Condominium Act (R.A.

4726)
Sections 2,4,5,9,18,20,23
Investors Lease Act or R.A. 7652, sec 4
JG Summit Holdings, Inc. v. CA, GR No. 124293, Jan. 31, 2005
RD of Rizal v. Ung Siu Temple, GR No. L-6776, May 21, 1955
Roman Catholic Apostolic Administrator of Davao v. Land Registration Commission GR No.
L-8451 Dec. 20, 1957
REPUBLIC ACT NO. 4726 June 18, 1966
AN ACT TO DEFINE CONDOMINIUM, ESTABLISH REQUIREMENTS FOR ITS
CREATION, AND GOVERN ITS INCIDENTS.
Sec. 1. The short title of this Act shall be "The Condominium Act".
Sec. 2. A condominium is an interest in real property consisting of separate interest in a
unit in a residential, industrial or commercial building and an undivided interest in
common, directly or indirectly, in the land on which it is located and in other common
areas of the building. A condominium may include, in addition, a separate interest in other
portions of such real property. Title to the common areas, including the land, or the
appurtenant interests in such areas, may be held by a corporation specially formed for the
purpose (hereinafter known as the "condominium corporation") in which the holders of
separate interest shall automatically be members or shareholders, to the exclusion of
others, in proportion to the appurtenant interest of their respective units in the common
areas.
Sec. 4. The provisions of this Act shall apply to property divided or to be divided into
condominiums only if there shall be recorded in the Register of Deeds of the province or
city in which the property lies and duly annotated in the corresponding certificate of title of
the land, if the latter had been patented or registered under either the Land Registration or
Cadastral Acts, an enabling or master deed which shall contain, among others, the
following:
(a) Description of the land on which the building or buildings and improvements are or are
to be located;
(b) Description of the building or buildings, stating the number of stories and basements,
the number of units and their accessories, if any;
(c) Description of the common areas and facilities;

(d) A statement of the exact nature of the interest acquired or to be acquired by the
purchaser in the separate units and in the common areas of the condominium project.
Where title to or the appurtenant interests in the common areas is or is to be held by a
condominium corporation, a statement to this effect shall be included;
(e) Statement of the purposes for which the building or buildings and each of the units are
intended or restricted as to use;
(f) A certificate of the registered owner of the property, if he is other than those executing
the master deed, as well as of all registered holders of any lien or encumbrance on the
property, that they consent to the registration of the deed;
(g) The following plans shall be appended to the deed as integral parts thereof:
(1) A survey plan of the land included in the project, unless a survey plan of the same
property had previously bee filed in said office;
(2) A diagrammatic floor plan of the building or buildings in the project, in sufficient detail
to identify each unit, its relative location and approximate dimensions;
(h) Any reasonable restriction not contrary to law, morals or public policy regarding the
right of any condominium owner to alienate or dispose of his condominium.
The enabling or master deed may be amended or revoked upon registration of an
instrument executed by the registered owner or owners of the property and consented to
by all registered holders of any lien or encumbrance on the land or building or portion
thereof. The term "registered owner" shall include the registered owners of condominiums
in the project. Until registration of a revocation, the provisions of this Act shall continue to
apply to such property.
Sec. 5. Any transfer or conveyance of a unit or an apartment, office or store or other space
therein, shall include the transfer or conveyance of the undivided interests in the common
areas or, in a proper case, the membership or shareholdings in the condominium
corporation: Provided, however, That where the common areas in the condominium project
are owned by the owners of separate units as co-owners thereof, no condominium unit
therein shall be conveyed or transferred to persons other than Filipino citizens, or
corporations at least sixty percent of the capital stock of which belong to Filipino citizens,
except in cases of hereditary succession. Where the common areas in a condominium
project are held by a corporation, no transfer or conveyance of a unit shall be valid if the
concomitant transfer of the appurtenant membership or stockholding in the corporation
will cause the alien interest in such corporation to exceed the limits imposed by existing
laws.
Sec. 9. The owner of a project shall, prior to the conveyance of any condominium therein,
register a declaration of restrictions relating to such project, which restrictions shall
constitute a lien upon each condominium in the project, and shall insure to and bind all

condominium owners in the project. Such liens, unless otherwise provided, may be
enforced by any condominium owner in the project or by the management body of such
project. The Register of Deeds shall enter and annotate the declaration of restrictions upon
the certificate of title covering the land included within the project, if the land is patented
or registered under the Land Registration or Cadastral Acts.
The declaration of restrictions shall provide for the management of the project by anyone
of the following management bodies: a condominium corporation, an association of the
condominium owners, a board of governors elected by condominium owners, or a
management agent elected by the owners or by the board named in the declaration. It
shall also provide for voting majorities quorums, notices, meeting date, and other rules
governing such body or bodies.
Such declaration of restrictions, among other things, may also provide:
(a) As to any such management body;
(1) For the powers thereof, including power to enforce the provisions of the declarations of
restrictions;
(2) For maintenance of insurance policies, insuring condominium owners against loss by
fire, casualty, liability, workmen's compensation and other insurable risks, and for bonding
of the members of any management body;
(3) Provisions for maintenance, utility, gardening and other services benefiting the
common areas, for the employment of personnel necessary for the operation of the
building, and legal, accounting and other professional and technical services;
(4) For purchase of materials, supplies and the like needed by the common areas;
(5) For payment of taxes and special assessments which would be a lien upon the entire
project or common areas, and for discharge of any lien or encumbrance levied against the
entire project or the common areas;
(6) For reconstruction of any portion or portions of any damage to or destruction of the
project;
(7) The manner for delegation of its powers;
(8) For entry by its officers and agents into any unit when necessary in connection with the
maintenance or construction for which such body is responsible;
(9) For a power of attorney to the management body to sell the entire project for the
benefit of all of the owners thereof when partition of the project may be authorized under
Section 8 of this Act, which said power shall be binding upon all of the condominium
owners regardless of whether they assume the obligations of the restrictions or not.

(b) The manner and procedure for amending such restrictions: Provided, That the vote of
not less than a majority in interest of the owners is obtained.
(c) For independent audit of the accounts of the management body;
(d) For reasonable assessments to meet authorized expenditures, each condominium unit
to be assessed separately for its share of such expenses in proportion (unless otherwise
provided) to its owners fractional interest in any common areas;
(e) For the subordination of the liens securing such assessments to other liens either
generally or specifically described;
(f) For conditions, other than those provided for in Sections eight and thirteen of this Act,
upon which partition of the project and dissolution of the condominium corporation may be
made. Such right to partition or dissolution may be conditioned upon failure of the
condominium owners to rebuild within a certain period or upon specified inadequacy of
insurance proceeds, or upon specified percentage of damage to the building, or upon a
decision of an arbitrator, or upon any other reasonable condition.
Sec. 18. Upon registration of an instrument conveying a condominium, the Register of
Deeds shall, upon payment of the proper fees, enter and annotate the conveyance on the
certificate of title covering the land included within the project and the transferee shall be
entitled to the issuance of a "condominium owner's" copy of the pertinent portion of such
certificate of title. Said "condominium owner's" copy need not reproduce the ownership
status or series of transactions in force or annotated with respect to other condominiums in
the project. A copy of the description of the land, a brief description of the condominium
conveyed, name and personal circumstances of the condominium owner would be
sufficient for purposes of the "condominium owner's" copy of the certificate of title. No
conveyance of condominiums or part thereof, subsequent to the original conveyance
thereof from the owner of the project, shall be registered unless accompanied by a
certificate of the management body of the project that such conveyance is in accordance
with the provisions of the declaration of restrictions of such project.
In cases of condominium projects registered under the provisions of the Spanish Mortgage
Law or Act 3344, as amended, the registration of the deed of conveyance of a
condominium shall be sufficient if the Register of Deeds shall keep the original or signed
copy thereof, together with the certificate of the management body of the project, and
return a copy of the deed of conveyance to the condominium owner duly acknowledge and
stamped by the Register of Deeds in the same manner as in the case of registration of
conveyances of real property under said laws.
Sec. 20. An assessment upon any condominium made in accordance with a duly registered
declaration of restrictions shall be an obligation of the owner thereof at the time the
assessment is made. The amount of any such assessment plus any other charges thereon,
such as interest, costs (including attorney's fees) and penalties, as such may be provided
for in the declaration of restrictions, shall be and become a lien upon the condominium

assessed when the management body causes a notice of assessment to be registered with
the Register of Deeds of the city or province where such condominium project is located.
The notice shall state the amount of such assessment and such other charges thereon a
may be authorized by the declaration of restrictions, a description of the condominium,
unit against which same has been assessed, and the name of the registered owner thereof.
Such notice shall be signed by an authorized representative of the management body or as
otherwise provided in the declaration of restrictions. Upon payment of said assessment
and charges or other satisfaction thereof, the management body shall cause to be
registered a release of the lien.
Such lien shall be superior to all other liens registered subsequent to the registration of
said notice of assessment except real property tax liens and except that the declaration of
restrictions may provide for the subordination thereof to any other liens and
encumbrances.
Such liens may be enforced in the same manner provided for by law for the judicial or
extra-judicial foreclosure of mortgages of real property. Unless otherwise provided for in
the declaration of restrictions, the management body shall have power to bid at
foreclosure sale. The condominium owner shall have the same right of redemption as in
cases of judicial or extra-judicial foreclosure of mortgages.
Sec. 23. Where, in an action for partition of a condominium project or for the dissolution of
condominium corporation on the ground that the project or a material part thereof has
been condemned or expropriated, the Court finds that the conditions provided for in this
Act or in the declaration of restrictions have not been met, the Court may decree a
reorganization of the project, declaring which portion or portions of the project shall
continue as a condominium project, the owners thereof, and the respective rights of said
remaining owners and the just compensation, if any, that a condominium owner may be
entitled to due to deprivation of his property. Upon receipt of a copy of the decree, the
Register of Deeds shall enter and annotate the same on the pertinent certificate of title.

REPUBLIC ACT NO. 7652

AN ACT ALLOWING THE LONG-TERM LEASE OF PRIVATE LANDS BY FOREIGN
INVESTORS
Section 1. Title. This Act shall be known as the "Investors' Lease Act."
Sec. 4. Coverage. Any foreign investor investing in the Philippines shall be allowed to
lease private lands in accordance with the laws of the Republic of the Philippines subject to
the following conditions:
(1) No lease contract shall be for a period exceeding fifty (50) years, renewable once for a
period of not more than twenty- five (25) years;

(2) The leased area shall be used solely for the purpose of the investment upon the mutual
agreement of the parties;
(3) The leased premises shall comprise such area as may reasonably be required for the
purpose of the investment subject however to the Comprehensive Agrarian Reform Law
and the Local Government Code.
The leasehold right acquired under long-term lease contracts entered into pursuant to this
Act may be sold, transferred, or assigned: Provided, That when the buyer, transferee, or
assignee is a foreigner or a foreign-owned enterprise, the conditions and limitations in
respect to the use of the leased property as provided for under this Act shall continue to
apply.

