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FRANCISCO I. CHAVEZ, petitioner, vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT CORPORATION,respondents. DECISION CARPIO, J.: This is an original Petition for Mandamus with prayer for a writ of preliminary injunction and a temporary restraining order. The petition seeks to compel the Public Estates Authority (PEA for brevity) to disclose all facts on PEAs then on-going renegotiations with Amari Coastal Bay and Development Corporation (AMARI for brevity) to reclaim portions of Manila Bay. The petition further seeks to enjoin PEA from signing a new agreement with AMARI involving such reclamation. meters of reclaimed areas at varying elevations above Mean Low Water Level located outside [3] the Financial Center Area and the First Neighborhood Unit. 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. The Freedom Islands have a total land area of One Million Five Hundred Seventy Eight Thousand Four Hundred and Forty One (1,578,441) square meters or 157.841 hectares. On April 25, 1995, PEA entered into a Joint Venture Agreement (JVA for brevity) with AMARI, a private corporation, to develop the Freedom Islands. The JVA also required the reclamation of an additional 250 hectares of submerged areas surrounding these islands to complete the configuration in the Master Development Plan of the Southern Reclamation Project-MCCRRP. PEA and AMARI entered into the JVA through negotiation without public [4] bidding. On April 28, 1995, the Board of Directors of PEA, in its Resolution No. 1245, [5] confirmed the JVA. On June 8, 1995, then President Fidel V. Ramos, through then [6] Executive Secretary Ruben Torres, approved the JVA. On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege speech in the Senate and denounced the JVA as the grandmother of all scams. As a result, the Senate Committee on Government Corporations and Public Enterprises, and the Committee on Accountability of Public Officers and Investigations, conducted a joint investigation. The Senate Committees reported the results of their investigation in Senate [7] 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 [8] [9] Secretary of Justice, the Chief Presidential Legal Counsel, and the Government Corporate [10] Counsel. The Legal Task Force upheld the legality of the JVA, contrary to the conclusions [11] reached by the Senate Committees. On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that there were on-going renegotiations between PEA and AMARI under an order issued by then President Fidel V. Ramos. According to these reports, PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo and retired Navy Officer Sergio Cruz composed the negotiating panel of PEA. On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition with Application for the Issuance of a Temporary Restraining Order and Preliminary Injunction docketed as G.R. No. 132994 seeking to nullify the JVA. The Court dismissed the petition for unwarranted disregard of judicial hierarchy, without prejudice to the refiling of the [12] case before the proper court. 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

The Facts

On November 20, 1973, the government, through the Commissioner of Public Highways, signed a contract with the Construction and Development Corporation of the Philippines (CDCP for brevity) to reclaim certain foreshore and offshore areas of Manila Bay. The contract also included the construction of Phases I and II of the Manila-Cavite Coastal Road. CDCP obligated itself to carry out all the works in consideration of fifty percent of the total reclaimed land. On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree No. 1084 creating PEA. PD No. 1084 tasked PEA to reclaim land, including foreshore and submerged areas, and to develop, improve, acquire, x x x lease and sell any and all kinds of [1] 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 [2] Bay under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP). On December 29, 1981, then President Marcos issued a memorandum directing PEA to amend its contract with CDCP, so that [A]ll future works in MCCRRP x x x shall be funded and owned by PEA. Accordingly, PEA and CDCP executed a Memorandum of Agreement dated December 29, 1981, which stated: (i) CDCP shall undertake all reclamation, construction, and such other works in the MCCRRP as may be agreed upon by the parties, to be paid according to progress of works on a unit price/lump sum basis for items of work to be agreed upon, subject to price escalation, retention and other terms and conditions provided for in Presidential Decree No. 1594. All the financing required for such works shall be provided by PEA. xxx (iii) x x x CDCP shall give up all its development rights and hereby agrees to cede and transfer in favor of PEA, all of the rights, title, interest and participation of CDCP in and to all the areas of land reclaimed by CDCP in the MCCRRP as of December 30, 1981 which have not yet been sold, transferred or otherwise disposed of by CDCP as of said date, which areas consist of approximately Ninety-Nine Thousand Four Hundred Seventy Three (99,473) square meters in the Financial Center Area covered by land pledge No. 5 and approximately Three Million Three Hundred Eighty Two Thousand Eight Hundred Eighty Eight (3,382,888) square

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lose billions of pesos in the sale by PEA of the reclaimed lands to AMARI. Petitioner prays that PEA publicly disclose the terms of any renegotiation of the JVA, invoking Section 28, Article II, and Section 7, Article III, of the 1987 Constitution on the right of the people to information on matters of public concern. Petitioner assails the sale to AMARI of lands of the public domain as a blatant violation of Section 3, Article XII of the 1987 Constitution prohibiting the sale of alienable lands of the public domain to private corporations. Finally, petitioner asserts that he seeks to enjoin the loss of billions of pesos in properties of the State that are of public dominion. After several motions for extension of time, PEA and AMARI filed their Comments on October 19, 1998 and June 25, 1998, respectively. Meanwhile, on December 28, 1998, petitioner filed an Omnibus Motion: (a) to require PEA to submit the terms of the renegotiated PEA-AMARI contract; (b) for issuance of a temporary restraining order; and (c) to set the case for hearing on oral argument. Petitioner filed a Reiterative Motion for Issuance of a TRO dated May 26, 1999, which the Court denied in a Resolution dated June 22, 1999. In a Resolution dated March 23, 1999, the Court gave due course to the petition and required the parties to file their respective memoranda. On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement (Amended JVA, for brevity). On May 28, 1999, the Office of the President under the administration of then President Joseph E. Estrada approved the Amended JVA. Due to the approval of the Amended JVA by the Office of the President, petitioner now prays that on constitutional and statutory grounds the renegotiated contract be declared null [14] and void.
[13]

The Courts Ruling

First issue: whether the principal reliefs prayed for in the petition are moot and academic because of subsequent events. The petition prays that PEA publicly disclose the terms and conditions of the on -going negotiations for a new agreement. The petition also prays that the Court enjoin PEA from privately entering into, perfecting and/or executing any new agreement with AMARI. PEA and AMARI claim the petition is now moot and academic because AMARI furnished petitioner on June 21, 1999 a copy of the signed Amended JVA containing the terms and conditions agreed upon in the renegotiations. Thus, PEA has satisfied petitioners prayer for a public disclosure of the renegotiations. Likewise, petitioners prayer to enjoin the signing of the Amended JVA is now moot because PEA and AMARI have already signed the Amended JVA on March 30, 1999. Moreover, the Office of the President has approved the Amended JVA on May 28, 1999. Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply fast-tracking the signing and approval of the Amended JVA before the Court could act on the issue. Presidential approval does not resolve the constitutional issue or remove it from the ambit of judicial review. We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the President cannot operate to moot the petition and divest the Court of its jurisdiction. PEA and AMARI have still to implement the Amended JVA. The prayer to enjoin the signing of the Amended JVA on constitutional grounds necessarily includes preventing its implementation if in the meantime PEA and AMARI have signed one in violation of the Constitution. Petitioners principal basis in assailing the renegotiation of the JVA is its violation of Section 3, Article XII of the Constitution, which prohibits the government from alienating lands of the public domain to private corporations. If the Amended JVA indeed violates the Constitution, it is the duty of the Court to enjoin its implementation, and if already implemented, to annul the effects of such unconstitutional contract. The Amended JVA is not an ordinary commercial contract but one which seeks to transfer title and ownership to 367.5 hectares of reclaimed lands and submerged areas of Manila Bay to a single private corporation . It now becomes more compelling for the Court to resolve the issue to insure the government itself does not violate a provision of the Constitution intended to safeguard the national patrimony. Supervening events, whether intended or accidental, cannot prevent the Court from rendering a decision if there is a grave violation of the Constitution. In the instant case, if the Amended JVA runs counter to the Constitution, the Court can still prevent the transfer of title and ownership of alienable lands of the public domain in the name of AMARI. Even in cases where supervening events had made the cases moot, the Court did not hesitate to resolve the legal or constitutional issues [17] raised to formulate controlling principles to guide the bench, bar, and the public. Also, the instant petition is a case of first impression. All previous decisions of the Court involving Section 3, Article XII of the 1987 Constitution, or its counterpart provision in the 1973 [18] Constitution, covered agricultural lands sold to private corporations which acquired the lands from private parties. The transferors of the private corporations claimed or could claim [19] the right to judicial confirmation of their imperfect titles under Title II of Commonwealth Act. 141 (CA No. 141 for brevity). In the instant case, AMARI seeks to acquire from PEA, a public corporation, reclaimed lands and submerged areas for non-agricultural purposes by purchase under PD No. 1084 (charter of PEA) and Title III of CA No. 141. Certain undertakings by AMARI under the Amended JVA constitute the consideration for the

The Issues
[15] [16]

The issues raised by petitioner, PEA I.

and AMARI

are as follows:

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

II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO OBSERVE THE PRINCIPLE GOVERNING THE HIERARCHY OF COURTS; III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES; IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT; V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES OFFICIAL INFORMATION ON ON-GOING NEGOTIATIONS BEFORE A FINAL AGREEMENT; VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE AGREEMENT FOR THE TRANSFER TO AMARI OF CERTAIN LANDS, RECLAIMED AND STILL TO BE RECLAIMED, VIOLATE THE 1987 CONSTITUTION; AND VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE ISSUE OF WHETHER THE AMENDED JOINT VENTURE AGREEMENT IS GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT.

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purchase. Neither AMARI nor PEA can claim judicial confirmation of their titles because the lands covered by the Amended JVA are newly reclaimed or still to be reclaimed. Judicial confirmation of imperfect title requires open, continuous, exclusive and notorious occupation of agricultural lands of the public domain for at least thirty years since June 12, 1945 or earlier. Besides, the deadline for filing applications for judicial confirmation of imperfect title [20] expired on December 31, 1987. 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 latters seventy percent proportionate share in the reclaimed areas as the reclamation progresses. The Amended JVA even allows AMARI to mortgage at any time [21] the entire reclaimed area to raise financing for the reclamation project. government lands to private parties requires public bidding. PEA was under a positive legal duty to disclose to the public the terms and conditions for the sale of its lands . The law obligated PEA to make this public disclosure even without demand from petitioner or from anyone. PEA failed to make this public disclosure because the original JVA, like the Amended JVA, was the result of a negotiated contract, not of a public bidding. Considering that PEA had an affirmative statutory duty to make the public disclosure, and was even in breach of this legal duty, petitioner had the right to seek direct judicial intervention. Moreover, and this alone is determinative of this issue, the principle of exhaustion of administrative remedies does not apply when the issue involved is a purely legal or [27] 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.

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

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

PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly from the Court. The principle of hierarchy of courts applies generally to cases involving factual questions. As it is not a trier of facts, the Court cannot entertain cases involving factual issues. The instant case, however, raises constitutional issues of transcendental [22] 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.

PEA argues that petitioner has no standing to institute mandamus proceedings to enforce his constitutional right to information without a showing that PEA refused to perform an affirmative duty imposed on PEA by the Constitution. PEA also claims that petitioner has not shown that he will suffer any concrete injury because of the signing or implementation of the Amended JVA. Thus, there is no actual controversy requiring the exercise of the power of judicial review. The petitioner has standing to bring this taxpayers suit because the petition seeks to compel PEA to comply with its constitutional duties. There are two constitutional issues involved here. First is the right of citizens to information on matters of public concern. Second is the application of a constitutional provision intended to insure the equitable distribution of alienable lands of the public domain among Filipino citizens. The thrust of the first issue is to compel PEA to disclose publicly information on the sale of government lands worth billions of pesos, information which the Constitution and statutory law mandate PEA to disclose. The thrust of the second issue is to prevent PEA from alienating hundreds of hectares of alienable lands of the public domain in violation of the Constitution, compelling PEA to comply with a constitutional duty to the nation. Moreover, the petition raises matters of transcendental importance to the [28] public. In Chavez v. PCGG, the Court upheld the right of a citizen to bring a taxpayers suit on matters of transcendental importance to the public, thus Besides, petitioner emphasizes, the matter of recovering the ill -gotten wealth of the Marcoses is an issue of transcendental importance to the public. He asserts that ordinary taxpayers have a right to initiate and prosecute actions questioning the validity of acts or orders of government agencies or instrumentalities, if the issues raised are of paramount public interest, and if they immediately affect the social, economic and moral well being of the people. Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest, when the proceeding involves the assertion of a public right, such as in this case. He invokes several decisions of this Court which have set aside the procedural matter of locus standi, when the subject of the case involved public interest.

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

PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose publicly certain information without first asking PEA the needed information. PEA claims petitioners direct resort to the Court violates the principle of exhaustion of administrative remedies. It also violates the rule that mandamus may issue only if there is no other plain, speedy and adequate remedy in the ordinary course of law. PEA distinguishes the instant case from Taada v. Tuvera where the Court granted the petition for mandamus even if the petitioners there did not initially demand from the Office of the President the publication of the presidential decrees. PEA points out that in Taada, the Executive Department had an affirmative statutory duty under Article 2 of the Civil [24] [25] Code and Section 1 of Commonwealth Act No. 638 to publish the presidential decrees. There was, therefore, no need for the petitioners in Taada to make an initial demand from the Office of the President. In the instant case, PEA claims it has no affirmative statutory duty to disclose publicly information about its renegotiation of the JVA. Thus, PEA asserts that the Court must apply the principle of exhaustion of administrative remedies to the instant case in view of the failure of petitioner here to demand initially from PEA the needed information. The original JVA sought to dispose to AMARI public lands held by PEA, a government [26]2 corporation. Under Section 79 of the Government Auditing Code, the disposition of
[23]

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xxx In Taada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution of the laws, he need not show that he has any legal or special interest in the result of the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a right then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to be valid and enforceable must be published in the Official Gazette or otherwise effectively promulgated. In ruling for the petitioners' legal standing, the Court declared that the right they sought to be enforced is a public right recognized by no less than the fundamental law of the land. Legaspi v. Civil Service Commission, while reiterating Taada, further declared that when a mandamus proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general 'public' which possesses the right. Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned contract for the development, management and operation of the Manila International Container Terminal, public interest [was] definitely involved considering the important role [of the subject contract] . . . in the economic development of the country and the magnitude of the financial consideration involved. We concluded that, as a consequence, the disclosure provision in the Constitution would constitute sufficient authority for upholding the petitioner's standing. Similarly, the instant petition is anchored on the right of the people to information and access to official records, documents and papers a right guaranteed under Section 7, Article III of the 1987 Constitution. Petitioner, a former solicitor general, is a Filipino citizen. Because of the satisfaction of the two basic requisites laid down by decisional law to sustain petitioner's legal standing, i.e. (1) the enforcement of a public right (2) espoused by a Filipino citizen, we rule that the petition at bar should be allowed. We rule that since the instant petition, brought by a citizen, involves the enforcement of constitutional rights - to information and to the equitable diffusion of natural resources matters of transcendental public importance, the petitioner has the requisite locus standi. The State policy of full transparency in all transactions involving public interest reinforces the peoples right to information on matters of public concern. This State policy is expressed in Section 28, Article II of the Constitution, thus: Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest. (Emphasis supplied) These twin provisions of the Constitution seek to promote transparency in policy-making and in the operations of the government, as well as provide the people sufficient information to exercise effectively other constitutional rights. These twin provisions are essential to the exercise of freedom of expression. If the government does not disclose its official acts, transactions and decisions to citizens, whatever citizens say, even if expressed without any restraint, will be speculative and amount to nothing. These twin provisions are also essential [29] to hold public officials at all times x x x accountable to the people, for unless citizens have the proper information, they cannot hold public officials accountable for anything. Armed with the right information, citizens can participate in public discussions leading to the formulation of government policies and their effective implementation. An informed citizenry is essential to the existence and proper functioning of any democracy. As explained by the Court [30] in Valmonte v. Belmonte, Jr. An essential element of these freedoms is to keep open a cont inuing dialogue or process of communication between the government and the people. It is in the interest of the State that the channels for free political discussion be maintained to the end that the government may perceive and be responsive to the peoples will. Yet, this open dialogue can be effective only to the extent that the citizenry is informed and thus able to formulate its will intelligently. Only when the participants in the discussion are aware of the issues and have access to information relating thereto can such bear fruit. PEA asserts, citing Chavez v. PCGG, that in cases of on-going negotiations the right to information is limited to definite propositions of the government. PEA maintains the right does not include access to intra-agency or inter-agency recommendations or communications during the stage when common assertions are still in the process of being formulated or are in the exploratory stage. Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage or before the closing of the transaction. To support its contention, AMARI cites the following discussion in the 1986 Constitutional Commission: Mr. Suarez. And when we say transactions which should be distinguished from contracts, agreements, or treaties or whatever, does the Gentleman refer to the steps leading to the consummation of the contract, or does he refer to the contract itself? Mr. Ople: The transactions used here, I suppose is generic and therefore, it can cover both steps leading to a contract and already a consummated contract, Mr. Presiding Officer. Mr. Suarez: This contemplates inclusion of negotiations leading to the consummation of the transaction. Mr. Ople: Yes, subject only to reasonable safeguards on the national interest.
[31]

Fifth issue: whether the constitutional right to information includes official information on on-going negotiations before a final agreement. Section 7, Article III of the Constitution explains the peoples right to information on matters of public concern in this manner: Sec. 7. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law. (Emphasis supplied)

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Mr. Suarez: Thank you.
[32]

(Emphasis supplied)

emasculation of a constitutional right, nor a retreat by the State of its avowed policy of full disclosure of all its transactions involving public interest. The right covers three categories of information which are matters of public concern, namely: (1) official records; (2) documents and papers pertaining to official acts, transactions and decisions; and (3) government research data used in formulating policies. The first category refers to any document that is part of the public records in the custody of government agencies or officials. The second category refers to documents and papers recording, evidencing, establishing, confirming, supporting, justifying or explaining official acts, transactions or decisions of government agencies or officials. The third category refers to research data, whether raw, collated or processed, owned by the government and used in formulating government policies. The information that petitioner may access on the renegotiation of the JVA includes evaluation reports, recommendations, legal and expert opinions, minutes of meetings, terms of reference and other documents attached to such reports or minutes, all relating to the JVA. However, the right to information does not compel PEA to prepare lists, abstracts, [34] summaries and the like relating to the renegotiation of the JVA. 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 [35] specifying when and how to conduct the inspection and copying. The right to information, however, does not extend to matters recognized as privileged [36] information under the separation of powers. The right does not also apply to information on military and diplomatic secrets, information affecting national security, and information on investigations of crimes by law enforcement agencies before the prosecution of the accused, [37] which courts have long recognized as confidential. The right may also be subject to other limitations that Congress may impose by law. There is no claim by PEA that the information demanded by petitioner is privileged information rooted in the separation of powers. The information does not cover Presidential conversations, correspondences, or discussions during closed-door Cabinet meetings which, like internal deliberations of the Supreme Court and other collegiate courts, or executive [38] sessions of either house of Congress, are recognized as confidential. This kind of information cannot be pried open by a co-equal branch of government. A frank exchange of exploratory ideas and assessments, free from the glare of publicity and pressure by interested parties, is essential to protect the independence of decision-making of those tasked to [39] exercise Presidential, Legislative and Judicial power. This is not the situation in the instant case. We rule, therefore, that the constitutional right to information includes official information on on-going negotiations before a final contract. The information, however, must constitute definite propositions by the government and should not cover recognized exceptions like privileged information, military and diplomatic secrets and similar matters affecting national [40] security and public order. Congress has also prescribed other limitations on the right to [41] information in several legislations.

AMARI argues there must first be a consummated contract before petitioner can invoke the right. Requiring government officials to reveal their deliberations at the pre-decisional stage will degrade the quality of decision-making in government agencies. Government officials will hesitate to express their real sentiments during deliberations if there is immediate public dissemination of their discussions, putting them under all kinds of pressure before they decide. We must first distinguish between information the law on public bidding requires PEA to disclose publicly, and information the constitutional right to information requires PEA to release to the public. Before the consummation of the contract, PEA must, on its own and without demand from anyone, disclose to the public matters relating to the disposition of its property. These include the size, location, technical description and nature of the property being disposed of, the terms and conditions of the disposition, the parties qualified to bid, the minimum price and similar information. PEA must prepare all these data and disclose them to the public at the start of the disposition process, long before the consummation of the contract, because the Government Auditing Code requires public bidding. If PEA fails to make this disclosure, any citizen can demand from PEA this information at any time during the bidding process. Information, however, on on-going evaluation or review of bids or proposals being undertaken by the bidding or review committee is not immediately accessible under the right to information. While the evaluation or review is still on-going, there are no official acts, transactions, or decisions on the bids or proposals. However, once the committee makes itsofficial recommendation, there arises a definite proposition on the part of the government. From this moment, the publics right to information attaches, and any citizen can access all the non-proprietary information leading to such definite proposition. In Chavez v. [33] PCGG, the Court ruled as follows: Considering the intent of the framers of the Constitution, we believe that it is incumbent upon the PCGG and its officers, as well as other government representatives, to disclose sufficient public information on any proposed settlement they have decided to take up with the ostensible owners and holders of ill-gotten wealth. Such information, though, must pertain to definite propositions of the government, not necessarily to intra-agency or inter-agency recommendations or communications during the stage when common assertions are still in the process of being formulated or are in the exploratory stage. There is need , of course, to observe the same restrictions on disclosure of information in general, as discussed earlier such as on matters involving national security, diplomatic or foreign relations, intelligence and other classified information. (Emphasis supplied) Contrary to AMARIs 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. This negates the State policy of full transparency on matters of public concern, a situation which the framers of the Constitution could not have intended. Such a requirement will prevent the citizenry from participating in the public discussion of any proposed contract, effectively truncating a basic right enshrined in the Bill of Rights. We can allow neither an

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

The Regalian Doctrine

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The ownership of lands reclaimed from foreshore and submerged areas is rooted in the Regalian doctrine which holds that the State owns all lands and waters of the public domain. Upon the Spanish conquest of the Philippines, ownership of all l ands, territories and [42] possessions in the Philippines passed to the Spanish Crown. The King, as the sovereign ruler and representative of the people, acquired and owned all lands and territories in the Philippines except those he disposed of by grant or sale to private individuals. The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting, however, the State, in lieu of the King, as the owner of all lands and waters of the public domain. The Regalian doctrine is the foundation of the time-honored principle of land ownership that all lands that were not acquired from the Government, either by purchase or [43] by grant, belong to the public domain. Article 339 of the Civil Code of 1889, which is now Article 420 of the Civil Code of 1950, incorporated the Regalian doctrine. Ownership and Disposition of Reclaimed Lands The Spanish Law of Waters of 1866 was the first statutory law governing the ownership and disposition of reclaimed lands in the Philippines. On May 18, 1907, the Philippine Commission enacted Act No. 1654 which provided for the lease, but not the sale, of reclaimed lands of the government to corporations and individuals . Later, on November 29, 1919, the Philippine Legislature approved Act No. 2874, the Public Land Act, which authorized the lease, but not the sale, of reclaimed lands of the government to corporations and individuals. On November 7, 1936, the National Assembly passed Commonwealth Act No. 141, also known as the Public Land Act, which authorized the lease, but not the sale, of reclaimed lands of the government to corporations and individuals. CA No. 141 continues to this day as the general law governing the classification and disposition of lands of the public domain. The Spanish Law of Waters of 1866 and the Civil Code of 1889 Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters within the maritime zone of the Spanish territory belonged to the public domain for public [44] use. The Spanish Law of Waters of 1866 allowed the reclamation of the sea under Article 5, which provided as follows: Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the provinces, pueblos or private persons, with proper permission, shall become the property of the party constructing such works, unless otherwise provided by the terms of the grant of authority. Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party undertaking the reclamation, provided the government issued the necessary permit and did not reserve ownership of the reclaimed land to the State. Article 339 of the Civil Code of 1889 defined property of public dominion as follows: Art. 339. Property of public dominion is 1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, riverbanks, shores, roadsteads, and that of a similar character; 2. That belonging exclusively to the State which, without being of general public use, is employed in some public service, or in the development of the national 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 [45] defense before the government could lease or alienate the property to private parties. Act No. 1654 of the Philippine Commission On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the lease of reclaimed and foreshore lands. The salient provisions of this law were as follows: Section 1. The control and disposition of the foreshore as defined in existing law, and the title to all Government or public lands made or reclaimed by the Government by dredging or filling or otherwise throughout the Philippine Islands, shall be retained by the Government without prejudice to vested rights and without prejudice to rights conceded to the City of Manila in the Luneta Extension. Section 2. (a) The Secretary of the Interior shall cause all Government or public lands made or reclaimed by the Government by dredging or filling or otherwise to be divided into lots or blocks, with the necessary streets and alleyways located thereon, and shall cause plats and plans of such surveys to be prepared and filed with the Bureau of Lands. (b) Upon completion of such plats and plans the Governor-General shall give notice to the public that such parts of the lands so made or reclaimed as are not needed for public purposes will be leased for commercial and business purposes , x x x. xxx (e) The leases above provided for shall be disposed of to the highest and best bidder therefore, subject to such regulations and safeguards as the Governor-General may by executive order prescribe. (Emphasis supplied) Act No. 1654 mandated that the government should retain title to all lands reclaimed by the government. The Act also vested in the government control and disposition of foreshore lands. Private parties could lease lands reclaimed by the government only if these lands were no longer needed for public purpose. Act No. 1654 mandated public bidding in the lease of government reclaimed lands. Act No. 1654 made government reclaimed wealth, such as walls, fortresses, and other works for the defense of the territory, and mines, until granted to private individuals. Property devoted to public use referred to property open for use by the public. In contrast, property devoted to public service referred to property used for some specific public service and open only to those authorized to use the property. Property of public dominion referred not only to property devoted to public use, but also to property not so used but employed to develop the national wealth. This class of property constituted property of public dominion although employed for some economic or commercial activity to increase the national wealth. Article 341 of the Civil Code of 1889 governed the re-classification of property of public dominion into private property, to wit:

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lands sui generis in that unlike other public lands which the government could sell to private parties, these reclaimed lands were available only for lease to private parties. Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866. Act No. 1654 did not prohibit private parties from reclaiming parts of the sea under Section 5 of the Spanish Law of Waters. Lands reclaimed from the sea by private parties with government permission remained private lands. Act No. 2874 of the Philippine Legislature On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public [46] Land Act. The salient provisions of Act No. 2874, on reclaimed lands, were as follows: Sec. 6. The Governor-General, upon the recommendation of the Secretary of Agriculture and Natural Resources, shall from time to time classify the lands of the public domain into (a) Alienable or disposable, (b) Timber, and (c) Mineral lands, x x x. Sec. 7. For the purposes of the government and disposition of alienable or disposable public lands, the Governor-General, upon recommendation by the Secretary of Agriculture and Natural Resources, shall from time to time declare what lands are open to disposition or concession under this Act. Sec. 8. Only those lands shall be declared open to disposition or concession which have been officially delimited or classified x x x. xxx Sec. 55. Any tract of land of the public domain which, being neither timber nor mineral land, shall be classified as suitable for residential purposes or for commercial, industrial, or other productive purposes other than agricultural purposes, and shall be open to disposition or concession, shall be disposed of under the provisions of this chapter, and not otherwise. Sec. 56. The lands disposable under this title shall be classified as follows: (a) Lands reclaimed by the Government by dredging, filling, or other means; (b) Foreshore; (c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable lakes or rivers; (d) Lands not included in any of the foregoing classes. x x x. Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six shall be disposed of to private parties by lease only and not otherwise , as soon as the Governor-General, upon recommendation by the Secretary of Agriculture and Natural Resources, shall declare that the same are not necessary for the public service and are open to disposition under this chapter. The lands included in class (d) may be disposed of by sale or lease under the provisions of this Act. (Emphasis supplied) Section 6 of Act No. 2874 authorized the Governor-General to classify lands of the [47] public domain into x x x alienable or disposable lands. Section 7 of the Act empowered the Governor-General to declare what lands are open to disposition or concession. Section 8 of the Act limited alienable or disposable lands only to those lands which have been officially delimited and classified. Section 56 of Act No. 2874 stated that lands disposable under this title shall be classified as government reclaimed, foreshore and marshy lands, as well as other lands. All these lands, however, must be suitable for residential, commercial, industrial or other productive non-agricultural purposes. These provisions vested upon the Governor-General the power to classify inalienable lands of the public domain into disposable lands of the public domain. These provisions also empowered the Governor-General to classify further such disposable lands of the public domain into government reclaimed, foreshore or marshy lands of the public domain, as well as other non-agricultural lands. Section 58 of Act No. 2874 categorically mandated that disposable lands of the public domain classified as government reclaimed, foreshore and marshy lands shall be disposed of to private parties by lease only and not otherwise. The Governor-General, before allowing the lease of these lands to private parties, must formally declare that the lands were not necessary for the public service. Act No. 2874 reiterated the State policy to lease and not to sell government reclaimed, foreshore and marshy lands of the public domain, a policy first enunciated in 1907 in Act No. 1654. Government reclaimed, foreshore and marshy lands remained sui generis, as the only alienable or disposable lands of the public domain that the government could not sell to private parties. The rationale behind this State policy is obvious. Government reclaimed, foreshore and marshy public lands for non-agricultural purposes retain their inherent potential as areas for public service. This is the reason the government prohibited the sale, and only allowed the lease, of these lands to private parties. The State always reserved these lands for some future public service. Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore and marshy lands into other non-agricultural lands under Section 56 (d). Lands falling under Section 56 (d) were the only lands for non-agricultural purposes the government could sell to private parties. Thus, under Act No. 2874, the government could not sell government reclaimed, foreshore and marshy lands to private parties, unless the legislature passed a [49] law allowing their sale. Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant to Section 5 of the Spanish Law of Waters of 1866. Lands reclaimed from the sea by private parties with government permission remained private lands. Dispositions under the 1935 Constitution On May 14, 1935, the 1935 Constitution took effect upon its ratification by the Filipino people. The 1935 Constitution, in adopting the Regalian doctrine, declared in Section 1, Article XIII, that Section 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government established under this Constitution. Natural resources, with the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for the exploitation, development, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for another twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the
[48]

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development of water power, in which cases beneficial use may be the measure and limit of the grant. (Emphasis supplied) The 1935 Constitution barred the alienation of all natural resources except public agricultural lands, which were the only natural resources the State could alienate. Thus, foreshore lands, considered part of the States natural resources, became inalienable by constitutional fiat, available only for lease for 25 years, renewable for another 25 years. The government could alienate foreshore lands only after these lands were reclaimed and classified as alienable agricultural lands of the public domain. Government reclaimed and marshy lands of the public domain, being neither timber nor mineral lands, fell under the [50] classification of public agricultural lands. However, government reclaimed and marshy lands, although subject to classification as disposable public agricultural lands, could only be leased and not sold to private parties because of Act No. 2874. The prohibition on private parties from acquiring ownership of government reclaimed and marshy lands of the public domain was only a statutory prohibition and the legislature could therefore remove such prohibition. The 1935 Constitution did not prohibit individuals and corporations from acquiring government reclaimed and marshy lands of the public domain that were classified as agricultural lands under existing public land laws. Section 2, Article XIII of the 1935 Constitution provided as follows: Section 2. No private corporation or association may acquire, lease, or hold public agricultural lands in excess of one thousand and twenty four hectares, nor may any individual acquire such lands by purchase in excess of one hundred and forty hectares, or by lease in excess of one thousand and twenty-four hectares, or by homestead in excess of twenty-four hectares. Lands adapted to grazing, not exceeding two thousand hectares, may be leased to an individual, private corporation, or association. (Emphasis supplied) Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58 of Act No. 2874 to open for sale to private parties government reclaimed and marshy lands of the public domain. On the contrary, the legislature continued the long established State policy of retaining for the government title and ownership of government reclaimed and marshy lands of the public domain. Commonwealth Act No. 141 of the Philippine National Assembly On November 7, 1936, the National Assembly approved Commonwealth Act No. 141, also known as the Public Land Act, which compiled the then existing laws on lands of the public domain. CA No. 141, as amended, remains to this day the existing general law governing the classification and disposition of lands of the public domain other than [51] timber and mineral lands. Section 6 of CA No. 141 empowers the President to classify lands of the public domain [52] into alienable or disposable lands of the public domain, which prior to such classification are inalienable and outside the commerce of man. Section 7 of CA No. 141 authorizes the President to declare what lands are open to disposition or concession. Section 8 of CA No. 141 states that the government can declare open for disposition or concession only lands that are officially delimited and classified. Sections 6, 7 and 8 of CA No. 141 read as follows: Sec. 6. The President, upon the recommendation of the Secretary of Agriculture and Commerce, shall from time to time classify the lands of the public domain into (a) Alienable or disposable, (b) Timber, and (c) Mineral lands, [53] and may at any time and in like manner transfer such lands from one class to another, for the purpose of their administration and disposition. Sec. 7. For the purposes of the administration and disposition of alienable or disposable public lands, the President, upon recommendation by the Secretary of Agriculture and Commerce, shall from time to time declare what lands are open to disposition or concession under this Act. Sec. 8. Only those lands shall be declared open to disposition or concession which have been officially delimited and classified and, when practicable, surveyed, andwhich have not been reserved for public or quasi-public uses, nor appropriated by the Government, nor in any manner become private property, nor those on which a private right authorized and recognized by this Act or any other valid law may be claimed, or which, having been reserved or appropriated, have ceased to be so. x x x. Thus, before the government could alienate or dispose of lands of the public domain, the President must first officially classify these lands as alienable or disposable, and then declare them open to disposition or concession. There must be no law reserving these lands for public or quasi-public uses. The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy lands of the public domain, are as follows: Sec. 58. Any tract of land of the public domain which, being neither timber nor mineral land, is intended to be used for residential purposes or for commercial, industrial, or other productive purposes other than agricultural, and is open to disposition or concession, shall be disposed of under the provisions of this chapter and not otherwise. Sec. 59. The lands disposable under this title shall be classified as follows: (a) Lands reclaimed by the Government by dredging, filling, or other means; (b) Foreshore; (c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable lakes or rivers; (d) Lands not included in any of the foregoing classes. Sec. 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to any person, corporation, or association authorized to purchase or lease public lands for agricultural purposes. x x x. Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine shall be disposed of to private parties by lease only and not otherwise , as soon as the President, upon recommendation by the Secretary of Agriculture, shall declare that the same are not necessary for the public service and are open to disposition under this chapter. The lands included in class (d) may be disposed of by sale or lease under the provisions of this Act. (Emphasis supplied) Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution, Section 58 of Act No. 2874 prohibiting the sale of government reclaimed, foreshore and marshy disposable lands of the public domain. All these lands are intended for residential, commercial, industrial or other non-agricultural purposes. As before, Section 61 allowed only

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the lease of such lands to private parties. The government could sell to private parties only lands falling under Section 59 (d) of CA No. 141, or those lands for non-agricultural purposes not classified as government reclaimed, foreshore and marshy disposable lands of the public domain. Foreshore lands, however, became inalienable under the 1935 Constitution which only allowed the lease of these lands to qualified private parties. Section 58 of CA No. 141 expressly states that disposable lands of the public domain intended for residential, commercial, industrial or other productive purposes other than agricultural shall be disposed of under the provisions of this chapter and not otherwise. Under Section 10 of CA No. 141, the term disposition includes lease of the land. Any disposition of government reclaimed, foreshore and marshy disposable lands for [54] non-agricultural purposes must comply with Chapter IX, Title III of CA No. 141, unless a subsequent law amended or repealed these provisions. In his concurring opinion in the landmark case of Republic Real Estate Corporation v. [55] Court of Appeals, Justice Reynato S. Puno summarized succinctly the law on this matter, as follows: Foreshore lands are lands of public dominion intended for public use. So too are lands reclaimed by the government by dredging, filling, or other means. Act 1654 mandated that the control and disposition of the foreshore and lands under water remained in the national government. Said law allowed only the leasing of reclaimed land. The Public Land Acts of 1919 and 1936 also declared that the foreshore and lands reclaimed by the government were to be disposed of to private parties by lease only and not otherwise. Before leasing, however, the Governor-General, upon recommendation of the Secretary of Agriculture and Natural Resources, had first to determine that the land reclaimed was not necessary for the public service. This requisite must have been met before the land could be disposed of. But even then, the foreshore and lands under water were not to be alienated and sold to private parties. The disposition of the reclaimed land was only by lease. The land remained property of the State. (Emphasis supplied) As observed by Justice Puno in his concurring opinion, Commonwealth Act No. 141 has remained in effect at present. The State policy prohibiting the sale to private parties of government reclaimed, foreshore and marshy alienable lands of the public domain, first implemented in 1907 was thus reaffirmed in CA No. 141 after the 1935 Constitution took effect. The prohibition on the sale of foreshore lands, however, became a constitutional edict under the 1935 Constitution. Foreshore lands became inalienable as natural resources of the State, unless reclaimed by the government and classified as agricultural lands of the public domain, in which case they would fall under the classification of government reclaimed lands. After the effectivity of the 1935 Constitution, government reclaimed and marshy disposable lands of the public domain continued to be only leased and not sold to private [56] parties. These lands remained sui generis, as the only alienable or disposable lands of the public domain the government could not sell to private parties. Since then and until now, the only way the government can sell to private parties government reclaimed and marshy disposable lands of the public domain is for the legislature to pass a law authorizing such sale. CA No. 141 does not authorize the President to reclassify government reclaimed and marshy lands into other non-agricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the only alienable or disposable lands for non-agricultural purposes that the government could sell to private parties. Moreover, Section 60 of CA No. 141 expressly requires congressional authority before lands under Section 59 that the government previously transferred to government units or entities could be sold to private parties. Section 60 of CA No. 141 declares that Sec. 60. x x x The area so leased or sold shall be such as shall, in the judgment of the Secretary of Agriculture and Natural Resources, be reasonably necessary for the purposes for which such sale or lease is requested, and shall not exceed one hundred and forty-four hectares: Provided, however, That this limitation shall not apply to grants, donations, or transfers made to a province, municipality or branch or subdivision of the Government for the purposes deemed by said entities conducive to the public interest; but the land so granted, donated, or transferred to a province, municipality or branch or subdivision of the Government shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its title, except when authorized by Congress: x x x. (Emphasis supplied) The congressional authority required in Section 60 of CA No. 141 mirrors the legislative authority required in Section 56 of Act No. 2874. One reason for the congressional authority is that Section 60 of CA No. 141 exempted government units and entities from the maximum area of public lands that could be acquired from the State. These government units and entities should not just turn around and sell these lands to private parties in violation of constitutional or statutory limitations. Otherwise, the transfer of lands for non-agricultural purposes to government units and entities could be used to circumvent constitutional limitations on ownership of alienable or disposable lands of the public domain. In the same manner, such transfers could also be used to evade the statutory prohibition in CA No. 141 on the sale of government reclaimed and marshy lands of the public domain to private parties. Section 60 of CA No. 141 constitutes by operation of law [57] a lien on these lands. In case of sale or lease of disposable lands of the public domain falling under Section 59 of CA No. 141, Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA No. 141 provide as follows: Sec. 63. Whenever it is decided that lands covered by this chapter are not needed for public purposes, the Director of Lands shall ask the Secretary of Agriculture and Commerce (now the Secretary of Natural Resources) for authority to dispose of the same. Upon receipt of such authority, the Director of Lands shall give notice by public advertisement in the same manner as in the case of leases or sales of agricultural public land, x x x. Sec. 67. The lease or sale shall be made by oral bidding; and adjudication shall be made to the highest bidder. x x x. (Emphasis supplied) Thus, CA No. 141 mandates the Government to put to public auction all leases or sales of [58] alienable or disposable lands of the public domain. Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the Spanish Law of Waters of 1866. Private parties could still reclaim portions of the sea with government permission. However, the reclaimed land could become private land only if classified as alienable agricultural land of the public domain open to disposition under CA No. 141. The 1935 Constitution prohibited the alienation of all natural resources except public agricultural lands. The Civil Code of 1950

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The Civil Code of 1950 readopted substantially the definition of property of public dominion found in the Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950 state that Art. 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. x x x. Art. 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State. Again, the government must formally declare that the property of public dominion is no longer needed for public use or public service, before the same could be classified as [59] patrimonial property of the State. In the case of government reclaimed and marshy lands of the public domain, the declaration of their being disposable, as well as the manner of their disposition, is governed by the applicable provisions of CA No. 141. Like the Civil Code of 1889, the Civil Code of 1950 included as property of public dominion those properties of the State which, without being for public use, are intended for public service or the development of the national wealth. Thus, government reclaimed and marshy lands of the State, even if not employed for public use or public service, if developed to enhance the national wealth, are classified as property of public dominion. of the public domain. If the land of public domain were neither timber nor mineral land, it would fall under the classification of agricultural land of the public domain. Both the 1935 and 1973 Constitutions, therefore, prohibited the alienation of all natural resources except agricultural lands of the public domain. The 1973 Constitution, however, limited the alienation of lands of the public domain to individuals who were citizens of the Philippines. Private corporations, even if wholly owned by Philippine citizens, were no longer allowed to acquire alienable lands of the public domain unlike in the 1935 Constitution. Section 11, Article XIV of the 1973 Constitution declared that Sec. 11. The Batasang Pambansa, taking into account conservation, ecological, and development requirements of the natural resources, shall determine by law the size of land of the public domain which may be developed, held or acquired by, or leased to, any qualified individual, corporation, or association, and the conditions therefor. No private corporation or association may hold alienable lands of the public domain except by lease not to exceed one thousand hectares in area nor may any citizen hold such lands by lease in excess of five hundred hectares or acquire by purchase, homestead or grant, in excess of twenty-four hectares. No private corporation or association may hold by lease, concession, license or permit, timber or forest lands and other timber or forest resources in excess of one hundred thousand hectares. However, such area may be increased by the Batasang Pambansa upon recommendation of the National Economic and Development Authority. (Emphasis supplied) Thus, under the 1973 Constitution, private corporations could hold alienable lands of the public domain only through lease. Only individuals could now acquire alienable lands of the public domain, and private corporations became absolutely barred from acquiring any kind of alienable land of the public domain . The constitutional ban extended to all kinds of alienable lands of the public domain, while the statutory ban under CA No. 141 applied only to government reclaimed, foreshore and marshy alienable lands of the public domain.
[60]

Dispositions under the 1973 Constitution

PD No. 1084 Creating the Public Estates Authority

The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the Regalian doctrine. Section 8, Article XIV of the 1973 Constitution stated that Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, wildlife, and other natural resources of the Philippines belong to the State. With the exception of agricultural, industrial or commercial, residential, and resettlement lands of the public domain, natural resources shall not be alienated, and no license, concession, or lease for the exploration, development, exploitation, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for not more than twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases, beneficial use may be the measure and the limit of the grant. (Emphasis supplied) The 1973 Constitution prohibited the alienation of all natural resources with the exception of agricultural, industrial or commercial, resident ial, and resettlement lands of the public domain. In contrast, the 1935 Constitution barred the alienation of all natural resources except public agricultural lands. However, the term public agricultural lands in the 1935 Constitution encompassed industrial, commercial, residential and resettlement lands

On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No. 1084 creating PEA, a wholly government owned and controlled corporation with a special charter. Sections 4 and 8 of PD No. 1084, vests PEA with the following purposes and powers: Sec. 4. Purpose. The Authority is hereby created for the following purposes: (a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other means, or to acquire reclaimed land; (b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands, buildings, estates and other forms of real property, owned, managed, controlled and/or operated by the government; (c) To provide for, operate or administer such service as may be necessary for the efficient, economical and beneficial utilization of the above properties. Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying out the purposes for which it is created, have the following powers and functions: (a)To prescribe its by-laws. xxx

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(i) To hold lands of the public domain in excess of the area permitted to private corporations by statute. (j) To reclaim lands and to construct work across, or otherwise, any stream, watercourse, canal, ditch, flume x x x. xxx (o) To perform such acts and exercise such functions as may be necessary for the attainment of the purposes and objectives herein specified. (Emphasis supplied) PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the public domain. Foreshore areas are those covered and uncovered by the ebb and flow of the [61] tide. Submerged areas are those permanently under water regardless of the ebb and flow [62] of the tide. Foreshore and submerged areas indisputably belong to the public [63] domain and are inalienable unless reclaimed, classified as alienable lands open to disposition, and further declared no longer needed for public service. The ban in the 1973 Constitution on private corporations from acquiring alienable lands of the public domain did not apply to PEA since it was then, and until today, a fully owned government corporation. The constitutional ban applied then, as it still applies now, only to private corporations and associations. PD No. 1084 expressly empowers PEA to hold lands of the public domain even in excess of the area permitted to private corporations by statute. Thus, PEA can hold title to private lands, as well as title to lands of the public domain. In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the public domain, there must be legislative authority empowering PEA to sell these lands. This legislative authority is necessary in view of Section 60 of CA No.141, which states Sec. 60. x x x; but the land so granted, donated or transferred to a province, municipality, or branch or subdivision of the Government shall not be alienated, encumbered or otherwise disposed of in a manner affecting its title, except when authorized by Congress; x x x. (Emphasis supplied) Without such legislative authority, PEA could not sell but only lease its reclaimed foreshore and submerged alienable lands of the public domain. Nevertheless, any legislative authority granted to PEA to sell its reclaimed alienable lands of the public domain would be subject to the constitutional ban on private corporations from acquiring alienable lands of the public domain. Hence, such legislative authority could only benefit private individuals. and utilization of natural resources shall be under the full control and supervision of the State. x x x. Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and national parks. Agricultural lands of the public domain may be further classified by law according to the uses which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof by purchase, homestead, or grant. Taking into account the requirements of conservation, ecology, and development, and subject to the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public domain which may be acquired, developed, held, or leased and the conditions therefor. (Emphasis supplied) The 1987 Constitution continues the State policy in the 1973 Constitution banning private corporations from acquiring any kind of alienable land of the public domain . Like the 1973 Constitution, the 1987 Constitution allows private corporations to hold alienable lands of the public domain only through lease. As in the 1935 and 1973 Constitutions, the general law governing the lease to private corporations of reclaimed, foreshore and marshy alienable lands of the public domain is still CA No. 141.

The Rationale behind the Constitutional Ban

The rationale behind the constitutional ban on corporations from acquiring, except through lease, alienable lands of the public domain is not well understood. During the deliberations of the 1986 Constitutional Commission, the commissioners probed the rationale behind this ban, thus: FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5 which says: `No private corporation or association may hold alienable lands of the public domain except by lease, not to exceed one thousand hectares in area. If we recall, this provision did not exist under the 1935 Constitution, but this was introduced in the 1973 Constitution. In effect, it prohibits private corporations from acquiring alienable public lands. But it has not been very clear in jurisprudence what the reason for this is. In some of the cases decided in 1982 and 1983, it was indicated that the purpose of this is to prevent large landholdings. Is that the intent of this provision? MR. VILLEGAS: I think that is the spirit of the provision. FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were instances where the Iglesia ni Cristo was not allowed to acquire a mere 313-square meter land where a

Dispositions under the 1987 Constitution

The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the Regalian doctrine. The 1987 Constitution declares that all natural resources are owned by the State, and except for alienable agricultural lands of the public domain, natural resources cannot be alienated. Sections 2 and 3, Article XII of the 1987 Constitution state that Section 2. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development,

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chapel stood because the Supreme Court said it would be in violation of this. (Emphasis supplied) In Ayog v. Cusi, this way:
[64]

the Court explained the rationale behind this constitutional ban in

1. [T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo Boulevard in Paranaque and Las Pinas, Metro Manila, with a combined titled area of 1,578,441 square meters; 2. [A]nother area of 2,421,559 square meters contiguous to the three islands; and 3. [A]t AMARIs option as approved by PEA, an additional 350 hectares more o r [65] less to regularize the configuration of the reclaimed area. PEA confirms that the Amended JVA involves the development of the Freedom Islands and further reclamation of about 250 hectares x x x, plus an option granted to AMARI to [66] subsequently reclaim another 350 hectares x x x. In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84 hectares of the 750-hectare reclamation project have been reclaimed, and the rest of the 592.15 hectares are still submerged areas forming part of Manila Bay . Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for PEAs actual cost in partially reclaiming the Freedom Islands. AMARI will also complete, at its own expense, the reclamation of the Freedom Islands. AMARI will further shoulder all the reclamation costs of all the other areas, totaling 592.15 hectares, still to be reclaimed. AMARI and PEA will share, in the proportion of 70 percent and 30 percent, respectively, the total net usable area which is defined in the Amended JVA as the total reclaimed area less 30 percent earmarked for common areas. Title to AMARIs share in the net usable area, totaling 367.5 hectares, will be issued in the name of AMARI. Section 5.2 (c) of the Amended JVA provides that x x x, PEA shall have the duty to execute without del ay the necessary deed of transfer or conveyance of the title pertaining to AMARIs Land share based on the Land Allocation Plan.PEA, when requested in writing by AMARI, shall then cause the issuance and delivery of the proper certificates of title covering AMARIs Land Share in the name of AMARI, x x x; provided, that if more than seventy percent (70%) of the titled area at any given time pertains to AMARI, PEA shall deliver to AMARI only seventy percent (70%) of the titles pertaining to AMARI, until such time when a corresponding proportionate area of additional land pertaining to PEA has been titled. (Emphasis supplied) Indisputably, under the Amended JVA AMARI will acquire and own a maximum of 367.5 hectares of reclaimed land which will be titled in its name. To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint venture PEAs statutory authority, rights and privileges to reclaim foreshore and submerged areas in Manila Bay. Section 3.2.a of the Amended JVA states that PEA hereby contributes to the joint venture its rights and privileges to perform Rawland Reclamation and Horizontal Development as well as own the Reclamation Area, thereby granting the Joint Venture the full and exclusive right, authority and privilege to undertake the Project in accordance with the Master Development Plan. The Amended JVA is the product of a renegotiation of the original JVA dated April 25, 1995 and its supplemental agreement dated August 9, 1995.

Indeed, one purpose of the constitutional prohibition against purchases of public agricultural lands by private corporations is to equitably diffuse land ownership or to encourage owner cultivatorship and the economic family-size farm and to prevent a recurrence of cases like the instant case. Huge landholdings by corporations or private persons had spawned social unrest. However, if the constitutional intent is to prevent huge landholdings, the Constitution could have simply limited the size of alienable lands of the public domain that corporations could acquire. The Constitution could have followed the limitations on individuals, who could acquire not more than 24 hectares of alienable lands of the public domain under the 1973 Constitution, and not more than 12 hectares under the 1987 Constitution. If the constitutional intent is to encourage economic family-size farms, placing the land in the name of a corporation would be more effective in preventing the break-up of farmlands. If the farmland is registered in the name of a corporation, upon the death of the owner, his heirs would inherit shares in the corporation instead of subdivided parcels of the farmland. This would prevent the continuing break-up of farmlands into smaller and smaller plots from one generation to the next. In actual practice, the constitutional ban strengthens the constitutional limitation on individuals from acquiring more than the allowed area of alienable lands of the public domain. Without the constitutional ban, individuals who already acquired the maximum area of alienable lands of the public domain could easily set up corporations to acquire more alienable public lands. An individual could own as many corporations as his means would allow him. An individual could even hide his ownership of a corporation by putting his nominees as stockholders of the corporation. The corporation is a convenient vehicle to circumvent the constitutional limitation on acquisition by individuals of alienable lands of the public domain. The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a limited area of alienable land of the public domain to a qualified individual. This constitutional intent is safeguarded by the provision prohibiting corporations from acquiring alienable lands of the public domain, since the vehicle to circumvent the constitutional intent is removed. The available alienable public lands are gradually decreasing in the face of an ever-growing population. The most effective way to insure faithful adherence to this constitutional intent is to grant or sell alienable lands of the public domain only to individuals. This, it would seem, is the practical benefit arising from the constitutional ban.

