative powers.[12] Hence,
his conveyance of the NFPC to form part of the capital of
PFDA cannot but be valid.
The fact that the PFDA has up to now no certificate of title to
the NFPC nor has the PFDA declared it for tax purposes is
of no consequence. Such a certificate is merely an evidence
of ownership and not the title itself,[13] while a tax declaration
does not prove nor disprove ownership. What is significant is
that the PFDA has openly declared and represented that
it owns, maintains and operates the NFPC when it leased a
portion thereof to the Frabelle Fishing Corporation on March
13, 1989.
All told, the PFDA being the owner of the NFPC
beginning February 8, 1982 is liable for the realty taxes due
thereon, its tax exemption being only from the payment of
income tax.[14]
WHEREFORE, the appealed decision is AFFIRMED, without
pronouncement as to costs.
SO ORDERED.[15]
Petitioner filed a motion for reconsideration but the same was denied
by the CA.
Petitioner now raises the following arguments:
One, the CA acknowledged that the property in question is a reclaimed land.
As such, it is a property of public dominion (Art. 420, Civil Code) and is
owned by the State. Notwithstanding this, the CA erroneously ruled that the
government had validly transferred ownership of the land to PFDA in 1982
when P.D. No. 977 was amended by E.O. No. 772 by virtue of which the
property became part of the assets of PFDA (Sec. 5 of E.O. No. 772);
Two, as a reclaimed land, the port complex should be considered a reserved
land. In NDC v. Cebu City,[16] the Supreme Court held that a reserved land is
a public land that has been withheld or kept back from sale or disposition.
The land remains an absolute property of the government. As its title remains
with the State, the reserved land is tax exempt;
Three, in Government v. Cabangis[17] and Lampria v. Director of
Lands,[18] this Court declared that the land reclaimed from the sea, as a result
of the construction by the government of a breakwater fronting the place
where it is situated, belongs to the State in accordance with Article 5 of the
Law of Waters of 1866;
Four, petitioner merely operates the area or the NFPC complex in favor of
the Republic of the Philippines. Section 4.A of P.D. No. 977, as amended by
E.O. No. 772, provides that PFDA shall:
[M]anage, administer, operate, improve and modernize,
coordinate and otherwise govern the activities, operation and
facilities in the fishing ports, markets and landings that may
hereinafter be placed under, or transferred to the Authority,
and such other fish markets, fishing ports/harbors and
infrastructure facilities as may be established under this
Decree; to investigate, prepare, adopt, implement and
execute a comprehensive plan for the overall development of
fishing port and market complexes and update such plan as
may be necessary from time to time; to construct or
authorize the construction in the land area under its
jurisdiction, of infrastructure facilities, factory buildings,
warehouses, cold storage and ice plants, and other
structures related to the fishing industry or necessary and
useful in the conduct of its business or in the attainment of
the purpose and objectives of this Decree; to acquire, hold
and dispose real and personal property in the exercise of its
functions and powers.
Lastly, the NFPC property is intended for public use and public service. As
such, it is owned by the State, hence, exempt from real property tax.
The issue is whether petitioner is liable to pay real property tax.
Local government units, pursuant to the fiscal autonomy granted by
the provisions of Republic Act No. 7160 or the 1991 Local Government
Code, can impose realty taxes on juridical persons [19] subject to the
limitations enumerated in Section 133 of the Code:
SEC. 133. Common Limitations on the Taxing Power
of Local Government Units. Unless otherwise provided
herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of
the following:
(o) taxes, fees, charges of any kind on the national
government, its agencies and instrumentalities, and
local government units.
Nonetheless, the above exemption does not apply when the beneficial use of
the government property has been granted to a taxable person. Section 234
(a) of the Code states that real property owned by the Republic of the
Philippines or any of its political subdivisions is exempted from payment of
the real property tax except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person.
Thus, as a rule, petitioner PFDA, being an instrumentality[20] of the
national government, is exempt from real property tax but the exemption
does not extend to the portions of the NFPC that were leased to taxable or
private persons and entities for their beneficial use.
This is in consonance with the ruling in Philippine Fisheries
Development Authority v. Court of Appeals[21] where this Court held that:
On the basis of the parameters set in the MIAA
[Manila International Airport Authority v. Court of
Appeals][22] case, the Authority should be classified as an
instrumentality of the national government. As such, it is
generally exempt from payment of real property tax, except
those portions which have been leased to private entities.
In the MIAA case, petitioner Philippine Fisheries
Development Authority was cited as among the
instrumentalities of the national government [23]
Indeed, the Authority is not a GOCC[24] but an
instrumentality of the government. The Authority has a
capital stock but it is not divided into shares of
stocks.[25] Also, it has no stockholders or voting shares.
Hence, it is not a stock corporation. Neither it is a non-stock
corporation because it has no members.
The real property tax assessments issued by the
City of Iloilo should be upheld only with respect to the
portions leased to private persons. In case the Authority fails
to pay the real property taxes due thereon, said portions
cannot be sold at public auction to satisfy the tax
delinquency.
The port built by the State in the Iloilo fishing
complex is a property of public dominion and cannot
therefore be sold at public auction. Article 420 of the Civil
Code provides:
ARTICLE 420. The following things
are property of public dominion:
(1) Those intended for public use, such
as roads, canals, rivers,
torrents, ports and
 bridges constructed by the State,
banks, shores, roadsteads, and others
of similar character;
(2) Those which belong to the State, without
being for public use, and are intended
for some public service or for the
development of national wealth.
The Iloilo [F]ishing [P]ort [Complex/IFPC] which was
constructed by the State for public use and/or public service
falls within the term port in the aforecited provision. Being a
property of public dominion the same cannot be subject to
execution or foreclosure sale.[26] Whether there are
improvements in the fishing port complex that should not be
construed to be embraced within the term port involves
evidentiary matters that cannot be addressed in the present
case. As for now, considering that the Authority is a national
government instrumentality, any doubt on whether the entire
IFPC may be levied upon to satisfy the tax delinquency
should be resolved against the City of Iloilo.
Similarly, for the same reason, the NFPC cannot be sold at public auction in
satisfaction of the tax delinquency assessments made by
the Municipality of Navotas on the entire complex.
Additionally, the land on which the NFPC property sits is a reclaimed
land, which belongs to the State. In Chavez v. Public Estates
Authority,[27] the Court declared that reclaimed lands are lands of the public
domain and cannot, without Congressional fiat, be subject of a sale, public or
private. [28]
In light of the above, petitioner is only liable to pay the
amount of P62,841,947.79 representing the total taxes due as of December
31, 2001 from PFDA-owned properties that were leased, as shown in the
Summary of Realty Taxes Due Properties Owned and/or Managed by PFDA
as per Realty Tax Order of Payment dated September 16, 2002.[29]
WHEREFORE, the petition is GRANTED. The Decision and
Resolution of the Court of Appeals, dated July 19, 2001 and September 19,
2001, respectively, in CA-G.R. CV No. 42472 are SET ASIDE. The Realty
Tax Order of Payment issued by
respondent Municipality of Navotas on September 16, 2002 is declared VOID
EXCEPT as to the amount of P62,841,947.79 representing the total taxes
due as of December 31, 2001 on the properties leased by petitioner to
private parties. Respondent Municipality of Navotas is DIRECTED to refrain
from levying on the Navotas Fishing Port Complex (NFPC) to satisfy the
payment of the real property tax delinquency.
PFDA vs CA
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY (PFDA) VS.
CENTRAL BOARD OF ASSESSMENT APPEALS, LOCAL BOARD OF
ASSESSMENT APPEALS OF LUCENA CITY, CITY OF LUCENA, LUCENA
CITY ASSESSOR AND LUCENA CITY TREASURER (G.R. NO. 178030, 15
DECEMBER 2010). SUBJECTS: GOVT INSTRUMENTALITY NOT
SUBJECT TO REAL PROPERTY TAX AND ITS PROPERTY CANT BE
AUCTIONED TO PAY FOR TAX DILINQUENCY; WHY PFDA IS NOT A
GOCC; BRIEF TITLE: PHIL FISHERIES DEVELOPMENT AUTHORITY VS.
CENTRAL BOARD OF ASSESSMENT APPEALS ET AL.
DIGEST:
PFDA WHICH MANAGED THE LUCENA FISHING PORT COMPLEX WAS
ORDERED BY LUCENA CITY TO PAY REAL PROPERTY TAX ON THE
FISHING PORT. LBAA, CBAA AND CTA ALL AFFIRMED THE ORDER OF
LUCENA CITY. SC RULED THAT PFDA IS EXEMPT BECAUSE IT IS A
GOVERNMENT INSTRUMENTALITY NOT A GOVERNMENT OWNED AND
CONTROLLED CORPORATION. BUT PORTIONS OF THE PORT LEASED
TO PRIVATE ENTITIES NOT EXEMPT FROM REAL PROPERTY TAX.
DOCTRINES:
PFDA, NOT BEING A GOVERNMENT OWNED OR CONTROLLED
CORPORATION IS NOT SUBJECT TO REAL PROPERTY TAX.
The ruling of the Court of Tax Appeals is anchored on the wrong premise that
the PFDA is a government-owned or controlled corporation. On the contrary,
this Court has already ruled that the PFDA is a government instrumentality
and not a government-owned or controlled corporation.
WHY PFDA IS NOT A GOCC; PROPERTY OF GOVT INSTRUMENTALITY
CANNOT BE SOLD AT PUBLIC AUCTION TO SATISFY TAX
DILINQUENCY;
In the 2007 case of Philippine Fisheries Development Authority v. Court of
Appeals,6 the Court resolved the issue of whether the PFDA is a
government-owned or controlled corporation or an instrumentality of the
national government. In that case, the City of Iloilo assessed real property
taxes on the Iloilo Fishing Port Complex (IFPC), which was managed and
operated by PFDA. The Court held that PFDA is an instrumentality of the
government and is thus exempt from the payment of real property tax, thus:
The Court rules that the Authority [PFDA] is not a GOCC but an
instrumentality of the national government which is generally exempt from
payment of real property tax. However, said exemption does not apply to the
portions of the IFPC which the Authority leased to private entities. With
respect to these properties, the Authority is liable to pay property tax.
Nonetheless, the IFPC, being a property of public dominion cannot be sold at
public auction to satisfy the tax delinquency.
xxx
Indeed, the Authority is not a GOCC but an instrumentality of the
government. The Authority has a capital stock but it is not divided into shares
of stocks. Also, it has no stockholders or voting shares. Hence it is not a
stock corporation. Neither is it a non-stock corporation because it has no
members.
The Authority is actually a national government instrumentality which is
defined as an agency of the national government, not integrated within the
department framework, vested with special functions or jurisdiction by law,
endowed with some if not all corporate powers, administering special funds,
and enjoying operational autonomy, usually through a charter. When the law
vests in a government instrumentality corporate powers, the instrumentality
does not become a corporation. Unless the government instrumentality is
organized as a stock or non-stock corporation, it remains a government
instrumentality exercising not only governmental but also corporate powers.7
(Emphasis supplied)
BUT PORTIONS OF THE PORT BEING LEASED TO PRIVATE ENTITIES
ARE SUBJECT TO REAL ESTATE TAX.
The exercise of the taxing power of local government units is subject to the
limitations enumerated in Section 133 of the Local Government Code. 9 Under
Section 133(o)10 of the Local Government Code, local government units have
no power to tax instrumentalities of the national government like the PFDA.
Thus, PFDA is not liable to pay real property tax assessed by the Office of
the City Treasurer of Lucena City on the Lucena Fishing Port Complex,
except those portions which are leased to private persons or entities.
(UNDERSCORING SUPPLIED).
# 13 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 178030 December 15, 2010
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY (PFDA), Petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, LOCAL BOARD OF
ASSESSMENT APPEALS OF LUCENA CITY, CITY OF LUCENA, LUCENA
CITY ASSESSOR AND LUCENA CITY TREASURER, Respondents.
DECISION
CARPIO, J.:
The Case
This petition for review1 assails the 9 May 2007 Decision2 of the Court of Tax
Appeals in C.T.A. EB No. 193, affirming the 5 October 2005 Decision of the
Central Board of Assessment Appeals (CBAA) in CBAA Case No. L-33. The
CBAA dismissed the appeal of petitioner Philippine Fisheries Development
Authority (PFDA) from the Decision of the Local Board of Assessment
Appeals (LBAA) of Lucena City, ordering PFDA to pay the real property taxes
imposed by the City Government of Lucena on the Lucena Fishing Port
Complex.
The Facts
The facts as found by the CBAA are as follows:
The records show that the Lucena Fishing Port Complex (LFPC) is one of the
fishery infrastructure projects undertaken by the National Government under
the Nationwide Fish Port-Package. Located at Barangay Dalahican, Lucena
City, the fish port was constructed on a reclaimed land with an area of 8.7
hectares more or less, at a total cost of PHP 296,764,618.77 financed
through a loan (L/A PH-25 and 51) from the Overseas Economic Cooperation
Fund (OECF) of Japan, dated November 9, 1978 and May 31, 1978,
respectively.
The Philippine Fisheries Development Authority (PFDA) was created by
virtue of P.D. 977 as amended by E.O. 772, with functions and powers to
(m)anage, operate, and develop the Navotas Fishing Port Complex and such
other fishing port complexes that may be established by the Authority.
Pursuant thereto, Petitioner-Appellant PFDA took over the management and
operation of LFPC in February 1992.
On October 26, 1999, in a letter addressed to PFDA, the City Government of
Lucena demanded payment of realty taxes on the LFPC property for the
period from 1993 to 1999 in the total amount of P39,397,880.00. This was
received by PFDA on November 24, 1999.
On October 17, 2000 another demand letter was sent by the Government of
Lucena City on the same LFPC property, this time in the amount of
P45,660,080.00 covering the period from 1993 to 2000.
On December 18, 2000 Petitioner-Appellant filed its Appeal before the Local
Board of Assessment Appeals of Lucena City, which was dismissed for lack
of merit. On November 6, 2001 Petitioner-Appellant filed its motion for
reconsideration; this was denied by the Appellee Local Board on December
10, 2001.3
PFDA appealed to the CBAA. In its Decision dated 5 October 2005, the
CBAA dismissed the appeal for lack of merit. The CBAA ruled:
Ownership of LFPC however has, before hand, been handed over to the
PFDA, as provided for under Sec. 11 of P.D. No. 977, as amended, and
declared under the MCIAA case [Mactan Cebu International Airport Authority
v. Marcos, G.R. No. 120082, 11 September 1996, 261 SCRA 667]. The
allegations therefore that PFDA is not the beneficial user of LFPC and not a
taxable person are rendered moot and academic by such ownership of PFDA
over LFPC.
xxx
PFDAs Charter, P.D. 977, provided for exemption from income tax under
Par. 2, Sec. 10 thereof: "(t)he Authority shall be exempted from the payment
of income tax". Nothing was said however about PFDAs exemption from
payment of real property tax: PFDA therefore was not to lay claim for realty
tax exemption on its Fishing Port Complexes. Reading Sec. 40 of P.D. 464
and Sec. 234 of R.A. 7160 however, provided such ground: LFPC is owned
by the Republic of the Philippines, PFDA is only tasked to manage, operate,
and develop the same. Hence, LFPC is exempted from payment of realty tax.
xxx
The ownership of LFPC as passed on by the Republic of the Philippines to
PFDA is bourne by Direct evidence: P.D. 977, as amended (supra).
Therefore, Petitioner-Appellants claim for realty tax exemption on LFPC is
untenable.
WHEREFORE, for all of the foregoing, the herein Appeal is hereby dismissed
for lack of merit.
SO ORDERED.4
PFDA moved for reconsideration, which the CBAA denied in its Resolution
dated 7 June 2006.5 On appeal, the Court of Tax Appeals denied PFDAs
petition for review and affirmed the 5 October 2005 Decision of the CBAA.
Hence, this petition for review.
The Ruling of the Court of Tax Appeals
The Court of Tax Appeals held that PFDA is a government-owned or
controlled corporation, and is therefore subject to the real property tax
imposed by local government units pursuant to Section 232 in relation to
Sections 193 and 234 of the Local Government Code. Furthermore, the
Court of Tax Appeals ruled that PFDA failed to prove that it is exempt from
real property tax pursuant to Section 234 of the Local Government Code or
any of its provisions.
The Issue
The sole issue raised in this petition is whether PFDA is liable for the real
property tax assessed on the Lucena Fishing Port Complex.
The Ruling of the Court
The petition is meritorious.
In ruling that PFDA is not exempt from paying real property tax, the Court of
Tax Appeals cited Sections 193, 232, and 234 of the Local Government
Code which read:
Section 193. Withdrawal of Tax Exemption Privileges. Unless otherwise
provided in this Code, tax exemptions or incentives granted to, or presently
enjoyed by all persons, whether natural or juridical, including government-
owned or -controlled corporations, except local water districts, cooperatives
duly registered under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of this
Code.
Section 232. Power to Levy Real Property Tax. A province or city or a
municipality within the Metropolitan Manila Area may levy an annual ad
valorem tax on real property such as land, building, machinery, and other
improvement not hereinafter specifically exempted.
Section 234. Exemptions from Real Property Tax. The following are
exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of
its political subdivision except when the beneficial use thereof has
been granted, for consideration or otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or convents
appurtenant thereto, mosques, nonprofit or religious cemeteries and
all lands, buildings and improvements actually, directly, and
exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned or -
controlled corporations engaged in the supply and distribution of
water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as
provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control and
environmental protection.
Except as provided herein, any exemption from payment of real property tax
previously granted to, or presently enjoyed by, all persons, whether natural or
juridical, including all government-owned or -controlled corporations are
hereby withdrawn upon the effectivity of this Code.
The Court of Tax Appeals held that as a government-owned or controlled
corporation, PFDA is subject to real property tax imposed by local
government units having jurisdiction over its real properties pursuant to
Section 232 of the Local Government Code. According to the Court of Tax
Appeals, Section 193 of the Local Government Code withdrew all tax
exemptions granted to government-owned or controlled corporations.
Furthermore, Section 234 of the Local Government Code explicitly provides
that any exemption from payment of real property tax granted to government-
owned or controlled corporations have already been withdrawn upon the
effectivity of the Local Government Code.
The ruling of the Court of Tax Appeals is anchored on the wrong premise that
the PFDA is a government-owned or controlled corporation. On the contrary,
this Court has already ruled that the PFDA is a government instrumentality
and not a government-owned or controlled corporation.
In the 2007 case of Philippine Fisheries Development Authority v. Court of
Appeals,6 the Court resolved the issue of whether the PFDA is a
government-owned or controlled corporation or an instrumentality of the
national government. In that case, the City of Iloilo assessed real property
taxes on the Iloilo Fishing Port Complex (IFPC), which was managed and
operated by PFDA. The Court held that PFDA is an instrumentality of the
government and is thus exempt from the payment of real property tax, thus:
The Court rules that the Authority [PFDA] is not a GOCC but an
instrumentality of the national government which is generally exempt
from payment of real property tax. However, said exemption does not
apply to the portions of the IFPC which the Authority leased to private
entities. With respect to these properties, the Authority is liable to pay
property tax. Nonetheless, the IFPC, being a property of public dominion
cannot be sold at public auction to satisfy the tax delinquency.
xxx
Indeed, the Authority is not a GOCC but an instrumentality of the
government. The Authority has a capital stock but it is not divided into shares
of stocks. Also, it has no stockholders or voting shares. Hence it is not a
stock corporation. Neither is it a non-stock corporation because it has no
members.
The Authority is actually a national government instrumentality which is
defined as an agency of the national government, not integrated within the
department framework, vested with special functions or jurisdiction by law,
endowed with some if not all corporate powers, administering special funds,
and enjoying operational autonomy, usually through a charter. When the law
vests in a government instrumentality corporate powers, the instrumentality
does not become a corporation. Unless the government instrumentality is
organized as a stock or non-stock corporation, it remains a government
instrumentality exercising not only governmental but also corporate
powers.7(Emphasis supplied)1avvphi1
This ruling was affirmed by the Court in a subsequent PFDA case involving
the Navotas Fishing Port Complex, which is also managed and operated by
the PFDA. In consonance with the previous ruling, the Court held in the
subsequent PFDA case that the PFDA is a government instrumentality not
subject to real property tax except those portions of the Navotas Fishing Port
Complex that were leased to taxable or private persons and entities for their
beneficial use.8
Similarly, we hold that as a government instrumentality, the PFDA is exempt
from real property tax imposed on the Lucena Fishing Port Complex, except
those portions which are leased to private persons or entities.
The exercise of the taxing power of local government units is subject to the
limitations enumerated in Section 133 of the Local Government Code.9 Under
Section 133(o)10 of the Local Government Code, local government units have
no power to tax instrumentalities of the national government like the PFDA.
Thus, PFDA is not liable to pay real property tax assessed by the Office of
the City Treasurer of Lucena City on the Lucena Fishing Port Complex,
except those portions which are leased to private persons or entities.
Besides, the Lucena Fishing Port Complex is a property of public dominion
intended for public use, and is therefore exempt from real property tax under
Section 234(a)11 of the Local Government Code. Properties of public
dominion are owned by the State or the Republic of the Philippines.12 Thus,
Article 420 of the Civil Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use,
and are intended for some public service or for the development
of the national wealth. (Emphasis supplied)
The Lucena Fishing Port Complex, which is one of the major infrastructure
projects undertaken by the National Government under the Nationwide
Fishing Ports Package, is devoted for public use and falls within the term
"ports." The Lucena Fishing Port Complex "serves as PFDAs commitment to
continuously provide post-harvest infrastructure support to the fishing
industry, especially in areas where productivity among the various players in
the fishing industry need to be enhanced."13 As property of public dominion,
the Lucena Fishing Port Complex is owned by the Republic of the Philippines
and thus exempt from real estate tax.
WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated
9 May 2007 of the Court of Tax Appeals in C.T.A. EB No. 193.
We DECLARE the Lucena Fishing Port Complex EXEMPT from real
property tax imposed by the City of Lucena. We declare VOID all the real
property tax assessments issued by the City of Lucena on the Lucena