12.0 The bidder shall be solely responsible for examining with appropriate care these rules,
the official bid forms, including any addenda or amendments thereto issued during the
bidding period. The bidder shall likewise be responsible for informing itself with respect to
any and all conditions concerning the PHILSECO Shares which may, in any manner, affect
the bidder's proposal. Failure on the part of the bidder to so examine and inform itself shall
be its sole risk and no relief for error or omission will be given by APT or COP. . . .
At the public bidding on the said date, petitioner J.G. Summit Holdings, Inc. 2 submitted a
bid of Two Billion and Thirty Million Pesos (P2,030,000,000.00) with an acknowledgment of
KAWASAKI/[PHILYARDS'] right to top, viz:

G.R. No. 124293

January 31, 2005

J.G. SUMMIT HOLDINGS, INC., petitioner,

vs.
COURT OF APPEALS; COMMITTEE ON PRIVATIZATION, its Chairman and Members;
ASSET PRIVATIZATION TRUST; and PHILYARDS HOLDINGS, INC., respondents.
RESOLUTION
PUNO, J.:
For resolution before this Court are two motions filed by the petitioner, J.G. Summit
Holdings, Inc. for reconsideration of our Resolution dated September 24, 2003 and to
elevate this case to the Court En Banc. The petitioner questions the Resolution which
reversion and deposit with APT the amount equivalent to ten percent (10%) of the highest
bid plus five percent (5%) thereof within the thirty (30)-day period mentioned in paragraph
6.0 above. APT will then serve notice upon Kawasaki Heavy Industries, Inc. and/or
[PHILYARDS] Holdings, Inc. declaring them as the preferred bidder and they shall have a
period of ninety (90) days from the receipt of the APT's notice within which to pay the
balance of their bid price.
6.2 Should Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. fail to
exercise their "Option to Top the Highest Bid" within the thirty (30)-day period, APT will
declare the highest bidder as the winning bidder.
xxx xxx xxx

4. I/We understand that the Committee on Privatization (COP) has up to thirty (30) days to
act on APT's recommendation based on the result of this bidding. Should the COP approve
the highest bid, APT shall advise Kawasaki Heavy Industries, Inc. and/or its nominee,
[PHILYARDS] Holdings, Inc. that the highest bid is acceptable to the National Government.
Kawasaki Heavy Industries, Inc. and/or [PHILYARDS] Holdings, Inc. shall then have a period
of thirty (30) calendar days from the date of receipt of such advice from APT within which
to exercise their "Option to Top the Highest Bid" by offering a bid equivalent to the highest
bid plus five (5%) percent thereof.
As petitioner was declared the highest bidder, the COP approved the sale on December 3,
1993 "subject to the right of Kawasaki Heavy Industries, Inc./[PHILYARDS] Holdings, Inc. to
top JGSMI's bid by 5% as specified in the bidding rules."
On December 29, 1993, petitioner informed APT that it was protesting the offer of PHI to
top its bid on the grounds that: (a) the KAWASAKI/PHI consortium composed of KAWASAKI,
[PHILYARDS], Mitsui, Keppel, SM Group, ICTSI and Insular Life violated the ASBR because
the last four (4) companies were the losing bidders thereby circumventing the law and
prejudicing the weak winning bidder; (b) only KAWASAKI could exercise the right to top; (c)
giving the same option to top to PHI constituted unwarranted benefit to a third party; (d)
no right of first refusal can be exercised in a public bidding or auction sale; and (e) the JG
Summit consortium was not estopped from questioning the proceedings.
On February 2, 1994, petitioner was notified that PHI had fully paid the balance of the
purchase price of the subject bidding. On February 7, 1994, the APT notified petitioner that
PHI had exercised its option to top the highest bid and that the COP had approved the
same on January 6, 1994. On February 24, 1994, the APT and PHI executed a Stock
Purchase Agreement. Consequently, petitioner filed with this Court a Petition for
Mandamus under G.R. No. 114057. On May 11, 1994, said petition was referred to the
Court of Appeals. On July 18, 1995, the Court of Appeals denied the same for lack of merit.
It ruled that the petition for mandamus was not the proper remedy to question the
constitutionality or legality of the right of first refusal and the right to top that was
exercised by KAWASAKI/PHI, and that the matter must be brought "by the proper party in
the proper forum at the proper time and threshed out in a full blown trial." The Court of
Appeals further ruled that the right of first refusal and the right to top are prima facie legal

and that the petitioner, "by participating in the public bidding, with full knowledge of the
right to top granted to KAWASAKI/[PHILYARDS] isestopped from questioning the validity
of the award given to [PHILYARDS] after the latter exercised the right to top and had paid in
full the purchase price of the subject shares, pursuant to the ASBR." Petitioner filed a
Motion for Reconsideration of said Decision which was denied on March 15, 1996.
Petitioner thus filed a Petition for Certiorari with this Court alleging grave abuse of
discretion on the part of the appellate court.
On November 20, 2000, this Court rendered x x x [a] Decision ruling among others that the
Court of Appeals erred when it dismissed the petition on the sole ground of the impropriety
of the special civil action of mandamus because the petition was also one of certiorari. It
further ruled that a shipyard like PHILSECO is a public utility whose capitalization must be
sixty percent (60%) Filipino-owned. Consequently, the right to top granted to KAWASAKI
under the Asset Specific Bidding Rules (ASBR) drafted for the sale of the 87.67% equity of
the National Government in PHILSECO is illegal not only because it violates the rules on
competitive bidding but more so, because it allows foreign corporations to own more
than 40% equity in the shipyard. It also held that "although the petitioner had the
opportunity to examine the ASBR before it participated in the bidding, it cannot be
estopped from questioning the unconstitutional, illegal and inequitable provisions thereof."
Thus, this Court voided the transfer of the national government's 87.67% share in
PHILSECO to Philyard[s] Holdings, Inc., and upheld the right of JG Summit, as the highest
bidder, to take title to the said shares, viz:
WHEREFORE, the instant petition for review on certiorari is GRANTED. The assailed
Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE. Petitioner is
ordered to pay to APT its bid price of Two Billion Thirty Million Pesos (P2,030,000,000.00),
less its bid deposit plus interests upon the finality of this Decision. In turn, APT is ordered
to:
(a) accept the said amount of P2,030,000,000.00 less bid deposit and interests from
petitioner;
(b) execute a Stock Purchase Agreement with petitioner;
(c) cause the issuance in favor of petitioner of the certificates of stocks representing 87.6%
of PHILSECO's total capitalization;
(d) return to private respondent PHGI the amount of Two Billion One Hundred Thirty-One
Million Five Hundred Thousand Pesos (P2,131,500,000.00); and
(e) cause the cancellation of the stock certificates issued to PHI.
SO ORDERED.
In separate Motions for Reconsideration, respondents submit[ted] three basic issues for x x
x resolution: (1) Whether PHILSECO is a public utility; (2) Whether under the 1977 JVA,

KAWASAKI can exercise its right of first refusal only up to 40% of the total capitalization of
PHILSECO; and (3) Whether the right to top granted to KAWASAKI violates the principles of
competitive bidding.3 (citations omitted)
In a Resolution dated September 24, 2003, this Court ruled in favor of the respondents. On
the first issue, we held that Philippine Shipyard and Engineering Corporation (PHILSECO) is
not a public utility, as by nature, a shipyard is not a public utility 4 and that no law declares
a shipyard to be a public utility.5 On the second issue, we found nothing in the 1977 Joint
Venture Agreement (JVA) which prevents Kawasaki Heavy Industries, Ltd. of Kobe, Japan
(KAWASAKI) from acquiring more than 40% of PHILSECOs total capitalization. 6 On the final
issue, we held that the right to top granted to KAWASAKI in exchange for its right of first
refusal did not violate the principles of competitive bidding. 7
On October 20, 2003, the petitioner filed a Motion for Reconsideration 8 and a Motion to
Elevate This Case to the Court En Banc.9 Public respondents Committee on Privatization
(COP) and Asset Privatization Trust (APT), and private respondent Philyards Holdings, Inc.
(PHILYARDS) filed their Comments on J.G. Summit Holdings, Inc.s (JG Summits) Motion for
Reconsideration and Motion to Elevate This Case to the Court En Banc on January 29, 2004
and February 3, 2004, respectively.
II. Issues
Based on the foregoing, the relevant issues to resolve to end this litigation are the
following:
1. Whether there are sufficient bases to elevate the case at bar to the Court en banc.
2. Whether the motion for reconsideration raises any new matter or cogent reason to
warrant a reconsideration of this Courts Resolution of September 24, 2003.
Motion to Elevate this Case to the
Court En Banc
The petitioner prays for the elevation of the case to the Court en banc on the following
grounds:
1. The main issue of the propriety of the bidding process involved in the present case has
been confused with the policy issue of the supposed fate of the shipping industry which
has never been an issue that is determinative of this case. 10
2. The present case may be considered under the Supreme Court Resolution dated
February 23, 1984 which included among en banc cases those involving a novel question
of law and those where a doctrine or principle laid down by the Court en banc or in division
may be modified or reversed.11

3. There was clear executive interference in the judicial functions of the Court when the
Honorable Jose Isidro Camacho, Secretary of Finance, forwarded to Chief Justice Davide, a
memorandum dated November 5, 2001, attaching a copy of the Foreign Chambers Report
dated Octobenciples on public bidding were likewise used to resolve the issues raised by
the petitioner. To be sure, petitioner leans on the right to top in a public bidding in arguing
that the case at bar involves a novel issue. We are not swayed. The right to top was merely
a condition or a reservation made in the bidding rules which was fully disclosed to all
bidding parties. In Bureau Veritas, represented by Theodor H. Hunermann v. Office
of the President, et al., 19we dealt with this conditionality, viz:
x x x It must be stressed, as held in the case of A.C. Esguerra & Sons v. Aytona, et al., (L18751, 28 April 1962, 4 SCRA 1245), that in an "invitation to bid, there is a condition
imposed upon the bidders to the effect that the bidding shall be subject to the
right of the government to reject any and all bids subject to its discretion. In the
case at bar, the government has made its choice and unless an unfairness or
injustice is shown, the losing bidders have no cause to complain nor right to
dispute that choice. This is a well-settled doctrine in this jurisdiction and
elsewhere."

most advantageous to the Government." It is a well-settled rule that where such

reservation is made in an Invitation to Bid, the highest or lowest bidder, as the
case may be, is not entitled to an award as a matter of right (C & C Commercial
Corp. v. Menor, L-28360, 27 January 1983, 120 SCRA 112). Even the lowest Bid or any Bid
may be rejected or, in the exercise of sound discretion, the award may be made to another
than the lowest bidder (A.C. Esguerra & Sons v. Aytona, supra, citing 43 Am. Jur., 788).
(emphases supplied)1awphi1.nt
Like the condition in the Bureau Veritas case, the right to top was a condition imposed by
the government in the bidding rules which was made known to all parties. It was a
condition imposed on all bidders equally, based on the APTs exercise of its
discretion in deciding on how best to privatize the governments shares in
PHILSECO. It was not a whimsical or arbitrary condition plucked from the ether and
inserted in the bidding rules but a condition which the APT approved as the best way the
government could comply with its contractual obligations to KAWASAKI under the JVA and
its mandate of getting the most advantageous deal for the government. The right to top
had its history in the mutual right of first refusal in the JVA and was reached by agreement
of the government and KAWASAKI.

The discretion to accept or reject a bid and award contracts is vested in the Government
agencies entrusted with that function. The discretion given to the authorities on this
matter is of such wide latitude that the Courts will not interfere therewith, unless it is
apparent that it is used as a shield to a fraudulent award (Jalandoni v. NARRA, 108 Phil. 486
[1960]). x x x The exercise of this discretion is a policy decision that necessitates prior
inquiry, investigation, comparison, evaluation, and deliberation. This task can best be
discharged by the Government agencies concerned, not by the Courts. The role of the
Courts is to ascertain whether a branch or instrumentality of the Government has
transgressed its constitutional boundaries. But the Courts will not interfere with executive
or legislative discretion exercised within those boundaries. Otherwise, it strays into the
realm of policy decision-making.

Further, there is no "executive interference" in the functions of this Court by the mere filing
of a memorandum by Secretary of Finance Jose Isidro Camacho. The memorandum was
merely "noted" to acknowledge its filing. It had no further legal significance. Notably
too, the assailed Resolution dated September 24, 2003 was decided unanimously
by the Special First Division in favor of the respondents.