The Amended Joint Venture Agreement

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

13 | P a g e
The threshold issue is whether AMARI, a private corporation, can acquire and own under the Amended JVA 367.5 hectares of reclaimed foreshore and submerged areas in Manila Bay in view of Sections 2 and 3, Article XII of the 1987 Constitution which state that: Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated . x x x. xxx Section 3. x x x Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, x x x.(Emphasis supplied) 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 [71] public or quasi-public use. Section 8 of CA No. 141 provides that only those lands shall be declared open to [72] disposition or concession which have been officially delimited and classified. The President has the authority to classify inalienable lands of the public domain into alienable or disposable lands of the public domain, pursuant to Section 6 of CA No. 141. In Laurel vs. [73] Garcia, the Executive Department attempted to sell the Roppongi property in Tokyo, Japan, which was acquired by the Philippine Government for use as the Chancery of the Philippine Embassy. Although the Chancery had transferred to another location thirteen [74] years earlier, the Court still ruled that, under Article 422 of the Civil Code, a property of public dominion retains such character until formally declared otherwise. The Court ruled that The fact that the Roppongi site has not been used for a long time for actual Embassy service does not automatically convert it to patrimonial property. Any such conversion happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A property continues to be part of the public domain, not available for private appropriation or ownership until there is a formal declaration on the part of the government to withdraw it from being such (Ignacio v. Director of Lands, 108 Phil. 335 [1960]. (Emphasis supplied) PD No. 1085, issued on February 4, 1977, authorized the issuance of special land patents for lands reclaimed by PEA from the foreshore or submerged areas of Manila Bay. On January 19, 1988 then President Corazon C. Aquino issued Special Patent No. 3517 in the name of PEA for the 157.84 hectares comprising the partially reclaimed Freedom Islands. Subsequently, on April 9, 1999 the Register of Deeds of the Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the name of PEA pursuant to Section 103 of PD No. 1529 authorizing the issuance of certificates of title corresponding to land patents. To this day, these certificates of title are still in the name of PEA. PD No. 1085, coupled with President Aquinos actual issuance of a special patent covering the Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085 and President Aquinos issuance of a land patent also constitute a declaration that the Freedom Islands are no longer needed for public service. The Freedom Islands are thus alienable or disposable lands of the public domain, open to disposition or concession to qualified parties. At the time then President Aquino issued Special Patent No. 3517, PEA had already reclaimed the Freedom Islands although subsequently there were partial erosions on some areas. The government had also completed the necessary surveys on these islands. Thus, the Freedom Islands were no longer part of Manila Bay but part of the land mass. Section 3, Article XII of the 1987 Constitution classifies lands of the public domain into agricultural, forest or timber, mineral lands, and national parks. Being neither timber, mineral, nor national park lands, the reclaimed Freedom Islands necessarily fall under the classification of agricultural lands of the public domain. Under the 1987 Constitution, agricultural lands of the public domain are the only natural resources that the State may alienate to qualified private parties. All other natural resources, such as the seas or bays, are water s x x x owned by the

Classification of Reclaimed Foreshore and Submerged Areas

PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila Bay are alienable or disposable lands of the public domain. In its [67] Memorandum, PEA admits that Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as alienable and disposable lands of the public domain: Sec. 59. The lands disposable under this title shall be classified as follows: (a) Lands reclaimed by the government by dredging, filling, or other means; x x x. (Emphasis supplied) Likewise, the Legal Task Force constituted under Presidential Administrative Order No. 365 admitted in its Report and Recommendation to then President Fidel V. Ramos, [R]eclaimed lands are classified as alienable and disposable lands of the public [69] domain. The Legal Task Force concluded that D. Conclusion Reclaimed lands are lands of the public domain. However, by statutory authority, the rights of ownership and disposition over reclaimed lands have been transferred to PEA, by virtue of which PEA, as owner, may validly convey the same to any qualified person without violating the Constitution or any statute. The constitutional provision prohibiting private corporations from holding public land, except [70] by lease (Sec. 3, Art. XVII, 1987 Constitution), does not apply to reclaimed lands whose ownership has passed on to PEA by statutory grant. Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila Bay are part of the lands of the public domain, waters x x x and other natural resources and consequently owned by the State. As such, foreshore and submerged areas
[68]

14 | P a g e
State forming part of the public domain, and are inalienable pursuant to Section 2, Article XII of the 1987 Constitution. AMARI claims that the Freedom Islands are private lands because CDCP, then a private corporation, reclaimed the islands under a contract dated November 20, 1973 with the Commissioner of Public Highways. AMARI, citing Article 5 of the Spanish Law of Waters of 1866, argues that if the ownership of reclaimed lands may be given to the party constructing the works, then it cannot be said that reclaimed lands are lands of the public domain which [75] the State may not alienate. Article 5 of the Spanish Law of Waters reads as follows: Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the provinces, pueblos or private persons, with proper permission, shall become the property of the party constructing such works, unless otherwise provided by the terms of the grant of authority. (Emphasis supplied) Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from the sea only with proper permission from the State. Private parties could own the reclaimed land only if not otherwise provided by the terms of the grant of authority. This clearly meant that no one could reclaim from the sea without permission from the State because the sea is property of public dominion. It also meant that the State could grant or withhold ownership of the reclaimed land because any reclaimed land, like the sea from which it emerged, belonged to the State. Thus, a private person reclaiming from the sea without permission from the State could not acquire ownership of the reclaimed land which would remain property of [76] public dominion like the sea it replaced. Article 5 of the Spanish Law of Waters of 1866 adopted the time-honored principle of land ownership that all lands that were not acquired [77] from the government, either by purchase or by grant, belong to the public domain. Article 5 of the Spanish Law of Waters must be read together with laws subsequently enacted on the disposition of public lands. In particular, CA No. 141 requires that lands of the public domain must first be classified as alienable or disposable before the government can alienate them. These lands must not be reserved for public or quasi-public [78] purposes. Moreover, the contract between CDCP and the government was executed after the effectivity of the 1973 Constitution which barred private corporations from acquiring any kind of alienable land of the public domain. This contract could not have converted the Freedom Islands into private lands of a private corporation. Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing the reclamation of areas under water and revested solely in the National Government the power to reclaim lands. Section 1 of PD No. 3-A declared that The provisions of any law to the contrary notwithstanding, the reclamation of areas under water, whether foreshore or inland, shall be limited to the National Government or any person authorized by it under a proper contract. (Emphasis supplied) x x x. PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because reclamation of areas under water could now be undertaken only by the National Government or by a person contracted by the National Government. Private parties may reclaim from the sea only under a contract with the National Government, and no longer by grant or permission as provided in Section 5 of the Spanish Law of Waters of 1866. Executive Order No. 525, issued on February 14, 1979, designated PEA as the National Governments implementing arm to undertake all reclamation projects of the government, which shall be undertaken by the PEA or through a proper contract executed by it with any person or entity. Under such contract, a private party receives compensation for reclamation services rendered to PEA. Payment to the contractor may be in cash, or in kind consisting of portions of the reclaimed land, subject to the constitutional ban on private corporations from acquiring alienable lands of the public domain. The reclaimed land can be used as payment in kind only if the reclaimed land is first classified as alienable or disposable land open to disposition, and then declared no longer needed for public service. The Amended JVA covers not only the Freedom Islands, but also an additional 592.15 hectares which are still submerged and forming part of Manila Bay. There is no legislative or Presidential act classifying these submerged areas as alienable or disposable lands of the public domain open to disposition. These submerged areas are not covered by any patent or certificate of title. There can be no dispute that these submerged areas form part of the public domain, and in their present state are inalienable and outside the commerce of man. Until reclaimed from the sea, these submerged areas are, under the Constitution, waters x x x owned by the State, forming part of the public domain and consequently inalienable. Only when actually reclaimed from the sea can these submerged areas be classified as public agricultural lands, which under the Constitution are the only natural resources that the State may alienate. Once reclaimed and transformed into public agricultural lands, the government may then officially classify these lands as alienable or disposable lands open to disposition. Thereafter, the government may declare these lands no longer needed for public service. Only then can these reclaimed lands be considered alienable or disposable lands of the public domain and within the commerce of man. The classification of PEAs reclaimed foreshore and submerged lands into alienable or disposable lands open to disposition is necessary because PEA is tasked under its charter to undertake public services that require the use of lands of the public domain. Under Section 5 of PD No. 1084, the functions of PEA include the following: [T]o own or operate railroads, tramways and other kinds of land transportation, x x x; [T]o construct, maintain and operate such systems of sanitary sewers as may be necessary; [T]o construct, maintain and operate such storm drains as may be necessary. PEA is empowered to issue rules and regulations as may be necessary for the proper use by private parties of any or all of the highways, roads, utilities, buildings and/or any of its properties and to impose or collect fees or tolls for their use. Thus, part of the reclaimed foreshore and submerged lands held by the PEA would actually be needed for public use or service since many of the functions imposed on PEA by its charter constitute essential public services. Moreover, Section 1 of Executive Order No. 525 provides that PEA shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government. The same section also states that [A]ll reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or entity; x x x. Thus, under EO No. 525, in relation to PD No. 3-A and PD No.1084, PEA became the primary implementing agency of the National Government to reclaim foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as the government entity to undertake the reclamation of lands and ensure their maximum utilization in [79] promoting public welfare and interests. Since large portions of these reclaimed lands would obviously be needed for public service, there must be a formal declaration segregating reclaimed lands no longer needed for public service from those still needed for public service. Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA shall belong to or be owned by the PEA, could not automatically operate to classify inalienable lands into alienable or disposable lands of the public domain. Otherwise, reclaimed foreshore and submerged lands of the public domain would automatically become alienable once reclaimed by PEA, whether or not classified as alienable or disposable.

15 | P a g e
The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No. 525, vests in the Department of Environment and Natural Resources (DENR for brevity) the following powers and functions: Sec. 4. Powers and Functions. The Department shall: (1) x x x xxx (4) Exercise supervision and control over forest lands, alienable and disposable public lands, mineral resources and, in the process of exercising such control, impose appropriate taxes, fees, charges, rentals and any such form of levy and collect such revenues for the exploration, development, utilization or gathering of such resources; xxx (14) Promulgate rules, regulations and guidelines on the issuance of licenses, permits, concessions, lease agreements and such other privileges concerning the development, exploration and utilization of the countrys marine, freshwater, and brackish water and over all aquatic resources of the country and shall continue to oversee, supervise and police our natural resources; cancel or cause to cancel such privileges upon failure, noncompliance or violations of any regulation, order, and for all other causes which are in furtherance of the conservation of natural resources and supportive of the national interest; (15) Exercise exclusive jurisdiction on the management and disposition of all lands of the public domain and serve as the sole agency responsible for classification, subclassification, surveying and titling of lands in consultation with appropriate [80] agencies. (Emphasis supplied) As manager, conservator and overseer of the natural resources of the State, DENR exercises supervision and control over alienable and disposable public lands. DENR also exercises exclusive jurisdiction on the management and disposition of all lands of the public domain. Thus, DENR decides whether areas under water, like foreshore or submerged areas of Manila Bay, should be reclaimed or not. This means that PEA needs authorization from DENR before PEA can undertake reclamation projects in Manila Bay, or in any part of the country. DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain. Hence, DENR decides whether reclaimed lands of PEA should be classified as [81] [82] alienable under Sections 6 and 7 of CA No. 141. Once DENR decides that the reclaimed lands should be so classified, it then recommends to the President the issuance of a proclamation classifying the lands as alienable or disposable lands of the public domain open to disposition. We note that then DENR Secretary Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the Revised Administrative Code and Sections 6 and 7 of CA No. 141. In short, DENR is vested with the power to authorize the reclamation of areas under water, while PEA is vested with the power to undertake the physical reclamation of areas under water, whether directly or through private contractors. DENR is also empowered to classify lands of the public domain into alienable or disposable lands subject to the approval of the President. On the other hand, PEA is tasked to develop, sell or lease the reclaimed alienable lands of the public domain. Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas does not make the reclaimed lands alienable or disposable lands of the public domain, much less patrimonial lands of PEA. Likewise, the mere transfer by the National Government of lands of the public domain to PEA does not make the lands alienable or disposable lands of the public domain, much less patrimonial lands of PEA. Absent two official acts a classification that these lands are alienable or disposable and open to disposition and a declaration that these lands are not needed for public service, lands reclaimed by PEA remain inalienable lands of the public domain. Only such an official classification and formal declaration can convert reclaimed lands into alienable or disposable [83] lands of the public domain, open to disposition under the Constitution, Title I and Title III of [84] CA No. 141 and other applicable laws.

PEAs Authority to Sell Reclaimed Lands

PEA, like the Legal Task Force, argues that as alienable or disposable lands of the public domain, the reclaimed lands shall be disposed of in accordance with CA No. 141, the Public Land Act. PEA, citing Section 60 of CA No. 141, admits that reclaimed lands transferred to a branch or subdivision of the government shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its title, except when authorized by [85] Congress: x x x. (Emphasis by PEA) In Laurel vs. Garcia, of 1987, which states that
[86]

the Court cited Section 48 of the Revised Administrative Code

Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following: x x x. Thus, the Court concluded that a law is needed to convey any real property belonging to the Government. The Court declared that It is not for the President to convey real property of the government on his or her own sole will. Any such conveyance must be authorized and approved by a law enacted by the Congress. It requires executive and legislative concurrence. (Emphasis supplied) PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority allowing PEA to sell its reclaimed lands. PD No. 1085, issued on February 4, 1977, provides that The land reclaimed in the foreshore and offshore area of Manila Bay pursuant to the contract for the reclamation and construction of the Manila-Cavite Coastal Road Project between the Republic of the Philippines and the Construction and Development Corporation of the Philippines dated November 20, 1973 and/or any other contract or reclamation covering the same area is hereby transferred, conveyed and assigned to the ownership and administration of the Public Estates Authority established pursuant to PD No. 1084; Provided, however, That the rights and interests of the Construction and Development Corporation of the Philippines pursuant to the aforesaid contract shall be recognized and respected. Henceforth, the Public Estates Authority shall exercise the rights and assume the obligations of the Republic of the Philippines (Department of Public Highways) arising from, or incident to,

16 | P a g e
the aforesaid contract between the Republic of the Philippines and the Construction and Development Corporation of the Philippines. In consideration of the foregoing transfer and assignment, the Public Estates Authority shall issue in favor of the Republic of the Philippines the corresponding shares of stock in said entity with an issued value of said shares of stock (which) shall be deemed fully paid and nonassessable. The Secretary of Public Highways and the General Manager of the Public Estates Authority shall execute such contracts or agreements, including appropriate agreements with the Construction and Development Corporation of the Philippines, as may be necessary to implement the above. Special land patent/patents shall be issued by the Secretary of Natural Resources in favor of the Public Estates Authority without prejudice to the subsequent transfer to the contractor or his assignees of such portion or portions of the land reclaimed or to be reclaimed as provided for in the above-mentioned contract. On the basis of such patents, the Land Registration Commission shall issue the corresponding certificate of title. (Emphasis supplied) On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the PEA which shall be responsible for its administration, development, utilization or disposition in accordance with the provisions of Presidential Decree No. 1084. Any and all income that the PEA may derive from the sale, lease or use of reclaimed lands shall be used in accordance with the provisions of Presidential Decree No. 1084. There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its reclaimed lands. PD No. 1085 merely transferred ownership and administration of lands reclaimed from Manila Bay to PEA, while EO No. 525 declared that lands reclaimed by PEA shall belong to or be owned by PEA. EO No. 525 expressly states that PEA should dispose of its reclaimed lands in accordance with the provisions of Presidential Decree No. 1084, the charter of PEA. PEAs charter, however, expressly tasks PEA to develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands x x x owned, managed, [87] controlled and/or operated by the government. (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 PEAs patrimonial lands. PEA may also sell its alienable or disposable lands of the public domain to private individuals since, with the legislative authority, there is no longer any statutory prohibition against such sales and the constitutional ban does not apply to individuals. PEA, however, cannot sell any of its alienable or disposable lands of the public domain to private corporations since Section 3, Article XII of the 1987 Constitution expressly prohibits such sales. The legislative authority benefits only individuals. Private corporations remain barred from acquiring any kind of alienable land of the public domain, including government reclaimed lands. The provision in PD No. 1085 stating that portions of the reclaimed lands could be transferred by PEA to the contractor or his assignees (Emphasis supplied) would not apply to private corporations but only to individuals because of the constitutional ban. Otherwise, the provisions of PD No. 1085 would violate both the 1973 and 1987 Constitutions.

The requirement of public auction in the sale of reclaimed lands

Assuming the reclaimed lands of PEA are classified as alienable or disposable lands open to disposition, and further declared no longer needed for public service, PEA would have to conduct a public bidding in selling or leasing these lands. PEA must observe the provisions of Sections 63 and 67 of CA No. 141 requiring public auction, in the absence of a law [88] exempting PEA from holding a public auction. Special Patent No. 3517 expressly states that the patent is issued by authority of the Constitution and PD No. 1084, supplemented by Commonwealth Act No. 141, as amended. This is an acknowledgm ent that the provisions of CA No. 141 apply to the disposition of reclaimed alienable lands of the public domain unless [89] otherwise provided by law. Executive Order No. 654, which authorizes PEA to determine the kind and manner of payment for the transfer of its assets and properties, does not exempt PEA from the requirement of public auction. EO No. 654 merely authorizes PEA to decide the mode of payment, whether in kind and in installment, but does not authorize PEA to dispense with public auction. Moreover, under Section 79 of PD No. 1445, otherwise known as the Government Auditing Code, the government is required to sell valuable government property through public bidding. Section 79 of PD No. 1445 mandates that Section 79. When government property has become unserviceable for any cause, or is no longer needed, it shall, upon application of the officer accountable therefor, be inspected by the head of the agency or his duly authorized representative in the presence of the auditor concerned and, if found to be valueless or unsaleable, it may be destroyed in their presence. If found to be valuable, it may be sold at public auction to the highest bidder under the supervision of the proper committee on award or similar body in the presence of the auditor concerned or other authorized representative of the Commission, after advertising by printed notice in the Official Gazette, or for not less than three consecutive days in any newspaper of general circulation , or where the value of the property does not warrant the expense of publication, by notices posted for a like period in at least three public places in the locality where the property is to be sold. In the event that the public auction fails, the property may be sold at a private sale at such price as may be fixed by the same committee or body concerned and approved by the Commission. It is only when the public auction fails that a negotiated sale is allowed, in which case the [90] Commission on Audit must approve the selling price. The Commission on Audit implements [91] Section 79 of the Government Auditing Code through Circular No. 89-296 dated January 27, 1989. This circular emphasizes that government assets must be disposed of only through public auction, and a negotiated sale can be resorted to only in case of failure of public auction. At the public auction sale, only Philippine citizens are qualified to bid for PEAs reclaimed foreshore and submerged alienable lands of the public domain. Private corporations are barred from bidding at the auction sale of any kind of alienable land of the public domain.

17 | P a g e
PEA originally scheduled a public bidding for the Freedom Islands on December 10, 1991. PEA imposed a condition that the winning bidder should reclaim another 250 hectares of submerged areas to regularize the shape of the Freedom Islands, under a 60-40 sharing of [92] the additional reclaimed areas in favor of the winning bidder. No one, however, submitted a bid. On December 23, 1994, the Government Corporate Counsel advised PEA it could sell the Freedom Islands through negotiation, without need of another public bidding, because of [93] the failure of the public bidding on December 10, 1991. 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 [94] reclamation area to 750 hectares. The failure of public bidding on December 10, 1991, [95] involving only 407.84 hectares, is not a valid justification for a negotiated sale of 750 hectares, almost double the area publicly auctioned. Besides, the failure of public bidding happened on December 10, 1991, more than three years before the signing of the original JVA on April 25, 1995. The economic situation in the country had greatly improved during the intervening period. Although Section 302 of the Local Government Code does not contain a proviso similar to that of the BOT Law, the constitutional restrictions on land ownership automatically apply even though not expressly mentioned in the Local Government Code. Thus, under either the BOT Law or the Local Government Code, the contractor or developer, if a corporate entity, can only be paid with leaseholds on portions of the reclaimed land. If the contractor or developer is an individual, portions of the reclaimed land, not [96] exceeding 12 hectares of non-agricultural lands, may be conveyed to him in ownership in view of the legislative authority allowing such conveyance. This is the only way these provisions of the BOT Law and the Local Government Code can avoid a direct collision with Section 3, Article XII of the 1987 Constitution.

Registration of lands of the public domain Finally, PEA theorizes that the act of conveying the ownership of the reclaimed lands to public respondent PEA transformed such lands of the public domain to private lands. This theory is echoed by AMARI which maintains that the issuance of the special patent leading to the eventual issuance of title takes the subject land away from the land of public domain and converts the property into patrimonial or private property. In short, PEA and AMARI contend that with the issuance of Special Patent No. 3517 and the corresponding certificates of titles, the 157.84 hectares comprising the Freedom Islands have become private lands of PEA. In support of their theory, PEA and AMARI cite the following rulings of the Court: 1. Sumail v. Judge of CFI of Cotabato,
[97]

Reclamation under the BOT Law and the Local Government Code

The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is absolute and clear: Private corporations or association s may not hold such alienable lands of the public domain except by lease, x x x. Even Republic Act No. 6957 (BOT Law, for brevity), cited by PEA and AMARI as legislative authority to sell reclaimed lands to private parties, recognizes the constitutional ban. Section 6 of RA No. 6957 states Sec. 6. Repayment Scheme. - For the financing, construction, operation and maintenance of any infrastructure projects undertaken through the build-operate-and-transfer arrangement or any of its variations pursuant to the provisions of this Act, the project proponent x x x may likewise be repaid in the form of a share in the revenue of the project or other non-monetary payments, such as, but not limited to, the grant of a portion or percentage of the reclaimed land, subject to the constitutional requirements with respect to the ownership of the land: x x x. (Emphasis supplied) A private corporation, even one that undertakes the physical reclamation of a government BOT project, cannot acquire reclaimed alienable lands of the public domain in view of the constitutional ban. Section 302 of the Local Government Code, also mentioned by PEA and AMARI, authorizes local governments in land reclamation projects to pay the contractor or developer in kind consisting of a percentage of the reclaimed land, to wit: Section 302. Financing, Construction, Maintenance, Operation, and Management of Infrastructure Projects by the Private Sector. x x x xxx In case of land reclamation or construction of industrial estates, the repayment plan may consist of the grant of a portion or percentage of the reclaimed land or the industrial estate constructed.

where the Court held

Once the patent was granted and the corresponding certificate of title was issued, the land ceased to be part of the public domain and became private property over which the Director of Lands has neither control nor jurisdiction. 2. Lee Hong Hok v. David,
[98]

where the Court declared -

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

where the Court ruled -

While the Director of Lands has the power to review homestead patents, he may do so only so long as the land remains part of the public domain and continues to be under his exclusive control; but once the patent is registered and a certificate of title is issued, the land ceases to be part of the public domain and becomes private property over which the Director of Lands has neither control nor jurisdiction. 4. Manalo v. Intermediate Appellate Court,
[100]

where the Court held

When the lots in dispute were certified as disposable on May 19, 1971, and free patents were issued covering the same in favor of the private respondents, the said lots ceased to be part of the public domain and, therefore, the Director of Lands lost jurisdiction over the same. 5.Republic v. Court of Appeals,
[101]

where the Court stated

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Proclamation No. 350, dated October 9, 1956, of President Magsaysay legally effected a land grant to the Mindanao Medical Center, Bureau of Medical Services, Department of Health, of the whole lot, validly sufficient for initial registration under the Land Registration Act. Such land grant is constitutive of a fee simple title or absolute title in favor of petitioner Mindanao Medical Center. Thus, Section 122 of the Act, which governs the registration of grants or patents involving public lands, provides that Whenever public lands in the Philippine Islands belonging to the Government of the United States or to the Government of the Philippines are alienated, granted or conveyed to persons or to public or private corporations, the same shall be brought forthwith under the operation of this Act (Land Registration Act, Act 496) and shall become registered lands. The first four cases cited involve petitions to cancel the land patents and the corresponding certificates of titles issued to private parties. These four cases uniformly hold that the Director of Lands has no jurisdiction over private lands or that upon issuance of the certificate of title the land automatically comes under the Torrens System. The fifth case cited involves the registration under the Torrens System of a 12.8-hectare public land granted by the National Government to Mindanao Medical Center, a government unit under the Department of Health. The National Government transferred the 12.8-hectare public land to serve as the site for the hospital buildings and other facilities of Mindanao Medical Center, which performed a public service. The Court affirmed the registration of the 12.8-hectare public land in the name of Mindanao Medical Center under Section 122 of Act No. 496. This fifth case is an example of a public land being registered under Act No. 496 without the land losing its character as a property of public dominion. In the instant case, the only patent and certificates of title issued are those in the name of PEA, a wholly government owned corporation performing public as well as proprietary functions. No patent or certificate of title has been issued to any private party. No one is asking the Director of Lands to cancel PEAs patent or certificates of tit le. In fact, the thrust of the instant petition is that PEAs certificates of title should remain with PEA, and the land covered by these certificates, being alienable lands of the public domain, should not be sold to a private corporation. Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant private or public ownership of the land. Registration is not a mode of acquiring ownership but is merely evidence of ownership previously conferred by any of the recognized modes of acquiring ownership. Registration does not give the registrant a better right than what the [102] registrant had prior to the registration. The registration of lands of the public domain under [103] the Torrens system, by itself, cannot convert public lands into private lands. Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the alienable land of the public domain automatically becomes private land cannot apply to government units and entities like PEA. The transfer of the Freedom Islands to PEA was made subject to the provisions of CA No. 141 as expressly stated in Special Patent No. 3517 issued by then President Aquino, to wit: NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the Philippines and in conformity with the provisions of Presidential Decree No. 1084, supplemented by Commonwealth Act No. 141, as amended, there are hereby granted and conveyed unto the Public Estates Authority the aforesaid tracts of land containing a total area of one million nine hundred fifteen thousand eight hundred ninety four (1,915,894) square meters; the technical description of which are hereto attached and made an integral part hereof. (Emphasis supplied) Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered by PD No. 1084. Section 60 of CA No. 141 prohibits, except when authorized by Congress, the sale of alienable lands of the public domain that are transferred to government units or entities. Section 60 of CA No. 141 constitutes, under Section 44 of PD No. 1529, a statutory lien affecting title of the registered land even if not annotated on the certificate of [104] title. Alienable lands of the public domain held by government entities under Section 60 of CA No. 141 remain public lands because they cannot be alienated or encumbered unless Congress passes a law authorizing their disposition. Congress, however, cannot authorize the sale to private corporations of reclaimed alienable lands of the public domain because of the constitutional ban. Only individuals can benefit from such law. The grant of legislative authority to sell public lands in accordance with Section 60 of CA No. 141 does not automatically convert alienable lands of the public domain into private or patrimonial lands. The alienable lands of the public domain must be transferred to qualified private parties, or to government entities not tasked to dispose of public lands, before these lands can become private or patrimonial lands. Otherwise, the constitutional ban will become illusory if Congress can declare lands of the public domain as private or patrimonial lands in the hands of a government agency tasked to dispose of public lands. This will allow private corporations to acquire directly from government agencies limitless areas of lands which, prior to such law, are concededly public lands. Under EO No. 525, PEA became the central implementing agency of the National Government to reclaim foreshore and submerged areas of the public domain. Thus, EO No. 525 declares that EXECUTIVE ORDER NO. 525 Designating the Public Estates Authority as the Agency Primarily Responsible for all Reclamation Projects Whereas, there are several reclamation projects which are ongoing or being proposed to be undertaken in various parts of the country which need to be evaluated for consistency with national programs; Whereas, there is a need to give further institutional support to the Governments declared policy to provide for a coordinated, economical and efficient reclamation of lands; Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall be limited to the National Government or any person authorized by it under proper contract; Whereas, a central authority is needed to act on behalf of the National Government which shall ensure a coordinated and integrated approach in the reclamation of lands ; Whereas, Presidential Decree No. 1084 creates the Public Estates Authority as a government corporation to undertake reclamation of lands and ensure their maximum utilization in promoting public welfare and interests; and Whereas, Presidential Decree No. 1416 provides the President with continuing authority to reorganize the national government including the transfer, abolition, or merger of functions and offices.

19 | P a g e
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution and pursuant to Presidential Decree No. 1416, do hereby order and direct the following: Section 1. The Public Estates Authority (PEA) shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government. All reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or entity; Provided, that, reclamation projects of any national government agency or entity authorized under its charter shall be undertaken in consultation with the PEA upon approval of the President. x x x . As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable lands of the public domain. Only when qualified private parties acquire these lands will the lands become private lands. In the hands of the government agency tasked and authorized to dispose of alienable of disposable lands of the public domain, these lands are still public, not private lands. Furthermore, PEAs 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 PEAs name does not automatically make such lands private. To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of alienable land of the public domain. PEA will simply turn around, as PEA has now done under the Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be reclaimed lands to a single private corporation in only one transaction. This scheme will effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos, now numbering over 80 million strong. This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since PEA can acquire x x x any and all kinds of lands. This will open the floodgates to corporations and even individuals acquiring hundreds of hectares of alienable lands of the public domain under the guise that in the hands of PEA these lands are private lands. This will result in corporations amassing huge landholdings never before seen in this country creating the very evil that the constitutional ban was designed to prevent. This will completely reverse the clear direction of constitutional development in this country. The 1935 Constitution allowed private corporations to acquire not more than 1,024 hectares of public [105] lands. The 1973 Constitution prohibited private corporations from acquiring any kind of public land, and the 1987 Constitution has unequivocally reiterated this prohibition. The contention of PEA and AMARI that public lands, once registered under Act No. 496 or PD No. 1529, automatically become private lands is contrary to existing laws. Several laws authorize lands of the public domain to be registered under the Torrens System or Act No. 496, now PD No. 1529, without losing their character as public lands. Section 122 of Act No. 496, and Section 103 of PD No. 1529, respectively, provide as follows: Act No. 496 Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x Government of the Philippine Islands are alienated, granted, or conveyed to persons or the public or private corporations, the same shall be brought forthwith under the operation of this Act and shall become registered lands. PD No. 1529 Sec. 103. Certificate of Title to Patents. Whenever public land is by the Government alienated, granted or conveyed to any person, the same shall be brought forthwith under the operation of this Decree. (Emphasis supplied) Based on its legislative history, the phrase conveyed to any person in Section 103 of PD No. 1529 includes conveyances of public lands to public corporations. Alienable lands of the public domain granted, donated, or transferred to a province, municipality, or branch or subdivision of the Government, as provided in Section 60 of CA No. 141, may be registered under the Torrens System pursuant to Section 103 of PD No. 1529. Such registration, however, is expressly subject to the condition in Section 60 of CA No. 141 that the land shall not be alienated, encumbered or otherwise disposed of in a manner affecting its title, except when authorized by Congress. This provision refers to government reclaimed, foreshore and marshy lands of the public domain that have been titled but still cannot be alienated or encumbered unless expressly authorized by Congress. The need for legislative authority prevents the registered land of the public domain from becoming private land that can be disposed of to qualified private parties. The Revised Administrative Code of 1987 also recognizes that lands of the public domain may be registered under the Torrens System. Section 48, Chapter 12, Book I of the Code states Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following: (1) x x x (2) For property belonging to the Republic of the Philippines, but titled in the name of any political subdivision or of any corporate agency or instrumentality , by the executive head of the agency or instrumentality. (Emphasis supplied) Thus, private property purchased by the National Government for expansion of a public wharf may be titled in the name of a government corporation regulating port operations in the country. Private property purchased by the National Government for expansion of an airport may also be titled in the name of the government agency tasked to administer the airport. Private property donated to a municipality for use as a town plaza or public school site [106] may likewise be titled in the name of the municipality. All these properties become properties of the public domain, and if already registered under Act No. 496 or PD No. 1529, remain registered land. There is no requirement or provision in any existing law for the deregistration of land from the Torrens System.

20 | P a g e
Private lands taken by the Government for public use under its power of eminent domain become unquestionably part of the public domain. Nevertheless, Section 85 of PD No. 1529 authorizes the Register of Deeds to issue in the name of the National Government new certificates of title covering such expropriated lands. Section 85 of PD No. 1529 states Sec. 85. Land taken by eminent domain. Whenever any registered land, or interest therein, is expropriated or taken by eminent domain, the National Government, province, city or municipality, or any other agency or instrumentality exercising such right shall file for registration in the proper Registry a certified copy of the judgment which shall state definitely by an adequate description, the particular property or interest expropriated, the number of the certificate of title, and the nature of the public use. A memorandum of the right or interest taken shall be made on each certificate of title by the Register of Deeds, and where the fee simple is taken, a new certificate shall be issued in favor of the National Government, province, city, municipality, or any other agency or instrumentality exercising such right for the land so taken. The legal expenses incident to the memorandum of registration or issuance of a new certificate of title shall be for the account of the authority taking the land or interest therein. (Emphasis supplied) Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively private or patrimonial lands. Lands of the public domain may also be registered pursuant to existing laws. AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the Freedom Islands or of the lands to be reclaimed from submerged areas of Manila Bay. In the words of AMARI, the Amended JVA is not a sale but a joint venture with a stipulation for reimbursement of the original cost incurred by PEA for the earlier reclamation and construction works performed by the CDCP under its 1973 contract with the Republic. Whether the Amended JVA is a sale or a joint venture, the fact remains that the Amended JVA requires PEA to cause the issuance and delivery of the certificates of title [107] conveying AMARIs Land Share in the name of AMARI. This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which provides that private corporations shall not hold such alienable lands of the public domain except by lease. The transfer of title and ownership to AMARI clearly means that AMARI will hold the reclaimed lands other than by lease. The transfer of title and ownership is a disposition of the reclaimed lands, a transaction considered a sale or alienation under CA [108] [109] No. 141, the Government Auditing Code, and Section 3, Article XII of the 1987 Constitution. The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas form part of the public domain and are inalienable. Lands reclaimed from foreshore and submerged areas also form part of the public domain and are also inalienable, unless converted pursuant to law into alienable or disposable lands of the public domain. Historically, lands reclaimed by the government are sui generis, not available for sale to private parties unlike other alienable public lands. Reclaimed lands retain their inherent potential as areas for public use or public service. Alienable lands of the public domain, increasingly becoming scarce natural resources, are to be distributed equitably among our ever-growing population. To insure such equitable distribution, the 1973 and 1987 Constitutions have barred private corporations from acquiring any kind of alienable land of the public domain. Those who attempt to dispose of inalienable natural resources of the State, or seek to circumvent the constitutional ban on alienation of lands of the public domain to private corporations, do so at their own risk. We can now summarize our conclusions as follows: 1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease these lands to private corporations but may not sell or transfer ownership of these lands to private corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership limitations in the 1987 Constitution and existing laws. 2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the public domain until classified as alienable or disposable lands open to disposition and declared no longer needed for public service. The government can make such classification and declaration only after PEA has reclaimed these submerged areas. Only then can these lands qualify as agricultural lands of the public domain, which are the only natural resources the government can alienate. In their present state, the 592.15 hectares of submerged areas are inalienable and outside the commerce of man. 3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, [110] ownership of 77.34 hectares of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain. 4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 [111] hectares of still submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of the 1987 Constitution which prohibits the alienation of natural resources other than agricultural lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the government can classify the reclaimed lands as alienable or disposable, and further declare them no longer needed for public service. Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will be void in view of Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain. Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 [112] Constitution. Under Article 1409 of the Civil Code, contracts whose object or purpose is contrary to law, or whose object is outside the commerce of men, are inexistent and void from the beginning. The Court must perform its duty to defend and uphold the Constitution, and therefore declares the Amended JVA null and void ab initio.

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

Considering that the Amended JVA is null and void ab initio, there is no necessity to rule on this last issue. Besides, the Court is not a trier of facts, and this last issue involves a determination of factual matters. WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari Coastal Bay Development Corporation are PERMANENTLY ENJOINED from implementing the Amended Joint Venture Agreement which is hereby declared NULL and VOID ab initio. SO ORDERED.

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22 | P a g e
FIRST DIVISION in Swiss banks; and (2) the reported execution of a compromise, between the government (through PCGG) and the Marcos heirs, on how to split or share these assets. Petitioner, invoking his constitutional right to information and the correlative duty of the [4] state to disclose publicly all its transactions involving the national interest, demands that respondents make public any and all negotiations and agreements pertaining to PCGGs task of recovering the Marcoses ill-gotten wealth. He claims that any compromise on the alleged billions of ill-gotten wealth involves an issue of paramount public interest, since it has a debilitating effect on the countrys economy that would be greatly prejudicial to the national interest of the Filipino people. Hence, the people in general have a right to know the transactions or deals being contrived and effected by the government. Respondents, on the other hand, do not deny forging a compromise agreement with the Marcos heirs. They claim, though, that petitioners action is premature, because there is no showing that he has asked the PCGG to disclose the negotiations and the Agreements. And even if he has, PCGG may not yet be compelled to make any disclosure, since the proposed terms and conditions of the Agreements have not become effective and binding. Respondents further aver that the Marcos heirs have submitted the subject Agreements to the Sandiganbayan for its approval in Civil Case No. 141, entitled Republic v. Heirs of Ferdinand E. Marcos,and that the Republic opposed such move on the principal grounds that (1) said Agreements have not been ratified by or even submitted to the President for approval, pursuant to Item No. 8 of the General Agreement; and (2) the Marcos heirs have failed to comply with their undertakings therein, particularly the collation and submission of an inventory of their assets. The Republic also cited an April 11, 1995 Resolution in Civil Case No. 0165, in which the Sandiganbayan dismissed a similar petition filed by the Marcoses attorney-in-fact. Furthermore, then President Fidel V. Ramos, in his May 4, 1998 Memorandum PCGG Chairman Magtanggol Gunigundo, categorically stated:
[5] [3]

[G.R. No. 130716. December 9, 1998]

FRANCISCO I. CHAVEZ, petitioner, vs. PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG) and MAGTANGGOL GUNIGUNDO, (in his capacity as chairman of the PCGG), respondents. GLORIA A. JOPSON, CELNAN A. JOPSON, SCARLET A. JOPSON, and TERESA A. JOPSON, petitioners-inintervention. DECISION PANGANIBAN, J: Petitioner asks this Court to define the nature and the extent of the peoples constitutional right to information on matters of public concern. Does this right include access to the terms of government negotiations prior to their consummation or conclusion? May the government, through the Presidential Commission on Good Government (PCGG), be required to reveal the proposed terms of a compromise agreement with the Marcos heirs as regards their alleged ill-gotten wealth? More specifically, are the General Agreement and Supplemental Agreement, both dated December 28, 1993 and executed between the PCGG and the Marcos heirs, valid and binding?

to then

The Case

These are the main questions raised in this original action seeking (1) to prohibit and [e]njoin respondents [PCGG and its chairman] from privately entering into, perfecting and/or executing any agreement with the heirs of the late President Ferdinand E. Marcos x x x relating to and concerning the properties and assets of Ferdinand Marcos located in the Philippines and/or abroad -- including the so-called Marcos gold hoard; and (2) to [c]ompel respondent[s] to make public all negotiations and agreement, be they ongoing or perfected, and all documents related to or relating to such negotiations and agreement between the [1] PCGG and the Marcos heirs.

This is to reiterate my previous position embodied in the Palace Press Release of 6 April 1995 that I have not authorized you to approve the Compromise Agreements of December 28, 1993 or any agreement at all with the Marcoses, and would have disapproved them had they been submitted to me. The Full Powers of Attorney of March 1994 and July 4, 1994, did not authorize you to approve said Agreements, which I reserve for myself as President of the Republic of the Philippines. The assailed principal Agreement
[6]

reads:

GENERAL AGREEMENT The Facts Petitioner Francisco I. Chavez, as taxpayer, citizen and former government official who initiated the prosecution of the Marcoses and their cronies who committed unmitigated plunder of the public treasury and the systematic subjugation of the countrys economy, [2] alleges that what impelled him to bring this action were several news reports bannered in a number of broadsheets sometime in September 1997. These news items referred to (1) the alleged discovery of billions of dollars of Marcos assets deposited in various coded accounts KNOW ALL MEN BY THESE PRESENTS: This Agreement entered into this 28th day of December, 1993, by and between The Republic of the Philippines, through the Presidential Commission on Good Government (PCGG), a governmental agency vested with authority defined under Executive Orders Nos. 1, 2 and 14, with offices at the Philcomcen Building, Pasig, Metro Manila, represented by its Chairman referred to as the FIRST PARTY,

23 | P a g e
-- and -Estate of Ferdinand E. Marcos, represented by Imelda Romualdez Marcos and Ferdinand R. Marcos, Jr., all of legal age, and with address at c/o No. 154 Lopez Rizal St., Mandaluyong, Metro Manila, and Imelda Romualdez Marcos, Imee Marcos Manotoc, Ferdinand E. Marcos, Jr., and Irene Marcos Araneta, hereinafter collectively referred to as the PRIVATE PARTY. W I T N E S S E T H: WHEREAS, the PRIVATE PARTY has been impelled by their sense of nationalism and love of country and of the entire Filipino people, and their desire to set up a foundation and finance impact projects like installation of power plants in selected rural areas and initiation of other community projects for the empowerment of the people; WHEREAS, the FIRST PARTY has obtained a judgment from the Swiss Federal Tribunal of December 21, 1990, that the $356 million belongs in principle to the Republic of the Philippines provided certain conditionalities are met, but even after 7 years, the FIRST PARTY has not been able to procure a final judgment of conviction against the PRIVATE PARTY; WHEREAS, the FIRST PARTY is desirous of avoiding a long-drawn out litigation which, as proven by the past 7 years, is consuming money, time and effort, and is counter-productive and ties up assets which the FIRST PARTY could otherwise utilize for its Comprehensive Agrarian Reform Program, and other urgent needs; WHEREAS, His Excellency, President Fidel V. Ramos, has adopted a policy of unity and reconciliation in order to bind the nations wounds and start the process of rebuilding this nation as it goes on to the twenty-first century; WHEREAS, this Agreement settles all claims and counterclaims which the parties may have against one another, whether past, present, or future, matured or inchoate. NOW, THEREFORE, for and in consideration of the mutual covenants set forth herein, the parties agree as follows: 1. The parties will collate all assets presumed to be owned by, or held by other parties for the benefit of, the PRIVATE PARTY for purposes of determining the totality of the assets covered by the settlement. The subject assets shall be classified by the nature thereof, namely: (a) real estate; (b) jewelry; (c) paintings and other works of art; (d) securities; (e) funds on deposit; (f) precious metals, if any, and (g) miscellaneous assets or assets which could not appropriately fall under any of the preceding classification. The list shall be based on the full disclosure of the PRIVATE PARTY to insure its accuracy. 2. Based on the inventory, the FIRST PARTY shall determine which shall be ceded to the FIRST PARTY, and which shall be assigned to/retained by the PRIVATE PARTY. The assets of the PRIVATE PARTY shall be net of, and exempt from, any form of taxes due the Republic of the Philippines. However, considering the unavailability of all pertinent and relevant documents and information as to balances and ownership, the actual specification of assets to be retained by the PRIVATE PARTY shall be covered by supplemental agreements which shall form part of this Agreement. 3. Foreign assets which the PRIVATE PARTY shall fully disclose but which are held by trustees, nominees, agents or foundations are hereby waived over by the PRIVATE PARTY in favor of the FIRST PARTY. For this purpose, the parties shall cooperate in taking the appropriate action, judicial and/or extrajudicial, to recover the same for the FIRST PARTY. 4. All disclosures of assets made by the PRIVATE PARTY shall not be used as evidence by the FIRST PARTY in any criminal, civil, tax or administrative case, but shall be valid and binding against said PARTY for use by the FIRST PARTY in withdrawing any account and/or recovering any asset. The PRIVATE PARTY withdraws any objection to the withdrawal by and/or release to the FIRST PARTY by the Swiss banks and/or Swiss authorities of the $356 million, its accrued interests, and/or any other account; over which the PRIVATE PARTY waives any right, interest or participation in favor of the FIRST PARTY. However, any withdrawal or release of any account aforementioned by the FIRST PARTY shall be made in the presence of any authorized representative of the PRIVATE PARTY. 5. The trustees, custodians, safekeepers, depositaries, agents, nominees, administrators, lawyers, or any other party acting in similar capacity in behalf of the PRIVATE PARTY are hereby informed through this General Agreement to insure that it is fully implemented and this shall serve as absolute authority from both parties for full disclosure to the FIRST PARTY of said assets and for the FIRST PARTY to withdraw said account and/or assets and any other assets which the FIRST PARTY on its own or through the help of the PRIVATE PARTY/their trustees, etc., may discover. 6. Any asset which may be discovered in the future as belonging to the PRIVATE PARTY or is being held by another for the benefit of the PRIVATE PARTY and which is not included in the list per No. 1 for whatever reason shall automatically belong to the FIRST PARTY, and the PRIVATE PARTY in accordance with No. 4 above, waives any right thereto. 7. This Agreement shall be binding on, and inure to the benefit of, the parties and their respective legal representatives, successors and assigns and shall supersede any other prior agreement. 8. The PARTIES shall submit this and any other implementing Agreements to the President of the Philippines for approval. In the same manner, the PRIVATE PARTY shall provide the FIRST PARTY assistance by way of testimony or deposition on any information it may have that could shed light on the cases being pursued by the FIRST PARTY against other parties. The FIRST PARTY shall desist from instituting new suits already subject of this Agreement against the PRIVATE PARTY and cause the dismissal of all other cases pending in the Sandiganbayan and in other courts. 9. In case of violation by the PRIVATE PARTY of any of the conditions herein contained, the PARTIES shall be restored automatically to the status quo ante the signing of this Agreement. For purposes of this Agreement, the PRIVATE PARTY shall be represented by Atty. Simeon M. Mesina, Jr., as their only Attorney-in-Fact.

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IN WITNESS WHEREOF, the parties have signed this instrument this 28th day of December, 1993, in Makati, Metro Manila. PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT By: [Sgd.] MAGTANGGOL C. GUNIGUNDO Chairman ESTATE OF FERDINAND E. MARCOS, IMELDA R. MARCOS, MA. IMELDA MARCOS-MANOTOC, FERDINAND R. MARCOS, JR., & IRENE MARCOSARANETA By: [Sgd.]IMELDA ROMUALDEZ-MARCOS [Sgd.] MA. IMELDA MARCOS-MANOTOC FERDINAND R. MARCOS, JR.
[7]

Marcos Manotoc, Ferdinand E. Marcos, Jr., and Irene Marcos Araneta, hereinafter collectively referred to as the PRIVATE PARTY. W I T N E S S E T H: The parties in this case entered into a General Agreement dated Dec. 28, 1993; The PRIVATE PARTY expressly reserve their right to pursue their interest and/or sue over local assets located in the Philippines against parties other than the FIRST PARTY. The parties hereby agree that all expenses related to the recovery and/or withdrawal of all assets including lawyers fees, agents fees, nominees service fees, bank charges, traveling expenses and all other expenses related thereto shall be for the account of the PRIVATE PARTY. In consideration of the foregoing, the parties hereby agree that the PRIVATE PARTY shall be entitled to the equivalent of 25% of the amount that may be eventually withdrawn from said $356 million Swiss deposits. IN WITNESS WHEREOF, the parties have signed this instrument this 28th day of December, 1993, in Makati, Metro Manila. PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT By: [Sgd.] MAGTANGGOL C. GUNIGUNDO Chairman ESTATE OF FERDINAND E. MARCOS, IMELDA R. MARCOS, MA. IMELDA MARCOS-MANOTOC, FERDINAND R. MARCOS, JR., & IRENE MARCOSARANETA By: [Sgd.] IMELDA ROMUALDEZ-MARCOS [Sgd.] MA. IMELDA MARCOS-MANOTOC FERDINAND R. MARCOS, JR.
[9]

[Sgd.] IRENE MARCOS-ARANETA Assisted by: [Sgd.] ATTY. SIMEON M. MESINA, JR. Counsel & Attorney-in-Fact Petitioner also denounces this supplement to the above Agreement: SUPPLEMENTAL AGREEMENT This Agreement entered into this 28th day of December, 1993, by and between -The Republic of the Philippines, through the Presidential Commission on Good Government (PCGG), a governmental agency vested with authority defined under Executive Orders Nos. 1, 2 and 14, with offices at the Philcomcen Building, Pasig, Metro Manila, represented by its Chairman Magtanggol C. Gunigundo, hereinafter referred to as the FIRST PARTY, -- and -Estate of Ferdinand E. Marcos, represented by Imelda Romualdez Marcos and Ferdinand R. Marcos, Jr., all of legal age, and with address at c/o No. 154 Lopez Rizal St., Mandaluyong, Metro Manila, and Imelda Romualdez Marcos, Imee
[8]

[Sgd.] IRENE MARCOS-ARANETA Assisted by: [Sgd.] ATTY. SIMEON M. MESINA, JR.

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Counsel & Attorney-in-Fact Acting on a motion of petitioner, the Court issued a Temporary Restraining [10] Order dated March 23, 1998, enjoining respondents, their agents and/or representatives from entering into, or perfecting and/or executing any a greement with the heirs of the late President Ferdinand E. Marcos relating to and concerning their ill-gotten wealth. First Procedural Issue: Petitioners Standing

Petitioner, on the one hand, explains that as a taxpayer and citizen, he has the legal personality to file the instant petition. He submits that since ill-gotten wealth belongs to the Filipino people and [is], in truth and in fact, part of the public tre asury, any compromise in relation to it would constitute a diminution of the public funds, which can be enjoined by a taxpayer whose interest is for a full, if not substantial, recovery of such assets. Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the Marcoses is an issue of transcendental importance to the public. He asserts that ordinary taxpayers have a right to initiate and prosecute actions questioning the validity of acts or orders of government agencies or ins trumentalities, if the issues raised are of paramount public interest; and if they immeasurably affect the social, economic, and moral well -being of the people. Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest, [14] when the proceeding involves the assertion of a public right, such as in this case. He [15] invokes several decisions of this Court which have set aside the procedural matter of locus standi, when the subject of the case involved public interest. On the other hand, the solicitor general, on behalf of respondents, contends that petitioner has no standing to institute the present action, because no expenditure of public funds is involved and said petitioner has no actual interest in the alleged agreement. Respondents further insist that the instant petition is premature, since there is no showing that petitioner has requested PCGG to disclose any such negotiations and agreements; or that, if he has, the Commission has refused to do so. Indeed, the arguments cited by petitioner constitute the controlling decisional rule as regards his legal standing to institute the instant petition. Access to public documents and [16] records is a public right, and the real parties in interest are the people themselves. In Taada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution of the laws, he need not show that he has any legal [18] or special interest in the result of the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a right then recognized in [19] Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to be valid and enforceable must be published in the Official Gazette or otherwise effectively promulgated. In ruling for the petitioners legal standing, the Court declared that the right they sought to be enforced is a public right recognized by no less than the fundamental law of the land. Legaspi v. Civil Service Commission, while reiterating Taada, further declared that when a mandamus proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of [21] the general public which possesses the right. Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned contract for the development, the management and the operation of the Manila International Container Terminal, public interest [was] definitely involved considering the important role [of the subject contract] x x x in the economic development of the country and the magnitude of the financial consideration invol ved. We concluded that, as a consequence, the disclosure provision in the Constitution would constitute sufficient authority for upholding the petitioners standing.
[22] [20] [17]

Issues

The Oral Argument, held on March 16, 1998, focused on the following issues: (a) Procedural: (1) Whether or not the petitioner has the personality or legal standing to file the instant petition; and (2) Whether or not this Court is the proper court before which this action may be filed. (b) Substantive: (1) Whether or not this Court could require the PCGG to disclose to the public the details of any agreement, perfected or not, with the Marcoses; and (2) Whether or not there exist any legal restraints against a compromise agreement between [11] the Marcoses and the PCGG relative to the Marcoses ill -gotten wealth. After their oral presentations, the parties filed their respective memoranda. On August 19, 1998, Gloria, Celnan, Scarlet and Teresa, all surnamed Jopson, filed before the Court a Motion for Intervention, attaching thereto their Petition in Intervention. They aver that they are among the 10,000 claimants whose right to claim from the Marcos Family and/or the Marcos Estate is recognized by the decision in In re Estate of Ferdinand Marcos, Human Rights Litigation, Maximo Hilao, et al., Class Plaintiffs No. 9215526, U.S. Court of Appeals for the 9th Circuit US App. Lexis 14796, June 16, 1994 and the Decision of the Swiss Supreme Court of December 10, 1997 . As such, they claim to have personal and direct interest in the subject matter of the instant case, since a distribution or disposition of the Marcos properties may adversely affect their legitimate claims. In a minute Resolution issued on August 24, 1998, the Court granted their motion to intervene and [12] required the respondents to comment thereon. The September 25, 1998 Comment of the solicitor general on said motion merely reiterated his aforecited arguments against the main [13] petition.

The Courts Ruling

The petition is imbued with merit.

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Similarly, the instant petition is anchored on the right of the people to information and access to official records, documents and papers -- a right guaranteed under Section 7, Article III of the 1987 Constitution. Petitioner, a former solicitor general, is a Filipino citizen. Because of the satisfaction of the two basic requisites laid down by decisional law to sustain petitioners legal standing, i.e. (1) the enforcement of a public right (2) espoused by a Filipino citizen, we rule that the petition at bar should be allowed. In any event, the question on the standing of Petitioner Chavez is rendered moot by the intervention of the Jopsons, who are among the legitimate claimants to the Marcos wealth. The standing of the Jopsons is not seriously contested by the solicitor general. Indeed, said petitioners-intervenors have a legal interest in the subject matter of the instant case, since a distribution or disposition of the Marcoses ill -gotten properties may adversely affect the satisfaction of their claims. First Substantive Issue: Public Disclosure of Terms of Any Agreement, Perfected or Not

In seeking the public disclosure of negotiations and agreements pertaining to a compromise settlement with the Marcoses as regards their alleged ill-gotten wealth, petitioner invokes the following provisions of the Constitution: Sec. 7 [Article III]. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law. Sec. 28 [Article II]. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions in volving public interest. Respondents opposite view is that the above constitutional provisions refer to completed and operative official acts, not to those still being considered. As regards the assailed Agreements entered into by the PCGG with the Marcoses, there is yet no right of action that has accrued, because said Agreements have not been approved by the President, and the Marcos heirs have failed to fulfill their express undertaking therein. Thus, the Agreements have not become effective. Respondents add that they are not aware of any ongoing negotiation for another compromise with the Marcoses regarding their alleged illgotten assets. The information and the transactions referred to in the subject provisions of the Constitution have as yet no defined scope and extent. There are no specific laws prescribing the exact limitations within which the right may be exercised or the correlative state duty may be obliged. However, the following are some of the recognized restrictions: (1) national security matters and intelligence information, (2) trade secrets and banking transactions, (3) criminal matters, and (4) other confidential information.

Second Procedural Issue:The Courts Jurisdiction

Petitioner asserts that because this petition is an original action for mandamus and one that is not intended to delay any proceeding in the Sandiganbayan, its having been filed before this Court was proper. He invokes Section 5, Article VIII of the Constitution, which confers upon the Supreme Court original jurisdiction over petitions for prohibition and mandamus. The solicitor general, on the other hand, argues that the petition has been erroneously brought before this Court, since there is neither a justiciable controversy nor a violation of petitioners rights by the PCGG. He alleges that the assailed agreements are already the very lis mota in Sandiganbayan Civil Case No. 0141, which has yet to dispose of the issue; thus, this petition is premature. Furthermore, respondents themselves have opposed the Marcos heirs motion, filed in the graft court, for the approval of the subject Agreements. Such opposition belies petitioners claim that the government, through respondents, has concluded a settlement with the Marcoses as regards their alleged ill-gotten assets. In Taada and Legaspi, we upheld therein petitioners resort to a mandamus proceeding, seeking to enforce a public right as well as to compel performance [23] of a public duty mandated by no less than the fundamental law. Further, Section 5, Article VIII of the Constitution, expressly confers upon the Supreme Court original jurisdiction over petitions for certiorari, prohibition, mandamus, quo warranto and habeas corpus. Respondents argue that petitioner should have properly sought relief before the Sandiganbayan, particularly in Civil Case No. 0141, in which the enforcement of the compromise Agreements is pending resolution. There may seem to be some merit in such argument, if petitioner is merely seeking to enjoin the enforcement of the compromise and/or to compel the PCGG to disclose to the public the terms contained in said Agreements. However, petitioner is here seeking the public di sclosure of all negotiations and agreement, be they ongoing or perfected, and documents related to or relating to such negotiations and agreement between the PCGG and the Marcos heirs. In other words, this petition is not confined to the Agreements that have already been drawn, but likewise to any other ongoing or future undertaking towards any settlement on the alleged Marcos loot. Ineluctably, the core issue boils down to the precise interpretation, in terms of scope, of the twin constitutional provisi ons on public transactions. This broad and prospective relief sought by the instant petition brings it out of the realm of Civil Case No. 0141.

Limitations to the Right: (1) National Security Matters

At the very least, this jurisdiction recognizes the common law holding that there is a governmental privilege against public disclosure with respect to state secrets regarding [24] military, diplomatic and other national security matters. But where there is no need to protect such state secrets, the privilege may not be invoked to withhold documents and other [25] information, provided that they are examined in strict confidence and given scrupulous protection. Likewise, information on inter-government exchanges prior to the conclusion of treaties and executive agreements may be subject to reasonable safeguards for the sake of national [26] interest.

(2) Trade Secrets and Banking Transactions

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The drafters of the Constitution also unequivocally affirmed that, aside from national security matters and intelligence information, trade or industrial secrets (pursuant to the [27] Intellectual Property Code and other related laws) as well as banking transactions (pursuant [28] [29] to the Secrecy of Bank Deposits Act ) are also exempted from compulsory disclosure. in Taada. Likewise did the public nature of the loanable funds of the GSIS and the public office held by the alleged borrowers (members of the defunct Batasang Pambansa) qualify the information sought in Valmonte as matters of public interest and concern. In Aquino[36] Sarmiento v. Morato, the Court also held that official acts of public officers done in pursuit of their official functions are public in character; hence, the records pertaining to such official acts and decisions are within the ambit of the constitutional right of access to public records. Under Republic Act No. 6713, public officials and employees are mandated to provide information on their policies and procedures in clear and understandable language, [and] ensure openness of information, public consultations and hearings whenever appropriate x x x, except when otherwise provided by law or when required by the public interest. In particular, the law mandates free public access, at reasonable hours, to the annual performance reports of offices and agencies of government and government-owned or controlled corporations; and the statements of assets, liabilities and financial disclosures of all [37] public officials and employees. In general, writings coming into the hands of public officers in connection with their official functions must be accessible to the public, consistent with the policy of transparency of governmental affairs. This principle is aimed at affording the people an opportunity to determine whether those to whom they have entrusted the affairs of the government are honestly, faithfully and competently performing their functions as public [38] [39] servants. Undeniably, the essence of democracy lies in the free flow of thought; but thoughts and ideas must be well-informed so that the public would gain a better perspective of vital issues confronting them and, thus, be able to criticize as well as participate in the affairs of the government in a responsible, reasonable and effective manner. Certainly, it is by ensuring an unfettered and uninhibited exchange of ideas among a well-informed public that a [40] government remains responsive to the changes desired by the people.