Fishing Port Complex managed by Philippine Fisheries Development
Authority, EXCEPT for the portions that the Philippine Fisheries Development
Authority has leased to private parties.
SO ORDERED.
# 14 EN BANC
[G.R. NO. 163072 : April 2, 2009]
MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioner, v. CITY OF
PASAY, SANGGUNIANG PANGLUNGSOD NG PASAY, CITY MAYOR OF
PASAY, CITY TREASURER OF PASAY, and CITY ASSESSOR OF
PASAY,Respondents.
DECISION
CARPIO, J.:
This is a Petition for Review on Certiorari 1 of the Decision2 dated 30 October
A7-183- 1992-
2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA- 18,441,981.20 11,553,901.13 29,995,882.33
05412 2001
G.R. SP No. 67416.
The Facts A7-183- 1992-
Petitioner Manila International Airport Authority (MIAA) operates and 109,946,736.00 68,881,630.13 178,828,366.13
05411 2001
administers the Ninoy Aquino International Airport (NAIA) Complex under
Executive Order No. 903 (EO 903),3 otherwise known as the Revised Charter A7-183- 1992-
of the Manila International Airport Authority. EO 903 was issued on 21 July 7,440,000.00 4,661,160.00 12,101,160.00
05245 2001
1983 by then President Ferdinand E. Marcos. Under Sections 34 and 225 of
EO 903, approximately 600 hectares of land, including the runways, the P642,747,726.2 P373,466,110.1 P1,016,213,836.3
GRAND TOTAL
airport tower, and other airport buildings, were transferred to MIAA. The 0 3 3
NAIA Complex is located along the border between Pasay City and
On 24 August 2001, the City of Pasay, through its City Treasurer, issued
Paraaque City.
notices of levy and warrants of levy for the NAIA Pasay properties. MIAA
On 28 August 2001, MIAA received Final Notices of Real Property Tax
received the notices and warrants of levy on 28 August 2001. Thereafter, the
Delinquency from the City of Pasay for the taxable years 1992 to 2001.
City Mayor of Pasay threatened to sell at public auction the NAIA Pasay
MIAA's real property tax delinquency for its real properties located in NAIA
properties if the delinquent real property taxes remain unpaid.
Complex, Ninoy Aquino Avenue, Pasay City (NAIA Pasay properties) is
On 29 October 2001, MIAA filed with the Court of Appeals a petition for
tabulated as follows:
prohibition and injunction with prayer for preliminary injunction or temporary
TAX restraining order. The petition sought to enjoin the City of Pasay from
DECLA imposing real property taxes on, levying against, and auctioning for public
TAXABL
- TAX DUE PENALTY TOTAL sale the NAIA Pasay properties.
E YEAR
RATIO On 30 October 2002, the Court of Appeals dismissed the petition and upheld
N the power of the City of Pasay to impose and collect realty taxes on the NAIA
Pasay properties. MIAA filed a motion for reconsideration, which the Court of
A7-183- 1997- Appeals denied. Hence, this petition.
243,522,855.00 123,351,728.18 366,874,583.18
08346 2001 The Court of Appeals' Ruling
The Court of Appeals held that Sections 193 and 234 of Republic Act No.
A7-183- 1992- 7160 or the Local Government Code, which took effect on 1 January 1992,
113,582,466.00 71,159,414.98 184,741,880.98
05224 2001 withdrew the exemption from payment of real property taxes granted to
natural or juridical persons, including government-owned or controlled
A7-191- 1992-
54,454,800.00 34,115,932.20 88,570,732.20 corporations, except local water districts, cooperatives duly registered under
00843 2001 Republic Act No. 6938, non-stock and non-profit hospitals and educational
institutions. Since MIAA is a government-owned corporation, it follows that its
A7-191- 1992-
1,632,960.00 1,023,049.44 2,656,009.44 tax exemption under Section 21 of EO 903 has been withdrawn upon the
00140 2001
effectivity of the Local Government Code.
A7-191- 1992- The Issue
6,068,448.00 3,801,882.85 9,870,330.85 The issue raised in this petition is whether the NAIA Pasay properties of
00139 2001
MIAA are exempt from real property tax.
A7-183- 1992- The Court's Ruling
59,129,520.00 37,044,644.28 96,174,164.28 The petition is meritorious.
05409 2001
In ruling that MIAA is not exempt from paying real property tax, the Court of
A7-183- 1992- Appeals cited Sections 193 and 234 of the Local Government Code which
20,619,720.00 12,918,254.58 33,537,974.58
05410 2001 read:
SECTION 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise
A7-183- 1992- provided in this Code, tax exemptions or incentives granted to, or presently
7,908,240.00 4,954,512.36 12,862,752.36
05413 2001 enjoyed by all persons, whether natural or juridical, including government-
owned or controlled corporations, except local water districts, cooperatives
duly registered under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of this
Code.
SECTION 234. Exemptions from Real Property Tax. - The following are
exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise to a taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant
thereto, mosques, non-profit or religious cemeteries and all lands, buildings
and improvements actually, directly, and exclusively used for religious,
charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively
used by local water districts and government owned or controlled
corporations engaged in the supply and distribution of water and/or
generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for
under R.A. No. 6938; andcralawlibrary
(e) Machinery and equipment used for pollution control and environment
protection.
Except as provided herein, any exemption from payment of real property tax
previously granted to, or presently enjoyed by, all persons, whether natural or
juridical, including all government-owned or controlled corporations are
hereby withdrawn upon the effectivity of this Code.
The Court of Appeals held that as a government-owned corporation, MIAA's
tax exemption under Section 21 of EO 903 has already been withdrawn upon
the effectivity of the Local Government Code in 1992.
In Manila International Airport Authority v. Court of Appeals 6 (2006 MIAA
case), this Court already resolved the issue of whether the airport lands and
buildings of MIAA are exempt from tax under existing laws. The 2006 MIAA
case originated from a petition for prohibition and injunction which MIAA filed
with the Court of Appeals, seeking to restrain the City of Paraaque from
imposing real property tax on, levying against, and auctioning for public sale
the airport lands and buildings located in Paraaque City. The only difference
between the 2006 MIAA case and this case is that the 2006 MIAA case
involved airport lands and buildings located in Paraaque City while this case
involved airport lands and buildings located in Pasay City. The 2006 MIAA
case and this case raised the same threshold issue: whether the local
government can impose real property tax on the airport lands, consisting
mostly of the runways, as well as the airport buildings, of MIAA. In the 2006
MIAA case, this Court held:
To summarize, MIAA is not a government-owned or controlled corporation
under Section 2(13) of the Introductory Provisions of the Administrative Code
because it is not organized as a stock or non-stock corporation. Neither is
MIAA a government-owned or controlled corporation under Section 16,
Article XII of the 1987 Constitution because MIAA is not required to meet the
test of economic viability. MIAA is a government instrumentality vested with
corporate powers and performing essential public services pursuant to
Section 2(10) of the Introductory Provisions of the Administrative Code. As a
government instrumentality, MIAA is not subject to any kind of tax by local
governments under Section 133(o) of the Local Government Code. The
exception to the exemption in Section 234(a) does not apply to MIAA
because MIAA is not a taxable entity under the Local Government Code.
Such exception applies only if the beneficial use of real property owned by
the Republic is given to a taxable entity.
Finally, the Airport Lands and Buildings of MIAA are properties devoted to
public use and thus are properties of public dominion. Properties of public
dominion are owned by the State or the Republic. Article 420 of the Civil
Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks, shores,
roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and
are intended for some public service or for the development of the national
wealth.
The term "ports x x x constructed by the State" includes airports and
seaports. The Airport Lands and Buildings of MIAA are intended for public
use, and at the very least intended for public service. Whether intended for
public use or public service, the Airport Lands and Buildings are properties of
public dominion. As properties of public dominion, the Airport Lands and
Buildings are owned by the Republic and thus exempt from real estate tax
under Section 234(a) of the Local Government Code.7 (Emphasis in the
original)
The definition of "instrumentality" under Section 2(10) of the Introductory
Provisions of the Administrative Code of 1987 uses the phrase "includes x x
x government-owned or controlled corporations" which means that a
government "instrumentality" may or may not be a "government-owned or
controlled corporation." Obviously, the term government "instrumentality"
is broader than the term "government-owned or controlled corporation."
Section 2(10) provides:
SEC. 2. General Terms Defined. - x x x
(10) Instrumentality refers to any agency of the national Government, not
integrated within the department framework, vested with special functions or
jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually
through a charter. This term includes regulatory agencies, chartered
institutions and government-owned or controlled corporations.
The term "government-owned or controlled corporation" has a separate
definition under Section 2(13)8 of the Introductory Provisions of the
Administrative Code of 1987:
SEC. 2. General Terms Defined. - x x x
(13) Government-owned or controlled corporation refers to any agency
organized as a stock or non-stock corporation, vested with functions relating
to public needs whether governmental or proprietary in nature, and owned by
the Government directly or through its instrumentalities either wholly, or,
where applicable as in the case of stock corporations, to the extent of at least
fifty-one (51) percent of its capital stock: Provided, That government-owned
or controlled corporations may further be categorized by the department of
Budget, the Civil Service Commission, and the Commission on Audit for the
purpose of the exercise and discharge of their respective powers, functions
and responsibilities with respect to such corporations.
The fact that two terms have separate definitions means that while a
government "instrumentality" may include a "government-owned or controlled
corporation," there may be a government "instrumentality" that will not qualify
as a "government-owned or controlled corporation."
A close scrutiny of the definition of "government-owned or controlled
corporation" in Section 2(13) will show that MIAA would not fall under such
definition. MIAA is a government "instrumentality" that does not qualify
as a "government-owned or controlled corporation." As explained in the
2006 MIAA case:
A government-owned or controlled corporation must be "organized as a stock
or non-stock corporation." MIAA is not organized as a stock or non-stock
corporation. MIAA is not a stock corporation because it has no capital stock
divided into shares. MIAA has no stockholders or voting shares. x x x
Section 3 of the Corporation Code defines a stock corporation as one whose
"capital stock is divided into shares and x x x authorized to distribute to the
holders of such shares dividends x x x." MIAA has capital but it is not divided
into shares of stock. MIAA has no stockholders or voting shares. Hence,
MIAA is not a stock corporation.
xxx
MIAA is also not a non-stock corporation because it has no members.
Section 87 of the Corporation Code defines a non-stock corporation as "one
where no part of its income is distributable as dividends to its members,
trustees or officers." A non-stock corporation must have members. Even if we
assume that the Government is considered as the sole member of MIAA, this
will not make MIAA a non-stock corporation. Non-stock corporations cannot
distribute any part of their income to their members. Section 11 of the MIAA
Charter mandates MIAA to remit 20% of its annual gross operating income to
the National Treasury. This prevents MIAA from qualifying as a non-stock
corporation.
Section 88 of the Corporation Code provides that non-stock corporations are
"organized for charitable, religious, educational, professional, cultural,
recreational, fraternal, literary, scientific, social, civil service, or similar
purposes, like trade, industry, agriculture and like chambers." MIAA is not
organized for any of these purposes. MIAA, a public utility, is organized to
operate an international and domestic airport for public use.
Since MIAA is neither a stock nor a non-stock corporation, MIAA does not
qualify as a government-owned or controlled corporation. What then is the
legal status of MIAA within the National Government?cralawred
MIAA is a government instrumentality vested with corporate powers to
perform efficiently its governmental functions. MIAA is like any other
government instrumentality, the only difference is that MIAA is vested with
corporate powers. x x x
When the law vests in a government instrumentality corporate powers, the
instrumentality does not become a corporation. Unless the government
instrumentality is organized as a stock or non-stock corporation, it remains a
government instrumentality exercising not only governmental but also
corporate powers. Thus, MIAA exercises the governmental powers of
eminent domain, police authority and the levying of fees and charges. At the
same time, MIAA exercises "all the powers of a corporation under the
Corporation Law, insofar as these powers are not inconsistent with the
provisions of this Executive Order."9
Thus, MIAA is not a government-owned or controlled corporation but a
government instrumentality which is exempt from any kind of tax from the
local governments. Indeed, the exercise of the taxing power of local
government units is subject to the limitations enumerated in Section 133 of
the Local Government Code.10 Under Section 133(o)11 of the Local
Government Code, local government units have no power to tax
instrumentalities of the national government like the MIAA. Hence, MIAA is
not liable to pay real property tax for the NAIA Pasay properties.
Furthermore, the airport lands and buildings of MIAA are properties of public
dominion intended for public use, and as such are exempt from real property
tax under Section 234(a) of the Local Government Code. However, under the
same provision, if MIAA leases its real property to a taxable person, the
specific property leased becomes subject to real property tax.12 In this case,
only those portions of the NAIA Pasay properties which are leased to taxable
persons like private parties are subject to real property tax by the City of
Pasay.
WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated
30 October 2002 and the Resolution dated 19 March 2004 of the Court of
Appeals in CA-G.R. SP No. 67416. We DECLARE the NAIA Pasay
properties of the Manila International Airport Authority EXEMPT from real
property tax imposed by the City of Pasay. We declare VOID all the real
property tax assessments, including the final notices of real property tax
delinquencies, issued by the City of Pasay on the NAIA Pasay properties of
the Manila International Airport Authority, except for the portions that the
Manila International Airport Authority has leased to private parties.
No costs.
SO ORDERED.
 # 15 SECOND DIVISION
[G.R. No. 185023 : August 24, 2011]
CITY OF PASIG, REPRESENTED BY THE CITY TREASURER AND THE
CITY ASSESSOR, VS. PETITIONER, REPUBLIC OF THE PHILIPPINES,
REPRESENTED BY THE PRESIDENTIAL COMMISSION ON GOOD
GOVERNMENT, RESPONDENT.
DECISION
CARPIO, J.:
The Case
This is a petition[1] for review on certiorari under Rule 45 of the Rules of
Court. The petition challenges the 17 October 2008 Decision[2] of the Court of
Appeals in CA-G.R. SP No. 97498, affirming the 6 November 2006
Decision[3] of the Regional Trial Court (RTC), National Capital Judicial
Region, Pasig City, Branch 155, in SCA No. 2901.
The Facts
Mid-Pasig Land Development Corporation (MPLDC) owned two parcels of
land, with a total area of 18.4891 hectares, situated in Pasig City. The
properties are covered by Transfer Certificate of Title (TCT) Nos. 337158 and
469702 and Tax Declaration Nos. E-030-01185 and E-030-01186 under the
name of MPLDC. Portions of the properties are leased to different business
establishments.
In 1986, the registered owner of MPLDC, Jose Y. Campos (Campos),
voluntarily surrendered MPLDC to the Republic of the Philippines.
On 30 September 2002, the Pasig City Assessor's Office sent MPLDC two
notices of tax delinquency for its failure to pay real property tax on the
properties for the period 1979 to 2001 totaling P256,858,555.86. In a letter
dated 29 October 2002, Independent Realty Corporation (IRC) President
Ernesto R. Jalandoni (Jalandoni) and Treasurer Rosario Razon informed the
Pasig City Treasurer that the tax for the period 1979 to 1986 had been paid,
and that the properties were exempt from tax beginning 1987.
In letters dated 10 July 2003 and 8 January 2004, the Pasig City Treasurer
informed MPLDC and IRC that the properties were not exempt from tax. In a
letter dated 16 February 2004, MPLDC General Manager Antonio Merelos
(Merelos) and Jalandoni again informed the Pasig City Treasurer that the
properties were exempt from tax. In a letter dated 11 March 2004, the Pasig
City Treasurer again informed Merelos that the properties were not exempt
from tax.
On 20 October 2005, the Pasig City Assessor's Office sent MPLDC a notice
of final demand for payment of tax for the period 1987 to 2005 totaling
P389,027,814.48. On the same day, MPLDC paid P2,000,000 partial
payment under protest.
On 9 November 2005, MPLDC received two warrants of levy on the
properties. On 1 December 2005, respondent Republic of the Philippines,
through the Presidential Commission on Good Government (PCGG), filed
with the RTC a petition for prohibition with prayer for issuance of a temporary
restraining order or writ of preliminary injunction to enjoin petitioner Pasig
City from auctioning the properties and from collecting real property tax.
On 2 December 2005, the Pasig City Treasurer offered the properties for
sale at public auction. Since there was no other bidder, Pasig City bought the
properties and was issued the corresponding certificates of sale.
On 19 December 2005, PCGG filed with the RTC an amended petition for
certiorari, prohibition and mandamus against Pasig City. PCGG prayed that:
(1) the assessments for the payment of real property tax and penalty be
declared void; (2) the warrants of levy on the properties be declared void; (3)
the public auction be declared void; (4) the issuance of certificates of sale be
declared void; (5) Pasig City be prohibited from assessing MPLDC real
property tax and penalty; (6) Pasig City be prohibited from collecting real
property tax and penalty from MPLDC; (7) Pasig City be ordered to assess
the actual occupants of the properties real property tax and penalty; and (8)
Pasig City be ordered to collect real property tax and penalty from the actual
occupants of the properties.
The RTC's Ruling
In its 6 November 2006 Decision, the RTC granted the petition for certiorari,
prohibition and mandamus. The RTC held:
The primordial issue to be resolved in the present case is whether or not
respondent City of Pasig, through the City Treasurer and the City Assessor,
acted with grave abuse of discretion amounting to lack or excess of
jurisdiction when it assessed, levied and sold in public auction the "payanig"
properties for non-payment of real property taxes.
However, before dwelling on the merits of the main issue, certain matters
need to be addressed by the Court, to wit:
1. Does the Court have jurisdiction over the instant petition?
2. Who owns the so-called "payanig" properties that were subjected to
payment of real property taxes by respondent?
The Court maintains that it is not precluded from assuming jurisdiction over
the instant amended petition which involves the legality of the assailed
actions by respondent in assessing and collecting real property tax on the
properties owned by the Republic of the Philippines. It is a jurisprudential
doctrine that the issue is purely legal when the authority of the respondent to
assess and collect real property taxes on the subject properties is being
questioned (Ty vs. Trampe, 250 SCRA 500).
xxxx
In the instant proceeding, there is no dispute that the properties are
surrendered ill-gotten wealth of former President Marcos. As such, the same
assumes [sic] a public character and thus belongs [sic] to the Republic of the
Philippines. x x x
xxxx
Hence, upon the voluntary surrender by Jose Y. Campos, the controlling
owner of Mid-Pasig and Independent Realty Corporation, of the "payanig"
properties to PCGG, a clear admission that these properties were part of the
ill-gotten wealth of former President Marcos was already evident. As such,
there was already constructive reconveyance to the State, which immediately
placed these reconveyed properties under the control and stewardship of the
PCGG as representative of the Republic of the Philippines. Under such
special circumstance, these voluntary surrendered properties had already
belonged to the State.
xxxx
Premised on the foregoing, the "payanig" properties, being part of the
recovered ill-gotten wealth of President Marcos, and therefore are owned by
the State itself, are exempt from payment of real property taxes. It is only
when the beneficial use of said properties has been granted to a taxable
person that the same may be subject to imposition of real property tax.
Furthermore, in real estate taxation, the unpaid tax attaches to the property
and is chargeable against the taxable person who had actual or beneficial
use and possession of it regardless of whether or not he is the owner
(Testate Estate of Concordia T. Lim vs. City of Manila, 182 SCRA 482).
In the instant case, the taxable persons being referred to are the lessees
occupying and/or doing business therein and have beneficial use over
portions within the "payanig" properties.
xxxx
Consequently, there can be no iota of doubt that respondent City of Pasig
abused its discretion by committing the acts sought to be annulled herein
despite knowledge of the fact that ownership over the subject properties
belong to petitioner. But what is more appalling in the instant action is that
such abuse was capriciously committed by respondent City of Pasig against
the sovereign State itself from where that atxing local government unit
derives its very existence. The spring cannot rise higher than its source.
xxxx
In sum, the acts of respondent in assessing real property taxes on properties
owned and controlled by the Republic of the Philippines, in collecting taxes
from Mid-Pasig in lieu of the actual occupants or beneficial users of certain
portions thereof, and in auctioning said properties in favor of respondent,
followed by the corresponding certificate of sale, are all unequivocally tainted
with grave abuse of discretion amounting to lack or excess of jurisdiction.
WHEREFORE, in the light of the foregoing, the instant Amended Petition is
hereby GRANTED.
Accordingly, the following acts of respondent are hereby ANNULLED and
SET ASIDE.
1. the assessment dated September 30, 2002 for the payment of real
property taxes and penalties made by the City of Pasig on two (2)
parcels of land covered by TCT No. 337158 and TCT No. 469702
registered under the name of Mid-Pasig;
2. the warrants of levy dated November 8, 2005 issued thereon by the
City of Pasig;
3. the subsequent public auction sale of subject properties held on
December 2, 2005 followed by the issuance of the corresponding
Certificate of Sale;
FURTHER, the City of Pasig is hereby PROHIBITED from further:
1. Assessing real property taxes and penalties charges [sic] on the said
properties;
2. Collecting said taxes and penalty charges from the State;
3. Disposing or encumbering the subject properties or any portion
thereof;
FURTHER, the City of Pasig is hereby COMMANDED:
1. To return or effect the refund of the amount of Two Million Pesos
(Php 2,000,000.00) paid under protest by Mid-Pasig Land
Development Corporation on October 20, 2005, or credit the same
amount to any outstanding tax liability that said corporation may have
with the City of Pasig; and
2. To assess and collect from the actual occupants or beneficial users
of the subject properties, and not from the State, whatever real
property taxes and penalties that may be due on the respective
areas occupied by them.
SO ORDERED.[4]
Pasig City appealed to the Court of Appeals.
The Court of Appeals' Ruling

