1

DAVAO SAW MILL CO., INC., plaintiff-appellant,

vs.
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening sentence of the decision in the trial court and as set forth by counsel for the
parties on appeal, involves the determination of the nature of the properties described in the complaint. The trial judge found that
those properties were personal in nature, and as a consequence absolved the defendants from the complaint, with costs against the
plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. It has operated a
sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However, the land upon which the business
was conducted belonged to another person. On the land the sawmill company erected a building which housed the machinery used
by it. Some of the implements thus used were clearly personal property, the conflict concerning machines which were placed and
mounted on foundations of cement. In the contract of lease between the sawmill company and the owner of the land there
appeared the following provision:
That on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by the party
of the second part shall pass to the exclusive ownership of the party of the first part without any obligation on its part to
pay any amount for said improvements and buildings; also, in the event the party of the second part should leave or
abandon the land leased before the time herein stipulated, the improvements and buildings shall likewise pass to the
ownership of the party of the first part as though the time agreed upon had expired: Provided, however, That the
machineries and accessories are not included in the improvements which will pass to the party of the first part on the
expiration or abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc., was the
defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in that action; a writ of execution
issued thereon, and the properties now in question were levied upon as personalty by the sheriff. No third party claim was filed for
such properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein. Indeed the bidder, which
was the plaintiff in that action, and the defendant herein having consummated the sale, proceeded to take possession of the
machinery and other properties described in the corresponding certificates of sale executed in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a number of occasions
treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of such persons is the
appellee by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
x x x x x x x x x
5. Machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in
connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements
of such trade of industry.
Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt that the trial judge
and appellees are right in their appreciation of the legal doctrines flowing from the facts.
In the first place, it must again be pointed out that the appellant should have registered its protest before or at the time of the sale
of this property. It must further be pointed out that while not conclusive, the characterization of the property as chattels by the
appellant is indicative of intention and impresses upon the property the character determined by the parties. In this connection the
decision of this court in the case of Standard Oil Co. of New York vs. Jaramillo ( [1923], 44 Phil., 630), whether obiter dicta or not,
furnishes the key to such a situation.
It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is machinery which is
involved; moreover, machinery not intended by the owner of any building or land for use in connection therewith, but intended by a
lessee for use in a building erected on the land by the latter to be returned to the lessee on the expiration or abandonment of the
lease.
A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was held that machinery
which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not
when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of
the owner. In the opinion written by Chief Justice White, whose knowledge of the Civil Law is well known, it was in part said:
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To determine this question involves fixing the nature and character of the property from the point of view of the rights of
Valdes and its nature and character from the point of view of Nevers & Callaghan as a judgment creditor of the Altagracia
Company and the rights derived by them from the execution levied on the machinery placed by the corporation in the
plant. Following the Code Napoleon, the Porto Rican Code treats as immovable (real) property, not only land and
buildings, but also attributes immovability in some cases to property of a movable nature, that is, personal property,
because of the destination to which it is applied. "Things," says section 334 of the Porto Rican Code, "may be immovable
either by their own nature or by their destination or the object to which they are applicable." Numerous illustrations are
given in the fifth subdivision of section 335, which is as follows: "Machinery, vessels, instruments or implements intended
by the owner of the tenements for the industrial or works that they may carry on in any building or upon any land and
which tend directly to meet the needs of the said industry or works." (See also Code Nap., articles 516, 518 et seq. to
and inclusive of article 534, recapitulating the things which, though in themselves movable, may be immobilized.) So far
as the subject-matter with which we are dealing machinery placed in the plant it is plain, both under the provisions
of the Porto Rican Law and of the Code Napoleon, that machinery which is movable in its nature only becomes
immobilized when placed in a plant by the owner of the property or plant. Such result would not be accomplished,
therefore, by the placing of machinery in a plant by a tenant or a usufructuary or any person having only a temporary
right. (Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and decisions
quoted in Fuzier-Herman ed. Code Napoleon under articles 522 et seq.) The distinction rests, as pointed out by
Demolombe, upon the fact that one only having a temporary right to the possession or enjoyment of property is not
presumed by the law to have applied movable property belonging to him so as to deprive him of it by causing it by an act
of immobilization to become the property of another. It follows that abstractly speaking the machinery put by the
Altagracia Company in the plant belonging to Sanchez did not lose its character of movable property and become
immovable by destination. But in the concrete immobilization took place because of the express provisions of the lease
under which the Altagracia held, since the lease in substance required the putting in of improved machinery, deprived the
tenant of any right to charge against the lessor the cost such machinery, and it was expressly stipulated that the
machinery so put in should become a part of the plant belonging to the owner without compensation to the lessee. Under
such conditions the tenant in putting in the machinery was acting but as the agent of the owner in compliance with the
obligations resting upon him, and the immobilization of the machinery which resulted arose in legal effect from the act of
the owner in giving by contract a permanent destination to the machinery.
x x x x x x x x x
The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the Altagracia Company,
being, as regards Nevers & Callaghan, movable property, it follows that they had the right to levy on it under the
execution upon the judgment in their favor, and the exercise of that right did not in a legal sense conflict with the claim
of Valdes, since as to him the property was a part of the realty which, as the result of his obligations under the lease, he
could not, for the purpose of collecting his debt, proceed separately against. (Valdes vs. Central Altagracia [192], 225
U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this instance to be paid by the
appellant.
Villa-Real, Imperial, Butte, and Goddard, JJ., concur.
B.H. BERKENKOTTER, plaintiff-appellant,
vs.
CU UNJIENG E HIJOS, YEK TONG LIN FIRE AND MARINE INSURANCE COMPANY, MABALACAT SUGAR COMPANY and
THE PROVINCE SHERIFF OF PAMPANGA, defendants-appellees.
Briones and Martinez for appellant.
Araneta, Zaragoza and Araneta for appellees Cu Unjieng e Hijos.
No appearance for the other appellees.
VILLA-REAL, J.:
This is an appeal taken by the plaintiff, B.H. Berkenkotter, from the judgment of the Court of First Instance of Manila, dismissing
said plaintiff's complaint against Cu Unjiengs e Hijos et al., with costs.
In support of his appeal, the appellant assigns six alleged errors as committed by the trial court in its decision in question which will
be discussed in the course of this decision.
The first question to be decided in this appeal, which is raised in the first assignment of alleged error, is whether or not the lower
court erred in declaring that the additional machinery and equipment, as improvement incorporated with the central are subject to
the mortgage deed executed in favor of the defendants Cu Unjieng e Hijos.
It is admitted by the parties that on April 26, 1926, the Mabalacat Sugar Co., Inc., owner of the sugar central situated in Mabalacat,
Pampanga, obtained from the defendants, Cu Unjieng e Hijos, a loan secured by a first mortgage constituted on two parcels and
land "with all its buildings, improvements, sugar-cane mill, steel railway, telephone line, apparatus, utensils and whatever forms
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part or is necessary complement of said sugar-cane mill, steel railway, telephone line, now existing or that may in the future exist
is said lots."
On October 5, 1926, shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc., decided to increase the
capacity of its sugar central by buying additional machinery and equipment, so that instead of milling 150 tons daily, it could
produce 250. The estimated cost of said additional machinery and equipment was approximately P100,000. In order to carry out
this plan, B.A. Green, president of said corporation, proposed to the plaintiff, B.H. Berkenkotter, to advance the necessary amount
for the purchase of said machinery and equipment, promising to reimburse him as soon as he could obtain an additional loan from
the mortgagees, the herein defendants Cu Unjieng e Hijos. Having agreed to said proposition made in a letter dated October 5,
1926 (Exhibit E), B.H. Berkenkotter, on October 9th of the same year, delivered the sum of P1,710 to B.A. Green, president of the
Mabalacat Sugar Co., Inc., the total amount supplied by him to said B.A. Green having been P25,750. Furthermore, B.H.
Berkenkotter had a credit of P22,000 against said corporation for unpaid salary. With the loan of P25,750 and said credit of
P22,000, the Mabalacat Sugar Co., Inc., purchased the additional machinery and equipment now in litigation.
On June 10, 1927, B.A. Green, president of the Mabalacat Sugar Co., Inc., applied to Cu Unjieng e Hijos for an additional loan of
P75,000 offering as security the additional machinery and equipment acquired by said B.A. Green and installed in the sugar central
after the execution of the original mortgage deed, on April 27, 1927, together with whatever additional equipment acquired with
said loan. B.A. Green failed to obtain said loan.
Article 1877 of the Civil Code provides as follows.
ART. 1877. A mortgage includes all natural accessions, improvements, growing fruits, and rents not collected when the
obligation falls due, and the amount of any indemnities paid or due the owner by the insurers of the mortgaged property
or by virtue of the exercise of the power of eminent domain, with the declarations, amplifications, and limitations
established by law, whether the estate continues in the possession of the person who mortgaged it or whether it passes
into the hands of a third person.
In the case of Bischoff vs. Pomar and Compaia General de Tabacos (12 Phil., 690), cited with approval in the case ofCea vs.
Villanueva (18 Phil., 538), this court laid shown the following doctrine:
1. REALTY; MORTGAGE OF REAL ESTATE INCLUDES IMPROVEMENTS AND FIXTURES. It is a rule, established by the
Civil Code and also by the Mortgage Law, with which the decisions of the courts of the United States are in accord, that in
a mortgage of real estate, the improvements on the same are included; therefore, all objects permanently attached to a
mortgaged building or land, although they may have been placed there after the mortgage was constituted, are also
included. (Arts. 110 and 111 of the Mortgage Law, and 1877 of the Civil Code; decision of U.S. Supreme Court in the
matter of Royal Insurance Co. vs. R. Miller, liquidator, and Amadeo [26 Sup. Ct. Rep., 46; 199 U.S., 353].)
2. ID.; ID.; INCLUSION OR EXCLUSION OF MACHINERY, ETC. In order that it may be understood that the machinery
and other objects placed upon and used in connection with a mortgaged estate are excluded from the mortgage, when it
was stated in the mortgage that the improvements, buildings, and machinery that existed thereon were also
comprehended, it is indispensable that the exclusion thereof be stipulated between the contracting parties.
The appellant contends that the installation of the machinery and equipment claimed by him in the sugar central of the Mabalacat
Sugar Company, Inc., was not permanent in character inasmuch as B.A. Green, in proposing to him to advance the money for the
purchase thereof, made it appear in the letter, Exhibit E, that in case B.A. Green should fail to obtain an additional loan from the
defendants Cu Unjieng e Hijos, said machinery and equipment would become security therefor, said B.A. Green binding himself not
to mortgage nor encumber them to anybody until said plaintiff be fully reimbursed for the corporation's indebtedness to him.
Upon acquiring the machinery and equipment in question with money obtained as loan from the plaintiff-appellant by B.A. Green,
as president of the Mabalacat Sugar Co., Inc., the latter became owner of said machinery and equipment, otherwise B.A. Green, as
such president, could not have offered them to the plaintiff as security for the payment of his credit.
Article 334, paragraph 5, of the Civil Code gives the character of real property to "machinery, liquid containers, instruments or
implements intended by the owner of any building or land for use in connection with any industry or trade being carried on therein
and which are expressly adapted to meet the requirements of such trade or industry.
If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co., Inc., in lieu of the other of
less capacity existing therein, for its sugar industry, converted them into real property by reason of their purpose, it cannot be said
that their incorporation therewith was not permanent in character because, as essential and principal elements of a sugar central,
without them the sugar central would be unable to function or carry on the industrial purpose for which it was established.
Inasmuch as the central is permanent in character, the necessary machinery and equipment installed for carrying on the sugar
industry for which it has been established must necessarily be permanent.
Furthermore, the fact that B.A. Green bound himself to the plaintiff B.H. Berkenkotter to hold said machinery and equipment as
security for the payment of the latter's credit and to refrain from mortgaging or otherwise encumbering them until Berkenkotter has
been fully reimbursed therefor, is not incompatible with the permanent character of the incorporation of said machinery and
equipment with the sugar central of the Mabalacat Sugar Co., Inc., as nothing could prevent B.A. Green from giving them as
security at least under a second mortgage.
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As to the alleged sale of said machinery and equipment to the plaintiff and appellant after they had been permanently incorporated
with sugar central of the Mabalacat Sugar Co., Inc., and while the mortgage constituted on said sugar central to Cu Unjieng e Hijos
remained in force, only the right of redemption of the vendor Mabalacat Sugar Co., Inc., in the sugar central with which said
machinery and equipment had been incorporated, was transferred thereby, subject to the right of the defendants Cu Unjieng e
Hijos under the first mortgage.
For the foregoing considerations, we are of the opinion and so hold: (1) That the installation of a machinery and equipment in a
mortgaged sugar central, in lieu of another of less capacity, for the purpose of carrying out the industrial functions of the latter and
increasing production, constitutes a permanent improvement on said sugar central and subjects said machinery and equipment to
the mortgage constituted thereon (article 1877, Civil Code); (2) that the fact that the purchaser of the new machinery and
equipment has bound himself to the person supplying him the purchase money to hold them as security for the payment of the
latter's credit, and to refrain from mortgaging or otherwise encumbering them does not alter the permanent character of the
incorporation of said machinery and equipment with the central; and (3) that the sale of the machinery and equipment in question
by the purchaser who was supplied the purchase money, as a loan, to the person who supplied the money, after the incorporation
thereof with the mortgaged sugar central, does not vest the creditor with ownership of said machinery and equipment but simply
with the right of redemption.
Wherefore, finding no error in the appealed judgment, it is affirmed in all its parts, with costs to the appellant. So ordered.
Malcolm, Imperial, Butte, and Goddard, JJ., concur.
MAKATI LEASING and FINANCE CORPORATION, petitioner,
vs.
WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents.
Loreto C. Baduan for petitioner.
Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.
Jose V. Mancella for respondent.

DE CASTRO, J.:
Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate Appellate Court) promulgated on August
27, 1981 in CA-G.R. No. SP-12731, setting aside certain Orders later specified herein, of Judge Ricardo J. Francisco, as Presiding
Judge of the Court of First instance of Rizal Branch VI, issued in Civil Case No. 36040, as wen as the resolution dated September
22, 1981 of the said appellate court, denying petitioner's motion for reconsideration.
It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and Finance Corporation, the
private respondent Wearever Textile Mills, Inc., discounted and assigned several receivables with the former under a Receivable
Purchase Agreement. To secure the collection of the receivables assigned, private respondent executed a Chattel Mortgage over
certain raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering Range.
Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the properties mortgage to it. However,
the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into private respondent's premises and was not able
to effect the seizure of the aforedescribed machinery. Petitioner thereafter filed a complaint for judicial foreclosure with the Court of
First Instance of Rizal, Branch VI, docketed as Civil Case No. 36040, the case before the lower court.
Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the enforcement of which was however
subsequently restrained upon private respondent's filing of a motion for reconsideration. After several incidents, the lower court
finally issued on February 11, 1981, an order lifting the restraining order for the enforcement of the writ of seizure and an order to
break open the premises of private respondent to enforce said writ. The lower court reaffirmed its stand upon private respondent's
filing of a further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of private respondent and removed the main
drive motor of the subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private respondent, set aside the Orders
of the lower court and ordered the return of the drive motor seized by the sheriff pursuant to said Orders, after ruling that the
machinery in suit cannot be the subject of replevin, much less of a chattel mortgage, because it is a real property pursuant to
Article 415 of the new Civil Code, the same being attached to the ground by means of bolts and the only way to remove it from
respondent's plant would be to drill out or destroy the concrete floor, the reason why all that the sheriff could do to enfore the writ
was to take the main drive motor of said machinery. The appellate court rejected petitioner's argument that private respondent is
estopped from claiming that the machine is real property by constituting a chattel mortgage thereon.
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A motion for reconsideration of this decision of the Court of Appeals having been denied, petitioner has brought the case to this
Court for review by writ of certiorari. It is contended by private respondent, however, that the instant petition was rendered moot
and academic by petitioner's act of returning the subject motor drive of respondent's machinery after the Court of Appeals' decision
was promulgated.
The contention of private respondent is without merit. When petitioner returned the subject motor drive, it made itself
unequivocably clear that said action was without prejudice to a motion for reconsideration of the Court of Appeals decision, as
shown by the receipt duly signed by respondent's representative.
1
Considering that petitioner has reserved its right to question the
propriety of the Court of Appeals' decision, the contention of private respondent that this petition has been mooted by such return
may not be sustained.
The next and the more crucial question to be resolved in this Petition is whether the machinery in suit is real or personal property
from the point of view of the parties, with petitioner arguing that it is a personality, while the respondent claiming the contrary, and
was sustained by the appellate court, which accordingly held that the chattel mortgage constituted thereon is null and void, as
contended by said respondent.
A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this Court, speaking through Justice J.B.L.
Reyes, ruled:
Although there is no specific statement referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant to
convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be
allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented
lot to which defendants-appellants merely had a temporary right as lessee, and although this can not in itself
alone determine the status of the property, it does so when combined with other factors to sustain the
interpretation that the parties, particularly the mortgagors, intended to treat the house as personality. Finally,
unlike in the Iya cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery &
Williamson, wherein third persons assailed the validity of the chattel mortgage, it is the defendants-appellants
themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case. The
doctrine of estoppel therefore applies to the herein defendants-appellants, having treated the subject house as
personality.
Examining the records of the instant case, We find no logical justification to exclude the rule out, as the appellate court did, the
present case from the application of the abovequoted pronouncement. If a house of strong materials, like what was involved in the
above Tumalad case, may be considered as personal property for purposes of executing a chattel mortgage thereon as long as the
parties to the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a
machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated as
such. This is really because one who has so agreed is estopped from denying the existence of the chattel mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court of Appeals lays stress on the fact that the
house involved therein was built on a land that did not belong to the owner of such house. But the law makes no distinction with
respect to the ownership of the land on which the house is built and We should not lay down distinctions not contemplated by law.
It must be pointed out that the characterization of the subject machinery as chattel by the private respondent is indicative of
intention and impresses upon the property the character determined by the parties. As stated in Standard Oil Co. of New York v.
Jaramillo, 44 Phil. 630, it is undeniable that the parties to a contract may by agreement treat as personal property that which by
nature would be real property, as long as no interest of third parties would be prejudiced thereby.
Private respondent contends that estoppel cannot apply against it because it had never represented nor agreed that the machinery
in suit be considered as personal property but was merely required and dictated on by herein petitioner to sign a printed form of
chattel mortgage which was in a blank form at the time of signing. This contention lacks persuasiveness. As aptly pointed out by
petitioner and not denied by the respondent, the status of the subject machinery as movable or immovable was never placed in
issue before the lower court and the Court of Appeals except in a supplemental memorandum in support of the petition filed in the
appellate court. Moreover, even granting that the charge is true, such fact alone does not render a contract void ab initio, but can
only be a ground for rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a proper
action in court. There is nothing on record to show that the mortgage has been annulled. Neither is it disclosed that steps were
taken to nullify the same. On the other hand, as pointed out by petitioner and again not refuted by respondent, the latter has
indubitably benefited from said contract. Equity dictates that one should not benefit at the expense of another. Private respondent
could not now therefore, be allowed to impugn the efficacy of the chattel mortgage after it has benefited therefrom,
From what has been said above, the error of the appellate court in ruling that the questioned machinery is real, not personal
property, becomes very apparent. Moreover, the case of Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70, heavily relied
upon by said court is not applicable to the case at bar, the nature of the machinery and equipment involved therein as real
properties never having been disputed nor in issue, and they were not the subject of a Chattel Mortgage. Undoubtedly, the Tumalad
case bears more nearly perfect parity with the instant case to be the more controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby reversed and set aside, and the Orders of
the lower court are hereby reinstated, with costs against the private respondent.
6