(3) Criminal Matters

Also excluded are classified law enforcement matters, such as those relating to the [30] apprehension, the prosecution and the detention of criminals, which courts may not inquire into prior to such arrest, detention and prosecution. Efforts at effective law enforcement would be seriously jeopardized by free public access to, for example, police information regarding rescue operations, the whereabouts of fugitives, or leads on covert criminal activities.

(4) Other Confidential Information

[31]

The Ethical Standards Act further prohibits public officials and employees from using or divulging confidential or classified information officially known to them by reason of their [32] office and not made available to the public. Other acknowledged limitations to information access include diplomatic correspondence, closed door Cabinet meetings and executive sessions of either house of [33] Congress, as well as the internal deliberations of the Supreme Court.

The Nature of the Marcoses Alleged Ill-Gotten Wealth Scope: Matters of Public Concern and Transactions Involving Public Interest We now come to the immediate matter under consideration. In Valmonte v. Belmonte Jr., the Court emphasized that the information sought must be matters of public concern, access to which may be limited by law. Similarly, the state policy of full public disclosure extends only to transactions involving public interest and may also be subject to reasonable conditions prescribed by law. As to the meanings of the terms public interest and public concern, the Court, in Legaspi v. Civil Service [35] Commission, elucidated: In determining whether or not a particular information is of public concern there is no rigid test which can be applied. Public concern like public interest is a term that eludes exact definition. Both terms embrace a broad spectrum of subjects which the public may want to know, either because these directly affect their lives, or simply because such matters naturally arouse the interest of an ordinary citizen. In the final analysis, it is for the courts to determine on a case by case basis whether the matter at issue is of interest or importance, as it relates to or affects the public. Considered a public concern in the above-mentioned case was the legitimate concern of citizens to ensure that government positions requiring civil service eligibility are occupied only by persons who are eligibles. So was the need to give the general public adequate notification of various laws that regulate and affect the actions and conduct of citizens, as held
[34]

Upon the departure from the country of the Marcos family and their cronies in February 1986, the new government headed by President Corazon C. Aquino was specifically mandated to [r]ecover ill-gotten properties amassed by the leaders and supporters of the previous regime and [to] protect the interest of the people through orders of sequestration or [41] freezing of assets or accounts. Thus, President Aquinos very first executive orders (which partook of the nature of legislative enactments) dealt with the recovery of these alleged illgotten properties. Executive Order No. 1, promulgated on February 28, 1986, only two (2) days after the Marcoses fled the country, created the PCGG which was primarily tasked to assist the President in the recovery of vast government resources allegedly amassed by former President Marcos, his immediate family, relatives and close associates both here and abroad. Under Executive Order No. 2, issued twelve (12) days later, all persons and entities who had knowledge or possession of ill-gotten assets and properties were warned and, under pain of penalties prescribed by law, prohibited from concealing, transferring or dissipating them or from otherwise frustrating or obstructing the recovery efforts of the government. On May 7, 1986, another directive (EO No. 14) was issued giving additional powers to the PCGG which, taking into account the overriding considerations of national interest and

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national survival, required it to achieve expeditiously and effectively its vital task of recovering ill-gotten wealth. With such pronouncements of our government, whose authority emanates from the people, there is no doubt that the recovery of the Marcoses alleged ill -gotten wealth is a [42] matter of public concern and imbued with public interest. We may also add that ill-gotten wealth, by its very nature, assumes a public character. Based on the aforementioned Executive Orders, ill-gotten wealth refers to assets and properties purportedly acquired, directly or indirectly, by former President Marcos, his immediate family, relatives and close associates through or as a result of their improper or illegal use of government funds or properties; or their having taken undue advantage of their public office; or their use of powers, influences or relationships, resulting in their unjust enrichment and causing grave damage and prejudice to the Filipino people and the Republic of the Philippines. Clearly, the assets and properties referred to supposedly originated from the government itself. To all intents and purposes, therefore, they belong to the people. As such, upon reconveyance they will be returned to the public treasury, subject only to the satisfaction of positive claims of certain persons as may be adjudged by competent courts. Another declared overriding consideration for the expeditious recovery of ill-gotten wealth is that it may be used for national economic recovery. We believe the foregoing disquisition settles the question of whether petitioner has a right to respondents disclosure of any agreement that may be arrived at concerning the Marcoses purported ill-gotten wealth. exploratory stage. There is a need, of course, to observe the same restrictions on disclosure of information in general, as discussed earlier -- such as on matters involving national security, diplomatic or foreign relations, intelligence and other classified information.

Second Substantive Issue: Legal Restraints on a Marcos-PCGG Compromise

Petitioner lastly contends that any compromise agreement between the government and the Marcoses will be a virtual condonation of all the alleged wrongs done by them, as well as an unwarranted permission to commit graft and corruption. Respondents, for their part, assert that there is no legal restraint on entering into a compromise with the Marcos heirs, provided the agreement does not violate any law.

Prohibited Compromises

Access to Information on Negotiating Terms

But does the constitutional provision likewise guarantee access to information regarding ongoing negotiations or proposals prior to the final agreement? This same clarification was sought and clearly addressed by the constitutional commissioners during [43] their deliberations, which we quote hereunder: MR. SUAREZ. And when we say transactions which should be distinguished from contracts, agreements, or treaties or whatever, does the Gentleman refer to the steps leading to the consummation of the contract, or does he refer to the contract itself? MR. OPLE. The transactions used here, I suppose, is generic and, therefore, it can cover both steps leading to a contract, and already a consummated contract, Mr. Presiding Officer. MR. SUAREZ. This contemplates inclusion of negotiations leading to the consummation of the transaction? MR. OPLE. Yes, subject to reasonable safeguards on the national interest. Considering the intent of the framers of the Constitution, we believe that it is incumbent upon the PCGG and its officers, as well as other government representatives, to disclose sufficient public information on any proposed settlement they have decided to take up with the ostensible owners and holders of ill-gotten wealth. Such information, though, must pertain to definite propositions of the government, [44] not necessarily to intra-agency or inter-agency recommendations or communications during the stage when common assertions are still in the process of being formulated or are in the

In general, the law encourages compromises in civil cases, except with regard to the following matters: (1) the civil status of persons, (2) the validity of a marriage or a legal separation, (3) any ground for legal separation, (4) future support, (5) the jurisdiction of courts, [45] and (6) future legitime. And like any other contract, the terms and conditions of a compromise must not be contrary to law, morals, good customs, public policy or public [46] [47] order. A compromise is binding and has the force of law between the parties, unless the consent of a party is vitiated -- such as by mistake, fraud, violence, intimidation or undue influence -- or when there is forgery, or if the terms of the settlement are so palpably [48] unconscionable. In the latter instances, the agreement may be invalidated by the courts.

Effect of Compromise on Civil Actions

One of the consequences of a compromise, and usually its primary object, is to avoid or [49] to end a litigation. In fact, the law urges courts to persuade the parties in a civil case to [50] agree to a fair settlement. As an incentive, a court may mitigate damages to be paid by a [51] losing party who shows a sincere desire to compromise. In Republic & Campos Jr. v. Sandiganbayan, which affirmed the grant by the PCGG of civil and criminal immunity to Jose Y. Campos and family, the Court held that in the absence of an express prohibition, the rule on compromises in civil actions under the Civil Code is applicable to PCGG cases. Such principle is pursuant to the objectives of EO No. 14, particularly the just and expeditious recovery of ill-gotten wealth, so that it may be used to hasten economic recovery. The same principle was upheld in Benedicto v. Board of [53] Administrators of Television Stations RPN, BBC and IBC andRepublic v. [54] Benedicto, which ruled in favor of the validity of the PCGG compromise agreement with Roberto S. Benedicto.
[52]

Immunity from Criminal Prosecution

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However, any compromise relating to the civil liability arising from an offense does not automatically terminate the criminal proceeding against or [55] extinguish the criminal liability of the malefactor. While a compromise in civil suits is expressly authorized by law, there is no similar general sanction as regards criminal liability. The authority must be specifically conferred. In the present case, the power to grant criminal immunity was conferred on PCGG by Section 5 of EO No. 14, as amended by EO No. 14-A, which provides: SECTION 5. The Presidential Commission on Good Government is authorized to grant immunity from criminal prosecution to any person who provides information or testifies in any investigation conducted by such Commission to establish the unlawful manner in which any respondent, defendant or accused has acquired or accumulated the property or properties in question in any case where such information or testimony is necessary to ascertain or prove the latters guilt or his civil liability. The immunity thereby granted shall be continued to protect the witness who repeats such testimony before the Sandiganbayan when required to do so by the latter or by the Commission. The above provision specifies that the PCGG may exercise such authority under these conditions: (1) the person to whom criminal immunity is granted provides information or testifies in an investigation conducted by the Commission; (2) the information or testimony pertains to the unlawful manner in which the respondent, defendant or accused acquired or accumulated ill-gotten property; and (3) such information or testimony is necessary to ascertain or prove guilt or civil liability of such individual. From the wording of the law, it can be easily deduced that the person referred to is a witness in the proceeding, not the principal respondent, defendant or accused. Thus, in the case of Jose Y. Campos, the grant of both civil and criminal immunity to him and his family was [i]n consideration of the full cooperation of Mr. Jose Y. Campos [with] 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 [56] to pay a sum of money as determined by the Philippine Government. Moreover, the grant of criminal immunity to the Camposes and the Benedictos was limited to acts and omissions prior to February 25, 1996. At the time such immunity was granted, no criminal cases have yet been filed against them before the competent courts. an afterthought, conceived in pro formacompliance with Section 5 of EO No. 14, as amended. There is no indication whatsoever that any of the Marcos heirs has indeed provided vital information against any respondent or defendant as to the manner in which the latter may have unlawfully acquired public property. Second, under Item No. 2 of the General Agreement, the PCGG commits to exempt from all forms of taxes the properties to be retained by the Marcos heirs. This is a clear violation of the Constitution. The power to tax and to grant tax exemptions is vested in the [58] Congress and, to a certain extent, in the local legislative bodies. Section 28 (4), Article VI of the Constitution, specifically provides: No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of the Congress. The PCGG has absolutely no power to grant tax exemptions, even under the cover of its authority to compromise ill-gotten wealth cases. Even granting that Congress enacts a law exempting the Marcoses from paying taxes on their properties, such law will definitely not pass the test of the equal protection clause under the Bill of Rights. Any special grant of tax exemption in favor only of the Marcos heirs will constitute class legislation. It will also violate the constitutional rule that taxation shall be [59] uniform and equitable. Neither can the stipulation be construed to fall within the power of the commissioner of internal revenue to compromise taxes. Such authority may be exercised only when (1) there is reasonable doubt as to the validity of the claim against the taxpayer, and (2) the [60] taxpayers financial position demonstrates a clear inability to pay. Definitely, neither requisite is present in the case of the Marcoses, because under the Agreement they are effectively conceding the validity of the claims against their properties, part of which they will be allowed to retain. Nor can the PCGG grant of tax exemption fall within the power of the commissioner to abate or cancel a tax liability. This power can be exercised only when (1) the tax appears to be unjustly or excessively assessed, or (2) the administration and [61] collection costs involved do not justify the collection of the tax due. In this instance, the cancellation of tax liability is done even before the determination of the amount due. In any event, criminal violations of the Tax Code, for which legal actions have been filed in court or in [62] which fraud is involved, cannot be compromised. Third, the government binds itself to cause the dismissal of all cases against the Marcos [63] heirs, pending before the Sandiganbayan and other courts. This is a direct encroachment on judicial powers, particularly in regard to criminal jurisdiction. Well-settled is the doctrine that once a case has been filed before a court of competent jurisdiction, the matter of its dismissal or pursuance lies within the full discretion and control of the judge. In a criminal case, the manner in which the prosecution is handled, including the matter of whom to [64] present as witnesses, may lie within the sound discretion of the government prosecutor; but the court decides, based on the evidence proffered, in what manner it will dispose of the case. Jurisdiction, once acquired by the trial court, is not lost despite a resolution, even by [65] the justice secretary, to withdraw the information or to dismiss the complaint. The prosecutions motion to withdraw or to dismiss is not the least binding upon the court. On the contrary, decisional rules require the trial court to make its own evaluation of the merits of the case, because granting such motion is equivalent to effecting a disposition of the case [66] itself. Thus, the PCGG, as the government prosecutor of ill-gotten wealth cases, cannot guarantee the dismissal of all such criminal cases against the Marcoses pending in the courts, for said dismissal is not within its sole power and discretion. Fourth, the government also waives all claims and counterclaims, whether past, [67] present, or future, matured or inchoate, against the Marcoses. Again, this allencompassing stipulation is contrary to law. Under the Civil Code, an action for future fraud

Validity of the PCGG-Marcos Compromise Agreements

Going now to the subject General and Supplemental Agreements between the PCGG and the Marcos heirs, a cursory perusal thereof reveals serious legal flaws. First, the Agreements do not conform to the above requirements of EO Nos. 14 and 14-A. We believe that criminal immunity under Section 5 cannot be granted to the Marcoses, who are the principal defendants in the spate of ill-gotten wealth cases now pending before the Sandiganbayan. As stated earlier, the provision is applicable mainly to witnesses who provide information or testify against a respondent, defendant or accused in an ill-gotten wealth case. While the General Agreement states that the Marcoses shall provide the [government] assistance by way of testimony or deposition on any information [they] may have that could [57] shed light on the cases being pursued by the [government] against other parties, the clause does not fully comply with the law. Its inclusion in the Agreement may have been only

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may not be waived. The stipulation in the Agreement does not specify the exact scope of future claims against the Marcoses that the government thereby relinquishes. Such vague and broad statement may well be interpreted to include all future illegal acts of any of the Marcos heirs, practically giving them a license to perpetrate fraud against the government without any liability at all. This is a palpable violation of the due process and equal protection guarantees of the Constitution. It effectively ensconces the Marcoses beyond the reach of the law. It also sets a dangerous precedent for public accountability. It is a virtual warrant for public officials to amass public funds illegally, since there is an open option to compromise their liability in exchange for only a portion of their ill-gotten wealth. Fifth, the Agreements do not provide for a definite or determinable period within which the parties shall fulfill their respective prestations. It may take a lifetime before the Marcoses submit an inventory of their total assets. Sixth, the Agreements do not state with specificity the standards for determining which assets shall be forfeited by the government and which shall be retained by the Marcoses. While the Supplemental Agreement provides that the Marcoses shall be entitled to 25 per cent of the $356 million Swiss deposits (less government recovery expenses), such sharing arrangement pertains only to the said deposits. No similar splitting scheme is defined with respect to the other properties. Neither is there, anywhere in the Agreements, a statement of the basis for the 25-75 percent sharing ratio. Public officers entering into an arrangement appearing to be manifestly and grossly disadvantageous to the government, in [69] violation of the Anti-Graft and Corrupt Practices Act, invite their indictment for corruption under the said law. Finally, the absence of then President Ramos approval of the principal Agreement, an express condition therein, renders the compromise incomplete and unenforceable. Nevertheless, as detailed above, even if such approval were obtained, the Agreements would still not be valid. From the foregoing disquisition, it is crystal clear to the Court that the General and Supplemental Agreements, both dated December 28, 1993, which the PCGG entered into with the Marcos heirs, are violative of the Constitution and the laws aforementioned. WHEREFORE, the petition is GRANTED. The General and Supplemental Agreements dated December 28, 1993, which PCGG and the Marcos heirs entered into are hereby declared NULL AND VOID for being contrary to law and the Constitution. Respondent PCGG, its officers and all government functionaries and officials who are or may be directly or indirectly involved in the recovery of the alleged ill-gotten wealth of the Marcoses and their associates are DIRECTED to disclose to the public the terms of any proposed compromise settlement, as well as the final agreement, relating to such alleged illgotten wealth, in accordance with the discussions embodied in this Decision. No pronouncement as to costs. SO ORDERED.
[68]

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An action is considered moot when it no long er presents a justiciable controversy [4] because the issues involved have become academic or dead. Under E.O. No. 43, the PCCR [5] was instructed to complete its task on or before June 30, 1999. However, on February 19, 1999, the President issued Executive Order No. 70 (E.O. No. 70), which extended the time frame for the completion of the commissions work, viz SECTION 6. Section 8 is hereby amended to read as follows: Time Frame. The Commission shall commence its work on 01 January 1999 and complete the same on or before 31 December 1999. The Commission shall submit its report and recommendations to the President within fifteen (15) working days from 31 December 1999. The PCCR submitted its recommendations to the President on December 20, 1999 and was dissolved by the President on the same day. It had likewise spent the funds allotted to [6] it. Thus, the PCCR has ceased to exist, having lost its raison detre. Subsequent events have overtaken the petition and the Court has nothing left to resolve. The staleness of the issue before us is made more manifest by the impossibility of granting the relief prayed for by petitioner. Basically, petitioner asks this Court to enjoin the [7] PCCR from acting as such. Clearly, prohibition is an inappropriate remedy since the body sought to be enjoined no longer exists. It is well established that prohibition is a preventive [8] remedy and does not lie to restrain an act that is already fait accompli. At this point, any ruling regarding the PCCR would simply be in the nature of an advisory opinion, which is definitely beyond the permissible scope of judicial power. In addition to the mootness of the issue, petitioners lack of standing constitutes another obstacle to the successful invocation of judicial power insofar as the PCCR is concerned. The question in standing is whether a party has alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult [9] constitutional questions. In assailing the constitutionality of E.O. Nos. 43 and 70, petitioner [10] asserts his interest as a citizen and taxpayer. A citizen acquires standing only if he can establish that he has suffered some actual or threatened injury as a result of the allegedly illegal conduct of the government; the injury is fairly traceable to the challenged action; and [11] the injury is likely to be redressed by a favorable action. In Kilosbayan, Incorporated v. [12] Morato, we denied standing to petitioners who were assailing a lease agreement between the Philippine Charity Sweepstakes Office and the Philippine Gaming Management Corporation, stating that, in Valmonte v. Philippine Charity Sweepstakes Office, G.R. No. 78716, Sept. 22, 1987, standing was denied to a petitioner who sought to declare a form of lottery known as Instant Sweepstakes invalid because, as the Court held, Valmonte brings the suit as a citizen, lawyer, taxpayer and father of three (3) minor children. But nowhere in his petition does petitioner claim that his rights and privileges as a lawyer or citizen have been directly and personally injured by the operation of the Instant Sweepstakes. The interest of the person assailing the constitutionality of a statute must be direct and personal. He must be able to show, not only that the law is invalid, but also that he has sustained or in immediate danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. It must appear that the person complaining has been or is about to be denied some right or privilege to which

EN BANC

[G. R. No. 140835. August 14, 2000]

RAMON A. GONZALES, petitioner, vs. HON. ANDRES R. NARVASA, as Chairman, PREPARATORY COMMISSION ON CONSTITUTIONAL REFORMS; HON. RONALDO B. ZAMORA, as Executive Secretary; COMMISSION ON AUDIT; ROBERTO AVENTAJADO, as Presidential Consultant on Council of Economic Advisers/Economic Affairs; ANGELITO C. BANAYO, as Presidential Adviser for/on Political Affairs; VERONICA IGNACIO-JONES, as Presidential Assistant/ Appointment Secretary (In charge of appointments), respondents. DECISION GONZAGA-REYES, J.: In this petition for prohibition and mandamus filed on December 9, 1999, petitioner Ramon A. Gonzales, in his capacity as a citizen and taxpayer, assails the constitutionality of the creation of the Preparatory Commission on Constitutional Reform (PCCR) and of the positions of presidential consultants, advisers and assistants. Petitioner asks this Court to enjoin the PCCR and the presidential consultants, advisers and assistants from acting as such, and to enjoin Executive Secretary Ronaldo B. Zamora from enforcing their advice and recommendations. In addition, petitioner seeks to enjoin the Commission on Audit from passing in audit expenditures for the PCCR and the presidential consultants, advisers and assistants. Finally, petitioner prays for an order compelling respondent Zamora to furnish petitioner with information on certain matters. On January 28, 2000, respondent Hon. Andres R. Narvasa, impleaded in his capacity as Chairman of the PCCR, filed his Comment to the Petition. The rest of the respondents, who are being represented in this case by the Solicitor General, filed their Comment with this Court on March 7, 2000. Petitioner then filed a Consolidated Reply on April 24, 2000, whereupon this case was considered submitted for decision. I. Preparatory Commission on Constitutional Reform The Preparatory Commission on Constitutional Reform (PCCR) was created by President Estrada on November 26, 1998 by virtue of Executive Order No. 43 (E.O. No. 43) in order to study and recommend proposed amendments and/or revisions to the 1987 [1] Constitution, and the manner of implementing the same. Petitioner disputes the constitutionality of the PCCR on two grounds. First, he contends that it is a public office which [2] only the legislature can create by way of a law. Secondly, petitioner asserts that by creating such a body the President is intervening in a process from which he is totally excluded by the [3] Constitution the amendment of the fundamental charter. It is alleged by respondents that, with respect to the PCCR, this case has become moot and academic. We agree.

32 | P a g e
he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute complained of. We apprehend no difference between the petitioner in Valmonte and the present petitioners. Petitioners do not in fact show what particularized interest they have for bringing this suit. It does not detract from the high regard for petitioners as civic leaders to say that their interest falls short of that required to maintain an action under Rule 3, d 2. Coming now to the instant case, petitioner has not shown that he has sustained or is in danger of sustaining any personal injury attributable to the creation of the PCCR. If at all, it is only Congress, not petitioner, which can claim any injury in this case since, according to petitioner, the President has encroached upon the legislatures powers to create a public office and to propose amendments to the Charter by forming the PCCR. Petitioner has sustained no direct, or even any indirect, injury. Neither does he claim that his rights or privileges have been or are in danger of being violated, nor that he shall be subjected to any penalties or burdens as a result of the PCCRs activities. Clearly, petitioner has failed to establish his locus standi so as to enable him to seek judicial redress as a citizen. A taxpayer is deemed to have the standing to raise a constitutional issue when it is established that public funds have been disbursed in alleged contravention of the law or the [13] Constitution. , Thus payers action is properly brought only when there is an exercise by [14] Congress of its taxing or spending power. This was our ruling in a recent case wherein petitioners Telecommunications and Broadcast Attorneys of the Philippines (TELEBAP) and GMA Network, Inc. questioned the validity of section 92 of B.P. No. 881 (otherwise knows as the Omnibus Election Code) requiring radio and television stations to give free air time to the [15] Commission on Elections during the campaign period. The Court held that petitioner TELEBAP did not have any interest as a taxpayer since the assailed law did not involve the [16] taxing or spending power of Congress. Many other rulings have premised the grant or denial of standing to taxpayers upon whether or not the case involved a disbursement of public funds by the [17] legislature. In Sanidad v. Commission on Elections, the petitioners therein were allowed to bring a taxpayers suit to question several presidential decrees promulgated by then President Marcos in his legislative capacity calling for a national referendum, with the Court explaining that ...[i]t is now an ancient rule that the valid source of a statute Presidential Decrees are of such nature may be contested by one who will sustain a direct injury as a result of its enforcement. At the instance of taxpayers, laws providing for the disbursement of public funds may be enjoined, upon the theory that the expenditure of public funds by an officer of the State for the purpose of executing an unconstitutional act constitutes a misapplication of such funds. The breadth of Presidential Decree No. 991 carries an appropriation of Five Million Pesos for the effective implementation of its purposes. Presidential Decree No. 1031 appropriates the sum of Eight Million Pesos to carry out its provisions. The interest of the aforenamed petitioners as taxpayers in the lawful expenditure of these amounts of public money sufficiently clothes them with that personality to litigate the validity of the Decrees appropriating said funds. In still another case, the Court held that petitioners the Philippine Constitution Association, Inc., a non-profit civic organization - had standing as taxpayers to question the constitutionality of Republic Act No. 3836 insofar as it provides for retirement gratuity and commutation of vacation and sick leaves to Senators and Representatives and to the elective [18] [19] officials of both houses of Congress. And in Pascual v. Secretary of Public Works, the Court allowed petitioner to maintain a taxpayers suit assailing the constitutional soundness of Republic Act No. 920 appropriating P85,000 for the construction, repair and improvement of feeder roads within private property. All these cases involved the disbursement of public funds by means of a law. Meanwhile, in Bugnay Construction and Development Corporation v. Laron , the Court declared that the trial court was wrong in allowing respondent Ravanzo to bring an action for injunction in his capacity as a taxpayer in order to question the legality of the contract of lease covering the public market entered into between the City of Dagupan and petitioner. The Court declared that Ravanzo did not possess the requisite standing to bring such taxpayers suit since [o]n its face, and there is no evidence to the contrary, t he lease contract entered into between petitioner and the City shows that no public funds have been or will be used in the construction of the market building. Coming now to the instant case, it is readily apparent that there is no exercise by Congress of its taxing or spending power. The PCCR was created by the President by virtue of E.O. No. 43, as amended by E.O. No. 70. Under section 7 of E.O. No. 43, the amount of P3 million is appropriated for its operational expenses to be sourced from the funds of the Office of the President. The relevant provision states Appropriations. The initial amount of Three Million Pesos (P3,000,000.00) is hereby appropriated for the operational expenses of the Commission to be sourced from funds of the Office of the President, subject to the usual accounting and auditing rules and regulations. Additional amounts shall be released to the Commission upon submission of requirements for expenditures. The appropriations for the PCCR were authorized by the President, not by Congress. In fact, there was no an appropriation at all. In a strict sense, appropriation has been defined as nothing more than the legislative authorization prescribed by the Constitution that money may be paid out of the Treasury, while appropriation made by law refers to the act of the legislature setting apart or assigning to a particular use a certain sum to be used in the [21] payment of debt or dues from the State to its creditors. The funds used for the PCCR were taken from funds intended for the Office of the President, in the exercise of the Chief Executives power to transfer funds pursuant to section 25 (5) of article VI of the Constitution. In the final analysis, it must be stressed that the Court retains the power to decide [22] whether or not it will entertain a taxpayers suit. In the case at bar, there being no exercise by Congress of its taxing or spending power, petitioner cannot be allowed to question the creation of the PCCR in his capacity as a taxpayer, but rather, he must establish that he has a personal and substantial interest in the case and tha t he has sustained or will sustain direct [23] injury as a result of its enforcement. In other words, petitioner must show that he is a real party in interest - that he will stand to be benefited or injured by the judgment or that he will be [24] entitled to the avails of the suit. Nowhere in his pleadings does petitioner presume to make such a representation. II. Presidential Consultants, Advisers, Assistants The second issue raised by petitioner concerns the presidential consultants. Petitioner alleges that in 1995 and 1996, the President created seventy (70) positions in the Office of the President and appointed to said positions twenty (20) presidential consultants, twenty-two [25] (22) presidential advisers, and twenty-eight (28) presidential assistants. Petitioner asserts that, as in the case of the PCCR, the President does not have the power to create these [26] positions.
[20]

33 | P a g e
Consistent with the abovementioned discussion on standing, petitioner does not have the personality to raise this issue before the Court. First of all, he has not proven that he has sustained or is in danger of sustaining any injury as a result of the appointment of such presidential advisers. Secondly, petitioner has not alleged the necessary facts so as to enable the Court to determine if he possesses a taxpayers interest in this particular issue. Unlike the PCCR which was created by virtue of an executive order, petitioner does not allege by what official act, whether it be by means of an executive order, administrative order, memorandum order, or otherwise, the President attempted to create the positions of presidential advisers, consultants and assistants. Thus, it is unclear what act of the President petitioner is assailing. In support of his allegation, petitioner merely annexed a copy of the Philippine Government Directory (Annex C) listing the names and positions of such presidential consultants, advisers and assistants to his petition. However, appointment is obviously not synonymous with creation. It would be improvident for this Court to entertain this issue given the insufficient nature of the allegations in the Petition. III. Right to Information Finally, petitioner asks us to issue a writ of mandamus ordering Executive Secretary Ronaldo B. Zamora to answer his letter (Annex D) dated October 4, 1999 requesting for the names of executive officials holding multiple positions in government, copies of their appointments, and a list of the recipients of luxury vehicles seized by the Bureau of Customs [27] and turned over to Malacanang. The right to information is enshrined in Section 7 of the Bill of Rights which provides that The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law. Under both the 1973 and 1987 Constitution, this is a self-executory provision which can be invoked by any citizen before the courts. This was our ruling in Legaspi v. Civil [29] Service Commission, wherein the Court classified the right to information as a public right and when a [m]andamus proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by the mere fact that the petitioner is a citizen, and therefore, part of the general public which possesses the right. However, Congress may provide for reasonable conditions upon the access to information. Such limitations were embodied in Republic Act No. 6713, otherwise knows as the Code of Conduct and Ethical Standards for Public Officials and Employees, which took effect on March 25, 1989. This law provides that, in the performance of their duties, all public officials and employees are obliged to respond to letters sent by the public within fifteen (15) working days from receipt thereof and to ensure the accessibility of all public documents for inspection by the public within reasonable working [30] hours, subject to the reasonable claims of confidentiality. Elaborating on the significance of the right to information, the Court said in Baldoza v. [31] Dimaano that [t]he incorporation of this right in the Constitution is a recognition of the fundamental role of free exchange of information in a democracy. There can be no realistic perception by the public of the nations problems, n or a meaningful democratic decisionmaking if they are denied access to information of general interest. Information is needed to enable the members of society to cope with the exigencies of the times. The information to which the public is entitled to are those concerning matters of public concern, a term which embrace[s] a broad spectrum of subjects which the public may want to know, either because these directly affect their lives, or simply because such matters naturally
[28]

arouse the interest of an ordinary citizen. In the final analysis, it is for the courts to determine in a case by case basis whether the matter at issue is of interest or importance, as it relates to [32] or affects the public. Thus, we agree with petitioner that respondent Zamora, in his official capacity as Executive Secretary, has a constitutional and statutory duty to answer petitioners letter dealing with matters which are unquestionably of public concern that is, appointments made to public offices and the utilization of public property. With regard to petitioners request for copies of the appointment papers of certain officials, respondent Zamora is obliged to allow the inspection and copying of the same subject to the reasonable limitations required for the [33] orderly conduct of official business. WHEREFORE, the petition is dismissed, with the exception that respondent Zamora is ordered to furnish petitioner with the information requested. SO ORDERED.

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EN BANC (8) Administer oaths, issue subpoena and subpoena duces tecum and take testimony in any investigation or inquiry, including the power to examine and have access to bank accounts and records; (9) Punish for contempt in accordance with the Rules of Court and under the same procedure and with the same penalties provided therein. Clearly, the specific provision of R.A. 6770, a later legislation, modifies the law on the Secrecy of Bank Deposits (R.A. 1405) and places the office of the Ombudsman in the same footing as [2] the courts of law in this regard. The basis of the Ombudsman in ordering an in camera inspection of the accounts is a trail of managers checks purchased by one George Trivinio, a respondent in OMB-0-97-0411, pending with the office of the Ombudsman. It would appear that Mr. George Trivinio, purchased fifty one (51) Managers Checks (MCs) for a total amount of P272.1 Million at Traders Royal Bank, United Nations Avenue branch, on May 2 and 3, 1995. Out of the 51 MCs, eleven (11) MCs in the amount of P70.6 million, were deposited and credited to an account maintained at [3] the Union Bank, Julia Vargas Branch. On May 26, 1998, the FFIB panel met in conference with petitioner Lourdes T. Marquez and Atty. Fe B. Macalino at the banks main office, Ayala Avenue, Makati City. The meeting was for the purpose of allowing petitioner and Atty. Macalino to view the checks furnished by Traders Royal Bank. After convincing themselves of the veracity of the checks, Atty. Macalino advised Ms. Marquez to comply with the order of the Ombudsman. Petitioner agreed to an in [4] camera inspection set on June 3, 1998. However, on June 4, 1998, petitioner wrote the Ombudsman explaining to him that the accounts in question cannot readily be identified and asked for time to respond to the order. The reason forwarded by petitioner was that despite diligent efforts and from the account numbers presented, we can not identify these accounts since the checks are issued in cash or bearer. We surmised that these accounts have long been dormant, hence are not covered by the new account number generated by the Union Bank system. We therefore have to [5] verify from the Interbank records archives for the whereabouts of thes e accounts. The Ombudsman, responding to the request of the petitioner for time to comply with the order, stated: firstly, it must be emphasized that Union Bank, Julia Vargas Branch was the depositary bank of the subject Traders Royal Bank Managers Checks (MCs), as shown at its dorsal portion and as cleared by the Philippine Clearing House, not the International Corporate Bank. Notwithstanding the fact that the checks were payable to cash or bearer, nonetheless, the name of the depositor(s) could easily be identified since the account numbers x x x where said checks were deposited are identified in the order. Even assuming that the accounts xxx were already classi fied as dormant accounts, the bank is still required to preserve the records pertaining to the accounts within a certain period of time as required by existing banking rules and regulations. And finally, the in camera inspection was already extended twice from May 13, 1998 to June 3, 1998, thereby giving the bank enough time within which to [6] sufficiently comply with the order.

[G.R. No. 135882. June 27, 2001]

LOURDES T. MARQUEZ, in her capacity as Branch Manager, Union Bank of the Philippines, petitioners, vs. HON. ANIANO A. DESIERTO, (in his capacity as OMBUDSMAN, Evaluation and Preliminary Investigation Bureau, Office of the Ombudsman, ANGEL C. MAYOR-ALGO, JR., MARY ANN CORPUZ-MANALAC and JOSE T. DE JESUS, JR., in their capacities as Chairman and Members of the Panel, respectively,respondents. DECISION PARDO, J.: In the petition at bar, petitioner seeks to-a. Annul and set aside, for having been issued without or in excess of jurisdiction or with grave abuse of discretion amounting to lack of jurisdiction, respondents order dated September 7, 1998 in OMB-0-97-0411, In Re: Motion to Cite Lourdes T. Marquez for indirect contempt, received by counsel of September 9, 1998, and their order dated October 14, 1998, denying Marquezs motion for recons ideration dated September 10, 1998, received by counsel on October 20, 1998. b. Prohibit respondents from implementing their order dated October 14, 1998, in proceeding with the hearing of the motion to cite Marquez for indirect contempt, through the issuance by this Court of a temporary restraining order and/or preliminary [1] injunction. The antecedent facts are as follows: Sometime in May 1998, petitioner Marquez received an Order from the Ombudsman Aniano A. Desierto dated April 29, 1998, to produce several bank documents for purposes of inspection in camera relative to various accounts maintained at Union Bank of the Philippines, Julia Vargas Branch, where petitioner is the branch manager. The accounts to be inspected are Account Nos. 011-37270, 240-020718, 245-30317-3 and 245-30318-1, involved in a case pending with the Ombudsman entitled, Fact-Finding and Intelligence Bureau (FFIB) v. Amado Lagdameo, et. al. The order further states: It is worth mentioning that the power of the Ombudsman to investigate and to require the production and inspection of records and documents is sanctioned by the 1987 Philippine Constitution, Republic Act No. 6770, otherwise known as the Ombudsman Act of 1989 and under existing jurisprudence on the matter. It must be noted that R. A. 6770 especially Section 15 thereof provides, among others, the following powers, functions and duties of the Ombudsman, to wit: x x x

35 | P a g e
Thus, on June 16, 1998, the Ombudsman issued an order directing petitioner to produce the bank documents relative to the accounts in issue. The order states: Viewed from the foregoing, your persistent refusal to comply with Ombudsmans order is unjustified, and is merely intended to delay the investigation of the case. Your act constitutes disobedience of or resistance to a lawful order issued by this office and is punishable as Indirect Contempt under Section 3(b) of R.A. 6770. The same may also constitute obstruction in the lawful exercise of the functions of the Ombudsman which is punishable under Section [7] 36 of R.A. 6770. On July 10, 1998, petitioner together with Union Bank of the Philippines, filed a petition [8] for declaratory relief, prohibition and injunction with the Regional Trial Court, Makati City, against the Ombudsman. The petition was intended to clear the rights and duties of petitioner. Thus, petitioner sought a declaration of her rights from the court due to the clear conflict between R. A. No. 6770, Section 15 and R. A. No. 1405, Sections 2 and 3. Petitioner prayed for a temporary restraining order (TRO) because the Ombudsman and other persons acting under his authority were continuously harassing her to produce the bank documents relative to the accounts in question. Moreover, on June 16, 1998, the Ombudsman issued another order stating that unless petitioner appeared before the FFIB with the documents requested, petitioner manager would be charged with indirect contempt and obstruction of justice. In the meantime, on July 14, 1998, the lower court denied petitioners prayer for a temporary restraining order and stated thus: After hearing the arguments of the parties, the court finds the application for a Temporary Restraining Order to be without merit. Since the application prays for the restraint of the respondent, in the exercise of his contempt powers under Section 15 (9) in relation to paragraph (8) of R.A. 6770, known a s The Ombudsman Act of 1989, there is no great or irreparable injury from which petitioners may suffer, if respondent is not so restrained. Respondent should he decide to exercise his contempt powers would still have to apply with the court. x x x Anyone who, without lawful excuse x x x refuses to produce documents for inspection, when thereunto lawfully required shall be subject to discipline as in case of contempt of Court and upon application of the individual or body exercising the power in question shall be dealt with by the Judge of the First Instance (now RTC) having jurisdiction of the case in a manner provided by law (section 580 of the Revised Administrative Code). Under the present Constitution only judges may issue warrants, hence, respondent should apply with the Court for the issuance of the warrant needed for the enforcement of his contempt orders. It is in these proceedings where petitioners may question the propriety of respondents exercise of his contempt powers. Petitioners are not therefore left without any adequate remedy. The questioned orders were issued with the investigation of the case of Fact -Finding and Intelligence Bureau vs. Amado Lagdameo, et. el., OMB-0-97-0411, for violation of R.A. 3019. Since petitioner failed to show prima facie evidence that the subject matter of the investigation is outside the jurisdiction of the Office of the Ombudsman, no writ of injunction may be issued by this Court to delay this investigation pursuant to Section 14 of the [10] Ombudsman Act of 1989.
[9]

On July 20, 1998, petitioner filed a motion for reconsideration based on the following grounds: a. Petitioners application for Temporary Restraining Order is not only to restrain the Ombudsman from exercising his contempt powers, but to stop him from implementing his Orders dated April 29,1998 and June 16,1998; and b. The subject matter of the investigation being conducted by the Ombudsman at [11] petitioners premises is outside his jurisdiction. On July 23, 1998, the Ombudsman filed a motion to dismiss the petition for declaratory [12] relief on the ground that the Regional Trial Court has no jurisdiction to hear a petition for relief from the findings and orders of the Ombudsman, citing R. A. No. 6770, Sections 14 and 27. On August 7, 1998, the Ombudsman filed an opposition to petitioners motion for [13] reconsideration dated July 20, 1998. On August 19, 1998, the lower court denied petitione rs [14] [15] reconsideration, and also the Ombudsmans motion to dismiss. motion for

On August 21, 1998, petitioner received a copy of the motion to cite her for contempt, filed with the Office of the Ombudsman by Agapito B. Rosales, Director, Fact Finding and [16] Intelligence Bureau (FFIB). On August 31, 1998, petitioner filed with the Ombudsman an opposition to the motion to cite her in contempt on the ground that the filing thereof was premature due to the petition [17] pending in the lower court. Petitioner likewise reiterated that she had no intention to disobey the orders of the Ombudsman. However, she wanted to be clarified as to how she [18] would comply with the orders without her breaking any law, particularly R. A. No. 1405. Respondent Ombudsman panel set the incident for hearing on September 7, [19] 1998. After hearing, the panel issued an order dated September 7, 1998, ordering petitioner and counsel to appear for a continuation of the hearing of the contempt charges [20] against her. On September 10, 1998, petitioner filed with the Ombudsman a motion for [21] reconsideration of the above order. Her motion was premised on the fact that there was a [22] pending case with the Regional Trial Court, Makati City, which would determine whether obeying the orders of the Ombudsman to produce bank documents would not violate any law. The FFIB opposed the motion, and on October 14, 1998, the Ombudsman denied the motion by order the dispositive portion of which reads: Wherefore, respondent Lourdes T. Marquezs motion for reconsideration is hereby DENIED, for lack of merit. Let the hearing of the motion of the Fact Finding Intelligence Bureau (FFIB) to cite her for indirect contempt be intransferrably set to 29 October 1998 at 2:00 oclock p.m. at which date and time she should appear personally to submit her additional evidence. [24] Failure to do so shall be deemed a waiver thereof. Hence, the present petition.
[25] [23]

The issue is whether petitioner may be cited for indirect contempt for her failure to produce the documents requested by the Ombudsman. And whether the order of the Ombudsman to have an in camera inspection of the questioned account is allowed as an exception to the law on secrecy of bank deposits (R. A. No. 1405). An examination of the secrecy of bank deposits law (R. A. No. 1405) would reveal the following exceptions:

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1. Where the depositor consents in writing; 2. Impeachment case; 3. By court order in bribery or dereliction of duty cases against public officials; 4. Deposit is subject of litigation; 5. Sec. 8, R. A. No. 3019, in cases of unexplained wealth as held in the case of [26] PNB vs. Gancayco The order of the Ombudsman to produce for in camera inspection the subject accounts with the Union Bank of the Philippines, Julia Vargas Branch, is based on a pending investigation at the Office of the Ombudsman against Amado Lagdameo, et. al. for violation of R. A. No. 3019, Sec. 3 (e) and (g) relative to the Joint Venture Agreement between the Public Estates Authority and AMARI. We rule that before an in camera inspection may be allowed, there must be a pending case before a court of competent jurisdiction. Further, the account must be clearly identified, the inspection limited to the subject matter of the pending case before the court of competent jurisdiction. The bank personnel and the account holder must be notified to be present during the inspection, and such inspection may cover only the account identified in the pending case. In Union Bank of the Philippines v. Court of Appeals, we held that Section 2 of the Law on Secrecy of Bank Deposits, as amended, declares bank deposits to be absolutely confidential except: (1) In an examination made in the course of a special or general examination of a bank that is specifically authorized by the Monetary Board after being satisfied that there is reasonable ground to believe that a bank fraud or serious irregularity has been or is being committed and that it is necessary to look into the deposit to establish such fraud or irregularity, In an examination made by an independent auditor hired by the bank to conduct its regular audit provided that the examination is for audit purposes only and the results thereof shall be for the exclusive use of the bank, Penal Code makes a crime of the violation of secrets by an officer, the revelation of trade and industrial secrets, and trespass to dwelling. Invasion of privacy is an offense in special laws like the Anti-Wiretapping Law, the Secrecy of Bank Deposits Act, and the Intellectual [28] Property Code. IN VIEW WHEREOF, we GRANT the petition. We order the Ombudsman to cease and desist from requiring Union Bank Manager Lourdes T. Marquez, or anyone in her place to comply with the order dated October 14, 1998, and similar orders. No costs. SO ORDERED.

(2)

(3) Upon written permission of the depositor, (4) In cases of impeachment, (5) Upon order of a competent court in cases of bribery or dereliction of duty of public officials, or (6) In cases where the money deposited or invested is the subject matter of the [27] litigation In the case at bar, there is yet no pending litigation before any court of competent authority. What is existing is an investigation by the office of the Ombudsman. In short, what the Office of the Ombudsman would wish to do is to fish for additional evidence to formally charge Amado Lagdameo, et. al., with the Sandiganbayan. Clearly, there was no pending case in court which would warrant the opening of the bank account for inspection. Zones of privacy are recognized and protected in our laws. The Civil Code provides that "[e]very person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons" and punishes as actionable torts several acts for meddling and prying into the privacy of another. It also holds a public officer or employee or any private individual liable for damages for any violation of the rights and liberties of another person, and recognizes the privacy of letters and other private communications. The Revised

37 | P a g e
On various dates, respondent delivered and sold to petitioner sundry goods in trade, THIRD DIVISION covered by Sales Invoices No. 8846,
[4]

9105,

[5]

8962,

[6]

and 8963, which correspond to

[7]

Purchase Orders No. 6433, 6684, 6634 and 6633, respectively. Under the contracts, AIR PHILIPPINES CORPORATION, Petitioner, G.R. No. 172835 Present: YNARES-SANTIAGO, J. Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ. Promulgated: petitioners total outstanding obligation amounted to P449,864.98 with interest at 14% per annum until the amount would be fully paid. For failure of the petitioner to comply with its obligation under said contracts, respondent filed a Complaint April 2000 with the RTC.
[8]

for a Sum of Money on 28

- versus -

PENNSWELL, INC. Respondent.

In its Answer,

[9]

petitioner contended that its refusal to pay was not without valid and

December 13, 2007 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

justifiable reasons. In particular, petitioner alleged that it was defrauded in the amount of P592,000.00 by respondent for its previous sale of four items, covered by Purchase Order No. 6626. Said items were misrepresented by respondent as belonging to a new line, but were in truth and in fact, identical with products petitioner had previously purchased from respondent. Petitioner asserted that it was deceived by respondent which merely altered the

DECISION

CHICO-NAZARIO, J.: names and labels of such goods. Petitioner specifically identified the items in question, as follows: Petitioner Air Philippines Corporation seeks, via the instant Petition for Review under Rule 45 of the Rules of Court, the nullification of the 16 February 2006 Decision May 2006 Resolution Order
[3] [2] [1]

and the 25 Label/Description 1. a. Anti-Friction Fluid b. Excellent Rust Corrosion (fake) Item No. MPL-800 MPL-008 Amount 153,941.40 155,496.00 P.O. 5714 5888 Date 05/20/99 06/20/99

of the Court of Appeals in CA-G.R. SP No. 86329, which affirmed the

dated 30 June 2004 of the Regional Trial Court (RTC), Makati City, Branch 64, in Civil

Case No. 00-561.

Petitioner Air Philippines Corporation is a domestic corporation engaged in the business of air transportation services. On the other hand, respondent Pennswell, Inc. was organized to engage in the business of manufacturing and selling industrial chemicals, solvents, and special lubricants.

2. a. Contact Grease b. Connector Grease (fake) 3. a. Trixohtropic Grease b. Di-Electric Strength Protective Coating (fake)

COG #2 CG EPC EPC#2

115,236.00 230,519.52 81,876.96 81,876.96

5540 6327 4582 5446

04/26/99 08/05/99 01/29/99 04/21/99

38 | P a g e
4. a. Dry Lubricant b. Anti-Seize Compound (fake) ASC-EP ASC-EP 2000 87,346.52 124,108.10 5712 4763 & 5890 05/20/99 02/16/99 &06/24/99 b. Thixohtropic Grease to be compared with Di-Electric Strength Protective Coating; and Dry Lubricant to be compared with Anti-Seize Compound[.]

c. According to petitioner, respondents products, namely Excellent Rust Corrosion, Connector Grease, Electric Strength Protective Coating, and Anti-Seize Compound, are identical with its Anti-Friction Fluid, Contact Grease, Thixohtropic Grease, and Dry Lubricant, respectively. Petitioner asseverated that had respondent been forthright about the identical character of the products, it would not have purchased the items complained of. Moreover, petitioner alleged that when the purported fraud was discovered, a conference was held between petitioner and respondent on 13 January 2000, whereby the parties agreed that respondent would return to petitioner the amount it previously paid. However, petitioner was surprised when it received a letter from the respondent, demanding payment of the amount of P449,864.94, which later became the subject of respondents Complaint for Collection of a Sum of Money against petitioner.

[Respondent] Pennswell, Inc. is given fifteen (15) days from receipt of this Order to submit to [petitioner] Air Philippines Corporation the chemical components of all the above-mentioned products for chemical [12] comparison/analysis.

Respondent sought reconsideration of the foregoing Order, contending that it cannot be compelled to disclose the chemical components sought because the matter is confidential. It argued that what petitioner endeavored to inquire upon constituted a trade secret which respondent cannot be forced to divulge. Respondent maintained that its products are specialized lubricants, and if their components were revealed, its business competitors may easily imitate and market the same types of products, in violation of its proprietary rights and to its serious damage and prejudice.

The RTC gave credence to respondents reasoning, and reversed itself. It issued an During the pendency of the trial, petitioner filed a Motion to Compel
[10]

respondent to

Order dated 30 June 2004, finding that the chemical components are respondents trade secrets and are privileged in character. A priori, it rationalized: The Supreme Court held in the case of Chavez vs. Presidential Commission on Good Government, 299 SCRA 744, p. 764, that the drafters of the Constitution also unequivocally affirmed that aside from national security matters and intelligence information, trade or industrial secrets (pursuant to the Intellectual Property Code and other related laws) as well as banking transactions (pursuant to the Secrecy of Bank Deposit Act) are also exempted from compulsory disclosure. Trade secrets may not be the subject of compulsory disclosure. By reason of [their] confidential and privileged character, ingredients or chemical components of the products ordered by this Court to be disclosed constitute trade secrets lest [herein respondent] would eventually be exposed to unwarranted business competition with others who may imitate and market the same kinds of products in violation of [respondents] proprietary rights. Being privileged, the detailed list of ingredients or chemical components may not be the subject of mode of discovery under Rule 27, Section 1 of the Rules of Court, which expressly makes privileged [13] information an exception from its coverage.

give a detailed list of the ingredients and chemical components of the following products, to wit: (a) Contact Grease and Connector Grease; (b) Thixohtropic Grease and Di-Electric Strength Protective Coating; and (c) Dry Lubricant and Anti-Seize Compound.
[11]

It appears

that petitioner had earlier requested the Philippine Institute of Pure and Applied Chemistry (PIPAC) for the latter to conduct a comparison of respondents goods.

On 15 March 2004, the RTC rendered an Order granting the petitioners motion. It disposed, thus: The Court directs [herein respondent] Pennswell, Inc. to give [herein petitioner] Air Philippines Corporation[,] a detailed list of the ingredients or chemical components of the following chemical products: a. Contact Grease to be compared with Connector Grease;

39 | P a g e
programs and information against the public. Otherwise, such information can be illegally and unfairly utilized by business competitors who, through their access to [respondent] Pennswells business secrets, may use the same for their own private gain and to the irreparable prejudice of the latter. xxxx Petition and affirmed the Order dated 30 June 2004 of the RTC. In the case before Us, the alleged trade secrets have a factual basis, i.e., it comprises of the ingredients and formulation of [respondent] Pennswells lubricant products which are unknown to the public and peculiar only to Pennswell. All told, We find no grave abuse of discretion amounting to lack or excess of jurisdiction on the part of public respondent Judge in finding that the detailed list of ingredients or composition of the subject lubricant products which petitioner [Air Philippines Corporation] seeks to be disclosed are trade secrets of [respondent] Pennswell; hence, privileged against [14] compulsory disclosure.

Alleging grave abuse of discretion on the part of the RTC, petitioner filed a Petition for Certiorari under Rule 65 of the Rules of Court with the Court of Appeals, which denied the

The Court of Appeals ruled that to compel respondent to reveal in detail the list of ingredients of its lubricants is to disregard respondents rights over its trade secrets. It was categorical in declaring that the chemical formulation of respondents products and their ingredients are embraced within the meaning of trade secrets. In disallowing the disclosure, the Court of Appeals expounded, thus: The Supreme Court in Garcia v. Board of Investments (177 SCRA 374 [1989]) held that trade secrets and confidential, commercial and financial information are exempt from public scrutiny. This is reiterated in Chavez v. Presidential Commission on Good Government (299 SCRA 744 [1998]) where the Supreme Court enumerated the kinds of information and transactions that are recognized as restrictions on or privileges against compulsory disclosure. There, the Supreme Court explicitly stated that: The drafters of the Constitution also unequivocally affirmed that, aside from national security matters and intelligence information, trade or industrial secrets (pursuant to the Intellectual Property Code and other related laws) as well as banking transactions (pursuant to the Secrecy of Bank Deposits Act) re also exempt from compulsory disclosure. It is thus clear from the foregoing that a party cannot be compelled to produce, release or disclose documents, papers, or any object which are considered trade secrets. In the instant case, petitioner [Air Philippines Corporation] would have [respondent] Pennswell produce a detailed list of ingredients or composition of the latters lubricant products so that a chemical comparison and analysis thereof can be obtained. On this note, We believe and so hold that the ingredients or composition of [respondent] Pennswells lubricants are trade secrets which it cannot be compelled to disclose. [Respondent] Pennswell has a proprietary or economic right over the ingredients or components of its lubricant products. The formulation thereof is not known to the general public and is peculiar only to [respondent] Pennswell. The legitimate and economic interests of business enterprises in protecting their manufacturing and business secrets are wellrecognized in our system. [Respondent] Pennswell has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential

Petitioners Motion for Reconsideration was denied.

Unyielding, petitioner brought the instant Petition before us, on the sole issue of: WHETHER THE COURT OF APPEALS RULED IN ACCORDANCE WITH PREVAILING LAWS AND JURISPRUDENCE WHEN IT UPHELD THE RULING OF THE TRIAL COURT THAT THE CHEMICAL COMPONENTS OR INGREDIENTS OF RESPONDENTS PRODUCTS ARE TRADE SECRETS OR INDUSTRIAL SECRETS THAT ARE NOT SUBJECT TO [15] COMPULSORY DISCLOSURE.

Petitioner seeks to convince this Court that it has a right to obtain the chemical composition and ingredients of respondents products to conduct a comparative analysis of its products. Petitioner assails the conclusion reached by the Court of Appeals that the matters are trade secrets which are protected by law and beyond public scrutiny. Relying on Section 1, Rule 27 of the Rules of Court, petitioner argues that the use of modes of discovery operates with desirable flexibility under the discretionary control of the trial

court. Furthermore, petitioner posits that its request is not done in bad faith or in any manner as to annoy, embarrass, or oppress respondent.

40 | P a g e
A trade secret is defined as a plan or process, tool, mechanism or compound known only to its owner and those of his employees to whom it is necessary to confide it.
[16]

unauthorized disclosure of trade secrets. The Court laid down the rule that any determination by management as to the confidential nature of technologies, processes, formulae or other so-called trade secrets must have a substantial factual basis which can pass judicial scrutiny. The Court rejected the employers naked contention that its own determination as to what constitutes a trade secret should be binding and conclusive upon the NLRC. As a caveat, the Court said that to rule otherwise would be to permit an employer to label almost anything a trade secret, and thereby create a weapon with which he/it may arbitrarily dismiss an employee on the pretext that the latter somehow disclosed a trade secret, even if in fact there be none at all to speak of.
[24]

The

definition also extends to a secret formula or process not patented, but known only to certain individuals using it in compounding some article of trade having a commercial value.
[17]

trade secret may consist of any formula, pattern, device, or compilation of information that: (1) is used in one's business; and (2) gives the employer an opportunity to obtain an advantage over competitors who do not possess the information.
[18]

Generally, a trade secret is a

process or device intended for continuous use in the operation of the business, for example, a machine or formula, but can be a price list or catalogue or specialized customer list.
[19]

It is

Hence, in Cocoland, the parameters in the determination

indubitable that trade secrets constitute proprietary rights. The inventor, discoverer, or possessor of a trade secret or similar innovation has rights therein which may be treated as property, and ordinarily an injunction will be granted to prevent the disclosure of the trade secret by one who obtained the information "in confidence" or through a "confidential relationship."
[20]

of trade secrets were set to be such substantial factual basis that can withstand judicial scrutiny.