In its 31 March 2008 Decision,[5] the Court of Appeals set aside the RTC's 6
November 2006 Decision. The Court of Appeals held:
We find nothing in PCGG's petition that supports its claim regarding Pasig
City's alleged grave abuse of discretion. It is undisputed that the subject
parcels of land are registered in the name of Mid-Pasig, a private entity.
Although the government, through the PCGG have [sic] sequestered Mid-
Pasig and all its assets including the subject parcels of land, the
sequestration per se, did not operate to convert Mid-Pasig and its properties
to public property. "The power of the PCGG to sequester property claimed to
be `ill-gotten' means to place or cause to be placed under its possession or
control said property, or any building or office wherein any such property and
any records pertaining thereto may be found, including `business enterprises
and entities' -- for the purpose of preventing the destruction, concealment or
dissipation of, and otherwise conserving and preserving the same -- until it
can be determined, through appropriate judicial proceedings, whether the
property was in truth `ill-gotten,' i.e., acquired through or as a result of
improper or illegal use of or the conversion of funds belonging to the
Government or any of its branches, instrumentalities, enterprises, banks or
financial institutions, or by taking undue advantage of official position,
authority, relationship, connection or influence, resulting in unjust enrichment
of the ostensible owner and great damage and prejudice to the State." x x x
As such, prior to a valid court declaration the "PCGG cannot perform acts of
strict ownership of [sic] sequestered property. It is a mere conservator." In
view thereof and the fact that Mid-Pasig and its properties have not been
validly declared by the Sandiganbayan as "ill-gotten" wealth, the same are
not yet public properties. The PCGG even admitted that the transfer
certificates of title covering the subject parcels of land in the name of Mid-
Pasig have not been cancelled due to an order of the Sandiganbayan. The
trial court also found that the subject parcels of land are the subject of
litigation between Ortigas and Company Limited Partnership and the PCGG
in Civil Case No. 0093 pending before the Sandiganbayan. These facts
clearly show that the Sandiganbayan has not validly declared yet that the
subject parcels of land are "ill-gotten" wealth. If so, they cannot be claimed
yet as properties of the State: they remain properties of a private entity.
Thus, Pasig City through its City Assessor and City Treasurer did not act with
grave abuse of discretion when it issued real property tax assessment on the
subject parcels of land.
Even admitting that the subject parcels of land are already owned by the
State, we still see no grave abuse of discretion on the part of Pasig City
when it issued the challenged tax assessment, for it is well settled that the
test of exemptions from taxation is the use of the property for purposes
mentioned in the Constitution. The owner of the property does not matter.
Even if he is not a tax-exempt entity, as long as the property is being used for
religious, charitable or educational purposes, the property is exempt from tax.
Conversely, even if the government owns the property, if the beneficial use
thereof has been granted, for consideration or otherwise, to a taxable person,
the property is subject to tax. Here, the PCGG admitted that portions of the
subject properties were leased to private entities engaged in commercial
dealings. As well, the trial court found that lessees occupy different areas of
the subject parcels of land beginning 1992 until 2005. Therefore, considering
that portions of the subject parcels of land are used for commercial purposes,
the duty imposed by law to owners and administrators of real property to
declare the same for tax purposes and the fact that the tax declarations over
the subject parcels of land are in the name of Mid-Pasig, again, Pasig City
did not act with grave abuse of discretion when it issued the challenged tax
assessment.
The foregoing snowball to one conclusion -- the allegations in PCGG's
petition imputing grave abuse of discretion on the part of Pasig City, acting
through the City Assessor and City Treasurer, in the assessment and
collection of the taxes were made in order to justify the filing of the petition for
certiorari, prohibition and mandamus with the trial court.
The extraordinary remedies of certiorari, prohibition and mandamus may be
resorted to only when there is no other plain, available, speedy and adequate
remedy in the course of law. Where administrative remedies are available,
petitions for the issuance of these peremptory writs do not lie in order to give
the administrative body the opportunity to decide the matter by itself correctly
and to prevent unnecessary and premature resort to courts.
Republic Act No. 7160 or the Local Government Code of 1991, clearly sets
forth the administrative remedies available to a taxpayer or real property
owner who is not satisfied with the assessment or reasonableness of the real
property tax sought to be collected. The Supreme Court outlined said
remedies, to wit:
Should the taxpayer/real property owner question the excessiveness or
reasonableness of the assessment, Section 252 directs that the taxpayer
should first pay the tax due before his protest can be entertained. There shall
be annotated on the tax receipts the words "paid under protest." It is only
after the taxpayer has paid the tax due that he may file a protest in writing
within thirty days from payment of the tax to the Provincial, City or Municipal
Treasurer, who shall decide the protest within sixty days from receipt. In no
case is the local treasurer obliged to entertain the protest unless the tax due
has been paid.
If the local treasurer denies the protest or fails to act upon it within the 60-day
period provided for in Section 252, the taxpayer/real property owner may
then appeal or directly file a verified petition with the LBAA within sixty days
from denial of the protest or receipt of the notice of assessment, as provided
in Section 226 of R.A. No. 7160[.]