It is only upon a clear showing of grave abuse of discretion that the Courts will set aside
the award of a contract made by a government entity. Grave abuse of discretion implies a
capricious, arbitrary and whimsical exercise of power (Filinvest Credit Corp. v. Intermediate
Appellate Court, No. 65935, 30 September 1988, 166 SCRA 155). The abuse of discretion
must be so patent and gross as to amount to an evasion of positive duty or to a virtual
refusal to perform a duty enjoined by law, as to act at all in contemplation of law, where
the power is exercised in an arbitrary and despotic manner by reason of passion or hostility
(Litton Mills, Inc. v. Galleon Trader, Inc., et al[.], L-40867, 26 July 1988, 163 SCRA 489).

Motion for Reconsideration

The facts in this case do not indicate any such grave abuse of discretion on the part of
public respondents when they awarded the CISS contract to Respondent SGS. In the
"Invitation to Prequalify and Bid" (Annex "C," supra), the CISS Committee made an
express reservation of the right of the Government to "reject any or all bids or
any part thereof or waive any defects contained thereon and accept an offer

Again, we emphasize that a decision or resolution of a Division is that of the Supreme

Court20 and the Court en banc is not an appellate court to which decisions or resolutions of
a Division may be appealed.21
For all the foregoing reasons, we find no basis to elevate this case to the Court en banc.

Three principal arguments were raised in the petitioners Motion for Reconsideration. First,
that a fair resolution of the case should be based on contract law, not on policy
considerations; the contracts do not authorize the right to top to be derived from the right
of first refusal.22 Second, that neither the right of first refusal nor the right to top can be
legally exercised by the consortium which is not the proper party granted such right under
either the JVA or the Asset Specific Bidding Rules (ASBR). 23 Third, that the maintenance of
the 60%-40% relationship between the National Investment and Development Corporation
(NIDC) and KAWASAKI arises from contract and from the Constitution because PHILSECO is
a landholding corporation and need not be a public utility to be bound by the 60%-40%
constitutional limitation.24
On the other hand, private respondent PHILYARDS asserts that J.G. Summit has not been
able to show compelling reasons to warrant a reconsideration of the Decision of the

Court.25 PHILYARDS denies that the Decision is based mainly on policy considerations and
points out that it is premised on principles governing obligations and contracts and
corporate law such as the rule requiring respect for contractual stipulations, upholding
rights of first refusal, and recognizing the assignable nature of contracts rights. 26 Also, the
ruling that shipyards are not public utilities relies on established case law and fundamental
rules of statutory construction. PHILYARDS stresses that KAWASAKIs right of first refusal or
even the right to top is not limited to the 40% equity of the latter. 27 On the landholding
issue raised by J.G. Summit, PHILYARDS emphasizes that this is a non-issue and even
involves a question of fact. Even assuming that this Court can take cognizance of such
question of fact even without the benefit of a trial, PHILYARDS opines that landholding by
PHILSECO at the time of the bidding is irrelevant because what is essential is that
ultimately a qualified entity would eventually hold PHILSECOs real estate
properties.28 Further, given the assignable nature of the right of first refusal, any applicable
nationality restrictions, including landholding limitations, would not affect the right of first
refusal itself, but only the manner of its exercise. 29 Also, PHILYARDS argues that if this Court
takes cognizance of J.G. Summits allegations of fact regarding PHILSECOs landholding, it
must also recognize PHILYARDS assertions that PHILSECOs landholdings were sold to
another corporation.30 As regards the right of first refusal, private respondent explains that
KAWASAKIs reduced shareholdings (from 40% to 2.59%) did not translate to a deprivation
or loss of its contractually granted right of first refusal. 31 Also, the bidding was valid
because PHILYARDS exercised the right to top and it was of no moment that losing bidders
later joined PHILYARDS in raising the purchase price. 32

In a Consolidated Comment dated March 8, 2004, J.G. Summit countered the arguments of
the public and private respondents in this wise:
1. The award by the APT of 87.67% shares of PHILSECO to PHILYARDS with losing bidders
through the exercise of a right to top, which is contrary to law and the constitution is null
and void for being violative of substantive due process and the abuse of right provision in
the Civil Code.
a. The bidders[] right to top was actually exercised by losing bidders.
b. The right to top or the right of first refusal cannot co-exist with a genuine competitive
bidding.
c. The benefits derived from the right to top were unwarranted.
2. The landholding issue has been a legitimate issue since the start of this case but is
shamelessly ignored by the respondents.
a. The landholding issue is not a non-issue.
b. The landholding issue does not pose questions of fact.
c. That PHILSECO owned land at the time that the right of first refusal was agreed upon
and at the time of the bidding are most relevant.

In cadence with the private respondent PHILYARDS, public respondents COP and APT
contend:

d. Whether a shipyard is a public utility is not the core issue in this case.

1. The conversion of the right of first refusal into a right to top by 5% does not violate any
provision in the JVA between NIDC and KAWASAKI.

3. Fraud and bad faith attend the alleged conversion of an inexistent right of first refusal to
the right to top.

2. PHILSECO is not a public utility and therefore not governed by the constitutional
restriction on foreign ownership.

a. The history behind the birth of the right to top shows fraud and bad faith.

3. The petitioner is legally estopped from assailing the validity of the proceedings of the
public bidding as it voluntarily submitted itself to the terms of the ASBR which included the
provision on the right to top.
4. The right to top was exercised by PHILYARDS as the nominee of KAWASAKI and the fact
that PHILYARDS formed a consortium to raise the required amount to exercise the right to
top the highest bid by 5% does not violate the JVA or the ASBR.
5. The 60%-40% Filipino-foreign constitutional requirement for the acquisition of lands does
not apply to PHILSECO because as admitted by petitioner itself, PHILSECO no longer owns
real property.
6. Petitioners motion to elevate the case to the Court en banc is baseless and would only
delay the termination of this case.33

b. The right of first refusal was, indeed, "effectively useless."

4. Petitioner is not legally estopped to challenge the right to top in this case.
a. Estoppel is unavailing as it would stamp validity to an act that is prohibited by law or
against public policy.
b. Deception was patent; the right to top was an attractive nuisance.
c. The 10% bid deposit was placed in escrow.
J.G. Summits insistence that the right to top cannot be sourced from the right of first
refusal is not new and we have already ruled on the issue in our Resolution of September
24, 2003. We upheld the mutual right of first refusal in the JVA. 34 We also ruled that nothing
in the JVA prevents KAWASAKI from acquiring more than 40% of PHILSECOs total

capitalization.35 Likewise, nothing in the JVA or ASBR bars the conversion of the right of first
refusal to the right to top. In sum, nothing new and of significance in the petitioners
pleading warrants a reconsideration of our ruling.
Likewise, we already disposed of the argument that neither the right of first refusal nor the
right to top can legally be exercised by the consortium which is not the proper party
granted such right under either the JVA or the ASBR. Thus, we held:
The fact that the losing bidder, Keppel Consortium (composed of Keppel, SM Group, Insular
Life Assurance, Mitsui and ICTSI), has joined PHILYARDS in the latter's effort to raise P2.131
billion necessary in exercising the right to top is not contrary to law, public policy or public
morals. There is nothing in the ASBR that bars the losing bidders from joining either the
winning bidder (should the right to top is not exercised) or KAWASAKI/PHI (should it
exercise its right to top as it did), to raise the purchase price. The petitioner did not allege,
nor was it shown by competent evidence, that the participation of the losing bidders in the
public bidding was done with fraudulent intent. Absent any proof of fraud, the formation by
[PHILYARDS] of a consortium is legitimate in a free enterprise system. The appellate court
is thus correct in holding the petitioner estopped from questioning the validity of the
transfer of the National Government's shares in PHILSECO to respondent. 36
Further, we see no inherent illegality on PHILYARDS act in seeking funding from parties
who were losing bidders. This is a purely commercial decision over which the State should
not interfere absent any legal infirmity. It is emphasized that the case at bar involves the
disposition of shares in a corporation which the government sought to privatize. As such,
the persons with whom PHILYARDS desired to enter into business with in order to raise
funds to purchase the shares are basically its business. This is in contrast to a case
involving a contract for the operation of or construction of a government infrastructure
where the identity of the buyer/bidder or financier constitutes an important consideration.
In such cases, the government would have to take utmost precaution to protect public
interest by ensuring that the parties with which it is contracting have the ability to
satisfactorily construct or operate the infrastructure.
On the landholding issue, J.G. Summit submits that since PHILSECO is a landholding
company, KAWASAKI could exercise its right of first refusal only up to 40% of the shares of
PHILSECO due to the constitutional prohibition on landholding by corporations with more
than 40% foreign-owned equity. It further argues that since KAWASAKI already held at least
40% equity in PHILSECO, the right of first refusal was inutile and as such, could not
subsequently be converted into the right to top. 37 Petitioner also asserts that, at present,
PHILSECO continues to violate the constitutional provision on landholdings as its shares are
more than 40% foreign-owned.38 PHILYARDS admits that it may have previously held land
but had already divested such landholdings.39 It contends, however, that even if PHILSECO
owned land, this would not affect the right of first refusal but only the exercise thereof. If
the land is retained, the right of first refusal, being a property right, could be assigned to a
qualified party. In the alternative, the land could be divested before the exercise of the
right of first refusal. In the case at bar, respondents assert that since the right of first

refusal was validly converted into a right to top, which was exercised not by KAWASAKI, but
by PHILYARDS which is a Filipino corporation (i.e., 60% of its shares are owned by Filipinos),
then there is no violation of the Constitution.40 At first, it would seem that questions of fact
beyond cognizance by this Court were involved in the issue. However, the records show
that PHILYARDS admits it had owned land up until the time of the
bidding.41 Hence, the only issue is whether KAWASAKI had a valid right of first
refusal over PHILSECO shares under the JVA considering that PHILSECO owned
land until the time of the bidding and KAWASAKI already held 40% of
PHILSECOs equity.
We uphold the validity of the mutual rights of first refusal under the JVA between
KAWASAKI and NIDC. First of all, the right of first refusal is a property right of PHILSECO
shareholders, KAWASAKI and NIDC, under the terms of their JVA. This right allows them to
purchase the shares of their co-shareholder before they are offered to a third party. The
agreement of co-shareholders to mutually grant this right to each other, by
itself, does not constitute a violation of the provisions of the Constitution
limiting land ownership to Filipinos and Filipino corporations. As PHILYARDS
correctly puts it, if PHILSECO still owns land, the right of first refusal can be validly
assigned to a qualified Filipino entity in order to maintain the 60%-40% ratio. This transfer,
by itself, does not amount to a violation of the Anti-Dummy Laws, absent proof of any
fraudulent intent. The transfer could be made either to a nominee or such other party
which the holder of the right of first refusal feels it can comfortably do business with.
Alternatively, PHILSECO may divest of its landholdings, in which case KAWASAKI, in
exercising its right of first refusal, can exceed 40% of PHILSECOs equity. In fact, it can
even be said that if the foreign shareholdings of a landholding corporation
exceeds 40%, it is not the foreign stockholders ownership of the shares which is
adversely affected but the capacity of the corporation to own land that is, the
corporation becomes disqualified to own land. This finds support under the basic corporate
law principle that the corporation and its stockholders are separate juridical entities. In this
vein, the right of first refusal over shares pertains to the shareholders whereas the
capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land
cannot deprive stockholders of their right of first refusal. No law disqualifies a person
from purchasing shares in a landholding corporation even if the latter will
exceed the allowed foreign equity, what the law disqualifies is the corporation
from owning land. This is the clear import of the following provisions in the Constitution:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities, or it may enter
into co-production, joint venture, or production-sharing agreements with Filipino
citizens, or corporations or associations at least sixty per centum of whose
capital is owned by such citizens. Such agreements may be for a period not exceeding