The chemical composition, formulation, and ingredients of respondents special lubricants are trade secrets within the contemplation of the law. Respondent was established to engage in the business of general manufacturing and selling of, and to deal in, distribute, sell or otherwise dispose of goods, wares, merchandise, products, including but not limited to

American jurisprudence has utilized the following factors

[21]

to determine if an

information is a trade secret, to wit: (1) the extent to which the information is known outside of the employer's business; the extent to which the information is known by employees and others involved in the business; the extent of measures taken by the employer to guard the secrecy of the information; the value of the information to the employer and to competitors; the amount of effort or money expended by the company in developing the information; and the extent to which the information could be easily or [22] readily obtained through an independent source.

industrial chemicals, solvents, lubricants, acids, alkalies, salts, paints, oils, varnishes, colors, pigments and similar preparations, among others. It is unmistakable to our minds that the manufacture and production of respondents products procee d from a formulation of a secret list of ingredients. In the creation of its lubricants, respondent expended efforts, skills, research, and resources. What it had achieved by virtue of its investments may not be wrested from respondent on the mere pretext that it is necessary for petitioners defense against a collection for a sum of money. By and large, the value of the information to respondent is crystal clear. The ingredients constitute the very fabric of respondents production and business. No doubt, the information is also valuable to respondents

(2)

(3)

(4) (5)

(6)

In Cocoland Commission,
[23]

Development

Corporation

v.

National

Labor

Relations

competitors. To compel its disclosure is to cripple respondents business, and to place it at an undue disadvantage. If the chemical composition of respondents lubricants are opened to public scrutiny, it will stand to lose the backbone on which its business is founded. This would

the issue was the legality of an employees termination on the ground of

41 | P a g e
result in nothing less than the probable demise of respondents business. Respondents proprietary interest over the ingredients which it had developed and expended money and effort on is incontrovertible. Our conclusion is that the detailed ingredients sought to be revealed have a commercial value to respondent. Not only do we acknowledge the fact that the information grants it a competitive advantage; we also find that there is clearly a glaring intent on the part of respondent to keep the information confidential and not available to the prying public. Rule 27 sets an unequivocal proviso that the documents, papers, books, accounts, letters, photographs, objects or tangible things that may be produced and inspected should not disclosure. We now take a look at Section 1, Rule 27 of the Rules of Court, which permits parties to inspect documents or things upon a showing of good cause before the court in which an action is pending. Its entire provision reads: SECTION 1. Motion for production or inspection order. Upon motion of any party showing good cause therefore, the court in which an action is pending may (a) order any party to produce and permit the inspection and copying or photographing, by or on behalf of the moving party, of any designated documents, papers, books, accounts, letters, photographs, objects or tangible things, not privileged, which constitute or contain evidence material to any matter involved in the action and which are in his possession, custody or control; or (b) order any party to permit entry upon designated land or other property in his possession or control for the purpose of inspecting, measuring, surveying, or photographing the property or any designated relevant object or operation thereon. The order shall specify the time, place and manner of making the inspection and taking copies and photographs, and may prescribe such terms and conditions as are just.
[27]

his possession, custody or control; or b) to permit entry upon designated land or other property in his possession or control for the purpose of inspecting, measuring, surveying, or photographing the property or any designated relevant object or operation thereon.

be

privileged.

[26]

The

documents

must

not

be

privileged

against

On the ground of public policy, the rules providing for production and inspection

of books and papers do not authorize the production or inspection of privileged matter; that is, books and papers which, because of their confidential and privileged character, could not be received in evidence.
[28]

Such a condition is in addition to the requisite that the items be

specifically described, and must constitute or contain evidence material to any matter involved in the action and which are in the partys possession, custody or control.

Section 24

[29]

of Rule 130 draws the types of disqualification by reason of privileged

communication, to wit: (a) communication between husband and wife; (b) communication between attorney and client; (c) communication between physician and patient; (d) communication between priest and penitent; and (e) public officers and public interest. There are, however, other privileged matters that are not mentioned by Rule 130. Among them are the following: (a) editors may not be compelled to disclose the source of published news;

A more than cursory glance at the above text would show that the production or inspection of documents or things as a mode of discovery sanctioned by the Rules of Court may be availed of by any party upon a showing of good cause therefor before the court in which an action is pending. The court may order any party: a) to produce and permit the inspection and copying or photographing of any designated documents, papers, books, accounts, letters, photographs, objects or tangible things, which are not privileged;
[25]

(b) voters may not be compelled to disclose for whom they voted; (c) trade secrets; (d) information contained in tax census returns; and (d) bank deposits.
[30]

We, thus, rule against the petitioner. We affirm the ruling of the Court of Appeals which upheld the finding of the RTC that there is substantial basis for respondent to seek protection of the law for its proprietary rights over the detailed chemical composition of its products.

which

constitute or contain evidence material to any matter involved in the action; and which are in

42 | P a g e
That trade secrets are of a privileged nature is beyond quibble. The protection that this jurisdiction affords to trade secrets is evident in our laws. The Interim Rules of Procedure on Government Rehabilitation, effective 15 December 2000, which applies to: (1) petitions for rehabilitation filed by corporations, partnerships, and associations pursuant to Presidential Decree No. 902-A,
[31]

as amended; and (2) cases for rehabilitation transferred from the

Securities and Exchange Commission to the RTCs pursuant to Republic Act No. 8799, otherwise known as The Securities Regulation Code, expressly provides that the court may issue an order to protect trade secrets or other confidential research, development, or commercial information belonging to the debtor.
[32]

SECTION 278. Procuring Unlawful Divulgence of Trade Secrets. Any person who causes or procures an officer or employee of the Bureau of Internal Revenue to divulge any confidential information regarding the business, income or inheritance of any taxpayer, knowledge of which was acquired by him in the discharge of his official duties, and which it is unlawful for him to reveal, and any person who publishes or prints in any manner whatever, not provided by law, any income, profit, loss or expenditure appearing in any income tax return, shall be punished by a fine of not more than two thousand pesos (P2,000), or suffer imprisonment of not less than six (6) months nor more than five (5) years, or both.

Republic Act No. 6969, or the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990, enacted to implement the policy of the state toregulate, restrict or prohibit the importation, manufacture, processing, sale, distribution, use and disposal of chemical substances and mixtures that present unreasonable risk and/or injury to health or the environment, also contains a provision that limits the right of the public to have access to records, reports or information concerning chemical substances and mixtures including safety data submitted and data on emission or discharge into the environment, if the matter is confidential such that it would divulge trade secrets,

Moreover, the Securities Regulation

Code is explicit that the Securities and Exchange Commission is not required or authorized to require the revelation of trade secrets or processes in any application, report or document filed with the Commission.
[33]

This confidentiality is made paramount as a

limitation to the right of any member of the general public, upon request, to have access to all information filed with the Commission.
[34]

Furthermore, the Revised Penal Code endows a cloak of protection to trade secrets under the following articles: Art. 291. Revealing secrets with abuse of office. The penalty of arresto mayor and a fine not exceeding 500 pesos shall be imposed upon any manager, employee or servant who, in such capacity, shall learn the secrets of his principal or master and shall reveal such secrets. Art. 292. Revelation of industrial secrets. The penalty of prision correccional in its minimum and medium periods and a fine not exceeding 500 pesos shall be imposed upon the person in charge, employee or workman of any manufacturing or industrial establishment who, to the prejudice of the owner thereof, shall reveal the secrets of the industry of the latter.

production or sales figures; or methods, production or processes unique to such manufacturer, processor or distributor; or would otherwise tend to affect adversely the competitive position of such manufacturer, processor or distributor.
[35]

Clearly, in accordance with our statutory laws, this Court has declared that intellectual and industrial property rights cases are not simple property cases.
[36]

Without

limiting such industrial property rights to trademarks and trade names, this Court has ruled that all agreements concerning intellectual property are intimately connected with economic development.
[37]

The protection of industrial property encourages investments in new ideas

and inventions and stimulates creative efforts for the satisfaction of human needs. It speeds Similarly, Republic Act No. 8424, otherwise known as the National Internal Revenue up transfer of technology and industrialization, and thereby bring about social and economic Code of 1997, has a restrictive provision on trade secrets, penalizing the revelation thereof by internal revenue officers or employees, to wit:

43 | P a g e
progress.
[38]

Verily, the protection of industrial secrets is inextricably linked to the

Article 4(q),

[44]

refers to goods, services and credits, debts or obligations which are primarily

advancement of our economy and fosters healthy competition in trade.

for personal, family, household or agricultural purposes, which shall include, but not be limited to, food, drugs, cosmetics, and devices. This is not the nature of respondents products. Its

Jurisprudence has consistently acknowledged the private character of trade secrets. There is a privilege not to disclose ones trade secrets.
[39]

products are not intended for personal, family, household or agricultural purposes. Rather, they are for industrial use, specifically for the use of aircraft propellers and engines.

Foremost, this Court has

declared that trade secrets and banking transactions are among the recognized restrictions to the right of the people to information as embodied in the Constitution.
[40]

We said that the

Petitioners argument that Republic Act No. 8203, or the Special Law on Counterfeit Drugs, requires the disclosure of the active ingredients of a drug is also on faulty ground.
[45]

drafters of the Constitution also unequivocally affirmed that, aside from national security matters and intelligence information, trade or industrial secrets (pursuant to the Intellectual Property Code and other related laws) as well as banking transactions (pursuant to the Secrecy of Bank Deposits Act), are also exempted from compulsory disclosure.
[41]

Respondents products are outside the scope of the cited law. They do not come
[46]

within the purview of a drug

which, as defined therein, refers to any chemical compound or

biological substance, other than food, that is intended for use in the treatment, prevention or diagnosis of disease in man or animals. Again, such are not the characteristics of

Significantly, our cases on labor are replete with examples of a protectionist stance towards the trade secrets of employers. For instance, this Court upheld the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company, on the rationalization that the company has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors.
[42]

respondents products.

What is clear from the factual findings of the RTC and the Court of Appeals is that the chemical formulation of respondents products is not known to the general public and is unique only to it. Both courts uniformly ruled that these ingredients are not within the knowledge of the public. Since such factual findings are generally not reviewable by this Court, it is not duty-bound to analyze and weigh all over again the evidence already considered in the proceedings below.
[47]

Notably, it was in a labor-related case that this Court made a

stark ruling on the proper determination of trade secrets.

We need not delve into the factual bases of such

In the case at bar, petitioner cannot rely on Section 77

[43]

of Republic Act 7394, or

findings as questions of fact are beyond the pale of Rule 45 of the Rules of Court. Factual findings of the trial court when affirmed by the Court of Appeals, are binding and conclusive on the Supreme Court.
[48]

the Consumer Act of the Philippines, in order to compel respondent to reveal the chemical components of its products. While it is true that all consumer products domestically sold, whether manufactured locally or imported, shall indicate their general make or active ingredients in their respective labels of packaging, the law does not apply to respondent. Respondents specialized lubricants -- namely, Contact Grease, Connector Grease, Thixohtropic Grease, Di-Electric Strength Protective Coating, Dry Lubricant and AntiSeize Compound -- are not consumer products. Consumer products, as it is defined in

We do not find merit or applicability in petitioners invocation of Section 12

[49]

of

the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990, which grants the public access to records, reports or information concerning chemical substances and mixtures, including safety data submitted, and data on emission or discharge into the

44 | P a g e
environment. To reiterate, Section 12
[50]

of said Act deems as confidential matters, WHEREFORE, the Petition is DENIED. The Decision dated 16 February 2006, and the Resolution dated 25 May 2006, of the Court of Appeals in CA-G.R. SP No. 86329 are AFFIRMED. No costs.

which may not be made public, those that would divulge trade secrets, including production or sales figures or methods; production or processes unique to such manufacturer, processor or distributor, or would otherwise tend to affect adversely the competitive position of such manufacturer, processor or distributor. It is true that under the same Act, the Department of Environment and Natural Resources may release information; however, the clear import of the law is that said authority is limited by the right to confidentiality of the manufacturer, processor or distributor, which information may be released only to a medical research or scientific institution where the information is needed for the purpose of medical diagnosis or treatment of a person exposed to the chemical substance or mixture. The right to confidentiality is recognized by said Act as primordial. Petitioner has not made the slightest attempt to show that these circumstances are availing in the case at bar.

SO ORDERED.

Indeed, the privilege is not absolute; the trial court may compel disclosure where it is indispensable for doing justice.
[51]

We do not, however, find reason to except respondents

trade secrets from the application of the rule on privilege. The revelation of respondents trade secrets serves no better purpose to the disposition of the main case pending with the RTC, which is on the collection of a sum of money. As can be gleaned from the facts, petitioner received respondents goods in trade in the normal course of business. To be sure, there are defenses under the laws of contracts and sales available to petitioner. On the other hand, the greater interest of justice ought to favor respondent as the holder of trade secrets. If we were to weigh the conflicting interests between the parties, we rule in favor of the greater interest of respondent. Trade secrets should receive greater protection from discovery, because they derive economic value from being generally unknown and not readily ascertainable by the public.
[52]

To the mind of this Court, petitioner was not able to

show a compelling reason for us to lift the veil of confidentiality which shields respondents trade secrets.

45 | P a g e
G.R. Nos. L-32613-14 December 27, 1972 PEOPLE OF THE PHILIPPINES, petitioner, vs. HON. SIMEON. FERRER (in his capacity as Judge of the Court of First Instance of Tarlac, Branch I), FELICIANO CO alias LEONCIO CO alias "Bob," and NILO S. TAYAG alias Romy Reyes alias "Taba,"respondents. Solicitor R. Mutuc for respondent Feliciano Co. Jose W. Diokno for respondent Nilo Tayag. (c) With the aid of armed men or persons who insure or afford impunity. Co moved to quash on the ground that the Anti-Subversion Act is a bill of attainder. Meanwhile, on May 25, 1970, another criminal complaint was filed with the same court, sharing the respondent Nilo Tayag and five others with subversion. After preliminary investigation was had, an information was filed, which, as amended, reads: The undersigned provincial Fiscal of Tarlac and State Prosecutors duly designated by the Secretary of Justice to collaborate with the Provincial Fiscal of Tarlac, pursuant to the Order dated June 5, above entitled case, hereby accuse Nilo S. Tayag, alias Romy Reyes alias TABA, ARTHUR GARCIA, RENATO (REY) CASIPE, ABELARDO GARCIA, MANUEL ALAVADO, BENJAMIN BIE alias COMMANDER MELODY and several JOHN DOES, whose identities are still unknown, for violation of REPUBLIC ACT No. 1700, otherwise known as the Anti-Subversion Law, committed as follows: That in or about March 1969 and for sometime prior thereto and thereafter, in the Province of Tarlac, within the jurisdiction of this Honorable Court, and elsewhere in the Philippines, the above-named accused knowingly, willfully and by overt acts organized, joined and/or remained as offices and/or ranking leaders, of the KABATAANG MAKABAYAN, a subversive organization as defined in Republic Act No. 1700; that BENJAMIN BIE and COMMANDER MELODY, in addition thereto, knowingly, willfully and by over acts joined and/or remained as a member and became an officer and/or ranking leader not only of the Communist Party of the Philippines but also of the New People's Army, the military arm of the Communist Party of the Philippines; and that all the above-named accused, as such officers and/or ranking leaders of the aforestated subversive organizations, conspiring, confederating and mutually helping one another, did then and there knowingly, willfully and feloniously commit subversive and/or seditious acts, by inciting, instigating and stirring the people to unite and rise publicly and tumultuously and take up arms against the government, and/or engage in rebellious conspiracies and riots to overthrow the government of the Republic of the Philippines by force, violence, deceit, subversion and/or other illegal means among which are the following: 1. On several occasions within the province of Tarlac, the accused conducted meetings and/or seminars wherein the said accused delivered speeches instigating and inciting the people to unite, rise in arms and overthrow the Government of the Republic of the Philippines, by force, violence, deceit, subversion and/or other illegal means; and toward this end, the said accused organized, among others a chapter of the KABATAANG MAKABAYAN in barrio Motrico, La Paz, Tarlac for the avowed purpose of undertaking or promoting an armed revolution, subversive and/or seditious propaganda, conspiracies, and/or riots and/or other illegal means to discredit and overthrow the Government of the Republic of the Philippines and to established in the Philippines a Communist regime.

CASTRO, J.:p I. Statement of the Case Posed in issue in these two cases is the constitutionality of the Anti-Subversion 1 Act, which outlaws the Communist Party of the Philippines and other "subversive associations," and punishes any person who "knowingly, willfully and by overt acts affiliates himself with, becomes or remains a member" of the Party or of any other similar "subversive" organization. On March 5, 1970 a criminal complaint for violation of section 4 of the Anti-Subversion Act was filed against the respondent Feliciano Co in the Court of First Instance of Tarlac. On March 10 Judge Jose C. de Guzman conducted a preliminary investigation and, finding a prima facie case against Co, directed the Government prosecutors to file the corresponding information. The twice-amended information, docketed as Criminal Case No. 27, recites: That on or about May 1969 to December 5, 1969, in the Municipality of Capas, Province of Tarlac, Philippines, and within the jurisdiction of this Honorable Court, the abovenamed accused, feloniously became an officer and/or ranking leader of the Communist Party of the Philippines, an outlawed and illegal organization aimed to overthrow the Government of the Philippines by means of force, violence, deceit, subversion, or any other illegal means for the purpose of establishing in the Philippines a totalitarian regime and placing the government under the control and domination of an alien power, by being an instructor in the Mao Tse Tung University, the training school of recruits of the New People's Army, the military arm of the said Communist Party of the Philippines. That in the commission of the above offense, the following aggravating circumstances are present, to wit: (a) That the crime has been committed in contempt of or with insult to public authorities; (b) That the crime was committed by a band; and afford impunity.

46 | P a g e
2. The accused NILO TAYAG alias ROMY REYES alias TABA, together with FRANCISCO PORTEM alias KIKO Gonzales and others, pursued the above subversive and/or seditious activities in San Pablo City by recruiting members for the New People's Army, and/or by instigating and inciting the people to organize and unite for the purpose of overthrowing the Government of the Republic of the Philippines through armed revolution, deceit, subversion and/or other illegal means, and establishing in the Philippines a Communist Government. That the following aggravating circumstances attended the commission of the offense: (a) aid of armed men or persons to insure or afford impunity; and (b) craft, fraud, or disguise was employed. On July 21, 1970 Tayag moved to quash, impugning the validity of the statute on the grounds that (1) it is a bill of attainder; (2) it is vague; (3) it embraces more than one subject not expressed in the title thereof; and (4) it denied him the equal protection of the laws. Resolving the constitutional issues raised, the trial court, in its resolution of September 15, 1970, declared the statute void on the grounds that it is a bill of attainder and that it is vague and overboard, and dismissed the informations against the two accused. The Government appealed. We resolved to treat its appeal as a special civil action for certiorari. II. Is the Act a Bill of Attainder? Article III, section 1 (11) of the Constitution states that "No bill of attainder or ex port facto law 2 shall be enacted." A bill of attainder is a legislative act which inflicts punishment without 3 4 trial. Its essence is the substitution of a legislative for a judicial determination of guilt. The constitutional ban against bills of attainder serves to implement the principle of separation of 5 powers by confining legislatures to 6 7 rule-making and thereby forestalling legislative usurpation of the judicial function. History in perspective, bills of attainder were employed to suppress unpopular causes and political 8 minorities, and it is against this evil that the constitutional prohibition is directed. The singling out of a definite class, the imposition of a burden on it, and a legislative intent, suffice to 9 stigmatizea statute as a bill of attainder. In the case at bar, the Anti-Subversion Act was condemned by the court a quo as a bill of attainder because it "tars and feathers" the Communist Party of the Philippines as a "continuing menace to the freedom and security of the country; its existence, a 'clear, present and grave danger to the security of the Philippines.'" By means of the Act, the trial court said, Congress usurped "the powers of the judge," and assumed "judicial magistracy by pronouncing the guilt of the CCP without any of the forms or safeguards of judicial trial." Finally, according to the trial court, "if the only issue [to be determined] is whether or not the accused is a knowing and voluntary member, the law is still a bill of attainder because it has expressly created a presumption of organizational guilt which the accused can never hope to overthrow." 1. When the Act is viewed in its actual operation, it will be seen that it does not specify the Communist Party of the Philippines or the members thereof for the purpose of punishment. What it does is simply to declare the Party to be an organized conspiracy for the overthrow of the Government for the purposes of the prohibition, stated in section 4, against membership in the outlawed organization. The term "Communist Party of the Philippines" issued solely for definitional purposes. In fact the Act applies not only to the Communist Party of the Philippines but also to "any other organization having the same purpose and their 10 successors." Its focus is not on individuals but on conduct. This feature of the Act distinguishes it from section 504 of the U.S. Federal Labor11 12 Management Reporting and Disclosure Act of 1959 which, in U.S. vs. Brown, was held to be a bill of attainder and therefore unconstitutional. Section 504 provided in its pertinent parts as follows: (a) No person who is or has been a member of the Communist Party ... shall serve (1) as an officer, director, trustee, member of any executive board or similar governing body, business agent, manager, organizer, or other employee (other than as an employee performing exclusively clerical or custodial duties) of any labor organization. during or for five years after the termination of his membership in the Communist Party.... (b) Any person who willfully violates this section shall be fined not more than $10,000 or imprisoned for not more than one year, or both. This statute specified the Communist Party, and imposes disability and penalties on its members. Membership in the Party, without more, ipso facto disqualifies a person from becoming an officer or a member of the governing body of any labor organization. As the Supreme Court of the United States pointed out: Under the line of cases just outlined, sec. 504 of the Labor Management Reporting and Disclosure Act plainly constitutes a bill of attainder. Congress undoubtedly possesses power under the Commerce Clause to enact legislation designed to keep from positions affecting interstate commerce persons who may use of such positions to bring about political strikes. In section 504, however, Congress has exceeded the authority granted it by the Constitution. The statute does not set forth a generally applicable rule decreeing that any person who commits certain acts or possesses certain characteristics (acts and characteristics which, in Congress' view, make them likely to initiate political strikes) shall not hold union office, and leaves to courts and juries the job of deciding what persons have committed the specified acts or possessed the specified characteristics. Instead, it designates in no uncertain terms the persons who possess the feared characteristics and therefore cannot hold union office without incurring criminal liability members of the Communist Party. Communist Party v. Subversive Activities Control Board, 367 US 1, 6 L ed 2d 625, 81 S CT 1357, lend a support to our conclusion. That case involved an appeal from an order by the Control Board ordering the Communist Party to register as a "Communist-action organization," under the Subversive Activities Control Act of 1950, 64 Stat 987, 50 USC sec. 781 et seq. (1958 ed). The definition of "Communist-action organization" which the Board is to apply is set forth in sec. 3 of the Act:

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[A]ny organization in the United States ... which (i)is substantially directed, dominated, or controlled by the foreign government or foreign organization controlling the world Communist movement referred to in section 2 of this title, and(ii) operates primarily to advance the objectives of such world Communist movement... 64 Stat 989, 50 USC sec. 782 (1958 ed.) A majority of the Court rejected the argument that the Act was a bill of attainder, reasoning that sec. 3 does not specify the persons or groups upon which the deprivations setforth in the Act are to be imposed, but instead sets forth a general definition. Although the Board has determined in 1953 that the Communist Party was a "Communist-action organization," the Court found the statutory definition not to be so narrow as to insure that the Party would always come within it: In this proceeding the Board had found, and the Court of Appeals has sustained its conclusion, that the Communist Party, by virtud of the activities in which it now engages, comes within the terms of the Act. If the Party should at anytime choose to abandon these activities, after it is once registered pursuant to sec. 7, the Act provides adequate means of relief. (367 US, at 87, 6 L ed 2d at 683) Indeed, were the Anti-Subversion Act a bill of attainder, it would be totally unnecessary to charge Communists in court, as the law alone, without more, would suffice to secure their punishment. But the undeniable fact is that their guilt still has to be judicially established. The Government has yet to prove at the trial that the accused joined the Party knowingly, willfully and by overt acts, and that they joined the Party, knowing its subversive character and with specific intent to further its basic objective, i.e., to overthrow the existing Government by force deceit, and other illegal means and place the country under the control and domination of a foreign power. As to the claim that under the statute organizationl guilt is nonetheless imputed despite the requirement of proof of knowing membership in the Party, suffice it to say that is precisely the nature of conspiracy, which has been referred to as a "dragneet device" whereby all who participate in the criminal covenant are liable. The contention would be correct if the statute were construed as punishing mere membership devoid of any specific intent to further the 13 unlawful goals of the Party. But the statute specifically required that membership must be knowing or active, with specific intent to further the illegal objectives of the Party. That is what section 4 means when it requires that membership, to be unlawful, must be shown to 14 have been acquired "knowingly, willfully and by overt acts." The ingredient of specific intent 15 to pursue the unlawful goals of the Party must be shown by "overt acts." This constitutes an element of "membership" distinct from the ingredient of guilty knowledge. The former requires proof of direct participation in the organization's unlawful activities, while the latter requires proof of mere adherence to the organization's illegal objectives. 2. Even assuming, however, that the Act specifies individuals and not activities, this feature is not enough to render it a bill of attainder. A statute prohibiting partners or employees of securities underwriting firms from serving as officers or employees of national banks on the basis of a legislative finding that the persons mentioned would be subject to the temptation to commit acts deemed inimical to the national economy, has been declared not to be a bill of 16 attainder. Similarly, a statute requiring every secret, oath-bound society having a membership of at least twenty to register, and punishing any person who becomes a member of such society which fails to register or remains a member thereof, was declared valid even if 17 in its operation it was shown to apply only to the members of the Ku Klux Klan. In the Philippines the validity of section 23 (b) of the Industrial Peace Act, requiring labor unions to file with the Department of Labor affidavits of union officers "to the effect that they are not members of the Communist Party and that they are not members of any organization which teaches the overthrow of the Government by force or by any illegal or unconstitutional 19 method," was upheld by this Court. Indeed, it is only when a statute applies either to named individuals or to easily ascertainable members of a group in such a way as to inflict punishment on them without a judicial trial does 20 it become a bill of attainder. It is upon this ground that statutes which disqualified those who had taken part in the rebellion against the Government of the United States during the Civil 21 22 War from holding office, or from exercising their profession, or which prohibited the payment of further compensation to individuals named in the Act on the basis of a finding that 23 they had engages in subversive activities, or which made it a crime for a member of the 24 Communist Party to serve as an officer or employee of a labor union, have been invalidated as bills of attainder. But when the judgment expressed in legislation is so universally acknowledged to be certain as to be "judicially noticeable," the legislature may apply its own rules, and judicial hearing is 25 not needed fairly to make such determination. In New York ex rel. Bryant vs. Zimmerman, the New York legislature passed a law requiring every secret, oath-bound society with a membership of at least twenty to register, and punishing any person who joined or remained a member of such a society failing to register. While the statute did not specify the Ku Klux Klan, in its operation the law applied to the KKK exclusively. In sustaining the statute against the claim that it discriminated against the Ku Klux Klan while exempting other secret, oath-bound organizations like masonic societies and the Knights of Columbus, the United States Supreme Court relied on common knowledge of the nature and activities of the Ku Klux Klan. The Court said: The courts below recognized the principle shown in the cases just cited and reached the conclusion that the classification was justified by a difference between the two classes of associations shown by experience, and that the difference consisted (a) in a manifest tendency on the part of one class to make the secrecy surrounding its purpose and membership a cloak for acts and conduct inimical to personal rights and public welfare, and (b) in the absence of such a tendency on the part of the other class. In pointing out this difference one of the courts said of the Ku Klux Klan, the principal association in the included class: "It is a matter of common knowledge that this organization functions largely at night, its members disguised by hoods and gowns and doing things calculated to strike terror into the minds of the people;" and later said of the other class: "These organizations and their purposes are well known, many of them having been in existence for many years. Many of them are oath-bound and secret. But we hear no complaint against them regarding violation of the peace or interfering with the rights of others." Another of the courts said: "It is a matter of common knowledge that the association or organization of which the relator is concededly a member exercises activities tending to the prejudice and intimidation of sundry classes of our citizens. But the legislation is not confined to this society;" and later said of the other class: "Labor unions have a recognized
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lawful purpose. The benevolent orders mentioned in the Benevolent Orders Law have already received legislative scrutiny and have been granted special privileges so that the legislature may well consider them beneficial rather than harmful agencies." The third court, after recognizing "the potentialities of evil in secret societies," and observing that "the danger of certain organizations has been judicially demonstrated," meaning in that state, said: "Benevolent orders, labor unions and college fraternities have existed for many years, and, while not immune from hostile criticism, have on the whole justified their existence." We assume that the legislature had before it such information as was readily available including the published report of a hearing, before a committee of the House of Representatives of the 57th Congress relating to the formation, purposes and activities of the Klu Klux Klan. If so it was advised putting aside controverted evidence that the order was a revival of the Ku Klux Klan of an earlier time with additional features borrowed from the Know Nothing and the A. P. A. orders of other periods; that its memberships was limited to native-born, gentile, protestant whites; that in part of its constitution and printed creed it proclaimed the widest freedom for all and full adherence to the Constitution of the United States; in another exacted of its member an oath to shield and preserve "white supremacy;" and in still another declared any person actively opposing its principles to be "a dangerous ingredient in the body politic of our country and an enemy to the weal of our national commonwealth;" that it was conducting a crusade against Catholics, Jews, and Negroes, and stimulating hurtful religious and race prejudices; that it was striving for political power and assuming a sort of guardianship over the administration of local, state and national affairs; and that at times it was taking into its own hands the punishment of what some of its members conceived to be 27 crimes. In the Philippines the character of the Communist Party has been the object of continuing scrutiny by this Court. In 1932 we found the Communist Party of the Philippines to be an 28 illegal association. In 1969 we again found that the objective of the Party was the "overthrow of the Philippine Government by armed struggle and to establish in the Philippines 29 a communist form of government similar to that of Soviet Russia and Red China." More 30 recently, in Lansang vs. Garcia, we noted the growth of the Communist Party of the Philippines and the organization of Communist fronts among youth organizations such as the Kabataang Makabayan (KM) and the emergence of the New People's Army. After meticulously reviewing the evidence, we said: "We entertain, therefore, no doubts about the existence of a sizeable group of men who have publicly risen in arms to overthrow the government and have thus been and still are engaged in rebellion against the Government of the Philippines. 3. Nor is it enough that the statute specify persons or groups in order that it may fall within the ambit of the prohibition against bills of attainder. It is also necessary that it must apply retroactively and reach past conduct. This requirement follows from the nature of a bill of attainder as a legislative adjudication of guilt. As Justice Frankfurter observed, "frequently a bill of attainder was ... doubly objectionable because of its ex post factofeatures. This is the historic explanation for uniting the two mischiefs in one clause 'No Bill of Attainder or ex post facto law shall be passed.' ... Therefore, if [a statute] is a bill of attainder it is also an ex post facto law. But if it is not an ex post facto law, the 31 reasons that establish that it is not are persuasive that it cannot be a bill of attainder." Thus in Gardner vs. Board of Public Works, the U.S. Supreme Court upheld the validity of the Charter of the City of Los Angeles which provided: ... [N]o person shall hold or retain or be eligible for any public office or employment in the service of the City of Los Angeles, in any office or department thereof, either elective or appointive, who has within five (5) years prior to the effective date of this section advised, advocated, or taught, or who may, after this section becomes effective, become a member of or affiliated with any group, society, association, organization or party which advises, advocates or teaches or has within said period of five (5) years advised, advocated, or taught the overthrow by force or violence of the Government of the United States of America or of the State of California. In upholding the statute, the Court stressed the prospective application of the Act to the petitioner therein, thus: ... Immaterial here is any opinion we might have as to the charter provision insofar as it purported to apply restrospectively for a five-year period to its effective date. We assume that under the Federal Constitution the Charter Amendment is valid to the extent that it bars from the city's public service persons who, subsequently to its adoption in 1941, advise, advocate, or reach the violent overthrow of the Government or who are or become affiliated with any group doing so. The provisions operating thus prospectively were a reasonable regulation to protect the municipal service by establishing an employment qualification of loyalty to the State and the United States. ... Unlike the provisions of the charter and ordinance under which petitioners were removed, the statute in the Lovett case did not declare general and prospectively operative standards of qualification and eligibility for public employment. Rather, by its terms it prohibited any further payment of compensationto named individuals or employees. Under these circumstances, viewed against the legislative background, the statutewas held to have imposed penalties without judicial trial. Indeed, if one objection to the bill of attainder is thatCongress thereby assumed judicial magistracy, them it mustbe demonstrated that the statute claimed to be a bill of attainderreaches past conduct and that the penalties it imposesare inescapable. As the U.S. Supreme Court observedwith respect to the U.S. Federal Subversive Activities ControlAct of 1950: Nor is the statute made an act of "outlawry" or of attainderby the fact that the conduct which it regulates is describedwith such particularity that, in probability, few organizationswill come within the statutory terms. Legislatures may act tocurb behaviour which they regard as harmful to the public welfare,whether that conduct is found to be engaged in by manypersons or by one. So long as the incidence of legislation issuch that the persons who engage in the regulated conduct, bethey many or few, can escape regulation merely by altering thecourse of their own present 33 activities, there can be no complaintof an attainder.
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This statement, mutatis mutandis, may be said of theAnti-Subversion Act. Section 4 thereof expressly statesthat the prohibition therein applies only to acts committed"After the approval of this Act." Only those who "knowingly,willfully and by overt acts affiliate themselves with,become or remain members of the Communist Party of thePhilippines and/or its successors or of any subversive association"after June 20, 1957, are punished. Those whowere members of the Party or of any other subversive associationat the time of the enactment of the law, weregiven the opportunity of purging themselves of liability byrenouncing in writing and under oath their membershipin the Party. The law expressly provides that such renunciationshall operate to exempt such persons from 34 penalliability. The penalties prescribed by the Act are thereforenot inescapable. III. The Act and the Requirements of Due Process 1. As already stated, the legislative declaration in section 2 of the Act that the Communist Party of the Philippinesis an organized conspiracy for the overthrow of theGovernment is inteded not to provide the basis for a legislativefinding of guilt of the members of the Party butrather to justify the proscription spelled out in section 4. Freedom of expression and freedom of association are sofundamental that they are thought by some to occupy 35 a"preferred position" in the hierarchy of constitutional values. Accordingly, any limitation on their exercise mustbe justified by the existence of a substantive evil. This isthe reason why before enacting the statute in question Congressconducted careful investigations and then stated itsfindings in the preamble, thus: ... [T]he Communist Party of the Philippines althoughpurportedly a political party, is in fact an organized conspiracyto overthrow the Government of the Republic of the Philippinesnot only by force and violence but also by deceit, subversionand other illegal means, for the purpose of establishing in thePhilippines a totalitarian regime subject to alien dominationand control; ... [T]he continued existence and activities of the CommunistParty of the Philippines constitutes a clear, present andgrave danger to the security of the Philippines; ... [I]n the face of the organized, systematice and persistentsubversion, national in scope but international in direction,posed by the Communist Party of the Philippines and its activities,there is urgent need for special legislation to cope withthis continuing menace to the freedom and security of the country. In truth, the constitutionality of the Act would be opento question if, instead of making these findings in enactingthe statute, Congress omitted to do so. In saying that by means of the Act Congress has assumed judicial magistracy, the trial courd failed to takeproper account of the distinction between legislative fact and adjudicative fact. Professor Paul Freund elucidatesthe crucial distinction, thus: ... A law forbidding the sale of beverages containingmore than 3.2 per cent of alcohol would raise a question of legislativefact, i.e., whether this standard has a reasonable relationto public health, morals, and the enforcement problem. Alaw forbidding the sale of intoxicating beverages (assuming itis not so vague as to require supplementation by rulemaking)would raise a question of adjudicative fact, i.e., whether thisor that beverage is intoxicating within the meaning of the statuteand the limits on governmental action imposed by the Constitution. Of course what we mean by fact in each case is itselfan ultimate conclusion founded on underlying facts and oncriteria of judgment for weighing them. A conventional formulation is that legislative facts those facts which are relevant to the legislative judgment will not be canvassed save to determine whether there is a rationalbasis for believing that they exist, while adjudicativefacts those which tie the legislative enactment to the litigant are to be demonstrated and found according to the ordinarystandards 36 prevailing for judicial trials. The test formulated in Nebbia vs. new York, andadopted by this Court in Lansang vs. 38 Garcia, is that 'if laws are seen to have a reasonable relation to a proper legislative purpose, and are neither arbitrary nor discriminatory, the requirements of due process are satisfied, and judicial determination to that effect renders a court functus officio." The recital of legislative findings implements this test. With respect to a similar statement of legislative findingsin the U.S. Federal Subversive Activities Control Actof 1950 (that "Communist-action organizations" are controlledby the foreign government controlling the worldCommunist movement and that they operate primarily to"advance the objectives of such world Communist movement"),the U.S. Supreme Court said: It is not for the courts to reexamine the validity of theselegislative findings and reject them....They are the productof extensive investigation by Committes of Congress over morethan a decade and a half. Cf. Nebbia v. New York, 291 U.S.502, 516, 530. We certainly cannot dismiss them as unfoundedirrational imaginings. ... And if we accept them, as we mustas a not unentertainable appraisal by Congress of the threatwhich Communist organizations pose not only to existing governmentin the United States, but to the United States as asovereign, independent Nation. ...we must recognize that thepower of Congress to regulate Communist organizations of thisnature is 39 extensive. This statement, mutatis mutandis, may be said of thelegislative findings articulated in the AntiSubversion Act. That the Government has a right to protect itself againstsubversion is a proposition too plain to require elaboration.Self-preservation is the "ultimate value" of society. It surpasses and transcendes every other value, "forif a society cannot protect its very structure from 40 armedinternal attack, ...no subordinate value can be protected" As Chief Justice Vinson so 41 aptly said in Dennis vs. United States: Whatever theoretical merit there may be to the argumentthat there is a 'right' to rebellion against dictatorial governmentsis without force where the existing structure of government provides for peaceful and orderly change. We rejectany principle of governmental helplessness in the face of preparationfor revolution, which principle, carried to its logical conclusion,must lead to anarchy. No one could conceive that it isnot within
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the power of Congress to prohibit acts intended tooverthrow the government by force and violence. 2. By carefully delimiting the reach of the Act to conduct (as explicitly described in sectin 4 thereof), Congressreaffirmed its respect for the rule that "even throughthe governmental purpose be legitimate and substantial,that purpose cannot be pursued by means that broadly 42 stiflefundamental personal liberties when the end can be more narrowly achieved." The requirement of knowing membership,as distinguished from nominalmembership, hasbeen 43 held as a sufficient basis for penalizing membershipin a subversive organization. For, as has been stated: Membership in an organization renders aid and encouragement to the organization; and when membership is acceptedor retained with knowledge that the organization is engaged inan unlawful purpose, the one accepting or retaining membershipwith such knowledge makes himself a party to the 44 unlawfulenterprise in which it is engaged. 3. The argument that the Act is unconstitutionallyoverbroad because section 2 merely speaks of "overthrow"of the Government and overthrow may be achieved by peaceful means, misconceives the function of the phrase"knowingly, willfully and by overt acts" in section 4. Section 2 is merely a legislative declaration; the definitionsof and the penalties prescribed for the different acts prescribedare stated in section 4 which requires that membershipin the Communist Party of the Philippines, to be unlawful, must be acquired "knowingly, willfully and by overt acts." Indeed, the first "whereas" clause makes clear thatthe overthrow contemplated is "overthrow not only by forceand violence but also be deceit, subversion and other illegalmeans." The absence of this qualificatio in section 2 appearsto be due more to an oversight rather than to deliberateomission. Moreover, the word "overthrow' sufficiently connotesthe use of violent and other illegal means. Only in a metaphoricalsense may one speak of peaceful overthrow ofgovernments, and certainly the law does not speak in metaphors.In the case of the Anti-Subversion Act, the use ofthe word "overthrow" in a metaphorical sense is hardlyconsistent with the clearly delineated objective of the "overthrow,"namely, "establishing in the Philippines a totalitarianregime and place [sic] the Government under thecontrol and domination of an alien power." What thisCourt once said in a prosecution for sedition is appropos: "The language used by the appellant clearly imported anoverthrow of the Government by violence, and it should beinterpreted in the plain and obvious sense in which it wasevidently intended to be understood. The word 'overthrow'could not have been intended as referring to an ordinarychange by the exercise of the elective franchise. The useof the whip [which the accused exhorted his audience to useagainst the Constabulary], an instrument designed toleave marks on the sides of adversaries, is inconsistentwith the mild interpretation which the 45 appellant wouldhave us impute to the language." IV. The Act and the Guaranty of Free Expression As already pointed out, the Act is aimed against conspiracies to overthrow the Government by force, violence orother illegal means. Whatever interest in freedom of speechand freedom of association is infringed by the prohibitionagainst knowing membership in the Communist Party ofthe Philippines, is so indirect and so insubstantial as to beclearly and heavily outweighed by the overriding considerationsof national security and the preservartion of democraticinstitutions in his country. The membership clause of the U.S. Federal Smith Actis similar in many respects to the membership provision ofthe Anti-Subversion Act. The former provides: Whoever organizes or helps or attempts to organize anysociety, group, or assembly of persons who teach, advocate, orencourage the overthrow or destruction of any such governmentby force or violence; or becomes or is a member of, or affiliatedwith, any such society, group or assembly of persons, knowingthe purpose thereof Shall be fined not more than $20,000 or imprisoned notmore than twenty years, or both, and shall be ineligible for emplymentby the United States or any department or agencythereof, for the five years next following his 46 conviction.... In sustaining the validity of this provision, the "Court said in Scales vs. United States:
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It was settled in Dennis that advocacy with which we arehere concerned is not constitutionally protected speech, and itwas further established that a combination to promote suchadvocacy, albeit under the aegis of what purports to be a politicalparty, is not such association as is protected by the firstAmendment. We can discern no reason why membership, whenit constitutes a purposeful form of complicity in a group engagingin this same forbidden advocacy, should receive anygreater degree of protection from the guarantees of that Amendment. Moreover, as was held in another case, where the problemsof accommodating the exigencies of self-preservationand the values of liberty are as complex and intricate as inthe situation described in the legislative findings stated inthe U.S. Federal Subversive Activities Control Act of 1950,the legislative judgment as to how that threat may best bemet consistently with the safeguards of personal freedomsis not to be set aside merely because the judgment of 48 judgeswould, in the first instance, have chosen other methods. For in truth, legislation, "whether it restrains freedom tohire or freedom to speak, is itself an effort at compromisebetween the claims of the social order and individual freedom,and when the legislative compromise in either case isbrought to the judicial test the court stands one step 49 removedfrom the conflict and its resolution through law." V. The Act and its Title The respondent Tayag invokes the constitutional commandthat "no bill which may be enacted into law shall embrace more than one subject which shall be expressed in the title of the 50 bill." What is assailed as not germane to or embraced in thetitle of the Act is the last proviso of section 4 which reads: And provided, finally, That one who conspires with anyother person to overthrow the Government of the Republic ofthe Philippines, or the government of any of its political subdivisionsby force, violence, deceit, subversion or illegal means,for the purpose of placing such Government or political subdivisionunder the control and domination of any lien power,

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shallbe punished by prision correccional to prision mayor with allthe accessory penalties provided therefor in the same code. It is argued that the said proviso, in reality, punishes notonly membership in the Communist Party of the Philippinesor similar associations, but as well "any conspiracyby two persons to overthrow the national or any local governmentby illegal means, even if their intent is not to establisha totalitarian regime, burt a democratic regime, evenif their purpose is not to place the nation under an aliencommunist power, but under an alien democratic power likethe United States or England or Malaysia or even an anti-communistpower like Spain, Japan, Thailand or Taiwanor Indonesia." The Act, in addition to its main title ("An Act to Outlawthe Communist Party of the Philippines and SimilarAssociations, Penalizing Membership Therein, and forOther Purposes"), has a short title. Section 1 providesthat "This Act shall be known as the Anti-Subversion Act."Together with the main title, the short title of the statuteunequivocally indicates that the subject matter is subversionin general which has for its fundamental purpose the substitutionof a foreign totalitarian regime in place of theexisting Government and not merely subversion by Communistconspiracies.. The title of a bill need not be a catalogue or an indexof its contents, and need not recite the 51 details of the Act. It is a valid title if it indicates in broad but clear termsthe nature, scope, 52 and consequences of the proposed lawand its operation. A narrow or technical construction isto be avoided, and the statute will be read fairly and reasonablyin order not to thwart the legislative intent. We holdthat the Anti-Subversion Act fully satisfies these requirements. VI. Conclusion and Guidelines In conclusion, even as we uphold the validity of theAnti-Subversion Act, we cannot overemphasize the needfor prudence and circumspection in its enforcement, operatingas it does in the sensitive area of freedom of expressionand belief. Accordingly, we set the following basic guidelines to be observed in any prosecution under the Act.The Government, in addition to proving such circumstancesas may affect liability, must establish the following elementsof the crime of joining the Communist Party of the Philippinesor any other subversive association: (1) In the case of subversive organizations other thanthe Communist Party of the Philippines, (a) that thepurpose of the organization is to overthrow the presentGovernment of the Philippines and to establish in thiscountry a totalitarian regime under the domination of aforeign power; (b) that the accused joined such organization;and (c) that he did so knowingly, willfully and byovert acts; and (2) In the case of the Communist Party of the Philippines,(a) that the CPP continues to pursue the objectiveswhich led Congress in 1957 to declare it to be an organizedconspiracy for the overthrow of the Government by illegalmeans for the purpose of placing the country under thecontrol of a foreign power; (b) that the accused joined theCPP; and (c) that he did so willfully, knowingly and byovert acts. We refrain from making any pronouncement as to thecrime or remaining a member of the Communist Party ofthe Philippines or of any other subversive association: weleave this matter to future determination. ACCORDINGLY, the questioned resolution of September15, 1970 is set aside, and these two cases are herebyremanded to the court a quo for trial on the merits. Costs de oficio.

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ANG LADLAD LGBT PARTY represented herein by its Chair, DANTON REMOTO, Petitioner, G.R. No. 190582 Since ancient times, society has grappled with deep disagreements about the definitions and Present: PUNO, C. J., CARPIO, CORONA, CARPIO MORALES, VELASCO, JR., NACHURA, LEONARDO-DE CASTRO, BRION, PERALTA, BERSAMIN, DEL CASTILLO, ABAD, VILLARAMA, JR., PEREZ, and MENDOZA, JJ. demands of morality. In many cases, where moral convictions are concerned, harmony among those theoretically opposed is an insurmountable goal. Yet herein lies the paradox philosophical justifications about what is moral are indispensable and yet at the same time powerless to create agreement. This Court recognizes, however, that practical solutions are preferable to ideological stalemates; accommodation is better than intransigence; reason more worthy than rhetoric. This will allow persons of diverse viewpoints to live together, if not harmoniously, then, at least, civilly.

- versus -

Factual Background

COMMISSION ON ELECTIONS, Promulgated: Respondent. April 8, 2010 x--------------------------------------------------------x DECISION DEL CASTILLO, J.: ... [F]reedom to differ is not limited to things that do not matter much. That would be a mere shadow of freedom. The test of its substance is the right to differ as to things that touch the heart of the existing order. Justice Robert A. Jackson [1] West Virginia State Board of Education v. Barnette

This is a Petition for Certiorari under Rule 65 of the Rules of Court, with an application for a writ of preliminary mandatory injunction, filed by Ang LadladLGBT Party (Ang Ladlad) against the Resolutions of the Commission on Elections (COMELEC) dated November 11, 2009 (the First Assailed Resolution) and December 16, 2009 (the Second Assailed Resolution) in SPP No. 09-228 (PL) (collectively, the Assailed Resolutions). The case has its roots in the COMELECs refusal to accredit Ang Ladlad as a party-list organization under Republic Act (RA) No. 7941, otherwise known as the Party-List System Act.
[4] [3] [2]

Ang Ladlad is an organization composed of men and women who identify themselves as lesbians, gays, bisexuals, or trans-gendered individuals (LGBTs). Incorporated in 2003, Ang Ladlad first One unavoidable consequence of everyone having the freedom to choose is that others may make different choices choices we would not make for ourselves, choices we may disapprove of, even choices that may shock or offend or anger us. However, choices are not to be legally prohibited merely because they are different, and the right to disagree and debate about important questions of public policy is a core value protected by our Bill of Rights. Indeed, our democracy is built on genuine recognition of, and respect for, diversity and difference in opinion. Before the COMELEC, petitioner argued that the LGBT community is a marginalized and under-represented sector that is particularly disadvantaged because of their sexual orientation and gender identity; that LGBTs are victims of exclusion, discrimination, and violence; that because of negative societal attitudes, LGBTs are constrained to hide their sexual orientation; and that Ang applied for registration with the COMELEC in 2006. The application for accreditation was denied on the ground that the organization had no substantial membership base. On August 17, 2009, Ang Ladlad again filed a Petition for registration with the COMELEC.
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Ladlad complied with the 8-point guidelines enunciated by this Court in Ang Bagong Bayani-OFW Labor Party v. Commission on Elections.
[6]

Ang Ladlad laid out its national membership base consisting of

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individual members and organizational supporters, and outlined its platform of governance.

Laws are deemed incorporated in every contract, permit, license, relationship, or accreditation. Hence, pertinent provisions of the Civil Code and the Revised Penal Code are deemed part of the requirement to be complied with for accreditation. ANG LADLAD collides with Article 695 of the Civil Code which defines nuisance as Any act, omission, establishment, business, condition of property, or anything else which x x x (3) shocks, defies; or disregards decency or morality x x x It also collides with Article 1306 of the Civil Code: The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy. Art 1409 of the Civil Code provides that Contracts whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy are inexistent and void from the beginning. Finally to safeguard the morality of the Filipino community, the Revised Penal Code, as amended, penalizes Immoral doctrines, obscene publications and exhibitions and indecent shows as follows: Art. 201. Immoral doctrines, obscene publications and exhibitions, and indecent shows. The penalty of prision mayor or a fine ranging from six thousand to twelve thousand pesos, or both such imprisonment and fine, shall be imposed upon: 1. Those who shall publicly expound or proclaim doctrines openly contrary to public morals; 2. (a) The authors of obscene literature, published with their knowledge in any form; the editors publishing such literature; and the owners/operators of the establishment selling the same; (b) Those who, in theaters, fairs, cinematographs or any other place, exhibit indecent or immoral plays, scenes, acts or shows, it being understood that the obscene literature or indecent or immoral plays, scenes, acts or shows, whether live or in film, which are prescribed by virtue hereof, shall include those which: (1) glorify criminals or condone crimes; (2) serve no other purpose but to satisfy the market for violence, lust or pornography; (3) offend any race or religion; (4) tend to abet traffic in and use of prohibited drugs; and (5) are contrary to law, public order, morals, good customs, established policies, lawful orders, decrees and edicts.

On November 11, 2009, after admitting the petitioners evidence, the COMELEC (Second Division) dismissed the Petition on moral grounds, stating that: x x x This Petition is dismissible on moral grounds. Petitioner defines the Filipino Lesbian, Gay, Bisexual and Transgender (LGBT) Community, thus: x x x a marginalized and under-represented sector that is particularly disadvantaged because of their sexual orientation and gender identity. and proceeded to define sexual orientation as that which: x x x refers to a persons capacity for profound emotional, affectional and sexual attraction to, and intimate and sexual relations with, individuals of a different gender, of the same gender, or more than one gender. This definition of the LGBT sector makes it crystal clear that petitioner tolerates immorality which offends religious beliefs. In Romans 1:26, 27, Paul wrote: For this cause God gave them up into vile affections, for even their women did change the natural use into that which is against nature: And likewise also the men, leaving the natural use of the woman, burned in their lust one toward another; men with men working that which is unseemly, and receiving in themselves that recompense of their error which was meet. In the Koran, the hereunder verses are pertinent: For ye practice your lusts on men in preference to women ye are indeed a people transgressing beyond bounds. (7.81) And we rained down on them a shower (of brimstone): Then see what was the end of those who indulged in sin and crime! (7:84) He said: O my Lord! Help Thou me against people who do mischief (29:30). As correctly pointed out by the Law Department in its Comment dated October 2, 2008: The ANG LADLAD apparently advocates sexual immorality as indicated in the Petitions par. 6F: Consensual partnerships or relationships by gays and lesbians who are already of age. It is further indicated in par. 24 of the Petition which waves for the record: In 2007, Men Having Sex with Men or MSMs in the Philippines were estimated as 670,000 (Genesis 19 is the history of Sodom and Gomorrah).

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3. Those who shall sell, give away or exhibit films, prints, engravings, sculpture or literature which are offensive to morals. Petitioner should likewise be denied accreditation not only for advocating immoral doctrines but likewise for not being truthful when it said that it or any of its nominees/party-list representatives have not violated or failed to comply with laws, rules, or regulations relating to the elections. Furthermore, should this Commission grant the petition, we will be exposing our youth to an environment that does not conform to the teachings of our faith. Lehman Strauss, a famous bible teacher and writer in the U.S.A. said in one article that older practicing homosexuals are a threat to the youth. As an agency of the government, ours too is the States avowed duty under Section 13, Article II of the Constitution to [8] protect our youth from moral and spiritual degradation. nation, its application for accreditation under the party-list system will remain just that. II. No substantial differentiation

In the United States, whose equal protection doctrine pervades Philippine jurisprudence, courts do not recognize lesbians, gays, homosexuals, and bisexuals (LGBT) as a special class of individuals. x x x Significantly, it has also been held that homosexuality is not a constitutionally protected fundamental right, and that nothing in the U.S. Constitution discloses a comparable intent to protect or promote the social or legal equality of homosexual relations, as in the case of race or religion or belief. xxxx Thus, even if societys understanding, tolerance, and acceptance of LGBTs is elevated, there can be no denying that Ladlad constituencies are still males and females, and they will remain either male or female protected by the same Bill of Rights that applies to all citizens alike. xxxx IV. Public Morals x x x There is no question about not imposing on Ladlad Christian or Muslim religious practices. Neither is there any attempt to any particular religious groups moral rules onLadlad. Rather, what are being adopted as moral parameters and precepts are generally accepted public morals. They are possibly religiousbased, but as a society, the Philippines cannot ignore its more than 500 years of Muslim and Christian upbringing, such that some moral precepts espoused by said religions have sipped [sic] into society and these are not publicly accepted moral norms. V. Legal Provisions

When Ang Ladlad sought reconsideration, three commissioners voted to overturn the First Assailed Resolution (Commissioners Gregorio Y. Larrazabal, Rene V. Sarmiento, and Armando Velasco), while three commissioners voted to deny Ang Ladlads Motion for

[9]

Reconsideration (Commissioners Nicodemo T. Ferrer, Lucenito N. Tagle, and Elias R. Yusoph). The COMELEC Chairman, breaking the tie and speaking for the majority in his Separate Opinion, upheld the First Assailed Resolution, stating that: I. The Spirit of Republic Act No. 7941

Ladlad is applying for accreditation as a sectoral party in the party-list system. Even assuming that it has properly proven its under-representation and marginalization, it cannot be said that Ladlads expressed sexual orientations per se would benefit the nation as a whole. Section 2 of the party-list law unequivocally states that the purpose of the party-list system of electing congressional representatives is to enable Filipino citizens belonging to marginalized and under-represented sectors, organizations and parties, and who lack well-defined political constituencies but who could contribute to the formulation and enactment of appropriate legislation that will benefit the nation as a whole, to become members of the House of Representatives. If entry into the party-list system would depend only on the ability of an organization to represent its constituencies, then all representative organizations would have found themselves into the party-list race. But that is not the intention of the framers of the law. The party-list system is not a tool to advocate tolerance and acceptance of misunderstood persons or groups of persons. Rather, the party-list system is a tool for the realization of aspirations of marginalized individuals whose interests are also the nations only that their interests have not been brought to the attention of the nation because of their under representation. Until the time comes when Ladlad is able to justify that having mixed sexual orientations and transgender identities is beneficial to the

But above morality and social norms, they have become part of the law of the land. Article 201 of the Revised Penal Code imposes the penalty of prision mayor upon Those who shall publicly expound or proclaim doctrines openly contrary to public morals. It penalizes immoral doctrines, obscene publications and exhibition and indecent shows. Ang Ladladapparently falls under these legal provisions. This is clear from its Petitions paragraph 6F: Consensual partnerships or relationships by gays and lesbians who are already of age It is further indicated in par. 24 of the Petition which waves for the record: In 2007, Men Having Sex with Men or MSMs in the Philippines were estimated as 670,000. Moreoever, Article 694 of the Civil Code defines nuisance as any act, omission x x x or anything else x x x which shocks, defies or disregards decency or morality x x x. These are all [10] unlawful.