And, if the taxpayer is not satisfied with the decision of the LBAA, he may
elevate the same to the CBAA, which exercises exclusive jurisdiction to hear
and decide all appeals from the decisions, orders and resolutions of the
Local Boards involving contested assessments of real properties, claims for
tax refund and/or tax credits or overpayments of taxes. An appeal may be
taken to the CBAA by filing a notice of appeal within thirty days from receipt
thereof.
From the Central Board Assessment Appeals, the dispute may then be taken
to the Court of Tax Appeals by filing a verified petition for review under Rule
42 of the Revised Rules of Court; to the Court of tax Appeals en banc; and
finally to the Supreme Court via a petition for review on certiorari pursuant to
Rule 45 of the Revised Rules of Court.
We are not convinced with PCGG's stance that their recourse of filing the
petition for certiorari, prohibition and mandamus before the trial court is
proper as they are questioning not merely the correctness of the tax
assessment but the actions of Pasig City, through its City Assessor and City
Treasurer, which were done in grave abuse of discretion amounting to lack or
excess of jurisdiction.
The well-established rule is that allegations in the complaint and the
character of the relief sought determine the nature of an action. A perusal of
the petition before the trial court plainly shows that what is actually being
assailed is the correctness of the assessments made by the City Assessor of
Pasig City on the subject parcels of land. PCGG claims, among others, that:
1) the subject parcels of land are exempt from real property taxation as they
are public property; 2) even if the subject parcels of land are subject to tax,
as the beneficial use thereof was granted to private persons and entities,
only the portion thereof used for commerce is subject to tax and the users
thereof are the ones liable to pay the tax; and 3) the right of Pasig City to
collect the real property taxes pertaining to 1987 to 1998 has already
prescribed. These claims essentially involve questions of fact, which are
improper in a petition for certiorari, prohibition and mandamus; hence, the
petition should have been brought, at the very first instance, to the Local
Board Assessment Appeals, which has authority to rule on the objections of
any interested party who is not satisfied with the action of the assessor.
Under the doctrine of primacy of administrative remedies, an error in the
assessment must be administratively pursued to the exclusion of ordinary
courts whose decisions would be void for lack of jurisdiction.
Granting that the assessor's authority and the legality of the assessment are
indeed an issue, the proper remedy is a suit for the refund of the real
property tax after paying the same under protest. It must be pointed out that
in order for the trial court to resolve the instant petition, the issues of the
correctness of the tax assessment and collection must also necessarily be
dealt with; hence, a petition for certiorari, prohibition and mandamus is not
the proper remedy. x x x [T]he resolution of the issues raised in the instant
case involve examination and determination of relevant and material facts,
i.e. facts relating to the ownership of the subject parcels of land, the portion
of the subject parcel of land used for commercial purposes and the identities
of the lessees and the users thereof. Since resolution of factual issues is not
allowed in a petition for certiorari, prohibition and mandamus, the trial court is
precluded from entertaining the petition.
Finally, Section 252 of the R.A. No. 7160 requires payment under protest in
assailing real property tax assessment. Even an appeal shall not suspend
the collection of the atx assessed without prejudice to a later adjustment
pending the outcome of the appeal. This principle is consistent with the time-
honored principle that taxes are the lifeblood of the nation. But the PCGG
failed to pay the tax assessment prior to questioning it before the trial court;
hence, the trial court should have dismissed PCGG's petition in line with the
Supreme Court pronouncement that a trial court has no jurisdiction to
entertain a similar petition absent payment under protest.
In conclusion and taking all the foregoing into account, we hold that the trial
court had no jurisdiction to take cognizance and decide PCGG petition for
certiorari, prohibition and mandamus; the trial court should have dismissed
the petition.[6]
PCGG filed a motion for reconsideration. In its 17 October 2008 Decision, the
Court of Appeals reversed itself. The Court of Appeals held:
At the outset, although as a rule, administrative remedies must first be
exhausted before ersort to judicial action can prosper, there is a well-settled
exception in cases where the controversy does not involve questions of fact
but only of law. We find that the Republic has shown a cause for the
application of the foregoing exception. Essentially, the Republic has raised a
pure question of law -- whether or not the City of Pasig has the power to
impose real property tax on the subject properties, which are owned by the
State. It bears stressing that the Republic did not raise any question
concerning the amount of the real property tax or the determination thereof.
Thus, having no plain, speedy, and adequate remedy in law, the Republic
correctly resorted to judicial action via the petition for certiorari, prohibition,
and mandamus, to seek redress.
We are convinced that the subject properties were not sequestered by the
government so as to amount to a deprivation of property without due process
of law; instead, they were voluntarily surrendered to the State by Campos, a
self-admitted crony of the then President Marcos. The relinquishment of the
subject properties to the State as ill-gotten wealth of Marcos, as recognized
by the Supreme Court, makes a judicial declaration that the same were ill-
gotten unnecessary. By virtue of said relinquishment, the State correctly
exercised dominion over the subject properties. Indubitably, the subject
properties, being ill-gotten wealth, belong to the State. x x x By its nature, ill-
gotten wealth is owned by the State. As a matter of fact, the Republic
continues to exercise dominion over the subject properties.[7]
Hence, the present petition.
Issues
Pasig City raises as issues that the lower courts erred in granting PCGG's
petition for certiorari, prohibition and mandamus and in ordering Pasig City to
assess and collect real property tax from the lessees of the properties.
The Court's Ruling
The petition is partly meritorious.
As correctly found by the RTC and the Court of Appeals, the Republic of the
Philippines owns the properties. Campos voluntarily surrendered MPLDC,
which owned the properties, to the Republic of the Philippines. In Republic of
the Philippines v. Sandiganbayan,[8] the Court stated:
x x x Jose Y. Campos, "a confessed crony of former President Ferdinand E.
Marcos," voluntarily surrendered or turned over to the PCGG the properties,
assets and corporations he held in trust for the deposed President. Among
the corporations he surrendered were the Independent Realty Corporation
and the Mid-Pasig Land Development Corporation.[9]
In Republic of the Philippines v. Sandiganbayan,[10] the Court stated:
The antecedent facts are stated by the Solicitor General as follows:
xxxx
"3. Sometime in the later part of August 1987, defendant Jose D. Campos,
Jr., having been served with summons on August 5, 1987, filed with the
respondent Court an undated `Manifestation and Motion to Dismiss
Complaint with Respect to Jose D. Campos' praying that he be removed as
party defendant from the complaint on the grounds that he had `voluntarily
surrendered or turned over any share in his name on [sic] any of the
corporations referred to, aside from disclaiming any interest, ownership or
right thereon to the Government of the Republic of the Philippines' and that
he was `entitled to the immunity granted by the Presidential Commission on
Good Government pursuant to Executive Order No. 14, under the
Commission's Resolution dated May 28, 1986 to Mr. Jose Y. Campos and
his family' he `being a member of the immediate family of Jose Y. Campos.'
xxxx
In the instant case, the PCGG issued a resolution dated May 28, 1986,
granting immunity from both civil and criminal prosecutions to Jose Y.
Campos and his family. The pertinent provisions of the resolution read as
follows:
"3.0. In consideration of the full cooperation of Mr. Jose Y. Campos to this
Commission, his voluntary surrender of the properties and assets disclosed
and declared by him to belong to deposed President Ferdinand E. Marcos to
the Government of the Republic of the Philippines, his full, complete and
truthful disclosures, and his commitment to pay a sum of money as
determined by the Philippine Government, this Commission has decided and
agreed:
xxxx
Undoubtedly, this resolution embodies a compromise agreement between
the PCGG on one hand and Jose Y. Campos on the other. Hence, in
exchange for the voluntary surrender of the ill-gotten properties acquired by
the then President Ferdinand E. Marcos and his family which were in Jose
Campos' control, the latter and his family were given full immunity in both civil
and criminal prosecutions. x x x
xxxx
By virtue of the PCGG's May 28, 1986 resolution, Jose Campos, Jr. was
given full immunity from both civil and criminal prosecutions in exchange for
the "full cooperation of Mr. Jose Y. Campos to this Commission, his voluntary
surrender of the properties and assets disclosed and declared by him to
belong to deposed President Ferdinand E. Marcos to the Government of the
Republic of the Philippines, his full, complete and truthful disclosures, and his
commitment to pay a sum of money as determined by the Philippine
Government." In addition, Campos, Jr. had already waived and surrendered
to the Republic his registered equity interest in the Marcos/Romualdez
corporations involved in the civil case.[11]
Even as the Republic of the Philippines is now the owner of the properties in
view of the voluntary surrender of MPLDC by its former registered owner,
Campos, to the State, such transfer does not prevent a third party with a
better right from claiming such properties in the proper forum. In the
meantime, the Republic of the Philippines is the presumptive owner of the
properties for taxation purposes.
Section 234(a) of Republic Act No. 7160 states that properties owned by the
Republic of the Philippines are exempt from real property tax "except when
the beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person." Thus, the portions of the properties not
leased to taxable entities are exempt from real estate tax while the portions
of the properties leased to taxable entities are subject to real estate tax. The
law imposes the liability to pay real estate tax on the Republic of the
Philippines for the portions of the properties leased to taxable entities. It is, of
course, assumed that the Republic of the Philippines passes on the real
estate tax as part of the rent to the lessees.
In Philippine Fisheries Development Authority v. Central Board of
Assessment Appeals,[12] the Court held:
In the 2007 case of Philippine Fisheries Development Authority v. Court of
Appeals,[ ]the Court resolved the issue of whether the PFDA is a government-
owned or controlled corporation or an instrumentality of the national
government. In that case, the City of Iloilo assessed real property taxes
on the Iloilo Fishing Port Complex (IFPC), which was managed and
operated by PFDA. The Court held that PFDA is an instrumentality of
the government and is thus exempt from the payment of real property
tax, thus:
The Court rules that the Authority is not a GOCC but an instrumentality
of the national government which is generally exempt from payment of
real property tax. However, said exemption does not apply to the
portions of the IFPC which the Authority leased to private entities. With
respect to these properties, the Authority is liable to pay property tax.
Nonetheless, the IFPC, being a property of public dominion cannot be sold at
public auction to satisfy the tax delinquency.
xxxx
This ruling was affirmed by the Court in a subsequent PFDA case involving
the Navotas Fishing Port Complex, which is also managed and operated by
the PFDA. In consonance with the previous ruling, the Court held in the
subsequent PFDA case that the PFDA is a government instrumentality
not subject to real property tax except those portions of the Navotas
Fishing Port Complex that were leased to taxable or private persons
and entities for their beneficial use.
Similarly, we hold that as a government instrumentality, the PFDA is
exempt from real property tax imposed on the Lucena Fishing Port
Complex, except those portions which are leased to private persons or
entities.[13] (Emphasis supplied)
In Government Service Insurance System v. City Treasurer of the City of
Manila,[14] the Court held:
x x x The tax exemption the property of the Republic or its
instrumentalities carries ceases only if, as stated in Sec. 234(a) of the
LGC of 1991, "beneficial use thereof has been granted, for a
consideration or otherwise, to a taxable person." GSIS, as a government
instrumentality, is not a taxable juridical person under Sec. 133(o) of the
LGC. GSIS, however, lost in a sense that status with respect to the
Katigbak property when it contracted its beneficial use to MHC,
doubtless a taxable person. Thus, the real estate tax assessment of
Php 54,826,599.37 covering 1992 to 2002 over the subject Katigbak
property is valid insofar as said tax delinquency is concerned as
assessed over said property.[15] (Emphasis supplied)
In Manila International Airport Authority v. Court of Appeals,[16] the Court
held:
x x x Section 234(a) of the Local Government Code states that real
property owned by the Republic loses its tax exemption only if the
"beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person." MIAA, as a government instrumentality, is
not a taxable person under Section 133(o) of the local Government Code.
Thus, even if we assume that the Republic has granted to MIAA the
beneficial use of the Airport Lands and Buildings, such fact does not make
these real properties subject to real estate tax.
However, portions of the Airport Lands and Buildings that MIAA leases
to private entities are not exempt from real estate tax. For example, the
land area occupied by hangars that MIAA leases to private corporations
is subject to real estate tax. In such a case, MIAA has granted the
beneficial use of such land area for a consideration to a taxable person
and therefore such land area is subject to real estate tax.[17] (Emphasis
supplied)
In Lung Center of the Philippines v. Quezon City,[18] the Court held:
x x x While portions of the hospital are used for the treatment of patients and
the dispensation of medical services to them, whether paying or non-paying,
other portions thereof are being leased to private individuals for their clinics
and a canteen. Further, a portion of the land is being leased to a private
individual for her business enterprise under the business name "Elliptical
Orchids and Garden Center." Indeed, the petitioner's evidence shows that it
collected P1,136,483.45 as rentals in 1991 and P1,679,999.28 for 1992 from
the said lessees.
Accordingly, we hold that the portions of the land leased to private
entities as well as those parts of the hospital leased to private
individuals are not exempt from such taxes. On the other hand, the
portions of the land occupied by the hospital and portions of the hospital
used for its patients, whether paying or non-paying, are exempt from real
property taxes.[19] (Emphasis supplied)
Article 420 of the Civil Code classifies as properties of public dominion those
that are "intended for public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, banks, shores, roadsteads" and those
that "are intended for some public service or for the development of the
national wealth." Properties of public dominion are not only exempt from real
estate tax, they are exempt from sale at public auction. In Heirs of Mario
Malabanan v. Republic,[20] the Court held that, "It is clear that property of
public dominion, which generally includes property belonging to the State,
cannot be x x x subject of the commerce of man."[21]
In Philippine Fisheries Development Authority v. Court of Appeals,[22] the
Court held:
x x x [T]he real property tax assessments issued by the City of Iloilo should
be upheld only with respect to the portions leased to private persons. In case
the Authority fails to pay the real property taxes due thereon, said
portions cannot be sold at public auction to satisfy the tax delinquency.
In Chavez v. Public Estates Authority it was held that reclaimed lands are
lands of the public dominion and cannot, without Congressional fiat, be
subject of a sale, public or private x x x.
In the same vein, the port built by the State in the Iloilo fishing complex
is a property of the public dominion and cannot therefore be sold at
public auction. Article 420 of the Civil Code, provides:
"Article 420. The following things are property of public dominion:
1. Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores,
roadsteads, and others of similar character;
2. Those which belong to the State, without being for public use, and
are intended for some public service or for the development of the
national wealth."
The Iloilo fishing port which was constructed by the State for public use
and/or public service falls within the term "port" in the aforecited
provision. Being a property of public dominion the same cannot be
subject to execution or foreclosure sale. In like manner, the reclaimed
land on which the IFPC is built cannot be the object of a private or public sale
without Congressional authorization.[23] (Emphasis supplied)
In Manila International Airport Authority,[24] the Court held:
x x x [T]he Airport Lands and Buildings of MIAA are properties devoted to
public use and thus are properties of public dominion. Properties of public
dominion are owned by the State or the Republic. Article 420 of the Civil
Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks, shores, roadsteads, and
others of similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth.
The term "ports x x x constructed by the Sate" includes airports and seaports.
The Airport Lands and Buildings of MIAA are intended for public use, and at
the very least intended for public service. Whether intended for public use or
public service, the Airport Lands and Buildings are properties of public
dominion. As properties of public dominion, the the Airport lands and
Buildings are owned by the Republic and thus exempt from real estate tax
under Section 234(a) of the Local Government Code.
xxxx
Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA,
being devoted to public use, are properties of public dominion and thus
owned by the State or the Republic of the Philippines. Article 420 specifically
mentions "ports x x x constructed by the State," which includes public airports
and seaports, as properties of public dominion and owned by the Republic.
As properties of public dominion owned by the Republic, there is no doubt
whatsoever that the Airport Lands and Buildings are expressly exempt from
real estate tax under Section 234(a) of the local Government Code. This
Court has also repeatedly ruled that properties of public dominion are
not subject to execution or foreclosure sale.[25] (Emphasis supplied)
In the present case, the parcels of land are not properties of public dominion
because they are not "intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks, shores,
roadsteads." Neither are they "intended for some public service or for the
development of the national wealth." MPLDC leases portions of the
properties to different business establishments. Thus, the portions of the
properties leased to taxable entities are not only subject to real estate tax,
they can also be sold at public auction to satisfy the tax delinquency.
In sum, only those portions of the properties leased to taxable entities are
subject to real estate tax for the period of such leases. Pasig City must,
therefore, issue to respondent new real property tax assessments covering
the portions of the properties leased to taxable entities. If the Republic of the
Philippines fails to pay the real property tax on the portions of the properties
leased to taxable entities, then such portions may be sold at public auction to
satisfy the tax delinquency.
WHEREFORE, the petition is PARTIALLY GRANTED. The Court SETS
ASIDE the 17 October 2008 Decision of the Court of Appeals in CA-G.R. SP
No. 97498 and declares VOID the 30 September 2002 real property tax
assessment issued by Pasig City on the subject properties of Mid-Pasig Land
Development Corporation, the 8 November 2005 warrants of levy on the
properties, and the 2 December 2005 auction sale. Pasig City
is DIRECTED to issue to respondent new real property tax assessments
covering only the portions of the properties actually leased to taxable entities,
and only for the period of such leases. Interests and penalties on such new
real property tax assessment shall accrue only after receipt of such new
assessment by respondent.
SO ORDERED.
# 16 FERNANDO et.al vs ACUNA et al.,
FACTS: A parcel of land was registered in the names of Spouses Jose
Fernando and Lucila Tinio and spouses Antonia Fernando and Felipe
Galvez. When they died inestestate, the property remained undivided. The
heirs and successors-in-interest, herein petitioners (Jose and Zoilo
Fernando, Norma Fernando Banares, Rosario Fernando Tangkencgo, heirs
of Tomas Fernando, heirs of Guillermo Fernando, heirs of Iluminada
Fernando and heirs of Germogena Fernando) failed to agree on the division
of the subject property. Thus, except for the heirs of Germogena Fernando,
filed a Complaint for partition against the heirs of Germogena Fernando
praying that the subject property be partitioned into 8 equal parts
corresponding to the hereditary interest of each group of heirs.
In his Complaint in intervention, 1998, respondent Leon Acuna
averred that the portion of the property identified as Lot 1303 was already
adjudicated the petitioners' predecessor-in-interest. He likewise claimed the
portion identified as Lot 1302 was also already adjudicated to other people
as well.
TC found that Lot 1302 was already titled in the names of third
persons. With respect to Lot 1303 TC found out that the November 1929
decision was never executed and has already prescribed. TC ordered the
reversion of Lot 1303 to the ownership of spouses Jose Fernando and Lucila