twenty-five years, renewable for not more than twenty-five years, and under such terms
and conditions as may be provided by law. In cases of water rights for irrigation, water
supply, fisheries, or industrial uses other than the development of water power, beneficial
use may be the measure and limit of the grant.
xxx xxx xxx
Section 7. Save in cases of hereditary succession, no private lands shall be
transferred or conveyed except to individuals, corporations, or associations
qualified to acquire or hold lands of the public domain.42 (emphases supplied)
The petitioner further argues that "an option to buy land is void in itself (Philippine Banking
Corporation v. Lui She, 21 SCRA 52 [1967]). The right of first refusal granted to KAWASAKI,
a Japanese corporation, is similarly void. Hence, the right to top, sourced from the right of
first refusal, is also void."43 Contrary to the contention of petitioner, the case of Lui She did
not that say "an option to buy land is void in itself," for we ruled as follows:
x x x To be sure, a lease to an alien for a reasonable period is valid. So is an
option giving an alien the right to buy real property on condition that he is
granted Philippine citizenship. As this Court said in Krivenko vs. Register of
Deeds:
[A]liens are not completely excluded by the Constitution from the use of lands for
residential purposes. Since their residence in the Philippines is temporary, they may be
granted temporary rights such as a lease contract which is not forbidden by the
Constitution. Should they desire to remain here forever and share our fortunes and
misfortunes, Filipino citizenship is not impossible to acquire.
But if an alien is given not only a lease of, but also an option to buy, a piece of
land, by virtue of which the Filipino owner cannot sell or otherwise dispose of
his property, this to last for 50 years, then it becomes clear that the
arrangement is a virtual transfer of ownership whereby the owner divests
himself in stages not only of the right to enjoy the land (jus possidendi, jus
utendi, jus fruendi and jus abutendi) but also of the right to dispose of it (jus
disponendi) rights the sum total of which make up ownership. It is just as if
today the possession is transferred, tomorrow, the use, the next day, the
disposition, and so on, until ultimately all the rights of which ownership is made
up are consolidated in an alien. And yet this is just exactly what the parties in this case did
within this pace of one year, with the result that Justina Santos'[s] ownership of her
property was reduced to a hollow concept. If this can be done, then the Constitutional ban
against alien landholding in the Philippines, as announced in Krivenko vs. Register of
Deeds, is indeed in grave peril.44 (emphases supplied; Citations omitted)
In Lui She, the option to buy was invalidated because it amounted to a virtual transfer of
ownership as the owner could not sell or dispose of his properties. The contract in Lui
She prohibited the owner of the land from selling, donating, mortgaging, or encumbering

the property during the 50-year period of the option to buy. This is not so in the case at bar
where the mutual right of first refusal in favor of NIDC and KAWASAKI does not amount to a
virtual transfer of land to a non-Filipino. In fact, the case at bar involves a right of first
refusal over shares of stock while the Lui She case involves an option to buy the
land itself. As discussed earlier, there is a distinction between the shareholders
ownership of shares and the corporations ownership of land arising from the separate
juridical personalities of the corporation and its shareholders.
We note that in its Motion for Reconsideration, J.G. Summit alleges that PHILSECO
continues to violate the Constitution as its foreign equity is above 40% and yet owns
long-term leasehold rights which are real rights.45 It cites Article 415 of the Civil
Code which includes in the definition of immovable property, "contracts for public works,
and servitudes and other real rights over immovable property."46 Any existing landholding,
however, is denied by PHILYARDS citing its recent financial statements. 47 First, these are
questions of fact, the veracity of which would require introduction of evidence. The Court
needs to validate these factual allegations based on competent and reliable evidence. As
such, the Court cannot resolve the questions they pose. Second, J.G. Summit misreads the
provisions of the Constitution cited in its own pleadings, to wit:
29.2 Petitioner has consistently pointed out in the past that private respondent is not a
60%-40% corporation, and this violates the Constitution x x x The violation continues to
this day because under the law, it continues to own real property
xxx xxx xxx
32. To review the constitutional provisions involved, Section 14, Article XIV of the 1973
Constitution (the JVA was signed in 1977), provided:
"Save in cases of hereditary succession, no private lands shall be transferred or
conveyed except to individuals, corporations, or associations qualified to acquire or hold
lands of the public domain."
32.1 This provision is the same as Section 7, Article XII of the 1987 Constitution.
32.2 Under the Public Land Act, corporations qualified to acquire or hold lands of the
public domain are corporations at least 60% of which is owned by Filipino citizens (Sec.
22, Commonwealth Act 141, as amended). (emphases supplied)
As correctly observed by the public respondents, the prohibition in the Constitution applies
only to ownership of land.48 It does not extend to immovable or real property as
defined under Article 415 of the Civil Code. Otherwise, we would have a strange
situation where the ownership of immovable property such as trees, plants and growing
fruit attached to the land49 would be limited to Filipinos and Filipino corporations only.
III.

WHEREFORE, in view of the foregoing, the petitioners Motion for Reconsideration is

DENIED WITH FINALITY and the decision appealed from is AFFIRMED. The Motion to Elevate
This Case to the Court En Banc is likewise DENIED for lack of merit.
SO ORDERED.

G.R. No. L-6776

May 21, 1955

THE REGISTER OF DEEDS OF RIZAL, petitioner-appellee,

vs.
UNG SIU SI TEMPLE, respondent-appellant.

Alejo F. Candido for appellant.

Office of the Solicitor General Querube C. Makalintal and Solicitor Felix V. Makasiar for
appellee.
REYES, J.B.L., J.:
The Register of Deeds for the province of Rizal refused to accept for record a deed of
donation executed in due form on January 22, 1953, by Jesus Dy, a Filipino citizen,
conveying a parcel of residential land, in Caloocan, Rizal, known as lot No. 2, block 48-D,
PSD-4212, G.L.R.O. Record No. 11267, in favor of the unregistered religious organization
"Ung Siu Si Temple", operating through three trustees all of Chinese nationality. The
donation was duly accepted by Yu Juan, of Chinese nationality, founder and deaconess of
the Temple, acting in representation and in behalf of the latter and its trustees.
The refusal of the Registrar was elevated en Consultato the IVth Branch of the Court of
First Instance of Manila. On March 14, 1953, the Court upheld the action of the Rizal
Register of Deeds, saying:
The question raised by the Register of Deeds in the above transcribed consulta is whether
a deed of donation of a parcel of land executed in favor of a religious organization whose
founder, trustees and administrator are Chinese citizens should be registered or not.
It appearing from the record of the Consulta that UNG SIU SI TEMPLE is a religious
organization whose deaconess, founder, trustees and administrator are all Chinese
citizens, this Court is of the opinion and so hold that in view of the provisions of the
sections 1 and 5 of Article XIII of the Constitution of the Philippines limiting the acquisition
of land in the Philippines to its citizens, or to corporations or associations at least sixty per
centum of the capital stock of which is owned by such citizens adopted after the
enactment of said Act No. 271, and the decision of the Supreme Court in the case of
Krivenko vs. the Register of Deeds of Manila, the deed of donation in question should not
be admitted for admitted for registration. (Printed Rec. App. pp 17-18).
Not satisfied with the ruling of the Court of First Instance, counsel for the donee Uy Siu Si
Temple has appealed to this Court, claiming: (1) that the acquisition of the land in
question, for religious purposes, is authorized and permitted by Act No. 271 of the old
Philippine Commission, providing as follows:
SECTION 1. It shall be lawful for all religious associations, of whatever sort or
denomination, whether incorporated in the Philippine Islands or in the name of other
country, or not incorporated at all, to hold land in the Philippine Islands upon which to build
churches, parsonages, or educational or charitable institutions.
SEC. 2. Such religious institutions, if not incorporated, shall hold the land in the name of
three Trustees for the use of such associations; . . .. (Printed Rec. App. p. 5.)

and (2) that the refusal of the Register of Deeds violates the freedom of religion clause of
our Constitution [Art. III, Sec. 1(7)].
We are of the opinion that the Court below has correctly held that in view of the absolute
terms of section 5, Title XIII, of the Constitution, the provisions of Act No. 271 of the old
Philippine Commission must be deemed repealed since the Constitution was enacted, in so
far as incompatible therewith. In providing that,
Save in cases of hereditary succession, no private agricultural land shall be transferred or
assigned except to individuals, corporations or associations qualified to acquire or hold
lands of the public domain in the Philippines,
the Constitution makes no exception in favor of religious associations. Neither is there any
such saving found in sections 1 and 2 of Article XIII, restricting the acquisition of public
agricultural lands and other natural resources to "corporations or associations at least sixty
per centum of the capital of which is owned by such citizens" (of the Philippines).
The fact that the appellant religious organization has no capital stock does not suffice to
escape the Constitutional inhibition, since it is admitted that its members are of foreign
nationality. The purpose of the sixty per centum requirement is obviously to ensure that
corporations or associations allowed to acquire agricultural land or to exploit natural
resources shall be controlled by Filipinos; and the spirit of the Constitution demands that in
the absence of capital stock, the controlling membership should be composed of Filipino
citizens.
To permit religious associations controlled by non-Filipinos to acquire agricultural lands
would be to drive the opening wedge to revive alien religious land holdings in this country.
We can not ignore the historical fact that complaints against land holdings of that kind
were among the factors that sparked the revolution of 1896.
As to the complaint that the disqualification under article XIII is violative of the freedom of
religion guaranteed by Article III of the Constitution, we are by no means convinced (nor
has it been shown) that land tenure is indispensable to the free exercise and enjoyment of
religious profession or worship; or that one may not worship the Deity according to the
dictates of his own conscience unless upon land held in fee simple.
The resolution appealed from is affirmed, with costs against appellant.

G.R. No. L-8451

December 20, 1957

THE ROMAN CATHOLIC APOSTOLIC ADMINISTRATOR OF DAVAO, INC., petitioner,

vs.
THE LAND REGISTRATION COMMISSION and THE REGISTER OF DEEDS OF DAVAO
CITY, respondents.
Teodoro Padilla, for petitioner.
Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General Jose G. Bautista
and Troadio T. Quianzon, Jr., for respondents.
FELIX, J.:
This is a petition for mandamus filed by the Roman Catholic Apostolic Administrator of
Davao seeking the reversal of a resolution by the Land Registration Commissioner in L.R.C.
Consulta No. 14. The facts of the case are as follows:
On October 4, 1954, Mateo L. Rodis, a Filipino citizen and resident of the City of Davao,
executed a deed of sale of a parcel of land located in the same city covered by Transfer
Certificate No. 2263, in favor of the Roman Catholic Apostolic Administrator of Davao Inc., s
corporation sole organized and existing in accordance with Philippine Laws, with Msgr.
Clovis Thibault, a Canadian citizen, as actual incumbent. When the deed of sale was
presented to Register of Deeds of Davao for registration, the latter.
having in mind a previous resolution of the Fourth Branch of the Court of First Instance of
Manila wherein the Carmelite Nuns of Davao were made to prepare an affidavit to the
effect that 60 per cent of the members of their corporation were Filipino citizens when they
sought to register in favor of their congregation of deed of donation of a parcel of land
required said corporation sole to submit a similar affidavit declaring that 60 per cent of the
members thereof were Filipino citizens.
The vendee in the letter dated June 28, 1954, expressed willingness to submit an affidavit,
both not in the same tenor as that made the Progress of the Carmelite Nuns because the
two cases were not similar, for whereas the congregation of the Carmelite Nuns had five
incorporators, the corporation sole has only one; that according to their articles of
incorporation, the organization of the Carmelite Nuns became the owner of properties
donated to it, whereas the case at bar, the totality of the Catholic population of Davao
would become the owner of the property bought to be registered.