On January 4, 2010, Ang Ladlad filed this Petition, praying that the Court annul the Assailed Resolutions and direct the COMELEC to grant Ang Ladladsapplication for accreditation. Ang

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Ladlad also sought the issuance ex parte of a preliminary mandatory injunction against the COMELEC, which had previously announced that it would begin printing the final ballots for the May 2010 elections by January 25, 2010. Ang Ladlad argued that the denial of accreditation, insofar as it justified the exclusion by using religious dogma, violated the constitutional guarantees against the establishment of religion. Petitioner also claimed that the Assailed Resolutions contravened its constitutional rights to privacy, freedom of speech and assembly, and equal protection of laws, as well as constituted violations of the Philippines On January 6, 2010, we ordered the Office of the Solicitor General (OSG) to file its Comment on behalf of COMELEC not later than 12:00 noon of January 11, 2010.
[11]

international obligations against discrimination based on sexual orientation.

Instead of filing a Comment, The OSG concurred with Ang Ladlads petition and argued that the COMELEC erred in denying petitioners application for registration since there was no basis for COMELECs allegations of immorality. It also opined that LGBTs have their own special interests and concerns which should have been recognized by the COMELEC as a separate classification. However, insofar as the purported violations of petitioners freedom of speech, expression, and assembly were concerned, the OSG maintained that there had been no restrictions on these rights.

however, the OSG filed a Motion for Extension, requesting that it be given until January 16, 2010 to Comment.
[12] [13]

Somewhat surprisingly, the OSG later filed a Comment in support of petitioners Thus, in order to give COMELEC the opportunity to fully ventilate its position, we required
[14]

application.

it to file its own comment. on February 2, 2010.

[15]

The COMELEC, through its Law Department, filed its Comment

In the meantime, due to the urgency of the petition, we issued a temporary restraining order on January 12, 2010, effective immediately and continuing until further orders from this Court, directing the COMELEC to cease and desist from implementing the Assailed Resolutions.
[16]

In its Comment, the COMELEC reiterated that petitioner does not have a concrete and genuine national political agenda to benefit the nation and that the petition was validly dismissed on moral grounds. It also argued for the first time that the LGBT sector is not among the sectors

Also, on January 13, 2010, the Commission on Human Rights (CHR) filed a Motion to Intervene or to Appear as Amicus Curiae, attaching thereto its Comment-in-Intervention.
[17]

enumerated by the Constitution and RA 7941, and that petitioner made untruthful statements in its petition when it alleged its national existence contrary to actual verification reports by COMELECs field personnel.

The CHR

opined that the denial of Ang Ladlads petition on moral grounds violated the standards and principles of the Constitution, the Universal Declaration of Human Rights (UDHR), and the International Covenant on Civil and Political Rights (ICCPR). On January 19, 2010, we granted the CHRs motion to intervene.

Our Ruling

On January 26, 2010, Epifanio D. Salonga, Jr. filed his Motion to Intervene was granted on February 2, 2010.
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which motion

We grant the petition. Compliance with the Requirements of the Constitution and Republic Act No. 7941

The Parties Arguments

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The COMELEC denied Ang Ladlads application for registration on the ground that the LGBT sector is neither enumerated in the Constitution and RA 7941, nor is it associated with or related to any of the sectors in the enumeration. Nonetheless, we find that there has been no misrepresentation. A cursory perusal of Ang Ladlads initial petition shows that it never claimed to exist in each province of the Philippines. Rather, petitioner alleged that the LGBT community in the Philippines was estimated to constitute at least 670,000 persons; that it had 16,100 affiliates and members around the country, and 4,044 members in Respondent mistakenly opines that our ruling in Ang Bagong Bayani stands for the proposition that only those sectors specifically enumerated in the law or related to said sectors (labor, peasant, fisherfolk, urban poor, indigenous cultural communities, elderly, handicapped, women, youth, veterans, overseas workers, and professionals) may be registered under the party-list system. As we explicitly ruled in Ang Bagong Bayani-OFW Labor Party v. Commission on Elections,
[20]

its electronic discussion group.

[22]

Ang Ladlad also represented itself to be a national LGBT umbrella

organization with affiliates around the Philippines composed of the following LGBT networks: Abra Gay Association Aklan Butterfly Brigade (ABB) Aklan Albay Gay Association Arts Center of Cabanatuan City Nueva Ecija Boys Legion Metro Manila Cagayan de Oro People Like Us (CDO PLUS) Cant Live in the Closet, Inc. (CLIC) Metro Manila Cebu Pride Cebu City Circle of Friends Dipolog Gay Association Zamboanga del Norte Gay, Bisexual, & Transgender Youth Association (GABAY) Gay and Lesbian Activists Network for Gender Equality (GALANG) Metro Manila Gay Mens Support Group (GMSG) Metro Manila Gay United for Peace and Solidarity (GUPS) Lanao del Norte Iloilo City Gay Association Iloilo City Kabulig Writers Group Camarines Sur Lesbian Advocates Philippines, Inc. (LEAP) LUMINA Baguio City Marikina Gay Association Metro Manila Metropolitan Community Church (MCC) Metro Manila Naga City Gay Association Naga City ONE BACARDI Order of St. Aelred (OSAe) Metro Manila PUP LAKAN RADAR PRIDEWEAR Rainbow Rights Project (R-Rights), Inc. Metro Manila San Jose del Monte Gay Association Bulacan Sining Kayumanggi Royal Family Rizal Society of Transexual Women of the Philippines (STRAP) Metro Manila Soul Jive Antipolo, Rizal The Link Davao City Tayabas Gay Association Quezon Womens Bisexual Network Metro Manila [23] Zamboanga Gay Association Zamboanga City

the

enumeration of marginalized and under-represented sectors is not exclusive. The crucial element is not whether a sector is specifically enumerated, but whether a particular organization complies with the requirements of the Constitution and RA 7941.

Respondent also argues that Ang Ladlad made untruthful statements in its petition when it alleged that it had nationwide existence through its members and affiliate organizations. The COMELEC claims that upon verification by its field personnel, it was shown that save for a few isolated places in the country, petitioner does not exist in almost all provinces in the country.
[21]

This argument that petitioner made untruthful statements in its petition when it alleged its national existence is a new one; previously, the COMELEC claimed that petitioner was not being truthful when it said that it or any of its nominees/party-list representatives have not violated or failed to comply with laws, rules, or regulations relating to the elections. Nowhere was this ground for denial of petitioners accreditation mentioned or even alluded to in the Assailed Resolutions. This, in itself, is quite curious, considering that the reports of petitioners alleged non-existence were already available to the COMELEC prior to the issuance of the First Assailed Resolution. At best, this is irregular procedure; at worst, a belated afterthought, a change in respondents theory, and a serious violation of petitioners right to procedural due process.

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Since the COMELEC only searched for the names ANG LADLAD LGBT or LADLAD LGBT, it is no surprise that they found that petitioner had no presence in any of these regions. In fact, if COMELECs findings are to be believed, petitioner does not even exist in Quezon City, which is registered as Ang Ladlads principal place of business. disputes may be resolved only on grounds articulable in secular terms." Otherwise, if government relies upon religious beliefs in formulating public policies and morals, the resulting policies and morals would require conformity to what some might regard as religious programs or agenda. The non-believers would therefore be compelled to conform to a standard of conduct buttressed by a religious belief, i.e., to a "compelled religion," anathema to religious freedom. Likewise, if government based its actions upon religious beliefs, it would tacitly approve or endorse that belief and thereby also tacitly disapprove contrary religious or non-religious views that would not support the policy. As a result, government will not provide full religious freedom for all its citizens, or even make it appear that those whose beliefs are disapproved are second-class citizens. In other words, government action, including its proscription of immorality as expressed in criminal law like concubinage, must have a secular purpose. That is, the government proscribes this conduct because it is "detrimental (or dangerous) to those conditions upon which depend the existence and progress of human society" and not because the conduct is proscribed by the beliefs of one religion or the other. Although admittedly, moral judgments based on religion might have a compelling influence on those engaged in public deliberations over what actions would be considered a moral disapprobation punishable by law. After all, they might also be adherents of a religion and thus have religious opinions and moral codes with a compelling influence on them; the human mind endeavors to regulate the temporal and spiritual institutions of society in a uniform manner, harmonizing earth with heaven. Succinctly put, a law could be religious or Kantian or Aquinian or utilitarian in its deepest roots, but it must have an articulable and discernible secular purpose and justification to pass scrutiny of the religion clauses. x x x Recognizing the religious nature of the Filipinos and the elevating influence of religion in society, however, the Philippine constitution's religion clauses prescribe not a strict but a benevolent neutrality. Benevolent neutrality recognizes that government must pursue its secular goals and interests but at the same time strive to uphold religious liberty to the greatest extent possible within flexible constitutional limits. Thus, although the morality contemplated by laws is secular, benevolent neutrality could allow for accommodation of morality based on religion, provided it does not offend [27] compelling state interests.

Against this backdrop, we find that Ang Ladlad has sufficiently demonstrated its compliance with the legal requirements for accreditation. Indeed, aside from COMELECs moral objection and the belated allegation of non-existence, nowhere in the records has the respondent ever found/ruled that Ang Ladlad is not qualified to register as a party-list organization under any of the requisites under RA 7941 or the guidelines in Ang Bagong Bayani. The difference, COMELEC claims, lies inAng Ladlads morality, or lack thereof. Religion as the Basis for Refusal to Accept Ang Ladlads Petition for Registration

Our Constitution provides in Article III, Section 5 that [n]o law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof. At bottom, what our non-establishment clause calls for is government neutrality in religious matters.
[24]

Clearly, governmental reliance on

[25]

religious justification is inconsistent with this policy of neutrality.

We thus find that it was grave

Public Morals as a Ground to Deny Ang Ladlads Petition for Registration

violation of the non-establishment clause for the COMELEC to utilize the Bible and the Koran to justify the exclusion of Ang Ladlad. Respondent suggests that although the moral condemnation of homosexuality and homosexual conduct may be religion-based, it has long been transplanted into generally accepted Rather than relying on religious belief, the legitimacy of the Assailed Resolutions should public morals. The COMELEC argues: depend, instead, on whether the COMELEC is able to advance some justification for its rulings beyond mere conformity to religious doctrine. Otherwise stated, government must act for secular purposes and in ways that have primarily secular effects. As we held in Estrada v. Escritor:
[26]

x x x The morality referred to in the law is public and necessarily secular, not religious as the dissent of Mr. Justice Carpio holds. "Religious teachings as expressed in public debate may influence the civil public order but public moral

Petitioners accreditation was denied not necessarily because their group consists of LGBTs but because of the danger it poses to the people especially the youth. Once it is recognized by the government, a sector which believes that there is nothing wrong in having sexual relations with individuals of the same gender is a bad example. It will bring down the standard of morals we cherish in our civilized society. Any society without a set of moral precepts is in danger of losing its own [28] existence.

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We are not blind to the fact that, through the years, homosexual conduct, and perhaps homosexuals themselves, have borne the brunt of societal disapproval. It is not difficult to imagine the reasons behind this censure religious beliefs, convictions about the preservation of marriage, family, and procreation, even dislike or distrust of homosexuals themselves and their perceived lifestyle. Nonetheless, we recall that the Philippines has not seen fit to criminalize homosexual conduct. Evidently, therefore, these generally accepted public morals have not been convincingly transplanted into the realm of law.
[29]

We also find the COMELECs reference to purported violations of our penal and civil laws flimsy, at best; disingenuous, at worst. Article 694 of the Civil Code defines a nuisance as any act, omission, establishment, condition of property, or anything else which shocks, defies, or disregards decency or morality, the remedies for which are a prosecution under the Revised Penal Code or any local ordinance, a civil action, or abatement without judicial proceedings.
[32]

A violation of Article 201 of

the Revised Penal Code, on the other hand, requires proof beyond reasonable doubt to support a criminal conviction. It hardly needs to be emphasized that mere allegation of violation of laws is not proof, and a mere blanket invocation of public morals cannot replace the institution of civil or criminal

The Assailed Resolutions have not identified any specific overt immoral act performed by Ang Ladlad. Even the OSG agrees that there should have been a finding by the COMELEC that the groups members have committed or are committing immoral acts.
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proceedings and a judicial determination of liability or culpability.

The OSG argues:

As such, we hold that moral disapproval, without more, is not a sufficient governmental interest to justify exclusion of homosexuals from participation in the party-list system. The denial of Ang

x x x A person may be sexually attracted to a person of the same gender, of a different gender, or more than one gender, but mere attraction does not translate to immoral acts. There is a great divide between thought and action. Reduction ad absurdum. If immoral thoughts could be penalized, COMELEC would have its hands full of disqualification cases against both the straights and the [31] gays. Certainly this is not the intendment of the law.

Ladlads registration on purely moral grounds amounts more to a statement of dislike and disapproval of homosexuals, rather than a tool to further any substantial public interest. Respondents blanket justifications give rise to the inevitable conclusion that the COMELEC targets homosexuals themselves as a class, not because of any particular morally reprehensible act. It is this selective targeting that

Respondent has failed to explain what societal ills are sought to be prevented, or why special protection is required for the youth. Neither has the COMELEC condescended to justify its position that petitioners admission into the party-list system would be so harmful as to irreparably damage the moral fabric of society. We, of course, do not suggest that the state is wholly without authority to regulate matters concerning morality, sexuality, and sexual relations, and we recognize that the government will and should continue to restrict behavior considered detrimental to society. Nonetheless, we cannot countenance advocates who, undoubtedly with the loftiest of intentions, situate morality on one end of an argument or another, without bothering to go through the rigors of legal reasoning and explanation. In this, the notion of morality is robbed of all value. Clearly then, the bare invocation of morality will not remove an issue from our scrutiny.

implicates our equal protection clause.

Equal Protection

Despite the absolutism of Article III, Section 1 of our Constitution, which provides nor shall any person be denied equal protection of the laws, courts have never interpreted the provision as an absolute prohibition on classification. Equality, said Aristotle, consists in the same treatment of similar persons.
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The equal protection clause guarantees that no person or class of persons shall be

deprived of the same protection of laws which is enjoyed by other persons or other classes in the same place and in like circumstances.
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Recent jurisprudence has affirmed that if a law neither burdens a fundamental right nor targets a suspect class, we will uphold the classification as long as it bears a rational relationship to some legitimate government end. Pilipinas,
[36] [35]

fail. We disagree with the OSGs position that homosexuals are a class in themselves for the purposes of the equal protection clause.
[38]

We are not prepared to single out homosexuals as a separate class

In Central Bank Employees Association, Inc. v. Banko Sentral ng

meriting special or differentiated treatment. We have not received sufficient evidence to this effect, and it is simply unnecessary to make such a ruling today. Petitioner itself has merely demanded that it be recognized under the same basis as all other groups similarly situated, and that the COMELEC made an unwarranted and impermissible classification not justified by the circumstances of the case. Freedom of Expression and Association

we declared that [i]n our jurisdiction, the standard of analysis of equal protection challenges

x x x have followed the rational basis test, coupled with a deferential attitude to legislative classifications and a reluctance to invalidate a law unless there is a showing of a clear and unequivocal breach of the Constitution.
[37]

The COMELEC posits that the majority of the Philippine population considers homosexual Under our system of laws, every group has the right to promote its agenda and attempt to conduct as immoral and unacceptable, and this constitutes sufficient reason to disqualify the petitioner. Unfortunately for the respondent, the Philippine electorate has expressed no such belief. No law exists square that deeply held convictions and differing opinions should be distilled and deliberated upon. As to criminalize homosexual behavior or expressions or parties about homosexual behavior. Indeed, even if we were to assume that public opinion is as the COMELEC describes it, the asserted state interest here that is, moral disapproval of an unpopular minority is not a legitimate state interest that is sufficient to satisfy rational basis review under the equal protection clause. The COMELECs differentiation, and its unsubstantiated claim that Ang Ladlad cannot contribute to the formulation of legislation that would benefit the nation, furthers no legitimate state interest other than disapproval of or dislike for a disfavored group. In a democracy, this common agreement on political and moral ideas is distilled in the public square. Where citizens are free, every opinion, every prejudice, every aspiration, and every moral discernment has access to the public square where people deliberate the order of their life together. Citizens are the bearers of opinion, including opinion shaped by, or espousing religious belief, and these citizens have equal access to the public square. In this representative democracy, the state is prohibited from determining which convictions and moral judgments may be proposed for public deliberation. Through a constitutionally designed process, the people deliberate and decide. Majority rule is a necessary principle in this democratic governance. Thus, when public deliberation on moral judgments is finally crystallized into law, the laws will largely reflect the beliefs and preferences of the majority, i.e., the mainstream or median groups.Nevertheless, in the very act of adopting and accepting a constitution and the limits it specifies including protection of religious freedom "not only for a minority, however small not only for a majority, however large but for each of us" the majority imposes upon itself a self-denying ordinance. It promises not to do what it otherwise could do: to ride roughshod over the dissenting minorities. we held in Estrada v. Escritor:
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persuade society of the validity of its position through normal democratic means.

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It is in the public

From the standpoint of the political process, the lesbian, gay, bisexual, and transgender have the same interest in participating in the party-list system on the same basis as other political parties similarly situated. State intrusion in this case is equally burdensome. Hence, laws of general application should apply with equal force to LGBTs, and they deserve to participate in the party-list system on the same basis as other marginalized and under-represented sectors.

Freedom of expression constitutes one of the essential foundations of a democratic society, and this freedom applies not only to those that are favorably received but also to those that offend,

It bears stressing that our finding that COMELECs act of differentiating LGBTs from heterosexuals insofar as the party-list system is concerned does not imply that any other law distinguishing between heterosexuals and homosexuals under different circumstances would similarly

shock, or disturb. Any restriction imposed in this sphere must be proportionate to the legitimate aim pursued. Absent any compelling state interest, it is not for the COMELEC or this Court to impose its

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views on the populace. Otherwise stated, the COMELEC is certainly not free to interfere with speech for no better reason than promoting an approved message or discouraging a disfavored one. authorities or the majority of the population.
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A political group should not be hindered solely because it

seeks to publicly debate controversial political issues in order to find solutions capable of satisfying everyone concerned.
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Only if a political party incites violence or puts forward policies that are

This position gains even more force if one considers that homosexual conduct is not illegal in this country. It follows that both expressions concerning ones homosexuality and the activity of forming a political association that supports LGBT individuals are protected as well. Other jurisdictions have gone so far as to categorically rule that even overwhelming public perception that homosexual conduct violates public morality does not justify criminalizing same-sex conduct.
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incompatible with democracy does it fall outside the protection of the freedom of association guarantee.
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We do not doubt that a number of our citizens may believe that homosexual conduct is distasteful, offensive, or even defiant. They are entitled to hold and express that view. On the other hand, LGBTs and their supporters, in all likelihood, believe with equal fervor that relationships between individuals of the same sex are morally equivalent to heterosexual relationships. They, too, are entitled to hold and express that view. However, as far as this Court is concerned, our democracy precludes using the religious or moral views of one part of the community to exclude from consideration the values of other members of the community.

European and United Nations judicial decisions have ruled in favor of gay rights claimants

on both privacy and equality grounds, citing general privacy and equal protection provisions in foreign and international texts.
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To the extent that there is much to learn from other jurisdictions that have

reflected on the issues we face here, such jurisprudence is certainly illuminating. These foreign authorities, while not formally binding on Philippine courts, may nevertheless have persuasive influence on the Courts analysis.

Of course, none of this suggests the impending arrival of a golden age for gay rights litigants. It In the area of freedom of expression, for instance, United States courts have ruled that existing free speech doctrines protect gay and lesbian rights to expressive conduct. In order to justify the prohibition of a particular expression of opinion, public institutions must show that their actions were caused by something more than a mere desire to avoid the discomfort and unpleasantness that always accompany an unpopular viewpoint.
[43]

well may be that this Decision will only serve to highlight the discrepancy between the rigid constitutional analysis of this Court and the more complex moral sentiments of Filipinos. We do not suggest that public opinion, even at its most liberal, reflect a clear-cut strong consensus favorable to gay rights claims and we neither attempt nor expect to affect individual perceptions of homosexuality through this Decision.

The OSG argues that since there has been neither prior restraint nor subsequent punishment With respect to freedom of association for the advancement of ideas and beliefs, in Europe, with its vibrant human rights tradition, the European Court of Human Rights (ECHR) has repeatedly stated that a political party may campaign for a change in the law or the constitutional structures of a state if it uses legal and democratic means and the changes it proposes are consistent with democratic principles. The ECHR has emphasized that political ideas that challenge the existing order and whose realization is advocated by peaceful means must be afforded a proper opportunity of expression through the exercise of the right of association, even if such ideas may seem shocking or unacceptable to the xxxx There was no utterance restricted, no publication censored, or any assembly denied. [COMELEC] simply exercised its authority to review and verify the qualifications of petitioner as a sectoral party applying to participate in the party-list system. This lawful exercise of duty cannot be said to be a transgression of Section 4, Article III of the Constitution. imposed on Ang Ladlad, and its members have not been deprived of their right to voluntarily associate, then there has been no restriction on their freedom of expression or association. The OSG argues that:

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A denial of the petition for registration x x x does not deprive the members of the petitioner to freely take part in the conduct of elections. Their right to vote will not be hampered by said denial. In fact, the right to vote is a constitutionallyguaranteed right which cannot be limited. As to its right to be elected in a genuine periodic election, petitioner contends that the denial of Ang Ladlads petition has the clear and immediate effect of limiting, if not outrightly nullifying the capacity of its members to fully and equally participate in public life through engagement in the party list elections. This argument is puerile. The holding of a public office is not a right but a [47] privilege subject to limitations imposed by law. x x x In this context, the principle of non-discrimination requires that laws of general application The OSG fails to recall that petitioner has, in fact, established its qualifications to participate in relating to elections be applied equally to all persons, regardless of sexual orientation. Although sexual the party-list system, and as advanced by the OSG itself the moral objection offered by the orientation is not specifically enumerated as a status or ratio for discrimination in Article 26 of the ICCPR, COMELEC was not a limitation imposed by law. To the extent, therefore, that the petitioner has been precluded, because of COMELECs action, from publicly expressing its views as a political party and participating on an equal basis in the political process with other equally-qualified party-list candidates, declared discrimination on the basis of sexual orientation to be prohibited under various international we find that there has, indeed, been a transgression of petitioners fundamental rights. Non-Discrimination Law and International The UDHR provides: Article 21. In an age that has seen international law evolve geometrically in scope and promise, international human rights law, in particular, has grown dynamically in its attempt to bring about a more just and humane world order. For individuals and groups struggling with inadequate structural and governmental support, international human rights norms are particularly significant, and should be effectively enforced in domestic legal systems so that such norms may become actual, rather than ideal, standards of conduct. Likewise, the ICCPR states: Article 25 Every citizen shall have the right and the opportunity, without any of the distinctions mentioned in article 2 and without unreasonable restrictions: (a) To take part in the conduct of public affairs, directly or through freely chosen representatives; Our Decision today is fully in accord with our international obligations to protect and promote human rights. In particular, we explicitly recognize the principle of non-discrimination as it relates to the right to electoral participation, enunciated in the UDHR and the ICCPR. (b) To vote and to be elected at genuine periodic elections which shall be by universal and equal suffrage and shall be held by secret ballot, guaranteeing the free expression of the will of the electors; (c) To have access, on general terms of equality, to public service in his country. The principle of non-discrimination is laid out in Article 26 of the ICCPR, as follows: (1) Everyone has the right to take part in the government of his country, directly or through freely chosen representatives. agreements.
[49]

Article 26 All persons are equal before the law and are entitled without any discrimination to the equal protection of the law. In this respect, the law shall prohibit any discrimination and guarantee to all persons equal and effective protection against discrimination on any ground such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status.

the ICCPR Human Rights Committee has opined that the reference to sex in Article 26 should be construed to include sexual orientation.
[48]

Additionally, a variety of United Nations bodies have

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As stated by the CHR in its Comment-in-Intervention, the scope of the right to electoral participation is elaborated by the Human Rights Committee in its General Comment No. 25 (Participation in Public Affairs and the Right to Vote) as follows: 1. Article 25 of the Covenant recognizes and protects the right of every citizen to take part in the conduct of public affairs, the right to vote and to be elected and the right to have access to public service. Whatever form of constitution or government is in force, the Covenant requires States to adopt such legislative and other measures as may be necessary to ensure that citizens have an effective opportunity to enjoy the rights it protects. Article 25 lies at the core of democratic government based on the consent of the people and in conformity with the principles of the Covenant. xxxx 15. The effective implementation of the right and the opportunity to stand for elective office ensures that persons entitled to vote have a free choice of candidates. Any restrictions on the right to stand for election, such as minimum age, must be justifiable on objective and reasonable criteria. Persons who are otherwise eligible to stand for election should not be excluded by unreasonable or discriminatory requirements such as education, residence or descent, or by reason of political affiliation. No person should suffer discrimination or disadvantage of any kind because of that person's candidacy. States parties should indicate and explain the legislative provisions which exclude any group or category of persons from [50] elective office. Using even the most liberal of lenses, these Yogyakarta Principles, consisting of a declaration formulated by various international law professors, are at best de lege ferenda and do not constitute binding obligations on the Philippines. Indeed, so much of contemporary international law is characterized by the soft law nomenclature, i.e., international law is full of principles that promote international cooperation, harmony, and respect for human rights, most of which amount to no more than well-meaning desires, without the support of either State practice or opinio juris.
[53]

We also hasten to add that not everything that society or a certain segment of society wants or demands is automatically a human right. This is not an arbitrary human intervention that may be added to or subtracted from at will. It is unfortunate that much of what passes for human rights today is a much broader context of needs that identifies many social desires as rights in order to further claims that international law obliges states to sanction these innovations. This has the effect of diluting real human rights, and is a result of the notion that if wants are couched in rights language, then they are no longer controversial.

We stress, however, that although this Court stands willing to assume the responsibility of giving effect to the Philippines international law obligations, the blanket invocation of international law is not the panacea for all social ills. We refer now to the petitioners invocation of the Yogyakarta Principles (the Application of International Human Rights Law In Relation to Sexual Orientation and Gender Identity),
[51]

As a final note, we cannot help but observe that the social issues presented by this case are emotionally charged, societal attitudes are in flux, even the psychiatric and religious communities are divided in opinion. This Courts role is not to impose its own view of acceptable behavior. Rather, it is to apply the Constitution and laws as best as it can, uninfluenced by public opinion, and confident in the knowledge that our democracy is resilient enough to withstand vigorous debate.

which petitioner declares to reflect binding principles of international law.

At this time, we are not prepared to declare that these Yogyakarta Principles contain norms that are obligatory on the Philippines. There are declarations and obligations outlined in said Principles which are not reflective of the current state of international law, and do not find basis in any of the sources of international law enumerated under Article 38(1) of the Statute of the International Court of Justice.
[52]

WHEREFORE, the Petition is hereby GRANTED. The Resolutions of the Commission on Elections dated November 11, 2009 and December 16, 2009 in SPP No. 09-228 (PL) are hereby SET ASIDE. The Commission on Elections is directed to GRANT petitioners application for party-list accreditation. SO ORDERED.

Petitioner has not undertaken any objective and rigorous analysis of these alleged principles

of international law to ascertain their true status.

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G.R. No. L-14355 October 31, 1919 The defendant Ildefonso Tambunting, answering the petition, denied each and every allegation of the complaint, and alleged that said expropriation was not a public improvement; that it was not necessary for the plaintiff to acquire the parcels of land in question; that a portion of the lands in question was used as a cemetery in which were the graves of his ancestors; that monuments and tombstones of great value were found thereon; that the land had become quasi-public property of a benevolent association, dedicated and used for the burial of the dead and that many dead were buried there; that if the plaintiff deemed it necessary to extend Rizal Avenue, he had offered and still offers to grant a right of way for the said extension over other land, without cost to the plaintiff, in order that the sepulchers, chapels and graves of his ancestors may not be disturbed; that the land so offered, free of charge, would answer every public necessity on the part of the plaintiff. The defendant Feliza Concepcion de Delgado, with her husband, Jose Maria Delgado, and each of the other defendants, answering separately, presented substantially the same defense as that presented by theComunidad de Chinos de Manila and Ildefonso Tambunting above referred to. The foregoing parts of the defense presented by the defendants have been inserted in order to show the general character of the defenses presented by each of the defendants. The plaintiff alleged that the expropriation was necessary. The defendants each alleged ( a) that no necessity existed for said expropriation and ( b) that the land in question was a cemetery, which had been used as such for many years, and was covered with sepulchres and monuments, and that the same should not be converted into a street for public purposes. Upon the issue thus presented by the petition and the various answers, the Honorable Simplicio del Rosario, judge, in a very elucidated opinion, with very clear and explicit reasons, supported by ambulance of authorities, decided that there was no necessity for the expropriation of the particular strip of land in question, and absolved each and all of the defendants from all liability under the complaint, without any finding as to costs. From that judgment the plaintiff appealed and presented the above question as its principal ground of appeal. The theory of the plaintiff is, that once it has established the fact, under the law, that it has authority to expropriate land, it may expropriate any land it may desire; that the only function of the court in such proceedings is to ascertain the value of the land in question; that neither the court nor the owners of the land can inquire into the advisible purpose of purpose of the expropriation or ask any questions concerning the necessities therefor; that the courts are mere appraisers of the land involved in expropriation proceedings, and, when the value of the land is fixed by the method adopted by the law, to render a judgment in favor of the defendant for its value. That the city of Manila has authority to expropriate private lands for public purposes, is not denied. Section 2429 of Act No. 2711 (Charter of the city of Manila) provides that "the city (Manila) . . . may condemn privateproperty for public use." The Charter of the city of Manila contains no procedure by which the said authority may be carried into effect. We are driven, therefore, to the procedure marked out by Act No. 190 to ascertain how the said authority may be exercised. From an examination of Act No. 190, in its section 241, we find how the right of eminent domain may be exercised. Said section 241 provides that, "The Government of the Philippine Islands, or of any province or department thereof, or of any municipality, and any person, or public or private corporation having, by

THE CITY OF MANILA, plaintiff-appellant, vs. CHINESE COMMUNITY OF MANILA, ET AL., defendants-appellees. City Fiscal Diaz for appellant. Crossfield and O'Brien, Williams, Ferrier and Sycip, Delgado and Delgado, Filemon Sotto, and Ramon Salinas for appellees.

JOHNSON, J.: The important question presented by this appeal is: In expropriation proceedings by the city of Manila, may the courts inquire into, and hear proof upon, the necessity of the expropriation? That question arose in the following manner: On the 11th day of December, 1916, the city of Manila presented a petition in the Court of First Instance of said city, praying that certain lands, therein particularly described, be expropriated for the purpose of constructing a public improvement. The petitioner, in the second paragraph of the petition, alleged: That for the purpose of constructing a public improvement, namely, the extension of Rizal Avenue, Manila, it is necessary for the plaintiff to acquire ownership in fee simple of certain parcels of land situated in the district of Binondo of said city within Block 83 of said district, and within the jurisdiction of this court. The defendant, the Comunidad de Chinos de Manila [Chinese Community of Manila], answering the petition of the plaintiff, alleged that it was a corporation organized and existing under and by virtue of the laws of the Philippine Islands, having for its purpose the benefit and general welfare of the Chinese Community of the City of Manila; that it was the owner of parcels one and two of the land described in paragraph 2 of the complaint; that it denied that it was either necessary or expedient that the said parcels be expropriated for street purposes; that existing street and roads furnished ample means of communication for the public in the district covered by such proposed expropriation; that if the construction of the street or road should be considered a public necessity, other routes were available, which would fully satisfy the plaintiff's purposes, at much less expense and without disturbing the resting places of the dead; that it had a Torrens title for the lands in question; that the lands in question had been used by the defendant for cemetery purposes; that a great number of Chinese were buried in said cemetery; that if said expropriation be carried into effect, it would disturb the resting places of the dead, would require the expenditure of a large sum of money in the transfer or removal of the bodies to some other place or site and in the purchase of such new sites, would involve the destruction of existing monuments and the erection of new monuments in their stead, and would create irreparable loss and injury to the defendant and to all those persons owning and interested in the graves and monuments which would have to be destroyed; that the plaintiff was without right or authority to expropriate said cemetery or any part or portion thereof for street purposes; and that the expropriation, in fact, was not necessary as a public improvement.

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law, the right to condemn private property for public use, shall exercise that right in the manner hereinafter prescribed." Section 242 provides that a complaint in expropriation proceeding shall be presented; that the complaint shall state with certainty the right of condemnation, with a description of the property sought to be condemned together with the interest of each defendant separately. Section 243 provides that if the court shall find upon trial that the right to expropriate the land in question exists, it shall then appoint commissioners. Sections 244, 245 and 246 provide the method of procedure and duty of the commissioners. Section 248 provides for an appeal from the judgment of the Court of First Instance to the Supreme Court. Said section 248 gives the Supreme Court authority to inquire into the right of expropriation on the part of the plaintiff. If the Supreme Court on appeal shall determine that no right of expropriation existed, it shall remand the cause to the Court of First Instance with a mandate that the defendant be replaced in the possession of the property and that he recover whatever damages he may have sustained by reason of the possession of the plaintiff. It is contended on the part of the plaintiff that the phrase in said section, "and if the court shall find the rightto expropriate exists," means simply that, if the court finds that there is some law authorizing the plaintiff to expropriate, then the courts have no other function than to authorize the expropriation and to proceed to ascertain the value of the land involved; that the necessity for the expropriation is a legislative and not a judicial question. Upon the question whether expropriation is a legislative function exclusively, and that the courts cannot intervene except for the purpose of determining the value of the land in question, there is much legal legislature. Much has been written upon both sides of that question. A careful examination of the discussions pro and con will disclose the fact that the decisions depend largely upon particular constitutional or statutory provisions. It cannot be denied, if the legislature under proper authority should grant the expropriation of a certain or particular parcelof land for some specified public purpose, that the courts would be without jurisdiction to inquire into the purpose of that legislation. If, upon the other hand, however, the Legislature should grant general authority to a municipal corporation to expropriate private land for public purposes, we think the courts have ample authority in this jurisdiction, under the provisions above quoted, to make inquiry and to hear proof, upon an issue properly presented, concerning whether or not the lands were private and whether the purpose was, in fact, public. In other words, have no the courts in this jurisdiction the right, inasmuch as the questions relating to expropriation must be referred to them (sec. 241, Act No. 190) for final decision, to ask whether or not the law has been complied with? Suppose in a particular case, it should be denied that the property is not private property but public, may not the courts hear proof upon that question? Or, suppose the defense is, that the purpose of the expropriation is not public butprivate, or that there exists no public purpose at all, may not the courts make inquiry and hear proof upon that question? The city of Manila is given authority to expropriate private lands for public purposes. Can it be possible that said authority confers the right to determine for itself that the land is private and that the purpose is public, and that the people of the city of Manila who pay the taxes for its support, especially those who are directly affected, may not question one or the other, or both, of these questions? Can it be successfully contended that the phrase used in Act No. 190, "and if the court upon trial shall find that such right exists," means simply that the court shall examine the statutes simply for the purpose of ascertaining whether a law exists authorizing the petitioner to exercise the right of eminent domain? Or, when the case arrives in the Supreme Court, can it be possible that the phrase, "if the Supreme Court shall determine that no right of expropriation exists," that that simply means that the Supreme Court shall also examine the enactments of the legislature for the purpose of determining whether or not a law exists permitting the plaintiff to expropriate? We are of the opinion that the power of the court is not limited to that question. The right of expropriation is not an inherent power in a municipal corporation, and before it can exercise the right some law must exist conferring the power upon it. When the courts come to determine the question, they must only find (a) that a law or authority exists for the exercise of the right of eminent domain, but (b) also that the right or authority is being exercised in accordance with the law. In the present case there are two conditions imposed upon the authority conceded to the City of Manila: First, the land must be private; and, second, the purpose must be public. If the court, upon trial, finds that neither of these conditions exists or that either one of them fails, certainly it cannot be contended that the right is being exercised in accordance with law. Whether the purpose for the exercise of the right of eminent domain is public, is a question of fact. Whether the land is public, is a question of fact; and, in our opinion, when the legislature conferred upon the courts of the Philippine Islands the right to ascertain upon trial whether the right exists for the exercise of eminent domain, it intended that the courts should inquire into, and hear proof upon, those questions. Is it possible that the owner of valuable land in this jurisdiction is compelled to stand mute while his land is being expropriated for a use not public, with the right simply to beg the city of Manila to pay him the value of his land? Does the law in this jurisdiction permit municipalities to expropriate lands, without question, simply for the purpose of satisfying the aesthetic sense of those who happen for the time being to be in authority? Expropriation of lands usually calls for public expense. The taxpayers are called upon to pay the costs. Cannot the owners of land question the public use or the public necessity? As was said above, there is a wide divergence of opinion upon the authority of the court to question the necessity or advisability of the exercise of the right of eminent domain. The divergence is usually found to depend upon particular statutory or constitutional provisions. It has been contended and many cases are cited in support of that contention, and section 158 of volume 10 of Ruling Case Law is cited as conclusive that the necessity for taking property under the right of eminent domain is not a judicial question. But those who cited said section evidently overlooked the section immediately following (sec. 159), which adds: "But it is obvious that if the property is taken in the ostensible behalf of a public improvement which it can never by any possibility serve, it is being taken for a use not public, and the owner's constitutional rights call for protection by the courts. While many courts have used sweeping expression in the decisions in which they have disclaimed the power of supervising the power of supervising the selection of the sites of public improvements , it may be safely said that the courts of the various states would feel bound to interfere to prevent an abuse of the discretion delegated by the legislature, by an attempted appropriation of land in utter disregard of the possible necessity of its use, or when the alleged purpose was a cloak to some sinister scheme." (Norwich City vs. Johnson, 86 Conn., 151; Bell vs. Mattoon Waterworks, etc. Co., 245 Ill., 544; Wheeling, etc. R. R. Co. vs. Toledo Ry. etc. Co., 72 Ohio St., 368; State vs. Stewart, 74 Wis., 620.)

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Said section 158 (10 R. C. L., 183) which is cited as conclusive authority in support of the contention of the appellant, says: The legislature, in providing for the exercise of the power of eminent domain, may directly determine the necessity for appropriating private property for a particular improvement for public use, and it may select the exact location of the improvement. In such a case, it is well settled that the utility of the proposed improvement, the extent of the public necessity for its construction, the expediency of constructing it, the suitableness of the location selected and the consequent necessity of taking the land selected for its site, are all questions exclusively for the legislature to determine, and the courts have no power to interfere, or to substitute their own views for those of the representatives of the people. Practically every case cited in support of the above doctrine has been examined, and we are justified in making the statement that in each case the legislature directly determined the necessity for the exercise of the right of eminent domain in the particular case. It is not denied that if the necessity for the exercise of the right of eminent domain is presented to the legislative department of the government and that department decides that there exists a necessity for the exercise of the right in a particular case, that then and in that case, the courts will not go behind the action of the legislature and make inquiry concerning the necessity. But, in the case ofWheeling, etc. R. R. Co. vs. Toledo, Ry, etc., Co. (72 Ohio St., 368 [106 Am. St. rep., 622, 628]), which was cited in support of the doctrine laid down in section 158 above quoted, the court said: But when the statute does not designate the property to be taken nor how may be taken, then the necessity of taking particular property is a question for the courts. Where the application to condemn or appropriate is made directly to the court, the question (of necessity) should be raised and decided in limene. The legislative department of the government was rarely undertakes to designate the precise property which should be taken for public use. It has generally, like in the present case, merely conferred general authority to take land for public use when a necessity exists therefor. We believe that it can be confidently asserted that, under such statute, the allegation of the necessity for the appropriation is an issuable allegation which it is competent for the courts to decide. (Lynch vs. Forbes, 161 Mass., 302 [42 Am. St. Rep., 402, 407].) There is a wide distinction between a legislative declaration that a municipality is given authority to exercise the right of eminent domain, and a decision by the municipality that there exist a necessity for the exercise of that right in a particular case. The first is a declaration simply that there exist reasons why the right should be conferred upon municipal corporation, while the second is the application of the right to a particular case. Certainly, the legislative declaration relating to the advisability of granting the power cannot be converted into a declaration that a necessity exists for its exercise in a particular case, and especially so when, perhaps, the land in question was not within the territorial authority was granted. Whether it was wise, advisable, or necessary to confer upon a municipality the power to exercise the right of eminent domain, is a question with which the courts are not concerned. But when that right or authority is exercised for the purpose of depriving citizens of their property, the courts are authorized, in this jurisdiction, to make inquiry and to hear proof upon the necessity in the particular case, and not the general authority. Volume 15 of the Cyclopedia of Law and Procedure (Cyc.), page 629, is cited as a further conclusive authority upon the question that the necessity for the exercise of the right of eminent domain is a legislative and not a judicial question. Cyclopedia, at the page stated, says: In the absence of some constitutional or statutory provision to the contrary, the necessity andexpediency of exercising the right of eminent domain are questions essentially political and not judicial in their character. The determination of those questions (the necessity and the expediency) belongs to the sovereign power; the legislative department is final and conclusive, and the courts have no power to review it (the necessity and the expediency) . . . . It (the legislature) may designate the particular property to be condemned, and its determination in this respect cannot be reviewed by the courts. The volume of Cyclopedia, above referred to, cites many cases in support of the doctrine quoted. While time has not permitted an examination of all of said citations, many of them have been examined, and it can be confidently asserted that said cases which are cited in support of the assertion that, "the necessity and expediency of exercising the right of eminent domain are questions essentially political and not judicial," show clearly and invariably that in each case the legislature itself usually, by a special law, designated the particular case in which the right of eminent domain might be exercised by the particular municipal corporation or entity within the state. (Eastern R. Co. vs. Boston, etc., R. Co., 11 Mass., 125 [15 Am. Rep., 13]; Brooklyn Park Com'rs vs. Armstrong, 45 N.Y., 234 [6 Am. Rep., 70]; Hairston vs. Danville, etc. Ry. Co., 208 U. S. 598; Cincinnati vs. Louisville, etc. Ry. Co., 223 U. S., 390; U.S. vs. Chandler-Dunbar Water Power Co., 229 U. S., 53; U.S. vs. Gettysburg, etc. Co., 160 U. S., 668; Traction Co. vs. Mining Co., 196 U.S., 239; Sears vs. City of Akron, 246 U.S., 351 [erroneously cited as 242 U.S.].) In the case of Traction Co. vs. Mining Co. (196 U.S., 239), the Supreme Court of the United States said: "It is erroneous to suppose that the legislature is beyond the control of the courts in exercising the power of eminent domain, either as to the nature of the use or the necessity to the use of any particular property . For if the use be not public or no necessity for the taking exists, the legislature cannot authorize the taking of private property against the will of the owner, notwithstanding compensation may be required." In the case of School Board of Carolina vs. Saldaa (14 Porto Rico, 339, 356), we find the Supreme Court of Porto Rico, speaking through Justice MacLeary, quoting approvingly the following, upon the question which we are discussing: "It is well settled that although the legislature must necessarily determine in the first instance whether the use for which they (municipalities, etc.) attempt to exercise the power is a public one or not, their (municipalities, etc.) determination is not final, but is subject to correction by the courts, who may undoubtedly declare the statute unconstitutional, if it shall clearly appear that the use for which it is proposed to authorize the taking of private property is in reality not public but private." Many cases are cited in support of that doctrine. Later, in the same decision, we find the Supreme Court of Porto Rico says: "At any rate, the rule is quite well settled that in the cases under consideration the determination of the necessity of taking a particular piece or a certain amount of land rests ultimately with the courts." (Spring Valley etc. Co. vs. San Mateo, etc. Co., 64 Cal., 123.) . In the case of Board of Water Com'rs., etc. vs. Johnson (86 Conn., 571 [41 L. R. A., N. S., 1024]), the Supreme Court of Connecticut approvingly quoted the following doctrine from

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Lewis on Eminent Domain (3d ed.), section 599: "In all such cases the necessity of public utility of the proposed work or improvement is a judicial question. In all such cases, where the authority is to take property necessary for the purpose, the necessity of taking particular property for a particular purpose is a judicial one, upon which the owner is entitled to be heard." (Riley vs. Charleston, etc. Co., 71 S. C., 457, 489 [110 Am. St. Rep., 579]; Henderson vs. Lexington 132 Ky., 390, 403.) The taking of private property for any use which is not required by the necessities or convenience of the inhabitants of the state, is an unreasonable exercise of the right of eminent domain, and beyond the power of the legislature to delegate. (Bennett vs. Marion, 106 Iowa, 628, 633; Wilson vs. Pittsburg, etc. Co., 222 Pa. St., 541, 545; Greasy, etc. Co. vs. Ely, etc. Co., 132 Ky., 692, 697.) In the case of New Central Coal Co. vs. George's etc. Co. (37 Md., 537, 564), the Supreme Court of the State of Maryland, discussing the question before us, said: "To justify the exercise of this extreme power (eminent domain) where the legislature has left it to depend upon the necessity that may be found to exist, in order to accomplish the purpose of the incorporation, as in this case, the party claiming the right to the exercise of the power should be required to show at least a reasonable degree of necessity for its exercise. Any rule less strict than this, with the large and almost indiscriminate delegation of the right to corporations, would likely lead to oppression and the sacrifice of private right to corporate power." In the case of Dewey vs. Chicago, etc. Co. (184 Ill., 426, 433), the court said: "Its right to condemn property is not a general power of condemnation, but is limited to cases where a necessity for resort to private property is shown to exist. Such necessity must appear upon the face of the petition to condemn. If the necessary is denied the burden is upon the company (municipality) to establish it." (Highland, etc. Co. vs. Strickley, 116 Fed., 852, 856; Kiney vs. Citizens' Water & Light Co., 173 Ind., 252, 257 ; Bell vs. Mattoon Waterworks, etc. Co., 245 Ill., 544 [137 Am. St. Rep. 338].) It is true that naby decisions may be found asserting that what is a public use is a legislative question, and many other decisions declaring with equal emphasis that it is a judicial question. But, as long as there is a constitutional or statutory provision denying the right to take land for any use other than a public use, it occurs to us that the question whether any particular use is a public one or not is ultimately, at least, a judicial question. The legislative may, it is true, in effect declare certain uses to be public, and, under the operation of the well-known rule that a statute will not be declared to be unconstitutional except in a case free, or comparatively free, from doubt, the courts will certainly sustain the action of the legislature unless it appears that the particular use is clearly not of a public nature. The decisions must be understood with this limitation; for, certainly, no court of last resort will be willing to declare that any and every purpose which the legislative might happen to designate as a public use shall be conclusively held to be so, irrespective of the purpose in question and of its manifestly private character Blackstone in his Commentaries on the English Law remarks that, so great is the regard of the law for private property that it will not authorize the least violation of it, even for the public good, unless there exists a very great necessity therefor. In the case of Wilkinson vs. Leland (2 Pet. [U.S.], 657), the Supreme Court of the United States said: "That government can scarcely be deemed free where the rights of property are left solely defendant on the legislative body, without restraint. The fundamental maxims of free government seem to require that the rights of personal liberty and private property should be held sacred. At least no court of justice in this country would be warranted in assuming that the power to violate and disregard them a power so repugnant to the common principles of justice and civil liberty lurked in any general grant of legislature authority, or ought to be implied from any general expression of the people. The people ought no to be presumed to part with rights so vital to their security and well-being without very strong and direct expression of such intention." (Lewis on Eminent Domain, sec. 603; Lecoul vs. Police Jury 20 La. Ann., 308; Jefferson vs. Jazem, 7 La. Ann., 182.) Blackstone, in his Commentaries on the English Law said that the right to own and possess land a place to live separate and apart from others to retain it as a home for the family in a way not to be molested by others is one of the most sacred rights that men are heirs to. That right has been written into the organic law of every civilized nation. The Acts of Congress of July 1, 1902, and of August 29, 1916, which provide that "no law shall be enacted in the Philippine Islands which shall deprive any person of his property without due process of law," are but a restatement of the time-honored protection of the absolute right of the individual to his property. Neither did said Acts of Congress add anything to the law already existing in the Philippine Islands. The Spaniard fully recognized the principle and adequately protected the inhabitants of the Philippine Islands against the encroachment upon the private property of the individual. Article 349 of the Civil Code provides that: "No one may be deprived of his property unless it be by competent authority, for some purpose of proven public utility, and after payment of the proper compensation Unless this requisite (proven public utility and payment) has been complied with, it shall be the duty of the courts to protect the owner of such property in its possession or to restore its possession to him , as the case may be." The exercise of the right of eminent domain, whether directly by the State, or by its authorized agents, is necessarily in derogation of private rights, and the rule in that case is that the authority must be strictly construed. No species of property is held by individuals with greater tenacity, and none is guarded by the constitution and laws more sedulously, than the right to the freehold of inhabitants. When the legislature interferes with that right, and, for greater public purposes, appropriates the land of an individual without his consent, the plain meaning of the law should not be enlarged by doubtly interpretation. (Bensely vs. Mountainlake Water Co., 13 Cal., 306 and cases cited [73 Am. Dec., 576].) The statutory power of taking property from the owner without his consent is one of the most delicate exercise of government authority. It is to be watched with jealous scrutiny. Important as the power may be to the government, the inviolable sanctity which all free constitutions attach to the right of property of the citizens, constrains the strict observance of the substantial provisions of the law which are prescribed as modes of the exercise of the power, and to protect it from abuse. Not only must the authority of municipal corporations to take property be expressly conferred and the use for which it is taken specified, but the power, with all constitutional limitation and directions for its exercise, must be strictly pursued. (Dillon on Municipal Corporations [5th Ed.], sec. 1040, and cases cited; Tenorio vs. Manila Railroad Co., 22 Phil., 411.) It can scarcely be contended that a municipality would be permitted to take property for some public use unless some public necessity existed therefor. The right to take private property for public use originates in the necessity, and the taking must be limited by such necessity. The appellant contends that inasmuch as the legislature has given it general authority to take private property for public use, that the legislature has, therefore, settled the question of the necessity in every case and that the courts are closed to the owners of the property upon that question. Can it be imagined, when the legislature adopted section 2429 of Act No. 2711, that it thereby declared that it was necessary to appropriate the property of

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Juan de la Cruz, whose property, perhaps, was not within the city limits at the time the law was adopted? The legislature, then, not having declared the necessity, can it be contemplated that it intended that a municipality should be the sole judge of the necessity in every case, and that the courts, in the face of the provision that "if upon trial they shall find that a right exists," cannot in that trial inquire into and hear proof upon the necessity for the appropriation in a particular case? The Charter of the city of Manila authorizes the taking of private property for public use. Suppose the owner of the property denies and successfully proves that the taking of his property serves no public use: Would the courts not be justified in inquiring into that question and in finally denying the petition if no public purpose was proved? Can it be denied that the courts have a right to inquire into that question? If the courts can ask questions and decide, upon an issue properly presented, whether the use is public or not, is not that tantamount to permitting the courts to inquire into the necessity of the appropriation? If there is no public use, then there is no necessity, and if there is no necessity, it is difficult to understand how a public use can necessarily exist. If the courts can inquire into the question whether a public use exists or not, then it seems that it must follow that they can examine into the question of the necessity. The very foundation of the right to exercise eminent domain is a genuine necessity, and that necessity must be of a public character. The ascertainment of the necessity must precede or accompany, and not follow, the taking of the land. (Morrison vs. Indianapolis, etc. Ry. Co., 166 Ind., 511; Stearns vs. Barre, 73 Vt., 281; Wheeling, etc. R. R. Co. vs. Toledo, Ry. etc. Co., 72 Ohio St., 368.) The general power to exercise the right of eminent domain must not be confused with the right to exercise it in a particular case. The power of the legislature to confer, upon municipal corporations and other entities within the State, general authority to exercise the right of eminent domain cannot be questioned by the courts, but that general authority of municipalities or entities must not be confused with the right to exercise it in particular instances. The moment the municipal corporation or entity attempts to exercise the authority conferred, it must comply with the conditions accompanying the authority. The necessity for conferring the authority upon a municipal corporation to exercise the right of eminent domain is admittedly within the power of the legislature. But whether or not the municipal corporation or entity is exercising the right in a particular case under the conditions imposed by the general authority, is a question which the courts have the right to inquire into. The conflict in the authorities upon the question whether the necessity for the exercise of the right of eminent domain is purely legislative and not judicial, arises generally in the wisdom and propriety of the legislature in authorizing the exercise of the right of eminent domain instead of in the question of the right to exercise it in a particular case. (Creston Waterworks Co. vs. McGrath, 89 Iowa, 502.) By the weight of authorities, the courts have the power of restricting the exercise of eminent domain to the actual reasonable necessities of the case and for the purposes designated by the law. (Fairchild vs. City of St. Paul. 48 Minn., 540.) And, moreover, the record does not show conclusively that the plaintiff has definitely decided that their exists a necessity for the appropriation of the particular land described in the complaint. Exhibits 4, 5, 7, and E clearly indicate that the municipal board believed at one time that other land might be used for the proposed improvement, thereby avoiding the necessity of distributing the quiet resting place of the dead. Aside from insisting that there exists no necessity for the alleged improvements, the defendants further contend that the street in question should not be opened through the cemetery. One of the defendants alleges that said cemetery is public property. If that allegations is true, then, of course, the city of Manila cannot appropriate it for public use. The city of Manila can only expropriate private property. It is a well known fact that cemeteries may be public or private. The former is a cemetery used by the general community, or neighborhood, or church, while the latter is used only by a family, or a small portion of the community or neighborhood. (11 C. J., 50.) Where a cemetery is open to public, it is a public use and no part of the ground can be taken for other public uses under a general authority. And this immunity extends to the unimproved and unoccupied parts which are held in good faith for future use. (Lewis on Eminent Domain, sec. 434, and cases cited.) The cemetery in question seems to have been established under governmental authority. The Spanish Governor-General, in an order creating the same, used the following language: The cemetery and general hospital for indigent Chinese having been founded and maintained by the spontaneous and fraternal contribution of their protector, merchants and industrials, benefactors of mankind, in consideration of their services to the Government of the Islands its internal administration, government and regime must necessarily be adjusted to the taste and traditional practices of those born and educated in China in order that the sentiments which animated the founders may be perpetually effectuated. It is alleged, and not denied, that the cemetery in question may be used by the general community of Chinese, which fact, in the general acceptation of the definition of a public cemetery, would make the cemetery in question public property. If that is true, then, of course, the petition of the plaintiff must be denied, for the reason that the city of Manila has no authority or right under the law to expropriate public property. But, whether or not the cemetery is public or private property, its appropriation for the uses of a public street, especially during the lifetime of those specially interested in its maintenance as a cemetery, should be a question of great concern, and its appropriation should not be made for such purposes until it is fully established that the greatest necessity exists therefor. While we do not contend that the dead must not give place to the living, and while it is a matter of public knowledge that in the process of time sepulchres may become the seat of cities and cemeteries traversed by streets and daily trod by the feet of millions of men, yet, nevertheless such sacrifices and such uses of the places of the dead should not be made unless and until it is fully established that there exists an eminent necessity therefor. While cemeteries and sepulchres and the places of the burial of the dead are still within the memory and command of the active care of the living; while they are still devoted to pious uses and sacred regard, it is difficult to believe that even the legislature would adopt a law expressly providing that such places, under such circumstances, should be violated. In such an appropriation, what, we may ask, would be the measure of damages at law, for the wounded sensibilities of the living, in having the graves of kindred and loved ones

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blotted out and desecrated by a common highway or street for public travel? The impossibility of measuring the damage and inadequacy of a remedy at law is too apparent to admit of argument. To disturb the mortal remains of those endeared to us in life sometimes becomes the sad duty of the living; but, except in cases of necessity, or for laudable purposes, the sanctity of the grave, the last resting place of our friends, should be maintained, and the preventative aid of the courts should be invoked for that object. (Railroad Company vs. Cemetery Co., 116 Tenn., 400; Evergreen Cemetery Associationvs. The City of New Haven, 43 Conn., 234; Anderson vs. Acheson, 132 Iowa, 744; Beatty vs. Kurtz, 2 Peters, 566.) In the present case, even granting that a necessity exists for the opening of the street in question, the record contains no proof of the necessity of opening the same through the cemetery. The record shows that adjoining and adjacent lands have been offered to the city free of charge, which will answer every purpose of the plaintiff. For all of the foregoing, we are fully persuaded that the judgment of the lower court should be and is hereby affirmed, with costs against the appellant. So ordered.