Tinio and spouses Antonia Fernando and Felipe Galvez and allowed the
partition of Lot 1303 among petitioners as successors-in-interest of said
registered owners. Excluded from the partition, however, were the portions of
the property which petitioners admitted had been sold or transferred to
Ruperta Sto. Domingo Villasenor and respondent Acuna.
With respect to Sapang Bayan, TC found that the same had not
been alleged in the pleadings nor raised as an issue during the pre-trial
conference. Also, according to the trial court, the parties failed to clearly
show whether Sapang Bayan was previously a dry portion of either Lot 1302
or Lot 1303. Neither was there any proof that Sapang Bayan was a river that
just dried up or that it was an accretion which the adjoining lots gradually
received from the effects of the current of water. It was likewise not
established who were the owners of the lots adjoining Sapang Bayan. The
trial court concluded that none of the parties had clearly and sufficiently
established their claims over Sapang Bay.
All the parties, with the except Acuna, elevated this case to the CA
which
REVERSED and SET ASIDE the desicsion. Hence, plaintiffs and defendants
in the court to SC for review.
ISSUE: Can the petitioners validly claim the ownership of the Sapang
Bayan?
HELD: NO. CA erred in ruling that the principle of accretion is applicable. the
Court of Appeals erred in ruling that the principle of accretion is applicable
("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."
Art. 457, CC) The character of the Sapang Bayan property was not shown to
be of the nature that is being referred to in the provision which is an accretion
known as alluvion. In fact the parties could not agree how Sapang Bayan
came about. Whether it was a gradual deposit received from the river current
or a dried-up creek bed connected to the main river could not be ascertained.
Even assuming that Sapang Bayan was a dried-up creek bed, under
Article 420, paragraph 1 and Article 502, of the CC, rivers and their natural
beds are property of public dominion. In the absence of any provision of law
vesting ownership of the dried-up river bed in some other person, it must
continue to belong to the State.
In Republic v. Court of Appeals Court ruled that lots were portions of
the bed of the Meycauayan river and are therefore classified as property of
the public domain under Article 420. They are not open to registration under
the Land Registration act. Furthermore, in Celestial v. Cachopero, the Court
similarly ruled that a dried-up creek bed is property of public dominion: A
creek, like the Salunayan Creek, is a recess or arm extending from a river
and participating in the ebb and flow of the sea. As such, under Article 420
the Salunayan Creek, including its natural bed, is property of the public
domain which is not susceptible to private appropriation and and acquisitive
prescription. And, absent any declaration by the government, that a portion of
the creek has dried-up does not, by itself, alter its inalienable character.
Therefore, on the basis of the law and jurisprudence on the matter, Sapang
Bayan cannot be adjudged to any of the parties in this case.
smbalbaboco
#17 THIRD DIVISION
G.R. No. 191109, July 18, 2012
 REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE PHILIPPINE
RECLAMATION AUTHORITY (PRA), Petitioner, v. CITY OF
PARAAQUE Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, on pure questions of law, assailing the January 8, 2010
Order1 of the Regional Trial Court, Branch 195, Paraaque City (RTC), which
ruled that petitioner Philippine Reclamation Authority (PRA) is a government-
owned and controlled corporation (GOCC), a taxable entity, and, therefore,
not exempt from payment of real property taxes. The pertinent portion of the
said order reads:chanroblesvirtualawlibrary
In view of the finding of this court that petitioner is not exempt from payment
of real property taxes, respondent Paraaque City Treasurer Liberato M.
Carabeo did not act xxx without or in excess of jurisdiction, or with grave
abuse of discretion amounting to lack or in excess of jurisdiction in issuing
the warrants of levy on the subject properties.chanroblesvirtualawlibrary
WHEREFORE, the instant petition is dismissed. The Motion for Leave to File
and Admit Attached Supplemental Petition is denied and the supplemental
petition attached thereto is not admitted.
The Public Estates Authority (PEA) is a government corporation created by
virtue of Presidential Decree (P.D.) No. 1084 (Creating the Public Estates
Authority, Defining its Powers and Functions, Providing Funds Therefor and
For Other Purposes) which took effect on February 4, 1977 to provide a
coordinated, economical and efficient reclamation of lands, and the
administration and operation of lands belonging to, managed and/or operated
by, the government with the object of maximizing their utilization and
hastening their development consistent with public interest.
On February 14, 1979, by virtue of Executive Order (E.O.) No. 525 issued by
then President Ferdinand Marcos, PEA was designated as the agency
primarily responsible for integrating, directing and coordinating all
reclamation projects for and on behalf of the National Government.
On October 26, 2004, then President Gloria Macapagal-Arroyo issued E.O.
No. 380 transforming PEA into PRA, which shall perform all the powers and
functions of the PEA relating to reclamation activities.
By virtue of its mandate, PRA reclaimed several portions of the foreshore
and offshore areas of Manila Bay, including those located in Paraaque City,
and was issued Original Certificates of Title (OCT Nos. 180, 202, 206, 207,
289, 557, and 559) and Transfer Certificates of Title (TCT Nos. 104628,
7312, 7309, 7311, 9685, and 9686) over the reclaimed lands.
On February 19, 2003, then Paraaque City Treasurer Liberato M.
Carabeo (Carabeo) issued Warrants of Levy on PRAs reclaimed properties
(Central Business Park and Barangay San Dionisio) located in Paraaque
City based on the assessment for delinquent real property taxes made by
then Paraaque City Assessor Soledad Medina Cue for tax years 2001 and
2002.chanroblesvirtualawlibrary
On March 26, 2003, PRA filed a petition for prohibition with prayer for
temporary restraining order (TRO) and/or writ of preliminary injunction
against Carabeo before the RTC.
On April 3, 2003, after due hearing, the RTC issued an order denying PRAs
petition for the issuance of a temporary restraining order.
On April 4, 2003, PRA sent a letter to Carabeo requesting the latter not to
proceed with the public auction of the subject reclaimed properties on April 7,
2003. In response, Carabeo sent a letter stating that the public auction could
not be deferred because the RTC had already denied PRAs TRO
application.
On April 25, 2003, the RTC denied PRAs prayer for the issuance of a writ of
preliminary injunction for being moot and academic considering that the
auction sale of the subject properties on April 7, 2003 had already been
consummated.
On August 3, 2009, after an exchange of several pleadings and the failure of
both parties to arrive at a compromise agreement, PRA filed a Motion for
Leave to File and Admit Attached Supplemental Petition which sought to
declare as null and void the assessment for real property taxes, the levy
based on the said assessment, the public auction sale conducted on April 7,
2003, and the Certificates of Sale issued pursuant to the auction sale.
On January 8, 2010, the RTC rendered its decision dismissing PRAs
petition. In ruling that PRA was not exempt from payment of real property
taxes, the RTC reasoned out that it was a GOCC under Section 3 of P.D. No.
1084. It was organized as a stock corporation because it had an authorized
capital stock divided into no par value shares. In fact, PRA admitted its
corporate personality and that said properties were registered in its name as
shown by the certificates of title. Therefore, as a GOCC, local tax exemption
is withdrawn by virtue of Section 193 of Republic Act (R.A.) No. 7160 [Local
Government Code (LGC)] which was the prevailing law in 2001 and 2002
with respect to real property taxation. The RTC also ruled that the tax
exemption claimed by PRA under E.O. No. 654 had already been expressly
repealed by R.A. No. 7160 and that PRA failed to comply with the procedural
requirements in Section 206 thereof.chanroblesvirtualawlibrary
Not in conformity, PRA filed this petition for certiorari assailing the January 8,
2010 RTC Order based on the following
GROUNDS
I Thus, PRA insists that, as an incorporated instrumentality of the National
THE TRIAL COURT GRAVELY ERRED IN FINDING THAT PETITIONER IS
LIABLE TO PAY REAL PROPERTY TAX ON THE SUBJECT RECLAIMED
LANDS CONSIDERING THAT PETITIONER IS AN INCORPORATED
INSTRUMENTALITY OF THE NATIONAL GOVERNMENT AND IS,
THEREFORE, EXEMPT FROM PAYMENT OF REAL PROPERTY TAX
UNDER SECTIONS 234(A) AND 133(O) OF REPUBLIC ACT 7160 OR THE
LOCAL GOVERNMENT CODE VIS--VIS MANILA INTERNATIONAL
AIRPORT AUTHORITY V. COURT OF
APPEALS.chanroblesvirtualawlibrary
II
THE TRIAL COURT GRAVELY ERRED IN FAILING TO CONSIDER THAT
RECLAIMED LANDS ARE PART OF THE PUBLIC DOMAIN AND, HENCE,
EXEMPT FROM REAL PROPERTY TAX.
PRA asserts that it is not a GOCC under Section 2(13) of the Introductory
Provisions of the Administrative Code. Neither is it a GOCC under Section
16, Article XII of the 1987 Constitution because it is not required to meet the
test of economic viability. Instead, PRA is a government instrumentality
vested with corporate powers and performing an essential public service
pursuant to Section 2(10) of the Introductory Provisions of the Administrative
Code. Although it has a capital stock divided into shares, it is not authorized
to distribute dividends and allotment of surplus and profits to its stockholders.
Therefore, it may not be classified as a stock corporation because it lacks the
second requisite of a stock corporation which is the distribution of dividends
and allotment of surplus and profits to the stockholders.
It insists that it may not be classified as a non-stock corporation because it
has no members and it is not organized for charitable, religious, educational,
professional, cultural, recreational, fraternal, literary, scientific, social, civil
service, or similar purposes, like trade, industry, agriculture and like
chambers as provided in Section 88 of the Corporation Code.
Moreover, PRA points out that it was not created to compete in the market
place as there was no competing reclamation company operated by the
private sector. Also, while PRA is vested with corporate powers under P.D.
No. 1084, such circumstance does not make it a corporation but merely an
incorporated instrumentality and that the mere fact that an incorporated
instrumentality of the National Government holds title to real property does
not make said instrumentality a GOCC. Section 48, Chapter 12, Book I of the
Administrative Code of 1987 recognizes a scenario where a piece of land
owned by the Republic is titled in the name of a department, agency or
instrumentality.
Government, it is exempt from payment of real property tax except when the
beneficial use of the real property is granted to a taxable person. PRA claims
that based on Section 133(o) of the LGC, local governments cannot tax the
national government which delegate to local governments the power to tax.
It explains that reclaimed lands are part of the public domain, owned by the
State, thus, exempt from the payment of real estate taxes. Reclaimed lands
retain their inherent potential as areas for public use or public service. While
the subject reclaimed lands are still in its hands, these lands remain public
lands and form part of the public domain. Hence, the assessment of real
property taxes made on said lands, as well as the levy thereon, and the
public sale thereof on April 7, 2003, including the issuance of the certificates
of sale in favor of the respondent Paraaque City, are invalid and of no force
and effect.chanroblesvirtualawlibrary
On the other hand, the City of Paraaque (respondent) argues that PRA
since its creation consistently represented itself to be a GOCC. PRAs very
own charter (P.D. No. 1084) declared it to be a GOCC and that it has entered
into several thousands of contracts where it represented itself to be a GOCC.
In fact, PRA admitted in its original and amended petitions and pretrial brief
filed with the RTC of Paraaque City that it was a GOCC.
Respondent further argues that PRA is a stock corporation with an
authorized capital stock divided into 3 million no par value shares, out of
which 2 million shares have been subscribed and fully paid up. Section 193
of the LGC of 1991 has withdrawn tax exemption privileges granted to or
presently enjoyed by all persons, whether natural or juridical, including
GOCCs.
Hence, since PRA is a GOCC, it is not exempt from the payment of real
property tax.
THE COURTS RULING
The Court finds merit in the petition.
Section 2(13) of the Introductory Provisions of the Administrative Code of
1987 defines a GOCC as follows:
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any agency
organized as a stock or non-stock corporation, vested with functions relating
to public needs whether governmental or proprietary in nature, and owned by
the Government directly or through its instrumentalities either wholly, or,
where applicable as in the case of stock corporations, to the extent of at least
fifty-one (51) percent of its capital stock: x x x.
On the other hand, Section 2(10) of the Introductory Provisions of the
Administrative Code defines a government "instrumentality" as follows:
SEC. 2. General Terms Defined. x x x x
(10) Instrumentality refers to any agency of the National Government, not
integrated within the department framework, vested with special functions or
jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually
through a charter. x x x
From the above definitions, it is clear that a GOCC must be "organized as a
stock or non-stock corporation while an instrumentality is vested by law with
corporate powers. Likewise, when the law makes a government
instrumentality operationally autonomous, the instrumentality remains part of
the National Government machinery although not integrated with the
department framework.
When the law vests in a government instrumentality corporate powers, the
instrumentality does not necessarily become a corporation. Unless the
government instrumentality is organized as a stock or non-stock corporation,
it remains a government instrumentality exercising not only governmental but
also corporate powers.
Many government instrumentalities are vested with corporate powers but
they do not become stock or non-stock corporations, which is a necessary
condition before an agency or instrumentality is deemed a GOCC. Examples
are the Mactan International Airport Authority, the Philippine Ports Authority,
the University of the Philippines, and Bangko Sentral ng Pilipinas. All these
government instrumentalities exercise corporate powers but they are not
organized as stock or non-stock corporations as required by Section 2(13) of
the Introductory Provisions of the Administrative Code. These government
instrumentalities are sometimes loosely called government corporate entities.
They are not, however, GOCCs in the strict sense as understood under the
Administrative Code, which is the governing law defining the legal
relationship and status of government entities.2
Correlatively, Section 3 of the Corporation Code defines a stock corporation
as one whose "capital stock is divided into shares and x x x authorized to
distribute to the holders of such shares dividends x x x." Section 87 thereof
defines a non-stock corporation as "one where no part of its income is
distributable as dividends to its members, trustees or officers." Further,
Section 88 provides that non-stock corporations are "organized for charitable,
religious, educational, professional, cultural, recreational, fraternal, literary,
scientific, social, civil service, or similar purposes, like trade, industry,
agriculture and like chambers."
Two requisites must concur before one may be classified as a stock
corporation, namely: (1) that it has capital stock divided into shares; and (2)
that it is authorized to distribute dividends and allotments of surplus and
profits to its stockholders. If only one requisite is present, it cannot be
properly classified as a stock corporation. As for non-stock corporations, they
must have members and must not distribute any part of their income to said
members.3
In the case at bench, PRA is not a GOCC because it is neither a stock nor a
non-stock corporation. It cannot be considered as a stock corporation
because although it has a capital stock divided into no par value shares as
provided in Section 74 of P.D. No. 1084, it is not authorized to distribute
dividends, surplus allotments or profits to stockholders. There is no provision
whatsoever in P.D. No. 1084 or in any of the subsequent executive
issuances pertaining to PRA, particularly, E.O. No. 525,5 E.O. No. 6546 and
EO No. 7987 that authorizes PRA to distribute dividends, surplus allotments
or profits to its stockholders.
PRA cannot be considered a non-stock corporation either because it does
not have members. A non-stock corporation must have members.8 Moreover,
it was not organized for any of the purposes mentioned in Section 88 of the
Corporation Code. Specifically, it was created to manage all government
reclamation projects.
Furthermore, there is another reason why the PRA cannot be classified as a
GOCC. Section 16, Article XII of the 1987 Constitution provides as follows:
Section 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Government-
owned or controlled corporations may be created or established by special
charters in the interest of the common good and subject to the test of
economic viability.chanroblesvirtualawlibrary
The fundamental provision above authorizes Congress to create GOCCs
through special charters on two conditions: 1) the GOCC must be
established for the common good; and 2) the GOCC must meet the test of
economic viability. In this case, PRA may have passed the first condition of
common good but failed the second one - economic viability. Undoubtedly,
the purpose behind the creation of PRA was not for economic or commercial
activities. Neither was it created to compete in the market place considering
that there were no other competing reclamation companies being operated
by the private sector. As mentioned earlier, PRA was created essentially to
perform a public service considering that it was primarily responsible for a
coordinated, economical and efficient reclamation, administration and
operation of lands belonging to the government with the object of maximizing
their utilization and hastening their development consistent with the public
interest. Sections 2 and 4 of P.D. No. 1084 reads, as
follows:chanroblesvirtualawlibrary
Section 2. Declaration of policy. It is the declared policy of the State to
provide for a coordinated, economical and efficient reclamation of lands, and
the administration and operation of lands belonging to, managed and/or
operated by the government, with the object of maximizing their utilization
and hastening their development consistent with the public interest.
Section 4. Purposes. 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 services as may be necessary
for the efficient, economical and beneficial utilization of the above properties.
The twin requirement of common good and economic viability was lengthily
discussed in the case of Manila International Airport Authority v. Court of
Appeals,9 the pertinent portion of which reads:
Third, the government-owned or controlled corporations created through
special charters are those that meet the two conditions prescribed in Section
16, Article XII of the Constitution. The first condition is that the government-
owned or controlled corporation must be established for the common good.
The second condition is that the government-owned or controlled corporation
must meet the test of economic viability. Section 16, Article XII of the 1987
Constitution provides:
SEC. 16. The Congress shall not, except by general law, provide for the
formation, organization, or regulation of private corporations. Government-
owned or controlled corporations may be created or established by special
charters in the interest of the common good and subject to the test of
economic viability.
The Constitution expressly authorizes the legislature to create "government-
owned or controlled corporations" through special charters only if these
entities are required to meet the twin conditions of common good and
economic viability. In other words, Congress has no power to create
government-owned or controlled corporations with special charters unless
they are made to comply with the two conditions of common good and
economic viability. The test of economic viability applies only to
government-owned or controlled corporations that perform economic
or commercial activities and need to compete in the market place.
Being essentially economic vehicles of the State for the common good
meaning for economic development purposes these government-
owned or controlled corporations with special charters are usually
organized as stock corporations just like ordinary private corporations.
In contrast, government instrumentalities vested with corporate powers
and performing governmental or public functions need not meet the
test of economic viability. These instrumentalities perform essential
public services for the common good, services that every modern State
must provide its citizens. These instrumentalities need not be
economically viable since the government may even subsidize their
entire operations. These instrumentalities are not the "government-owned
or controlled corporations" referred to in Section 16, Article XII of the 1987
Constitution.
Thus, the Constitution imposes no limitation when the legislature creates
government instrumentalities vested with corporate powers but performing
essential governmental or public functions. Congress has plenary authority to
create government instrumentalities vested with corporate powers provided
these instrumentalities perform essential government functions or public
services. However, when the legislature creates through special charters
corporations that perform economic or commercial activities, such entities
known as "government-owned or controlled corporations" must meet the
test of economic viability because they compete in the market place.
This is the situation of the Land Bank of the Philippines and the Development
Bank of the Philippines and similar government- owned or controlled