As the Register of Deeds entertained some doubts as to the registerability if the document,
the matter was referred to the Land Registration Commissioner en consulta for resolution
in accordance with section 4 of Republic Act No. 1151. Proper hearing on the matter was
conducted by the Commissioner and after the petitioner corporation had filed its
memorandum, a resolution was rendered on September 21, 1954, holding that in view of
the provisions of Section 1 and 5 of Article XIII of the Philippine Constitution, the vendee
was not qualified to acquire private lands in the Philippines in the absence of proof that at
least 60 per centum of the capital, property, or assets of the Roman Catholic Apostolic
Administrator of Davao, Inc., was actually owned or controlled by Filipino citizens, there
being no question that the present incumbent of the corporation sole was a Canadian
citizen. It was also the opinion of the Land Registration Commissioner that section 159 of
the corporation Law relied upon by the vendee was rendered operative by the
aforementioned provisions of the Constitution with respect to real estate, unless the
precise condition set therein that at least 60 per cent of its capital is owned by Filipino
citizens be present, and, therefore, ordered the Registered Deeds of Davao to deny
registration of the deed of sale in the absence of proof of compliance with such condition.
After the motion to reconsider said resolution was denied, an action for mandamus was
instituted with this Court by said corporation sole, alleging that under the Corporation Law
as well as the settled jurisprudence on the matter, the deed of sale executed by Mateo L.
Rodis in favor of petitioner is actually a deed of sale in favor of the Catholic Church which is
qualified to acquire private agricultural lands for the establishment and maintenance of
places of worship, and prayed that judgment be rendered reserving and setting aside the
resolution of the Land Registration Commissioner in question. In its resolution of November
15, 1954, this Court gave due course to this petition providing that the procedure
prescribed for appeals from the Public Service Commission of the Securities and Exchange
Commissions (Rule 43), be followed.
Section 5 of Article XIII of the Philippine Constitution reads as follows:
SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be
transferred or assigned except to individuals, corporations, or associations qualified to
acquire or hold lands of the public domain in the Philippines.
Section 1 of the same Article also provides the following:
SECTION 1. All agricultural, timber, and mineral lands of the public domain, water,
minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other
natural resources of the Philippines belong to the State, and their disposition, exploitation,
development, or utilization shall be limited to cititzens of the Philippines, or to corporations
or associations at least sixty per centum of the capital of which is owned by such citizens,
SUBJECT TO ANY EXISTING RIGHT, grant, lease, or concession AT THE TIME OF THE
INAUGURATION OF THE GOVERNMENT ESTABLISHED UNDER CONSTITUTION. Natural
resources, with the exception of public agricultural land, shall not be alienated, and no
license, concession, or leases for the exploitation, development, or utilization of any of the

natural resources shall be granted for a period exceeding twenty-five years, renewable for
another twenty-five years, except as to water rights for irrigation, water supply, fisheries,
or industrial uses other than the development of water power, in which cases other than
the development and limit of the grant.
In virtue of the foregoing mandates of the Constitution, who are considered "qualified" to
acquire and hold agricultural lands in the Philippines? What is the effect of these
constitutional prohibition of the right of a religious corporation recognized by our
Corporation Law and registered as a corporation sole, to possess, acquire and register real
estates in its name when the Head, Manager, Administrator or actual incumbent is an
alien?

such beneficiary exercise ant right of ownership over the same. This set-up, respondents
argued, falls short of a trust. The respondents instead tried to prove that in reality, the
beneficiary of ecclesiastical properties are not members or faithful of the church but
someone else, by quoting a portion a portion of the ought of fidelity subscribed by a bishop
upon his elevation to the episcopacy wherein he promises to render to the Pontificial Father
or his successors an account of his pastoral office and of all things appertaining to
the state of this church.
Respondents likewise advanced the opinion that in construing the constitutional provision
calling for 60 per cent of Filipino citizenship, the criterion of the properties or assets
thereof.

Petitioner consistently maintained that a corporation sole, irrespective of the citizenship of

its incumbent, is not prohibited or disqualified to acquire and hold real properties. The
Corporation Law and the Canon Law are explicit in their provisions that a corporation sole
or "ordinary" is not the owner of the of the properties that he may acquire but merely the
administrator thereof. The Canon Law also specified that church temporalities are owned
by the Catholic Church as a "moral person" or by the diocess as minor "moral persons"
with the ordinary or bishop as administrator.

In solving the problem thus submitted to our consideration, We can say the following: A
corporation sole is a special form of corporation usually associated with the clergy.
Conceived and introduced into the common law by sheer necessity, this legal creation
which was referred to as "that unhappy freak of English law" was designed to facilitate the
exercise of the functions of ownership carried on by the clerics for and on behalf of the
church which was regarded as the property owner (See I Couvier's Law Dictionary, p. 682683).

And elaborating on the composition of the Catholic Church in the Philippines, petitioner
explained that as a religious society or organization, it is made up of 2 elements or
divisions the clergy or religious members and the faithful or lay members. The 1948
figures of the Bureau of Census showed that there were 277,551 Catholics in Davao and
aliens residing therein numbered 3,465. Ever granting that all these foreigners are
Catholics, petitioner contends that Filipino citizens form more than 80 per cent of the entire
Catholics population of that area. As to its clergy and religious composition, counsel for
petitioner presented the Catholic Directory of the Philippines for 1954 (Annex A) which
revealed that as of that year, Filipino clergy and women novices comprise already 60.5 per
cent of the group. It was, therefore, allowed that the constitutional requirement was fully
met and satisfied.

A corporation sole consists of one person only, and his successors (who will always be one
at a time), in some particular station, who are incorporated by law in order to give them
some legal capacities and advantages, particularly that of perpetuity, which in their natural
persons they could not have had. In this sense, the king is a sole corporation; so is a
bishop, or dens, distinct from their several chapters (Reid vs. Barry, 93 Fla. 849, 112 So.
846).

Respondents, on the other hand, averred that although it might be true that petitioner is
not the owner of the land purchased, yet he has control over the same, with full power to
administer, take possession of, alienate, transfer, encumber, sell or dispose of any or all
lands and their improvements registered in the name of the corporation sole and can
collect, receive, demand or sue for all money or values of any kind that may be kind that
may become due or owing to said corporation, and vested with authority to enter into
agreements with any persons, concerns or entities in connection with said real properties,
or in other words, actually exercising all rights of ownership over the properties. It was
their stand that the theory that properties registered in the name of the corporation sole
are held in true for the benefit of the Catholic population of a place, as of Davao in the
case at bar should be sustained because a conglomeration of persons cannot just be
pointed out as the cestui que trust or recipient of the benefits from the property allegedly
administered in their behalf. Neither can it be said that the mass of people referred to as

The provisions of our Corporation law on religious corporations are illuminating and sustain
the stand of petitioner. Section 154 thereof provides:
SEC. 154. For the administration of the temporalities of any religious denomination,
society or church and the management of the estates and the properties thereof, it shall
be lawful for the bishop, chief priest, or presiding either of any such religious
denomination, society or church to become a corporation sole, unless inconsistent wit the
rules, regulations or discipline of his religious denomination, society or church or forbidden
by competent authority thereof.
See also the pertinent provisions of the succeeding sections of the same Corporation Law
copied hereunder:
SEC. 155. In order to become a corporation sole the bishop, chief priest, or presiding elder
of any religious denomination, society or church must file with the Securities and Exchange
Commissioner articles of incorporation setting forth the following facts:
xxx xxx xxx.

(3) That as such bishop, chief priest, or presiding elder he is charged with the
administration of the temporalities and the management of the estates and properties of
his religious denomination, society, or church within its territorial jurisdiction, describing it;
xxx xxx xxx.
(As amended by Commonwealth Act No. 287).
SEC. 157. From and after the filing with the Securities and Exchange Commissioner of the
said articles of incorporation, which verified by affidavit or affirmation as aforesaid and
accompanied by the copy of the commission, certificate of election, or letters of
appointment of the bishop, chief priest, or presiding elder, duly certified as prescribed in
the section immediately preceding such the bishop, chief priest, or presiding elder, as the
case may be, shall become a corporation sole and all temporalities, estates, and properties
the religious denomination, society, or church therefore administered or managed by him
as such bishop, chief priest, or presiding elder, shall be held in trust by him as a
corporation sole, for the use, purpose, behalf, and sole benefit of his religious
denomination, society, or church, including hospitals, schools, colleges, orphan, asylums,
parsonages, and cemeteries thereof. For the filing of such articles of incorporation, the
Securities and Exchange Commissioner shall collect twenty-five pesos. (As amended by
Commonwealth Act. No. 287); and.
SEC. 163. The right to administer all temporalities and all property held or owned by a
religious order or society, or by the diocese, synod, or district organization of any religious
denomination or church shall, on its incorporation, pass to the corporation and shall be
held in trust for the use, purpose behalf, and benefit of the religious society, or order so
incorporated or of the church of which the diocese, or district organization is an organized
and constituent part.
The Cannon Law contains similar provisions regarding the duties of the corporation sole or
ordinary as administrator of the church properties, as follows:
Al Ordinario local pertenence vigilar diligentemente sobre la administracion de todos los
bienes eclesiasticos que se hallan en su territorio y no estuvieren sustraidos de su
jurisdiccion, salvs las prescriciones legitimas que le concedan mas aamplios derechos.
Teniendo en cuenta los derechos y las legitimas costumbres y circunstancias, procuraran
los Ordinarios regular todo lo concerniente a la administracion de los bienes eclesciasticos,
dando las oportunas instucciones particularles dentro del narco del derecho comun. (Title
XXVIII, Codigo de Derecho Canonico, Lib. III, Canon 1519).1
That leaves no room for doubt that the bishops or archbishops, as the case may be, as
corporation's sole are merely administrators of the church properties that come to their
possession, in which they hold in trust for the church. It can also be said that while it is
true that church properties could be administered by a natural persons, problems
regarding succession to said properties can not be avoided to rise upon his death. Through

this legal fiction, however, church properties acquired by the incumbent of a corporation
sole pass, by operation of law, upon his death not his personal heirs but to his successor in
office. It could be seen, therefore, that a corporation sole is created not only to administer
the temporalities of the church or religious society where he belongs but also to hold and
transmit the same to his successor in said office. If the ownership or title to the properties
do not pass to the administrators, who are the owners of church properties?.
Bouscaren and Elis, S.J., authorities on cannon law, on their treatise comment:
In matters regarding property belonging to the Universal Church and to the Apostolic See,
the Supreme Pontiff exercises his office of supreme administrator through the Roman
Curia; in matters regarding other church property, through the administrators of the
individual moral persons in the Church according to that norms, laid down in the Code of
Cannon Law. This does not mean, however, that the Roman Pontiff is the owner of all the
church property; but merely that he is the supreme guardian (Bouscaren and Ellis, Cannon
Law, A Text and Commentary, p. 764).
and this Court, citing Campes y Pulido, Legislacion y Jurisprudencia Canonica, ruled in the
case of Trinidad vs. Roman Catholic Archbishop of Manila, 63 Phil. 881, that:
The second question to be decided is in whom the ownership of the properties constituting
the endowment of the ecclesiastical or collative chaplaincies is vested.
Canonists entertain different opinions as to the persons in whom the ownership of the
ecclesiastical properties is vested, with respect to which we shall, for our purpose, confine
ourselves to stating with Donoso that, while many doctors cited by Fagnano believe that it
resides in the Roman Pontiff as Head of the Universal Church, it is more probable that
ownership, strictly speaking, does not reside in the latter, and, consequently, ecclesiastical
properties are owned by the churches, institutions and canonically established private
corporations to which said properties have been donated.
Considering that nowhere can We find any provision conferring ownership of church
properties on the Pope although he appears to be the supreme administrator or guardian
of his flock, nor on the corporation sole or heads of dioceses as they are admittedly
mere administrators of said properties, ownership of these temporalities logically fall and
develop upon the church, diocese or congregation acquiring the same. Although this
question of ownership of ecclesiastical properties has off and on been mentioned in several
decisions of the Court yet in no instance was the subject of citizenship of this religious
society been passed upon.
We are not unaware of the opinion expressed by the late Justice Perfecto in his dissent in
the case of Agustines vs. Court of First Instance of Bulacan, 80 Phil. 565, to the effect that
"the Roman Catholic Archbishop of Manila is only a branch of a universal church by the
Pope, with permanent residence in Rome, Italy". There is no question that the Roman
Catholic Church existing in the Philippines is a tributary and part of the international
religious organization, for the word "Roman" clearly expresses its unity with and recognizes

the authority of the Pope in Rome. However, lest We become hasty in drawing conclusions,
We have to analyze and take note of the nature of the government established in the
Vatican City, of which it was said:

Commissioner, however, maintained that since the Philippine Constitution is a later

enactment than public Act No. 1459, the provisions of Section 159 in amplification of
Section 13 thereof, as regard real properties, should be considered repealed by the former.