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G.R. No. 15915 September 7, 1921 public lands, and all claims on the part of private individuals for such lands, buildings, or an interest therein not so presented will be forever barred. On the 10th of February, 1915, the petitioner herein, through his attorney, Felipe Agoncillo, presented a motion in the Court of First Instance, asking that said Executive Order No. 112 be declared unconstitutional and that the proceedings thereunder be dismissed. The court refused to decide that motion for the reasons set forth in its order of May 18, 1915. On the 22nd day of May, 1915, the petitioner, Leoncio Sea, was personally served with notice of the reservation proceedings, and five months thereafter, to wit, on the 22d day of October, 1915, he presented in the Court of First Instance a "comparecencia" in which he alleged that part of his land, composed of 36,510 square meters, was included in said reservation; and that he was about to present a petition for the registration of the same under the Land Registration Act, and asked permission of the court to present said petition. On the 9th day of August, 1918, more than three years since the receipt of the notice above referred to, the petitioner presented the present petition for the registration of the land in question. The lower court denied said petition upon the ground that, the same not having been presented within the six months' period provided by Act No. 627, the land in question was conclusively presumed to be public land. The appellant makes two principal assignments of error: That the lower court erred (1) in not finding that Executive Order No. 112 was void and of no effect; and (2) in finding that the right of the petitioner had prescribed. Under the first assignment of error the appellant contends that Executive Order No. 112 was void and of no effect in so far as lot No. 2 in question was concerned because ( a) the Governor-General had no authority to reserve private property, and ( b) even if he had such authority, he was not authorized to reserve the same for railroad purposes. In answer to that contention it is sufficient to say that the Governor-General, in said executive order, did not reserve any private property but only "all public lands included within the limits described" in said executive order. Indeed, it was expressly ordered that "all private lands or interests therein within the limits described, ought forthwith to be brought within the operation of 'The Land Registration Act,' and to become registered land within the meaning of said 'The Land Registration Act,' in pursuance of the provisions of Act No. 627 of the Philippine Commission." It is clear, then, that it was not attempted by said executive order to appropriate private property without compensation and without due process of law. It was earnestly urged by the appellant that the Governor-General had no authority, under Act No. 648, to reserve any part of the public domain "for railroad purposes;" that he was only authorized by said Act to reserve it "for specific public uses." "Railroads may properly be termed public highways, whether constructed by the Government itself or by the agency of corporations or individuals under legislative authority." (33 Cyc., 37.) "A historical research discloses the meaning of the term 'public use' to be one of constant growth. As society advances, it demands upon the individual increase and each demand is a new use to which the resources of the individual may be devoted." (6 Words and Phrases, 5828.) It cannot be denied that a railroad is a public necessity in this country a factor indispensable to its economic development and material welfare. It is in recognition of this fact that railroad corporations are empowered by law to exercise the right of eminent domain. We are therefore of the opinion that a railroad is a public use, for "whatever is beneficially employed for the community is a public use." (Aldrige vs. Tuscumbia C. and D. R. R. Co. [Ala.], 23 Am. Dec., 307.) It cannot be questioned that a railroad for general travel or the transportation of produce

LEONCIO SEA Y MEDINA, applicant-appellant, vs. THE MANILA RAILROAD COMPANY and THE INSULAR GOVERNMENT, objectorsappellees. G. N. Trinidad for appellant. Jose A. Santos for appellees. JOHNSON, J.: This is an application for the registration of a parcel of land situated in the barrio of Palsabagon, municipality of Pagbilao, Province of Tayabas, containing three lots of which lot No. 2 is the only one in question. Said lot No. 2 is composed of 35, 327 square meters, and is occupied by the Manila Railroad Company, the same being within civil reservation No. 3 of the Court of First Instance of Tayabas (G. L. R. O. reservation Case No. 242). The lower court denied the registration of said lot upon the ground that the application for registration had not been presented within the time required by law in said civil reservation proceedings. It appears that by Executive Order No. 112, dated December 3, 1914, the Governor-General, pursuant to the provisions of Act No. 648, reserved "for railroad purposes" a strip of land 30 meters wide and more than 80 kilometers long, from the municipality of Lucena to the municipality of Caluag, Province of Tayabas. Lot No. 2 in question is included within said reservation. Upon being duly notified by the Governor-General of said Executive Order, the Judge of the Court of First Instance of the Province of Tayabas, pursuant to the provisions of section 2 of Act No. 648, on the 21st day of December, 1914, issued the following notice to all the parties concerned: Whereas under the provisions of Act No. 648 of the Philippine Commission, by executive order there have been reserved from settlement or public sale and for railroad purposes the following described lands the public domain the use of which has not otherwise been directed by law: xxx xxx xxx

And whereas the Governor-General has certified in writing that said lands are reserved for civil public uses, and has given notice thereof to the Judge of the Court of First Instance of the Fourteenth Judicial District; Now, therefore, pursuance of the requirements of said act, Notice is hereby given that claims for all private lands, buildings, and interests therein, within the limits aforesaid, must be presented in said court for registration under 'The Land Registration Act' within six calendar months from the date of this notice, and that all, lands, buildings and interests therein, within the limits aforesaid not so presented within the time herein limited will be conclusively adjudged to be

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for the country at large is a public use. (Buffalo Bayou, etc. R. Co. vs. Ferris, 26 Tex., 588, 598.) Referring to the second assignment of error with regard to the question of prescription, it will be noted that on the 22d day of May, 1915, five months after receipt of notice in the civil reservation proceedings, the appellant notified the Court of First Instance that lot No. 2 in question belonged to him and that he was about to present an application for its registration under the Land Registration Act, and asked permission of the court to do so. The appellant did not present that application until after more than three years had elapsed. The question now arises as to whether the appellant had fulfilled the requirements of the law so as to preserve his rights to the land claimed by him. Section 3 of act No. 627, among other things, provides that "claims for all private lands, buildings, and interests therein" within the limits of the reservation, "must be presented for registration under the Land Registration Act within six calendar months from the date of issuing the notice, and that all lands, buildings, and interests therein within the limits aforesaid not so presented within the time therein limited will be conclusively adjudged to be public lands, and all claims on the part of private individuals for such lands buildings, or an interest therein not so presented will be forever barred." The appellant contends that the notice or claim presented by him on May 22, 1915, was a sufficient compliance with the foregoing provisions of law to preserve his right. It will be noted that the appellant did not present a claim for the registration of the land in question under the Land Registration Act, as required by section 3 of Act No. 627, but merely notified the court that he was about to present such claim, and asked permission to do so. That notice was wholly unnecessary; it was not required by law, and its presentation had no legal effect. What the appellant ought to have done was to present the petition for registration, spoken of in said notice, within six months after receipt of notice. He did not present it until after more than three years had elapsed. Under these circumstances, and in view of the decisions of this court in the cases of Jose vs. Commander of Philippine Squadron (16 Phil., 62); Ruymann and Farris vs. Director of Lands (34 Phil., 428); and Roman Catholic Archbishop of Manila vs. Barrio of Santo Cristo (39 Phil., 1), we are constrained to concur with the opinion of the lower court that the appellant's claim has prescribed under said section 3 of Act No. 627. Therefore, the judgment of the lower court is hereby affirmed, with costs. So ordered.

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G.R. No. 124795 December 10, 2008 occupation of the property up to the present plus 12% interest per annum until fully paid; (c) P150,000.00 for actual damages on account of the destruction of crops and improvements on the property when the occupation of the property commenced plus 12% interest per annum until fully paid; (d) at least P100,000.00 as exemplary damages; (e) P100,000.00 plus 15% of the amount and properties to be recovered as attorney's fees; and (f) costs of the 3 suit. In its Amended Answer, PNR alleged that, per authority granted by law (Presidential Decree No. 741), it acquired parcels of land used in the construction of the railway track to Carmona, Cavite. It, however, denied that the property acquired from Forfom was leased to tenants. It likewise denied that the acquisition of Forfom's property was made without the consent of Dr. Felix Limcaoco, the former owner of the property. It stressed that the acquisition of the properties used in the project was done through negotiations with the respective owners. It asserted that no crop was damaged when it acquired the property subject of the case. Further, it denied liability for unrealized income, exemplary damages and attorney's fees. PNR explained that former President Ferdinand E. Marcos approved what was known to be the Carmona Project -- a 5.1 kilometer railroad extension line from San Pedro, Laguna to San Jose, Carmona, Cavite to serve the squatters' resettlement area in said localities. It claimed that it negotiated with the respective owners of the affected properties and that they were paid just compensation. Dr. Felix Limcaoco, it said, was not paid because he failed to present the corresponding titles to his properties. It claimed that the right to and just compensation for the subject property was the declared fair market value at the time of the taking which was P0.60 per square meter. It disclosed that in a meeting with the representatives of Dr. Limcaoco, the price agreed upon was P1.25 per square meter, the amount the adjoining owners was paid. It prayed that the instant complaint be dismissed, and that the owner of the properties involved be compelled to accept the amount of P1.25 per square meter as price for the properties. In an Order dated 29 October 1990, the pre-trial conference on the case was set. On 13 March 1991, for failure of the parties to reach any agreement, pre-trial was terminated and 6 trial of the case scheduled. Thereafter, trial on the merits ensued. The following witnesses testified for Forfom: (1) Leon Capati; (2) Marites Dimaculangan; (3) Marilene L. de Guzman; (4) Gavino Rosas de Claro; and (5) Jose Elazegui. Mr. Leon Capati, employee of Forfom, testified that he knew Dr. Felix Limcaoco, Sr. because he worked for him since 1951 until his death. He knew Forfom Development Corporation to be a corporation formed by the children of Dr. Limcaoco and owner of the properties left behind by said doctor. He said he worked as overseer in Hacienda Limcaoco in San Pedro, Laguna owned by Dr. Limcaoco. Said hacienda was converted to the Olympia Complex Subdivision now owned by Forfom. Being a worker of Forfom, he disclosed that in 1972, the PNR forcibly took portions of the property of Forfom. Armed men installed railroads and even used bulldozers which caused the destruction of around eleven hectares of sugar land. Since 1972, he said PNR used the property for its benefit and even leased part of it to people living near the railroad. At that time, he claimed that the value of sugarcane was P200.00 per piko and that the plantation harvested sixty (60) tons annually worth P224,000.00. In all, from 1972 to 1985, he claimed Forfom lost P2,917,200.00 in ruined sugar, unrealized harvest, excluding unrealized harvest for nine mango trees which yielded 60 kaings per tree per harvest. Ms. Marites Dimaculangan, an officer of Forfom, corroborated the testimony of Mr. Leon 9 Capati. She presented documents showing that Hacienda Limcaoco was previously owned by Dr. Felix Limcaoco, then the ownership was transferred to Forfom. As proof that Hacienda
8 7 5 4

FORFOM DEVELOPMENT CORPORATION, petitioner, vs. PHILIPPINE NATIONAL RAILWAYS, respondent. DECISION CHICO-NAZARIO, J.: Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court which 1 seeks to set aside the Decision of the Court of Appeals dated 24 April 1996. Petitioner Forfom Development Corporation (Forfom) is a domestic corporation duly organized and existing under the laws of the Philippines with principal office at Cabuyao, Laguna, while respondent Philippine National Railways (PNR) is a government corporation engaged in proprietary functions with principal office at the PNR Railway Station, C.M. Recto Avenue, Tutuban, Binondo, Manila. The facts, stripped of the non-essentials, are as follows: Forfom is the registered owner of several parcels of land in San Vicente, San Pedro, Laguna under Transfer Certificates of Title (TCT) Nos. T-34384, T-34386 and 34387, all of the Registry of Deeds of Laguna. Said parcels of land were originally registered in the name of Felix Limcaoco, predecessor-in-interest of Forfom, under Original Certificates of Title (OCT) Nos. (0-326) 0-384 and (0-328) 0-386. In a cabinet meeting held on 1 November 1972, then President Ferdinand E. Marcos approved the Presidential Commuter Service Project, more commonly known as the Carmona Project of the President. Per Resolution No. 751 dated 2 November 1972 of the PNR Board of Directors, its General Manager was authorized to implement the project. The San PedroCarmona Commuter Line Project was implemented with the installation of railroad facilities and appurtenances. During the construction of said commuter line, several properties owned by private individuals/corporations were traversed as right-of-way. Among the properties through which the commuter line passed was a 100,128 square-meter portion owned by Forfom covered by TCT Nos. T-34384, T-34386 and T-34387. On 24 August 1990, Forfom filed before the Regional Trial Court (RTC) of Binan, Laguna a 2 complaint for Recovery of Posssession of Real Property and/or Damages. It alleged that PNR, with the aid of military men, and without its consent and against its will, occupied 100,128 square meters of its property located in San Pedro, Laguna and installed thereon railroad and railway facilities and appurtenances. It further alleged that PNR rented out portions of the property to squatters along the railroad tracks. Despite repeated verbal and written demands for the return of the property or for the payment of its price, PNR failed to comply. It prayed that PNR be ordered to vacate the property and to cause the eviction of all shanties and squatters that PNR had taken in as lessees, and that it be restored to the peaceful occupation and enjoyment thereof. It likewise asked that Forfom be ordered to pay (a) P1,000.00 per month per hectare from occupation of the property until the same is vacated as rentals plus interest at 24% per annum; (b) P1,600,000.00 as unrealized income from

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Limcaoco was converted into a low-cost housing subdivision known as the Olympia Complex Subdivision, she presented permits from the Human Settlements Regulatory Commission and 10 11 from the Municipality of San Pedro. She also adduced in evidence several letters allegedly showing that PNR occupied the property owned by the Limcaocos. As a result, around eleven 12 hectares of the sugar cane plantation were destroyed. From 1972 to 1985, she claimed that part of the property taken by PNR was leased to squatters beside the railroad tracks. She added that Forfom incurred a loss totaling P2,917,200.00. She claimed that the current price of land contiguous to the parcels taken by PNR was P1,000.00 per square meter. Ms. Marilene L. De Guzman, Executive Vice-President of Forfom and daughter of the Late Dr. Felix Limcaoco, corroborated the testimonies of Mr. Capati and Ms. Dimaculangan. She disclosed that his father died on 25 March 1973. She learned from her father and from Mr. Leon Capati that when the armed men took a portion of their property, the armed men did not show any court order or authority from any agency of the government. The armed men used bulldozers destroying 11 hectares of sugarcane and some mango trees. She said those taken over were used as railroad tracks and a portion beside the tracks were being leased to squatters. She revealed that the present fair market value of land at Olympia Complex 14 is P1,400.00 per square meter. If the land is not developed, same can be sold for P800.00 per square meter. She said from the time their property was taken over by PNR, her family 15 has been writing to PNR regarding compensation for their land. Ms. De Guzman said the property was still in the name of Dr. Felix Limcaoco, Sr. and Mrs. Olympia Limcaoco when the PNR took over a portion of their properties. She said she was not informed by Mr. Capati that the PNR took the said property over pursuant to a Presidential Mandate in order to provide transportation for relocated squatters. She explained that her father and Mr. Capati were not advised to harvest their crops and were surprised by the taking over of the land. Mr. Gavino Rosas de Claro, Land Register Examiner of the Register of Deeds of Calamba, Laguna, testified as representative of the Register of Deeds. He brought in Court the originals 17 18 of TCT Nos. T-34384 and T-34386, both in the name of Forfom Development Corporation 19 and OCT Nos. (O-326) O-384 and (O-328) O-386, both in the name of Dr. Felix Limcaoco, 20 Sr. Thereafter, photocopies thereof were compared with the originals which were found to be faithful reproductions of the same. Jose Elazegui, Supervisor, Southern Tagalog Facoma, Inc. was presented to show the production of sugar and molasses on the property of Forfom. He presented duplicate original copies of Tuos ng inaning Tubo for the years 1984-1985, 1985-1986, 1986-1987 and 198722 1988. The documents showed the production (average yield per area per picul) in other properties owned by Forfom other than the properties subject matter of this case. For the defendant, Mrs. Edna Ramos, Department Manager of the Real Estate Department of 23 the PNR, took the stand. She testified that she was familiar with the acquisition by the PNR of the right of way for the San Pedro-Carmona Commuter Line. It was acquired and established by Presidential Mandate and pursuant to the authority of the PNR to expropriate 24 under its charter (Presidential Decree No. 741). She explained that President Ferdinand E. Marcos authorized the PNR to acquire said right of way in a Cabinet Meeting on 1 November 1972 as evidenced by an excerpt of the minutes of the meeting of the PNR Board of Directors 25 on Resolution No. 751. The right of way was acquired to provide a cheap, efficient and safe means of transportation to the squatters who were relocated in Cavite. The commuter line, 26 she said, was primarily for service rather than profit. As shown by the letter dated 30 April 1974 of Nicanor T. Jimenez, former General Manager of the PNR, to Mrs. Olympia Hemedes
21 16 13

Vda. de Limcaoco, the acquisition of the right of way was with the knowledge and consent of Dr. Felix Limcaoco, Sr. Mrs. Ramos disclosed that the total area acquired by the PNR for the San Pedro-Carmona Commuter Line was 15.7446 hectares or sixteen (16) lots in all owned by seven (7) private landowners and three (3) corporations. Among the private landowners were Isabel Oliver, Leoncia Blanco, Catalina Sanchez, Tomas Oliver, Alejandro Oliver and Antonio Sibulo. Per record of PNR, they were paid P1.25 per square meter for their lands. They executed Absolute Deeds of Sale in favor of the PNR, as a result of which, titles to the lands were 27 transferred to PNR. The remaining 9 lots belonging to the three private corporations Forfom Development Corporation, Alviar Development Manufacturing & Trading Supply Corp. and Life Realty Development Corporation - were not paid for because these corporations were not able to present their respective titles, which had been used as loan collaterals in the 28 Philippine National Bank and the Government Service Insurance System. The unit price per square meter, which the negotiating panel of the PNR and the representatives of the three corporations was considering then, was P1.25. In a letter dated 3 October 1975, Mr. Felix Limcaoco, Jr. of Forfom was asking for P12.00 per square meter for their land 29 and P150,000.00 for damaged sugar crops and mango trees. She likewise said she had the minutes of the conference between Mr. Limcaoco and the PNR Chief Construction Engineer 30 held at the PNR General Manager's Office on 24 July 1979. Mrs. Ramos clarified that as a matter of policy, PNR employees and other persons were not allowed to settle on the PNR's right of way. Squatting along the right of way had never been encouraged. To prevent its proliferation, special contracts were entered into with selected parties under strict conditions to vacate the property leased upon notice. She explained that the leasing of PNR's right of way was an incidental power and was in response to the government's social housing project. In its decision dated 29 October 1992, the trial court ruled generally in favor of plaintiff, the dispositive portion reading: WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and against defendant ordering the latter to pay the former the following: 1. Just compensation of the subject real properties consisting of 100,128 square meters and covered by TCT Nos. T-34387, T-34384 and T-34386 at P10.00 per square meter, with legal interest from the time of actual taking of plaintiff's real properties until payment is made by the defendant; 2. The amount of P4,480,000.00 as unearned income of plaintiff from 1972 up to the current year, and thereafter, the amount of P224,000 yearly, with legal interest until payment is made; 3. Actual damages in the amount of P150,000 corresponding to sugarcane crops and mango trees destroyed or damaged as a result of the unlawful taking of plaintiff's real properties, with legal interest until payment is made; 4. The amount of P100,000 as and for attorney's fees; 5. The amount of P150,000 for litigation expenses plus the costs of this suit.

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Plaintiff's claim for recovery of possession and the other prayers in the complaint are 31 hereby dismissed for want of merit. The trial court found that the properties of Forfom were taken by PNR without due process of law and without just compensation. Although the power of eminent domain was not exercised in accordance with law, and PNR occupied petitioner's properties without previous condemnation proceedings and payment of just compensation, the RTC ruled that, by its acquiescence, Forfom was estopped from recovering the properties subject of this case. As to its right to compensation and damages, it said that the same could not be denied. The trial court declared that P10.00 per square meter was the fair and equitable market value of the real properties at the time of the taking thereof. Not contented with the decision, both parties appealed to the Court of Appeals by filing their 32 respective Notices of Appeal. PNR questioned the trial court's ruling fixing the just compensation at P10.00 per square meter and not the declared value of P0.60 per square meter or the fair market value of P1.25 paid to an adjacent owner. It likewise questioned the award of actual damages and unearned income to Forfom. On 24 April 1996, the appellate court disposed of the case as follows: WHEEFORE, the decision appealed from is hereby AFFIRMED insofar as (1) it denies plaintiff's claim for recovery of possession and (2) it awards just compensation at the rate of P10.00 per square meter which defendant must pay to plaintiff, but with legal rate of interest thereon hereby specifically fixed at six (6) percent per annum starting from January of 1973 until full payment is made. However, the appealed decision is MODIFIED in the sense that plaintiff's claim for damages is DENIED for lack of merit. No pronouncement as to costs.
33

the subject property. Thus, the failure of defendant to first file an expropriation proceedings and pay just compensation is now beside the point. And even if the contention of plaintiff that defendant used force is true, the former can no longer complain at this time. What controls now is the fact that by its own act of negotiating with defendant for the payment of just compensation, plaintiff had in effect made representations that it acquiesced to the taking of its property by defendant. We therefore agree with the lower court that plaintiff, by its acquiescence, waived its right, and is thus estopped, from recovering the subject property or from challenging any supposed irregularity in its acquisition. xxxx Plaintiff's right to recover just compensation, however, remains. On this matter, we agree with the P10.00 per square meter valuation fixed by the trial court x x x. xxxx With the long delay in the payment of just compensation however, defendant should pay interest thereon at the legal rate of six (6) percent per annum from the time of 34 occupation until payment is made. x x x. Still unsatisfied with the decision, Forfom filed the instant petition for review on certiorari raising the following issues: A. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER CANNOT RECOVER POSSESSION OF ITS LAND DESPITE THE ADMISSION THAT IT WAS FORCIBLY TAKEN (DURING THE MARTIAL LAW ERA) WITHOUT ANY EXPROPRIATION PROCEEDING OR PAYMENT OF COMPENSATION SIMPLY BECAUSE PETITIONER DID NOT OPPOSE THE ARMED AND FORCIBLE TAKING THEREOF: B. THE HONORABLE COURT OF APPEALS EMPLOYED DOUBLE STANDARD OF JUSTICE IN ADMITTING HEARSAY EVIDENCE OF PNR YET REJECTING THAT OF PETITIONER WHICH IS PROPERLY IDENTIFIED WITH ABUNDANT CROSS EXAMINATION CONDUCTED ON THE BASIS OF PETITIONER'S REJECTED EVIDENCE: C. THE HONORABLE COURT OF APPEALS ERRED GRIEVOUSLY IN HOLDING THAT IN THIS ACTION "THE FAILURE OF DEFENDANT TO FIRST FILE AN EXPROPRIATION PROCEEDINGS AND PAY JUST COMPENSATION (FOR THE PROPERTY OF PETITIONER FORCIBLY TAKEN BY PRIVATE RESPONDENT) IS (NOW) BESIDE THE POINT." D. THE HONORABLE COURT OF APPEALS ERRED IN AGREEING WITH THE RTC IN FIXING THE COMPENSATION FOR THE LAND FORCIBLY TAKEN BY PNR AT A RIDICULOUS, OUTRAGEOUS, AND ABSURD PRICE OF P10.00 PER SQUARE METER DESPITE THE EVIDENCE SHOWING THAT THE PRICE OF LAND IN THE ADJACENT AND SURROUNDING AREAS IS MORE THAN P1,500.00 PER SQUARE METER:

Except for the deletion of the award of damages, attorney's fees and litigation expenses, the appellate court agreed the with trial court. We quote: There is no dispute that defendant neither commenced an expropriation proceedings nor paid just compensation prior to its occupation and construction of railroad lines on the subject property. Nevertheless, plaintiff's prayer to recover the property cannot be granted. Immediately after the occupation, or within a reasonable time thereafter, there is no showing that the same was opposed or questioned by plaintiff or its representatives on the ground that defendant never filed an expropriation proceedings and that no just compensation was ever paid. Neither is there a showing that plaintiff sought to recover the property because the taking was done forcibly with the aid of armed men. Instead, and this is borne out by certain communications between the parties through their respective officers or representatives, what plaintiff actually did was to negotiate with defendant for the purpose of fixing the amount which the latter should pay as just compensation and, if there be any, damages. x x x. xxxx Clearly, a continuing negotiation between the parties took place for the purpose only of fixing the amount of just compensation and not because plaintiff wanted to recover

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E. THE HONORABLE COURT OF APPEALS ERRED IN IGNORING THE EVIDENCE ESTABLISHING THE RIGHT OF THE PETITIONER TO BE AWARDED ACTUAL OR COMPENSATORY DAMAGES, ATTORNEY'S FEES, AND UNREALIZED INCOME: F. THE HONORABLE COURT OF APPEALS ERRED IN AND ABUSED ITS DISCRETION IN ADOPTING DOUBLE STANDARD IN ITS EVALUATION OF THE EVIDENCE AND IN ADMITTING PNR's PATENTLY HEARSAY EVIDENCE WHILE REJECTING PETITIONER'S RELEVANT - MATERIAL AND ADMISSIBLE EVIDENCE: G. THE HONORABLE COURT OF APPEALS DEVIATED FROM ESTABLISHED JURISPRUDENCE IN UNJUSTIFIABLY IGNORING AND SETTING ASIDE THE FINDINGS OF FACTS OF THE TRIAL COURT THAT ARE IN FACT SUPPORTED BY ABUNDANT EVIDENCE: H. THE HONORABLE COURT OF APPEALS APPARENTLY SUPPRESSED THE EVIDENCE THAT PRIVATE RESPONDENT PNR APART FROM FORCIBLY TAKING THE LAND OF PETITIONER WITH THE EMPLOYMENT OF ARMED MEN, RENTED OUT PORTIONS OF SAID LAND TO ITS TENANTS WHO PAID HEFTY RENTALS FOR THE USE OF THE SAME AS RESIDENTIAL LOTS (AND 35 NOT FOR PUBLIC PURPOSES). On the other hand, PNR accepted the decision of the Court of Appeals and no longer appealed. The primary question to be resolved is: Can petitioner Forfom recover possession of its property because respondent PNR failed to file any expropriation case and to pay just compensation? The power of eminent domain is an inherent and indispensable power of the State. Being inherent, the power need not be specifically conferred on the government by the 36 Constitution. Section 9, Article III states that private property shall not be taken for public use without just compensation. The constitutional restraints are public use and just 37 compensation. The fundamental power of eminent domain is exercised by the Legislature. It may be 38 delegated by Congress to the local governments, other public entities and public utilities. In 39 the case at bar, PNR, under its charter, has the power of expropriation. A number of circumstances must be present in the taking of property for purposes of eminent domain: (1) the expropriator must enter a private property; (2) the entrance into private property must be for more than a momentary period; (3) the entry into the property should be under warrant or color of legal authority; (4) the property must be devoted to a public purpose or otherwise informally, appropriately or injuriously affected; and (5) the utilization of the property for public use must be in such a way as to oust the owner and deprive him of all 40 beneficial enjoyment of the property. In the case at bar, the expropriator (PNR) entered the property of Forfom, a private land. The entrance into Forfom's property was permanent, not for a fleeting or brief period. PNR has been in control, possession and enjoyment of the subject land since December 1972 or January 1973. PNR's entry into the property of Forfom was with the approval of then President Marcos and with the authorization of the PNR's Board of Directors. The property of Forfom measuring around eleven hectares was devoted to public use - railroad tracks, facilities and appurtenances for use of the Carmona Commuter Service. With the entrance of PNR into the property, Forfom was deprived of material and beneficial use and enjoyment of the property. It is clear from the foregoing that there was a taking of property within the constitutional sense. Forfom argues that the property taken from it should be returned because there was neither expropriation case filed by PNR nor just compensation paid for the same. It can be gathered from the records that Forfom accepted the fact of the taking of its land when it negotiated with PNR for just compensation, knowing fully well that there was no expropriation case filed at all. Forfom's inaction for almost eighteen (18) years to question the absence of expropriation proceedings and its discussions with PNR as to how much petitioner shall be paid for its land preclude it from questioning the PNR's power to expropriate or the public purpose for which the power was exercised. In other words, it has waived its right and is estopped from assailing the takeover of its land on the ground that there was no case for expropriation that was commenced by PNR. In Manila Railroad Co. v. Paredes, the first case in this jurisdiction in which there was an attempt to compel a public service corporation, endowed with the power of eminent domain, to vacate the property it had occupied without first acquiring title thereto by amicable purchase or expropriation proceedings, we said: x x x whether the railroad company has the capacity to acquire the land in dispute by virtue of its delegated power of eminent domain, and, if so, whether the company occupied the land with the express or implied consent or acquiescence of the owner. If these questions of fact be decided in the affirmative, it is uniformly held that an action of ejectment or trespass or injunction will not lie against the railroad company, but only an action for damages, that is, recovery of the value of the land taken, and the consequential damages, if any. The primary reason for thus denying to the owner the remedies usually afforded to him against usurpers is the irremedial injury which would result to the railroad company and to the public in general. It will readily be seen that the interruption of the transportation service at any point on the right of way impedes the entire service of the company and causes loss and inconvenience to all passengers and shippers using the line. Under these circumstances, public policy, if not public necessity, demands that the owner of the land be denied the ordinarily remedies of ejectment and injunction. The fact that the railroad company has the capacity to eventually acquire the land by expropriation proceedings undoubtedly assists in coming to the conclusion that the property owner has no right to the remedies of ejectment or injunction. There is also something akin to equitable estoppel in the conduct of one who stands idly by and watches the construction of the railroad without protest. x x x. But the real strength of the rule lies in the fact that it is against public policy to permit a property owner, under such circumstances, to interfere with the service rendered to the public by the railroad company. x x x. (I)f a landowner, knowing that a railroad company has entered upon his land and is engaged in constructing its road without having complied with a statute requiring either payment by agreement or proceedings to condemn, remains inactive and permits it to go on and expend large sums in the work, he is estopped from maintaining either trespass or ejectment for the entry, and will be regarded as having acquiesced therein, and will be restricted to a suit for damages.
41

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Further, in De Ynchausti v. Manila Electric Railroad & Light Co.,
42

we ruled:

The owner of land, who stands by, without objection, and sees a public railroad constructed over it, can not, after the road is completed, or large expenditures have been made thereon upon the faith of his apparent acquiescence, reclaim the land, or enjoin its use by the railroad company. In such a case there can only remain to the owner a right of compensation. xxxx One who permits a railroad company to occupy and use his land and construct its roads thereon without remonstrance or complaint, cannot afterwards reclaim it free from the servitude he has permitted to be imposed upon it. His acquiescence in the company's taking possession and constructing its works under circumstances which made imperative his resistance, if he ever intended to set up illegality, will be considered a waiver. But while this presumed waiver is a bar to his action to dispossess the company, he is not deprived of his action for damages for the value of the land, of for injuries done him by the construction or operation of the road. xxxx We conclude that x x x the complaint in this action praying for possession and for damages for the alleged unlawful detention of the land in question, should be dismissed x x x but that such dismissal x x x should be without prejudice to the right of the plaintiff to institute the appropriate proceedings to recover the value of the lands actually taken, or to compel the railroad corporation to take the necessary steps to secure the condemnation of the land and to pay the amount of the compensation and damages assessed in the condemnation proceedings. In Ansaldo v. Tantuico, Jr., a case involving the takeover by the Government of two private lots to be used for the widening of a road without the benefit of an action for expropriation or agreement with its owners, we held that the owners therein, having been silent for more than two decades, were deemed to have consented to such taking -- although they knew that there had been no expropriation case commenced -- and therefore had no reason to impugn the existence of the power to expropriate or the public purpose for which that power had been exercised. In said case, we directed the expropriator to forthwith institute the appropriate expropriation action over the land, so that just compensation due the owners may be determined in accordance with the Rules of Court. From the afore-cited cases, it is clear that recovery of possession of the property by the landowner can no longer be allowed on the grounds of estoppel and, more importantly, of public policy which imposes upon the public utility the obligation to continue its services to the public. The non-filing of the case for expropriation will not necessarily lead to the return of the property to the landowner. What is left to the landowner is the right of compensation. Forfom argues that the recovery of its property is justified because PNR failed to pay just compensation from the time its property was taken. We do not agree. It is settled that nonpayment of just compensation does not entitle the private landowners to recover possession 44 of their expropriated lot.
43

Forfom contends that since there is enormous proof that portions of the property taken by PNR were being leased to third parties there was enough justification for the Court of Appeals to order the return to petitioner of the leased portions as well as the rents received therefrom. We find such contention to be untenable. As ruled above, Forfom's inaction on and acquiescence to the taking of its land without any expropriation case being filed, and its continued negotiation with PNR on just compensation for the land, prevent him from raising any issues regarding the power and right of the PNR to expropriate and the public purpose for which the right was exercised. The only issue that remains is just compensation. Having no right to further question PNR's act of taking over and the corresponding public purpose of the condemnation, Forfom cannot now object to PNR's lease of portions of the land to third parties. The leasing out of portions of the property is already a matter between PNR and third persons in which Forfom can no longer participate. The same no longer has any bearing on the issue of just compensation. Forfom further avers that the leasing out of portions of the property to third persons is beyond the scope of public use and thus should be returned to it. We do not agree. The public-use requisite for the valid exercise of the power of eminent domain is a flexible and evolving concept influenced by changing conditions. At present, it may not be amiss to state that whatever is beneficially employed for the general welfare satisfies the requirement of public 45 use. The term "public use" has now been held to be synonymous with "public interest," 46 "public benefit," "public welfare," and "public convenience." It includes the broader notion of 47 indirect public benefit or advantage. Whatever may be beneficially employed for the general 48 welfare satisfies the requirement of public use. In the instant case, Mrs. Ramos of the PNR explains that the leasing of PNR's right of way is an incidental power and is in response to the government's social housing project. She said that to prevent the proliferation of squatting along the right of way, special contracts were entered into with selected parties under strict conditions to vacate the property leased upon notice. To the court, such purpose is indeed public, for it addresses the shortage in housing, which is a matter of concern for the state, as it directly affects public health, safety, environment and the general welfare. Forfom claims it was denied due process when its property was forcibly taken without due compensation for it. Forfom is not being denied due process. It has been given its day in court. The fact that its cause is being heard by this Court is evidence that it is not being denied due process. We now go to the issue of just compensation. Under Section 5 of the 1997 Rules of Civil Procedure, the court shall appoint not more than three competent and disinterested persons as commissioners to ascertain and report to the court the just compensation for the property. Though the ascertainment of just compensation 49 is a judicial prerogative, the appointment of commissioners to ascertain just compensation for the property sought to be taken is a mandatory requirement in expropriation cases. While it is true that the findings of commissioners may be disregarded and the trial court may substitute its own estimate of the value, it may only do so for valid reasons; that is, where the commissioners have applied illegal principles to the evidence submitted to them, where they have disregarded a clear preponderance of evidence, or where the amount allowed is either grossly inadequate or excessive. Thus, "trial with the aid of the commissioners is a substantial 50 right that may not be done away with capriciously or for no reason at all."

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In the case before us, the trial court determined just compensation, but not in an expropriation case. Moreover, there was no appointment of commissioners as mandated by the rules. The appointment of commissioners is one of the steps involved in expropriation proceedings. What the judge did in this case was contrary to what the rules prescribe. The judge should not have made a determination of just compensation without first having appointed the required commissioners who would initially ascertain and report the just compensation for the property involved. This being the case, we find the valuation made by the trial court to be ineffectual, not having been made in accordance with the procedure provided for by the rules. The next issue to be resolved is the time when just compensation should be fixed. Is it at the time of the taking or, as Forfom maintains, at the time when the price is actually paid? Where actual taking was made without the benefit of expropriation proceedings, and the owner sought recovery of the possession of the property prior to the filing of expropriation proceedings, the Court has invariably ruled that it is the value of the property at the time of 51 taking that is controlling for purposes of compensation. In the case at bar, the just compensation should be reckoned from the time of taking which is January 1973. The determination thereof shall be made in the expropriation case to be filed without delay by the PNR after the appointment of commissioners as required by the rules. Admittedly, the PNR's occupation of Forfom's property for almost eighteen (18) years entitles the latter to payment of interest at the legal rate of six (6%) percent on the value of the land at 52 the time of taking until full payment is made by the PNR. For almost 18 years, the PNR has enjoyed possession of the land in question without the benefit of expropriation proceedings. It is apparent from its actuations that it has no intention of filing any expropriation case in order to formally place the subject land in its name. All these years, it has given Forfom the runaround, failing to pay the just compensation it rightly deserves. PNR's uncaring and indifferent posture must be corrected with the awarding of exemplary damages, attorney's fees and expenses of litigation. However, since Forfom no longer appealed the deletion by both lower courts of said prayer for exemplary damages, the same cannot be granted. As to attorney's fees and expenses of litigation, we find the award thereof to be just and equitable. The amounts of P100,000.00 as attorney's fees and P50,000.00 as litigation expenses are reasonable under the premises. As explained above, the prayer for the return of the leased portions, together with the rental received therefrom, is denied. Unearned income for years after the takeover of the land is likewise denied. Having turned over the property to PNR, Forfom has no more right to receive any income, if there be any, derived from the use of the property which is already under the control and possession of PNR. As to actual damages corresponding to the sugarcane and mango trees that were allegedly destroyed when PNR entered and took possession of the subject land, we find that the same, being a question of fact, is better left to be determined by the expropriation court where the PNR will be filing the expropriation case. Evidence for such claim may be introduced before 53 the condemnation proceedings. WHEREFORE, the instant petition is PARTIALLY DENIED insofar as it denies Forfom Development Corporation's prayer for recovery of possession (in whole or in part) of the subject land, unearned income, and rentals. The petition is PARTIALLY GRANTED in that attorney's fees and litigation expenses in the amounts of P100,000.00 and P50,000.00, respectively, are awarded. The Philippine National Railways is DIRECTED to forthwith institute the appropriate expropriation action over the land in question, so that just compensation due to its owner may be determined in accordance with the Rules of Court, with interest at the legal rate of six (6%) percent per annum from the time of taking until full payment is made. As to the claim for the alleged damaged crops, evidence of the same, if any, may be presented before the expropriation court. No costs. SO ORDERED.

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G.R. No. L-2089 October 31, 1949 carry out the objectives of this Act. For this purpose, the agency so created or designated shall be considered a public corporation. The National Assembly approved this enactment on the authority of section 4 of Article XIII of the Constitution which, copied verbatim, is as follows: The Congress may authorize, upon payment of just compensation, the expropriation of lands to be subdivided into small lots and conveyed at cost to individuals. What lands does this provision have in view? Does it comprehend all lands regardless of their location, nature and area? The answer is to be found in the explanatory statement of Delegate Miguel Cuaderno, member of the Constitutional Convention who was the author or sponsor of the above-quoted provision. In this speech, which was entitled "Large Estates and Trust in Perpetuity" and is transcribed in full in Aruego's "The Framing of the Philippine Constitution," Mr. Cuaderno said: There has been an impairment of public tranquility, and to be sure a continuous of it, because of the existence of these conflicts. In our folklore the oppression and exploitation of the tenants are vividly referred to; their sufferings at the hand of the landlords are emotionally pictured in our drama; and even in the native movies and talkies of today, this theme of economic slavery has been touched upon. In official documents these same conflicts are narrated and exhaustively explained as a threat to social order and stability. But we should go to Rizal inspiration and illumination in this problem of this conflicts between landlords and tenants. The national hero and his family were persecuted because of these same conflicts in Calamba, and Rizal himself met a martyr's death because of his exposal of the cause of the tenant class, because he would not close his eyes to oppression and persecution with his own people as victims.lawphi1.nt I ask you, gentlemen of the Convention, knowing this as you do and feeling deeply as you must feel a regret over the immolation of the hero's life, would you not write in the Constitution the provision on large estates and trust in perpetuity, so that you would be the very instrument of Providence to complete the labors of Rizal to insure domestic tranquility for the masses of our people? If we are to be true to our trust, if it is our purpose in drafting our constitution to insure domestic tranquility and to provide for the well-being of our people, we cannot, we must fail to prohibit the ownership of large estates, to make it the duty of the government to break up existing large estates, and to provide for their acquisition by purchase or through expropriation and sale to their occupants, as has been provided in the Constitutions of Mexico and Jugoslavia. No amendment was offered and there was no debate. According to Dean Aruego, Mr. Cuaderno's resolution was readily and totally approved by the Convention. Mr. Cuaderno's speech therefore may be taken as embodying the intention of the framers of the organic law, and Act No. 539 should be construed in a manner consonant with that intention. It is to be presumed that the National Assembly did not intend to go beyond the constitutional scope of its powers.

JUSTA G. GUIDO, petitioner, vs. RURAL PROGRESS ADMINISTRATION, c/o FAUSTINO AGUILAR, Manager, Rural Progress Administration,respondent. Guillermo B. Guevara for petitioner. Luis M. Kasilag and Lorenzo B. Vizconde for respondent.

TUASON, J.: This a petition for prohibition to prevent the Rural Progress Administration and Judge Oscar Castelo of the Court of First Instance of Rizal from proceeding with the expropriation of the petitioner Justa G. Guido's land, two adjoining lots, part commercial, with a combined area of 22,655 square meters, situated in Maypajo, Caloocan, Rizal, just outside the north Manila boundary, on the main street running from this city to the north. Four grounds are adduced in support of the petition, to wit: (1) That the respondent RPA (Rural Progress Administration) acted without jurisdiction or corporate power in filling the expropriation complaint and has no authority to negotiate with the RFC a loan of P100,000 to be used as part payment of the value of the land. (2) That the land sought to be expropriated is commercial and therefore excluded within the purview of the provisions of Act 539. (3) That majority of the tenants have entered with the petitioner valid contracts for lease, or option to buy at an agreed price, and expropriation would impair those existing obligation of contract. (4) That respondent Judge erred in fixing the provisional value of the land at P118,780 only and in ordering its delivery to the respondent RPA. We will take up only ground No. 2. Our conclusion on this branch of the case will make superfluous a decision on the other questions raised. Sections 1 and 2 of Commonwealth Act No. 539, copied verbatim, are as follows: SECTION 1. The President of the Philippines is authorized to acquire private lands or any interest therein, through purchaser or farms for resale at reasonable prices and under such conditions as he may fix to their bona fide tenants or occupants or to private individuals who will work the lands themselves and who are qualified to acquire and own lands in the Philippines. SEC. 2. The President may designated any department, bureau, office, or instrumentality of the National Government, or he may organize a new agency to

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There are indeed powerful considerations, aside from the intrinsic meaning of section 4 of Article XIII of the Constitution, for interpreting Act No. 539 in a restrictive sense. Carried to extremes, this Act would be subversive of the Philippine political and social structure. It would be in derogation of individual rights and the time-honored constitutional guarantee that no private property of law. The protection against deprivation of property without due process for public use without just compensation occupies the forefront positions (paragraph 1 and 2) in the Bill for private use relieves the owner of his property without due process of law; and the prohibition that "private property should not be taken for public use without just compensation" (Section 1 [par. 2], Article III, of the Constitution) forbids necessary implication the appropriation of private property for private uses (29 C.J.S., 819). It has been truly said that the assertion of the right on the part of the legislature to take the property of and citizen and transfer it to another, even for a full compensation, when the public interest is not promoted thereby, is claiming a despotic power, and one inconsistent with very just principle and fundamental maxim of a free government. (29 C.J.S., 820.) Hand in hand with the announced principle, herein invoked, that "the promotion of social justice to insure the well-being and economic security of all the people should be the concern of the state," is a declaration, with which the former should be reconciled, that "the Philippines is a Republican state" created to secure to the Filipino people "the blessings of independence under a regime of justice, liberty and democracy." Democracy, as a way of life enshrined in the Constitution, embraces as its necessary components freedom of conscience, freedom of expression, and freedom in the pursuit of happiness. Along with these freedoms are included economic freedom and freedom of enterprise within reasonable bounds and under proper control. In paving the way for the breaking up of existing large estates, trust in perpetuity, feudalism, and their concomitant evils, the Constitution did not propose to destroy or undermine the property right or to advocate equal distribution of wealth or to authorize of what is in excess of one's personal needs and the giving of it to another. Evincing much concern for the protection of property, the Constitution distinctly recognize the preferred position which real estate has occupied in law for ages. Property is bound up with every aspects of social life in a democracy as democracy is conceived in the Constitution. The Constitution owned in reasonable quantities and used legitimately, plays in the stimulation to economic effort and the formation and growth of a social middle class that is said to be the bulwark of democracy and the backbone of every progressive and happy country. The promotion of social justice ordained by the Constitution does not supply paramount basis for untrammeled expropriation of private land by the Rural Progress Administration or any other government instrumentality. Social justice does not champion division of property or equality of economic status; what it and the Constitution do guaranty are equality of opportunity, equality of political rights, equality before the law, equality between values given and received on the basis of efforts exerted in their production. As applied to metropolitan centers, especially Manila, in relation to housing problems, it is a command to devise, among other social measures, ways and means for the elimination of slums, shambles, shacks, and house that are dilapidated, overcrowded, without ventilation. light and sanitation facilities, and for the construction in their place of decent dwellings for the poor and the destitute. As will presently be shown, condemnation of blighted urban areas bears direct relation to public safety health, and/or morals, and is legal. In reality, section 4 of Article XIII of the Constitution is in harmony with the Bill of Rights. Without that provision the right of eminent domain, inherent in the government, may be exercised to acquire large tracts of land as a means reasonably calculated to solve serious economic and social problem. As Mr. Aruego says "the primary reason" for Mr. Cuaderno's recommendation was "to remove all doubts as to the power of the government to expropriation the then existing landed estates to be distributed at costs to the tenant-dwellers thereof in the event that in the future it would seem such expropriation necessary to the solution of agrarian problems therein." In a broad sense, expropriation of large estates, trusts in perpetuity, and land that embraces a whole town, or a large section of a town or city, bears direct relation to the public welfare. The size of the land expropriated, the large number of people benefited, and the extent of social and economic reform secured by the condemnation, clothes the expropriation with public interest and public use. The expropriation in such cases tends to abolish economic slavery, feudalistic practices, and other evils inimical to community prosperity and contentment and public peace and order. Although courts are not in agreement as to the tests to be applied in determining whether the use is public or not, some go far in the direction of a liberal construction as to hold that public advantage, and to authorize the exercise of the power of eminent domain to promote such public benefit, etc., especially where the interest involved are considerable magnitude. (29 C.J.S., 823, 824. See also People of Puerto Rico vs. Eastern Sugar Associates, 156 Fed. [2nd], 316.) In some instances, slumsites have been acquired by condemnation. The highest court of New York States has ruled that slum clearance and reaction of houses for low-income families were public purposes for which New York City Housing authorities could exercise the power of condemnation. And this decision was followed by similar ones in other states. The underlying reasons for these decisions are that the destruction of congested areas and insanitary dwellings diminishes the potentialities of epidemic, crime and waste, prevents the spread of crime and diseases to unaffected areas, enhances the physical and moral value of the surrounding communities, and promotes the safety and welfare of the public in general. (Murray vs. La Guardia, 52 N.E. [2nd], 884; General Development Coop. vs. City of Detroit, 33 N.W. [2ND], 919; Weizner vs. Stichman, 64 N.Y.S. [2nd], 50.) But it will be noted that in all these case and others of similar nature extensive areas were involved and numerous people and the general public benefited by the action taken. The condemnation of a small property in behalf of 10, 20 or 50 persons and their families does not inure to the benefit of the public to a degree sufficient to give the use public character. The expropriation proceedings at bar have been instituted for the economic relief of a few families devoid of any consideration of public health, public peace and order, or other public advantage. What is proposed to be done is to take plaintiff's property, which for all we know she acquired by sweat and sacrifice for her and her family's security, and sell it at cost to a few lessees who refuse to pay the stipulated rent or leave the premises. No fixed line of demarcation between what taking is for public use and what is not can be made; each case has to be judge according to its peculiar circumstances. It suffices to say for the purpose of this decision that the case under consideration is far wanting in those elements which make for public convenience or public use. It is patterned upon an ideology far removed from that consecrated in our system of government and embraced by the majority of the citizens of this country. If upheld, this case would open the gates to more oppressive expropriations. If this expropriation be constitutional, we see no reason why a 10-, 15-, or 25-hectare farm land might not be expropriated and subdivided, and sold to those who want to own a portion of it. To make the analogy closer, we find no reason why the Rural Progress Administration could not take by condemnation an urban lot containing an area of 1,000 or 2,000 square meters for subdivision into tiny lots for resale to its occupants or those who want to build thereon. The petition is granted without special findings as to costs.