SO ORDERED.
Makasiar (Chairman), Aquino, Concepcion Jr., Guerrero and Escolin JJ., concur.
Abad Santos, J., concurs in the result.
LA BUGAL BLAAN TRIBAL ASSOCIATION INC., et. al. v. VICTOR O. RAMOS, Secretary Department of Environment and
Natural Resources; HORACIO RAMOS, Director, Mines and Geosciences Bureau (MGB-DENR); RUBEN TORRES,
Executive Secretary; and WMC (PHILIPPINES) INC.
G.R. No. 127882, 27 January 2004, En Banc (Carpio-Morales, J.)

The constitutional provision allowing the President to enter into FTAA is a exception to the rule that participation in
the nations natural resources is reserved exclusively to Filipinos. Provision must be construed strictly against their
enjoyment by non-Filipinos.

FACTS: RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the effectivity of RA 7942, or on March 30, 1995,
the President signed a Financial and Technical Assistance Agreement (FTAA) with WMCP, a corporation organized under Philippine
laws, covering close to 100,000 hectares of land in South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato. On August
15, 1995, the Environment Secretary Victor Ramos issued DENR Administrative Order 95-23, which was later repealed by DENR
Administrative Order 96-40, adopted on December 20, 1996.

Petitioners prayed that RA 7942, its implementing rules, and the FTAA between the government and WMCP be declared
unconstitutional on ground that they allow fully foreign owned corporations like WMCP to exploit, explore and develop Philippine
mineral resources in contravention of Article XII Section 2 paragraphs 2 and 4 of the Charter.

In January 2001, WMC - a publicly listed Australian mining and exploration company - sold its whole stake in WMCP to Sagittarius
Mines, 60% of which is owned by Filipinos while 40% of which is owned by Indophil Resources, an Australian company. DENR
approved the transfer and registration of the FTAA in Sagittarius name but Lepanto Consolidated assailed the same. The latter case
is still pending before the Court of Appeals.

EO 279, issued by former President Aquino on July 25, 1987, authorizes the DENR to accept, consider and evaluate proposals from
foreign owned corporations or foreign investors for contracts or agreements involving wither technical or financial assistance for
large scale exploration, development and utilization of minerals which upon appropriate recommendation of the (DENR) Secretary,
the President may execute with the foreign proponent. WMCP likewise contended that the annulment of the FTAA would violate a
treaty between the Philippines and Australia which provides for the protection of Australian investments.

ISSUES:
1. Whether or not the Philippine Mining Act is unconstitutional for allowing fully foreign-owned corporations to
exploit the Philippine mineral resources.
2. Whether or not the FTAA between the government and WMCP is a service contract that permits fully foreign
owned companies to exploit the Philippine mineral resources.
HELD:

First Issue: RA 7942 is Unconstitutional

RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting fully foreign owned corporations to exploit the
Philippine natural resources.

Article XII Section 2 of the 1987 Constitution retained the Regalian Doctrine which states that All lands of the public domain,
waters, minerals, coal, petroleum, and other 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. The same section also
states that, the exploration and development and utilization of natural resources shall be under the full control and supervision of
the State.

Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitution authorizing the State to grant licenses,
concessions, or leases for the exploration, exploitation, development, or utilization of natural resources. By such omission, the
utilization of inalienable lands of the public domain through license, concession or lease is no longer allowed under the 1987
Constitution.

Under the concession system, the concessionaire makes a direct equity investment for the purpose of exploiting a particular natural
resource within a given area. The concession amounts to complete control by the concessionaire over the countrys natural
resource, for it is given exclusive and plenary rights to exploit a particular resource at the point of extraction.

The 1987 Constitution, moreover, has deleted the phrase management or other forms of assistance in the 1973 Charter. The
present Constitution now allows only technical and financial assistance. The management and the operation of the mining
activities by foreign contractors, the primary feature of the service contracts was precisely the evil the drafters of the 1987
Constitution sought to avoid.

The constitutional provision allowing the President to enter into FTAAs is an exception to the rule that participation in the nations
natural resources is reserved exclusively to Filipinos. Accordingly, such provision must be construed strictly against their enjoyment
by non-Filipinos. Therefore, RA 7942 is invalid insofar as the said act authorizes service contracts. Although the statute employs the
phrase financial and technical agreements in accordance with the 1987 Constitution, its pertinent provisions actually treat these
agreements as service contracts that grant beneficial ownership to foreign contractors contrary to the fundamental law.
7


The underlying assumption in the provisions of the law is that the foreign contractor manages the mineral resources just like the
foreign contractor in a service contract. By allowing foreign contractors to manage or operate all the aspects of the mining
operation, RA 7942 has, in effect, conveyed beneficial ownership over the nations mineral resources to these contractors, leaving
the State with nothing but bare title thereto.

The same provisions, whether by design or inadvertence, permit a circumvention of the constitutionally ordained 60-40%
capitalization requirement for corporations or associations engaged in the exploitation, development and utilization of Philippine
natural resources.

When parts of a statute are so mutually dependent and connected as conditions, considerations, inducements or compensations for
each other as to warrant a belief that the legislature intended them as a whole, then if some parts are unconstitutional, all
provisions that are thus dependent, conditional or connected, must fail with them.

Under Article XII Section 2 of the 1987 Charter, foreign owned corporations are limited only to merely technical or financial
assistance to the State for large scale exploration, development and utilization of minerals, petroleum and other mineral oils.

Second Issue: RP Government-WMCP FTAA is a Service Contract

The FTAA between he WMCP and the Philippine government is likewise unconstitutional since the agreement itself is a service
contract.

Section 1.3 of the FTAA grants WMCP a fully foreign owned corporation, the exclusive right to explore, exploit, utilize and dispose of
all minerals and by-products that may be produced from the contract area. Section 1.2 of the same agreement provides that EMCP
shall provide all financing, technology, management, and personnel necessary for the Mining Operations.

These contractual stipulations and related provisions in the FTAA taken together, grant WMCP beneficial ownership over natural
resources that properly belong to the State and are intended for the benefit of its citizens. These stipulations are abhorrent to the
1987 Constitution. They are precisely the vices that the fundamental law seeks to avoid, the evils that it aims to suppress.
Consequently, the contract from which they spring must be struck down.
FRANCISCO I. CHAVEZ, petitioner, vs. PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT
CORPORATION, respondents.
R E S O L U T I O N
CARPIO, J.:
For resolution of the Court are the following motions: (1) Motion to Inhibit and for Re-Deliberation filed by respondent Amari
Coastal Bay Development Corporation (Amari for brevity) on September 13, 2002; (2) Motion to Set Case for Hearing on Oral
Argument filed by Amari on August 20, 2002;

(3) Motion for Reconsideration and Supplement to Motion for Reconsideration filed by
Amari on July 26, 2002 and August 20, 2002, respectively; (4) Motion for Reconsideration and Supplement to Motion for
Reconsideration filed by respondent Public Estates Authority (PEA for brevity) on July 26, 2002 and August 8, 2002, respectively;
and (5) Motion for Reconsideration and/or Clarification filed by the Office of the Solicitor General on July 25, 2002. Petitioner
Francisco I. Chavez filed on November 13, 2002 his Consolidated Opposition to the main and supplemental motions for
reconsideration.
To recall, the Courts decision of July 9, 2002 (Decision for brevity) on the instant case states in its summary:
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
areinalienable and outside the commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, 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 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.
8

Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 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.
Amari seeks the inhibition of Justice Antonio T. Carpio, ponente of the Decision, on the ground that Justice Carpio, before his
appointment to the Court, wrote in his Manila Times column of July 1, 1997, I have always maintained that the law requires the
public bidding of reclamation projects. Justice Carpio, then a private law practitioner, also stated in the same column, The Amari-
PEA reclamation contract is legally flawed because it was not bid out by the PEA. Amari claims that because of these statements
Justice Carpio should inhibit himself on the grounds of bias and prejudgment and that the instant case should be re-deliberated
after being assigned to a new ponente.
The motion to inhibit Justice Carpio must be denied for three reasons. First, the motion to inhibit came after Justice Carpio
had already rendered his opinion on the merits of the case. The rule is that a motion to inhibit must be denied if filed after a
member of the Court had already given an opinion on the merits of the case,
[1]
the rationale being that a litigant cannot be
permitted to speculate upon the action of the Court xxx (only to) raise an objection of this sort after a decision has been
rendered. Second, as can be readily gleaned from the summary of the Decision quoted above, the absence of public bidding is not
one of the ratio decidendi of the Decision which is anchored on violation of specific provisions of the Constitution. The absence of
public bidding was not raised as an issue by the parties. The absence of public bidding was mentioned in the Decision only to
complete the discussion on the law affecting reclamation contracts for the guidance of public officials. At any rate, the Office of the
Solicitor General in its Motion for Reconsideration concedes that the absence of public bidding in the disposition of the Freedom
Islands rendered the Amended JVA null and void.
[2]
Third, judges and justices are not disqualified from participating in a case just
because they have written legal articles on the law involved in the case. As stated by the Court in Republic v. Cocofed,
[3]
-
The mere fact that, as a former columnist, Justice Carpio has written on the coconut levy will not disqualify him, in the same
manner that jurists will not be disqualified just because they may have given their opinions as textbook writers on the question
involved in a case.
Besides, the subject and title of the column in question was The CCP reclamation project and the column referred to the Amari-
PEA contract only in passing in one sentence.
Amaris motion to set the case for oral argument must also be denied since the pleadings of the parties have discussed
exhaustively the issues involved in the case.
The motions for reconsideration reiterate mainly the arguments already discussed in the Decision. We shall consider in this
Resolution only the new arguments raised by respondents.
In its Supplement to Motion for Reconsideration, Amari argues that the Decision should be made to apply prospectively, not
retroactively to cover the Amended JVA. Amari argues that the existence of a statute or executive order prior to its being adjudged
void is an operative fact to which legal consequences are attached, citing De Agbayani v. PNB,
[4]
thus:
x x x. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been
in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is
entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more
fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in
operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a
fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the governmental organ
which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it
can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of
fairness and justice then, if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination [of
unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various
aspects, - with respect to particular relations, individual and corporate, and particular conduct, private and official." This language
has been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila Motor Co., Inc. v. Flores. x x x.
x x x
x x x That before the decision they were not constitutionally infirm was admitted expressly. There is all the more reason then to
yield assent to the now prevailing principle that the existence of a statute or executive order prior to its being adjudged void is an
operative fact to which legal consequences are attached.
Amari now claims that assuming arguendo that Presidential Decree Nos. 1084 and 1085, and Executive Order Nos. 525 and 654
are inconsistent with the 1987 Constitution, the limitation imposed by the Decision on these decrees and executive orders should
only be applied prospectively from the finality of the Decision.
Amari likewise asserts that a new doctrine of the Court cannot operate retroactively if it impairs vested rights. Amari
maintains that the new doctrine embodied in the Decision cannot apply retroactively on those who relied on the old doctrine in good
faith, citing Spouses Benzonan v. Court of Appeals,
[5]
thus:
9

At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that enunciated
in Monge and Tupas cited above. The petitioners Benzonan and respondent Pe and the DBP are bound by these decisions for
pursuant to Article 8 of the Civil Code "judicial decisions applying or interpreting the laws or the Constitution shall form a part of the
legal system of the Philippines." But while our decisions form part of the law of the land, they are also subject to Article 4 of the
Civil Code which provides that "laws shall have no retroactive effect unless the contrary is provided." This is expressed in the
familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale against retroactivity is easy to
perceive. The retroactive application of a law usually divests rights that have already become vested or impairs the obligations of
contract and hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]).
The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. Thus, we
emphasized in People v. Jabinal, 55 SCRA 607 [1974] "x x x when a doctrine of this Court is overruled and a different view is
adopted, the new doctrine should be applied prospectively and should not apply to parties who had relied on the old doctrine and
acted on the faith thereof.
There may be special cases where weighty considerations of equity and social justice will warrant a retroactive application of
doctrine to temper the harshness of statutory law as it applies to poor farmers or their widows and orphans. In the present
petitions, however, we find no such equitable considerations. Not only did the private respondent apply for free agricultural land
when he did not need it and he had no intentions of applying it to the noble purposes behind the law, he would now repurchase for
only P327,995.00, the property purchased by the petitioners in good faith for P1,650,000.00 in 1979 and which, because of
improvements and the appreciating value of land must be worth more than that amount now.
The buyers in good faith from DBP had a right to rely on our rulings in Monge and Tupas when they purchased the property from
DBP in 1979 or thirteen (13) years ago. Under the rulings in these two cases, the period to repurchase the disputed lot given to
respondent Pe expired on June 18, 1982. He failed to exercise his right. His lost right cannot be revived by relying on the 1988 case
of Belisario. The right of petitioners over the subject lot had already become vested as of that time and cannot be impaired by the
retroactive application of the Belisario ruling.
Amaris reliance on De Agbayani and Spouses Benzonan is misplaced. These cases would apply if the prevailing law or
doctrine at the time of the signing of the Amended JVA was that a private corporation could acquire alienable lands of the public
domain, and the Decision annulled the law or reversed this doctrine. Obviously, this is not the case here.
Under the 1935 Constitution, private corporations were allowed to acquire alienable lands of the public domain. But since the
effectivity of the 1973 Constitution, private corporations were banned from holding, except by lease, alienable lands of the public
domain. The 1987 Constitution continued this constitutional prohibition. The prevailing law before, during and after the signing of
the Amended JVA is that private corporations cannot hold, except by lease, alienable lands of the public domain. The Decision has
not annulled or in any way changed the law on this matter. The Decision, whether made retroactive or not, does not change the
law since the Decision merely reiterates the law that prevailed since the effectivity of the 1973 Constitution. Thus, De
Agbayani, which refers to a law that is invalidated by a decision of the Court, has no application to the instant case.
Likewise, Spouses Benzonan is inapplicable because it refers to a doctrine of the Court that is overruled by a subsequent
decision which adopts a new doctrine. In the instant case, there is no previous doctrine that is overruled by the Decision. Since
the case of Manila Electric Company v. Judge Castro-Bartolome,
[6]
decided on June 29, 1982, the Court has applied
consistently the constitutional provision that private corporations cannot hold, except by lease, alienable lands of the publ ic
domain. The Court reiterated this in numerous cases, and the only dispute in the application of this constitutional provision is
whether the land in question had already become private property before the effectivity of the 1973 Constitution.
[7]
If the land was
already private land before the 1973 Constitution because the corporation had possessed it openly, continuously, exclusively and
adversely for at least thirty years since June 12, 1945 or earlier, then the corporation could apply for judicial confirmation of its
imperfect title. But if the land remained public land upon the effectivity of the 1973 Constitution, then the corporation could never
hold, except by lease, such public land. Indisputably, the Decision does not overrule any previous doctrine of the Court.
The prevailing doctrine before, during and after the signing of the Amended JVA is that private corporations cannot hold,
except by lease, alienable lands of the public domain. This is one of the two main reasons why the Decision annulled the Amended
JVA. The other main reason is that submerged areas of Manila Bay, being part of the sea, are inalienable and beyond the
commerce of man, a doctrine that has remained immutable since the Spanish Law on Waters of 1886. Clearly, the Decision merely
reiterates, and does not overrule, any existing judicial doctrine.
Even on the characterization of foreshore lands reclaimed by the government, the Decision does not overrule existing law or
doctrine. Since the adoption of the Regalian doctrine in this jurisdiction, the sea and its foreshore areas have always been part of
the public domain. And since the enactment of Act No. 1654 on May 18, 1907 until the effectivity of the 1973 Constitution,
statutory law never allowed foreshore lands reclaimed by the government to be sold to private corporations. The 1973 and 1987
Constitution enshrined and expanded the ban to include any alienable land of the public domain.
There are, of course, decisions of the Court which, while recognizing a violation of the law or Constitution, hold that the sale
or transfer of the land may no longer be invalidated because of weighty considerations of equity and social justice.
[8]
The
invalidation of the sale or transfer may also be superfluous if the purpose of the statutory or constitutional ban has been achieved.
But none of these cases apply to Amari.
Thus, the Court has ruled consistently that where a Filipino citizen sells land to an alien who later sells the land to a Filipino,
the invalidity of the first transfer is corrected by the subsequent sale to a citizen.
[9]
Similarly, where the alien who buys the land
subsequently acquires Philippine citizenship, the sale is validated since the purpose of the constitutional ban to limit land ownership
to Filipinos has been achieved.
[10]
In short, the law disregards the constitutional disqualification of the buyer to hold land if the land
is subsequently transferred to a qualified party, or the buyer himself becomes a qualified party. In the instant case, however,
Amari has not transferred the Freedom Islands, or any portion of it, to any qualified party. In fact, Amari admits that title to the
Freedom Islands still remains with PEA.
[11]