GOVERNMENT. In the Roman Catholic Church supreme authority and jurisdiction over
clergy and laity alike as held by the pope who (since the Middle Ages) is elected by the
cardinals assembled in conclave, and holds office until his death or legitimate
abdication. . . While the pope is obviously independent of the laws made, and the officials
appointed, by himself or his predecessors, he usually exercises his administrative authority
according to the code of canon law and through the congregations, tribunals and offices of
the Curia Romana. In their respective territories (called generally dioceses) and over their
respective subjects, the patriarchs, metropolitans or archbishops and bishops exercise a
jurisdiction which is called ordinary (as ar said properties in their name. As professor Javier
J. Nepomuceno very well says "Man in his search for the immortal and imponderable, has,
even before the dawn of recorded history, erected temples to the Unknown God, and there
is no doubt that he will continue to do so for all time to come, as long as he continues
'imploring the aid of Divine Providence'" (Nepomuceno's Corporation Sole, VI Ateneo Law
Journal, No. 1, p. 41, September, 1956). Under the circumstances of this case, We might
safely state that even before the establishment of the Philippine Commonwealth and of the
Republic of the Philippines every corporation sole then organized and registered had by
express provision of law the necessary power and qualification to purchase in its name
private lands located in the territory in which it exercised its functions or ministry and for
which it was created, independently of the nationality of its incumbent unique and single
member and head, the bishop of the dioceses. It can be also maintained without fear of
being gainsaid that the Roman Catholic Apostolic Church in the Philippines has no
nationality and that the framers of the Constitution, as will be hereunder explained, did not
have in mind the religious corporations sole when they provided that 60 per centum of the
capital thereof be owned by Filipino citizens.

There is a reason to believe that when the specific provision of the Constitution invoked by
respondent Commissioner was under consideration, the framers of the same did not have
in mind or overlooked this particular form of corporation. It is undeniable that the
naturalization and conservation of our national resources was one of the dominating
objectives of the Convention and in drafting the present Article XII of the Constitution, the
delegates were goaded by the desire (1) to insure their conservation for Filipino posterity;
(2) to serve as an instrument of national defense, helping prevent the extension into the
country of foreign control through peaceful economic penetration; and (3) to prevent
making the Philippines a source of international conflicts with the consequent danger to its
internal security and independence (See The Framing of the Philippine Constitution by
Professor Jose M. Aruego, a Delegate to the Constitutional Convention, Vol. II. P. 592-604).
In the same book Delegate Aruego, explaining the reason behind the first consideration,
wrote:

There could be no controversy as to the fact that a duly registered corporation sole is an
artificial being having the right of succession and the power, attributes, and properties
expressly authorized by law or incident to its existence (section 1, Corporation Law). In
outlining the general powers of a corporation. Public Act. No. 1459 provides among others:
SEC. 13. Every corporation has the power:
(5) To purchase, hold, convey, sell, lease, lot, mortgage, encumber, and otherwise deal
with such real and personal property as the purpose for which the corporation was formed
may permit, and the transaction of the lawful business of the corporation may reasonably
and necessarily require, unless otherwise prescribed in this Act: . . .
In implementation of the same and specially made applicable to a form of corporation
recognized by the same law, Section 159 aforequoted expressly allowed the corporation
sole to purchase and hold real as well as personal properties necessary for the promotion
of the objects for which said corporation sole is created. Respondent Land Registration

At the time of the framing of Philippine Constitution, Filipino capital had been to be rather
shy. Filipinos hesitated s a general rule to invest a considerable sum of their capital for the
development, exploitation and utilization of the natural resources of the country. They had
not as yet been so used to corporate as the peoples of the west. This general apathy, the
delegates knew, would mean the retardation of the development of the natural resources,
unless foreign capital would be encouraged to come and help in that development. They
knew that the naturalization of the natural resources would certainly not encourage
the INVESTMENT OF FOREIGN CAPITAL into them. But there was a general feeling in the
Convention that it was better to have such a development retarded or even postpone
together until such time when the Filipinos would be ready and willing to undertake it
rather than permit the natural resources to be placed under the ownership or control of
foreigners in order that they might be immediately be developed, with the Filipinos of the
future serving not as owners but utmost as tenants or workers under foreign masters. By
all means, the delegates believed, the natural resources should be conserved for Filipino
posterity.
It could be distilled from the foregoing that the farmers of the Constitution intended said
provisions as barrier for foreigners or corporations financed by such foreigners to acquire,
exploit and develop our natural resources, saving these undeveloped wealth for our people
to clear and enrich when they are already prepared and capable of doing so. But that is not
the case of corporations sole in the Philippines, for, We repeat, they are mere
administrators of the "temporalities" or properties titled in their name and for the benefit
of the members of their respective religion composed of an overwhelming majority of
Filipinos. No mention nor allusion whatsoever is made in the Constitution as to the
prohibition against or the liability of the Roman Catholic Church in the Philippines to
acquire and hold agricultural lands. Although there were some discussions on landholdings,

they were mostly confined in the inclusion of the provision allowing the Government to
break big landed estates to put an end to absentee landlordism.
But let us suppose, for the sake of argument, that the above referred to inhibitory clause of
Section 1 of Article XIII of the constitution does have bearing on the petitioner's case; even
so the clause requiring that at least 60 per centum of the capital of the corporation be
owned by Filipinos is subordinated to the petitioner's aforesaid right already existing at the
time of the inauguration of the Commonwealth and the Republic of the Philippines. In the
language of Mr. Justice Jose P. Laurel (a delegate to the Constitutional Convention), in his
concurring opinion of the case of Gold Creek mining Corporation, petitioner vs. Eulogio
Rodriguez, Secretary of Agriculture and Commerce, and Quirico Abadilla, Director of the
Bureau of Mines, respondent, 66 Phil. 259:
The saving clause in the section involved of the Constitution was originally embodied in the
report submitted by the Committee on Naturalization and Preservation of Land and Other
Natural Resources to the Constitutional Convention on September 17, 1954. It was later
inserted in the first draft of the Constitution as section 13 of Article XIII thereof, and finally
incorporated as we find it now. Slight have been the changes undergone by the proviso
from the time when it comes out of the committee until it was finally adopted. When first
submitted and as inserted to the first draft of the Constitution it reads: 'subject to any
right, grant, lease, or concession existing in respect thereto on the date of the adoption of
the Constitution'. As finally adopted, the proviso reads: 'subject to any existing right, grant,
lease, or concession at the time of the inauguration of the Government established under
this Constitution'. This recognition is not mere graciousness but springs form the just
character of the government established. The framers of the Constitution were not
obscured by the rhetoric of democracy or swayed to hostility by an intense spirit of
nationalism. They well knew that conservation of our natural resources did not mean
destruction or annihilation of acquired property rights. Withal, they erected a government
neither episodic nor stationary but well-nigh conservative in the protection of property
rights. This notwithstanding nationalistic and socialistic traits discoverable upon even a
sudden dip into a variety of the provisions embodied in the instrument.
The writer of this decision wishes to state at this juncture that during the deliberation of
this case he submitted to the consideration of the Court the question that may be termed
the "vested right saving clause" contained in Section 1, Article XII of the Constitution, but
some of the members of this Court either did not agree with the theory of the writer, or
were not ready to take a definite stand on the particular point I am now to discuss
deferring our ruling on such debatable question for a better occasion, inasmuch as the
determination thereof is not absolutely necessary for the solution of the problem involved
in this case. In his desire to face the issues squarely, the writer will endeavor, at least as a
disgression, to explain and develop his theory, not as a lucubration of the Court, but of his
own, for he deems it better and convenient to go over the cycle of reasons that are linked
to one another and that step by step lead Us to conclude as We do in the dispositive part
of this decision.

It will be noticed that Section 1 of Article XIII of the Constitution provides, among other
things, that "all agricultural lands of the public domain and their disposition shall be limited
to citizens of the Philippines or to corporations at least 60 per centum of the capital of
which is owned by such citizens, SUBJECT TO ANY EXISTING RIGHT AT THE TIME OF THE
INAUGURATION OF THE GOVERNMENT ESTABLISHED UNDER THIS CONSTITUTION."
As recounted by Mr. Justice Laurel in the aforementioned case of Gold Creek Mining
Corporation vs. Rodriguez et al., 66 Phil. 259, "this recognition (in the clause already
quoted), is not mere graciousness but springs from the just character of the government
established. The farmers of the Constitution were not obscured by the rhetoric of
democracy or swayed to hostility by an intense spirit of nationalism. They well knew that
conservation of our natural resources did not mean destruction or annihilation
of ACQUIRED PROPERTY RIGHTS".
But respondents' counsel may argue that the preexisting right of acquisition of public or
private lands by a corporation which does not fulfill this 60 per cent requisite, refers to
purchases of the Constitution and not to later transactions. This argument would imply that
even assuming that petitioner had at the time of the enactment of the Constitution the
right to purchase real property or right could not be exercised after the effectivity of our
Constitution, because said power or right of corporations sole, like the herein petitioner,
conferred in virtue of the aforequoted provisions of the Corporation Law, could no longer
be exercised in view of the requisite therein prescribed that at least 60 per centum of the
capital of the corporation had to be Filipino. It has been shown before that: (1) the
corporation sole, unlike the ordinary corporations which are formed by no less than 5
incorporators, is composed of only one persons, usually the head or bishop of the diocese,
a unit which is not subject to expansion for the purpose of determining any percentage
whatsoever; (2) the corporation sole is only the administrator and not the owner of the
temporalities located in the territory comprised by said corporation sole; (3) such
temporalities are administered for and on behalf of the faithful residing in the diocese or
territory of the corporation sole; and (4) the latter, as such, has no nationality and the
citizenship of the incumbent Ordinary has nothing to do with the operation, management
or administration of the corporation sole, nor effects the citizenship of the faithful
connected with their respective dioceses or corporation sole.
In view of these peculiarities of the corporation sole, it would seem obvious that when the
specific provision of the Constitution invoked by respondent Commissioner (section 1, Art.
XIII), was under consideration, the framers of the same did not have in mind or overlooked
this particular form of corporation. If this were so, as the facts and circumstances already
indicated tend to prove it to be so, then the inescapable conclusion would be that this
requirement of at least 60 per cent of Filipino capital was never intended to apply to
corporations sole, and the existence or not a vested right becomes unquestionably
immaterial.
But let us assumed that the questioned proviso is material. yet We might say that a
reading of said Section 1 will show that it does not refer to any actual acquisition of land up