corporations, which derive their income to meet operating expenses
solely from commercial transactions in competition with the private
sector. The intent of the Constitution is to prevent the creation of
government-owned or controlled corporations that cannot survive on their
own in the market place and thus merely drain the public
coffers.chanroblesvirtualawlibrary
Commissioner Blas F. Ople, proponent of the test of economic viability,
explained to the Constitutional Commission the purpose of this test, as
follows:
MR. OPLE: Madam President, the reason for this concern is really that when
the government creates a corporation, there is a sense in which this
corporation becomes exempt from the test of economic performance. We
know what happened in the past. If a government corporation loses, then it
makes its claim upon the taxpayers' money through new equity infusions
from the government and what is always invoked is the common good. That
is the reason why this year, out of a budget of P115 billion for the entire
government, about P28 billion of this will go into equity infusions to support a
few government financial institutions. And this is all taxpayers' money which
could have been relocated to agrarian reform, to social services like health
and education, to augment the salaries of grossly underpaid public
employees. And yet this is all going down the drain.
Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with
the "common good," this becomes a restraint on future enthusiasts for state
capitalism to excuse themselves from the responsibility of meeting the
market test so that they become viable. And so, Madam President, I
reiterate, for the committee's consideration and I am glad that I am joined in
this proposal by Commissioner Foz, the insertion of the standard of
"ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the
common good.
Father Joaquin G. Bernas, a leading member of the Constitutional
Commission, explains in his textbook The 1987 Constitution of the Republic
of the Philippines: A Commentary:
The second sentence was added by the 1986 Constitutional Commission.
The significant addition, however, is the phrase "in the interest of the
common good and subject to the test of economic viability." The addition
includes the ideas that they must show capacity to function efficiently in
business and that they should not go into activities which the private sector
can do better. Moreover, economic viability is more than financial viability but
also includes capability to make profit and generate benefits not quantifiable
in financial terms.
Clearly, the test of economic viability does not apply to government
entities vested with corporate powers and performing essential public
services. The State is obligated to render essential public services
regardless of the economic viability of providing such service. The non-
economic viability of rendering such essential public service does not excuse
the State from withholding such essential services from the public.
However, government-owned or controlled corporations with special
charters, organized essentially for economic or commercial objectives, must
meet the test of economic viability. These are the government-owned or
controlled corporations that are usually organized under their special charters
as stock corporations, like the Land Bank of the Philippines and the
Development Bank of the Philippines. These are the government- owned or
controlled corporations, along with government-owned or controlled
corporations organized under the Corporation Code, that fall under the
definition of "government-owned or controlled corporations" in Section 2(10)
of the Administrative Code. [Emphases supplied]
This Court is convinced that PRA is not a GOCC either under Section 2(3) of
the Introductory Provisions of the Administrative Code or under Section 16,
Article XII of the 1987 Constitution. The facts, the evidence on record and
jurisprudence on the issue support the position that PRA was not organized
either as a stock or a non-stock corporation. Neither was it created by
Congress to operate commercially and compete in the private market.
Instead, PRA is a government instrumentality vested with corporate powers
and performing an essential public service pursuant to Section 2(10) of the
Introductory Provisions of the Administrative Code. Being an incorporated
government instrumentality, it is exempt from payment of real property tax.
Clearly, respondent has no valid or legal basis in taxing the subject reclaimed
lands managed by PRA. On the other hand, Section 234(a) of the LGC, in
relation to its Section 133(o), exempts PRA from paying realty taxes and
protects it from the taxing powers of local government units. Sections 234(a)
and 133(o) of the LGC provide, as follows:
SEC. 234. Exemptions from Real Property Tax The following are exempted
from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person.
xxxx
SEC. 133. Common Limitations on the Taxing Powers of Local Government
Units. Unless otherwise provided herein, the exercise of the taxing powers
of provinces, cities, municipalities, and barangays shall not extend to the levy
of the following:
xxxx
(o) Taxes, fees or charges of any kinds on the National Government, its
agencies and instrumentalities, and local government units. [Emphasis
supplied]
It is clear from Section 234 that real property owned by the Republic of the
Philippines (the Republic) is exempt from real property tax unless the
beneficial use thereof has been granted to a taxable person. In this case,
there is no proof that PRA granted the beneficial use of the subject reclaimed
lands to a taxable entity. There is no showing on record either that PRA
leased the subject reclaimed properties to a private taxable entity.
This exemption should be read in relation to Section 133(o) of the same
Code, which prohibits local governments from imposing "[t]axes, fees or
charges of any kind on the National Government, its agencies and
instrumentalities x x x." The Administrative Code allows real property owned
by the Republic to be titled in the name of agencies or instrumentalities of the
national government. Such real properties remain owned by the Republic
and continue to be exempt from real estate tax.
Indeed, the Republic grants the beneficial use of its real property to an
agency or instrumentality of the national government. This happens when the
title of the real property is transferred to an agency or instrumentality even as
the Republic remains the owner of the real property. Such arrangement does
not result in the loss of the tax exemption, unless the beneficial use thereof
has been granted, for consideration or otherwise, to a taxable person."10
The rationale behind Section 133(o) has also been explained in the case of
the Manila International Airport Authority,11 to wit:
Section 133(o) recognizes the basic principle that local governments
cannot tax the national government, which historically merely delegated to
local governments the power to tax. While the 1987 Constitution now
includes taxation as one of the powers of local governments, local
governments may only exercise such power "subject to such guidelines and
limitations as the Congress may provide."
When local governments invoke the power to tax on national government
instrumentalities, such power is construed strictly against local governments.
The rule is that a tax is never presumed and there must be clear language in
the law imposing the tax. Any doubt whether a person, article or activity is
taxable is resolved against taxation. This rule applies with greater force when
local governments seek to tax national government instrumentalities.
Another rule is that a tax exemption is strictly construed against the taxpayer
claiming the exemption. However, when Congress grants an exemption to a
national government instrumentality from local taxation, such exemption is
construed liberally in favor of the national government instrumentality. As this
Court declared in Maceda v. Macaraig, Jr.:
The reason for the rule does not apply in the case of exemptions running to
the benefit of the government itself or its agencies. In such case the practical
effect of an exemption is merely to reduce the amount of money that has to
be handled by government in the course of its operations. For these reasons,
provisions granting exemptions to government agencies may be construed
liberally, in favor of non tax-liability of such agencies.
There is, moreover, no point in national and local governments taxing
each other, unless a sound and compelling policy requires such
transfer of public funds from one government pocket to another.
There is also no reason for local governments to tax national
government instrumentalities for rendering essential public services to
inhabitants of local governments. The only exception is when the
legislature clearly intended to tax government instrumentalities for the
delivery of essential public services for sound and compelling policy
considerations. There must be express language in the law empowering local
governments to tax national government instrumentalities. Any doubt
whether such power exists is resolved against local
governments.chanroblesvirtualawlibrary
Thus, Section 133 of the Local Government Code states that "unless
otherwise provided" in the Code, local governments cannot tax national
government instrumentalities. As this Court held in Basco v. Philippine
Amusements and Gaming Corporation:
The states have no power by taxation or otherwise, to retard, impede, burden
or in any manner control the operation of constitutional laws enacted by
Congress to carry into execution the powers vested in the federal
government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government
over local governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the
entire absence of power on the part of the States to touch, in that way
(taxation) at least, the instrumentalities of the United States (Johnson v.
Maryland, 254 US 51) and it can be agreed that no state or political
subdivision can regulate a federal instrumentality in such a way as to prevent
it from consummating its federal responsibilities, or even to seriously burden
it in the accomplishment of them." (Antieau, Modern Constitutional Law, Vol.
2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru
extermination of what local authorities may perceive to be undesirable
activities or enterprise using the power to tax as "a tool for regulation." (U.S.
v. Sanchez, 340 US 42)
The power to tax which was called by Justice Marshall as the "power to
destroy" (McCulloch v. Maryland, supra) cannot be allowed to defeat an
instrumentality or creation of the very entity which has the inherent power to
wield it. [Emphases supplied]
The Court agrees with PRA that the subject reclaimed lands are still part of
the public domain, owned by the State and, therefore, exempt from payment
of real estate taxes.
Section 2, Article XII of the 1987 Constitution reads in part, as follows:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum,
and other mineral oils, all forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and other natural resources are owned by
the State. With the exception of agricultural lands, all other natural resources
shall not be alienated. The exploration, development, and utilization of
natural resources shall be under the full control and supervision of the State.
The State may directly undertake such activities, or it may enter into co-
production, joint venture, or production-sharing agreements with Filipino
citizens, or corporations or associations at least 60 per centum of whose
capital is owned by such citizens. Such agreements may be for a period not
exceeding twenty-five years, renewable for not more than twenty-five years,
and under such terms and conditions as may provided by law. In cases of
water rights for irrigation, water supply, fisheries, or industrial uses other than
the development of waterpower, beneficial use may be the measure and limit
of the grant.chanroblesvirtualawlibrary
Similarly, Article 420 of the Civil Code enumerates properties belonging to
the State:
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. [Emphases supplied]
Here, the subject lands are reclaimed lands, specifically portions of the
foreshore and offshore areas of Manila Bay. As such, these lands remain
public lands and form part of the public domain. In the case of Chavez v.
Public Estates Authority and AMARI Coastal Development Corporation,12 the
Court held that foreshore and submerged areas irrefutably belonged to the
public domain and were inalienable unless reclaimed, classified as alienable
lands open to disposition and further declared no longer needed for public
service. The fact that alienable lands of the public domain were transferred to
the PEA (now PRA) and issued land patents or certificates of title in PEAs
name did not automatically make such lands private. This Court also held
therein that reclaimed lands retained their inherent potential as areas for
public use or public service.
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.13
Likewise, it is worthy to mention Section 14, Chapter 4, Title I, Book III of the
Administrative Code of 1987, thus:
SEC 14. Power to Reserve Lands of the Public and Private Dominion of the
Government.-
(1) The President shall have the power to reserve for settlement or public
use, and for specific public purposes, any of the lands of the public domain,
the use of which is not otherwise directed by law. The reserved land shall
thereafter remain subject to the specific public purpose indicated until
otherwise provided by law or proclamation.
Reclaimed lands such as the subject lands in issue are reserved lands for
public use. They are properties of public dominion. The ownership of such
lands remains with the State unless they are withdrawn by law or presidential
proclamation from public use.
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.
As the Court has repeatedly ruled, properties of public dominion are not
subject to execution or foreclosure sale.14 Thus, the assessment, levy and
foreclosure made on the subject reclaimed lands by respondent, as well as
the issuances of certificates of title in favor of respondent, are without basis.
WHEREFORE, the petition is GRANTED. The January 8, 2010 Order of the
Regional Trial Court, Branch 195, Paraaque City, is REVERSED and SET
ASIDE. All reclaimed properties owned by the Philippine Reclamation
Authority are hereby declared EXEMPT from real estate taxes. All real estate
tax assessments, including the final notices of real estate tax delinquencies,
issued by the City of Paraaque on the subject reclaimed properties; the
assailed auction sale, dated April 7, 2003; and the Certificates of Sale
subsequently issued by the Paraaque City Treasurer in favor of the City of
Paraaque, are all declared VOID.redchanroblesvirtualawlibrary
SO ORDERED.
#18 SPECIAL SECOND DIVISION
G.R. No. 191667, April 22, 2015
LAND BANK OF THE PHILIPPINES, Petitioner, v. EDUARDO M.
CACAYURAN, Respondent,
MUNICIPALITY OF AGOO, LA UNION, Intervenor.
AMENDED DECISION
PERLAS-BERNABE, J.:
Before the Court are the following motions: (a) the Motion for
Reconsideration1 dated May 22, 2013, filed by petitioner Land Bank of the
Philippines (LBP) assailing the Decision2 dated April 17, 2013 of the Court
(April 17, 2013 Decision), which upheld the Decision3 dated March 26, 2010
of the Court of Appeals (CA) in CA-G.R. CV. No. 89732 affirming with
modification the Decision4 dated April 10, 2007 of the Regional Trial Court of
Agoo, La Union, Branch 31 in Civil Case No. A-2473; (b) the Motion for
Leave to Intervene with Pleading-in-Intervention Attached 5 dated July 8,
2013, filed by the Municipality of Agoo, La Union (Municipality) praying that it
be allowed to intervene in this case; and (c) the Motion for Reconsideration-
in-Intervention6 dated July 8, 2013, filed by the Municipality seeking that the
Court set aside its April 17, 2013 Decision and promulgate a new one in its
stead dismissing the case (subject motions).
The Facts
The instant case arose from two (2) loans (Subject Loans) entered into by
the Municipality with LBP in order to finance the Redevelopment Plan of the
Agoo Public Plaza (Public Plaza). Through Resolution Nos. 68-20057 and
139-2005,8 the Sangguniang Bayan of the Municipality (Sangguniang Bayan)
authorized its then-Mayor Eufranio Eriguel (Mayor Eriguel) to enter into a
P4,000,000.00-loan with LBP, the proceeds of which were used to construct
ten (10) kiosks at the Public Plaza. Around a year later, the SB issued
Resolution Nos. 58-20069 and 128-2006,10 this time authorizing Mayor
Eriguel to obtain a P28,000,000.00-loan from LBP for the construction of a
commercial center named "Agoo People's Center" within the premises of the
Public Plaza. In order to secure the Subject Loans, the Municipality used as
collateral, among others, a 2,323.75-square meter lot situated at the south
eastern portion of the Public Plaza (Plaza Lot).11
However, a group of residents, led by respondent Eduardo M. Cacayuran
(Cacayuran), opposed the redevelopment of the Public Plaza, as well as the
funding therefor thru the Subject Loans, claiming that these were "highly
irregular, violative of the law, and detrimental to public interests, and will
result to wanton desecration of the [Public Plaza]."12 Further, Cacayuran
requested the municipal officers to furnish him with the various documents
relating to the Public Plaza's redevelopment, which, however, went
unheeded.13 Thus, Cacayuran, invoking his right as a taxpayer, filed a
complaint14 against LBP and various officers of the Municipality, including
Mayor Eriguel (but excluding the Municipality itself as party-defendant),
assailing the validity of the aforesaid loan agreements and praying that the
commercialization of the Public Plaza be enjoined.15
Initially, the municipal officers moved for the outright dismissal of the
complaint, which was denied, thus constraining them to file their respective
answers. For its part, LBP asserted, inter alia, that Cacayuran did not have
any cause of action since he was not privy to the loan agreements entered
into by LBP and the Municipality.16
During the pendency of the proceedings, the construction of the Agoo
People's Center was completed. Later on, the Sangguniang Bayan passed
Municipal Ordinance No. 02-200717 declaring the area where such building
stood as patrimonial property of the Municipality.18
The RTC Ruling
In a Decision19 dated April 10, 2007, the RTC declared the Subject Loans
null and void, finding that the resolutions approving the procurement of the
same were passed in a highly irregular manner and thus, ultra vires. As such,
it pronounced that the Municipality was not bound by the Subject Loans and
that the municipal officers should, instead, be held personally liable for the
same. Further, it ruled that since the Plaza Lot is a property for public use, it
cannot be used as collateral for the Subject Loans.20
Aggrieved, LBP and the municipal officers appealed21 to the CA. However,
the appeal of the municipal officers was deemed abandoned and dismissed
for their failure to file an appellants' brief despite due notice.22 Thus, only
LBP's appeal was given due course by the CA.23
The CA Ruling
In a Decision24 dated March 26, 2010, the CA affirmed the ruling of the RTC,
with modification excluding then-Vice Mayor Antonio Eslao from personal
liability arising from the Subject Loans. It held that: (a) Cacayuran had locus
standi to file the instant complaint, considering that he is a resident of the
Municipality and the issue at hand involved public interest of transcendental
importance; (b) Resolution Nos. 68-2005, 138-2005, 58-2006, 126-2006
were invalidly passed due to non-compliance with certain provisions of
Republic Act No. 7160,25 otherwise known as the Local Government Code of
1991 (LGC); (c) the Plaza Lot is property of public dominion, and thus,
cannot be used as collateral; and (d) the procurement of the Subject Loans
were ultra vires acts for having been entered into without proper authority
and that the collaterals used therefor constituted improper disbursement of
public funds.26
Dissatisfied, LBP filed a petition for review on certiorari27 before this Court.
Proceedings Before the Court
In a Decision28 dated April 17, 2013 the Court denied LBP's petition, and
accordingly, affirmed the ruling of the CA. Agreeing with the CA, the Court
held that: (a) Cacayuran had legal standing to institute a taxpayer's suit;29 (b)
Resolution Nos. 68-2005, 139-2005, 58-2006, 126-2006 cannot be relied
upon to validate the Subject Loans, as the LGC requires the passing of an
ordinance in order for any loan agreement to be valid;30 and (c) the
procurement of the Subject Loans are ultra vires acts of the municipal
officers who approved the same, and thus, liability therefor shall devolve
upon them.31
Undaunted, LBP moved for reconsideration, basically reiterating its earlier
position that Cacayuran had no legal standing to sue, and that Resolution
Nos. 68-2005, 139-2005, 58-2006, and 126-2006 may be relied upon in
validating the Subject Loans.32
Meanwhile, the Municipality filed a Motion for Leave to Intervene with
Pleading-In-Intervention Attached33 dated July 8, 2013 and a Motion for
Reconsideration in-Intervention34 of even date, praying that it be included as
a party-litigant to the instant case. It contends that as a contracting party to
the Subject Loans, it is an indispensable party to the action filed by
Cacayuran. As such, there cannot be any "real disposition" of the instant suit
by reason of its exclusion from the same.
In opposition,35 Cacayuran maintains that LBP did not raise any new matter
to warrant reconsideration of the April 17, 2013 Decision. Anent the
Municipality's motion to intervene, Cacayuran insists that the Municipality is
not a real party-in-interest to the instant case as his complaint is against the
municipal officers in their personal capacity for their ultra vires acts which are
not binding on the Municipality.
Finally, in its Comment on the Motion for Leave to Intervene and Motion for
Reconsideration-in-Intervention36 dated May 6, 2014, LBP agrees with the
Municipality that the latter is an indispensable party to the instant case and
as such, should be included herein.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the Municipality
should be deemed as an indispensable party to the instant case, and thus,
be ordered impleaded herein.
The Court's Ruling
The Court rules in the affirmative.
Section 7, Rule 3 of the Rules of Court mandates that all indispensable
parties should be joined in a suit, viz.:
SEC. 7. Compulsory joinder of indispensable parties. - Parties-in-interest