10

The Court has also ruled consistently that a sale or transfer of the land may no longer be questioned under the principle
of res judicata, provided the requisites for res judicata are present.
[12]
Under this principle, the courts and the parties are bound by
a prior final decision, otherwise there will be no end to litigation. As the Court declared in Toledo-Banaga v. Court of
Appeals,
[13]
once a judgement has become final and executory, it can no longer be disturbed no matter how erroneous it may
be. In the instant case, there is no prior final decision adjudicating the Freedom Islands to Amari.
There are, moreover, special circumstances that disqualify Amari from invoking equity principles. Amari cannot claim good
faith because even before Amari signed the Amended JVA on March 30, 1999, petitioner had already filed the instant case on April
27, 1998 questioning precisely the qualification of Amari to acquire the Freedom Islands. Even before the filing of this petition,
two Senate Committees
[14]
had already approved on September 16, 1997 Senate Committee Report No. 560. This Report
concluded, after a well-publicized investigation into PEAs sale of the Freedom Islands to Amari, that the Freedom Islands are
inalienable lands of the public domain. Thus, Amari signed the Amended JVA knowing and assuming all the attendant risks,
including the annulment of the Amended JVA.
Amari has also not paid to PEA the full reimbursement cost incurred by PEA in reclaiming the Freedom Islands. Amari states
that it has paid PEA only P300,000,000.00
[15]
out of theP1,894,129,200.00 total reimbursement cost agreed upon in the Amended
JVA. Moreover, Amari does not claim to have even initiated the reclamation of the 592.15 hectares of submerged areas covered in
the Amended JVA, or to have started to construct any permanent infrastructure on the Freedom Islands. In short, Amari does not
claim to have introduced any physical improvement or development on the reclamation project that is the subject of the Amended
JVA. And yet Amari claims that it had already spent a whopping P9,876,108,638.00 as its total development cost as of June 30,
2002.
[16]
Amari does not explain how it spent the rest of the P9,876,108,638.00 total project cost after paying
PEA P300,000,000.00. Certainly, Amari cannot claim to be an innocent purchaser in good faith and for value.
In its Supplement to Motion for Reconsideration, PEA claims that it is similarly situated as the Bases Conversion
Development Authority (BCDA) which under R.A. No. 7227 is tasked to sell portions of the Metro Manila military camps and other
military reservations. PEAs comparison is incorrect. The Decision states as follows:
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 or disposable lands of the public domain, these lands are still public, not private lands.
PEA is the central implementing agency tasked to undertake reclamation projects nationwide. PEA took the place of
Department of Environment and Natural Resources (DENR for brevity) as the government agency charged with leasing or
selling all reclaimed lands of the public domain. In the hands of PEA, which took over the leasing and selling functions of
DENR, reclaimed foreshore lands are public lands in the same manner that these same lands would have been public
lands in the hands of DENR. BCDA is an entirely different government entity. BCDA is authorized by law to
sell specific government lands that have long been declared by presidential proclamations as military reservations for use by the
different services of the armed forces under the Department of National Defense. BCDAs mandate is specific and limited in area,
while PEAs mandate is general and national. BCDA holds government lands that have been granted to end-user government
entities the military services of the armed forces. In contrast, under Executive Order No. 525, PEA holds the reclaimed public
lands, not as an end-user entity, but as the government agency primarily responsible for integrating, directing, and coordinating
all reclamation projects for and on behalf of the National Government.
In Laurel v. Garcia,
[17]
cited in the Decision, the Court ruled that land devoted to public use by the Department of Foreign
Affairs, when no longer needed for public use, may be declared patrimonial property for sale to private parties provided there is a
law authorizing such act. Well-settled is the doctrine that public land granted to an end-user government agency for a specific
public use may subsequently be withdrawn by Congress from public use and declared patrimonial property to be sold to private
parties. R.A. No. 7227 creating the BCDA is a law that declares specific military reservations no longer needed for defense or
military purposes and reclassifies such lands as patrimonial property for sale to private parties.
Government owned lands, as long they are patrimonial property, can be sold to private parties, whether Filipino citizens or
qualified private corporations. Thus, the so-called Friar Lands acquired by the government under Act No. 1120 are patrimonial
property
[18]
which even private corporations can acquire by purchase. Likewise, reclaimed alienable lands of the public domain if
sold or transferred to a public or municipal corporation for a monetary consideration become patrimonial property in the hands of
the public or municipal corporation. Once converted to patrimonial property, the land may be sold by the public or municipal
corporation to private parties, whether Filipino citizens or qualified private corporations.
We reiterate what we stated in the Decision is the rationale for treating PEA in the same manner as DENR with respect to
reclaimed foreshore lands, thus:
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, if not thousands, 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
11

ban was designed to prevent. This will completely reverse the clear direction of constitutional development in this country. The
1935 Constitution allowed private corporations to acquire not more than 1,024 hectares of public lands. The 1973 Constitution
prohibited private corporations from acquiring any kind of public land, and the 1987 Constitution has unequivocally reiterated this
prohibition.
Finally, the Office of the Solicitor General and PEA argue that the cost of reclaiming deeply submerged areas is enormous
and it would be difficult for PEA to accomplish such project without the participation of private corporations.
[19]
The Decision does
not bar private corporations from participating in reclamation projects and being paid for their services in reclaiming lands. What
the Decision prohibits, following the explicit constitutional mandate, is for private corporations to acquire reclaimed lands of the
public domain. There is no prohibition on the directors, officers and stockholders of private corporations, if they are Filipino
citizens, from acquiring at public auction reclaimed alienable lands of the public domain. They can acquire not more than 12
hectares per individual, and the land thus acquired becomes private land.
Despite the nullity of the Amended JVA, Amari is not precluded from recovering from PEA in the proper proceedings, on a
quantum meruit basis, whatever Amari may have incurred in implementing the Amended JVA prior to its declaration of nullity.
WHEREFORE, finding the Motions for Reconsideration to be without merit, the same are hereby DENIED with FINALITY. The
Motion to Inhibit and for Re-Deliberation and the Motion to Set Case for Hearing on Oral Argument are likewise DENIED.
SO ORDERED.
NIMFA USERO, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents.
LUTGARDA R. SAMELA, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents.
D E C I S I O N
CORONA, J.:
Before this Court are two consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. The first petition,
docketed as G.R. No. 152115, filed by Nimfa Usero, assails the September 19, 2001 decision
[1]
of the Court of Appeals in CA-GR SP
No. 64718. The second petition, docketed as G.R. No. 155055, filed by Lutgarda R. Samela, assails the January 11, 2002
decision
[2]
of the Court of Appeals in CA-GR SP NO. 64181.
The undisputed facts follow.
Petitioners Lutgarda R. Samela and Nimfa Usero are the owners respectively of lots 1 and 2, Block 5, Golden Acres
Subdivision, Barrio Almanza, Las Pias City.
Private respondent spouses Polinar are the registered owners of a parcel of land at no. 18 Anahaw St., Pilar Village, Las Pias
City, behind the lots of petitioners Samela and Usero.
Situated between the lots of the parties is a low-level strip of land, with a stagnant body of water filled with floating water
lilies; abutting and perpendicular to the lot of petitioner Samela, the lot of the Polinars and the low-level strip of land is the
perimeter wall of Pilar Village Subdivision.
Apparently, every time a storm or heavy rains occur, the water in said strip of land rises and the strong current passing
through it causes considerable damage to the house of respondent Polinars. Frustrated by their predicament, private respondent
spouses, on July 30, 1998, erected a concrete wall on the bank of the low-level strip of land about three meters from their house
and rip-rapped the soil on that portion of the strip of land.
Claiming ownership of the subject strip of land, petitioners Samela and Usero demanded that the spouses Apolinar stop their
construction but the spouses paid no heed, believing the strip to be part of a creek. Nevertheless, for the sake of peace, the
Polinars offered to pay for the land being claimed by petitioners Samela and Usero. However, the parties failed to settle their
differences.
On November 9, 1998, petitioners filed separate complaints for forcible entry against the Polinars at the Metropolitan Trial
Court of Las Pias City. The case filed by petitioner Samela was docketed as Civil Case No. 5242, while that of petitioner Usero was
docketed as Civil Case No. 5243.
In Civil Case No. 5242, petitioner Samela adduced in evidence a copy of her Transfer Certificate of Title, plan of consolidation,
subdivision survey, the tax declaration in her name, and affidavits of petitioner Usero and a certain Justino Gamela whose property
was located beside the perimeter wall of Pilar Village.
The spouses Polinar, on the other hand, presented in evidence their own TCT; a barangay certification as to the existence of
the creek; a certification from the district engineer that the western portion of Pilar Village is bound by a tributary of Talon Creek
throughout its entire length; boundary and index map of Pilar Village showing that the village is surrounded by a creek and that the
Polinar property is situated at the edge of said creek; and pictures of the subject strip of land filled with water lilies.
On March 22, 1999, the trial court rendered a decision in favor of petitioner Samela:
WHEREFORE, the Court hereby renders judgment ordering the defendants to vacate and remove at their expense the
improvements made on the subject lot; ordering the defendants to pay the plaintiff P1,000.00 a month as reasonable compensation
for the use of the portion encroached from the filing of the complaint until the same is finally vacated; and to pay
plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit.
[3]

12

In a parallel development, the Metropolitan Trial Court, in Civil Case No. 5243, issued an order on February 29, 2000,
directing petitioner Usero and the Polinar spouses to commission a professional geodetic engineer to conduct a relocation survey
and to submit the report to the trial court.
On April 24, 2000, Mariano Flotilde, a licensed geodetic engineer, conducted a relocation survey of Useros property covered
by TCT No. T- 29545. The result of the said relocation survey, as stated in his affidavit, was as follows:
1. That I executed a relocation survey of Lot 2, Block 5, (LRC) PCS-4463 covered by TCT No. T-29545 registered in the
name of Nimfa O. Usero;
2. That according to my survey, I found out that there is no existing creek on the boundary of the said lot;
3. That based on the relocation plan surveyed by the undersigned, attached herewith, appearing is the encroachment
on the above-mentioned lot by Spouses Herminigildo and Cecilia Polinar with an area of FORTY THREE (43)
SQUARE METERS;
4. That this affidavit was made in compliance with Court Order dated February 23, 2000 of Metropolitan Trial Court,
Las Pias City, Branch LXXIX.
[4]

On August 25, 2000, the Metropolitan Trial Court decided in favor of petitioner Usero:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them:
a) To vacate and remove at their expense the improvement made on the subject lot;
b) To pay the plaintiff P1,000.00 a month as reasonable compensation for the portion encroached from the time of the
filing of the complaint until the same is finally vacated;
c) To pay plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit.
SO ORDERED.
[5]

The Polinar spouses appealed the decisions of the two Municipal Trial Courts to the Regional Trial Court of Las Pias, Branch
253 which heard the appeals separately.
On December 20, 2000, the Regional Trial Court, deciding Civil Case No. 5242, reversed the decision of the trial court and
ordered the dismissal of the complaint. It confirmed the existence of the creek between the northwestern portion of the lot of
petitioner Samela and the southwestern portion of the lot of the spouses Polinar:
Finding the existence of a creek between the respective properties of the parties, plaintiff-appellee cannot therefore lay claim of
lawful ownership of that portion because the same forms part of public dominion. Consequently, she cannot legally stop the
defendants-appellants from rip-rapping the bank of the creek to protect the latters property from soil erosion thereby avoiding
danger to their lives and damage to property.
Absent a lawful claim by the plaintiff-appellee over the subject portion of that lot, defendants-appellants are not duty bound to pay
the former compensation for the use of the same. As a result, they may maintain the said improvements introduced thereon
subject to existing laws, rules and regulations and/or ordinances appurtenant thereto.
WHEREFORE, premises considered, the Decision rendered by Branch 79 of the Metropolitan Trial Court, Las Pias is REVERSED.
Accordingly, the instant complaint is DISMISSED.
SO ORDERED.
[6]

On March 16, 2001, the Regional Trial Court, in Civil Case No. 5243, also reversed the finding of the Municipal Trial Court:
From the foregoing, defendants-appellants may maintain the improvements introduced on the subject portion of the lot subject to
existing laws, rules and regulations and/or ordinances pertaining thereto. Consequently, no compensation may be awarded in favor
of the plaintiff-appellee.
WHEREFORE, premises considered, the above-mentioned Decision rendered by Branch 79 of the Las Pias City Metropolitan Trial
Court is REVERSED. Accordingly, the instant complaint is DISMISSED.
From the adverse decisions of the Regional Trial Court, petitioners filed their respective petitions for review on certiorari to
the Court of Appeals. Petitioner Samelas case was docketed as CA-G.R. SP 64181 while that of petitioner Usero was docketed as
CA-G.R. SP 64718.
Both petitions failed in the CA. Thus the instant consolidated petitions.
13