to the right, qualification or power to acquire and hold private real property. The population
of the Philippines, Catholic to a high percentage, is ever increasing. In the practice of
religion of their faithful the corporation sole may be in need of more temples where to
pray, more schools where the children of the congregation could be taught in the principles
of their religion, more hospitals where their sick could be treated, more hallow or
consecrated grounds or cemeteries where Catholics could be buried, many more than
those actually existing at the time of the enactment of our Constitution. This being the
case, could it be logically maintained that because the corporation sole which, by express
provision of law, has the power to hold and acquire real estate and personal property of its
churches, charitable benevolent, or educational purposes (section 159, Corporation Law) it
has to stop its growth and restrain its necessities just because the corporation sole is a
non-stock corporation composed of only one person who in his unity does not admit of any
percentage, especially when that person is not the owner but merely an administrator of
the temporalities of the corporation sole? The writer leaves the answer to whoever may
read and consider this portion of the decision.
Anyway, as stated before, this question is not a decisive factor in disposing the case, for
even if We were to disregard such saving clause of the Constitution, which reads: subject
to any existing right, grant, etc., at the same time of the inauguration of the Government
established under this Constitution, yet We would have, under the evidence on record,
sufficient grounds to uphold petitioner's contention on this matter.
In this case of the Register of Deeds of Rizal vs. Ung Sui Si Temple, 2 G.R. No. L-6776,
promulgated May 21, 1955, wherein this question was considered from a different angle,
this Court through Mr. Justice J.B.L. Reyes, said:
The fact that the appellant religious organization has no capital stock does not suffice to
escape the Constitutional inhibition, since it is admitted that its members are of foreign
nationality. The purpose of the sixty per centum requirement is obviously to ensure that
corporation or associations allowed to acquire agricultural land or to exploit natural
resources shall be controlled by Filipinos; and the spirit of the Constitution demands that in
the absence of capital stock, the controlling membership should be composed of Filipino
citizens.
In that case respondent-appellant Ung Siu Si Temple was not a corporation sole but a
corporation aggregate, i.e., an unregistered organization operating through 3 trustees, all
of Chinese nationality, and that is why this Court laid down the doctrine just quoted. With
regard to petitioner, which likewise is a non-stock corporation, the case is different,
because it is a registered corporation sole, evidently of no nationality and registered
mainly to administer the temporalities and manage the properties belonging to the faithful
of said church residing in Davao. But even if we were to go over the record to inquire into
the composing membership to determine whether the citizenship requirement is satisfied
or not, we would find undeniable proof that the members of the Roman Catholic Apostolic
faith within the territory of Davao are predominantly Filipino citizens. As indicated before,
petitioner has presented evidence to establish that the clergy and lay members of this

religion fully covers the percentage of Filipino citizens required by the Constitution. These
facts are not controverted by respondents and our conclusion in this point is sensibly
obvious.
Dissenting OpinionDiscussed. After having developed our theory in the case and
arrived at the findings and conclusions already expressed in this decision. We now deem it
proper to analyze and delve into the basic foundation on which the dissenting opinion
stands up. Being aware of the transcendental and far-reaching effects that Our ruling on
the matter might have, this case was thoroughly considered from all points of view, the
Court sparing no effort to solve the delicate problems involved herein.
At the deliberations had to attain this end, two ways were open to a prompt dispatch of the
case: (1) the reversal of the doctrine We laid down in the celebrated Krivenko case by
excluding urban lots and properties from the group of the term "private agricultural lands"
use in this section 5, Article XIII of the Constitution; and (2) by driving Our reasons to a
point that might indirectly cause the appointment of Filipino bishops or Ordinary to head
the corporations sole created to administer the temporalities of the Roman Catholic Church
in the Philippines. With regard to the first way, a great majority of the members of this
Court were not yet prepared nor agreeable to follow that course, for reasons that are
obvious. As to the second way, it seems to be misleading because the nationality of the
head of a diocese constituted as a corporation sole has no material bearing on the
functions of the latter, which are limited to the administration of the temporalities of the
Roman Catholic Apostolic Church in the Philippines.
Upon going over the grounds on which the dissenting opinion is based, it may be noticed
that its author lingered on the outskirts of the issues, thus throwing the main points in
controversy out of focus. Of course We fully agree, as stated by Professor Aruego, that the
framers of our Constitution had at heart to insure the conservation of the natural resources
of Our motherland of Filipino posterity; to serve them as an instrument of national defense,
helping prevent the extension into the country of foreign control through peaceful
economic penetration; and to prevent making the Philippines a source of international
conflicts with the consequent danger to its internal security and independence. But all
these precautions adopted by the Delegates to Our Constitutional Assembly could have not
been intended for or directed against cases like the one at bar. The emphasis and
wonderings on the statement that once the capacity of a corporation sole to acquire
private agricultural lands is admitted there will be no limit to the areas that it may hold and
that this will pave the way for the "revival or revitalization of religious landholdings that
proved so troublesome in our past", cannot even furnish the "penumbra" of a threat to the
future of the Filipino people. In the first place, the right of Filipino citizens, including those
of foreign extraction, and Philippine corporations, to acquire private lands is not subject to
any restriction or limit as to quantity or area, and We certainly do not see any wrong in
that. The right of Filipino citizens and corporations to acquire public agricultural lands is
already limited by law. In the second place, corporations sole cannot be considered as
aliens because they have no nationality at all. Corporations sole are, under the law, mere
administrators of the temporalities of the Roman Catholic Church in the Philippines. In the

third place, every corporation, be it aggregate or sole, is only entitled to purchase, convey,
sell, lease, let, mortgage, encumber and otherwise deal with real properties when it is
pursuant to or in consonance with the purposes for which the corporation was formed, and
when the transactions of the lawful business of the corporation reasonably and necessarily
require such dealing section 13-(5) of the Corporation Law, Public Act No. 1459 and
considering these provisions in conjunction with Section 159 of the same law which
provides that a corporation sole may only "purchase and hold real estate and personal
properties for its church, charitable, benevolent or educational purposes", the above
mentioned fear of revitalization of religious landholdings in the Philippines is absolutely
dispelled. The fact that the law thus expressly authorizes the corporations sole to receive
bequests or gifts of real properties (which were the main source that the friars had to
acquire their big haciendas during the Spanish regime), is a clear indication that the
requisite that bequests or gifts of real estate be for charitable, benevolent, or educational
purposes, was, in the opinion of the legislators, considered sufficient and adequate
protection against the revitalization of religious landholdings.
Finally, and as previously stated, We have reason to believe that when the Delegates to the
Constitutional Convention drafted and approved Article XIII of the Constitution they do not
have in mind the corporation sole. We come to this finding because the Constitutional
Assembly, composed as it was by a great number of eminent lawyers and jurists, was like
any other legislative body empowered to enact either the Constitution of the country or
any public statute, presumed to know the conditions existing as to particular subject
matter when it enacted a statute (Board of Commerce of Orange Country vs. Bain, 92 S.E.
176; N. C. 377).
Immemorial customs are presumed to have been always in the mind of the Legislature in
enacting legislation. (In re Kruger's Estate, 121 A. 109; 277 P. 326).
The Legislative is presumed to have a knowledge of the state of the law on the subjects
upon which it legislates. (Clover Valley Land and Stock Co. vs. Lamb et al., 187, p.
723,726.)
The Court in construing a statute, will assume that the legislature acted with full
knowledge of the prior legislation on the subject and its construction by the courts. (Johns
vs. Town of Sheridan, 89 N. E. 899, 44 Ind. App. 620.).
The Legislature is presumed to have been familiar with the subject with which it was
dealing . . . . (Landers vs. Commonwealth, 101 S. E. 778, 781.).
The Legislature is presumed to know principles of statutory construction. (People vs.
Lowell, 230 N. W. 202, 250 Mich. 349, followed in P. vs. Woodworth, 230 N.W. 211, 250
Mich. 436.).
It is not to be presumed that a provision was inserted in a constitution or statute without
reason, or that a result was intended inconsistent with the judgment of men of common
sense guided by reason" (Mitchell vs. Lawden, 123 N.E. 566, 288 Ill. 326.) See City of

Decatur vs. German, 142 N. E. 252, 310 Ill. 591, and may other authorities that can be
cited in support hereof.
Consequently, the Constitutional Assembly must have known:
1. That a corporation sole is organized by and composed of a single individual, the head of
any religious society or church operating within the zone, area or jurisdiction covered by
said corporation sole (Article 155, Public Act No. 1459);
2. That a corporation sole is a non-stock corporation;
3. That the Ordinary ( the corporation sole proper) does not own the temporalities which he
merely administers;
4. That under the law the nationality of said Ordinary or of any administrator has
absolutely no bearing on the nationality of the person desiring to acquire real property in
the Philippines by purchase or other lawful means other than by hereditary succession,
who according to the Constitution must be a Filipino (sections 1 and 5, Article XIII).
5. That section 159 of the Corporation Law expressly authorized the corporation sole to
purchase and hold real estate for its church, charitable, benevolent or educational
purposes, and to receive bequests or gifts for such purposes;
6. That in approving our Magna Carta the Delegates to the Constitutional Convention,
almost all of whom were Roman Catholics, could not have intended to curtail the
propagation of the Roman Catholic faith or the expansion of the activities of their church,
knowing pretty well that with the growth of our population more places of worship, more
schools where our youth could be taught and trained; more hallow grounds where to bury
our dead would be needed in the course of time.
Long before the enactment of our Constitution the law authorized the corporations sole
even to receive bequests or gifts of real estates and this Court could not, without any clear
and specific provision of the Constitution, declare that any real property donated, let as say
this year, could no longer be registered in the name of the corporation sole to which it was
conveyed. That would be an absurdity that should not receive our sanction on the pretext
that corporations sole which have no nationality and are non-stock corporations composed
of only one person in the capacity of administrator, have to establish first that at least sixty
per centum of their capital belong to Filipino citizens. The new Civil Code even provides:
ART. 10. In case of doubt in the interpretation or application of laws, it is presumed that
the lawmaking body intended right and justice to prevail.
Moreover, under the laws of the Philippines, the administrator of the properties of a Filipino
can acquire, in the name of the latter, private lands without any limitation whatsoever, and
that is so because the properties thus acquired are not for and would not belong to the

administrator but to the Filipino whom he rense'. (Vol. 3, Sutherland on Statutory

Construction, 3rd ed., 150.).
A constitution is not intended to be a limitation on the development of a country nor an
obstruction to its progress and foreign relations (Moscow Fire Ins. Co. of Moscow, Russia vs.
Bank of New York and Trust Co., 294 N. Y. S.648; 56 N.E. 2d. 745, 293 N.Y. 749).
Although the meaning or principles of a constitution remain fixed and unchanged from the
time of its adoption, a constitution must be construed as if intended to stand for a great
length of time, and it is progressive and not static. Accordingly, it should not receive too
narrow or literal an interpretation but rather the meaning given it should be applied in such
manner as to meet new or changed conditions as they arise (U.S. vs. Lassic, 313 U.S. 299,
85 L. Ed., 1368).
Effect should be given to the purpose indicated by a fair interpretation of the language
used and that construction which effectuates, rather than that which destroys a plain
intent or purpose of a constitutional provision, is not only favored but will be adopted
(State ex rel. Randolph Country vs. Walden, 206 S.W. 2d 979).
It is quite generally held that in arriving at the intent and purpose the construction should
be broad or liberal or equitable, as the better method of ascertaining that intent, rather
than technical (Great Southern Life Ins. Co. vs. City of Austin, 243 S.W. 778).
All these authorities uphold our conviction that the framers of the Constitution had not in
mind the corporations sole, nor intended to apply them the provisions of section 1 and 5 of
said Article XIII when they passed and approved the same. And if it were so as We think it
is, herein petitioner, the Roman Catholic Apostolic Administrator of Davao, Inc., could not
be deprived of the right to acquire by purchase or donation real properties for charitable,
benevolent and educational purposes, nor of the right to register the same in its name with
the Register of Deeds of Davao, an indispensable requisite prescribed by the Land
Registration Act for lands covered by the Torrens system.