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G.R. No. L-18841 January 27, 1969 of messages handled in the international service, and those that may hereafter be promulgated by said convention and adhered to by the Government of the Republic 1 of the Philippines. The defendant, Philippine Long Distance Telephone Company (PLDT for short), is a public service corporation holding a legislative franchise, Act 3426, as amended by Commonwealth Act 407, to install, operate and maintain a telephone system throughout the Philippines and to carry on the business of electrical transmission of messages within the 2 Philippines and between the Philippines and the telephone systems of other countries. The RCA Communications, Inc., (which is not a party to the present case but has contractual relations with the parties) is an American corporation authorized to transact business in the Philippines and is the grantee, by assignment, of a legislative franchise to operate a domestic station for the reception and transmission of long distance wireless messages (Act 2178) and to operate broadcasting and radio-telephone and radio-telegraphic communications services 3 (Act 3180). Sometime in 1933, the defendant, PLDT, and the RCA Communications, Inc., entered into an agreement whereby telephone messages, coming from the United States and received by RCA's domestic station, could automatically be transferred to the lines of PLDT; and vice-versa, for calls collected by the PLDT for transmission from the Philippines to the United States. The contracting parties agreed to divide the tolls, as follows: 25% to PLDT and 75% to RCA. The sharing was amended in 1941 to 30% for PLDT and 70% for RCA, and again amended in 1947 to a 50-50 basis. The arrangement was later extended to radiotelephone messages to and from European and Asiatic countries. Their contract contained a 4 stipulation that either party could terminate it on a 24-month notice to the other. On 2 5 February 1956, PLDT gave notice to RCA to terminate their contract on 2 February 1958. Soon after its creation in 1947, the Bureau of Telecommunications set up its own Government Telephone System by utilizing its own appropriation and equipment and by 6 renting trunk lines of the PLDT to enable government offices to call private parties. Its application for the use of these trunk lines was in the usual form of applications for telephone service, containing a statement, above the signature of the applicant, that the latter will abide by the rules and regulations of the PLDT which are on file with the Public Service 7 Commission. One of the many rules prohibits the public use of the service furnished the 8 telephone subscriber for his private use. The Bureau has extended its services to the general 9 public since 1948, using the same trunk lines owned by, and rented from, the PLDT, and 10 prescribing its (the Bureau's) own schedule of rates. Through these trunk lines, a Government Telephone System (GTS) subscriber could make a call to a PLDT subscriber in the same way that the latter could make a call to the former. On 5 March 1958, the plaintiff, through the Director of Telecommunications, entered into an agreement with RCA Communications, Inc., for a joint overseas telephone service whereby the Bureau would convey radio-telephone overseas calls received by RCA's station 11 to and from local residents. Actually, they inaugurated this joint operation on 2 February 12 1958, under a "provisional" agreement. On 7 April 1958, the defendant Philippine Long Distance Telephone Company, complained to the Bureau of Telecommunications that said bureau was violating the conditions under which their Private Branch Exchange (PBX) is inter-connected with the PLDT's facilities, referring to the rented trunk lines, for the Bureau had used the trunk lines not only for the use of government offices but even to serve private persons or the general public, in competition with the business of the PLDT; and gave notice that if said violations were not

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, defendant-appellant. Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Antonio A. Torres and Solicitor Camilo D. Quiason for plaintiff-appellant. Ponce Enrile, Siguion Reyna, Montecillo and Belo for defendant-appellant. REYES, J.B.L., J.: Direct appeals, upon a joint record on appeal, by both the plaintiff and the defendant from the dismissal, after hearing, by the Court of First Instance of Manila, in its Civil Case No. 35805, of their respective complaint and counterclaims, but making permanent a preliminary mandatory injunction theretofore issued against the defendant on the interconnection of telephone facilities owned and operated by said parties. The plaintiff, Republic of the Philippines, is a political entity exercising governmental powers through its branches and instrumentalities, one of which is the Bureau of Telecommunications. That office was created on 1 July 1947, under Executive Order No. 94, with the following powers and duties, in addition to certain powers and duties formerly vested in the Director of Posts: 1awphil.t SEC. 79. The Bureau of Telecommunications shall exercise the following powers and duties: (a) To operate and maintain existing wire-telegraph and radio-telegraph offices, stations, and facilities, and those to be established to restore the pre-war telecommunication service under the Bureau of Posts, as well as such additional offices or stations as may hereafter be established to provide telecommunication service in places requiring such service; (b) To investigate, consolidate, negotiate for, operate and maintain wire-telephone or radio telephone communication service throughout the Philippines by utilizing such existing facilities in cities, towns, and provinces as may be found feasible and under such terms and conditions or arrangements with the present owners or operators thereof as may be agreed upon to the satisfaction of all concerned; (c) To prescribe, subject to approval by the Department Head, equitable rates of charges for messages handled by the system and/or for time calls and other services that may be rendered by said system; (d) To establish and maintain coastal stations to serve ships at sea or aircrafts and, when public interest so requires, to engage in the international telecommunication service in agreement with other countries desiring to establish such service with the Republic of the Philippines; and (e) To abide by all existing rules and regulations prescribed by the International Telecommunication Convention relative to the accounting, disposition and exchange

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stopped by midnight of 12 April 1958, the PLDT would sever the telephone 13 connections. When the PLDT received no reply, it disconnected the trunk lines being rented 14 by the Bureau at midnight on 12 April 1958. The result was the isolation of the Philippines, 15 on telephone services, from the rest of the world, except the United States. At that time, the Bureau was maintaining 5,000 telephones and had 5,000 pending 16 applications for telephone connection. The PLDT was also maintaining 60,000 telephones 17 and had also 20,000 pending applications. Through the years, neither of them has been able to fill up the demand for telephone service. The Bureau of Telecommunications had proposed to the PLDT on 8 January 1958 that both enter into an interconnecting agreement, with the government paying (on a call basis) for all calls passing through the interconnecting facilities from the Government 18 Telephone System to the PLDT. The PLDT replied that it was willing to enter into an agreement on overseas telephone service to Europe and Asian countries provided that the Bureau would submit to the jurisdiction and regulations of the Public Service Commission and 19 in consideration of 37 1/2% of the gross revenues. In its memorandum in lieu of oral argument in this Court dated 9 February 1964, on page 8, the defendant reduced its offer to 33 1/3 % (1/3) as its share in the overseas telephone service. The proposals were not accepted by either party. On 12 April 1958, plaintiff Republic commenced suit against the defendant, Philippine Long Distance Telephone Company, in the Court of First Instance of Manila (Civil Case No. 35805), praying in its complaint for judgment commanding the PLDT to execute a contract with plaintiff, through the Bureau, for the use of the facilities of defendant's telephone system throughout the Philippines under such terms and conditions as the court might consider reasonable, and for a writ of preliminary injunction against the defendant company to restrain the severance of the existing telephone connections and/or restore those severed. Acting on the application of the plaintiff, and on the ground that the severance of telephone connections by the defendant company would isolate the Philippines from other countries, the court a quo, on 14 April 1958, issued an order for the defendant: (1) to forthwith reconnect and restore the seventy-eight (78) trunk lines that it has disconnected between the facilities of the Government Telephone System, including its overseas telephone services, and the facilities of defendant; (2) to refrain from carrying into effect its threat to sever the existing telephone communication between the Bureau of Telecommunications and defendant, and not to make connection over its telephone system of telephone calls coming to the Philippines from foreign countries through the said Bureau's telephone facilities and the radio facilities of RCA Communications, Inc.; and (3) to accept and connect through its telephone system all such telephone calls coming to the Philippines from foreign countries until further order of this Court. On 28 April 1958, the defendant company filed its answer, with counterclaims. It denied any obligation on its part to execute a contrary of services with the Bureau of Telecommunications; contested the jurisdiction of the Court of First Instance to compel it to enter into interconnecting agreements, and averred that it was justified to disconnect the trunk lines heretofore leased to the Bureau of Telecommunications under the existing agreement because its facilities were being used in fraud of its rights. PLDT further claimed that the Bureau was engaging in commercial telephone operations in excess of authority, in competition with, and to the prejudice of, the PLDT, using defendants own telephone poles, without proper accounting of revenues. After trial, the lower court rendered judgment that it could not compel the PLDT to enter into an agreement with the Bureau because the parties were not in agreement; that under Executive Order 94, establishing the Bureau of Telecommunications, said Bureau was not limited to servicing government offices alone, nor was there any in the contract of lease of the trunk lines, since the PLDT knew, or ought to have known, at the time that their use by the Bureau was to be public throughout the Islands, hence the Bureau was neither guilty of fraud, abuse, or misuse of the poles of the PLDT; and, in view of serious public prejudice that would result from the disconnection of the trunk lines, declared the preliminary injunction permanent, although it dismissed both the complaint and the counterclaims. Both parties appealed. Taking up first the appeal of the Republic, the latter complains of the action of the trial court in dismissing the part of its complaint seeking to compel the defendant to enter into an interconnecting contract with it, because the parties could not agree on the terms and conditions of the interconnection, and of its refusal to fix the terms and conditions therefor. We agree with the court below that parties can not be coerced to enter into a contract where no agreement is had between them as to the principal terms and conditions of the contract. Freedom to stipulate such terms and conditions is of the essence of our contractual system, and by express provision of the statute, a contract may be annulled if tainted by violence, intimidation, or undue influence (Articles 1306, 1336, 1337, Civil Code of the Philippines). But the court a quo has apparently overlooked that while the Republic may not compel the PLDT to celebrate a contract with it, the Republic may, in the exercise of the sovereign power of eminent domain, require the telephone company to permit interconnection of the government telephone system and that of the PLDT, as the needs of the government service may require, subject to the payment of just compensation to be determined by the court. Nominally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the expropriated property; but no cogent reason appears why the said power may not be availed of to impose only a burden upon the owner of condemned property, without loss of title and possession. It is unquestionable that real property may, through expropriation, be subjected to an easement of right of way. The use of the PLDT's lines and services to allow inter-service connection between both telephone systems is not much different. In either case private property is subjected to a burden for public use and benefit. If, under section 6, Article XIII, of the Constitution, the State may, in the interest of national welfare, transfer utilities to public ownership upon payment of just compensation, there is no reason why the State may not require a public utility to render services in the general interest, provided just compensation is paid therefor. Ultimately, the beneficiary of the interconnecting service would be the users of both telephone systems, so that the condemnation would be for public use. The Bureau of Telecommunications, under section 78 (b) of Executive Order No. 94, may operate and maintain wire telephone or radio telephone communications throughout the Philippines by utilizing existing facilities in cities, towns, and provinces under such terms and conditions or arrangement with present owners or operators as may be agreed upon to the satisfaction of all concerned; but there is nothing in this section that would exclude resort to condemnation proceedings where unreasonable or unjust terms and conditions are exacted, to the extent of crippling or seriously hampering the operations of said Bureau.

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A perusal of the complaint shows that the Republic's cause of action is predicated upon the radio telephonic isolation of the Bureau's facilities from the outside world if the severance of interconnection were to be carried out by the PLDT, thereby preventing the Bureau of Telecommunications from properly discharging its functions, to the prejudice of the general public. Save for the prayer to compel the PLDT to enter into a contract (and the prayer is no essential part of the pleading), the averments make out a case for compulsory rendering of inter-connecting services by the telephone company upon such terms and conditions as the court may determine to be just. And since the lower court found that both parties "are practically at one that defendant (PLDT) is entitled to reasonable compensation from plaintiff for the reasonable use of the former's telephone facilities" (Decision, Record on Appeal, page 224), the lower court should have proceeded to treat the case as one of condemnation of such services independently of contract and proceeded to determine the just and reasonable compensation for the same, instead of dismissing the petition. This view we have taken of the true nature of the Republic's petition necessarily results in overruling the plea of defendant-appellant PLDT that the court of first instance had no jurisdiction to entertain the petition and that the proper forum for the action was the Public Service Commission. That body, under the law, has no authority to pass upon actions for the taking of private property under the sovereign right of eminent domain. Furthermore, while the defendant telephone company is a public utility corporation whose franchise, equipment and other properties are under the jurisdiction, supervision and control of the Public Service Commission (Sec. 13, Public Service Act), yet the plaintiff's telecommunications network is a public service owned by the Republic and operated by an instrumentality of the National Government, hence exempt, under Section 14 of the Public Service Act, from such jurisdiction, supervision and control. The Bureau of Telecommunications was created in pursuance of a state policy reorganizing the government offices to meet the exigencies attendant upon the establishment of the free and independent Government of the Republic of the Philippines, and for the purpose of promoting simplicity, economy and efficiency in its operation (Section 1, Republic Act No. 51) and the determination of state policy is not vested in the Commission (Utilities Com. vs. Bartonville Bus Line, 290 Ill. 574; 124 N.E. 373). Defendant PLDT, as appellant, contends that the court below was in error in not holding that the Bureau of Telecommunications was not empowered to engage in commercial telephone business, and in ruling that said defendant was not justified in disconnecting the telephone trunk lines it had previously leased to the Bureau. We find that the court a quo ruled correctly in rejecting both assertions. Executive Order No. 94, Series of 1947, reorganizing the Bureau of Telecommunications, expressly empowered the latter in its Section 79, subsection (b), to "negotiate for, operate and maintain wire telephone or radio telephone communication service throughout the Philippines", and, in subsection (c), "to prescribe, subject to approval by the Department Head, equitable rates of charges for messages handled by the system and/or for time calls and other services that may be rendered by the system". Nothing in these provisions limits the Bureau to non-commercial activities or prevents it from serving the general public. It may be that in its original prospectuses the Bureau officials had stated that the service would be limited to government offices: but such limitations could not block future expansion of the system, as authorized by the terms of the Executive Order, nor could the officials of the Bureau bind the Government not to engage in services that are authorized by law. It is a well-known rule that erroneous application and enforcement of the law by public officers do not block subsequent correct application of the statute (PLDT vs. Collector of Internal Revenue, 90 Phil. 676), and that the Government is never estopped by mistake or error on the part of its agents (Pineda vs. Court of First Instance of Tayabas, 52 Phil. 803, 807; Benguet Consolidated Mining Co. vs. Pineda, 98 Phil. 711, 724). The theses that the Bureau's commercial services constituted unfair competition, and that the Bureau was guilty of fraud and abuse under its contract, are, likewise, untenable. First, the competition is merely hypothetical, the demand for telephone service being very much more than the supposed competitors can supply. As previously noted, the PLDT had 20,000 pending applications at the time, and the Bureau had another 5,000. The telephone company's inability to meet the demands for service are notorious even now. Second, the charter of the defendant expressly provides: SEC. 14. The rights herein granted shall not be exclusive, and the rights and power to grant to any corporation, association or person other than the grantee franchise for the telephone or electrical transmission of message or signals shall not be impaired or affected by the granting of this franchise: (Act 3436) And third, as the trial court correctly stated, "when the Bureau of Telecommunications subscribed to the trunk lines, defendant knew or should have known that their use by the subscriber was more or less public and all embracing in nature, that is, throughout the Philippines, if not abroad" (Decision, Record on Appeal, page 216). The acceptance by the defendant of the payment of rentals, despite its knowledge that the plaintiff had extended the use of the trunk lines to commercial purposes, continuously since 1948, implies assent by the defendant to such extended use. Since this relationship has been maintained for a long time and the public has patronized both telephone systems, and their interconnection is to the public convenience, it is too late for the defendant to claim misuse of its facilities, and it is not now at liberty to unilaterally sever the physical connection of the trunk lines. ..., but there is high authority for the position that, when such physical connection has been voluntarily made, under a fair and workable arrangement and guaranteed by contract and the continuous line has come to be patronized and established as a great public convenience, such connection shall not in breach of the agreement be severed by one of the parties. In that case, the public is held to have such an interest in the arrangement that its rights must receive due consideration. This position finds approval in State ex rel. vs. Cadwaller, 172 Ind. 619, 636, 87 N.E. 650, and is stated in the elaborate and learned opinion of Chief Justice Myers as follows: "Such physical connection cannot be required as of right, but if such connection is voluntarily made by contract, as is here alleged to be the case, so that the public acquires an interest in its continuance, the act of the parties in making such connection is equivalent to a declaration of a purpose to waive the primary right of independence, and it imposes upon the property such a public status that it may not be disregarded" citing Mahan v. Mich. Tel. Co., 132 Mich. 242, 93 N.W. 629, and the reasons upon which it is in part made to rest are referred to in the same opinion, as follows: "Where private property is by the consent of the owner invested with a public interest or privilege for the benefit of the public, the owner can no longer deal with it as private property only, but must hold it subject to the right of the public in the exercise of that public interest or privilege conferred for their benefit." Allnut v.

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Inglis (1810) 12 East, 527. The doctrine of this early case is the acknowledged law. (Clinton-Dunn Tel. Co. v. Carolina Tel. & Tel. Co., 74 S.E. 636, 638). It is clear that the main reason for the objection of the PLDT lies in the fact that said appellant did not expect that the Bureau's telephone system would expand with such rapidity as it has done; but this expansion is no ground for the discontinuance of the service agreed upon. The last issue urged by the PLDT as appellant is its right to compensation for the use of its poles for bearing telephone wires of the Bureau of Telecommunications. Admitting that section 19 of the PLDT charter reserves to the Government the privilege without compensation of using the poles of the grantee to attach one ten-pin cross-arm, and to install, maintain and operate wires of its telegraph system thereon; Provided, however, That the Bureau of Posts shall have the right to place additional cross-arms and wires on the poles of the grantee by paying a compensation, the rate of which is to be agreed upon by the Director of Posts and the grantee; the defendant counterclaimed for P8,772.00 for the use of its poles by the plaintiff, contending that what was allowed free use, under the aforequoted provision, was one ten-pin cross-arm attachment and only for plaintiff's telegraph system, not for its telephone system; that said section could not refer to the plaintiff's telephone system, because it did not have such telephone system when defendant acquired its franchise. The implication of the argument is that plaintiff has to pay for the use of defendant's poles if such use is for plaintiff's telephone system and has to pay also if it attaches more than one (1) ten-pin cross-arm for telegraphic purposes. As there is no proof that the telephone wires strain the poles of the PLDT more than the telegraph wires, nor that they cause more damage than the wires of the telegraph system, or that the Government has attached to the poles more than one ten-pin cross-arm as permitted by the PLDT charter, we see no point in this assignment of error. So long as the burden to be borne by the PLDT poles is not increased, we see no reason why the reservation in favor of the telegraph wires of the government should not be extended to its telephone lines, any time that the government decided to engage also in this kind of communication. In the ultimate analysis, the true objection of the PLDT to continue the link between its network and that of the Government is that the latter competes "parasitically" (sic) with its own telephone services. Considering, however, that the PLDT franchise is non-exclusive; that it is well-known that defendant PLDT is unable to adequately cope with the current demands for telephone service, as shown by the number of pending applications therefor; and that the PLDT's right to just compensation for the services rendered to the Government telephone system and its users is herein recognized and preserved, the objections of defendantappellant are without merit. To uphold the PLDT's contention is to subordinate the needs of the general public to the right of the PLDT to derive profit from the future expansion of its services under its non-exclusive franchise. WHEREFORE, the decision of the Court of First Instance, now under appeal, is affirmed, except in so far as it dismisses the petition of the Republic of the Philippines to compel the Philippine Long Distance Telephone Company to continue servicing the Government telephone system upon such terms, and for a compensation, that the trial court may determine to be just, including the period elapsed from the filing of the original complaint or petition. And for this purpose, the records are ordered returned to the court of origin for further hearings and other proceedings not inconsistent with this opinion. No costs.

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September 30, 1960 G.R. No. L-13582 REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. CIRILO P. BAYLOSIS, ET AL., defendants and appellants. Manuel P. Calanog for appellants. First Assistant Solicitor General Guillermo E. Torres and Solicitor R.P. Caiza for appellee. , J.: This case is an offshoot of our decision in G.R. No. L-6191, Republic of the Philippines vs. Cirilo Baylosis, et al., promulgated January 31, 1955, (96 Phil. 461; 51 O.G. No. 2, 62), sustaining the motions to dismiss of appellants and ordering the dismissal of the expropriation proceedings filed by the Republic of the Philippines in the Court of First Instance of Batangas (C.C. No. 84) to expropriate seven lots formerly constituting part of the Lian Estate (Hacienda Lian) in the municipality of Lian, Batangas. It appears that after the records were returned by this Court to the Court a quo, the plaintiff Republic of the Philippines filed on June 30, 1955 a motion to withdraw its preliminary deposit of P27,105.22 made pursuant to section 3, Rule 69 of the Rules of Court, and by virtue of which it was placed in the possession of parcels in question, on the ground that whatever claims for damages the finality of our decision in G.R. No. L-6191, which made no pronouncement on nor contained a reservation of defendants right to claim damages. Defendants opposed the motion, claiming that their losses and damages resulting from the transfer of the possession of their lands to plaintiff and which they alleged in their motions to dismiss had not yet been determined by the trial court. Notwithstanding the opposition, the court below, on July 25, 1955, ordered the result of the aforesaid deposit to plaintiff, for the reason that the defendants have not taken any step towards the recovery of such damages, nor is there any assurance that they would do so in the immediate future, on the assumption that their right to pursue such claim for damages is not barred by laches. Defendants accordingly moved for the reconsideration of such order, and before their motion for reconsideration was resolved, also moved that their counterclaims for the damages be set for hearing. Both motions were denied by the court; whereupon, defendants interposed the present appeal to this Court. We find merit in the appeal. Firstly, appellants are right in claiming that the lower court should not have authorized the withdrawal of plaintiffs preliminary deposit before their right to recover the damages allegedly suffered by them by reason of the filing of the expropriation suit is finally determined and adjudicated. For as we said in Visayan Refining Co. vs. Camus, 40 Phil. 562, said deposit protects the defendant from any danger of loss resulting from the temporary o ccupation of the land by the Government, for it is obvious that this preliminary deposit serve the double purpose of a prepayment upon the value of the property, if finally expropriated, and as an indemnity against damages in the eventuality that the proceedings should fail of consummation. To return this deposit to plaintiff now would, therefore, be depriving defendants of this legal safeguard for the payment of their damages in case they are finally held to have the right to collect said damages in these same proceedings. The decisive question in this appeal, therefore, is whether or not appellants can still prove and recover their damages in this same action. Appellee and the lower court entertain the view that appellants are now barred from claiming any damages in this case, because our decision in G.R. No. L-6191 made no reservation of their right to do so, and said decision is now res judicata. Appellants, upon the other hand, maintain that the only issue involved in that appeal was plaintiffs right to expropriate their lands, and as their right to damages was not brought up and litigated therein, the decision of this Court in said appeal can not be res judicata as to such matter. Again we find appellants position on this matter the more tenable. The records show that all of appellants motion to dismiss contained counterclaims for damages supposedly suffered by them as a result of the filing of the expropriation proceedings. When the motions to dismiss were called for trial, however, the hearing was confined to the issue of plaintiffs right to expropriate, and evidence was accordingly adduced by the parties on this question alone (see Decision of the court below, R.A., pp. 162-163). In fact, defendants at this hearing started to prove their damages, but they were prevented from doing so by the lower Court, saying that such matter will be for the commissioners (t.s.n. of February 18, 1952, p. 293); and for that reason, defendants, through counsel, repeatedly manifested that they were reserving their right to present evidence on their damages (t.s.n., ibid, pp. 293, 297, 298), and the reservation was approved by the court (ibid, p. 298). Unfortunately for defendants, the trial court upheld plaintiffs right to expropriate; and from this finding exclusively, they appealed to this Court in G.R. No. L-6191. In view of the antecedents, it can not be said that appellants are now barred from proving their alleged in this case simply because their right to do so had not been reserved in our decision in G.R. No. L-6191. The reservation had already been made in the court below and duly approved therein; the reservation was not questioned by the Government, and it did not appeal therefrom. As there was already that reservation, it was needless for appellants, to raise such matter on appeal or ask for a reservation of their right to prove damages in our

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decision in G.R. No. L-6191. In a similar case wherein agreed to the appointment of commissioners and presented evidence before them, upon the understanding that said hearing was without prejudice to discussing later the question relative to the right to plaintiff to expropriate, we held that the reservation was very expressive in the sense that in the mind of the court, defendants never had the intention of waiving that defense as otherwise it would not stated in its order such reservation. Such reservation negatives the idea of waiver. (Republic vs. G.R. No. L-6161, May 28, 1954.) The reservation made by appellants and approved by the court in this case can not be any less effective than the reservation in the Gabriel case. Plaintiff-appellee cites two cases to support its contention that the absence of a reservation of appellants right to recover damages in G.R. No. L-6191 forecloses such right, but the case cited are inapplicable to this case because of the substantial differences in the facts and issues in said cases and the present one. In the first place, both cases cited involved, not motions to dismiss filed by defendants wherein they expressly included counterclaims for damages as in this case, but motions to dismiss at the instance of plaintiff, the very party that filed the expropriation proceedings. In the first case, Metropolitan Water District vs. De Los Angeles, 55 Phil. 776 plaintiffs motion to dismiss was even filed after the lower court had already decided the case in its favor, and an appeal already taken by both parties on the question of just compensation. In view of the motion to dismiss filed by plaintiff on appeal, the only question presented for decision was whether or not plaintiff should be allowed to dismiss the proceedings at that stage, since defendants had already suffered great damages by reason of their dispossession and incurred into great expenses by reason of the long and protracted litigation. In sustaining plaintiffs right to dismiss, we had, of necessity and in justice to defendants, to reserve to them the right to recover their damages either in the same or in another action. While in the case of City of Manila vs. J.C. Ruymann, 37 Phil. 421, the lower court sustained plaintiffs motion to dismiss the expropriation proceedings, reserving to defendants their to prove damages in another action, so that defendants appealed, urging that they should be allowed to recover their damages in the same proceedings since they had claimed damages in their motions to dismiss. As the precise question presented to us in the appeal was defendants right to claim and recover damages in the same proceedings, it was necessary for us to declare in our decision that they had said right. These cases can not be invoked in the case at bar, not only because the only question presented in G.R. No. L-6191 was whether or not plaintiff was entitled to expropriate defendants properties, but also because, as already stated, the right of defendants to prove in the same proceedings the damages alleged in their motions to dismiss had already been reserved to them by the trial court. Wherefore, the order appealed from is reserved, and the records are remanded to the court a quo for trial on appellants counterclaims for damages and oth er reliefs contained in their motions to dismiss. Costs against plaintiff-appellee. The remaining question involves the denial by the court below of appellants m otion to set for hearing their counterclaims for damages, for the reason given that the motion of the defendants to set for hearing their counterclaim for damages would in effect be to reopen a case decided by the Supreme Court unconditionally and with fi nality (R.A., p. 208). This order will also have to be reserve, in view of what we have already said upholding appellants right to prove and recover their damages in these same proceedings. As for appellees contention that appellants are guilty of laches in the prosecution of their claims for damages, we do not think the delay of four months in their asking for the trial of their counterclaims (see Appellees Brief, p. 8) is such unreasonable length of time as would justify us to dismiss said claims on the ground of laches or non-suit. Anyway, no prejudice could have been caused plaintiff by this delay.

85 | P a g e
FERMIN MANAPAT, Petitioner, G.R. No. 110478
[1]

YNARES-SANTIAGO, J., - versus - versus AUSTRIA-MARTINEZ, CHICO-NAZARIO, COURT OF APPEALS and MAXIMO LOBERANES, NATIONAL HOUSING ELADIO QUIMQUE, CESARIO AUTHORITY, VEGA, JUANITO SANTOS, Respondents. ALEJANDRO ORACION and GONZALO MERCADO, x- - - - - - - - - - - - - - - - - - - - - - - - -x Respondents. October 15, 2007 Promulgated: REYES, JJ. NACHURA, and Chairperson,

DOMINGO LIM, Petitioner,

G.R. No. 116176 x------------------------------------------------------------------------------------x

- versus DECISION

COURT OF APPEALS and NACHURA, J.: NATIONAL HOUSING AUTHORITY, Respondents. x- - - - - - - - - - - - - - - - - - - - - - - - -x For the resolution of the Court are three consolidated petitions for review NATIONAL HOUSING AUTHORITY, Petitioner, Present: G.R. Nos. 116491-503 on certiorari under Rule 45 of the Rules of Court. G.R. No. 110478 assails the May 27, 1993 Decision
[2]

of the Court of Appeals (CA) in CA-G.R. CV Nos. 10200-10212. G.R. No.

[3]

116176 questions the June 28, 1994 Decision

of the appellate court in CA-G.R. CV No.

86 | P a g e
27159. G.R. Nos.
[4]

116491-503

assails

the March

2,

1994 and

the July

25,

1994 Resolutions

of the CA also in CA-G.R. CV Nos. 10200-10212.

The three-decade saga of the parties herein has for its subject parcels of land forming part of what was originally known as the Grace Park Subdivision in Caloocan City and formerly owned by the Roman Catholic Archbishop of Manila (RCAM) and/or the Philippine Realty Corporation (PRC).

87 | P a g e
The Facts filed several expropriation proceedings over the already subdivided lots for the purpose of developing Grace Park under the Zonal Improvement Program (ZIP) and subdividing it into small lots for distribution and resale at a low cost to the residents of the area. Sometime in the 1960s, RCAM allowed a number of individuals to occupy the Grace Park property on condition that they would vacate the premises should the former push through with the plan to construct a school in the area. The plan, however, did not materialize, thus, the occupants offered to purchase the portions they occupied. Later, as they could not afford RCAMs proposed price, the occupants, organizing themselves as exclusive members of the Eulogio Rodriguez, Jr. Tenants Association, Inc., petitioned the Government for the acquisition of the said property, its subdivision into home lots, and the resale of the subdivided lots to them at a low price.
[5] [9]

The following

cases were filed by the NHA with the Regional Trial Court (RTC) of Caloocan City: C-6225, C6226, C-6227, C-6228, C-6229, C-6230, C-6231, C-6232, C-6233, C-6234, C-6235, C-6236, C-6237, C-6238, C-6255 and C-6435.
[10]

After due proceedings, the trial court rendered separate decisions dismissing the expropriation cases, with the exceptions of Cases Nos. C-6233 and C-6236 in which it ordered the condemnation of the involved lots.
[11]

On motion for reconsideration by the NHA in

Cases Nos. C-6227, C-6228, C-6230, C-6234, C-6235, C-6238 and C-6255, the trial court later amended its decision, set aside its dismissal of the said cases, ordered the Acting on the associations petition, the Government, in 1963, through the Land Tenure Administration (LTA), later succeeded by the Peoples Homes ite and Housing Corporation (PHHC), negotiated for the acquisition of the property from RCAM/PRC. But because of the high asking price of RCAM and the budgetary constraints of the Government, the latters effort to purchase and/or to expropriate the property was discontinued. RCAM then decided to effect, on its own, the subdivision of the property and the sale of the individual subdivided lots to the public.
[6]

condemnation of the involved lots and fixed the amount of just compensation at P180.00 per square meter. In Cases Nos. C-6225, C-6229, C-6231, C-6232, C-6237 and C-6435, the RTC however denied NHAs motion for reconsideration.
[12]

NHA eventually appealed to the CA the decisions in Cases Nos. C-6225, C-6229, C6231, C-6232, C-6237 and C-6435 on the issue of the necessity of the taking, and the amended ruling in Cases Nos. C-6227, C-6228, C-6230, C-6234, C-6235, C-6238 and C6255 on the issue of just compensation.
[13]

Petitioners Manapat and Lim and respondents Loberanes,

Quimque, Vega,Santos, Oracion and Mercado in these consolidated cases were among those who purchased individual subdivided lots of Grace Park directly from RCAM and/or PRC.
[7]

The CA consolidated the appeals and docketed

them as CA-G.R. CV No. 10200-10212. NHA likewise filed with the CA an appeal from the decision in C-6226, which was docketed as CA-G.R. CV No. 27159. A significant turn of events however happened in 1977 when the late President Ferdinand E. Marcos issued Presidential Decree (PD) No. 1072,
[8]

appropriatingP1.2M out of On May 27, 1993, the appellate court rendered its Decision 10200-10212 disposing of the appealed cases as follows:
[14]

the Presidents Special Operations Funds to cover the additional amount needed for the expropriation of Grace Park. The National Housing Authority (NHA), PHHCs successor, then

in CA-G.R. CV No.

88 | P a g e

WHEREFORE, rendered:

premises

considered,

judgment

is

hereby Rosemarie and Dolores Guanzon, two of the owners of the lots in C-6225, filed before this Court a petition for review on certiorari of the aforesaid decision of the appellate court

1) Reversing and setting aside the decisions of dismissal in Cases Nos. C-6225, C-6229, C-6231, C-6232, C-6237 and C-6435; and in lieu thereof an order of condemnation is entered declaring that plaintiffappellant NHA has a lawful right to take the lots involved for the public use described in the complaints;

[Their petition was docketed as G.R. Nos. 110462-74]. On September 5, 1994, we dismissed their petition for failure to sufficiently show that the CA had committed any reversible error in the challenged decision.
[16]

An Entry of Judgment was issued on February 2, 1995.

[17]

2) Affirming the decisions in Case Nos. C-6227, C-6228, C-6234, C-6235, C-6238 and C-6255 insofar as said decision granted the expropriation; declaring that plaintiff-appellant NHA has a lawful right to take the lots involved for the public use stated in the complaint; but annulling and setting aside the just compensation fixed by the trial court at P180.00 per square meter in the said cases;

Likewise, Julia Diez and Remedios Macato, the owners of the lots in C-6227, assailed before us the afore-quoted CA decision through a petition under Rule 45. On July 28, 1993, however, in G.R. No. 110770, we denied their Motion for Extension of Time to file a petition for review on certiorari for their failure to submit an affidavit of service of the motion as

3) Ordering the remand of all the appealed cases, except for Case No. C-6230, to the trial court for determination of the just compensation to which defendants are entitled in accordance with Rule 67 of the Revised Rules of Court;

required by

4) Finding the compromise agreement in Case No. C-6230, entitled, NHA v. Aurora Dy dela Costa, et al. in accordance with law, and not contrary to morals or public policy, and rendering judgment in accordance therewith;

5) Ordering Remedios Macato to be joined as defendant with Julia C. Diaz in Case No. C-6227.

No pronouncement as to costs.

SO ORDERED.

[15]

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Circular No. 19-91.
[18]

After denying their motion for reconsideration,

[20]

[19]

we issued an Entry of

Judgment on August 27, 1993.

Petitioner Manapat, the defendant-landowner in C-6229, also elevated the case before us via a petition for review on certiorari docketed as G.R. No. 110478. dismissed this petition for having been filed out of time, reconsideration.
[23] [22] [21]

Quimque are declared exempt from expropriation and the corresponding complaints for expropriation (sic) DISMISSED insofar as said lots are concerned. Lot No. 22, Block No. 157 owned by movant Alejandro Oracion is declared exempt from expropriation to the extent of Three Hundred (300) square meters. Only the remaining Ninety (90) square meters shall be the subject of expropriation, the portion to be determined by the lower court in the manner most beneficial to the owner and consistent with the objective of PD 1072.

We initially SO ORDERED.
[26]

but we reinstated it on motion for

In the meantime, the other defendants-landowners in the expropriation cases RCAM/PRC in C-6225, Maximo Loberanes and Eladio Quimque in C-6231, Alejandro Oracion, Gonzalo Mercado, Cesario Vega and Juanito Santos in C-6435, and Remedios Macato in C-6227moved for the reconsideration of the said May 27, 1993 Decision of the CA.
[24]

Aggrieved by the said March 2, 1994 CA Resolution specifically with regard to the exemption from expropriation of the lots of Loberanes, Quimque, Mercado, Vega and Santos, and the partial exemption of the lot of Oracion, NHA moved for the reconsideration of the same. In the subsequent July 25, 1994 Resolution,
[27]

the appellate court denied NHAs

In the March 2, 1994 Resolution,

[25]

the appellate court resolved the motions in this

motion, together with the belated motion of Vivencio S. de Guzman, the defendant-landowner in C-6255. The dispositive portion of the July 25, 1994 Resolution reads:

wise:

WHEREFORE, premises considered, the motion for reconsideration of movants Roman Catholic Archbishop of Manila and Philippine Realty Corporation (in Special Civil Action No. 6225) and movant-intervenor Remedios Macato (in Special Civil Action No. 6227) are DENIED.

WHEREFORE, the motions for reconsideration of defendantappellant Vivencio S. de Guzman of the decision promulgated May 27, 1993 and of plaintiff-appellant National Housing Authority of the resolution promulgated March 2, 1994 are DENIED.

SO ORDERED. The motions for reconsideration of movants Gonzalo Mercado, Cesario Vega and Juanito Santos (in Special Civil Action No. 6435) and movants Maximo Loberanes and Eladio Quimque (in Special Civil Action No. 6231) are GRANTED. The motion for reconsideration of movant Alejandro Oracion (in Special Civil Action No. 6435) is partially granted to the extent of Three Hundred (300) square meters of Lot 22, Block 157. The decision of this Court promulgated May 27, 1993 is accordingly MODIFIED. Lot No. 26, Block No. 157 owned by Cesario Vega and Juanito Santos, and Lot No. 4, Block No. 157 owned by Maximo Loberanes and Eladio

[28]

With the denial of its motion for reconsideration, NHA filed with this Court a Consolidated Petition for Review
[29]

under Rule 45, as aforesaid, assailing the March 2, 1994

and the July 25, 1994 Resolutions of the appellate court. NHAs petition was docketed

90 | P a g e
as G.R. Nos. 116491-503 against respondents Loberanes and Quimque (in C-6231), Vega, Santos, Oracion and Mercado (in C-6435). In G.R. No. 110487, petitioner Manapat argues in the main that, as he is also a member of the tenant association, the beneficiary of the expropriation, it would be incongruous to take the land away from him only to give it back to him as an intended In Decision
[30]

separate

development,

the

CA,

on June

28,

1994,

rendered

its beneficiary. Accordingly, the CA, in its May 27, 1993 Decision in CA-G.R. CV No. 1020010212, should not have allowed the expropriation of his lot. To further support his stance,

in CA-G.R. CV No. 27159, reversing the RTCs ruling in C-6226. The fallo of the

decision reads: Manapat raises the following grounds:

WHEREFORE, FOREGOING PREMISES CONSIDERED, the appealed decision dated October 29, 1986 is hereby REVERSED for want of merit. Let the record of this case be remanded to the court of origin for further proceedings.

IT IS SO ORDERED.

[31]

THE COURT OF APPEALS ERRED IN HOLDING THAT THE ISSUANCE MADE IN THE EXERCISE OF LEGISLATIVE POWER, SPECIFYING THE LOTS TO BE EXPROPRIATED AND THE PURPOSE FOR WHICH THEY ARE INTENDED, REMOVES FROM THE JUDICIARY THE DETERMINATION OF THE NECESSITY OF THE TAKING, THERE BEING [33] NO SHOWING OF ABUSE OF DISCRETION.

II Discontented with the appellate courts ruling, petitioner Domingo Lim, one of the owners of the lots subject of C-6226, elevated the case to us via a petition for review on certiorari docketed as G.R. No. 116176.
[32]

SUPERVENING EVENT RENDERS IMPROPER THE DISPOSITION BY THE COURT OF APPEALS FOR AN ORDER OF CONDEMNATION DECLARING THAT NHA HAS A LAWFUL RIGHT TO TAKE THE LOT OF FERMIN MANAPAT FOR SUPPOSED PUBLIC USE AND FOR REMAND OF HIS CASE TO THE TRIAL COURT FOR DETERMINATION OF JUST [34] COMPENSATION.

The Issues III

Thus, for resolution by this Court are the following consolidated cases: (1) G.R. No. 110478 of Manapat; (2) G.R. Nos. 116491-503 of the NHA; and (3)G.R. No. 116176 of Lim.

THE COURT OF APPEALS SHOULD HAVE CONSIDERED THAT FERMIN MANAPAT IS NOT ONLY A BONA FIDE OCCUPANT IN THE GRACE PARK SUBDIVISION FOR PURPOSES OF P.D. 1072 BUT

91 | P a g e
LIKEWISE HAS A TRANSFER CERTIFICATE OF TITLE NO. 42370 OF THE REGISTRY OF DEEDS FOR THE CITY OF CALOOCANOVER THE SAME LOT SOUGHT TO BE EXPROPRIATED WHICH SHOULD NOT BE SUBJECT TO COLLATERAL ATTACK AS DISPOSED BY THE COURT [35] OF APPEALS. B. IV Republic Act 7279 is a substantive and penal law with a penalty clause which cannot apply retroactively especially to [39] pending actions.

Republic Act No. 7279 and PD 1072 are not in pari [40] materia.

THE COURT OF APPEALS SHOULD HAVE CONSIDERED THAT THE EVENTUAL BENEFICIARIES OF ITS BENEVOLENT EXPROPRIATION [36] ARE SQUATTERS.

The retroactive application of Article VI, Section 10 of RA 7279 will affect vested rights of petitioner-appellant NHA [41] arising from its exercise of the power of eminent domain.

II

NHA, in its petition in G.R. Nos. 116491-503, primarily contends that the CA erred when it issued its March 2, 1994 Resolution and modified the May 27, 1993 Decision in CAG.R. CV No. 10200-10212 to the extent that it applied retroactively Article VI, Section 10 of Republic Act (R.A.) No. 7279, thus exempting from expropriation the 300-sq m lots of respondents Loberanes, Quimque, Vega, Santos, Oracion and Mercado. NHA summarized its arguments as follows:

The Honorable Court of Appeals erred in ignoring the impractical [42] consequences resulting from a selective expropriation of lots.

In G.R. No. 116176, petitioner Lim, a non-member of the tenant association who bought from RCAM/PRC four lots of the subdivided Grace Park Subdivision, follows:
[43]

argues as

I 1 The Honorable Court of Appeals erred in applying retroactively Article VI, Section 10 of Republic Act No. 7279 to the subject expropriation cases [37] instituted back in 1977 by petitioner-appellant NHA.

A.

Republic Act 7279 passed in 1992 should operate prospectively and, therefore, should not be given retroactive [38] effect.

Respondent NHA may not, as it would herein, legally re-group several smaller lots into which a much bigger lot had previously been subdivided, and consider and treat them as one again for the purpose of subdividing it once more into still smaller lots for distribution to its supposed or intended [44] beneficiaries.

92 | P a g e

There really was no genuine necessity for the expropriation of the lots in question to satisfy the purpose thereof as alleged in the complaint [45] therefor.

Being inherent, the power need not be specifically conferred on the government by the Constitution. Section 9, Article III of the Constitution, which mandates that private property shall not be taken for a public use without just compensation, merely imposes a limit on the

3 governments exercise of the power and provides a measure of protection to the individuals right to property. Respondent Court did not sustain the clear finding of the trial court that no evidence sufficient to prove its claim that the expropriation of said lots and subdividing them again into much smaller lots for resale to their present occupants would provide the latter with more healthful, decent and peaceful surroundings and thus improve the quality of their lives was ever presented [46] by respondent NHA.
[50]

Just like its two companion fundamental powers of the State,

[51]

the power of eminent

domain is exercised by the Legislature. However, it may be delegated by Congress to the President, administrative bodies, local government units, and even to private enterprises performing public services.
[52]

Stripped of non-essentials, the petitions raise only one fundamental issue, and that is, whether the NHA may validly expropriate the parcels of land subject of these cases. Albeit the power partakes of a sovereign character, it is by no means absolute. Its exercise is subject to limitations, one of which is, precisely, Section 9, Article III of the The Courts Ruling Constitution.

The power of eminent domain is an inherent and indispensable power of the State. Also called the power of expropriation, it is described as the highest and most exac t idea of property remaining in the government that may be acquired for some public purpose through a method in the nature of a compulsory sale to the State.
[47]

Over the years and in a plethora of cases, this Court has recognized the following requisites for the valid exercise of the power of eminent domain: (1) the property taken must be private property; (2) there must be genuine necessity to take the private property; (3) the taking must be for public use; (4) there must be payment of just compensation; and (5) the taking must comply with due process of law.
[53]

By virtue of its

sovereign character, the exercise of the power prevails over the non-impairment clause,
[48]

Accordingly, the question that this Court must

and is clearly superior to the final and executory judgment rendered by a court in an
[49]

resolve is whether these requisites have been adequately addressed.

ejectment case.

93 | P a g e
It is incontrovertible that the parcels of land subject of these consolidated petitions are private property. Thus, the first requisite is satisfied. As to the third requisite of public use, we examine the purpose for which the expropriation was undertaken by NHA. As set forth in its petition, NHA justifies the taking of the subject property for the purpose of improving and upgrading the area by constructing roads and installing facilities thereon under the Governments zonal improvement program With respect to the second, it is well to recall that in Lagcao v. Judge Labra,
[54]

we

and subdividing them into much smaller lots for distribution and sale at a low cost to qualified beneficiaries, mostly underprivileged long-time occupants of Grace Park. Around 510 families with approximately 5 members each will be benefited by the project.
[58]

declared that the foundation of the right to exercise eminent domain is genuine necessity, and that necessity must be of a public character. As a rule, the determination of whether there is genuine necessity for the exercise is a justiciable question.
[55]

The only remaining

However, when the power is

obstacle in the completion of this project is the lots subject of these consolidated petitions as the other lots in Grace Park have already been expropriated.
[59]

exercised by the Legislature, the question of necessity is essentially a political question.

[56]

Thus, in City of Manila v. Chinese Community,

[57]

we held:

The Zonal Improvement Program (ZIP), being implemented for government by NHA, The legislature, in providing for the exercise of the power of eminent domain, may directly determine the necessity for appropriating private property for a particular improvement for public use, and it may select the exact location of the improvement. In such a case, it is well-settled that the utility of the proposed improvement, the extent of the public necessity for its construction, the expediency of constructing it, the suitableness of the location selected and the consequent necessity of taking the land selected for its site, are all questions exclusively for the legislature to determine, and the courts have no power to interfere, or to substitute their own views for those of the representatives of the people. draws breath from policy mandates found in the 1987 Constitution.
[60]

It is an integral part of
[61]

the governments socialized housing program which, in Sumulong v. Guerrero,

we

deemed compliant with the public use requirement, it being a program clearly devoted to a public purpose. Justice Irene R. Cortes, speaking eloquently for the Court, said:

Socialized housing is defined as, the construction of dwelling units for the middle and lower class members of our society, including the construction of the supporting infrastructure and other facilities (Pres. Decree No. 1224, par. 1). This definition was later expanded to include among others: In the instant cases, the authority to expropriate came from Presidential Decree No. 1072, issued by then President Ferdinand E. Marcos in 1977. At that time, and as explicitly recognized under the 1973 Constitution, President Marcos had legislative powers. Perforce, the expropriation of the subject properties identified with specificity in the P.D. --- was directed by legislation. The issue of necessity then assumed the nature of a political question. a) The construction and/or improvement of dwelling units for the middle and lower income groups of the society, including the construction of the supporting infrastructure and other facilities;

94 | P a g e
b) Slum clearance, relocation and resettlement of squatters and slum dwellers as well as the provision of related facilities and services; independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living and an improved quality of life for all. [Art. II, sec. 9]

c) Slum improvement which consists basically of allocating homelots to the dwellers in the area or property involved, rearrangement and re-alignment of existing houses and other dwelling structures and the construction and provision of basic community facilities and services, where there are none, such as roads, footpaths, drainage, sewerage, water and power system, schools, barangay centers, community centers, clinics, open spaces, parks, playgrounds and other recreational facilities;

The state shall, by law, and for the common good, undertake, in cooperation with the private sector, a continuing program of urban land reform and housing which will make available at affordable cost decent housing and basic services to underprivileged and homeless citizens in urban centers and resettlement areas. It shall also promote adequate employment opportunities to such citizens. In the implementation of such program the State shall respect the rights of small property owners. (Art. XIII, sec. 9, Emphasis supplied)

d) The provision of economic opportunities, including the development of commercial and industrial estates and such other facilities to enhance the total community growth; and

e) Such other activities undertaken in pursuance of the objective to provide and maintain housing for the greatest number of people under Presidential Decree No. 757. (Pres. Decree No. 1259, sec. 1)

Housing is a basic human need. Shortage in housing is a matter of state concern since it directly and significantly affects public health, safety, the environment and in sum, the general welfare. The public character of housing measures does not change because units in housing projects cannot be occupied by all but only by those who satisfy prescribed qualifications. A beginning has to be made, for it is not possible to provide housing for all who need it, all at once.

xxxx

Specifically, urban renewal or redevelopment and the construction of low-cost housing is recognized as a public purpose, not only because of the expanded concept of public use but also because of specific provisions in the Constitution. The 1973 Constitution made it incumbent upon the State to establish, maintain and ensure adequate social services including housing [Art. II, sec. 7]. The 1987 Constitution goes even further by providing that:

Population growth, the migration to urban areas and the mushrooming of crowded makeshift dwellings is a worldwide development particularly in developing countries. So basic and urgent are housing problems that the United Nations General Assembly proclaimed 1987 as the International Year of Shelter for the Homeless to focus the attention of the international community on those problems. The General Assembly is [s]eriously concerned that, despite the efforts of Governments at the national and local levels and of international organizations, the living conditions of the majority of the people in slums and squatter areas and rural settlements, especially in developing countries, continue to deteriorate in both relative and absolute terms. [G.A. Res. 37/221, Yearbook of t he United Nations 1982, Vol. 36, p. 1043-4]

social

The State shall promote a just and dynamic order that will ensure the prosperity and

In the light of the foregoing, this Court is satisfied that "socialized housing" falls within the confines of "public use". It is, particularly important to draw attention to paragraph (d) of Pres. Dec. No. 1224 which should be

95 | P a g e
construed in relation with the preceding three paragraphs. Provisions on economic opportunities inextricably linked with low-cost housing, or slum clearance, relocation and resettlement, or slum improvement emphasize [62] the public purpose of the project. We are not persuaded.

J. M. Tuason & Co., Inc. v. Land Tenure Administration

[65]

is instructive. In that case,

this Court adopted the dissenting opinion of Justice J. B. L. Reyes inRepublic v. It need only be added, at this juncture, that the public use requisite for the valid exercise of the power of eminent domain is a flexible and evolving concept influenced by changing conditions. At present, it may not be amiss to state that whatever is beneficially employed for the general welfare satisfies the requirement of public use.
[63]

Baylosis,

[66]

that the propriety of exercising the power of eminent domain cannot be

determined on a purely quantitative or area basis, given that the Constitution speaks of lands, not of landed estates. Speaking through Justice (later Chief Justice) Enrique M. Fernando, the Court said:

Still, petitioner Manapat insists that, being himself a beneficiary of the expropriation (because he has been a long-time resident of Grace Park), it would be incongruous for government to take his land away from him only to give it back to him. This contention sadly fails to comprehend the public purpose for the taking under the socialized housing program. The parcels of land subject of the expropriation are, precisely, being taken so that they can be subdivided into much smaller lots --- at an average of 66.5 square meters per lot
[64]

--- for distribution to deserving dwellers in the area. Upon the completion of the project,

Manapat, and those similarly situated as he, cannot assert any right to be awarded the very same lots they currently occupy, nor be entitled to the same area of the land they now have.

This is not to say of course that property rights are disregarded. This is merely to emphasize that the philosophy of our Constitution embodying as it does what Justice Laurel referred to as its nationalistic and socialist traits discoverable upon even a sudden dip into a variety of [its] provisions although not extending as far as the destruction or annihilation of the rights to property, negates the postulate which at one time reigned supreme in American constitutional law as to their well-nigh inviolable character. This is not so under our Constitution, which rejects the doctrine of laissez faire with its abhorrence for the least interference with the autonomy supposed to be enjoyed by the property owner. Laissez faire, as Justice Malcolm pointed out as far back as 1919, did not take too firm a foothold in our jurisprudence. Our Constitution is much more explicit. There is no room for it for laissez faire. So Justice Laurel affirmed not only in the above opinion but in another concurring opinion quoted with approval in at least two of our subsequent decisions. We had occasion to reiterate such a view in the ACCFA case, decided barely two months ago.

Then, we have petitioner Lim and respondents Vega, Santos, Oracion, and Mercado, who argue that the lots they own should not be expropriated are already titled in their names and are very small in area, being already the subdivided portions of the original Grace Park Subdivision.

This particular grant of authority to Congress authorizing the expropriation of land is a clear manifestation of such a policy that finds expression in our fundamental law. So is the social justice principle enshrined in the Constitution of which it is an expression, as so clearly pointed out in the respective dissenting opinions of Justice J.B.L. Reyes and Chief Justice Paras in the Baylosis case. Why it should be thus is so plausibly set forth in the ACCFA decision, the opinion being penned by Justice Makalintal. We quote: The growing complexities of modern society, however, have rendered this traditional classification of the functions of government quite unrealistic, not to say obsolete. The areas which used to

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be left to private enterprise and initiative and which the government was called upon to enter optionally, and only because it was better equipped to administer for the public welfare than is any private individual or group of individuals, continue to lose their well -defined boundaries and to be absorbed within activities that the government must undertake in its sovereign capacity if it is to meet the increasing social challenges of the times. Here as almost everywhere else the tendency is undoubtedly towards a greater socialization of economic forces. Here of course this development was envisioned, indeed adopted as a national policy, by the Constitution itself in its declaration of principle concerning the promotion of social justice. compensation. Under case law, the said determination is a judicial prerogative.
[70]

As to the

observance of the fifth requisite, the due process clause, in the expropriation proceedings, all the parties have been given their day in court. That they are now before this Court is attestation enough that they were not denied due process of law.

From the foregoing disquisitions, it is unmistakable that all the requirements for the valid exercise of the power of eminent domain have been complied with. Thus, our answer to the singular and fundamental issue in these consolidated cases is: YES, the NHA may validly In a more recent decision,
[67]

we had occasion to declare that the fact that the

expropriate the subject parcels of land.

property is less than -hectare and that only a few would actually benefit from the expropriation does not diminish its public use character, inasmuch as public use now includes the broader notion of indirect public benefit or advantage, including in particular, urban land reform and housing. One final matter: the propriety of the application by the CA of R.A. No. 7279, otherwise known as the Urban Development and Housing Act of 1992.

The Courts departure from the land size or area test finds further affirmation in its rulings in Mataas na Lupa
[69]

The Court is not unaware of the condition now imposed by R.A. No. 7279

[71]

that, for

Tenants

Association,

Inc.

v.

Dimayuga

[68]

andthe

purposes of urban development and housing under the Act, where expropriation is resorted to, parcels of land owned by small property owners shall be exempted.
[72]

aforecited Sumulong v. Guerrero.

Small property

owners are owners of residential lands with an area not exceeding 300 sq m in highly urbanized cities and 800 sq m in other urban areas and who do not own any other real Given this discussion, it is clear that public use, as a requisite for the exercise of eminent domain in the instant cases, has been adequately fulfilled. property.
[73]

Invoking this limitation under the said law, the appellate court in the questioned

rulings exempted from expropriation the lots owned by Loberanes, Quimque, Mercado, Vega and Santos, and partially exempted the lot of Oracion.

To satisfy the fourth requisite, we affirm the appellate courts disposition that the subject cases be remanded to the trial court for the determination of the amount of just The CAs ruling on this point is incorrect. R.A. No. 7279 was enacted in 1992, almost two decades after the expropriation cases against the property owners herein were instituted

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with the RTC in 1977. Nova constitutio futuris formam imponere debet, non praeteritis . A new statute should affect the future, not the past. The law looks forward, not backward.
[74]

Article 4

of the Civil Code even explicitly declares, (l)aws shall have no retroactive effect, unless the contrary is provided.
[75]

In these consolidated cases, the Court finds that the language of R.A.

No. 7279 does not suggest that the Legislature has intended its provisions to have any retroactive application. On the contrary, Section 49 of the said law indicate s that it shall take effect upon its publication in at least two (2) national newspapers of general circulation.
[76]

The laws prospective application being clearly stated, the Court cannot agree

with the disposition of the appellate court that the subject lots not exceeding 300 sq m are exempt from expropriation.

WHEREFORE, PREMISES CONSIDERED, the May 27, 1993 Decision of the Court of Appeals in CA-G.R. CV No. 10200-10212 and the June 28, 1994 Decision in CA-G.R. CV No. 27159 are AFFIRMED; and the March 2, 1994 and the July 25, 1994 Resolutions in CA-G.R. CV Nos. 10200-10212 are REVERSEDand SET ASIDE.

SO ORDERED.

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June 26, 1940 G.R. No. 47065 PANGASINAN TRANSPORTATION CO., INC., petitioner, vs. THE PUBLIC SERVICE COMMISSION, respondent. C. de G. Alvear for petitioner. Evaristo R. Sandoval for respondent. Laurel, J.: The petitioner has been engaged for the past twenty years in the business of transporting passengers in the Province of Pangasinan and Tarlac and, to a certain extent, in the Province of Nueva Ecija and Zambales, by means of motor vehicles commonly known as TPU buses, in accordance with the terms and conditions of the certificates of public convenience issued in its favor by the former Public Utility Commission in cases Nos. 24948, 30973, 36830, 32014 and 53090. On August 26, 1939, the petitioner filed with the Public Service Commission an application for authorization to operate ten additional new Brockway trucks (case No. 56641), on the ground that they were needed to comply with the terms and conditions of its existing certificates and as a result of the application of the Eight Hour Labor Law. In the decision of September 26, 1939, granting the petitioners application for increase of equipment, the Public Service Commission ordered: Section 15 of Commonwealth Act No. 146, as amended by section 1 of Commonwealth Act Y de acuerdo con que se provee por el articulo 15 de la ley No. 146 del Commonwealth, tal como ha sido enmendada por el articulo 1 de la Ley No. 454, por la presente se enmienda las condiciones de los certificados de convenciencia publica expedidos en los expedientes Nos. 24948, 30973, 36831, 32014 y la authorizacion el el expediente No. 53090, asi que se consideran incorporadas en los mismos las dos siguientes condiciones: Que los certificados de conveniencia publica y authorizacion arriba mencionados seran validos y subsistentes solamente durante de veinticinco (25) anos, contados desde la fecha de la promulgacion de esta decision. Que la empresa de la solicitante porda ser adquirida por el Commonwealth de Filipinas o por alguna dependencia del mismo en cualquier tiempo que lo deseare previo pago del precio d costo de su equipo util, menos una depreciacion razonable que se ha fijar por la Comision al tiempo de su adquisicion. Not being agreeable to the two new conditions thus incorporated in its existing certificates, the petitioner filed on October 9, 1939 a motion for reconsideration which was denied by the The Commission may prescribed as a condition for the issuance of the certificate provided in the preceding paragraph that the service can be acquired by the Commonwealth of the Philippines or by any instrumentality thereof upon payment of the cost price of its useful equipment, less reasonable depreciation; and likewise, that the certificate shall valid only for a definite period of time; and that the violation of any of these conditions shall produce the With the exception to those enumerated in the preceding section, no public service shall operate in the Philippines without possessing a valid and subsisting certificate from the Public Service Commission, known as certificate of public convenience, or c ertificate of convenience and public necessity, as the case may be, to the effect that the operation of said service and the authorization to do business will promote the public interests in a proper and suitable manner. No. 454, invoked by the respondent Public Service Commission in the decision complained of in the present proceedings, reads as follows: Public Service Commission on November 14, 1939. Whereupon, on November 20, 1939, the present petition for a writ of certiorari was instituted in this court praying that an order be issued directing the secretary of the Public Service Commission to certify forthwith to this court the records of all proceedings in case No. 56641; that this court, after hearing, render a decision declaring section 1 of Commonwealth Act No. 454 unconstitutional and void; that, if this court should be of the opinion that section 1 of Commonwealth Act No. 454 is constitutional, a decision be rendered declaring that the provisions thereof are not applicable to valid and subsisting certificates issued prior to June 8, 1939. Stated in the language of the petitioner, it is contended: 1. That the legislative powers granted to the Public Service Commission by section 1 of Commonwealth Act No. 454, without limitation, guide or rule except the unfettered discretion and judgment of the Commission, constitute a complete and total abdication by the Legislature of its functions in the premises, and for that reason, the Act, in so far as those powers are concerned, is unconstitutional and void. 2. That even if it be assumed that section 1 of Commonwealth Act No. 454, is valid delegation of legislative powers, the Public Service Commission has exceeded its authority because: (a) The Act applies only to future certificates and not to valid and subsisting certificates issued prior to June 8, 1939, when said Act took effect, and (b) the Act, as applied by the Commission, violates constitutional guarantees.