The pivotal issue in the case at bar is whether or not the disputed strip of land, allegedly encroached upon by the spouses
Polinar, is the private property of petitioners or part of the creek and therefore part of the public domain. Clearly this an issue which
calls for a review of facts already determined by the Court of Appeals.
The jurisdiction of the Court in petitions for review on certiorari under Rule 45 of the Rules of Court is limited to reviewing
only errors of law, not of fact, unless the factual findings complained of are devoid of support by the evidence on record or the
assailed judgment is based on a misapprehension of facts.
[7]
This is obviously not the case here.
A careful scrutiny of the records reveals that the assailed decisions are founded on sufficient evidence. That the subject strip
of land is a creek is evidenced by: (1) a barangay certification that a creek exists in the disputed strip of land; (2) a certification
from the Second Manila Engineering District, NCR-DPWH, that the western portion of Pilar Village where the subject strip of land is
located is bounded by a tributary of Talon Creek and (3) photographs showing the abundance of water lilies in the subject strip of
land. The Court of Appeals was correct: the fact that water lilies thrive in that strip of land can only mean that there is a
permanent stream of water or creek there.
In contrast, petitioners failed to present proof sufficient to support their claim. Petitioners presented the TCTs of their
respective lots to prove that there is no creek between their properties and that of the Polinars. However, an examination of said
TCTs reveals that the descriptions thereon are incomplete. In petitioner Samelas TCT No. T-30088, there is no boundary
description relative to the northwest portion of the property pertaining to the site of the creek. Likewise in TCT No. T-22329-A of
the spouses Polinar, the southeast portion which pertains to the site of the creek has no described boundary. Moreover the tax
declaration presented by petitioner is devoid of any entry on the west boundary vis-a-vis the location of the creek. All the pieces
of evidence taken together, we can only conclude that the adjoining portion of these boundaries is in fact a creek and belongs to no
one but the state.
Property is either of public dominion or of private ownership.
[8]
Concomitantly, Article 420 of the Civil Code provides:
ART. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the
State, banks, shores, roadsteads, and others of similar character;
The phrase others of similar character includes a creek which is a recess or an arm of a river. It is property belonging to
the public domain which is not susceptible to private ownership.
[9]
Being public water, a creek cannot be registered under the
Torrens System in the name of any individual
[10]
.
Accordingly, the Polinar spouses may utilize the rip-rapped portion of the creek to prevent the erosion of their property.
WHEREFORE, the consolidated petitions are hereby denied. The assailed decisions of the Court of Appeals in CA-G.R. SP
64181 and CA-G.R. SP 64718 are affirmed in toto.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Carpio-Morales, and Garcia, JJ., concur.
VIUDA DE TAN TOCO, plaintiff-appellant,
vs.
THE MUNICIPAL COUNCIL OF ILOILO, defendant-appellee.
Arroyo & Evangelista for appellant.
Provincial Fiscal Borromeo Veloso for appelle.
VILLAMOR, J.:
It appears from the record that the widow of Tan Toco had sued the municipal council of Iloilo for the amount of P42,966.40, being
the purchase price of two strips of land, one on Calle J. M. Basa consisting of 592 square meters, and the other on Calle Aldiguer
consisting of 59 square meters, which the municipality of Iloilo had appropriated for widening said street. The Court of First
Instance of Iloilo sentenced the said municipality to pay the plaintiff the amount so claimed, plus the interest, and the said
judgment was on appeal affirmed by this court.
1

On account of lack of funds the municipality of Iloilo was unable to pay the said judgment, wherefore plaintiff had a writ of
execution issue against the property of the said municipality, by virtue of which the sheriff attached two auto trucks used for street
sprinkling, one police patrol automobile, the police stations on Mabini street, and in Molo and Mandurriao and the concrete
structures, with the corresponding lots, used as markets by Iloilo, Molo, and Mandurriao.
After notice of the sale of said property had been made, and a few days before the sale, the provincial fiscal of Iloilo filed a motion
which the Court of First Instance praying that the attachment on the said property be dissolved, that the said attachment be
declared null and void as being illegal and violative of the rights of the defendant municipality.
Plaintiffs counsel objected o the fiscal's motion but the court, by order of August 12, 1925, declared the attachment levied upon the
aforementioned property of the defendant municipality null and void, thereby dissolving the said attachment.
14

From this order the plaintiff has appealed by bill of exceptions. The fundamental question raised by appellant in her four
assignments of error is whether or not the property levied upon is exempt from execution.
The municipal law, section 2165 of the Administrative Code, provides that:
Municipalities are political bodies corporate, and as such are endowed with the faculties of municipal corporations, to be
exercised by and through their respective municipal government in conformity with law.
It shall be competent for them, in their proper corporate name, to sue and be sued, to contract and be contracted with,
to acquire and hold real and personal property for municipal purposes, and generally to exercise the powers hereinafter
specified or otherwise conferred upon them by law.
For the purposes of the matter here in question, the Administrative Code does not specify the kind of property that a municipality
may acquire. However, article 343 of the Civil Code divides the property of provinces and towns (municipalities) into property for
public use and patrimonial property. According to article 344 of the same Code, provincial roads and foot-path, squares, streets,
fountains and public waters, drives and public improvements of general benefit built at the expense of the said towns or provinces,
are property for public use.
All other property possessed by the said towns and provinces is patrimonial and shall be subject to the provisions of the Civil Code
except as provided by special laws.
Commenting upon article 344, Mr. Manresa says that "In accordance with administrative legislation" (Spanish) we must distinguish,
as to the patrimonial property of the towns, "between that a common benefit and that which is private property of the town. The
first differs from property for public use in that generally its enjoyment is less, as it is limited to neighbors or to a group or class
thereof; and, furthermore, such use, more or less general, is not intrinsic with this kind of property, for by its very nature it may be
enjoyed as though it were private property. The third group, that is, private property, is used in the name of the town or province
by the entities representing it and, like and private property, giving a source of revenue."
Such distinction, however, is of little practical importance in this jurisdiction in view of the different principles underlying the
functions of a municipality under the American rule. Notwithstanding this, we believe that the principle governing property of the
public domain of the State is applicable to property for public use of the municipalities as said municipal is similar in character. The
principle is that the property for public use of the State is not within the commerce of man and, consequently, is inalienable and not
subject to prescription. Likewise, property for public of the municipality is not within the commerce of man so long as it is used by
the public and, consequently, said property is also inalienable.
The American Law is more explicit about this matter as expounded by Mcquilin in Municipal Corporations, volume 3, paragraph
1160, where he says that:
States statutes often provide the court houses, jails and other buildings owned by municipalities and the lots on which
they stand shall be exempt from attachment and execution. But independent of express statutory exemption, as a
general proposition, property, real and personal, held by municipal corporations, in trust for the benefit of their
inhabitants, and used for public purposes, is exempt.
For example, public buildings, school houses, streets, squares, parks, wharves, engines and engine houses, and the like,
are not subject to execution. So city waterworks, and a stock of liquors carried in a town dispensary, are exempt. The
reason for the exemption is obvious. Municipal corporations are created for public purposes and for the good of the
citizens in their aggregate or public capacity. That they may properly discharge such public functions corporate property
and revenues are essential, and to deny them these means the very purpose of their creation would be materially
impeded, and in some instances practically destroy it. Respecting this subject the Supreme Court of Louisiana remarked:
"On the first view of this question there is something very repugnant to the moral sense in the idea that a municipal
corporation should contract debts, and that, having no resources but the taxes which are due to it, these should not be
subjected by legal process to the satisfaction of its creditors. This consideration, deduced from the principles of moral
equity has only given way to the more enlarged contemplation of the great and paramount interests of public order and
the principles of government."
It is generally held that property owned by a municipality, where not used for a public purpose but for quasi private
purposes, is subject to execution on a judgment against the municipality, and may be sold. This rule applies to shares of
stock owned by a municipal corporation, and the like. But the mere fact that corporate property held for public uses is
being temporarily used for private purposes does not make it subject execution.
If municipal property exempt from execution is destroyed, the insurance money stands in lieu thereof and is also exempt.
The members or inhabitants of a municipal corporation proper are not personally liable for the debts of the municipality,
except that in the New England States the individual liability of the inhabitant is generally maintained.
In Corpus Juris, vol 23, page 355, the following is found:
15

Where property of a municipal or other public corporation is sough to be subjected to execution to satisfy judgments
recovered against such corporation, the question as to whether such property is leviable or not is to be determined by the
usage and purposes for which it is held. The rule is that property held for public uses, such as public buildings, streets,
squares parks, promenades, wharves, landing places fire engines, hose and hose carriages, engine houses, public
markets, hospitals, cemeteries, and generally everything held for governmental purposes, is not subject to levy and sale
under execution against such corporation. The rule also applies to funds in the hands of a public officer. Likewise it has
been held that taxes due to a municipal corporation or country cannot be seized under execution by a creditor of such
corporation. But where a municipal corporation or country owns in its proprietary, as distinguished from its public or
governmental capacity, property not useful or used for a public purpose but for quasi private purposes, the general rule is
that such property may be seized and sold under execution against the corporation, precisely as similar property of
individuals is seized and sold. But property held for public purposes is not subject to execution merely because it is
temporarily used for private purposes, although if the public use is wholly abandoned it becomes subject to execution.
Whether or not property held as public property is necessary for the public use is a political, rather than a judicial
question.
In the case of City of New Orleans vs. Louisiana Construction Co., Ltd. (140 U. S., 654; 35 Law. ed., 556), it was held that a wharf
for unloading sugar and molasses, open to the public, was property for the public use of the City of New Orleans and was not
subject to attachment for the payment of the debts of the said city.
In that case it was proven that the said wharf was a parcel of land adjacent to the Mississippi River where all shipments of sugar
and molasses taken to New Orleans were unloaded.
That city leased the said wharf to the Louisiana Construction Company, Ltd., in order that it might erect warehouses so that the
merchandise upon discharge might not be spoiled by the elements. The said company was given the privilege of charging certain
fees for storing merchandise in the said warehouses and the public in general had the right to unload sugar and molasses there by
paying the required fees, 10 per cent of which was turned over to the city treasury.
The United States Supreme Court on an appeal held that the wharf was public property, that it never ceased to be such in order to
become private property of the city; wherefore the company could not levy execution upon the wharf in order to collect the amount
of the judgment rendered in favor thereof.
In the case of Klein vs. City of New Orleans (98 U. S., 149; 25 Law. ed., 430), the Supreme Court of the United States that a public
wharf on the banks of the Mississippi River was public property and not subject to execution for the payment of a debt of the City of
New Orleans where said wharf was located.
In this case a parcel of land adjacent to the Mississippi River, which formerly was the shore of the river and which later enlarged
itself by accession, was converted into a wharf by the city for public use, who charged a certain fee for its use.
It was held that the land was public property as necessary as a public street and was not subject to execution on account of the
debts of the city. It was further held that the fees collected where also exempt from execution because they were a part of the
income of the city.
In the case of Tufexis vs. Olaguera and Municipal Council of Guinobatan (32 Phil., 654), the question raised was whether for the
payment of a debt to a third person by the concessionaire of a public market, the said public market could be attached and sold at
public auction. The Supreme Court held that:
Even though a creditor is unquestionably entitled to recover out of his debtor's property, yet when among such property
there is included the special right granted by the Government of usufruct in a building intended for a public service, and
when this privilege is closely related to a service of a public character, such right of the creditor to the collection of a debt
owed him by the debtor who enjoys the said special privilege of usufruct in a public market is not absolute and may be
exercised only through the action of court of justice with respect to the profits or revenue obtained under the special right
of usufruct enjoyed by debtor.
The special concession of the right of usufruct in a public market cannot be attached like any ordinary right, because that
would be to permit a person who has contracted with the state or with the administrative officials thereof to conduct and
manage a service of a public character, to be substituted, without the knowledge and consent of the administrative
authorities, by one who took no part in the contract, thus giving rise to the possibility of the regular course of a public
service being disturbed by the more or less legal action of a grantee, to the prejudice of the state and the public
interests.
The privilege or franchise granted to a private person to enjoy the usufruct of a public market cannot lawfully be attached
and sold, and a creditor of such person can recover his debt only out of the income or revenue obtained by the debtor
from the enjoyment or usufruct of the said privilege, in the same manner that the rights of such creditors of a railroad
company can be exercised and their credit collected only out of the gross receipts remaining after deduction has been
made therefrom of the operating expenses of the road. (Law of November 12, 1896, extended to the overseas provinces
by the royal order of August 3, 1886.)
16

For the reasons contained in the authorities above quoted we believe that this court would have reached the same conclusion if the
debtor had been municipality of Guinobatan and the public market had been levied upon by virtue of the execution.
It is evident that the movable and immovable property of a municipality, necessary for governmental purpose, may not be attached
and sold for the payment of a judgment against the municipality. The supreme reason for this rule is the character of the public use
to which such kind of property is devoted. The necessity for government service justifies that the property of public of the
municipality be exempt from execution just as it is necessary to exempt certain property of private individuals in accordance with
section 452 of the Code of Civil Procedure.
Even the municipal income, according to the above quoted authorities, is exempt from levy and execution. In volume 1, page 467,
Municipal Corporations by Dillon we find that:
Municipal corporations are instituted by the supreme authority of a state for the public good. They exercise, by delegation
from the legislature, a portion of the sovereign power. The main object of their creation is to act as administrative
agencies for the state, and to provide for the police and local government of certain designated civil divisions of its
territory. To this end they are invested with certain governmental powers and charged with civil, political, and municipal
duties. To enable them beneficially to exercise these powers and discharge these duties, they are clothed with the
authority to raise revenues, chiefly by taxation, and subordinately by other modes as by licenses, fines, and penalties.
The revenue of the public corporation is the essential means by which it is enabled to perform its appointed work.
Deprived of its regular and adequate supply of revenue, such a corporation is practically destroyed and the ends of its
erection thwarted. Based upon considerations of this character, it is the settled doctrine of the law that only the public
property but also the taxes and public revenues of such corporations cannot be seized under execution against them,
either in the treasury or when in transit to it. Judgments rendered for taxes, and the proceeds of such judgments in the
hands of officers of the law, are not subject to execution unless so declared by statute. The doctrine of the inviolability of
the public revenues by the creditor is maintained, although the corporation is in debt, and has no means of payment but
the taxes which it is authorized to collect.
Another error assigned by counsel for appellant is the holding of the court a quo that the proper remedy for collecting the judgment
in favor of the plaintiff was by way or mandamus.
While this question is not necessarily included in the one which is the subject of this appeal, yet we believe that the holding of the
court, assigned as error by appellant's counsel, is true when, after a judgment is rendered against a municipality, it has no property
subject to execution. This doctrine is maintained by Dillon (Municipal Corporations, vol. 4, par. 1507, 5th ed.) based upon the
decisions of several States of the Union upholding the same principle and which are cited on page 2679 of the aforesaid work. In
this sense this assignment of error, we believe, is groundless.
By virtue of all the foregoing, the judgment appealed from should be and is hereby affirmed with costs against the appellant. So
ordered.
Avancea, C. J., Street, Malcolm, Ostrand, Johns, Romualdez and Villa-Real., JJ., concur.
THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee,
vs.
CITY OF ZAMBOANGA, SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, defendants-appellants.
Fortugaleza, Lood, Sarmiento, M. T. Yap & Associates for plaintiff-appellee.
Office of the Solicitor General for defendants-appellants.
BENGZON, J.P., J.:
Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the provincial capital of the then
Zamboanga Province. On October 12, 1936, Commonwealth Act 39 was approved converting the Municipality of Zamboanga into
Zamboanga City. Sec. 50 of the Act also provided that
Buildings and properties which the province shall abandon upon the transfer of the capital to another place will be
acquired and paid for by the City of Zamboanga at a price to be fixed by the Auditor General.
The properties and buildings referred to consisted of 50 lots and some buildings constructed thereon, located in the City of
Zamboanga and covered individually by Torrens certificates of title in the name of Zamboanga Province. As far as can be gleaned
from the records,
1
said properties were being utilized as follows
No. of Lots Use
1 ................................................ Capitol Site
3 ................................................ School Site
3 ................................................ Hospital Site
17

3 ................................................ Leprosarium
1 ................................................ Curuan School
1 ................................................ Trade School
2 ................................................ Burleigh School
2 ................................................ High School Playground
9 ................................................ Burleighs
1 ................................................ Hydro-Electric Site (Magay)
1 ................................................ San Roque
23 ................................................ vacant
It appears that in 1945, the capital of Zamboanga Province was transferred to Dipolog.
2
Subsequently, or on June 16, 1948,
Republic Act 286 was approved creating the municipality of Molave and making it the capital of Zamboanga Province.
On May 26, 1949, the Appraisal Committee formed by the Auditor General, pursuant to Commonwealth Act 39, fixed the
value of the properties and buildings in question left by Zamboanga Province in Zamboanga City at P1,294,244.00.
3

On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga into two (2): Zamboanga del Norte
and Zamboanga del Sur. As to how the assets and obligations of the old province were to be divided between the two new ones,
Sec. 6 of that law provided:
Upon the approval of this Act, the funds, assets and other properties and the obligations of the province of
Zamboanga shall be divided equitably between the Province of Zamboanga del Norte and the Province of Zamboanga del
Sur by the President of the Philippines, upon the recommendation of the Auditor General.
Pursuant thereto, the Auditor General, on January 11, 1955, apportioned the assets and obligations of the defunct Province
of Zamboanga as follows: 54.39% for Zamboanga del Norte and 45.61% for Zamboanga del Sur. Zamboanga del Norte therefore
became entitled to 54.39% of P1,294,244.00, the total value of the lots and buildings in question, or P704,220.05 payable by
Zamboanga City.
On March 17, 1959, the Executive Secretary, by order of the President, issued a ruling
4
holding that Zamboanga del Norte
had a vested right as owner (should be co-owner pro-indiviso) of the properties mentioned in Sec. 50 of Commonwealth Act 39,
and is entitled to the price thereof, payable by Zamboanga City. This ruling revoked the previous Cabinet Resolution of July 13,
1951 conveying all the said 50 lots and buildings thereon to Zamboanga City for P1.00, effective as of 1945, when the provincial
capital of the then Zamboanga Province was transferred to Dipolog.
The Secretary of Finance then authorized the Commissioner of Internal Revenue to deduct an amount equal to 25% of the
regular internal revenue allotment for the City of Zamboanga for the quarter ending March 31, 1960, then for the quarter ending
June 30, 1960, and again for the first quarter of the fiscal year 1960-1961. The deductions, all aggregating P57,373.46, was
credited to the province of Zamboanga del Norte, in partial payment of the P764,220.05 due it.
However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of Commonwealth Act 39 by providing that