have attached to a thing; it must have become 'fixed and established'" (Balboa vs.
Farrales, 51 Phil. 498). But the case at bar has to be considered as an exception to the rule
because among the rights granted by section 159 of the Corporation Law was the right to
receive bequests or gifts of real properties for charitable, benevolent and educational
purposes. And this right to receive such bequests or gifts (which implies donations in
futuro), is not a mere potentiality that could be impaired without any specific provision in
the Constitution to that effect, especially when the impairment would disturbingly affect
the propagation of the religious faith of the immense majority of the Filipino people and the
curtailment of the activities of their Church. That is why the writer gave us a basis of his
contention what Professor Aruego said in his book "The Framing of the Philippine
Constitution" and the enlightening opinion of Mr. Justice Jose P. Laurel, another Delegate to
the Constitutional Convention, in his concurring opinion in the case of Goldcreek Mining Co.
vs. Eulogio Rodriguez et al., 66 Phil. 259. Anyway the majority of the Court did not deem
necessary to pass upon said "vested right saving clause" for the final determination of this
case.
JUDGMENT
Wherefore, the resolution of the respondent Land Registration Commission of September
21, 1954, holding that in view of the provisions of sections 1 and 5 of Article XIII of the
Philippine Constitution the vendee (petitioner) is not qualified to acquire lands in the
Philippines in the absence of proof that at least 60 per centum of the capital, properties or
assets of the Roman Catholic Apostolic Administrator of Davao, Inc. is actually owned or
controlled by Filipino citizens, and denying the registration of the deed of sale in the
absence of proof of compliance with such requisite, is hereby reversed. Consequently, the
respondent Register of Deeds of the City of Davao is ordered to register the deed of sale
executed by Mateo L. Rodis in favor of the Roman Catholic Apostolic Administrator of
Davao, Inc., which is the subject of the present litigation. No pronouncement is made as to
costs. It is so ordered.

We leave as the last theme for discussion the much debated question above referred to as
"the vested right saving clause" contained in section 1, Article XIII of the Constitution. The
dissenting Justice hurls upon the personal opinion expressed on the matter by the writer of
the decision the most pointed darts of his severe criticism. We think, however, that this
strong dissent should have been spared, because as clearly indicated before, some
members of this Court either did not agree with the theory of the writer or were not ready
to take a definite stand on that particular point, so that there being no majority opinion
thereon there was no need of any dissension therefrom. But as the criticism has been
made the writer deems it necessary to say a few words of explanation.
The writer fully agrees with the dissenting Justice that ordinarily "a capacity to acquire
(property) in futuro, is not in itself a vested or existing property right that the Constitution
protects from impairment. For a property right to be vested (or acquired) there must be a
transition from the potential or contingent to the actual, and the proprietary interest must

DIGEST
JG Summit Holdings INC. vs. Court of AppealsG.R. No. 124293 January 31, 2005

Facts:
The National Investment and Development Corporation (NIDC), a government corporation,
entered into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe,
Japan (KAWASAKI) for the construction, operation and management of the Subic National
Shipyard Inc., (SNS) which subsequently became the Philippine Shipyard and Engineering
Corporation (PHILSECO).Under the JVA, the NDC and KAWASAKI will contribute P330M for
the capitalization of PHILSECO in the proportion of 60%-40% respectively. One of its salient
features is the grant to the parties of the right of first refusal should either of them decide
to sell, assign or transfer its interest in the joint venture. NIDC transferred all its rights, title
and interest in PHILSECO to the Philippine National Bank (PNB). Such interests were
subsequently transferred to the National Government pursuant to an Administrative Order.
When the former President Aquino issued Proclamation No. 50 establishing the Committee
on Privatization (COP) and the Asset Privatization Trust (APT) to take title to, and
possession of, conserve, manage and dispose of non-performing assets of the National
Government, a trust agreement was entered into between the National Government and
the APT wherein the latter was named the trustee of the National Governments share in
PHILSECO. In the interest of the national economy and the government, the COP and the
APT deemed it best to sell the National Governments share in PHILSECO to private
entities. After a series of negotiations between the APT and KAWASAKI , they agreed that
the latters right of first refusal under the JVA be exchanged for the right to top by 5%,
the highest bid for the said shares. They further agreed that KAWASAKI would be entitled
to name a company in which it was a stockholder, which could exercise the right to top.
KAWASAKI then informed APT that Philyards Holdings, Inc. (PHI) would exercise its right to
top. At the public bidding, petitioner J.G. Summit Holdings Inc. submitted a bid of Two
Billion and Thirty Million Pesos (Php2,030,000,000.00) with an acknowledgement of
KAWASAKI/PHILYARDS right to top. As petitioner was declared the highest bidder, the COP
approved the sale subject to the right of Kawasaki Heavy Industries, Inc. / PHILYARDS
Holdings Inc. to top JGs bid by 5% as specified in the bidding rules. On the other hand, the
respondent by virtue of right to top by 5%, the highest bid for the said shares timely
exercised the same. Petitioners, in their motion for reconsideration, raised, inter alia, the
issue on the maintenance of the 60%-40% relationship between the NIDC and KAWASAKI
arising from the Constitution because PHILSECO is a landholding corporation and need not
be a public utility to be bound by the 60%-40% constitutional limitation.
ISSUE:
Whether or not the respondent is prohibited to possess the disputed property considering
the prohibition stipulated in the 1987 Constitution against foreign owned companies.
RULING:
The court upheld the validity of the mutual rights of first refusal under the JVA between
KAWASAKI and NIDC. The right of first refusal is a property right of PHILSECO shareholders,
KAWASAK Iand NIDC, under the terms of their JVA. This right allows them to purchase the

shares of their co-shareholder before they are offered to a third party. The agreement of
co-shareholders to mutually grant this right to each other, by itself, does not constitute a
violation of the provisions of the Constitution limiting landownership to Filipinos and Filipino
corporations. As PHILYARDS correctly puts it, if PHILSECO still owns the land, the right of
first refusal can be validly assigned to a qualified Filipino entity in order to maintain the
60%-40% ration. This transfer by itself, does not amount to a violation of the Anti-Dummy
Laws, absent proof of any fraudulent intent. The transfer could be made either to a
nominee or such other party which the holder of the right of first refusal feels it can
comfortably do business with. Alternatively, PHILSECO may divest of its landholdings, in
which case KAWASAKI, in exercising its right of first refusal, can exceed 40% of PHILSECOs
equity. In fact, it can even be said that if the foreign shareholdings of a landholding
corporation exceeds 40%, it is not the foreign stockholders ownership of the shares which
is adversely affected but the capacity of the corporation to won landthat is, the
corporation becomes disqualified to own land. This finds support under the basic corporate
law principle that the corporation and its stockholders are separate judicial entities. In this
vein, the right of first refusal over shares pertains to the shareholders whereas the
capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land
cannot deprive stockholders of their right of first refusal.
No law disqualifies a person from purchasing shares in a landholding corporation even if
the latter will exceed the allowed foreign equity, what the law disqualifies is the
corporation from owning land.

1. Mateo Rodis, a Filipino citizen and resident of Davao, executed a deed of sale of a parcel
of land located in the same city in favor of the Roman Catholic Administrator of Davao, a
corporation sole organized and existing in accordance with Philippine laws. The
incumbent administrator is Msgr. Clovis Thibault, a Canadian citizen

REGISTER OF DEEDS vs UNG SIU SI TEMPLEGR. No. L-6776 May 21,1955

FACTS:
A Filipino citizen executed a deed of donation in favor of the Ung Siu Si Temple, an
unregistered religious organization that operated through three trustees all of Chinese
nationality. The Register of Deeds refused to record the deed of donation executed in due
form arguing that the Consitution provides that acquisition of land is limited to Filipino
citizens, or to corporations or associations at least 60% of which is owned by such citizens.
ISSUE:
Whether a deed of donation of a parcel of land executed in favor of a religious organization
whose founder, trustees and administrator are Chinese citizens should be registered or
not.

2. When the deed was presented to the Register of Deeds for registration, it required them
to submit an affidavit stating that the ownership of the corporation is 60% Filipino citizens
as required under the Constitution.
-Roman Catholic stated that it was a corporation sole (meaning only one incorporator) and
that the totality of the Catholic population in Davao would become the owner of the
property.
3. Register of Deeds doubted this and submitted the case for en consulta in the Land
Registration Commission.
4. LRC ruled that the requirement of the Constitution must be followed and since the 60%
cannot be complied with, the registration should be denied. Hence, this appeal.
ISSUE(S):
1.) WON the Roman Catholic Apostolic Church, being a corporation sole, can lawfully
acquire lands in the Philippines. 2.) Can corporation sole register the property?

RULING:

HELD: Yes. The order is reversed.

Sec. 5, Art. 13 of the Constitution provides that save in cases of hereditary succession, no
private agricultural land shall be transferred or assigned except to individuals,
corporations, or associations qualified to hold lands of the public domain in the Philippines.
The Constitution does not make any exception in favor of religious associations. The fact
that appellant has no capital stock does not exempt it from the Constitutional inhibition,
since its member are of foreign nationality. The purpose of the 60% requirement is to
ensure that corporations or associations allowed to acquire agricultural lands or to exploit
natural resources shall be controlled by Filipinos; and the spirit of the Constitution
demands that in the absence of capital stock, controlling membership should be composed
of Filipino citizens.

RATIO:

As to the complaint that the disqualification under Art. 13 of the Constitution violated the
freedom of religion, the Court was not convinced that land tenure is indispensable to the
free exercise and enjoyment of religious profession or worship.
Roman Catholic Apostolic Administrator of Davao v. Land Registration
Commission GR No. L-8451 Dec. 20, 1957
FACTS:

"SEC. 159. Any corporation sole may purchase and hold real estate and personal property
for its church, charitable, benevolent, or educational purposes, and may receive bequests
or gifts for such purposes. Such corporation may mortgage or sell real property held by it
upon obtaining an order for that purpose from the Court of First Instance of the province in
which the property is situated; but before making the order proof must be made to the
satisfaction of the court that notice of the application for leave to mortgage or sell has
been given by publication or otherwise in such manner and for such time as said court or
the judge thereof may have directed, and that it is to the interest of the corporation that
leave to mortgage or sell should be granted. The application for leave to mortgage or sell
must be made by petition, duly verified by the bishop, chief priest, or presiding elder,
acting as corporation sole, and may be opposed by any member of the religious
denomination, society, or church represented by the corporation sole: Provided, however,
That in cases when the rules, regulations and discipline of the religious denomination,
society or church concerned represented by such corporation sole regulate the methods of
acquiring, holding, selling, and mortgaging real estate and personal property, such rules,
regulations, and discipline shall control and the intervention of the courts shall not be
necessary." (The Corporation Law.) And in accordance with the above section, the
temporalities of the Church or of a parish or diocese are allowed to be registered in the

name of the corporation sole for purposes of administration and in trust for the real
owners.
The mere fact that the Corporation Law authorizes the corporation sole to acquire and hold
real estate or other property does not make the latter the real owner thereof, as his tenure
of Church property is merely for the purposes of administration. As stated above, the
bishop is only the legal (technical) owner or trustee, the parish or diocese being the

beneficial owner, or cestui que trust. The corporation sole is a mere contrivance to enable
a church to acquire, own and manage properties belonging to the church. It is only a
means to an end. The constitutional provision could not have been meant to apply to the
means through which and by which property may be owned or acquired, but to the
ultimate owner of the property. Hence, the citizenship of the priest forming the corporation
sole should be no impediment if the parish or diocese which owns the property is qualified
to own and possess the property