without whom no final determination can be had of an action shall be joined
either as plaintiffs or defendants.
"An indispensable party is one whose interest will be affected by the court's
action in the litigation, and without whom no final determination of the case
can be had. The party's interest in the subject matter of the suit and in the
relief sought are so inextricably intertwined with the other parties' that his
legal presence as a party to the proceeding is an absolute necessity. In his
absence, there cannot be a resolution of the dispute of the parties before the
court which is effective, complete, or equitable."37Thus, the absence of an
indispensable party renders all subsequent actions of the court null and void,
for want of authority to act, not only as to the absent parties but even as to
those present.38
Nevertheless, it must be stressed that the failure to implead any
indispensable party to a suit does not necessarily result in the outright
dismissal of the complaint. In Heirs of Mesina v. Heirs of Fian, Sr.39 the Court
definitively explained that in instances of non-joinder of indispensable parties,
the proper remedy is to implead them and not to dismiss the case:
The non-joinder of indispensable parties is not a ground for the
dismissal of an action. At any stage of a judicial proceeding and/or at such
times as are just, parties may be added on the motion of a party or on the
initiative of the tribunal concerned. If the plaintiff refuses to implead an
indispensable party despite the order of the court, that court may dismiss the
complaint for the plaintiffs failure to comply with the order. The remedy is to
implead the non-party claimed to be indispensable.40 (Emphases and
underscoring supplied)
In this case, a judicious review of the records reveals that Cacayuran's
complaint against LBP and the municipal officers primarily prays that the
commercialization of the Public Plaza be enjoined and also, that the Subject
Loans be declared null and void for having been unlawfully entered into by
the said officers. However, Cacayuran failed to implead in his complaint the
Municipality, a real party-in-interest41and an indispensable party that stands
to be directly affected by any judicial resolution on the case, considering that:
(a) the contracting parties to the Subject Loans are LBP and the Municipality;
and (b) the Municipality owns the Public Plaza as well as the improvements
constructed thereon, including the Agoo People's Center. As the Municipality
aptly points out:42
3. To recapitulate: The case had its beginnings in the two (2) Loans
obtained by [the Municipality] from [LBP] and by the Board Resolutions
passed and adopted by the Sangguniang Bayan of Agoo, La Union, together
with the Mayor and Vice-Mayor of the Municipality.
xxxx
3d. The two (2) Loans were covered and evidenced by separate Loan
Agreements and Mortgage/Assignment Documents. The parties which
entered into and executed the covering documents were [LBP] as
lender and [the Municipality] as borrower.
3e. When the construction was about 40% complete, [Cacayuran] as a
taxpayer filed the case against the: (i) Mayor; (ii) Vice-Mayor; and (iii) Ten
(10) Members [of] the Sangguniang Bayan [of] Agoo, La Union, as
defendants. [The Municipality] was excluded, and was not impleaded as a
defendant in the case.
xxxx
Indeed, [the Municipality! Ion whose lands stands and is found the Agoo
Public Plaza, where the Kiosks and Commercial Building were under
construction and which constructions were sought to be restrained]
stands to be benefited or injured by the judgment in the case so filed or
the party entitled to the avails of the case and is, therefore, the real
party-in-interest.
xxxx
3k. Without having to say so, the RTC dispositions as affirmed with
modification by the CA Decision which, in turn was affirmed by the SC
Decision must not be binding upon [the Municipality], the real party-in-
interest, the indispensable party in fact, not impleaded as defendant in
this case.43 (Emphases and underscoring supplied).
The Court observes that it is only now that the issue of the Municipality's
exclusion from the instant case, despite its status as an indispensable party,
became apparent. This recent finding may be credited to the fact that the
initial parties before the Court, i.e., LBP and Cacayuran, have dissimilar
interests from that of the Municipality, and, hence, had no incentive to raise
the issue of the latter's status as an indispensable party. On the one hand,
Cacayuran's interest to the case is centered on the declaration of nullity of
the Subject Loans, as well as the enjoinment of the commercialization of the
Public Plaza; and on the other hand, LBP's interest to the case is anchored
on its capacity as creditor to the Subject Loans. To the mind of the Court, the
municipal officers would have been in the best position to raise this issue;
however, they were unable to do so because their appeal before the CA was
deemed abandoned for their failure to file an appellants' brief on time.
Be that as it may, the Court is not precluded from taking cognizance of the
Municipality's status as an indispensable party even at this stage of the
proceedings. Indeed, the presence of indispensable parties is necessary to
vest the court with jurisdiction44 and, corollarily, the issue on jurisdiction may
be raised at any stage of the proceedings.45 Thus, as it has now come to the
fore that any resolution of this case would not be possible and, hence, not
attain any real finality due to the non-joinder of the Municipality, the Court is
constrained to set aside all subsequent actuations of the courts a quo in this
case, including that of the Court's, and remand the case all the way back to
the RTC for the inclusion of all indispensable parties to the case and its
immediate disposition on the merits.46 With this, the propriety of the
Municipality's present intervention is now mooted.
WHEREFORE, the subject motions are PARTLY GRANTED. The Decision
dated April 17, 2013 of the Court, which upheld the Decision dated March 26,
2010 of the Court of Appeals in CA-G.R. CV. No. 89732 affirming with
modification the Decision dated April 10, 2007 of the Regional Trial Court of
Agoo, La Union, Branch 31 in Civil Case No. A-2473 is hereby SET ASIDE.
Accordingly, the instant case is REMANDED to the court a quo, which is
hereby DIRECTED to order respondent Eduardo M. Cacayuran to implead all
indispensable parties and thereafter, PROCEED with the resolution of the
case on the merits WITH DISPATCH.
SO ORDERED.
Carpio, (Chairperson), Brion, Del Castillo, and Perez, JJ., concur.
FIRST DIVISION
G.R. No. 192896, July 24, 2013
DREAM VILLAGE NEIGHBORHOOD ASSOCIATION, INC.,
REPRESENTED BY ITS INCUMBENT PRESIDENT, GREG
SERIEGO, Petitioner, v. BASES CONVERSION DEVELOPMENT
AUTHORITY,Respondent.
DECISION
REYES, J.:
Before us on Petition for Review1 under Rule 45 of the Rules of Court is the
Decision2 dated September 10, 2009 and Resolution3 dated July 13, 2010 of
the Court of Appeals (CA) in CA-G.R. SP No. 85228 nullifying and setting
aside for lack of jurisdiction the Resolution4 dated April 28, 2004 of the
Commission on the Settlement of Land Problems (COSLAP) in COSLAP
Case No. 99-500. The fallo of the assailed COSLAP Resolution reads, as
follows:cralavvonlinelawlibrary
WHEREFORE, premises considered, judgment is hereby rendered as
follows:cralavvonlinelawlibrary
1. Declaring the subject property, covering an area of 78,466 square meters,
now being occupied by the members of the Dream Village Neighborhood
Association, Inc. to be outside of Swo-00-0001302 BCDA property.
2. In accordance with the tenets of social justice, members of said
association are advised to apply for sales patent on their respective occupied
lots with the Land Management Bureau, DENR-NCR, pursuant to R.A. Nos.
274 and 730.
3. Directing the Land Management Bureau-DENR-NCR to process the sales
patent application of complainants pursuant to existing laws and regulation.
4. The peaceful possession of actual occupants be respected by the
respondents.
SO ORDERED.5nadcralavvonlinelawlibrary
Antecedent Facts
Petitioner Dream Village Neighborhood Association, Inc. (Dream Village)
claims to represent more than 2,000 families who have been occupying a
78,466-square meter lot in Western Bicutan, Taguig City since 1985 in the
concept of owners continuously, exclusively and notoriously. 6 The lot used
to be part of the Hacienda de Maricaban (Maricaban), owned by Dolores
Casal y Ochoa and registered under a Torrens title,7 Original Certificate of
Title (OCT) No. 291, issued on October 17, 1906 by the Registry of Deeds of
Rizal.8Maricaban covered several parcels of land with a total area of over
2,544 hectares spread out over Makati, Pasig, Taguig, Pasay, and
Paraaque.9
Following the purchase of Maricaban by the government of the United States
of America (USA) early in the American colonial period, to be converted into
the military reservation known as Fort William Mckinley, Transfer Certificate
of Title (TCT) No. 192 was issued in the name of the USA to cancel OCT No.
291.10 The US government later transferred 30 has. of Maricaban to the
Manila Railroad Company, for which TCT No. 192 was cancelled by TCT
Nos. 1218 and 1219, the first in the name of the Manila Railroad Company
for 30 has., and the second in the name of the USA for the rest of
the Maricaban property.11
On January 29, 1914, TCT No. 1219 was cancelled and replaced by TCT No.
1688, and later that year, on September 15, 1914, TCT No. 1688 was
cancelled and replaced by TCT No. 2288, both times in the name of the
USA.12 On December 6, 1956, the USA formally ceded Fort William Mckinley
to the Republic of the Philippines (Republic), and on September 11, 1958,
TCT No. 2288 was cancelled and replaced by TCT No. 61524, this time in
the name of the Republic.13 On July 12, 1957, President Carlos P. Garcia
issued Proclamation No. 423 withdrawing from sale or settlement the tracts
of land within Fort William Mckinley, now renamed Fort Bonifacio, and
reserving them for military purposes.14
On January 7, 1986, President Ferdinand E. Marcos issued Proclamation
No. 2476 declaring certain portions of Fort Bonifacio alienable and
disposable15 in the manner provided under Republic Act (R.A.) Nos. 274 and
730, in relation to the Public Land Act,16 thus allowing the sale to the settlers
of home lots in Upper Bicutan, Lower Bicutan, Signal Village, and Western
Bicutan.17
On October 16, 1987, President Corazon C. Aquino issued Proclamation No.
172 amending Proclamation No. 2476 by limiting to Lots 1 and 2 of the
survey Swo-13-000298 the areas in Western Bicutan open for disposition.18
On March 13, 1992, R.A. No. 7227 was passed19 creating the Bases
Conversion and Development Authority (BCDA) to oversee and accelerate
the conversion of Clark and Subic military reservations and their extension
camps (John Hay Station, Wallace Air Station, ODonnell Transmitter Station,
San Miguel Naval Communications Station and Capas Relay Station) to
productive civilian uses. Section 820 of the said law provides that the capital
of the BCDA will be provided from sales proceeds or transfers of lots in nine
(9) military camps in Metro Manila, including 723 has. of Fort Bonifacio. The
law, thus, expressly authorized the President of the Philippines to sell the
above lands, in whole or in part, which are hereby declared alienable and
disposable pursuant to the provisions of existing laws and regulations
governing sales of government properties,21 specifically to raise capital for
the BCDA. Titles to the camps were transferred to the BCDA for this
purpose,22 and TCT No. 61524 was cancelled on January 3, 1995 by TCT
Nos. 23888, 23887, 23886, 22460, 23889, 23890, and 23891, now in the
name of the BCDA.23
Excepted from disposition by the BCDA are: a) approximately 148.80 has.
reserved for the National Capital Region (NCR) Security Brigade, Philippine
Army officers housing area, and Philippine National Police jails and support
services (presently known as Camp Bagong Diwa); b) approximately 99.91
has. in Villamor Air Base for the Presidential Airlift Wing, one squadron of
helicopters for the NCR and respective security units; c) twenty one (21)
areas segregated by various presidential proclamations; and d) a proposed
30.15 has. as relocation site for families to be affected by the construction of
Circumferential Road 5 and Radial Road 4, provided that the boundaries and
technical description of these exempt areas shall be determined by an actual
ground survey.24
Now charging the BCDA of wrongfully asserting title to Dream Village and
unlawfully subjecting its members to summary demolition, resulting in unrest
and tensions among the residents,25 on November 22, 1999, the latter filed a
letter-complaint with the COSLAP to seek its assistance in the verification
survey of the subject 78,466-sq m property, which they claimed is within Lot
1 of Swo-13-000298 and thus is covered by Proclamation No. 172. They
claim that they have been occupying the area for thirty (30) years in the
concept of owners continuously, exclusively and notoriously for several
years, and have built their houses of sturdy materials thereon and
introduced paved roads, drainage and recreational and religious facilities.
Dream Village, thus, asserts that the lot is not among those transferred to the
BCDA under R.A. No. 7227, and therefore patent applications by the
occupants should be processed by the Land Management Bureau (LMB).
On August 15, 2000, Dream Village formalized its complaint by filing an
Amended Petition26 in the COSLAP. Among the reliefs it sought
were:cralavvonlinelawlibrary
d. DECLARING the subject property as alienable and disposable by
virtue of applicable laws;chanroblesvirtualawlibrary
e. Declaring the portion of Lot 1 of subdivision Plan SWO-13-000298,
situated in the barrio of Western Bicutan, Taguig, Metro Manila,
which is presently being occupied by herein petitioner as within the
coverage of Proclamation Nos. 2476 and 172 and outside the claim
of AFP-RSBS INDUSTRIAL PARK COMPLEX and/or BASES
CONVESION DEVELOPMENT AUTHORITY.
f. ORDERING the Land Management Bureau to process the
application of the ASSOCIATION members for the purchase of their
respective lots under the provisions of Acts Nos. 274 and
730.27 (Underscoring supplied)
Respondent BCDA in its Answer28 dated November 23, 2000 questioned the
jurisdiction of the COSLAP to hear Dream Villages complaint, while
asserting its title to the subject property pursuant to R.A. No. 7227. It argued
that under Executive Order (E.O.) No. 561 which created the COSLAP, its
task is merely to coordinate the various government offices and agencies
involved in the settlement of land problems or disputes, adding that BCDA
does not fall in the enumeration in Section 3 of E.O. No. 561, it being neither
a pastureland-lease holder, a timber concessionaire, or a government
reservation grantee, but the holder of patrimonial government property which
cannot be the subject of a petition for classification, release or subdivision by
the occupants of Dream Village.
In its Resolution29 dated April 28, 2004, the COSLAP narrated that it called a
mediation conference on March 22, 2001, during which the parties agreed to
have a relocation/verification survey conducted of the subject lot. On April 4,
2001, the COSLAP wrote to the Department of Environment and Natural
Resources (DENR)-Community Environment and Natural Resources Office-
NCR requesting the survey, which would also include Swo-00-0001302,
covering the adjacent AFP-RSBS Industrial Park established by
Proclamation No. 1218 on May 8, 1998 as well as the abandoned
Circumferential Road 5 (C-5 Road).30
On April 1, 2004, the COSLAP received the final report of the verification
survey and a blueprint copy of the survey plan from Atty. Rizaldy Barcelo,
Regional Technical Director for Lands of DENR. Specifically, Item No. 3 of
the DENR report states:cralavvonlinelawlibrary
3. Lot-1, Swo-000298 is inside Proclamation 172. Dream Village
Neighborhood Association, Inc. is outside Lot-1, Swo-13-000298 and
inside Lot-10, 11 & Portion of Lot 13, Swo-00-0001302 with an actual
area of 78,466 square meters. Likewise, the area actually is outside
Swo-00-0001302 of BCDA.31 (Emphasis ours and underscoring
supplied)
COSLAP Ruling
On the basis of the DENRs verification survey report, the COSLAP resolved
that Dream Village lies outside of BCDA, and particularly, outside of Swo-00-
0001302, and thus directed the LMB of the DENR to process the applications
of Dream Villages members for sales patent, noting that in view of the length
of time that they have been openly, continuously and notoriously occupying
the subject property in the concept of an owner, x x x they are qualified to
apply for sales patent on their respective occupied lots pursuant to R.A. Nos.
274 and 730 in relation to the provisions of the Public Land Act. 32
On the question of its jurisdiction over the complaint, the COSLAP cited the
likelihood that the summary eviction by the BCDA of more than 2,000
families in Dream Village could stir up serious social unrest, and maintained
that Section 3(2) of E.O. No. 561 authorizes it to assume jurisdiction and
resolve land problems or disputes which are critical and explosive in nature
considering, for instance, the large number of parties involved, the presence
or emergence of social tension or unrest, or other similar critical situations
requiring immediate action, even as Section 3(2)(d) of E.O. No. 561 also
allows it to take cognizance of petitions for classification, release and/or
subdivision of lands of the public domain, exactly the ultimate relief sought
by Dream Village. Rationalizing that it was created precisely to provide a
more effective mechanism for the expeditious settlement of land problems in
general, the COSLAP invoked as its authority the 1990 case of Baaga v.
COSLAP,33 where this Court said:cralavvonlinelawlibrary
It is true that Executive Order No. 561 provides that the COSLAP may take
cognizance of cases which are critical and explosive in nature considering,
for instance, the large number of parties involved, the presence or
emergence of social tension or unrest, or other similar critical situations
requiring immediate action. However, the use of the word may does not
mean that the COSLAPs jurisdiction is merely confined to the above
mentioned cases. The provisions of the said Executive Order are clear that
the COSLAP was created as a means of providing a more effective
mechanism for the expeditious settlement of land problems in general, which
are frequently the source of conflicts among settlers, landowners and cultural
minorities. Besides, the COSLAP merely took over from the abolished
PACLAP whose functions, including its jurisdiction, power and authority to
act on, decide and resolve land disputes (Sec. 2, P.D. No. 832) were all
assumed by it. The said Executive Order No. 561 containing said provision,
being enacted only on September 21, 1979, cannot affect the exercise of
jurisdiction of the PACLAP Provincial Committee of Koronadal on September
20, 1978. Neither can it affect the decision of the COSLAP which merely
affirmed said exercise of jurisdiction.34
In its Motion for Reconsideration35 filed on May 20, 2004, the BCDA
questioned the validity of the survey results since it was conducted without its
representatives present, at the same time denying that it received a
notification of the DENR verification survey.36 It maintained that there is no
basis for the COSLAPs finding that the members of Dream Village were in
open, continuous, and adverse possession in the concept of owner, because
not only is the property not among those declared alienable and disposable,
but it is a titled patrimonial property of the State.37
In the Order38 dated June 17, 2004, the COSLAP denied BCDAs Motion for
Reconsideration, insisting that it had due notice of the verification survey,
while also noting that although the BCDA wanted to postpone the verification
survey due to its tight schedule, it actually stalled the survey when it failed to
suggest an alternative survey date to ensure its presence.
CA Ruling
On Petition for Review39 to the CA, the BCDA argued that the dispute is
outside the jurisdiction of the COSLAP because of the lands history of
private ownership and because it is registered under an indefeasible Torrens
title40; that Proclamation No. 172 covers only Lots 1 and 2 of Swo-13-000298
in Western Bicutan, whereas Dream Village occupies Lots 10, 11 and part of
13 of Swo-00-0001302, which also belongs to the BCDA41; that the COSLAP
resolution is based on an erroneous DENR report stating that Dream Village
is outside of BCDA, because Lots 10, 11, and portion of Lot 13 of Swo-00-
0001302 are within the BCDA42; that the COSLAP was not justified in
ignoring BCDAs request to postpone the survey to the succeeding year
because the presence of its representatives in such an important verification
survey was indispensable for the impartiality of the survey aimed at resolving
a highly volatile situation43; that the COSLAP is a mere coordinating
administrative agency with limited jurisdiction44; and, that the present case is
not among those enumerated in Section 3 of E.O. No. 56145.
The COSLAP, on the other hand, maintained that Section 3(2)(e) of E.O. No.
561 provides that it may assume jurisdiction and resolve land problems or
disputes in other similar land problems of grave urgency and
magnitude,46 and the present case is one such problem.
The CA in its Decision47 dated September 10, 2009 ruled that the COSLAP
has no jurisdiction over the complaint because the question of whether
Dream Village is within the areas declared as available for disposition in
Proclamation No. 172 is beyond its competence to determine, even as the
land in dispute has been under a private title since 1906, and presently its
title is held by a government agency, the BCDA, in contrast to the case of
Baaga relied upon by Dream Village, where the disputed land was part of
the public domain and the disputants were applicants for sales patent
thereto.
Dream Villages motion for reconsideration was denied in the appellate
courts Order48 of July 13, 2010.
Petition for Review in the Supreme Court
On petition for review on certiorari to this Court, Dream Village interposes the
following issues:cralavvonlinelawlibrary
A
IN ANNULLING THE RESOLUTION OF COSLAP IN COSLAP CASE NO.
99-500, THE HONORABLE [CA] DECIDED THE CASE IN A MANNER NOT
CONSISTENT WITH LAW AND APPLICABLE DECISIONS OF THIS
HONORABLE COURT;chanroblesvirtualawlibrary
B
THE HONORABLE [CA] ERRED IN RULING THAT COSLAP HAD NO
JURISDICTION OVER THE CONTROVERSY BETWEEN THE PARTIES
HEREIN[.]49nadcralavvonlinelawlibrary
The Courts Ruling
We find no merit in the petition.