All buildings, properties and assets belonging to the former province of Zamboanga and located within the City of
Zamboanga are hereby transferred, free of charge, in favor of the said City of Zamboanga. (Stressed for emphasis).
Consequently, the Secretary of Finance, on July 12, 1961, ordered the Commissioner of Internal Revenue to stop from
effecting further payments to Zamboanga del Norte and to return to Zamboanga City the sum of P57,373.46 taken from it out of
the internal revenue allotment of Zamboanga del Norte. Zamboanga City admits that since the enactment of Republic Act 3039,
P43,030.11 of the P57,373.46 has already been returned to it.
This constrained plaintiff-appellee Zamboanga del Norte to file on March 5, 1962, a complaint entitled "Declaratory Relief
with Preliminary Mandatory Injunction" in the Court of First Instance of Zamboanga del Norte against defendants-appellants
Zamboanga City, the Secretary of Finance and the Commissioner of Internal Revenue. It was prayed that: (a) Republic Act 3039 be
declared unconstitutional for depriving plaintiff province of property without due process and just compensation; (b) Plaintiff's rights
and obligations under said law be declared; (c) The Secretary of Finance and the Internal Revenue Commissioner be enjoined from
reimbursing the sum of P57,373.46 to defendant City; and (d) The latter be ordered to continue paying the balance of P704,220.05
in quarterly installments of 25% of its internal revenue allotments.
On June 4, 1962, the lower court ordered the issuance of preliminary injunction as prayed for. After defendants filed their
respective answers, trial was held. On August 12, 1963, judgment was rendered, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring Republic Act No. 3039 unconstitutional insofar as it deprives
plaintiff Zamboanga del Norte of its private properties, consisting of 50 parcels of land and the improvements thereon
18

under certificates of title (Exhibits "A" to "A-49") in the name of the defunct province of Zamboanga; ordering defendant
City of Zamboanga to pay to the plaintiff the sum of P704,220.05 payment thereof to be deducted from its regular
quarterly internal revenue allotment equivalent to 25% thereof every quarter until said amount shall have been fully
paid; ordering defendant Secretary of Finance to direct defendant Commissioner of Internal Revenue to deduct 25% from
the regular quarterly internal revenue allotment for defendant City of Zamboanga and to remit the same to plaintiff
Zamboanga del Norte until said sum of P704,220.05 shall have been fully paid; ordering plaintiff Zamboanga del Norte to
execute through its proper officials the corresponding public instrument deeding to defendant City of Zamboanga the 50
parcels of land and the improvements thereon under the certificates of title (Exhibits "A" to "A-49") upon payment by the
latter of the aforesaid sum of P704,220.05 in full; dismissing the counterclaim of defendant City of Zamboanga; and
declaring permanent the preliminary mandatory injunction issued on June 8, 1962, pursuant to the order of the Court
dated June 4, 1962. No costs are assessed against the defendants.
It is SO ORDERED.
Subsequently, but prior to the perfection of defendants' appeal, plaintiff province filed a motion to reconsider praying that
Zamboanga City be ordered instead to pay the P704,220.05 in lump sum with 6% interest per annum. Over defendants' opposition,
the lower court granted plaintiff province's motion.
The defendants then brought the case before Us on appeal.
Brushing aside the procedural point concerning the property of declaratory relief filed in the lower court on the assertion that
the law had already been violated and that plaintiff sought to give it coercive effect, since assuming the same to be true, the Rules
anyway authorize the conversion of the proceedings to an ordinary action,
5
We proceed to the more important and principal
question of the validity of Republic Act 3039.
The validity of the law ultimately depends on the nature of the 50 lots and buildings thereon in question. For, the matter
involved here is the extent of legislative control over the properties of a municipal corporation, of which a province is one. The
principle itself is simple: If the property is owned by the municipality (meaning municipal corporation) in its public and
governmental capacity, the property is public and Congress has absolute control over it. But if the property is owned in its private
or proprietary capacity, then it is patrimonial and Congress has no absolute control. The municipality cannot be deprived of it
without due process and payment of just compensation.
6

The capacity in which the property is held is, however, dependent on the use to which it is intended and devoted. Now,
which of two norms, i.e., that of the Civil Code or that obtaining under the law of Municipal Corporations, must be used in
classifying the properties in question?
The Civil Code classification is embodied in its Arts. 423 and 424 which provide:1wph1.t
ART. 423. The property of provinces, cities, and municipalities is divided into property for public use and
patrimonial property.
ART. 424. Property for public use, in the provinces, cities, and municipalities, consists of the provincial roads, city
streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public service paid for
by said provinces, cities, or municipalities.
All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to the
provisions of special laws. (Stressed for emphasis).
Applying the above cited norm, all the properties in question, except the two (2) lots used as High School playgrounds, could
be considered as patrimonial properties of the former Zamboanga province. Even the capital site, the hospital and leprosarium
sites, and the school sites will be considered patrimonial for they are not for public use. They would fall under the phrase "public
works for public service" for it has been held that under the ejusdem generis rule, such public works must be for free and
indiscriminate use by anyone, just like the preceding enumerated properties in the first paragraph of Art 424.
7
The playgrounds,
however, would fit into this category.
This was the norm applied by the lower court. And it cannot be said that its actuation was without jurisprudential precedent
for in Municipality of Catbalogan v. Director of Lands,
8
and in Municipality of Tacloban v. Director of Lands,
9
it was held that the
capitol site and the school sites in municipalities constitute their patrimonial properties. This result is understandable because,
unlike in the classification regarding State properties, properties for public service in the municipalities are not classified as public.
Assuming then the Civil Code classification to be the chosen norm, the lower court must be affirmed except with regard to the two
(2) lots used as playgrounds.
On the other hand, applying the norm obtaining under the principles constituting the law of Municipal Corporations, all those
of the 50 properties in question which are devoted to public service are deemed public; the rest remain patrimonial. Under this
norm, to be considered public, it is enough that the property be held and, devoted for governmental purposes like local
administration, public education, public health, etc.
10

19

Supporting jurisprudence are found in the following cases: (1) HINUNANGAN V. DIRECTOR OF LANDS,
11
where it was stated
that "... where the municipality has occupied lands distinctly for public purposes, such as for the municipal court house, the public
school, the public market, or other necessary municipal building, we will, in the absence of proof to the contrary, presume a grant
from the States in favor of the municipality; but, as indicated by the wording, that rule may be invoked only as to property which is
used distinctly for public purposes...." (2) VIUDA DE TANTOCO V. MUNICIPAL COUNCIL OF ILOILO
12
held that municipal properties
necessary for governmental purposes are public in nature. Thus, the auto trucks used by the municipality for street sprinkling, the
police patrol automobile, police stations and concrete structures with the corresponding lots used as markets were declared exempt
from execution and attachment since they were not patrimonial properties. (3) MUNICIPALITY OF BATANGAS VS. CANTOS
13
held
squarely that a municipal lot which had always been devoted to school purposes is one dedicated to public use and is not
patrimonial property of a municipality.
Following this classification, Republic Act 3039 is valid insofar as it affects the lots used as capitol site, school sites and its
grounds, hospital and leprosarium sites and the high school playground sites a total of 24 lots since these were held by the
former Zamboanga province in its governmental capacity and therefore are subject to the absolute control of Congress. Said lots
considered as public property are the following:
TCT Number Lot Number U s e
2200 ...................................... 4-B ...................................... Capitol Site
2816 ...................................... 149 ...................................... School Site
3281 ...................................... 1224 ...................................... Hospital Site
3282 ...................................... 1226 ...................................... Hospital Site
3283 ...................................... 1225 ...................................... Hospital Site
3748 ...................................... 434-A-1 ...................................... School Site
5406 ...................................... 171 ...................................... School Site
5564 ...................................... 168 ...................................... High School Play-ground
5567 ...................................... 157 & 158 ...................................... Trade School
5583 ...................................... 167 ...................................... High School Play-ground
6181 ...................................... (O.C.T.) ...................................... Curuan School
11942 ...................................... 926 ...................................... Leprosarium
11943 ...................................... 927 ...................................... Leprosarium
11944 ...................................... 925 ...................................... Leprosarium
5557 ...................................... 170 ...................................... Burleigh School
5562 ...................................... 180 ...................................... Burleigh School
5565 ...................................... 172-B ...................................... Burleigh
5570 ...................................... 171-A ...................................... Burleigh
5571 ...................................... 172-C ...................................... Burleigh
5572 ...................................... 174 ...................................... Burleigh
5573 ...................................... 178 ...................................... Burleigh
5585 ...................................... 171-B ...................................... Burleigh
5586 ...................................... 173 ...................................... Burleigh
5587 ...................................... 172-A ...................................... Burleigh
We noticed that the eight Burleigh lots above described are adjoining each other and in turn are between the two lots
wherein the Burleigh schools are built, as per records appearing herein and in the Bureau of Lands. Hence, there is sufficient basis
for holding that said eight lots constitute the appurtenant grounds of the Burleigh schools, and partake of the nature of the same.
Regarding the several buildings existing on the lots above-mentioned, the records do not disclose whether they were
constructed at the expense of the former Province of Zamboanga. Considering however the fact that said buildings must have been
erected even before 1936 when Commonwealth Act 39 was enacted and the further fact that provinces then had no power to
authorize construction of buildings such as those in the case at bar at their own expense,
14
it can be assumed that said buildings
were erected by the National Government, using national funds. Hence, Congress could very well dispose of said buildings in the
same manner that it did with the lots in question.
But even assuming that provincial funds were used, still the buildings constitute mere accessories to the lands,which are
public in nature, and so, they follow the nature of said lands, i.e., public. Moreover, said buildings, though located in the city, will
not be for the exclusive use and benefit of city residents for they could be availed of also by the provincial residents. The province
then and its successors-in-interest are not really deprived of the benefits thereof.
But Republic Act 3039 cannot be applied to deprive Zamboanga del Norte of its share in the value of the rest of the 26
remaining lots which are patrimonial properties since they are not being utilized for distinctly, governmental purposes. Said lots
are:
20

TCT Number Lot Number U s e
5577 ...................................... 177 ...................................... Mydro, Magay

13198 ...................................... 127-0 ...................................... San Roque

5569 ...................................... 169 ...................................... Burleigh
15


5558 ...................................... 175 ...................................... Vacant

5559 ...................................... 188 ...................................... "

5560 ...................................... 183 ...................................... "

5561 ...................................... 186 ...................................... "

5563 ...................................... 191 ...................................... "

5566 ...................................... 176 ...................................... "

5568 ...................................... 179 ...................................... "

5574 ...................................... 196 ...................................... "

5575 ...................................... 181-A ...................................... "

5576 ...................................... 181-B ...................................... "

5578 ...................................... 182 ...................................... "

5579 ...................................... 197 ...................................... "

5580 ...................................... 195 ...................................... "

5581 ...................................... 159-B ...................................... "

5582 ...................................... 194 ...................................... "

5584 ...................................... 190 ...................................... "

5588 ...................................... 184 ...................................... "

5589 ...................................... 187 ...................................... "

5590 ...................................... 189 ...................................... "

5591 ...................................... 192 ...................................... "

5592 ...................................... 193 ...................................... "

5593 ...................................... 185 ...................................... "

7379 ...................................... 4147 ...................................... "

Moreover, the fact that these 26 lots are registered strengthens the proposition that they are truly private in nature. On the
other hand, that the 24 lots used for governmental purposes are also registered is of no significance since registration cannot
convert public property to private.
16

We are more inclined to uphold this latter view. The controversy here is more along the domains of the Law of Municipal
Corporations State vs. Province than along that of Civil Law. Moreover, this Court is not inclined to hold that municipal
property held and devoted to public service is in the same category as ordinary private property. The consequences are dire. As
ordinary private properties, they can be levied upon and attached. They can even be acquired thru adverse possession all these
to the detriment of the local community. Lastly, the classification of properties other than those for public use in the municipalities
as patrimonial under Art. 424 of the Civil Code is "... without prejudice to the provisions of special laws." For purpose of this
article, the principles, obtaining under the Law of Municipal Corporations can be considered as "special laws". Hence, the
classification of municipal property devoted for distinctly governmental purposes as public should prevail over the Civil Code
classification in this particular case.
Defendants' claim that plaintiff and its predecessor-in-interest are "guilty of laches is without merit. Under Commonwealth
Act 39, Sec. 50, the cause of action in favor of the defunct Zamboanga Province arose only in 1949 after the Auditor General fixed
the value of the properties in question. While in 1951, the Cabinet resolved transfer said properties practically for free to
Zamboanga City, a reconsideration thereof was seasonably sought. In 1952, the old province was dissolved. As successor-in-
interest to more than half of the properties involved, Zamboanga del Norte was able to get a reconsideration of the Cabinet
Resolution in 1959. In fact, partial payments were effected subsequently and it was only after the passage of Republic Act 3039 in
1961 that the present controversy arose. Plaintiff brought suit in 1962. All the foregoing, negative laches.
It results then that Zamboanga del Norte is still entitled to collect from the City of Zamboanga the former's 54.39% share in
the 26 properties which are patrimonial in nature, said share to computed on the basis of the valuation of said 26 properties as
contained in Resolution No. 7, dated March 26, 1949, of the Appraisal Committee formed by the Auditor General.
Plaintiff's share, however, cannot be paid in lump sum, except as to the P43,030.11 already returned to defendant City. The
return of said amount to defendant was without legal basis. Republic Act 3039 took effect only on June 17, 1961 after a partial
payment of P57,373.46 had already been made. Since the law did not provide for retroactivity, it could not have validly affected a
completed act. Hence, the amount of P43,030.11 should be immediately returned by defendant City to plaintiff province. The
remaining balance, if any, in the amount of plaintiff's 54.39% share in the 26 lots should then be paid by defendant City in the
same manner originally adopted by the Secretary of Finance and the Commissioner of Internal Revenue, and not in lump sum.
Plaintiff's prayer, particularly pars. 5 and 6, read together with pars. 10 and 11 of the first cause of action recited in the
complaint
17
clearly shows that the relief sought was merely the continuance of the quarterly payments from the internal revenue
allotments of defendant City. Art. 1169 of the Civil Code on reciprocal obligations invoked by plaintiff to justify lump sum payment
21

is inapplicable since there has been so far in legal contemplation no complete delivery of the lots in question. The titles to the
registered lots are not yet in the name of defendant Zamboanga City.
WHEREFORE, the decision appealed from is hereby set aside and another judgment is hereby entered as follows:.
(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del Norte in lump sum the amount of
P43,030.11 which the former took back from the latter out of the sum of P57,373.46 previously paid to the latter; and
(2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever balance remains of plaintiff's 54.39%
share in the 26 patrimonial properties, after deducting therefrom the sum of P57,373.46, on the basis of Resolution No. 7 dated
March 26, 1949 of the Appraisal Committee formed by the Auditor General, by way of quarterly payments from the allotments of
defendant City, in the manner originally adopted by the Secretary of Finance and the Commissioner of Internal Revenue. No costs.
So ordered.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Concepcion, C.J., is on leave.
RAFAEL S. SALAS, in his capacity as Executive Secretary; CONRADO F. ESTRELLA, in his capacity as Governor of the
Land Authority; and LORENZO GELLA, in his capacity as Register of Deeds of Manila, petitioners-appellants,
vs.
HON. HILARION U. JARENCIO, as Presiding Judge of Branch XXIII, Court of First Instance of Manila; ANTONIO J.
VILLEGAS, in his capacity as Mayor of the City of Manila; and the CITY OF MANILA, respondents-appellees.
Office of the Solicitor General Felix V. Makasiar, Assistant Solicitor-General Antonio A. Torres, Solicitor Raul I. Goco and Magno B.
Pablo & Cipriano A. Tan, Legal Staff, Land Authority for petitioners-appellants.
Gregorio A. Ejercito and Felix C. Chavez for respondents-appellees.