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immediate cancellation of the certificate without the necessity of any express action on the part of the Commission. In estimating the depreciation, the effect of the use of the equipment, its actual condition, the age of the model, or other circumstances affecting its value in the market shall be taken into consideration. The foregoing is likewise applicable to any extension or amendment of certificates actually force and to those which may hereafter be issued, to permits to modify itineraries and time schedules of public services and to authorization to renew and increase equipment and properties. Under the first paragraph of the aforequoted section 15 of Act No. 146, as amended, no public service can operate without a certificate of public convenience or certificate of convenience and public necessity to the effect that the operation of said service and the authorization to do business will public interests in a proper and suitable manner. Under the second paragraph, one of the conditions which the Public Service Commission may prescribed the issuance of the certificate provided for in the first paragraph is that the service can be acquired by the Commonwealth of the Philippines or by any instrumental thereof upon payment of the cost price of its useful equipment, less reasonable depreciation, a condition which is virtually a restatement of the principle already embodied in the Constitution, section 6 of Article XII, which provides that the State may, in the interest of national welfare and defense, establish and operate industries and means of transportation and communication, and, upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government. Another condition which the Commission may prescribed, and which is assailed by the petitioner, is that the certificate shall be valid only for a definite period of time. As there is a relation between the first and second paragraphs of said section 15, the two provisions must be read and interpreted together. That is to say, in issuing a certificate, the Commission must necessarily be satisfied that the operation of the service under said certificate during a definite period fixed therein will promote the public interests in a proper and suitable manner. Under section 16 (a) of Commonwealth Act. No. 146 which is a complement of section 15, the Commission is empowered to issue certificates of public convenience whenever it finds that the operation of the public service proposed and the authorization to do business will promote the public interests in a proper and suitable manner. Inasmuch as the period to be fixed by the Commission under section 15 is inseparable from the certificate itself, said period cannot be disregarded by the Commission in determining the question whether the issuance of the certificate will promote the public The theory of the separation of powers is designed by its originators to secure action and at the same time to forestall overaction which necessarily results from undue concentration of powers, and thereby obtain efficiency and prevent deposition. Thereby, the rule of law was established which narrows the range of governmental action and makes it subject to control by certain devices. As a corollary, we find the rule prohibiting delegation of legislative authority, and from the earliest time American legal authorities have proceeded on the theory that legislative power must be exercised by the legislature alone. It is frankness, however, to confess that as one delves into the mass of judicial pronouncement, he finds a great deal of confusion. One thing, however, is apparent in the development of the principle of separation of powers and that is that the maxim of delegatus non potest delegari or delegata potestas non potest delegari, attributed to Bracton (De Legius et Consuetedinious Angliae, edited by G. E. Woodbine, Yale University Press, 1922, vol. 2, p. 167) but which is also recognized in interests in a proper and suitable manner. Conversely, in determining a definite period of time, the Commission will be guided by public interests, the only limitation to its power being that said period shall not exceed fifty years (sec. 16 (a), Commonwealth Act No. 146; Constitution, Art. XIII, sec. 8.) We have already ruled that public interest furnishes a sufficient standard. (People vs. Fernandez and Trinidad, G. R. No. 45655, promulgated June 15, 1938; People vs. Rosenthal and Osmea, G. R. Nos. 46076 and 46077, promulgated June 12, 1939, citing New York Central Securities Corporation vs. U.S.A., 287 U.S. 12, 24, 25, 77 Law. ed. 138, 145, 146; Schenchter Poultry Corporation vs. I.S., 295, 540, 79 Law. ed. 1570, 1585; Ferrazzini vs. Gsell, 34 Phil. 697, 711-712.) Section 8 of Article XIII of the Constitution provides, among other things, that no franchise, certificate, or any other form of authorization for the operation of a public utility shall be for a longer period than fifty years, and when it was ordained, in section 15 of Commonwealth Act No. 146, as amended by Commonwealth Act No. 454, that the Public Service Commission may prescribed as a condition for the issuance of a certificate that it shall be valid only for a definite period of time and, in section 16 (a) that no such certificates shall be issued for a period of more than fifty years, the National Assembly meant to give effect to the aforesaid constitutional mandate. More than this, it has thereby also declared its will that the period to be fixed by the Public Service Commission shall not be longer than fifty years. All that has been delegated to the Commission, therefore, is the administrative function, involving the use discretion, to carry out the will of the National Assembly having in view, in addition, the promotion of public interests in a proper and suitable manner. The fact that the National Assembly may itself exercise the function and authority thus conferred upon the Public Service Commission does not make the provision in question constitutionally objectionable.

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principle in the Roman Law (D. 17.18.3), has been made to adapt itself to the complexities of modern governments, giving rise to the adoption, within certain limits, of the principle of subordinate legislation, not only in the United States and England but in practically all modern governments. (People vs. Rosenthal and Osmea, G. R. Nos. 46076 and 46077, promulgated June 12, 1939.) Accordingly, with the growing complexity of modern life, the multiplication of the subjects of governmental regulation, and the increased difficulty of administering the laws, there is a constantly growing tendency toward the delegation of greater powers by the legislature, and toward the approval of the practice by the court. (Dillon Catfish Drainage Dist, v. Bank of Dillon, 141 S. E. 274, 275, 143 S. Ct. 178; State vs. Knox County, 54 S. W. 2d. 973, 976, 165 Tenn. 319.) In harmony with such growing tendency, this Court, since the decision in the case of Compaia General de Tabacos de Filipinas vs. Board of Public Utility Commissioner (34 Phil. 136), relied upon by the petitioner, has, in instances, extended its seal of approval to the delegation of greater powers by the legislature. (Inchausti Steamship Co. vs. Public Utility Commissioner, 44 Phil. Autobus Co. vs. De Jesus, 56 Phil. 446; People vs. Fernandez & Trinidad, G. R. No. 45655, promulgated June 15, 1938; People vs. Rosenthal & Osmea, G. R. Nos. 46076, 46077, promulgated June 12, 1939; and Robb and Hilscher vs. People, G. R. No. L-45866, promulgated June 12, 1939.) Under the fourth paragraph of section 15 of Commonwealth Act No. 146, as amended by Commonwealth Act No. 454, the power of the Public Service Commission to prescribed the conditions that the service can be acquired by the Commonwealth of the Philippines or by any instrumentality thereof upon payment of the cost price of its useful equipment, less reasonable, and that the certificate shall be valid only for a definite period of time is expressly made applicable to any extension or amendment of certificates actually in force and to authorizations to renew and increase equipment and properties. We have examined the legislative proceedings on the subject and have found that these conditions were purposely made applicable to existing certificates of public convenience. The history of Commonwealth Act No. 454 reveals that there was an attempt to suppress, by way of amendment, the sentence and likewise, that the certificate shall be valid only for a definite period of time, but the attempt failed: xxxxxxxxx Sr. CUENCO. Seor Presidente, para otra enmienda. En la misma pagina, lineas 23 y 24, pido que se supriman las palabras and likewise, that the certificate shall be valid only for a definite period time. Esta disposicion del proyecto autoriza a la Comision de Servicios Publicos a fijar un plazo de vigencia certificado de conveniencia publica. Todo el mundo sabe que bo se puede determinar cuando los intereses del servicio publico requiren la explotacion xxxxxxxxx By a majority vote the proposed amendment was defeated. (Sesion de 17 de mayo de 1939, Asamblea Nacional.) The petitioner is mistaken in the suggestion that, simply because its existing certificates had been granted before June 8, 1939, the date when Commonwealth Act No. 454, amendatory of section 15 of Commonwealth Act No. 146, was approved, it must be deemed to have the right of holding them in perpetuity. Section 74 of the Philippine Bill provided that no franchise, privilege, or concession shall be granted to any corporation except under the conditions that it shall be subject to amendment, alteration, or repeal by the Congress of the United States. The Jones Law, incorporating a similar mandate, provided, in section 28, that no franchise or right shall be granted to any individual, firm, or corporation except under the conditions that it shall be subject to amendment, alteration, or repeal by the Congress of the United States. Lastly, the Constitution of the Philippines provided, in section 8 of Article XIII, that no franchise or right shall be granted to any individual, firm, or corporation, except under the condition that it shall be subject to amendment, alteration, or repeal by the National Assembly when the public interest so requires. The National Assembly, by virtue of th e Constitution, logically succeeded to the Congress of the United States in the power to amend, alter or repeal any franchise or right granted prior to or after the approval of the Constitution; and when Commonwealth Acts Nos. 146 and 454 were enacted, the National Assembly, to the de un servicio publico y ha de saber la Comision de Servisios, si en un tiempo determinado, la explotacion de algunos buses en cierta ruta ya no tiene de ser, sobre todo, si tiene en cuenta; que la explotacion de los servicios publicos depende de condiciones flutuantes, asi como del volumen como trafico y de otras condiciones. Ademas, el servicio publico se concede por la Comision de Servicios Publicos el interes publico asi lo exige. El interes publico no tiene duracion fija, no es permanente; es un proceso mas o menos indefinido en cuanto al tiempo. Se ha acordado eso en el caucus de anoche. EL PRESIDENTE PRO TEMPORE. Que dice el Comite? Sr. ALANO. El Comite siente tener que rechazar esa enmienda, en vista de que esto certificados de conveniencia publica es igual que la franquicia: sepuede extender. Si los servicios presentados por la compaia durante el tiempo de su certificado lo require, puede pedir la extension y se le extendera; pero no creo conveniente el que nosotros demos un certificado de conveniencia publica de una manera que podria pasar de cincuenta anos, porque seria anticonstitucional.

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extent therein provided, has declared its will and purpose to amend or alter existing certificates of public convenience. Upon the other hand, statutes enacted for the regulation of public utilities, being a proper exercise by the state of its police power, are applicable not only to those public utilities coming into existence after its passage, but likewise to those already established and in operation. Nor is there any merit in petitioners contention, that, because of the esta blishment of petitioners operations prior to May 1, 1917, they are not subject to the regulations of the Commission. Statutes for the regulation of public utilities are a proper exercise by the state of its police power. As soon as the power is exercised, all phases of operation of established utilities, become at once subject to the police power thus called into operation. Procedures Transportation Co. v. Railroad Commission, 251 U. S. 228, 40 Sup. Ct. 131, 64 Law. ed. 239, Law v. Railroad Commission, 184 Cal. 737, 195 Pac. 423, 14 A. L. R. 249. The statute is applicable not only to those public utilities coming into existence after its passage, but likewise to those already established and in operation. The Auto Stage and Truck Transportation Act (Stats. 1917, c. 213) is a statute passed in pursuance of the police power. The only distinction recognized in the statute between those established before and those established after the passage of the act is in the method of the creation of their operative rights. A certificate of public convenience and necessity it required for any new operation, but no such certificate is required of any transportation company for the operation which was actually carried on in good faith on May 1, 1917, This distinction in the creation of their operative rights in no way affects the power of the Commission to supervise and regulate them. Obviously the power of the Commission to hear and dispose of complaints is as effective against companies securing their operative rights prior to May 1, 1917, as against those subsequently securing such right under a certificate of public convenience and necessity. (Motor Transit Co. et al. v. Railroad Commission of California et al., 209 Pac. 586.) Moreover, Commonwealth Acts Nos. 146 and 454 are not only the organic acts of the Public Service Commission but are a part of the charter of every utility company operating or seeking to operate a franchise in the Philippines. (Streator Aqueduct Co. v. e t al., 295 Fed. 385.) The business of a common carrier holds such a peculiar relation to the public interest that there is superinduced upon it the right of public regulation. When private property is affected with a public interest it ceased to be juris privati only. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by discounting the use, but so long as he maintains the use he must submit to control. Indeed, this right of regulation is so far beyond question that it is well settled that the power of the state to exercise legislative control over public utilities may be exercised through boards of commissioners. (Fisher vs. Yangco Steamship Company, 31 Phil. 1, citing Munn vs. Illinois, 94 U.S. 113; Georgia R. & Bkg. Co. vs. Smith, 128 U.S. 174; Budd vs. New York, 143 U.S. 517; New York etc. R. Co. vs. Bristol 151 U.S. 556, 571; Connecticut etc. R. Co. vs. Woodruff, 153 U.S. 689; Louisville etc. Ry Co. vs. Kentucky, 161 U.S. 677, 695.) This right of the state to regulate public utilities is founded upon the police power, and statutes for the control and regulation of utilities are a legitimate exercise thereof, for the protection of the public as well as of the utilities themselves. Such statutes are, therefore, not unconstitutional, either impairing the obligation of contracts, taking property without due process, or denying the equal protection of the laws, especially inasmuch as the question whether or not private property shall be devoted to a public and the consequent burdens assumed is ordinarily for the owner to decide; and if he voluntarily places his property in public service he cannot complain that it becomes subject to the regulatory powers of the state. (51 C. J., sec. 21, pp. 9-10.) in the light of authorities which hold that a certificate of public convenience constitutes neither a franchise nor contract, confers no property right, and is mere license or privilege. (Burgess vs. Mayor & Alderman of Brockton, 235 Mass. 95, 100, 126 N. E. 456; Roberto vs. Commisioners of Department of Public Utilities, 262 Mass. 583, 160 N. E. 321; Scheible vs. Hogan, 113 Ohio St. 83, 148 N. E. 581; Martz vs. Curtis [J. L.] Cartage Co. [1937], 132 Ohio St. 271, 7 N. E. [d] 220; Manila Yellow Taxicab Co. vs. Sabellano, 59 Phil. 773.) Whilst the challenged provisions of Commonwealth Act No. 454 are valid and constitutional, we are, however, of the opinion that the decision of the Public Service Commission should be reversed and the case remanded thereto for further proceedings for the reason now to be stated. The Public Service Commission has power, upon proper notice and hearing, to amend, modify or revoke at any time any certificate issued under the provisions of this Act, whenever the facts and circumstances on the strength of which said certificate was issued have been misrepresented or materially changed. (Section 16, par. [m], Commonwealth Act No. 146.) The petitioners application here was for an increase of its equipment to enable it to comply with the conditions of its certificates of public convenience. On the matter of limitation to twenty five (25) years of the life of its certificates of public convenience, there had been neither notice nor opportunity given the petitioner to be heard or present evidence. The Commission appears to have taken advantage of the petitioner to augment petitioners equipment in imposing the limitation of twenty-five (25) years which might as well be twenty or fifteen or any number of years. This is, to say the least, irregular and should not be

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sanctioned. There are cardinal primary rights which must be respected even in proceedings of this character. The first of these rights is the right to a hearing, which includes the right of the party interested or affected to present his own case and submit evidence in support thereof. In the language of Chief Justice Hughes, in Morgan v. U.S., (304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed. 1129), the liberty and property of the citizen shall be protected by the rudimentary requirements of fair play. Not only must the party be given an opportunity to pre sent his case and to adduce evidence tending to establish the rights which he asserts but the tribunal must consider the evidence presented. (Chief Justice Hughes in Morgan vs. U.S., 298 U.S. 468, 56 S. Ct. 906, 80 Law. ed. 1288.) In the language of this Court in Edwards vs. McCoy (22 Phil. 598), the right to adduce evidence, without the corresponding duty on the part of the board to consider it, is vain. Such right is conspicuously futile if the person or persons to whom the evidence is presented can thrust it aside without or consideration. While the duty to deliberate does not impose the obligation to decide right, it does imply a necessity which cannot be disregarded, namely, that of having something to support its decision. A decision with absolutely nothing to support it is a nullity, at least when directly attacked. (Edwards vs. McCoy, supra.) This principle emanates from the more fundamental principle that the genius of constitutional government is contrary to the vesting of unlimited power anywhere. Law is both a grant and a limitation upon power. The decision appealed from is hereby reversed and the case remanded to the Public Service Commission for further proceedings in accordance with law and this decision, without any pronouncement regarding costs. So ordered.

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LABRADOR, J p: [G.R. No. L-19555. May 29, 1964.] This is a petition for a writ of certiorari with prohibition to review and set aside a decision of the Court of Agrarian Relations, Hon. Guillermo S. Santos, presiding, approving a petition of Geronimo B. Ramos, tenant, against his landlord, Mateo de Ramas, for the change of their tenancy contract from share to leasehold tenancy. Respondent Geronimo B. Ramos is the tenant of herein petitioner Mateo de Ramas on a 2 1/2 hectare land at Muzon, Naic, Cavite, under a verbal share tenancy contract at 70-30. On June 22, 1960, or one month before the beginning of the agricultural year 1960-1961, Ramos informed petitioner of his desire to change their contract from that of share tenancy to leasehold tenancy. Petitioner refused to grant the request insisting on the former 70-30 sharing basis, so on May 23, 1961 Ramos filed a petition with the Court of Agrarian Relations praying that he be allowed to change their tenancy contract from share to leasehold, in accordance with the provisions of Section 14 of Republic Act No. 1199, as amended. Petitioner opposed the petition as groundless and violating their gentleman's agreement. During the pendency of the case respondent Ramos moved to suspend the proceedings on the ground that the constitutionality of Section 14 of Republic Act No. 1199 has been raised, among other issues, before the Supreme Court in the case of Juliano vs. CAR, et al., G.R. No. L-17627, and that to continue with the case would only result in loss of time, money, etc., if the Supreme Court declare Sec. 14 of Republic Act No. 1199 unconstitutional. This motion was denied in an order dated September 22, 1961. On December 14, 1961 Ramos presented his evidence; but Ramas waived the presentation of his evidence; manifesting that he would appeal whatever decision the agrarian court might render. On March 1, 1962, respondent court rendered judgment upholding the constitutionality of Sec. 14 of Republic Act No. 1199, citing Our ruling in Pineda, et al. vs. Pingul and CIR, 92 Phil., 89 where We upheld the constitutionality or validity of Act No. 4054, as amended by Com. Act 178 and Republic Act 34. Against the above judgment the present petition is brought before Us, petitioner praying that after proper hearing, Sec. 14 of Republic Act No. 1199 be declared unconstitutional and that the writ of prohibition prayed for be granted. Petitioner first questions the agrarian court's action in proceeding with the hearing of CAR Case No. 246, Cavite '61, deciding the same, and ordering execution of its decision despite the pendency before Us of a similar case raising the constitutionality of Sec. 14 of Republic Act No. 1199. We find no error or irregularity in the court's proceeding with the case. The mere fact that the constitutionality of a law is raised in another case pending in the Supreme Court is not a valid reason for suspending the proceedings in this case. Laws are considered valid until declared unconstitutional, and until then courts are in duty bound to enforce them. (Magtibay vs. Alikpala, G.R. No. L-17590 and Juliano vs. CAR, G.R. No. L17627, both promulgated on November 29, 1962) The present suit, specifically concerns the validity of Section 14 of the said Act which is as follows: "Sec. 14. Change of System. The tenant shall have the right to change the tenancy contract from one of share tenancy to leasehold tenancy and vice versa and from one crop sharing arrangement to another of the share tenancy. If the share tenancy contract is in writing and is duly registered, the right to change from one crop sharing arrangement to another may be exercised at least one month before the

MATEO DE RAMAS, petitioner, vs. THE COURT OF AGRARIAN RELATIONS and GERONIMO B. RAMOS,respondents.

Carlos P. Torres for petitioner. J. M. Dator and T. T. Riel for respondent.

SYLLABUS

1. CONSTITUTIONAL LAW; SECTION 14, OF REPUBLIC ACT NO. 1199 AUTHORIZING TENANT TO CHANGE FROM SHARE TO LEASEHOLD TENANCY IS CONSTITUTIONAL AND VALID. Section 14 of Republic Act No. 1199 is certainly justified by the directive in the Constitution to do justice to labor. By the change of laborer can improve his lowly lot. And if it cannot be justified as an act of social justice enjoined in the Constitution, it may be considered as an exercise of the police power of the State. 2. ID.; ID.; SECTION 14 OF REPUBLIC ACT NO. 1199 IS LEGALLY JUSTIFIED IN IMPAIRING THE OBLIGATIONS OF CONTRACTS. Section 14 of Republic Act No. 1199 is legally justified in impairing the obligation of an existing contract between the tenant and the landlord. Obligations of contracts must yield to a proper exercise of the police power. 3. AGRICULTURAL TENANCY; RIGHT OF TENANT TO CHANGE TENANCY SYSTEM NOT OPPRESSIVE. The right granted to a tenant to change the contract from share to leasehold tenancy cannot be considered unreasonable or oppressive. 4. PLEADINGS AND PRACTICE; ISSUE OF CONSTITUTIONALITY IN THE SUPREME COURT IS NO REASON TO SUSPEND PROCEEDING. The mere fact that the constitutionality of a law is raised in another case pending in the Supreme Court is not a valid reason for suspending the proceedings in the present case.

DECISION

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beginning of the next agricultural year after the expiration of the period of the contract. In the absence of any registered written contract, the right may be exercised at least one month before the agricultural year when the change shall be effected." (As amended by Section 4, R. A. 2263.) The above provision is attacked on the ground of unconstitutionality in that it impairs the obligation of contracts, because after a contract of share tenancy has been adopted between the landlord and the tenant, the latter is empowered, notwithstanding said contract, to change it into leasehold tenancy. The question presented makes a review of tenancy laws useful in order to secure a correct perspective of the issue. The promotion of social justice and of the well-being and economic security of all the people is a primary aim of the Constitution (Sec. 5, Art. II). In line with this goal, the State encourages small landholdings as against large estates (Article XIII of the Constitution) and has taken upon itself the duty to protect the agricultural laborer and to regulate the relations between him and the landowner. (Sec. 6, Art. XIV, Id.) Even before the approval of the Constitution the Legislature had already passed Act No. 4054, known as the "Philippine Rice Share Tenancy Act", approved February 27, 1933. The Act's aim is primarily to regulate the relations between landlords and tenants. Freedom of tenancy contract is allowed so long as it is not contrary to existing laws, customs, morals and public policy (Sec. 7). In the absence of contract the crop is divided equally between the landlord and the tenant, a system known as the share tenancy (Sec. 8). The contract is to last according to the stipulation of the parties, and in its absence it shall be in force only during one agricultural year. The landlord may not dismiss a tenant while a tenancy contract is in force, except for any just and reasonable cause as enumerated in Section 19 of Act No. 4054. On June 9, 1939, Commonwealth Act No. 461 was passed. This law further protects the security of tenure of the tenant, and provides that the tenant may not be dispossessed of the land except for any of the causes mentioned in Section 19 of Act No. 4054 and subject to the approval of a representative of the Department of Justice (Sec. 1) On September 30, 1946, Republic Act No. 34 was approved, amending certain sections of Act No. 4054 and providing for a sharing ratio between the landlord and the tenant, depending on which of them furnishes the necessary implements and work animals and defrays all the expenses for planting and cultivation (Sec. 3, Rep. Act No. 34, amending Sec. 8, Act No. 4054). In the case of Tapang vs. Court of Industrial Relations, 72 Phil. 79, the validity of Section 19 of Act No. 4054 (Sec. 19 provides that landlord may not dismiss tenant except for good cause) and of Commonwealth Act No. 461 was questioned on the ground that they violate the constitutional guarantee against impairment of contracts. Overruling this argument, the Supreme Court said: "El argumento de que la Ley No. 461 del Commonwealth es contraria a la Constitution porque altera obligaciones contractuales, no tiene ninguna fuerza, porque, . . . la misma Constitucion manda que se debe 'promover la justicia social a fin de asegurar el bienestar y la estabilidad economica de todo el pueblo', y que se debe proteger al mismo tiempo 'a todos los trabajadores, especialmente a las mujeres' y no hay duda de que las dos mencionadas leyes tienden a dicho fin, protegiendo al aparcero y al propietario por igual, y estableciendo reglas que han de determinar las relaciones que deben existir entre los dos, para su proprio beneficio." (Per Pablo,J., Tapang vs. CIR, supra) The argument that the tenancy relationship had ceased after the expiration of the agricultural year was declared by the Court to be without any validity because Section 26 of Act No. 4054, the basis of said argument, must be understood to have been annulled or at least subject to the provisions of Commonwealth Act No. 461 (ante). Said this Court: "'No obstante todo contrato o disposicion en contrario de cualquier ley vigente, en todos los casos en que un terreno es ocupado bajo un sistema cualquiera de aparceria, no se ha de desposeer al aparcero del terreno cultivado por el mismo, sin la aprobacion de un representante del Departamento de Justicia debidamente autorizado al efecto y como no sea por alguna de las causas expresadas en el articulo diecinueve de la Ley Numero Cuatro mil cincuenta y cuatro o por alguno otro motivo justificado.' " (Ibid.) After the passage of the above laws the need was felt for an agency familiar with landlord-tenant problems and capable of effectively enforcing existing laws. So, a special division of the Department of Justice to act as compulsory arbiter was first set up; later the arbitration and litigation aspects of tenancy cases were transferred to the Court of Industrial Relations whose docket was already clogged with cases involving other labor legislation. Act No. 5054 left much to be desired. It is not of universal application. Its principles were not in force throughout the Philippines, but only in localities where it was adopted or where it was put into effect by presidential proclamation. (C.A. 173, Sec. 4; Iburan vs.Labes, 87 Phil. 234). In other places, the standard of conduct laid down by Act No. 4054 was inapplicable. (De la Cruz vs.Asociacion Zanjera Casilian, 83 Phil. 214) Even under the law the oppressive conditions under which tenants theretofore found themselves were practically left unremedied; they still remained at the mercy of their landlords. The latest attempt to remedy the miserable plight of tenants came with the passage of Republic Act No. 1199, otherwise known as the "Agricultural Tenancy Act of the Philippines," which repeals the old Tenancy (Act No. 4054), Commonwealth Act No. 461, and various amendments of these laws. The purpose of this Act, according to Section 2 thereof, is "to establish agricultural tenancy relations between landholders and tenants upon the principle of social justice; to afford adequate protection to the rights of both tenants and landlords; to insure an equitable division of the produce and income derived from the land; to provide tenant-farmers with incentives to greater and more efficient agricultural production; to bolster their economic position and to encourage their participation in the development of peaceful, vigorous and democratic rural communities." Later on, or on June 14, 1955, Republic Act No. 1267 was passed creating the "Court of Agrarian Relations", said to be a concomitant of the Agricultural Tenancy Act, and designed to provide the long-needed medium for deciding agricultural problems. (3 Philippine Annotated Laws, p. 72.) A study of the Agricultural Tenancy Act (Rep. Act No. 1199) discloses that it is an improvement of its predecessor Act 4054, as amended. Most of its provisions deal with the regulation of the relations of the landlord and tenant (Secs. 6, 7, 8, 9), the fixing of the share of each in the products of the land cultivated by the tenant in general (Secs. 32, 33, 34, 35), the guaranteeing of the permanency of tenure of the tenant and his heirs on the land he and his predecessors cultivate (Secs. 6, 7, 9, 49, 50, 51). Its most important provision is the protection of the tenant against exploitation by the landlord, as it prescribes the utilization by

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the landlord of the personal services of the tenant and the members of his household without compensation (Sec. 23). It fixes interests on loans secured by the tenant from the landlord and prescribes the payment of such loans from the share of the tenant in the harvest at the current price, and requires the keeping of books of account showing the amounts received by the tenant as loans from the landlord, etc. (Secs. 16, 18, 48.) The above provisions are clearly an improvement of Act No 4054. They are intended to protect tenants from abuse and exploitation by their landlords. The validity of these provisions has not been questioned as they clearly fall within the province of regulatory provisions enjoined expressly in the Constitution (Art. XIV, Sec. 6). The provisions are clearly of apparent wisdom and validity, evidently not subject to question as they do not appear to have ever been questioned in the short span of life of the law (approved August 30, 1954). The history of land tenancy, especially in Central Luzon, is a dark spot in the social life and history of the people. It was among the tenants of Central Luzon that the late Pedro Abad Santos, acting as a saviour of the tenant class, which for generations has been relegated to a life of bondage, without hope of salvation or improvement, enunciated a form of socialism as a remedy for the pitiful condition of the tenants of Central Luzon. It was in Central Luzon also that the tenants forming the PKM organization of tenants and, during the war, the Hukbalahap, rose in arms against the constituted authority as their only salvation from permanent thraldom. According to statistics, whereas at the beginning of the century we had only 19% of the people belonging to the tenant class, after 60 years the prevailing percentage has reached 39%. It is the desire to improve the condition of the peasant class that must have impelled the Legislature to adopt the provisions as a whole of the Agricultural Tenancy Act, and particularly Section 14 of said Act. The section in question (Sec. 14, Rep. Act No. 1199) permits a tenant who has accumulated savings to free himself from obtaining the usurious loans for expenses needed in plowing, harrowing, planting, and harvesting. The tenant who has accumulated savings that would enable him to buy implements and farm animals is allowed by the provision in question to free himself from the bondage of permanent share tenancy by a change to leasehold tenancy. The tenant who is used to cultivating riceland cannot conceive of any form or manner in which he can invest his meager savings other than by the purchase of farm implements and work animals. In other words, the only avenue left to him to improve his lot is by permitting him to change his contract of tenancy from that of share system to that of leasehold system. The increase that he receives in his share as a consequence of the change is only 5% (under the share system the landlord receives 30% and under leasehold he receives only 25% if the land is first class, and 20% if the land is second class). But by the change the tenant is released from the stranglehold of the landlord, and becomes a semiindependent farmer. The provision in question is certainly justified by the directive contained in the Constitution to do justice to labor. By the change the laborer can improve his lowly lot. And if it cannot be justified as an act of social justice enjoined in the Constitution, it may be considered as an exercise of the police power of the State which tries to improve the situation of a great percentage of the people and preserve the security of the State against possible internal upheavals that the tenant class might be forced to create to improve their lowly lot. The tenant uprisings in Central Luzon from 1946 to 1952 must certainly have been the main cause or reason for the enactment of the Agricultural Tenancy Act in 1954 and of the particular section in question. The desire to improve the tenant class certainly has been impelled by the necessity of insuring the internal security of the country, a paramount aim and end justifying the exercise of the police power. The legal question that is posed before Us is: Is the enactment of Section 14 of Republic Act No. 1199 in virtue of the police power of the State limited by the fact that it violates a contractual right (existing in favor of the defendant-appellant in this case)? The general rule has been stated thus: "A police regulation, obviously intended as such, and not operating unreasonably beyond the occasions of its enactment, is not rendered invalid by the fact that it may affect incidentally the exercise of some right guaranteed by the Constitution. For example, it is said that the proper exercise of the police power is not subject to restraint by constitutional provisions designed for the general protection of rights of individual life, liberty and property." (11 Am. Jur. 991-992) Is Section 14 of Republic Act No. 1199 legally justified in impairing the obligation of an existing contract between the tenant and the landlord? The answer to this is again stated as follows: "The constitutional prohibition against state laws impairing the obligation of contracts does not restrict the power of the state to protect the public health, the public morals, or the public safety. One or more of these factors may be involved in the execution of such contracts. Rights and privileges arising from contracts are subject to regulations for the protection of the public health, the public morals, and the public safety, in the same sense and to the same extent as is all property, whether owned by natural persons or corporations. Not all police legislation which has the effect of impairing a contract is obnoxious to the constitutional prohibition as to impairment." ( Ibid., pp. 1000-1001) Obligations of contracts must yield to a proper exercise of the police power when such power is exercised, as in this case to preserve the security of the State and the means adopted are reasonably adapted to the accomplishment of that end and are not arbitrary or oppressive. (11 Am. Jur. 1002-1003) The right granted to the tenant to change the contract from share tenancy to that of leasehold tenancy can not be considered unreasonable or oppressive, because of the landlord's giving up of 5% of the harvest (the change from share to leasehold tenancy reduces the landlord's share from 30% to 25%) the tenant becomes more responsible, more competent, and financially prepared to comply with his obligations under the lease, to the ultimate benefit of the landlord, with the consequent improvement of a lot of a big segment of the population and thereby giving full meaning to the social justice directive contained in the Constitution. WHEREFORE, in view of the above consideration We hold the disputed Section 14 of Republic Act No. 1199 constitutional and valid. The judgment appealed from is affirmed. Without costs.

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CHINA BANKING CORPORATION, Petitioner, G.R. No. 172192 In 1999, respondent ASB Development Corporation applied for and was granted a Present: - versus YNARES-SANTIAGO, J., Chairper son, ASB HOLDINGS, INC., ASB REALTY CORP., ASB DEVELOPMENT CORP. (formerly TIFFANY TOWER REALTY CORP.), ASB LAND, INC., ASB FINANCE, INC., MAKATI HOPE CHRISTIAN SCHOOL, INC., BEL-AIR HOLDINGS CORP., WINCHESTER TRADING, INC., VYL DEVELOPMENT CORP., GERICK HOLDINGS CORP., and NEIGHBORHOOD Promulgated: HOLDINGS, INC., Respondents. December 23, 2008 x--------------------------------------------------x DECISION Respondent corporations defaulted in the payment of the agreed loan amortizations, REYES, R.T., J.: interest, and other charges. Demands to pay were left unheeded. AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ. credit line by petitioner China Bank in the principal amount ofP35,000,000.00. The loan was secured by a real estate mortgage constituted over two contiguous lots with a combined area of 1,332.5 square meters in Grace Park,Caloocan City. The said properties are covered by Transfer Certificate of Title (TCT) Nos. 2981096 and 298110 of the Register of Deeds of Caloocan City.

In 2000, respondent ASB Realty Corporation, an affiliate of ASB Development, obtained an omnibus credit line from petitioner China Bank in the amount

ofP265,000,000.00. The loan was secured by two real estate mortgages: (1) over two parcels of land situated at Salcedo, Legaspi Village, Makati City, covered by TCTNos. 205136 and 206189; and (2) over a parcel of land located at Constellation Street, Bel-

Air Village, Makati City, covered by TCT No. 201933.

THE Constitutional proscription on impairment of contracts and preference of credits are at the core of this controversy involving the rehabilitation plan of ASB Development Corporation, a debtor of petitioner China Banking Corporation (China Bank).

On May 2, 2000, ASB Development Corporation and its affiliates, including ASB Realty, ASB Holdings, ASB Land, ASB Finance, Makati Hope Christian School, Bel-Air Holdings, Winchester Trading, VYL Development, Gerick Holdings and Neighborhood Holdings, filed before the SEC a petition for rehabilitation with prayer for suspension of actions and

Before Us is a petition for review on certiorari under Rule 45 of the Decision

[1]

of the

proceedings, pursuant to Presidential Decree No. 902-A, as amended, docketed as SEC Case No. 05-00-6609. In its petition, respondent averred, inter alia, that: 6. The total assets of petitioner ASB Group of Companies, together with petitioner ASB Allied Companies, amount to Nineteen Billion Four Hundred Ten Million Pesos (P19,410,000,000.00).

Court of Appeals (CA) upholding the Securities and Exchange Commission (SEC) approval of respondents corporate rehabilitation plan.

The Facts 7. The Projects were financed with loans or borrowings from bank and individual creditors which resulted in petitioner Group of Companies having a total liability in the amount of Twelve Billion Seven Hundred Million Pesos (P12,700,000,000.00).

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8. On account of the sudden non-renewal and/or the massive withdrawal by creditors of their loans to petitioner ASB Holdings, Inc., coupled with the recent developments in the country, like, among others, (i) the glut in the real estate market; (ii) the severe drop in the sale of real properties; (iii) the depreciation of the peso vis--vis the dollar; and (iv) the decreased investor confidence in the economy, petitioner Group of Companies was unable to complete and sell some of its projects on schedule and, hence, was unable to service its obligations as they fell due. 9. Petitioner Group of Companies possesses sufficient property to cover its obligations. However, petitioner Group of Companies foresees its inability to pay its obligations within a period of one (1) year. 10. Because of the inability of the Group of Companies to pay its obligations as they respectively fall due, its secured and non-secured creditors pressed for payments of due and maturing obligations and threatened to initiate separate actions against it, which will adversely affect its operations and shatter its hope in rehabilitating itself for the benefit of its investors and creditors and the general public. 11. There is a clear, present and imminent danger that the creditors of petitioner Group of Companies will institute extrajudicial and judicial foreclosure proceedings and file court actions unless restrained by this Honorable Commission. 12. The institution of extrajudicial and judicial foreclosure proceedings and the filing of court actions against petitioner Group of Companies will necessarily result in the paralization of its business operation and its assets being lost, dissipated or wasted. 13. There is, therefore, a need for the suspension of payment of all claims against petitioner Group of Companies, in the separate and combined capacities of its member companies, while it is working for its rehabilitation. 14. Petitioner Group of Companies has at least seven hundred twelve (712) creditors, three hundred seventeen (317) contractors/suppliers and four hundred ninety-two (492) condominium unit buyers, who will certainly be prejudiced by the disruption of the operations of petitioner ASB Group of Companies which seeks to protect the interest of the parties from any precipitate action of any person who may only have his individual interest in mind. 15. The business of petitioner ASB Group of Companies is feasible and profitable. Petitioner Group of Companies will eventually be able to pay all its obligations given some changes in its management, organization, policies, strategies, operations, or finances. 16. With the support of this Honorable Commission, petitioner Group of Companies is confident that it will be able to embark on a sound and viable rehabilitation plan, with a built-in debt repayment schedule through the optimal use of their present facilities, assets and resources. Although a proposed rehabilitation plan is attached to this petition, a detailed and comprehensive rehabilitation proposal will be presented for the approval of this Honorable Commission, with the foregoing salient features: a. Servicing and eventual full repayment of all debts and liabilities, focusing on debt restructure and possible liquidation through dacion en pago, transfer and assignment, or outright sale of assets, in order to lighten the debt burden of petitioner Group of Companies; b. Forming of strategic alliances with third party investors, including joint ventures and similar arrangements; c. Contributing specified properties from petitioner ASB Allied Companies; d. Streamlining the operations of petitioner ASB Group of Companies, and the effective management of its revenues and funds towards the strengthening of its financial and business positions; and e. Stabilizing the operations of petitioner Group of Companies, and preparing it to take advantage [2] of future opportunities for growth and development.

In filing the petition for rehabilitation, respondents contended that while they have sufficient capitalization, the company will be hard-pressed to service its obligations in favor of petitioner bank and its other creditors due to a glut in the real estate market, the depreciation of the currency and decreased investor confidence in the Philippine economy. Respondents then prayed that the SEC, after due hearing: (a) appoint an interim receiver; (b) suspend all actions against the ASB Group for a period of sixty days subject

to extension; and (c) approve a rehabilitation plan for the ASB Group and appoint a rehabilitation receiver to monitor the implementation of the said rehabilitation plan.

On May 4, 2000, the Hearing Panel of the SEC Securities Investigation and Clearing Department, finding the petition for rehabilitation sufficient in form and substance, issued a 60-day Suspension Order (a) suspending all actions for claims against the ASB Group

of Companies pending or still to be filed with any court, office, board, body, or tribunal; (b) enjoining the ASB Group of Companies from disposing of their properties in any manner,

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except in the ordinary course of business, and from paying their liabilities outstanding as of the date of the filing of the petition; and (c) appointing Atty. Monico V. Jacob as interim receiver of the ASB Group of Companies. On June On May 22, 2000, the SEC Hearing Panel issued an order appointing 10, 2003, the SEC En Banc denied with finality petitioner banks via dacion en pago is insufficient to cover the amount of its outstanding loans; and that the preference conferred by law to the bank as a secured creditor has been rendered illusory.

appeal. Undaunted, petitioner elevated the matter to the CA via petition for review under Rule 43 of the 1997 Rules of Civil Procedure.

Mr. Fortunato Cruz as interim receiver of the ASB Group of Companies, replacing Atty.Monico Jacob.

CA Disposition On August 18, 2000, respondent ASB Development Corporation submitted the rehabilitation plan for approval of the SEC. The plan, in part, provides: x x x Based on the program, secured creditors claims amounting to PhP5.192 billion will be paid in full including interest up to April 30, 2000. Secured creditors have been asked to waive all penalties and other charges. This dacion en pago program is essential to eventually pay all creditors and rehabilitate the ASB Group of Companies. If the dacion en pago herein contemplated does not materialize for failure of the secured creditors to agree thereto, this rehabilitation plan contemplates to settle the obligations (without interest, penalties, and other related charges accruing after the date of the initial suspension order) to secured creditors with mortgaged properties at ASB selling prices for the general interest of the employees, creditors, unit buyers, government, general [3] public, and the economy. On October 28, 2005, the CA dismissed the banks petition for lack of merit. In ruling against petitioner bank, the appellate court opined: The assailed rehabilitation plan does not violate the principle of mutuality of contracts. In fact, the provisions of said plan recognize the secured creditors right to refuse or reject the dacion en pago arrangements proposed therein. To illustrate, the rehabilitation plan pertinently states: x x x If the dacion en pago herein contemplated does not materialize for failure of the secured creditors to agree thereto, this rehabilitation plan contemplates to settle the obligations (without interest, penalties, and other related charges accruing after the date of the initial suspension order) to secured creditors with mortgaged properties at ASB selling prices for the general interest of the employees, creditors, unit buyers, government, general public and the economy. Inasmuch as the proposed dacion en pago can proceed only upon agreement of all the parties concerned, there is no basis for petitioners assertion that its freedom to contract is unduly curtailed and that it is being compelled to accept certain properties as settlement for respondents obligations. the SEC En On the other hand, We find no cogent reason to disturb or reverse the findings of the lower tribunals regarding the valuation of respondents assets and viability of the rehabilitation plan. As the SEC en banc observed: x x x the selling values and net realizable values of the properties are not much higher than the appraisals conducted by Cuervo Appraiser, Inc. in 1997 and 2000. In addition, the valuations given to the unfinished projects proposed to be dacioned to secured creditors are

On April 26, 2001, the ASB rehabilitation plan was approved by the SEC.

Aggrieved,

petitioner

bank

appealed

the

plans

approval

to

Banc. According to petitioner, the SEC order compelling the bank to surrender its present collateral and accept certain properties located in Pasig City and Paraaque City as payment of the obligations due it violates the constitutional proscription against impairment of contracts. It was likewise argued that the value of the properties being offered by ASB

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based on the selling price of appellees [respondents] on similar projects for which deeds of absolute sale have been consummated. (Resolution dated June 10, 2003) It is a basic principle of law that courts will not interfere in matters which are addressed to the sound discretion or judgment of government agencies entrusted with the regulation of activities coming under the special technical knowledge and training of such agencies ( Olaguer vs. Domingo, 359 SCRA 78). Given their special knowledge and expertise over matters falling under their jurisdiction, they are in a better position to pass judgment thereon and their findings of fact in that regard are generally accorded respect, if not finality, by the courts ( Palele vs. Court of Appeals, 362 SCRA 141). At any rate, petitioners concerns about the viability of the rehabilitation plan should be laid to rest by the fact that less than two years after its approval by the SEC hearing panel, 54% of respondents obligations to creditor banks had already been paid. This only shows that the continued implementation of the rehabilitation plan may well lead to petitioners full recovery of its claims against respondents. All told, We find that the SEC correctly upheld the order of the [4] hearing panel approving the ASB Groups rehabilitation plan. This is not the first time that the matter of the rehabilitation plan of respondent ASB Development Corporation has reached the Courts corridors. This Court, in two separate occasions, has already placed the said plan under the crucible.

In Metropolitan Bank & Trust Company v. ASB Holdings, Inc., confronted with triple questions:

[5]

the Court was

a. The rehabilitation plan compels petitioner bank to accept, through a dacion en pago arrangement, the mortgaged properties based on ASB Group of Companies transfer values and to release part of the collateral. This forced transfer of properties and diminution of the banks right to enforce its lien on the mortgaged properties violate its constitutional right against impairment of contracts and right to due process. b. The rehabilitation plan compels petitioner bank to waive the interests, penalties and other charges that accrued after the SEC issued its Stay Order. Again, this is in violation of the constitutional mandate on nonimpairment of contracts and due process. c. Only respondent ASB Holdings, Inc. suffered financial distress as stated in the Rehabilitation Plan and, as such, the coercive reach of the SECs Stay Order under P.D. 902-A can extend only to the enforcement of claims against this distressed corporation. It cannot suspend the claims [6] and actions against its affiliate corporations.

Issues

Petitioner has resorted to the present review on certiorari, raising twin issues: I. WHETHER OR NOT THE ASB REHABILITATION PLAN VIOLATES THE PRINCIPLES OF MUTUALITY OF CONTRACTS, CURTAILS A PARTYS FREEDOM TO CONTRACT;

In resolving the questions in favor of the distressed corporation, the Court held then: We are not convinced that the approval of the Rehabilitation Plan impairs petitioner banks lien over the mortgaged properties. Section 6[c] of P.D. No. 902-A provides that upon appointment of a management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body shall be suspended. By that statutory provision, it is clear that the approval of the Rehabilitation Plan and the appointment of a rehabilitation receiver merely suspend the actions for claims against respondent corporations. Petitioner banks preferred status over the unsecured creditors relative to the mortgage liens is retained, but the enforcement of such preference is suspended. The loan agreements between the parties have not been set aside and petitioner bank may still enforce its preference when the assets of ASB Group of Companies will be liquidated. Considering that the provisions of the loan agreements are merely

II. WHETHER OR NOT THE ASB REHABILITATION PLAN PRESENTS A TRUE, ACCURATE, AND INDEPENDENTLY VERIFIED PICTURE OF RESPONDENTS-DEBTORS RESPECTIVE FINANCIAL CONDITIONS.

Our Ruling

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suspended, there is no impairment of contracts, specifically its lien in the mortgaged properties. As we stressed in Rizal Commercial Banking Corporation v. Intermediate Appellate Court, such suspension shall not prejudice or render ineffective the status of a secured creditor as compared to a totally unsecured creditor, for what P.D. No. 902-A merely provides is that all actions for claims against the distressed corporation, partnership or association shall be suspended. This arrangement provided by law is intended to give the receiver a chance to rehabilitate the corporation if there should still be a possibility for doing so, without being unnecessarily disturbed by the creditors actions against the distressed corporation. However, in the event that rehabilitation is no longer feasible and the claims against the distressed corporation would eventually have to be settled, the secured creditors, like petitioner bank, shall enjoy preference over the unsecured creditors. Likewise, there is no compulsion on the part of petitioner bank to accept a dacion en pago arrangement of the mortgaged properties based on ASB Group of Companies transfer values and to condone interests and penalties. The Rehabilitation Plan itself, under item IV-A, explains the dacion en pago proposal, thus: IV. A. THE REVISED REHABILITATION PLAN The Total Approach of the secured creditors to agree thereto, this rehabilitation plan contemplates to settle the obligations (without interest, penalties, and other related charges accruing after the date of the initial suspension order) to secured creditors with mortgaged properties at ASB selling prices for the general interest on the employees, creditors, unit buyers, government, general public, and the economy. xxxx Indeed, based on the above explanation in the Rehabilitation Plan, the dacion en pago program and the intent of respondent ASB Group of Companies to ask creditors to waive the interests, penalties and related charges are not compulsory in nature. They are merely proposals for the creditors to accept. In fact, as explained, there was already an initial discussion on these proposals and the majority of the secured creditors showed their desire to complete dacion en pago transactions, but they must be based on MUTUALLY AGREED UPON TERMS. TheSEC En Banc in its Resolution dated April 15, 2003, affirming the SEC Hearing Panels Order of April 26, 2001 approving the Rehabilitation Plan, aptly declared: x x x petitioner asserts that the Rehabilitation Plan is not legally feasible because respondents cannot dictate the terms of dacion. We do not agree. A cursory reading of the Rehabilitation Plan debunks this assertion. The Plan provides that dacion en pago transaction will be effected only if the secured creditors, like petitioner, agree thereto and under terms and conditions mutually agreeable to private respondents and the secured creditor concerned. The dacion en pago program is essential to eventually pay all creditors and rehabilitate private respondents. If the dacion en pago does not materialize in case secured creditors refuse to agree thereto, the Rehabilitation Plan contemplates to settle the obligations to secured creditors with mortgaged properties at selling prices. This is for the general interest of the employees, creditors, unit buyers, government, general public, and the economy. With respect to the third assigned error, we note that the same was not raised by petitioner bank in its Comment/Opposition to the Rehabilitation Plan filed with the SEC Hearing Panel. Such belated issue cannot be considered, especially because it involves a question of fact, the resolution of which is normally beyond the authority of this Court as it is not a trier of facts. At any rate, the SEC En Banc found that the SEC Hearing Panel acted within its legal authority in resolving this case. Neither it over stepped its lawful authority nor acted whimsically in approving the Rehabilitation Plan. Hence, it cannot be faulted of grave a buse of discretion. We find no reason to disturb such finding, it being a fundamental rule that factual findings of quasi-judicial agencies, like the SEC, which have acquired expertise as their jurisdiction is confined to special matters such as the subject of this case, are generally accorded great respect and even finality, absent any showing that they arbitrarily disregarded evidence or misapprehended evidence to such an extent as to compel a contrary conclusion if such evidence had been properly appreciated.

It is apparent that ASBs corporate indebtedness needs to be reduced as quickly as possible in order to prevent rapid deterioration in equity x x x. In order to reduce debt quickly, we must do the following: 1. Complete or sell on-going projects; 2. Invite secured creditors to complete dacion en pago transactions, waiving all penalties; and 3. Invite unsecured creditors to purchase real estate parcels and other assets and set-off the amount of their outstanding claim against the purchase price. The assets included in the above program include all real estate assets. In order to determine the feasibility of the above, representatives of our financial advisors met with or had discussions with most of the secured creditors. Preliminary discussions indicate support from the secured creditors towards the concepts of the program associated with them. The majority of these secured creditors appear to want to complete dacion en pagotransactions based on MUTUALLY AGREED UPON TERMS x x x. We continue to pursue discussions with secured creditors. Based on the program, secured creditors claims amounting to PhP5.192 billion will be paid in full including interest up to April 30, 2000. Secured creditors have been asked to waive all penalties and other charges. This dacion en pago program is essential to eventually pay all creditors and rehabilitate the ASB Group of Companies. If the dacion en pago herein contemplated does not materialize for failure

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Petitioner bank also argues that ASB Group of Companies is merely a generic name used to describe collectively various companies and as such, it is not a legal entity with juridical personality and cannot be a party to a suit. True, ASB Group of Companies is merely used in this case as a generic name, for brevity, to collectively describe the various companies/corporations that filed a Petition For Rehabilitation with the SEC. However, in their petition, all the respondent corporations are individually [7] named as petitioners, not ASB Group of Companies. through the hearing panel that heard the petition for approval of the Rehabilitation Plan, was acting as a quasi-judicial body and, thus, its order approving the plan cannot constitute an impairment of the right and the freedom to contract. Besides, the mere fact that the Rehabilitation Plan proposes a dacion en pago approach does not render it defective on the ground of impairment of the right to contract. Dacion enpago is a special mode of payment where the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. The undertaking really partakes in a sense of the nature of sale, that is, the creditor is really buying the thing or property of the debtor, the payment for which is to be charged against the debtors debt. As such, the essential elements of a contract of sale, namely; consent, object certain, and cause or consideration must be present. Being a form of contract, the dacion en pago agreement cannot be perfected without the consent of the parties involved. We find no element of compulsion in the dacion en pago provision of the Rehabilitation Plan. It was not the only solution presented by the ASB to pay its creditors. In fact, it was stated in the Rehabilitation Plan that: x x x If the dacion en pago herein contemplated does not materialize for failure of the secured creditors to agree thereto, the rehabilitation plan contemplates to settle the obligations (without interest, penalties and other related charges accruing after the date of the initial suspension order) to secured creditors with mortgaged properties at ASB selling prices for the general interest of the employees, creditors, unit buyers, government, general public, and the economy. Thus, if BPI does not find the dacion en pago modality acceptable, the ASB Group can propose to settle its debts at such amount as is equivalent to the selling price of the mortgaged properties. If BPI still refuses this option, it can assert its rights in the liquidation and distribution of the ASB Groups assets. It will not lose its status as a secured creditor, retaining its preference over unsecured creditors when the assets of the [9] corporation are finally liquidated.

In a related case, Bank of the Philippine Islands v. Securities and Exchange Commission,
[8]

the Court En Banc would be more emphatic in holding that: The petition must be denied.

The very same issues confronted the Court in the case of Metropolitan Bank & Trust Company v. ASB Holdings, et al. In this case, Metropolitan Bank & Trust Company (MBTC) refused to enter into a dacion en pago arrangement contained in ASBs proposed Rehabilitation Plan. MBTC argued, among others, that the forced transfer of properties and the diminution of its right to enforce its lien on the mortgaged properties violate its constitutional right against impairment of contracts and right to due process. The Court ruled that there is no impairment of contracts because the approval of the Rehabilitation Plan and the appointment of a rehabilitation receiver merely suspends the action for claims against the ASB Group, and MBTC may still enforce its preference when the assets of the ASB Group will be liquidated. But if the rehabilitation is found to be no longer feasible, then the claims against the distressed corporation would have to be settled eventually and the secured creditors shall enjoy preference over the unsecured ones. Moreover, the Court stated that there is no compulsion to enter into a dacion enpago agreement, nor to waive the interests, penalties and related charges, since these are merely proposals to creditors such as MBTC, such that in the event the secured creditors refuse thedacion, the Rehabilitation Plan proposes to settle the obligations to secured creditors with mortgaged properties at selling prices. Rehabilitation proceedings in our jurisdiction, much like the bankruptcy laws of the United States, have equitable and rehabilitative purposes. On the one hand, they attempt to provide for the efficient and equitable distribution of an insolvent debtor's remaining assets to its creditors; and on the other, to provide debtors with a fresh start by relieving them of the weight of their outstanding debts and permitting them to reorganize their affairs. The rationale of P.D. No. 902-A, as amended, is to effect a feasible and viable rehabilitation, by preserving a floundering business as going concern, because the assets of a business are often more valuable when so maintained than they would be when liquidated. The Court reiterates that the SECs approval of the Rehabilitation Plan did not impair BPIs right to contract. As correctly contended by private respondents, the non-impairment clause is a limit on the exercise of legislative power and not of judicial or quasi-judicial power. The SEC,

We are inclined to rule in a similar fashion here.

In intruding into corporate affairs, the State must, at all times, promote a wider and more meaningful equitable distribution of wealth and protect investments and the public. To Our mind, the approval by the SEC of the rehabilitation plan of respondent corporations is a step towards that direction.

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The terms of the rehabilitation plan unveil that secured creditors like petitioner bank may refuse or reject the dacion en pago arrangements stated in it. It cannot be implemented without petitioners consent.

Further, the approval of the plan and the appointment of a receiver merely suspend actions and claims that may be raised against respondent bank. They do not, in any manner, obliterate petitioners status as a preferred secured creditor.

Questions on the viability of the plan should likewise be laid to rest. As the CA aptly observed, majority of respondents obligations to creditor banks had already been paid as early as two years upon the approval of the plan.

WHEREFORE, the petition is DENIED and the appealed Court of Appeals Decision AFFIRMED. SO ORDERED.

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