The BCDA holds title to Fort Bonifacio.
That the BCDA has title to Fort Bonifacio has long been decided with finality.
In Samahan ng Masang Pilipino sa Makati, Inc. v. BCDA,50 it was
categorically ruled as follows:cralavvonlinelawlibrary
First, it is unequivocal that the Philippine Government, and now the BCDA,
has title and ownership over Fort Bonifacio. The case of Acting Registrars of
Land Titles and Deeds of Pasay City, Pasig and Makati is final and
conclusive on the ownership of the then Hacienda de Maricaban estate by
the Republic of the Philippines. Clearly, the issue on the ownership of the
subject lands in Fort Bonifacio is laid to rest. Other than their view that the
USA is still the owner of the subject lots, petitioner has not put forward any
claim of ownership or interest in them.51nadcralavvonlinelawlibrary
The facts in Samahan ng Masang Pilipino sa Makati are essentially not much
different from the controversy below. There, 20,000 families were long-time
residents occupying 98 has. of Fort Bonifacio in Makati City, who vainly
sought to avert their eviction and the demolition of their houses by the BCDA
upon a claim that the land was owned by the USA under TCT No. 2288. The
Supreme Court found that TCT No. 2288 had in fact been cancelled by TCT
No. 61524 in the name of the Republic, which title was in turn cancelled on
January 3, 1995 by TCT Nos. 23888, 23887, 23886, 22460, 23889, 23890,
and 23891, all in the name of the BCDA. The Court ruled that the BCDAs
aforesaid titles over Fort Bonifacio are valid, indefeasible and beyond
question, since TCT No. 61524 was cancelled in favor of BCDA pursuant to
an explicit authority under R.A. No. 7227, the legal basis for BCDAs
takeover and management of the subject lots.52
Dream Village sits on the abandoned C-5 Road, which lies outside the
area declared in Proclamation Nos. 2476 and 172 as alienable and
disposable.
Pursuant to Proclamation No. 2476, the following surveys were conducted by
the Bureau of Lands to delimit the boundaries of the areas excluded from the
coverage of Proclamation No. 423:cralavvonlinelawlibrary
Barangay Survey Plan Date Approved
1. Lower Bicutan SWO-13-000253 October 21, 1986
2. Signal Village SWO-13-000258 May 13, 1986
3. Upper Bicutan SWO-13-000258 May 13, 1986
4. Western Bicutan SWO-13-000298 January 15, 198753
However, the survey plan for Western Bicutan, Swo-13-000298, shows that
Lots 3, 4, 5 and 6 thereof are inside the area segregated for the Libingan ng
mga Bayani under Proclamation No. 208, which then leaves only Lots 1 and
2 of Swo-13-000298 as available for disposition. For this reason, it was
necessary to amend Proclamation No. 2476. Thus, in Proclamation No. 172
only Lots 1 and 2 of Swo-13-000298 are declared alienable and disposable.54
The DENR verification survey report states that Dream Village is not situated
in Lot 1 of Swo-13-000298 but actually occupies Lots 10, 11 and part of 13 of
Swo-00-0001302: x x x [Dream Village] is outside Lot1, SWO-13-000298 and
inside Lot 10, 11 & portion of Lot 13, SWO-00-0001302 with an actual area of
78466 square meters. The area is actually is [sic] outside SWO-00-0001302
of BCDA.55 Inexplicably and gratuitously, the DENR also states that the area
is outside of BCDA, completely oblivious that the BCDA holds title over the
entire Fort Bonifacio, even as the BCDA asserts that Lots 10, 11 and 13 of
SWO-00-0001302 are part of the abandoned right-of-way of C-5 Road. This
area is described as lying north of Lot 1 of Swo-13-000298 and of Lots 3, 4, 5
and 6 of Swo-13-000298 (Western Bicutan) inside the Libingan ng mga
Bayani, and the boundary line of Lot 1 mentioned as C-5 Road is really the
proposed alignment of C-5 Road, which was abandoned when, as
constructed, it was made to traverse northward into the Libingan ng mga
Bayani. Dream Village has not disputed this assertion.
The mere fact that the original plan for C-5 Road to cross Swo-00-0001302
was abandoned by deviating it northward to traverse the southern part
of Libingan ng mga Bayani does not signify abandonment by the government
of the bypassed lots, nor that these lots would then become alienable and
disposable. They remain under the title of the BCDA, even as it is significant
that under Section 8(d) of R.A. No. 7227, a relocation site of 30.5 has. was to
be reserved for families affected by the construction of C-5 Road. It is
nowhere claimed that Lots 10, 11 and 13 of Swo-00-0001302 are part of the
said relocation site. These lots border C-5 Road in the south,56 making them
commercially valuable to BCDA, a farther argument against a claim that the
government has abandoned them to Dream Village.
While property of the State or any of its subdivisions patrimonial in
character may be the object of prescription, those intended for some
public service or for the development of the national wealth are
considered property of public dominion and therefore not susceptible
to acquisition by prescription.
Article 1113 of the Civil Code provides that property of the State or any of its
subdivisions not patrimonial in character shall not be the object of
prescription. Articles 420 and 421 identify what is property of public
dominion and what is patrimonial property:cralavvonlinelawlibrary
Art. 420. The following things are property of public
dominion:cralavvonlinelawlibrary
(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;chanroblesvirtualawlibrary
(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.
One question laid before us is whether the area occupied by Dream Village is
susceptible of acquisition by prescription. In Heirs of Mario Malabanan v.
Republic,57 it was pointed out that from the moment R.A. No. 7227 was
enacted, the subject military lands in Metro Manila became alienable and
disposable. However, it was also clarified that the said lands did not thereby
become patrimonial, since the BCDA law makes the express reservation that
they are to be sold in order to raise funds for the conversion of the former
American bases in Clark and Subic. The Court noted that the purpose of the
law can be tied to either public service or the development of national
wealth under Article 420(2) of the Civil Code, such that the lands remain
property of the public dominion, albeit their status is now alienable and
disposable. The Court then explained that it is only upon their sale to a
private person or entity as authorized by the BCDA law that they become
private property and cease to be property of the public dominion:58
For as long as the property belongs to the State, although already classified
as alienable or disposable, it remains property of the public dominion if when
it is intended for some public service or for the development of the national
wealth.59
Thus, under Article 422 of the Civil Code, public domain lands become
patrimonial property only if there is a declaration that these are alienable or
disposable, together with an express government manifestation that the
property is already patrimonial or no longer retained for public service or the
development of national wealth. Only when the property has become
patrimonial can the prescriptive period for the acquisition of property of the
public dominion begin to run. Also under Section 14(2) of Presidential Decree
(P.D.) No. 1529, it is provided that before acquisitive prescription can
commence, the property sought to be registered must not only be classified
as alienable and disposable, it must also be expressly declared by the State
that it is no longer intended for public service or the development of the
national wealth, or that the property has been converted into patrimonial.
Absent such an express declaration by the State, the land remains to be
property of public dominion.60
Since the issuance of Proclamation No. 423 in 1957, vast portions of the
former Maricaban have been legally disposed to settlers, besides those
segregated for public or government use. Proclamation No. 1217 (1973)
established the Maharlika Village in Bicutan, Taguig to serve the needs of
resident Muslims of Metro Manila; Proclamation No. 2476 (1986), as
amended by Proclamation No. 172 (1987), declared more than 400 has.
of Maricaban in Upper and Lower Bicutan, Signal Village, and Western
Bicutan as alienable and disposable; Proclamation No. 518 (1990) formally
exempted from Proclamation No. 423 the Barangays of Cembo, South
Cembo, West Rembo, East Rembo, Comembo, Pembo and Pitogo,
comprising 314 has., and declared them open for disposition.
The above proclamations notwithstanding, Fort Bonifacio remains property of
public dominion of the State, because although declared alienable and
disposable, it is reserved for some public service or for the development of
the national wealth, in this case, for the conversion of military reservations in
the country to productive civilian uses.61 Needless to say, the acquisitive
prescription asserted by Dream Village has not even begun to run.
Ownership of a land registered under a Torrens title cannot be lost by
prescription or adverse possession.
Dream Village has been unable to dispute BCDAs claim that Lots 10, 11 and
part of 13 of Swo-00-0001302 are the abandoned right-of-way of C-5 Road,
which is within the vast titled territory of Fort Bonifacio. We have already
established that these lots have not been declared alienable and disposable
under Proclamation Nos. 2476 or 172.
Moreover, it is a settled rule that lands under a Torrens title cannot be
acquired by prescription or adverse possession.62 Section 47 of P.D. No.
1529, the Property Registration Decree, expressly provides that no title to
registered land in derogation of the title of the registered owner shall be
acquired by prescription or adverse possession. And, although the registered
landowner may still lose his right to recover the possession of his registered
property by reason of laches,63 nowhere has Dream Village alleged or
proved laches, which has been defined as such neglect or omission to assert
a right, taken in conjunction with lapse of time and other circumstances
causing prejudice to an adverse party, as will operate as a bar in equity. Put
any way, it is a delay in the assertion of a right which works disadvantage to
another because of the inequity founded on some change in the condition or
relations of the property or parties. It is based on public policy which, for the
peace of society, ordains that relief will be denied to a stale demand which
otherwise could be a valid claim.64
The subject property having been expressly reserved for a specific
public purpose, the COSLAP cannot exercise jurisdiction over the
complaint of the Dream Village settlers.
BCDA has repeatedly asserted that the COSLAP has no jurisdiction to hear
Dream Villages complaint. Concurring, the CA has ruled that questions as to
the physical identity of Dream Village and whether it lies in Lots 10, 11 and
13 of Swo-00-0001302, or whether Proclamation No. 172 has released the
disputed area for disposition are issues which are manifestly beyond the
scope of the COSLAPs jurisdiction vis--vis Paragraph 2, Section 3 of E.O.
No. 561,65 rendering its Resolution a patent nullity and its pronouncements
void. Thus, the CA said, under Section 3 of E.O. No. 561, the COSLAPs
duty would have been to refer the conflict to another tribunal or agency of
government in view of the serious ramifications of the disputed
claims:cralavvonlinelawlibrary
In fine, it is apparent that the COSLAP acted outside its jurisdiction in taking
cognizance of the case. It would have been more prudent if the COSLAP has
[sic] just referred the controversy to the proper forum in order to fully thresh
out the ramifications of the dispute at bar. As it is, the impugned Resolution is
a patent nullity since the tribunal which rendered it lacks jurisdiction. Thus,
the pronouncements contained therein are void. We have consistently ruled
that a judgment for want of jurisdiction is no judgment at all. It cannot be the
source of any right or the creator of any obligation. All acts performed
pursuant to it and all claims emanating from it have no legal
effect.66 (Citation omitted)
We add that Fort Bonifacio has been reserved for a declared specific public
purpose under R.A. No. 7227, which unfortunately for Dream Village does
not encompass the present demands of its members. Indeed, this purpose
was the very reason why title to Fort Bonifacio has been transferred to the
BCDA, and it is this very purpose which takes the dispute out of the direct
jurisdiction of the COSLAP. A review of the history of the COSLAP will
readily clarify that its jurisdiction is limited to disputes over public lands not
reserved or declared for a public use or purpose.
On July 31, 1970, President Marcos issued E.O. No. 251 creating the
Presidential Action Committee on Land Problems (PACLAP) to expedite and
coordinate the investigation and resolution of all kinds of land disputes
between settlers, streamline and shorten administrative procedures, adopt
bold and decisive measures to solve land problems, or recommend other
solutions.67 E.O. No. 305, issued on March 19, 1971, reconstituted the
PACLAP and gave it exclusive jurisdiction over all cases involving public
lands and other lands of the public domain,68 as well as adjudicatory powers
phrased in broad terms: To investigate, coordinate, and resolve
expeditiously land disputes, streamline administrative proceedings, and, in
general, to adopt bold and decisive measures to solve problems
involving public lands and lands of the public domain. 69
On November 27, 1975, P.D. No. 832 reorganized the PACLAP and
enlarged its functions and duties. Section 2 thereof even granted it quasi
judicial functions, to wit:cralavvonlinelawlibrary
Sec. 2. Functions and duties of the PACLAP. The PACLAP shall have the
following functions and duties:cralavvonlinelawlibrary
1. Direct and coordinate the activities, particularly the investigation work, of
the various government agencies and agencies involved in land problems or
disputes, and streamline administrative procedures to relieve small settlers
and landholders and members of cultural minorities of the expense and time-
consuming delay attendant to the solution of such problems or
disputes;chanroblesvirtualawlibrary
2. Refer for immediate action any land problem or dispute brought to the
attention of the PACLAP, to any member agency having jurisdiction
thereof: Provided, That when the Executive Committee decides to act on a
case, its resolution, order or decision thereon shall have the force and effect
of a regular administrative resolution, order or decision, and shall be binding
upon the parties therein involved and upon the member agency having
jurisdiction thereof;
xxxx
4. Evolve and implement a system of procedure for the speedy investigation
and resolution of land disputes or problems at provincial level, if possible.
(Underscoring supplied)
On September 21, 1979, E.O. No. 561 abolished the PACLAP and created
the COSLAP to be a more effective administrative body to provide a
mechanism for the expeditious settlement of land problems among small
settlers, landowners and members of the cultural minorities to avoid social
unrest.70Paragraph 2, Section 3 of E.O No. 561 now specifically enumerates
the instances when the COSLAP can exercise its adjudicatory
functions:cralavvonlinelawlibrary
Sec. 3. Powers and Functions. The Commission shall have the following
powers and functions:cralavvonlinelawlibrary
1. Coordinate the activities, particularly the investigation work, of the various
government offices and agencies involved in the settlement of land problems
or disputes, and streamline administrative procedures to relieve small settlers
and landholders and members of cultural minorities of the expense and time
consuming delay attendant to the solution of such problems or
disputes;chanroblesvirtualawlibrary
2. Refer and follow-up for immediate action by the agency having appropriate
jurisdiction any land problem or dispute referred to the Commission:
Provided, That the Commission may, in the following cases, assume
jurisdiction and resolve land problems or disputes which are critical and
explosive in nature considering, for instance, the large number of the parties
involved, the presence or emergence of social tension or unrest, or other
similar critical situations requiring immediate action:cralavvonlinelawlibrary
(a) Between occupants/squatters and pasture lease agreement holders or
timber concessionaires;chanroblesvirtualawlibrary
(b) Between occupants/squatters and government reservation
grantees;chanroblesvirtualawlibrary
(c) Between occupants/squatters and public land claimants or
applicants;chanroblesvirtualawlibrary
(d) Petitions for classification, release and/or subdivision of lands of the
public domain; and
(e) Other similar land problems of grave urgency and magnitude.
xxxx
Citing the constant threat of summary eviction and demolition by the BCDA
and the seriousness and urgency of the reliefs sought in its Amended
Petition, Dream Village insists that the COSLAP was justified in assuming
jurisdiction of COSLAP Case No. 99-500. But in Longino v. Atty. General,71 it
was held that as an administrative agency, COSLAPs jurisdiction is limited to
cases specifically mentioned in its enabling statute, E.O. No. 561. The
Supreme Court said:cralavvonlinelawlibrary
Administrative agencies, like the COSLAP, are tribunals of limited jurisdiction
and, as such, could wield only such as are specifically granted to them by the
enabling statutes. x x x.
xxxx
Under the law, [E.O. No. 561], the COSLAP has two options in acting on a
land dispute or problem lodged before it, namely, (a) refer the matter to the
agency having appropriate jurisdiction for settlement/resolution; or (b)
assume jurisdiction if the matter is one of those enumerated in paragraph
2(a) to (e) of the law, if such case is critical and explosive in nature, taking
into account the large number of the parties involved, the presence or
emergence of social tension or unrest, or other similar critical situations
requiring immediate action. In resolving whether to assume jurisdiction over a
case or to refer the same to the particular agency concerned, the COSLAP
has to consider the nature or classification of the land involved, the parties to
the case, the nature of the questions raised, and the need for immediate and
urgent action thereon to prevent injuries to persons and damage or
destruction to property. The law does not vest jurisdiction on the COSLAP
over any land dispute or problem.72 (Citation omitted)
The Longino ruling has been consistently cited in subsequent COSLAP
cases, among them Davao New Town Development Corp. v.
COSLAP,73Barranco v. COSLAP,74NHA v. COSLAP,75 Cayabyab v. de
Aquino,76Ga, Jr. v. Tubungan,77Machado v. Gatdula,78 and Vda. de Herrera
v. Bernardo.79
Thus, in Machado, it was held that the COSLAP cannot invoke Section
3(2)(e) of E.O. No. 561 to assume jurisdiction over other similar land
problems of grave urgency, since the statutory construction principle
of ejusdem generis prescribes that where general words follow an
enumeration of persons or things, by words of a particular and specific
meaning, such general words are not to be construed in their widest extent
but are to be held as applying only to persons or things of the same kind as
those specifically mentioned.80 Following this rule, COSLAPs jurisdiction is
limited to disputes involving lands in which the government has a proprietary
or regulatory interest,81 or public lands covered with a specific license from
the government such as a pasture lease agreements, a timber concessions,
or a reservation grants,82 and where moreover, the dispute is between
occupants/squatters and pasture lease agreement holders or timber
concessionaires; between occupants/squatters and government reservation
grantees; and between occupants/squatters and public land claimants or
applicants.
In Longino, the parties competed to lease a property of the Philippine
National Railways. The high court rejected COSLAPs jurisdiction, noting that
the disputed lot is not public land, and neither party was a squatter, patent
lease agreement holder, government reservation grantee, public land
claimant or occupant, or a member of any cultural minority, nor was the
dispute critical and explosive in nature so as to generate social tension or
unrest, or a critical situation which required immediate action.83
In Davao New Town Development Corp., it was held that the COSLAP has
no concurrent jurisdiction with the Department of Agrarian Reform (DAR) in
respect of disputes concerning the implementation of agrarian reform laws,
since [t]he grant of exclusive and primary jurisdiction over agrarian reform
matters on the DAR implies that no other court, tribunal, or agency is
authorized to resolve disputes properly cognizable by the DAR. 84 Thus,
instead of hearing and resolving the case, COSLAP should have simply
referred private respondents complaint to the DAR or DARAB. According to
the Court:cralavvonlinelawlibrary
The abovementioned proviso [Section (3)(2) of E.O. No. 561], which vests
COSLAP the power to resolve land disputes, does not confer upon COSLAP
blanket authority to assume every matter referred to it. Its jurisdiction is
confined only to disputes over lands in which the government has proprietary
or regulatory interest. Moreover, the land dispute in Baaga involved parties
with conflicting free patent applications which was within the authority of
PACLAP to resolve, unlike that of the instant case which is exclusively
cognizable by the DAR.85
In Barranco, COSLAP issued a writ to demolish structures encroaching into
private property. The Supreme court ruled that COSLAP may resolve only
land disputes involving public lands or lands of the public domain or those
covered with a specific license from the government such as a pasture lease
agreement, a timber concession, or a reservation grant.86
In NHA, it was held that COSLAP has no jurisdiction over a boundary dispute
between two local government units, that its decision is an utter nullity
correctible by certiorari, that it can never become final and any writ of
execution based on it is void, and all acts performed pursuant to it and all
claims emanating from it have no legal effect.87
In Cayabyab, it was held that the jurisdiction of COSLAP does not extend to
disputes involving the ownership of private lands, or those already covered
by a certificate of title, as these fall exactly within the jurisdiction of the courts
and other administrative agencies.88
In Ga, Jr., it was reiterated that the COSLAP has no jurisdiction over
controversies relating to ownership and possession of private lands, and
thus, the failure of respondents to properly appeal from the COSLAP
decision before the appropriate court was held not fatal to the petition for
certiorari that they eventually filed with the CA. The latter remedy remained
available despite the lapse of the period to appeal from the void COSLAP
decision.89
In Machado, the high court ruled that COSLAP has no jurisdiction in disputes
over private lands between private parties, reiterating the essential rules
contained in Section 3 of E.O. No. 561 governing the exercise by COSLAP of
its jurisdiction, to wit:cralavvonlinelawlibrary
Under these terms, the COSLAP has two different rules in acting on a land
dispute or problem lodged before it, e.g., COSLAP can assume jurisdiction
only if the matter is one of those enumerated in paragraph 2(a) to (e) of the
law. Otherwise, it should refer the case to the agency having appropriate
jurisdiction for settlement or resolution. In resolving whether to assume
jurisdiction over a case or to refer it to the particular agency concerned, the
COSLAP considers: (a) the nature or classification of the land involved; (b)
the parties to the case; (c) the nature of the questions raised; and (d) the
need for immediate and urgent action thereon to prevent injury to persons
and damage or destruction to property. The terms of the law clearly do not
vest on the COSLAP the general power to assume jurisdiction over any land
dispute or problem. Thus, under EO 561, the instances when the COSLAP
may resolve land disputes are limited only to those involving public lands or
those covered by a specific license from the government, such as pasture
lease agreements, timber concessions, or reservation grants.90 (Citations
omitted)
In Vda. de Herrera, the COSLAP assumed jurisdiction over a complaint for
interference, disturbance, unlawful claim, harassment and trespassing over
a private parcel of land. The CA ruled that the parties were estopped to
question COSLAPs jurisdiction since they participated actively in the
proceedings. The Supreme Court, noting from the complaint that the case
actually involved a claim of title and possession of private land, ruled that the
RTC or the MTC has jurisdiction since the dispute did not fall under Section
3, paragraph 2 (a) to (e) of E.O. No. 561, was not critical and explosive in
nature, did not involve a large number of parties, nor was there social tension
or unrest present or emergent.91
In the case at bar, COSLAP has invoked Baaga to assert its jurisdiction.
There, Guillermo Baaga had filed a free patent application with the Bureau
of Lands over a public land with an area of 30 has. Gregorio Daproza
(Daproza) also filed a patent application for the same property. The opposing
claims and protests of the claimants remained unresolved by the Bureau of
Lands, and neither did it conduct an investigation. Daproza wrote to the
COSLAP, which then opted to exercise jurisdiction over the controversy. The
high court sustained COSLAP, declaring that its jurisdiction is not confined to
the cases mentioned in paragraph 2(a) to (e) of E.O. No. 561, but includes
land problems in general, which are frequently the source of conflicts among
settlers, landowners and cultural minorities.
But as the Court has since clarified in Longino and in the other cases
aforecited, the land dispute in Baaga was between private individuals who
were free patent applicants over unregistered public lands. In contrast, the
present petition involves land titled to and managed by a government agency
which has been expressly reserved by law for a specific public purpose other
than for settlement. Thus, as we have advised in Longino, the law does not
vest jurisdiction on the COSLAP over any land dispute or problem, but it has
to consider the nature or classification of the land involved, the parties to the
case, the nature of the questions raised, and the need for immediate and
urgent action thereon to prevent injuries to persons and damage or
destruction to property.
WHEREFORE, premises considered, the petition is DENIED.
SO ORDERED.
Dream Village v Bases Devt Authority (July 24, 2013)FACTS:
Dream Village claims to represent more than 2k families, in OCEN
occupation &possession of 7.8 ha land in Fort Bonifacio
DV filed petition b4 COSLAP, seeking
o
Declaration that subj property is alienable & disposable, thus outside
BCDAscope;
o
LMB order processing members sales patent application

BCDA asserts title per RA 7227 and questioned COSLAP jurisdiction

COSLAP ruled for Dream Village. On petition for review, CA held COSLAP h
as no
jurisdiction because of lands private ownership and its is registered under a
n
indefeasible Torrens Title.

Dream Village MR is denied and filed petition for review in SC.

ISSUE: WON area occupied by Dream Village is susceptible of acquisition by
prescriptionHELD:

DV petition is denied. Area is not susceptible of acquisition by prescription.

Present petition involves land titled to and managed by a govt agency

expresslyreserved by law for a specific public purpose other than for
settlement.

COSLAP jurisdiction limited to

o

lands govt has proprietary or regulatory interests or

o

public lands covered with specific license

Fort Bonifacio remains property of public dominion of the State.

Though declared alienable & disposable, it is reserved for some public

service or for thenational wealth devt, in this case, for the conversion of
military reservations toproductive civilian uses.

Ownership of land registered under Torrens title cannot be lost by

prescription oradverse possession