ESGUERRA, J.:p
This is a petition for review of the decision of the Court of First Instance of Manila, Branch XXIII, in Civil Case No. 67946, dated
September 23, 1968, the dispositive portion of which is as follows:
WHEREFORE, the Court renders judgment declaring Republic Act No. 4118 unconstitutional and invalid in that it
deprived the City of Manila of its property without due process and payment of just compensation. Respondent
Executive Secretary and Governor of the Land Authority are hereby restrained and enjoined from implementing
the provisions of said law. Respondent Register of Deeds of the City of Manila is ordered to cancel Transfer
Certificate of Title No. 80876 which he had issued in the name of the Land Tenure Administration and reinstate
Transfer Certificate of Title No. 22547 in the name of the City of Manila which he cancelled, if that is feasible, or
issue a new certificate of title for the same parcel of land in the name of the City of Manila.
1

The facts necessary for a clear understanding of this case are as follows:
On February 24, 1919, the 4th Branch of the Court of First Instance of Manila, acting as a land registration court, rendered
judgment in Case No. 18, G.L.R.O. Record No. 111, declaring the City of Manila the owner in fee simple of a parcel of land known
as Lot No. 1, Block 557 of the Cadastral Survey of the City of Mani1a, containing an area of 9,689.8 square meters, more or less.
Pursuant to said judgment the Register of Deeds of Manila on August 21, 1920, issued in favor of the City of Manila, Original
Certificate of Title No. 4329 covering the aforementioned parcel of land. On various dates in 1924, the City of Manila sold portions
of the aforementioned parcel of land in favor of Pura Villanueva. As a consequence of the transactions Original Certificate of Title
No. 4329 was cancelled and transfer certificates of title were issued in favor of Pura Villanueva for the portions purchased by her.
When the last sale to Pura Villanueva was effected on August 22, 1924, Transfer Certificate of Title No. 21974 in the name of the
City of Manila was cancelled and in lieu thereof Transfer Certificate of Title (TCT) No. 22547 covering the residue thereof known as
Lot 1-B-2-B of Block 557, with an area of 7,490.10 square meters, was issued in the name of the City of Manila.
On September 21, 1960, the Municipal Board of Manila, presided by then Vice-Mayor Antono J. Villegas, adopted a resolution
requesting His Excellency, the President of the Philippines to consider the feasibility of declaring the City property bounded by
Florida, San Andres, and Nebraska Streets, under Transfer Certificate of Title Nos. 25545 and 22547, containing a total area of
7,450 square meters as a patrimonial property of the City of Manila for the purpose of reselling these lots to the actual occupants
thereof.
2

The said resolution of the Municipil Board of the City of Manila was officially transmitted to the President of the Philippines by then
Vice-Mayor Antonio J. Villegas on September 21, 1960, with the information that the same resolution was, on the same date,
transmitted to the Senate and House of Representatives of the Congress of the Philippines.
3

22

During the First Session of the Fifth Congress of the Philippines, House Bill No. 191 was filed in the House of Representatives by
then Congressman Bartolome Cabangbang seeking to declare the property in question as patrimonial property of the City of Manila,
and for other purposes. The explanatory note of the Bill gave the grounds for its enactment, to wit:
In the particular case of the property subject of this bill, the City of Manila does not seem to have use thereof
as a public communal property. As a matter of fact, a resolution was adopted by the Municipal Board of Manila
at its regular session held on September 21, 1960, to request the feasibility of declaring the city property
bounded by Florida, San Andres and Nebraska Streets as a patrimonial property of the City of Manila for the
purpose of reselling these lots to the actual occupants thereof. Therefore, it will be to the best interest of
society that the said property be used in one way or another. Since this property has been occupied for a long
time by the present occupants thereof and since said occupants have expressed their willingness to buy the
said property, it is but proper that the same be sold to them.
4

Subsequently, a revised version of the Bill was introduced in the House of Representatives by Congressmen Manuel Cases, Antonio
Raquiza and Nicanor Yiguez as House Bill No. 1453, with the following explanatory note:
The accompanying bill seeks to convert one (1) parcel of land in the district of Malate, which is reserved as
communal property into a disposable or alienable property of the State and to provide its subdivision and sale
to bona fide occupants or tenants.
This parcel of land in question was originally an aggregate part of a piece of land with an area of 9,689.8
square meters, more or less. ... On September 21, 1960, the Municipal Board of Manila in its regular session
unanimously adopted a resolution requesting the President of the Philippines and Congress of the Philippines
the feasibility of declaring this property into disposable or alienable property of the State. There is therefore a
precedent that this parcel of land could be subdivided and sold to bona fide occupants. This parcel of land will
not serve any useful public project because it is bounded on all sides by private properties which were formerly
parts of this lot in question.
Approval of this bill will implement the policy of the Administration of land for the landless and the Fifth
Declaration of Principles of the Constitution, which states that the promotion of Social Justice to insure the well-
being and economic security of all people should be the concern of the State. We are ready and willing to enact
legislation promoting the social and economic well-being of the people whenever an opportunity for enacting
such kind of legislation arises.
In view of the foregoing consideration and to insure fairness and justice to the present bona fide occupants thereof, approval of this
Bill is strongly urged.
5

The Bill having been passed by the House of Representatives, the same was thereafter sent to the Senate where it was thoroughly
discussed, as evidenced by the Congressional Records for May 20, 1964, pertinent portion of which is as follows:
SENATOR FERNANDEZ: Mr. President, it will be re called that when the late Mayor Lacson was still alive, we
approved a similar bill. But afterwards, the late Mayor Lacson came here and protested against the approval,
and the approval was reconsidered. May I know whether the defect in the bill which we approved, has already
been eliminated in this present bill?
SENATOR TOLENTINO: I understand Mr. President, that that has already been eliminated and that is why the
City of Manila has no more objection to this bill.
SENATOR FERNANDEZ: Mr. President, in view of that manifestation and considering that Mayor Villegas and
Congressman Albert of the Fourth District of Manila are in favor of the bill. I would not want to pretend to know
more what is good for the City of Manila.
SENATOR TOLENTINO: Mr. President, there being no objection, I move that we approve this bill on second
reading.
PRESIDENT PRO-TEMPORE: The biII is approved on second reading after several Senetors said aye and nobody
said nay.
The bill was passed by the Senate, approved by the President on June 20, 1964, and became Republic Act No. 4118. It reads as
follows:
Lot I-B-2-B of Block 557 of the cadastral survey of the City of Manila, situated in the District of Malate, City of
Manila, which is reserved as communal property, is hereby converted into disposal or alienable land of the
State, to be placed under the disposal of the Land Tenure Administration. The Land Tenure Administration
shall subdivide the property into small lots, none of which shall exceed one hundred and twenty square meters
in area and sell the same on installment basis to the tenants or bona fide occupants thereof and to individuals,
in the order mentioned: Provided, That no down payment shall be required of tenants or bona fideoccupants
23

who cannot afford to pay such down payment: Provided, further, That no person can purchase more than one
lot: Provided, furthermore, That if the tenant or bona fide occupant of any given lot is not able to purchase the
same, he shall be given a lease from month to month until such time that he is able to purchase the
lot: Provided, still further, That in the event of lease the rentals which may be charged shall not exceed eight
per cent per annum of the assessed value of the property leased: And provided, finally, That in fixing the price
of each lot, which shall not exceed twenty pesos per square meter, the cost of subdivision and survey shall not
be included.
Sec. 2. Upon approval of this Act no ejectment proceedings against any tenant or bona fide occupant of the
above lots shall be instituted and any ejectment proceedings pending in court against any such tenant or bona
fide occupant shall be dismissed upon motion of the defendant: Provided, That any demolition order directed
against any tenant or bona fide occupant shall be lifted.
Sec. 3. Upon approval of this Act, if the tenant or bona fide occupant is in arrears in the payment of any
rentals, the amount legally due shall be liquidated and shall be payable in twenty-four equal monthly
installments from the date of liquidation.
Sec. 4. No property acquired by virtue of this Act shall be transferred, sold, mortgaged, or otherwise disposed
of within a period of five years from the date full ownership thereof has been vested in the purchaser without
the consent of the Land Tenure Administration.
Sec. 5. In the event of the death of the purchaser prior to the complete payment of the price of the lot
purchased by him, his widow and children shall succeed in all his rights and obligations with respect to his lot.
Sec. 6. The Chairman of the Land Tenure Administration shall implement and issue such rules and regulations
as may be necessary to carry out the provisions of this Act.
Sec. 7. The sum of one hundred fifty thousand pesos is appropriated out of any funds in the National Treasury
not otherwise appropriated, to carry out the purposes of this Act.
Sec. 8. All laws or parts of laws inconsistent with this Act are repealed or modified accordingly.
Sec. 9. This Act shall take effect upon its approval.
Approved, June 20, 1964.
To implement the provisions of Republic Act No. 4118, and pursuant to the request of the occupants of the property involved, then
Deputy Governor Jose V. Yap of the Land Authority (which succeeded the Land Tenure Administration) addressed a letter, dated
February 18, 1965, to Mayor Antonio Villegas, furnishing him with a copy of the proposed subdivision plan of said lot as prepared
for the Republic of the Philippines for resale of the subdivision lots by the Land Authority to bona fide applicants.
6

On March 2, 1965, the City Mayor of Manila, through his Executive and Technical Adviser, acknowledged receipt of the proposed
subdivision plan of the property in question and informed the Land Authority that his office would interpose no objection to the
implementation of said law, provided that its provisions be strictly complied with.
7

With the above-mentioned written conformity of the City of Manila for the implementation of Republic Act No. 4118, the Land
Authority, thru then Deputy Governor Jose V. Yap, requested the City Treasurer of Manila, thru the City Mayor, for the surrender
and delivery to the former of the owner's duplicate of Transfer Certificate of Title No. 22547 in order to obtain title thereto in the
name of the Land Authority. The request was duly granted with the knowledge and consent of the Office of the City Mayor.
8

With the presentation of Transfer Certificate of Title No. 22547, which had been yielded as above stated by the, City authorities to
the Land Authority, Transfer Certificate of Title (T.C.T. No. 22547) was cancelled by the Register of Deeds of Manila and in lieu
thereof Transfer Certificate of Title No. 80876 was issued in the name of the Land Tenure Administration (now Land Authority)
pursuant to the provisions of Republic Act No.
4118.
9

But due to reasons which do not appear in the record, the City of Manila made a complete turn-about, for on December 20, 1966,
Antonio J. Villegas, in his capacity as the City Mayor of Manila and the City of Manila as a duly organized public corporation, brought
an action for injunction and/or prohibition with preliminary injunction to restrain, prohibit and enjoin the herein appellants,
particularly the Governor of the Land Authority and the Register of Deeds of Manila, from further implementing Republic Act No.
4118, and praying for the declaration of Republic Act No. 4118 as unconstitutional.
With the foregoing antecedent facts, which are all contained in the partial stipulation of facts submitted to the trial court and
approved by respondent Judge, the parties waived the presentation of further evidence and submitted the case for decision. On
September 23, 1968, judgment was rendered by the trial court declaring Republic Act No. 4118 unconstitutional and invalid on the
ground that it deprived the City of Manila of its property without due process of law and payment of just compensation. The
24

respondents were ordered to undo all that had been done to carry out the provisions of said Act and were restrained from further
implementing the same.
Two issues are presented for determination, on the resolution of which the decision in this case hinges, to wit:
I. Is the property involved private or patrimonial property of the City of Manila?
II. Is Republic Act No. 4118 valid and not repugnant to the Constitution?
I.
As regards the first issue, appellants maintain that the land involved is a communal land or "legua comunal" which is a portion of
the public domain owned by the State; that it came into existence as such when the City of Manila, or any pueblo or town in the
Philippines for that matter, was founded under the laws of Spain, the former sovereign; that upon the establishment of a pueblo,
the administrative authority was required to allot and set aside portions of the public domain for a public plaza, a church site, a site
for public buildings, lands to serve as common pastures and for streets and roads; that in assigning these lands some lots were
earmarked for strictly public purposes, and ownership of these lots (for public purposes) immediately passed to the new
municipality; that in the case of common lands or "legua comunal", there was no such immediate acquisition of ownership by the
pueblo, and the land though administered thereby, did not automatically become its property in the absence of an express grant
from the Central Government, and that the reason for this arrangement is that this class of land was not absolutely needed for the
discharge of the municipality's governmental functions.
It is argued that the parcel of land involved herein has not been used by the City of Manila for any public purpose and had not been
officially earmarked as a site for the erection of some public buildings; that this circumstance confirms the fact that it was originally
"communal" land alloted to the City of Manila by the Central Government not because it was needed in connection with its
organization as a municipality but simply for the common use of its inhabitants; that the present City of Manila as successor of the
Ayuntamiento de Manila under the former Spanish sovereign merely enjoys the usufruct over said land, and its exercise of acts of
ownership by selling parts thereof did not necessarily convert the land into a patrimonial property of the City of Manila nor divest
the State of its paramount title.
Appellants further argue that a municipal corporation, like a city is a governmental agent of the State with authority to govern a
limited portion of its territory or to administer purely local affairs in a given political subdivision, and the extent of its authority is
strictly delimited by the grant of power conferred by the State; that Congress has the exclusive power to create, change or destroy
municipal corporations; that even if We admit that legislative control over municipal corporations is not absolute and even if it is
true that the City of Manila has a registered title over the property in question, the mere transfer of such land by an act of the
legislature from one class of public land to another, without compensation, does not invade the vested rights of the City.
Appellants finally argue that Republic Act No. 4118 has treated the land involved as one reserved for communal use, and this
classification is conclusive upon the courts; that if the City of Manila feels that this is wrong and its interests have been thereby
prejudiced, the matter should be brought to the attention of Congress for correction; and that since Congress, in the exercise of its
wide discretionary powers has seen fit to classify the land in question as communal, the Courts certainly owe it to a coordinate
branch of the Government to respect such determination and should not interfere with the enforcement of the law.
Upon the other hand, appellees argue by simply quoting portions of the appealed decision of the trial court, which read thus:
The respondents (petitioners-appellants herein) contend, among other defenses, that the property in question
is communal property. This contention is, however, disproved by Original Certificate of Title No. 4329 issued on
August 21, 1920 in favor of the City of Manila after the land in question was registered in the City's favor. The
Torrens Title expressly states that the City of Manila was the owner in 'fee simple' of the said land. Under Sec.
38 of the Land Registration Act, as amended, the decree of confirmation and registration in favor of the City of
Manila ... shall be conclusive upon and against all persons including the Insular Government and all the
branches there ... There is nothing in the said certificate of title indicating that the land was 'communal' land as
contended by the respondents. The erroneous assumption by the Municipal Board of Manila that the land in
question was communal land did not make it so. The Municipal Board had no authority to do that.
The respondents, however, contend that Congress had the power and authority to declare that the land in
question was 'communal' land and the courts have no power or authority to make a contrary finding. This
contention is not entirely correct or accurate. Congress has the power to classify 'land of the public domain',
transfer them from one classification to another and declare them disposable or not. Such power does not,
however, extend to properties which are owned by cities, provinces and municipalities in their 'patrimonial'
capacity.
Art. 324 of the Civil Code provides that properties of provinces, cities and municipalities are divided into
properties for public use and patrimonial property. Art. 424 of the same code provides that properties for public
use consist of provincial roads, city streets, municipal streets, the squares, fountains, public waters,
promenades and public works for public service paid for by said province, cities or municipalities. All other
property possessed by any of them is patrimonial. Tested by this criterion the Court finds and holds that the
land in question is patrimonial property of the City of Manila.
25

Respondents contend that Congress has declared the land in question to be 'communal' and, therefore, such
designation is conclusive upon the courts. The Courts holds otherwise. When a statute is assailed as
unconstitutional the Courts have the power and authority to inquire into the question and pass upon it. This has
long ago been settled in Marbury vs. Madison, 2 L. ed. 60, when the United States Supreme Court speaking
thru Chief Justice Marshall held:
... If an act of the legislature, repugnant to the constitution, is void, does it,
notwithstanding its validity, bind the courts, and oblige them to give effect? It is
emphatically the province and duty of the judicial department to say what the law is ... So
if a law be in opposition to the constitution; if both the law and the constitution apply to a
particular case, so that the court must either decide that case conformable to the
constitution, disregarding the law, the court must determine which of these conflicting
rules governs the case. This is of the very essence of unconstitutional judicial duty.
Appellees finally concluded that when the courts declare a law unconstitutional it does not mean that the judicial power is superior
to the legislative power. It simply means that the power of the people is superior to both and that when the will of the legislature,
declared in statutes, stands in opposition to that of the people, declared in the Constitution, the judges ought to be governed by the
Constitution rather than by the statutes.
There is one outstanding factor that should be borne in mind in resolving the character of the land involved, and it is that the City
of Manila, although declared by the Cadastral Court as owner in fee simple, has not shown by any shred of evidence in what
manner it acquired said land as its private or patrimonial property. It is true that the City of Manila as well as its predecessor, the
Ayuntamiento de Manila, could validly acquire property in its corporate or private capacity, following the accepted doctrine on the
dual character public and private of a municipal corporation. And when it acquires property in its private capacity, it acts like
an ordinary person capable of entering into contracts or making transactions for the transmission of title or other real rights. When
it comes to acquisition of land, it must have done so under any of the modes established by law for the acquisition of ownership and
other real rights. In the absence of a title deed to any land claimed by the City of Manila as its own, showing that it was acquired
with its private or corporate funds, the presumption is that such land came from the State upon the creation of the municipality
(Unson vs. Lacson, et al., 100 Phil. 695). Originally the municipality owned no patrimonial property except those that were granted
by the State not for its public but for private use. Other properties it owns are acquired in the course of the exercise of its corporate
powers as a juridical entity to which category a municipal corporation pertains.
Communal lands or "legua comunal" came into existence when a town or pueblo was established in this country under the laws of
Spain (Law VII, Title III, Book VI, Recopilacion de las Leyes de Indios). The municipalities of the Philippines were not entitled, as a
matter of right, to any part of the public domain for use as communal lands. The Spanish law provided that the usufruct of a portion
of the public domain adjoining municipal territory might be granted by the Government for communal purposes, upon proper
petition, but, until granted, no rights therein passed to the municipalities, and, in any event, the ultimate title remained in the
sovereign (City of Manila vs. Insular Government, 10 Phil. 327).
For the establishment, then, of new pueblos the administrative authority of the province, in representation of
the Governor General, designated the territory for their location and extension and the metes and bounds of
the same; and before alloting the lands among the new settlers, a special demarcation was made of the places
which were to serve as the public square of the pueblo, for the erection of the church, and as sites for the
public buildings, among others, the municipal building or the casa real, as well as of the lands whick were to
constitute the common pastures, and propios of the municipality and the streets and roads which were to
intersect the new town were laid out, ... . (Municipality of Catbalogan vs. Director of Lands, 17 Phil. 216, 220)
(Emphasis supplied)
It may, therefore, be laid down as a general rule that regardless of the source or classification of land in the possession of a
municipality, excepting those acquired with its own funds in its private or corporate capacity, such property is held in trust for the
State for the benefit of its inhabitants, whether it be for governmental or proprietary purposes. It holds such lands subject to the
paramount power of the legislature to dispose of the same, for after all it owes its creation to it as an agent for the performance of
a part of its public work, the municipality being but a subdivision or instrumentality thereof for purposes of local administration.
Accordingly, the legal situation is the same as if the State itself holds the property and puts it to a different use (2
McQuilin,Municipal Corporations, 3rd Ed., p. 197, citing Monagham vs. Armatage, 218 Minn. 27, 15 N. W. 2nd 241).
True it is that the legislative control over a municipal corporation is not absolute even when it comes to its property devoted to
public use, for such control must not be exercised to the extent of depriving persons of their property or rights without due process
of law, or in a manner impairing the obligations of contracts. Nevertheless, when it comes to property of the municipality which it
did not acquire in its private or corporate capacity with its own funds, the legislature can transfer its administration and disposition
to an agency of the National Government to be disposed of according to its discretion. Here it did so in obedience to the
constitutional mandate of promoting social justice to insure the well-being and economic security of the people.
It has been held that a statute authorizing the transfer of a Municipal airport to an Airport Commission created by the legislature,
even without compensation to the city, was not violative of the due process clause of the American Federal Constitution. The
Supreme Court of Minnessota in Monagham vs. Armatage, supra, said:
... The case is controlled by the further rule that the legislature, having plenary control of the local municipality,
of its creation and of all its affairs, has the right to authorize or direct the expenditures of money in its
treasury, though raised, for a particular purpose, for any legitimate municipal purpose, or to order and direct a
26

distribution thereof upon a division of the territory into separate municipalities ... . The local municipality has
no such vested right in or to its public funds, like that which the Constitution protects in the individual as
precludes legislative interferences. People vs. Power, 25 Ill. 187; State Board (of Education) vs. City, 56 Miss.
518. As remarked by the supreme court of Maryland in Mayor vs. Sehner, 37 Md. 180: "It is of the essence of
such a corporation, that the government has the sole right as trustee of the public interest, at its own good will
and pleasure, to inspect, regulate, control, and direct the corporation, its funds, and franchises."
We therefore hold that c.500, in authorizing the transfer of the use and possession of the municipal airport to
the commission without compensation to the city or to the park board, does not violate the Fourteenth
Amendment to the Constitution of the United States.
The Congress has dealt with the land involved as one reserved for communal use (terreno comunal). The act of classifying State
property calls for the exercise of wide discretionary legislative power and it should not be interfered with by the courts.
This brings Us to the second question as regards the validity of Republic Act No. 4118, viewed in the light of Article III, Sections 1,
subsection (1) and (2) of the Constitution which ordain that no person shall be deprived of his property without due process of law
and that no private property shall be taken for public use without just compensation.
II .
The trial court declared Republic Act No. 4118 unconstitutional for allegedly depriving the City of Manila of its property without due
process of law and without payment of just compensation. It is now well established that the presumption is always in favor of the
constitutionality of a law (U S. vs. Ten Yu, 24 Phil. 1; Go Ching, et al. vs. Dinglasan, et al., 45 O.G. No. 2, pp. 703, 705). To declare
a law unconstitutional, the repugnancy of that law to the Constitution must be clear and unequivocal, for even if a law is aimed at
the attainment of some public good, no infringement of constitutional rights is allowed. To strike down a law there must be a clear
showing that what the fundamental law condemns or prohibits, the statute allows it to be done (Morfe vs. Mutuc, et al., G.R. No. L-
20387, Jan. 31, 1968; 22 SCRA 424). That situation does not obtain in this case as the law assailed does not in any manner trench
upon the constitution as will hereafter be shown. Republic Act No. 4118 was intended to implement the social justice policy of the
Constitution and the Government program of "Land for the Landless". The explanatory note of House Bill No. 1453 which became
Republic Act No. 4118, reads in part as follows:
Approval of this bill will implement the policy of the administration of "land for the landless" and the Fifth
Declaration of Principles of the Constitution which states that "the promotion of social justice to insure the well-
being and economic security of all people should be the concern of the State." We are ready and willing to
enact legislation promoting the social and economic well-being of the people whenever an opportunity for
enacting such kind of legislation arises.
The respondent Court held that Republic Act No. 4118, "by converting the land in question which is the patrimonial property of
the City of Manila into disposable alienable land of the State and placing it under the disposal of the Land Tenure Administration
violates the provisions of Article III (Secs. 1 and 2) of the Constitution which ordain that "private property shall not be taken for
public use without just compensation, and that no person shall be deprived of life, liberty or property without due process of law".
In support thereof reliance is placed on the ruling in Province of Zamboanga del Norte vs. City of Zamboanga, G.R. No. 2440, March
28, 1968; 22 SCRA 1334, which holds that Congress cannot deprive a municipality of its private or patrimonial property without due
process of law and without payment of just compensation since it has no absolute control thereof. There is no quarrel over this rule
if it is undisputed that the property sought to be taken is in reality a private or patrimonial property of the municipality or city. But
it would be simply begging the question to classify the land in question as such. The property, as has been previously shown, was
not acquired by the City of Manila with its own funds in its private or proprietary capacity. That it has in its name a registered title
is not questioned, but this title should be deemed to be held in trust for the State as the land covered thereby was part of the
territory of the City of Manila granted by the sovereign upon its creation. That the National Government, through the Director of
Lands, represented by the Solicitor General, in the cadastral proceedings did not contest the claim of the City of Manila that the
land is its property, does not detract from its character as State property and in no way divests the legislature of its power to deal
with it as such, the state not being bound by the mistakes and/or negligence of its officers.
One decisive fact that should be noted is that the City of Manila expressly recognized the paramount title of the State over said land
when by its resolution of September 20, 1960, the Municipal Board, presided by then Vice-Mayor Antonio Villegas, requested "His
Excellency the President of the Philippines to consider the feasibility of declaring the city property bounded by Florida, San Andres
and Nebraska Streets, under Transfer Certificate of Title Nos. 25545 and 25547, containing an area of 7,450 square meters, as
patrimonial property of the City of Manila for the purpose of reselling these lots to the actual occupants thereof." (See Annex E,
Partial Stipulation of Facts, Civil Case No. 67945, CFI, Manila, p. 121, Record of the Case) [Emphasis Supplied]
The alleged patrimonial character of the land under the ownership of the City of Manila is totally belied by the City's own official act,
which is fatal to its claim since the Congress did not do as bidden. If it were its patrimonial property why should the City of Manila
be requesting the President to make representation to the legislature to declare it as such so it can be disposed of in favor of the
actual occupants? There could be no more blatant recognition of the fact that said land belongs to the State and was simply granted
in usufruct to the City of Manila for municipal purposes. But since the City did not actually use said land for any recognized public
purpose and allowed it to remain idle and unoccupied for a long time until it was overrun by squatters, no presumption of State
grant of ownership in favor of the City of Manila may be acquiesced in to justify the claim that it is its own private or patrimonial
property (Municipality of Tigbauan vs. Director of Lands, 35 Phil. 798; City of Manila vs. Insular Government, 10 Phil. 327;
Municipality of Luzuriaga vs. Director of Lands, 24 Phil. 193). The conclusion of the respondent court that Republic Act No. 4118
converted a patrimonial property of the City of Manila into a parcel of disposable land of the State and took it away from the City
27

without compensation is, therefore, unfounded. In the last analysis the land in question pertains to the State and the City of Manila
merely acted as trustee for the benefit of the people therein for whom the State can legislate in the exercise of its legitimate
powers.
Republic Act No. 4118 was never intended to expropriate the property involved but merely to confirm its character as communal
land of the State and to make it available for disposition by the National Government: And this was done at the instance or upon
the request of the City of Manila itself. The subdivision of the land and conveyance of the resulting subdivision lots to the occupants
by Congressional authorization does not operate as an exercise of the power of eminent domain without just compensation in
violation of Section 1, subsection (2), Article III of the Constitution, but simply as a manifestation of its right and power to deal with
state property.
It should be emphasized that the law assailed was enacted upon formal written petition of the Municipal Board of Manila in the form
of a legally approved resolution. The certificate of title over the property in the name of the City of Manila was accordingly cancelled
and another issued to the Land Tenure Administration after the voluntary surrender of the City's duplicate certificate of title by the
City Treasurer with the knowledge and consent of the City Mayor. To implement the provisions of Republic Act No. 4118, the then
Deputy Governor of the Land Authority sent a letter, dated February 18, 1965, to the City Mayor furnishing him with a copy of the
"proposed subdivision plan of the said lot as prepared for the Republic of the Philippines for subdivision and resale by the Land
Authority to bona fide applicants." On March 2, 1965, the Mayor of Manila, through his Executive and Technical Adviser,
acknowledged receipt of the subdivision plan and informed the Land Authority that his Office "will interpose no objection to the
implementation of said law provided that its provisions are strictly complied with." The foregoing sequence of events, clearly
indicate a pattern of regularity and observance of due process in the reversion of the property to the National Government. All such
acts were done in recognition by the City of Manila of the right and power of the Congress to dispose of the land involved.
Consequently, the City of Manila was not deprived of anything it owns, either under the due process clause or under the eminent
domain provisions of the Constitution. If it failed to get from the Congress the concession it sought of having the land involved
given to it as its patrimonial property, the Courts possess no power to grant that relief. Republic Act No. 4118 does not, therefore,
suffer from any constitutional infirmity.
WHEREFORE, the appealed decision is hereby reversed, and petitioners shall proceed with the free and untrammeled
implementation of Republic Act No. 4118 without any obstacle from the respondents. Without costs.
Concepcion, C.J., Makalintal, Zaldivar, Castro, Fernando, Teehankee and Antonio, JJ., concur.
Barredo and Makasiar, JJ., took no part.
CEBU OXYGEN & ACETYLENE CO., INC., petitioner,
vs.
HON. PASCUAL A. BERCILLES Presiding Judge, Branch XV, 14th Judicial District, and JOSE L. ESPELETA, Assistant
Provincial Fiscal, Province of Cebu, representing the Solicitor General's Office and the Bureau of Lands, respondents.
CONCEPCION, Jr., J.:
This is a petition for the review of the order of the Court of First Instance of Cebu dismissing petitioner's application for registration
of title over a parcel of land situated in the City of Cebu.
The parcel of land sought to be registered was only a portion of M. Borces Street, Mabolo, Cebu City. On September 23, 1968, the
City Council of Cebu, through Resolution No. 2193, approved on October 3, 1968, declared the terminal portion of M. Borces Street,
Mabolo, Cebu City, as an abandoned road, the same not being included in the City Development Plan.
1
Subsequently, on December
19, 1968, the City Council of Cebu passed Resolution No. 2755, authorizing the Acting City Mayor to sell the land through a public
bidding.
2
Pursuant thereto, the lot was awarded to the herein petitioner being the highest bidder and on March 3, 1969, the City of
Cebu, through the Acting City Mayor, executed a deed of absolute sale to the herein petitioner for a total consideration of
P10,800.00.
3
By virtue of the aforesaid deed of absolute sale, the petitioner filed an application with the Court of First instance of
Cebu to have its title to the land registered.
4

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

After hearing the parties, on October 11, 1974 the trial court issued an order dismissing the petitioner's application for registration
of title.
6
Hence, the instant petition for review.
For the resolution of this case, the petitioner poses the following questions:
(1) Does the City Charter of Cebu City (Republic Act No. 3857) under Section 31, paragraph 34, give the City
of Cebu the valid right to declare a road as abandoned? and
28

(2) Does the declaration of the road, as abandoned, make it the patrimonial property of the City of Cebu which
may be the object of a common contract?
(1) The pertinent portions of the Revised Charter of Cebu City provides:
Section 31. Legislative Powers. Any provision of law and executive order to the contrary notwithstanding, the
City Council shall have the following legislative powers:
xxx xxx xxx
(34) ...; to close any city road, street or alley, boulevard, avenue, park or square. Property thus withdrawn
from public servitude may be used or conveyed for any purpose for which other real property belonging to the
City may be lawfully used or conveyed.
From the foregoing, it is undoubtedly clear that the City of Cebu is empowered to close a city road or street. In the case ofFavis vs.
City of Baguio,
7
where the power of the city Council of Baguio City to close city streets and to vacate or withdraw the same from
public use was similarly assailed, this court said:
5. So it is, that appellant may not challenge the city council's act of withdrawing a strip of Lapu-Lapu Street at
its dead end from public use and converting the remainder thereof into an alley. These are acts well within the
ambit of the power to close a city street. The city council, it would seem to us, is the authority competent to
determine whether or not a certain property is still necessary for public use.
Such power to vacate a street or alley is discretionary. And the discretion will not ordinarily be controlled or
interfered with by the courts, absent a plain case of abuse or fraud or collusion. Faithfulness to the public trust
will be presumed. So the fact that some private interests may be served incidentally will not invalidate the
vacation ordinance.
(2) Since that portion of the city street subject of petitioner's application for registration of title was withdrawn from public use, it
follows that such withdrawn portion becomes patrimonial property which can be the object of an ordinary contract.
Article 422 of the Civil Code expressly provides that "Property of public dominion, when no longer intended for public use or for
public service, shall form part of the patrimonial property of the State."
Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and unequivocal terms, states that: "Property thus
withdrawn from public servitude may be used or conveyed for any purpose for which other real property belonging to the City may
be lawfully used or conveyed."
Accordingly, the withdrawal of the property in question from public use and its subsequent sale to the petitioner is valid. Hence, the
petitioner has a registerable title over the lot in question.
WHEREFORE, the order dated October 11, 1974, rendered by the respondent court in Land Reg. Case No. N-948, LRC Rec. No. N-
44531 is hereby set aside, and the respondent court is hereby ordered to proceed with the hearing of the petitioner's application for
registration of title.
SO ORDERED.
Makalintal, C.J, Fernando, Barredo and Aquino, JJ., concur.
MUNICIPALITY OF SAN MIGUEL, BULACAN, petitioner,
vs.
HONORABLE OSCAR C. FERNANDEZ, in his capacity as the Presiding Judge, Branch IV, Baliuag, Bulacan, The
PROVINCIAL SHERIFF of Bulacan, MARGARITA D. VDA. DE IMPERIO, ADORACION IMPERIO, RODOLFO IMPERIO,
CONRADO IMPERIO, ERNESTO IMPERIO, ALFREDO IMPERIO, CARLOS IMPERIO, JR., JUAN IMPERIO and SPOUSES
MARCELO PINEDA and LUCILA PONGCO, respondents.
RELOVA, J.:
In Civil Case No. 604-B, entitled "Margarita D. Vda. de Imperio, et al. vs. Municipal Government of San Miguel, Bulacan, et al.", the
then Court of First Instance of Bulacan, on April 28, 1978, rendered judgment holding herein petitioner municipality liable to private
respondents, as follows:
29

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the
defendant Municipal Government of San Miguel Bulacan, represented by Mayor Mar Marcelo G. Aure and its
Municipal Treasurer:
1. ordering the partial revocation of the Deed of Donation signed by the deceased Carlos Imperio in favor of the
Municipality of San Miguel Bulacan, dated October 27, 1947 insofar as Lots Nos. 1, 2, 3, 4 and 5, Block 11 of
Subdivision Plan Psd-20831 are concerned, with an aggregate total area of 4,646 square meters, which lots are
among those covered and described under TCT No. T-1831 of the Register of Deeds of Bulacan in the name of
the Municipal Government of San Miguel Bulacan,
2. ordering the defendant to execute the corresponding Deed of Reconveyance over the aforementioned five
lots in favor of the plaintiffs in the proportion of the undivided one-half () share in the name of plaintiffs
Margarita D. Vda. de Imperio, Adoracion, Rodolfo, Conrado, Ernesto, Alfredo, Carlos, Jr. and Juan, all surnamed
Imperio, and the remaining undivided one-half () share in favor of plaintiffs uses Marcelo E. Pineda and Lucila
Pongco;
3. ordering the defendant municipality to pay to the plaintiffs in the proportion mentioned in the immediately
preceding paragraph the sum of P64,440.00 corresponding to the rentals it has collected from the occupants
for their use and occupation of the premises from 1970 up to and including 1975, plus interest thereon at the
legal rate from January 1970 until fully paid;
4. ordering the restoration of ownership and possession over the five lots in question in favor of the plaintiffs in
the same proportion aforementioned;
5. ordering the defendant to pay the plaintiffs the sum of P3,000.00 for attomey's fees; and to pay the cost of
suit.
The counterclaim of the defendant is hereby ordered dismissed for lack of evidence presented to substantiate
the same.
SO ORDERED. (pp. 11-12, Rollo)
The foregoing judgment became final when herein petitioner's appeal was dismissed due to its failure to file the record on appeal on
time. The dismissal was affirmed by the then Court of Appeals in CA-G.R. No. SP-12118 and by this Court in G.R. No. 59938.
Thereafter, herein private respondents moved for issuance of a writ of execution for the satisfaction of the judgment. Respondent
judge, on July 27, 1982, issued an order, to wit:
Considering that an entry of judgment had already been made on June 14, 1982 in G. R. No. L-59938 and;
Considering further that there is no opposition to plaintiffs' motion for execution dated July 23, 1983;
Let a writ of execution be so issued, as prayed for in the aforestated motion. (p. 10, Rollo)
Petitioner, on July 30, 1982, filed a Motion to Quash the writ of execution on the ground that the municipality's property or funds
are all public funds exempt from execution. The said motion to quash was, however, denied by the respondent judge in an order
dated August 23, 1982 and the alias writ of execution stands in full force and effect.
On September 13, 1982, respondent judge issued an order which in part, states:
It is clear and evident from the foregoing that defendant has more than enough funds to meet its judgment
obligation. Municipal Treasurer Miguel C, Roura of San Miguel, Bulacan and Provincial Treasurer of Bulacan
Agustin O. Talavera are therefor hereby ordered to comply with the money judgment rendered by Judge
Agustin C. Bagasao against said municipality. In like manner, the municipal authorities of San Miguel, Bulacan
are likewise ordered to desist from plaintiffs' legal possession of the property already returned to plaintiffs by
virtue of the alias writ of execution.
Finally, defendants are hereby given an inextendible period of ten (10) days from receipt of a copy of this order
by the Office of the Provincial Fiscal of Bulacan within which to submit their written compliance, (p. 24, Rollo)
When the treasurers (provincial and municipal) failed to comply with the order of September 13, 1982, respondent judge issued an
order for their arrest and that they will be release only upon compliance thereof.
Hence, the present petition on the issue whether the funds of the Municipality of San Miguel, Bulacan, in the hands of the provincial
and municipal treasurers of Bulacan and San Miguel, respectively, are public funds which are exempt from execution for the
satisfaction of the money judgment in Civil Case No. 604-B.
30

Well settled is the rule that public funds are not subject to levy and execution. The reason for this was explained in the case of
Municipality of Paoay vs. Manaois, 86 Phil. 629 "that they are held in trust for the people, intended and used for the
accomplishment of the purposes for which municipal corporations are created, and that to subject said properties and public funds
to execution would materially impede, even defeat and in some instances destroy said purpose." And, inTantoco vs. Municipal
Council of Iloilo, 49 Phil. 52, it was held that "it is the settled doctrine of the law that not only the public property but also the taxes
and public revenues of such corporations Cannot be seized under execution against them, either in the treasury or when in transit
to it. Judgments rendered for taxes, and the proceeds of such judgments in the hands of officers of the law, are not subject to
execution unless so declared by statute." Thus, it is clear that all the funds of petitioner municipality in the possession of the
Municipal Treasurer of San Miguel, as well as those in the possession of the Provincial Treasurer of Bulacan, are also public funds
and as such they are exempt from execution.
Besides, Presidential Decree No. 477, known as "The Decree on Local Fiscal Administration", Section 2 (a), provides:
SEC. 2. Fundamental Principles. Local government financial affairs, transactions, and operations shall be
governed by the fundamental principles set forth hereunder:
(a) No money shall be paid out of the treasury except in pursuance of a lawful appropriation or other specific
statutory authority.
xxx xxx xxx
Otherwise stated, there must be a corresponding appropriation in the form of an ordinance duly passed by the Sangguniang Bayan
before any money of the municipality may be paid out. In the case at bar, it has not been shown that the Sangguniang Bayan has
passed an ordinance to this effect.
Furthermore, Section 15, Rule 39 of the New Rules of Court, outlines the procedure for the enforcement of money judgment:
(a) By levying on all the property of the debtor, whether real or personal, not otherwise exempt from
execution, or only on such part of the property as is sufficient to satisfy the judgment and accruing cost, if he
has more than sufficient property for the purpose;
(b) By selling the property levied upon;
(c) By paying the judgment-creditor so much of the proceeds as will satisfy the judgment and accruing costs;
and
(d) By delivering to the judgment-debtor the excess, if any, unless otherwise, directed by judgment or order of
the court.
The foregoing has not been followed in the case at bar.
ACCORDINGLY, the petition is granted and the order of respondent judge, dated July 27, 1982, granting issuance of a writ of
execution; the alias writ of execution, dated July 27, 1982; and the order of respondent judge, dated September 13, 1982,
directing the Provincial Treasurer of Bulacan and the Municipal Treasurer of San Miguel, Bulacan to comply with the money
judgments, are SET ASIDE; and respondents are hereby enjoined from implementing the writ of execution.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr., and De la Fuente, JJ,. concur.
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, applicant-appellant,
vs.
CONSORCIA CABANGIS, ET AL., claimants-appellees.
Attorney-General Jaranilla for appellant.
Abad Santos, Camus & Delgado for appellees.
VILLA-REAL, J.:
The Government of the Philippine Islands appeals to this court from the judgment of the Court of First Instance of Manila in
cadastral proceeding No. 373 of the Court of First Instance of Manila, G. L. R. O. Cadastral Record No. 373, adjudicating the title
and decreeing the registration of lots Nos. 36, 39 and 40, block 3055 of the cadastral survey of the City of Manila in favor of
Consuelo, Consorcia, Elvira and Tomas, surnamed Cabangis, in equal parts, and dismissing the claims presented by the
Government of the Philippine Islands and the City of Manila.
31

In support of its appeal, the appellant assigns the following alleged errors as committed by the trial court in its judgment, to wit:
1. The lower court erred in not holding that the lots in question are of the public domain, the same having been gained
from the sea (Manila Bay) by accession, by fillings made by the Bureau of Public Works and by the construction of the
break-water (built by the Bureau of Navigation) near the mouth of Vitas Estero.
2. The lower court erred in holding that the lots in question formed part of the big parcel of land belonging to the spouses
Maximo Cabangis and Tita Andres, and in holding that these spouses and their successors in interest have been in
continuous, public, peaceful and uninterrupted possession of said lots up to the time this case came up.
3. The lower court erred in holding that said lots existed before, but that due to the current of the Pasig River and to the
action of the big waves in Manila Bay during the south-west monsoons, the same disappeared.
4. The lower court erred in adjudicating the registration of the lands in question in the name of the appellees, and in
denying the appellant's motion for a new trial.
A preponderance of the evidence in the record which may properly be taken into consideration in deciding the case, proves the
following facts:
Lots 36, 39 and 40, block 3035 of cadastral proceeding No. 71 of the City of Manila, G. L. R. O. Record No. 373, were formerly a
part of a large parcel of land belonging to the predecessor of the herein claimants and appellees. From the year 1896 said land
began to wear away, due to the action of the waves of Manila Bay, until the year 1901 when the said lots became completely
submerged in water in ordinary tides, and remained in such a state until 1912 when the Government undertook the dredging of
Vitas Estuary in order to facilitate navigation, depositing all the sand and silt taken from the bed of the estuary on the low lands
which were completely covered with water, surrounding that belonging to the Philippine Manufacturing Company, thereby slowly
and gradually forming the lots, the subject matter of this proceeding.
Up to the month of February, 1927 nobody had declared lot 39 for the purposes of taxation, and it was only in the year 1926 that
Dr. Pedro Gil, in behalf of the claimants and appellees, declared lot No. 40 for such purpose.
In view of the facts just stated, as proved by a preponderance of the evidence, the question arises: Who owns lots 36, 39 and 40 in
question?
The claimants-appellees contend that inasmuch as the said lots once formed a part of a large parcel of land belonging to their
predecessors, whom they succeeded, and their immediate predecessor in interest, Tomas Cabangis, having taken possession
thereof as soon as they were reclaimed, giving his permission to some fishermen to dry their fishing nets and deposit
their bancas thereon, said lots belong to them.
Article 339, subsection 1, of the Civil Code, reads:
Article 339. Property of public ownership is
1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
riverbanks, shorts, roadsteads, and that of a similar character.
x x x x x x x x x
Article 1, case 3, of the Law of Waters of August 3, 1866, provides as follows:
ARTICLE 1. The following are part of the national domain open to public use:
x x x x x x x x x
3. The Shores. By the shore is understood that space covered and uncovered by the movement of the tide. Its interior or
terrestrial limit is the line reached by the highest equinoctial tides. Where the tides are not appreciable, the shore begins
on the land side at the line reached by the sea during ordinary storms or tempests.
In the case of Aragon vs. Insular Government (19 Phil., 223), with reference to article 339 of the Civil Code just quoted, this court
said:
We should not be understood, by this decision, to hold that in a case of gradual encroachment or erosion by the ebb and flow of the
tide, private property may not become 'property of public ownership,' as defined in article 339 of the code, where it appears that
32

the owner has to all intents and purposes abandoned it and permitted it to be totally destroyed, so as to become a part of the
'playa' (shore of the seas), 'rada' (roadstead), or the like. . . .
In the Enciclopedia Juridica Espanola, volume XII, page 558, we read the following:
With relative frequency the opposite phenomenon occurs; that is, the sea advances and private properties are
permanently invaded by the waves, and in this case they become part of the shore or beach. They then pass to the public
domain, but the owner thus dispossessed does not retain any right to the natural products resulting from their new
nature; it is a de facto case of eminent domain, and not subject to indemnity.
Now then , when said land was reclaimed, did the claimants-appellees or their predecessors recover it as their original property?
As we have seen, the land belonging to the predecessors of the herein claimants-appellees began to wear way in 1896, owing to
the gradual erosion caused by the ebb and flow of the tide, until the year 1901, when the waters of Manila Bay completely
submerged a portion of it, included within lots 36, 39 and 40 here in question, remaining thus under water until reclaimed as a
result of certain work done by the Government in 1912. According to the above-cited authorities said portion of land, that is, lots
36, 39 and 40, which was private property, became a part of the public domain. The predecessors of the herein claimants-appellees
could have protected their land by building a retaining wall, with the consent of competent authority, in 1896 when the waters of
the sea began to wear it away, in accordance with the provisions of Article 29 of the aforecited Law of Waters of August 3, 1866,
and their failure to do so until 1901, when a portion of the same became completely covered by said waters, remaining thus
submerged until 1912, constitutes abandonment.
Now then: The lots under discussion having been reclaimed from the seas as a result of certain work done by the Government, to
whom do they belong?
The answer to this question is found in article 5 of the aforementioned Law of Waters, which is as follows:
ART. 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.
The fact that from 1912 some fishermen had been drying their fishing nets and depositing their bancas on lots 36, 39 and 40, by
permission of Tomas Cabangis, does not confer on the latter or his successors the ownership of said lots, because, as they were
converted into public land, no private person could acquire title thereto except in the form and manner established by the law.
In the case of Buzon vs. Insular Government and City of Manila (13 Phil., 324), cited by the claimants-appellees, this court,
admitting the findings and holdings of the lower court, said the following:
If we heed the parol evidence, we find that the seashore was formerly about one hundred brazas distant from the land in
question; that, in the course of time, and by the removal of a considerable quantity of sand from the shore at the back of
the land for the use of the street car company in filling in Calle Cervantes, the sea water in ordinary tides now covers part
of the land described in the petition.
The fact that certain land, not the bed of a river or of the sea, is covered by sea water during the period of ordinary high
tide, is not a reason established by any law to cause the loss thereof, especially when, as in the present case, it becomes
covered by water owing to circumstances entirely independent of the will of the owner.
In the case of Director of Lands vs. Aguilar (G.R. No. 22034),
1
also cited by the claimants-appellees, wherein the Government
adduced no evidence in support of its contention, the lower court said in part:
The contention of the claimants Cabangis is to the effect that said lots are a part of the adjoining land adjudicated to their
deceased father, Don Tomas Cabangis, which, for over fifty years had belonged to their deceased grandmother, Tita
Andres, and that, due to certain improvements made in Manila Bay, the waters of the sea covered a large part of the lots
herein claimed.
The Government of the Philippine Islands also claims the ownership of said lots, because, at ordinary high tide, they are
covered by the sea.
Upon petition of the parties, the lower court made an ocular inspection of said lots on September 12, 1923, and on said
inspection found some light material houses built thereon, and that on that occasion the waters of the sea did not reach
the aforesaid lots.
From the evidence adduced at the trial of this cause, it may be inferred that Tita Andres, during her lifetime was the
owner of a rather large parcel of land which was adjudicated by a decree to her son Tomas Cabangis; the lots now in
question are contiguous to that land and are covered by the waters of the sea at extraordinary high tide; some 50 years
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before the sea did not reach said strip of land, and on it were constructed, for the most part, light material houses,
occupied by the tenants of Tita Andres, to whom they paid rent. Upon her death, her son Tomas Cabangis succeeded to
the possession, and his children succeeded him, they being the present claimants, Consuelo, Jesus, Tomas, and
Consorcia Cabangis.
The Government of the Philippine Islands did not adduce any evidence in support of its contention, with the exception of
registry record No. 8147, to show that the lots here in question were not excluded from the application presented in said
proceeding.
It will be seen that in the case of Buzon vs. Insular Government and City of Manila, cited above, the rise of the waters of the sea
that covered the lands there in dispute, was due not to the action of the tide but to the fact that a large quantity of sand was taken
from the sea at the side of said land in order to fill in Cervantes Street, and this court properly held that because of this act,
entirely independent of the will of the owner of said land, the latter could not lose the ownership thereof, and the mere fact that the
waters of the sea covered it as a result of said act, is not sufficient to convert it into public land, especially, as the land was high
and appropriate for building purposes.
In the case of the Director of Lands vs. Aguilar also cited by the claimants-appellees, the Insular Government did not present any
evidence in support of its contention, thus leaving uncontradicted the evidence adduced by the claimants Aguilar et al., as to the
ownership, possession and occupation of said lots.
In the instant case the evidence shows that from 1896, the waves of Manila Bay had been gradually and constantly washing away
the sand that formed the lots here in question, until 1901, when the sea water completely covered them, and thus they remained
until the year 1912. In the latter year they were reclaimed from the sea by filling in with sand and silt extracted from the bed of
Vitas Estuary when the Government dredged said estuary in order to facilitate navigation. Neither the herein claimants-appellees
nor their predecessors did anything to prevent their destruction.
In conclusion, then, we hold that the lots in question having disappeared on account of the gradual erosion due to the ebb and flow
of the tide, and having remained in such a state until they were reclaimed from the sea by the filling in done by the Government,
they are public land. (Aragon vs. Insular Government, 19 Phil., 223; Francisco vs. Government of the Philippine Islands, 28 Phil.,
505).
By virtue whereof, the judgment appealed from is reversed and lots Nos. 36, 39 and 40 of cadastral proceeding No. 373 of the City
of Manila are held to be public land belonging to the Government of the United States under the administration and control of the
Government of the Philippine Islands. So ordered.
Johnson, Street, Malcolm, Ostrand, Johns and Romualdez, JJ., concur.